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DHS Adjuster Licensing, Pandemic Regulatory Catchup, Idaho Joins SBS

This post is part of a series sponsored by AgentSync.

Variations in laws, compliance protocols, industry transparency and general regulatory cultures can give the impression that keeping up with changes in the industry is a bit like herding cats. So, what better way to wrangle some of the more localized insurance news than in a Regulatory Roundup?

On an ongoing basis, in no particular order or rank, we grapple with the various regulatory changes, compliance actions and commissioner decisions in our summary. As a disclaimer: There is a lot going on at any given time in these here United States, so this is not a comprehensive picture of state-level action by any means. Think of it instead as a test plate of regulation.

States clarify designated home state allowances for licensing foreign adjusters

It’s starting to look a lot like disaster preparedness season as states issue clarifications and rule changes for adjusters and casualty insurers. Wyoming and New Mexico issued bulletins through July to clarify one point: when it is (or is not) acceptable to use a Designated Home State (DHS) to issue a license to a non-resident insurance adjuster.

For the unfamiliar, not all states require adjusters to have a specific insurance license. So if you want to be an adjuster working across state lines and your state of residence does not offer an adjuster license, in order to obtain a license that other states would consider valid for license reciprocity, you would apply for a designated home state license in another state.

If you use a DHS license, you agree to treat the state you “designate” as your home state as if it were your state of residence. So, by all means, that’s where you’re going to focus on compliance. Continuing education, renewal dates, license fees – all will be based on your DHS license status.

The bulletins issued by Wyoming and New Mexico make it clear that not all DHS adjuster licenses are created equal.

“This memorandum serves to clarify when designated home state licenses are not acceptable. There are some states that do not require staff adjusters to be licensed. However, if a staff adjuster’s state of residence offers a resident independent adjuster license and does not restrict a staff adjuster from obtaining that license, the adjuster must hold the independent adjuster license,” the Wyoming bulletin states.

“The Office of the Superintendent of Insurance accepts a DHS license for reciprocity purposes only when the individual’s home state does not require licensure as an adjuster, allows a staff adjuster to be licensed as an independent adjuster, or the individual’s home state licensure requirements do not require meeting the criteria required by OSI to be licensed as an adjuster in New Mexico, says New Mexico.

Essentially, both states call out cases where the adjusters’ states of residence do not require the adjuster to have a license, but also do not prohibit them from doing so. Essentially, they are saying that about you could be licensed as an adjuster in your state of residence, and your state of residence has reasonable continuing education and licensing requirements, you must do so.

Rules still catching up with pandemic changes

Thanks to covid-19 quarantines, home offices and hybrids also gained traction in insurance. But as we’ve talked about on this blog before, the rules have yet to catch up to the new order for highly mobile businesses.

This regulatory summary contains some changes that we have to imagine are partly due to this remote shift. First, at the end of July 2022, Nebraska removed its proctoring requirement for continuing education. Previously, online self-study courses in the state required a proctor to be present to ensure licensees were on top of everything during the exam.

Also in the category of post-pandemic changes, the Financial Industry Regulatory Authority (FINRA) has proposed a rule that would make some exceptions for remote workers. Currently, non-branch supervisory locations are held to a standard that requires an inspection every year. The rule would make an exception for specific residential enforcement duties, keeping them on a three-year inspection cycle.

If that seems jargony, let’s cut to the chase: Under current rules, a remote worker who has some form of financial oversight theoretically speaking must have their house inspected every year to meet financial supervision obligations. This rule would make it easier so that they would have a lighter inspection standard every three years. The rule indicates that there is also a sliding scale; the controller of a restricted company that has come under SEC scrutiny will probably have to agree to some annual inspections if they work remotely.

Idaho joins State Based Systems

Idaho joins State Based Systems (SBS). Beginning in late September 2022, Idaho licensing, renewal, and business contact change requests will follow SBS codes and eligibility lines.

This puts Idaho in good company, given that Massachusetts switched to SBS earlier in the year, marking a major improvement in the state’s ease of doing business. Of particular note, with the switch to SBS, Massachusetts appointments can now be easily managed for those working with providers who sync data with NIPR.

Michigan shows that the role of insurance producer is not for people who like

Insurance fraud is a serious issue, whether it leads to unpaid medical bills or social inflation. And it’s often quite easy to attribute bad intentions to things like unlicensed sales or falsified paperwork. However, the case of a Michigan insurance agent shows that the social dynamics of insurance sales can be its own crucible of dishonesty.

A media release from the Department of Insurance and Financial Services in July 2022 outlined its case against a Michigan producer. The producer’s office manager overheard the producer on a call with a prospective life insurance customer in August 2019. The customer described the process of having undergone cancer treatment, including chemotherapy, in the previous year. Yet, the office manager noted, the producer filled out the life insurance application as if the client had a clear, cancer-free health history.

The office manager reported the call to the producer’s supervisor, who flagged it to Michigan DIFS. DIFS contacted the producer with a letter of inquiry in December 2019, and the producer quickly responded in January 2020, admitting he lied on the application. The producer “doesn’t like to say no,” said the DIFS press release.

Further inquiries by DIFS were met with no opposition or request for a hearing, so, unchallenged, the department concluded that the producer should be punished for having “used fraudulent, coercive, or dishonest methods, or demonstrated incompetence, unreliability, or financial irresponsibility in the conduct of business in this state or somewhere else.” As a result, the Michigan DIFS revoked the producer’s license.

Other government rule changes in brief

Wisconsin announced administrative license actions (aka, denials of license applications or revoked licenses) for June, which is somewhat eye-opening in that the majority of licenses on the list were revoked for failure to pay taxes.

New Yorks excess line association, the Excess Line Association of New York (ELANY), has updated its list of approved E&S insurers.

Georgia has added an “Agent – ​​Georgia Access” line of authority, effective August 12, 2022, which requires some new non-uniform application questions and is only eligible for those who concurrently hold an accident and illness line of authority.

Arizona effective September 24, 2022, it will waive initial license fees for first-time insurance license applicants in the state whose family income falls at or below 200 percent of federal poverty guidelines, or who is the spouse of an active duty military service member, or who is a veteran honorably discharged for two years or less when they apply.

Colorado amended its title insurance regulation to include a requirement that an insurer either issue a policy within 90 days or report to the Colorado Division of Insurance within 30 days that the agent or agency did not deliver the policy.

Alabama has posted requests for price changes from insurers that offer ACA (Affordable Care Act) compliant health care plans in the state, which you can view here.

Pennsylvania The Surplus Lines Association has issued a bulletin warning surplus lines producers that if they charge a fee on policies in addition to collecting a commission, they are likely violating state law. (So, read between the lines, don’t.)

Utah has implemented a limited eligibility line for producers who want to sell pet insurance. And if you’re interested in reading about pet insurance, we’ve got that, too.

North Carolina converts the Company/Independent Adjuster and Self-Employed Adjuster license types to license classes, with no eligibility requirements. The change will take effect in mid-August for those working through the NIPR Producer Database (PDB).

Washington Insurance Commissioner Mike Kreidler’s rule banning credit scoring in insurance underwriting (which the commissioner referenced in the Commissioners’ Corner on this blog) was shot down by a court in late July. Judge Indu Thomas found Kreidler acted in good faith, but overstepped the bounds of his office, and said the issue should be decided by the legislature.

While these points of interest are not comprehensive, our knowledge of producer licensing and compliance maintenance is. See how AgentSync can help you look smarter today.

Legislation COVID-19

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