License Types
Unfair Trade Practices
In addition to licensing, the state is responsible for the way agents conduct business within the state. Below are the prohibited practices many states outline in their insurance codes. 1. Misrepresentation - Cannot misrepresent or falsely advertise terms or benefits of a policy; must be accurate and honest. 2. Rebating or Prohibited Inducements - Giving or offering some benefit other than those specific in the policy - gifts, cash, etc. - to get the customer to buy. 3. Twisting - Convincing the customer to cancel already existing insurance and buy another policy from the agent, to the detriment of the insured. 4. Unfair Discrimination - Giving a lower or higher rate than another insured in identical circumstance or accepting a bribe from a customer to provide insurance or a lower premium. 5. Sliding - Sliding is when an agent slides in a coverage or product without the insured's consent or implies that the additional product is required by law when it's not. Example: Sally really improved her cross sell numbers when she included the premium for an umbrella policy in with the homeowner premium so customers thought it was just one policy. After all, she knew they needed the umbrella coverage. 6. Fraud - A fraudulent insurance act is any illegal act that is committed while engaged in the business of insurance and intended to defraud. Example: Ben wrote a new policy for a customer and collected the insurance premium. However, he never turned in the insurance application to the company and kept the premium. 7. Claims Settlement - Claims adjusters are also held to high ethical standards and are subject to disciplinary action if found engaging in unfair claims settlement practices. Some examples of unfair claims settlement practices: Misrepresenting material facts of the claim to claimants, denying claims without conducting reasonable investigations, or failing to implement standards for proper investigation of claims. 8. False Advertising - It is illegal to create or circulate any advertisement about an insurance business or agent that is untrue, deceptive or misleading. 9. Unfair Comparison - Agents and companies are not permitted to make unfair comparisons of policies, benefits, rates or compare non-comparable policies. 10. Boycott, Coercion, Intimidation - It is illegal to boycott, coerce or intimidate anyone to result in an unreasonable restraint of or monopoly in the insurance business. Example: An agent decided to run a local independent agency out of town by organizing all of the groups he was affiliated with in town to spread the word that the agency principles were involved in the drug cartel. The accusation was false but resulted in the agency losing many customers. This is an example of the unfair trade practice of boycott. 11. Defamation - Oral or written statement that is false and intended to defame the character of any insurer or agent. 12. Controlled Business - Licensees may not become licensed solely to insure property in which they have an interest. The interest may be directly or through family or employment relationships. Example: Bob's family is in the real estate business. Their firm includes residential development, real estate sales and mortgage brokerage. Bob would like to get his insurance license so that he can write the homeowner insurance on the properties they sell. This is considered controlled business and Bob may not get a license solely for that purpose.
License requirements
It is illegal for someone to sell insurance without first obtaining a license from the state to do so. Below are the agent's responsibilities regarding licensing and records. Application Process- The application process for an insurance license includes a background check. The DOI has the right to refuse a license if the applicant has committed a felony, misdemeanor or been involved in dishonest activity that relates to the responsibilities of the license. Some states also require licensees to renew their licenses and pay a fee every renewal period. Examination- Each state requires applicants to pass a license examination for the license type desired. Exam content outlines are made available for review. Review the exam requirements for your state including the number of test attempts permitted. Pre-Licensing Education - Applicants for a license must learn the concepts, laws and practices of the profession and prepare for the license examination. Some states set requirements for the pre-licensing study. Agent's Records - Agents must maintain records of policy transactions either electronically or paper files including applications, endorsements and documents signed by the insured. Agents must also make their records available to the insurance commissioner or office of insurance regulation upon request.
Types of Licenses
Agent License (Producer) - The agent license has two types in some states - general lines agent and a personal lines only agent. The General Lines Agent is authorized to transact both personal and commercial insurance while the Personal Lines Agent is only authorized to transact non-commercial lines used in the personal insurance market such as auto, homeowners and personal liability, for example. • Captive - These producers are employees of the insurance company and their compensation comes in the form of commission and/or salary from their employer. • Independent - Independent agents/producers work for an agency and may represent multiple insurance companies. They receive commission directly from the companies they write insurance policies for and may have some ownership of the business they write. Customer/Insurance Service Rep - Persons who perform assigned duties related to property and casualty insurance are required to hold a customer or insurance representative license. The license authorizes them to explain insurance coverage, describe insurance products, quote premiums, and service policies. They may also issue binders with the approval of their managing agent. Limited License - Agents can be issued a license to sell only one type of insurance such as personal auto insurance only. Limited licenses are also issued for selling other single lines such as travel insurance, prearranged funeral insurance, title insurance or self-storage insurance. In some cases the agent may sell the limited line if he has a producer license for that type of insurance. For example someone with a life insurance producer may sell prearrange funeral insurance since it is a form of life insurance. A producer may also qualify to sell the product with a limited line license only. Non-Resident - Agents may also apply for non-resident licenses once they have a licensing in their home state. Non-resident licensed agents have the same rights and privileges as a resident license holder. States often have reciprocal licensing agreements with other states which expedites the processing. Adjuster - States require employees who investigate and adjust losses on behalf of the insurer to be licensed. Adjusting a loss involves determining how policy coverage applies and making the appropriate claims payments. Agency/Managing General Agent - Managers of agencies or agents are also licensed professionals. Other Licenses - Some states also offer other licenses. Surplus Lines Agents sell more specialized insurance such as Lloyd's of London or other surplus lines that provide coverage for the unusual or high risk scenarios. Surplus Lines Agents must be licensed in their state to sell the lines of business they represent. Risk Managers are licensed but may not receive commission from the sale of insurance. Emergency or temporary licenses are issued only for a short period time and are used when insurance business has to transition to a family member because of death or disability of the agent. Insurance Consultants provide insurance guidance for a fee with respect to the benefits, advantages or disadvantages of insurance policies. Consultants charge for their expertise and advice.
Maintaining a License
Agents are responsible for maintaining their license. In order to do so, they must be aware of the following: Appointments - Agents must ensure that they are appointed by each company they represent. Appointments are filed by the company and remain in place until terminated or withdrawn. If an agent holds a license but is not appointed by any company for a period of time, their license may be terminated due to the inactivity. Communicating w/ DOI - Agents must notify the DOI of a change in their mailing address, a felony conviction or administrative action taken against them. Continuing Education - Agents have a responsibility to stay current on the insurance laws and practices in their state. Each state establishes continuing education requirements including the number of CE hours per license renewal period. The requirements may also include specific topics as established by the state. Agents are responsible for ensuring that the state has received evidence of course completions. Failure to comply with the continuing education requirements can result in a disciplinary action such as an appointment or license termination. Professional Behavior - The Insurance Commissioner may deny, suspend, terminate, or refuse to renew a licensee who violates the state insurance laws, has failed to maintain the qualifications of the license including continuing education, committed a felony or engaged in any unethical trade practices.
