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Why MGAs should proactively verify producer data

Why MGAs should proactively verify producer data

This post is part of a series sponsored by AgentSync.

Despite common misconceptions in the industry, managers of general agents and insurers (MGA and MGU) are also in various ways to proactively verify producer licenses.

Insurance companies are often burdened with producer compliance for appointments, and agencies usually work closely and personally with producers and their license compliance, but since MGAs and MGUs occupy the middle of an insurance distribution channel, there is a common misconception that they do not need to care about anyone. aspect of producer compliance.

Before we go into the reasons for being one step ahead of producer verification, remember that we are firm advocates of compliance, but our blog is not your compliance. So do your due diligence on your regulatory requirements.

Your MGA should verify producer data

If you̵

7;ve heard Reagan’s favorite Russian saying, “trust but verify,” you probably understand that just because your manufacturer says they’re licensed in five states and designated by your three favorite operators does not. Sometimes they have simply missed a deadline for renewal. Sometimes the error is not as easy to fix.

No matter why a manufacturer’s self-reported information may be inaccurate, if your MGA does not take steps to protect itself against bad data, you are taking unnecessary risks. Let’s look at some of the reasons why your insurance MGA or MGU should proactively verify your producer data against a source of truth:

Conveyor contracts can hold MGAs responsible for producer management

While all MGAs or MGUs are required to write and guarantee a certain amount of business on behalf of their carrier partners, there are many other tasks they can take on, such as paying claims or making producer appointments. Whatever information your MGA takes on should be stated in your contract with each insurance company.

Depending on the contract, you may have to hold the meetings on behalf of your carrier partner. If this is the case, your MGA mainly assumes responsibility for maintaining the insurance company’s supervision of the manufacturer’s compliance. If you are an MGA or MGU and you are interested in helping us understand more about your duties and responsibilities, please take our anonymous MGA Basic Survey.

Whether producer management rests on your shoulders or not, by proactively verifying producer licenses and appointment data, you protect your operator in a way that reduces both of your risks. It is a valuable service and one that gives you an advantage in their distribution channel.

Verification of producer licenses protects assigned commission payments

Almost every state and territory has a producer law that is in some way modeled on the National Association of Insurance Commissioner (NAIC) Producer Licensing Model Act, either in its current form or earlier versions. It is clear that no one can pay commission to anyone who operates outside the full license.

It’s easy to read that “paying commissions is a carrier problem”, but if you make money on your producers ‘sales through assigned commissions – where a carrier-producer contract “allocates” you some of your affiliated downstream producers’ commissions – then licensing rights are tied to your livelihood.

As a fun thought exercise, let’s imagine you’re recruiting an agency with top-selling producers who know how to move a product. Then, a few weeks or months after you open that flush line, the carrier realizes that the insurance agents have some uneven compliance. What does that commission loss do to your pipeline?

Verification of insurance license with growing and retaining upstream and downstream partners

Whether you are talking to operators or agencies, data is important. Everyone wants to know where you can sell and for whom. But if you do not verify producer licenses and meeting data, then you guess you have about as many agents that are probably good to sell in more or less any number of states. It’s not data.

Being able to talk about the facts about your producer licenses and appointments is an attractive feature of a partnership. Verification puts you at less risk for your partners and also talks about the quality of business you will add to their distribution chain.

M&A, MGA and producer management

The MGA space is one of the disturbances. Mergers and acquisitions are currently a fundamental part of the landscape within the MGA area, and just like expanding your insurance distribution network, it’s about being a party to M & As about good data. You’ve probably heard horror stories about advertised M&As that fall through or radically change price points halfway. It is often the case that internal data does not agree with the public opinion.

Verifying producer information not only assures potential buyers of your compliance risk level, but also saves you the reputation risk of a deteriorating deal.

Proactive risk protection with agency partners

Let’s take a Mario Puzo minute here and pretend you’re Michael Corleone. When do you want to know that Fredo has become angry? Is it after the assassination attempt? Or is it before?

If you forgive The Godfather references, the point here is that some careless agencies are not worth the risk they pose. But you may not realize it until it’s too late and your name appears in a deposit that explores the sales funnel named in an inappropriate sales investigation.

By proactively verifying insurance producer licenses, you are not just taking risks that each producer can pose. You also collect data that can clearly show you if you have an agency with a high-risk culture, an agency that poses a threat to your growth and your reputation.

If you’re ready to avoid heartache, see how AgentSync can help painlessly verify insurance manufacturers’ licensing and meeting information.

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