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Insurance 101: Agency-level licensing

This post is part of a series sponsored by AgentSync.

Often the administrative side, including the details of who needs which license at an insurance agency, is anything but uncomplicated.

In general, when we ask “Who needs an insurance license?”, Your friendly local agent comes with his tailored jacket, sculpted hair and always ready smile to think about. And you might be thinking, “Yeah, OF COURSE.”

But keep in mind that most states’ criteria for who needs a license are all those who “sell, apply for, or negotiate” insurance policies. And although producers may have a meeting with a carrier, they are ultimately likely to be downstream in the distribution channel, which means that in the end there are some intermediaries between them and the carrier. So, what does it look like when it comes to licensing for a particular agency?

Before we answer, we ask you to give us a brief revelation that we are insurance geeks, not legal researchers. Hopefully, this paragraph will get you started on licensing considerations, but if you need serious help or have non-theoretical questions about your situation, you want a compliance or legal specialist to help you.

DRLP license

When it comes to having a full stack license, your agency̵

7;s MVP is your designated responsible licensed producer (DRLP). Depending on the state, they can also be called your principal agent, your designated responsible person or any other variant of these themes.

DRLP’s function is largely supervision. Most government regulations technically require the DRLP to take over compliance oversight of all agents operating under them. Functionally, this is about responsibility: the DRLP is likely to be held accountable for all the agency’s actions.

Although some states do not require a principal agent to be licensed, or they allow multiple agents to cumulatively hold appropriate licenses, most states require the DRLP (s) to have licenses within all lines of government (LOA) under which the company sells. It is also a good idea to make sure that DRLP has a license in all the territories you sell in.

Insurance 101: Agency-level licensing

Now your other agents may not have an exclusive relationship with your agency. They can still sign contracts under other LOAs with other DRLPs and other agencies, but for the purposes of your specific agency, by and large, your DRLP’s licenses are = the agency’s possible licenses.

Keep in mind that because LOAs and industries vary from state to state, you need to consider that discrepancy in your DRLP licensing. For example, not all states have an adjustment license. If your resident state is a “non-licensing” state, you may need your DRLP to apply to a state that makes license adjustments and makes that state its designated home state for that license.

Seven states require the designated person on the register to be an official, director, partner or member of the Agency, but otherwise do not require a license for their designated responsible person. If you plan to work across states, you want to make sure your DRLP selects as many boxes as possible.

If you are looking for a DRLP, these questions can help you find your candidate:

  • Can your DRLP pass a background check? Failing a background check in one state can raise red flags in others.
  • Are they personally reliable? Some states have no backstop if your DRLP quits unexpectedly or loses its license – your business may need to stop selling and reusing in these circumstances. This is a good reason to consider making your DRLP a key member of the company that is unlikely to leave, even if the state does not require them to be.
  • Do they have the bandwidth for compliance monitoring? Many government regulations on abuse are based on whether someone in a position of authority knew or should have known that something shady was going on. If someone is a great salesperson, but they will be too busy to meet other agents and ensure decent compliance hygiene, they may not be the best option for DRLP.

DRLP licenses are quite important to an agency, because, in some states, if the DRLP license expires, the agency is also considered to have expired. Or, in the case of Vermont, a DRLP that quits unexpectedly terminates the agency’s ability to function as an insurance agency altogether. For more information on the keys to government DRLP licensing, check out this blog.

Get your agency licenses

Your agency’s license is, in most states, separate from your DRLP’s license or any license from the manufacturers operating under your agency.

It is worth noting that not all states require agencies to be licensed; Iowa, Rhode Island, Tennessee, Vermont and Wisconsin all consider agency licenses optional. BUT even if your state of residence is one of these five states, you will still want a license if you plan to have agents working across the country. Like the rules for producer licenses, maintaining your agency’s domestic license makes it easier to obtain licenses in your foreign states.

LOAs are also important here. Not only do most states require your DRLP (s) to have licenses in the areas of jurisdiction you sell, some states do not issue licenses for certain LOAs or industries. As this can be such an area of ​​disagreement, make sure you understand the laws of your resident state when they apply to producers, agencies and when they relate to other states.

For example, if you intend to trade in an industry that is not recognized by your resident state, foreign states will not have a license to evaluate for reciprocity. If so, you can apply in a state that recognizes that license class or industry and considers it to be your “designated home state.”

It is important to be incredibly sincere and honest when it comes to your license applications, as double-sidedness can have a snowball effect from closing many doors. Most state regulators are people with compassionate hearts; Past mistakes can often be explained, learned from, or forgiven, but lying or omitting information can pretty much drain that goodwill out of a situation.

Working across states also means working with different renewal dates for your agency license. Some government licenses are perpetual – you never have to renew! Others renew annually, every two years, every two years, or even every four years. To make it even more confusing, some renewals take place on the anniversary of your license date while others take place on your birthday. No wonder we came up with a solution to keep track of all this for you!

Insurance agency branch licensing

When working outside your state of residence, also understand that states differ in the protocol for registering and licensing individual branches in each state, and what that means. A selection of variations between states can give you an idea of ​​what to look for:

  • Most states require that only the main branch of an agency be licensed, and otherwise new branches do not require notification of SOS or DOI.
  • Some states require the authority to notify SOS or DOI of new branches.
  • A few states require branches to obtain a completely new license.

In addition to these variations, the definition of what constitutes a branch in each state also plays a major role. This became a point of contention early in the covid-19 pandemic as some states doubled that agents working from their own homes would need to register their homes as branches. California requires branch registration based on whether it stores records (which can be confusing in today’s world of cloud-based record keeping). And Texas’ changes in mid-2021 eased branch rules precisely because the state did not want a recently remote workforce to storm the office with registrations of housing offices.

If there seems to be a lot to keep in mind when maintaining agency license requirements, we think you’re right. That’s why AgentSync does what we do. See how we can help you.

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