Insurance Agent/Broker Licensing

INSURANCE AGENT/BROKER LICENSING

Growing your agency's business might require you to obtain licenses in other states. Most experienced agents/brokers comprehend and are willing to do what it takes to ensure that the commercial side of the transaction succeeds. However, some seem to forget all this hard work is wasted if project planning fails to allow adequate time to obtain proper licensing in the target state(s). 'Ramsey's Rules' outlined below will direct you toward obtaining and maintaining proper licenses to help your new venture prosper. (I assume that anyone who reads this article already holds insurance licenses in one or more states but needs (at least one) additional license in another state to take advantage of a business opportunity.

I am constantly reminded of the number of intelligent, thoughtful agency executives who for all intents and purposes jeopardize their business by accepting half-baked advice from someone they would not trust with their car and daughter on prom night.

Obtaining the licensing information as the first step of your new project/program (not your third, 15th or 23rd step). How do you go about obtaining this information? Contact the agent licensing section of the department of insurance of the target state and request a copy of its agent/broker license instructions and application forms (see the State Insurance Department Directory in back). Most states have their own specific, easy-to-follow instructions on the licensing process. Get this packet and quickly read through it even if you intend to delegate the project of obtaining the license to a member of your staff or retain a consultant or licensing service. In fact, reading over the instructions will give you a good idea of the time and effort involved in obtaining the necessary license and whether you or a staff member will have the time to prepare, file, and follow up on license issuance within the time constraints you are working under. You should consider retaining outside assistance when you plan to seek licenses in several states at the same time. Be sure that whoever is going to do this work can focus the necessary attention on the project to complete it as quickly as possible.

Remember, it is YOUR business and you had better look out for its best interests unless you are looking for a career change.

Clearly define how you intend to operate and identify the key points to be covered in licensing. Licensing services and consultants who do licensing work usually ask the client to complete a form which requests most of the information contained on state application forms. This information is then typed onto the appropriate state forms and returned to the client for rechecking, signature, and attachment of the proper fees. The problem with this approach is that planned operations might not match license authorization. That can mean trouble later, unless someone is willing to take a couple of extra minutes to be sure everything is right. The answer to simple questions such as, 'Will you write Life/Disability or Property/Casualty coverages or both?' and 'Do you intend to open an office in the target state or do you plan to operate from your existing office?' will help define the types of licenses needed. Whether you intend to conduct business as an individual, partnership, or corporation can have a direct bearing on whether a license can be obtained for that entity (a few states, such as Alabama, issue nonresident licenses only to individuals, not to partnerships or corporations). If you are seeking a license for a corporation, make sure that an application for individual licenses are also filed. When you receive an approval, make sure you have approval for the corporation and all individual transactors.

By carefully outlining how operations will be conducted, you can dictate whether you need to seek licensure as an agent, broker, managing general agency, surplus line broker, etc. Sometimes you find that you do not need to obtain a license in another state. For example, some states, such as California, do not require nonresidents to obtain a license to insure risks with incidental exposures in the state as long as the unlicensed nonresident does not enter the state to solicit, service, or inspect the entities insured; However, other states, such a Texas, do require nonresidents to be licensed under the same circumstances. Keep in mind that 'entering' the state may include obtaining information by mail and telephone as well as physical presence inside the state. Also, many states will not issue a surplus line broker's license to a nonresident except in connection with a risk retention group.

If your activities will involve related services by the same or by one or more related entities, such as a third-party administrator or claims adjuster, check to see if those activities require licensing as well and, if they are, be sure that those licenses are obtained as well for the corporations and all individuals involved. 'FC&S Bulletins' published by the National Underwriter Company and the 'State Licensing Requirements Guide' published by Pictorial, Inc. offer helpful summaries of state licensing procedures and provide invaluable overviews of each state's licensing and continuing education requirements. Even if someone else is going to do the licensing work for you, you should at least review the state's overview/summary.

If someone else will actually do the licensing work for you, it may be enough for you to review a state overview or summary during the application process. However, the individual handling the licensing work for you MUST obtain and review all applicable sections of the target state's insurance code. Once the license has been obtained, you will need access to a copy of the state insurance code, regulations, and bulletins. How can you obtain another state's insurance code? Some state departments of insurance sell or can refer you to a source for a relatively inexpensive copy of the state insurance code, the department's regulations, and the department's bulletins. Otherwise, contact the National Insurance Law Service (NILS) or another law book publisher. If you are comfortable 'surfing the net,' you will find pricey but instant access to on-line law libraries on the Internet. Another possible source is the law library maintained by a local bar association or a nearby law school.

This sounds cynical, but the people who drafted agent/broker licensing laws and regulations never considered whether the requirements being adopted would make it easier for the agent/broker to make a living. Just filling out the forms won't suffice. Most states require that you provide a copy of your license certified by your home state insurance department. If you are seeking licenses for a corporation, you probably will also need to obtain a copy of the articles of incorporation and/or certificate of good standing certified by your home state's Secretary of State. As a rule of thumb, it takes 30 to 60 days to gather all the information necessary to file the application. Once the application has been filed, don't expect to receive the approval by return mail: approval time frames of 60 to 90 days or even longer are not uncommon in certain states for certain types of licenses.

Because the licensing process can be terribly slow (even when the process moves quickly, it is very slow), you need to begin as soon as possible. Since you cannot start writing the program/account until you have the necessary licenses, processing delays may push you beyond your frustration tolerance level. However, all you can do is relax, breathe deeply, and try to make sure that you aren't the reason for the delay. Keep the ball in the department's court by making certain the application and any required supplemental information are complete in every respect. Many states will simply return an incomplete application without action. Once the application and all necessary supplements have been submitted, your application will be 'ripened' according to the season of the year in a big pile of similar forms. Discount any claims by license services or consultants that they can obtain the license you need significantly faster than anyone else on earth. To deliver on such a promise, it would be necessary to overcome the Universal Laws of Orderly Bureaucratic Work Flow and Form Processing. While occasional triumphs over this inertia have been reported, they are rarely confirmed by reliable sources or any documented evidence. Only a complete application will allow unimpeded progress step to step. Again, if you make it your business to know generally what's involved in obtaining the license(s) you need and if you monitor activities through periodic progress reports, you should be able to assess the quality and timeliness of the work being done on your behalf.

You should apply this rule to all licenses, permits, and/or corporate authorizations held. For example, don't assume that meeting your home state's continuing education requirements will be sufficient to retain the license(s) obtained from other states. If your home state does not have a continuing education requirement, you will probably need to meet the continuing education requirements for each state in which you are licensed. Also, maintaining corporate authority usually requires making one or two filings each year. Make sure that you, your attorney, a consultant you have retained, or someone on your staff is assigned to monitor and ensure that all requirements are met when due, that all necessary filings are made in a timely manner. Demand that your files be clearly documented to show what must be done, what has been done, when it was done, who received copies, the check number, the date, the amount of any fees paid, etc.

In summary, obtaining agent/broker licenses in new states can sometimes be a frustrating, humbling, time-consuming exercise which is nonetheless a necessary part of an agent/broker's success. In many ways, producer licensing is a lot like building a campfire: In the warmth of the glow, one can scarcely remember gathering the wood.

Alabama, 135 S. Union St., Montgomery, AL 36130, (205) 269-3570

Alaska, P.O. Box 110805, Juneau, AK 99811, (907) 465-2515

Arizona, 2910 N. 44th St., #210 Phoenix, AZ 85018, (602) 912-8466

Arkansas, 1123 University Ave., #400 Little Rock, AR 72204, (501) 686-2900

California, 700 L St., 4th Floor, Sacramento, CA 95814, (916) 322-3555

Colorado, 1560 Broadway, #850, Denver, CO 80202, (303) 894-7499

Connecticut, P.O. Box 816, Hartford, CT 06142, (203) 297-3800

Delaware, 841 Silver Lake Blvd., Dover, DE 19901, (302) 739-4251

Dist of Columbia, P.O. Box 37200, Washington, DC 20013, (202) 727-7940

Florida, 200 E. Gaines St., Tallahassee, FL 32399, (904) 922-3137

Georgia, 2 Martin Luther King Dr., Atlanta, GA 30334, (404) 656-2100

Hawaii, P.O. Box 3614, Honolulu, HI 96811, (808) 586-2780

Idaho, 500 S. 10th St., Boise, ID 83720, (208) 334-2250

Illinois, 320 W. Washington St., Springfield, IL 62767, (217) 782-4515

Indiana, 311 W. Washington St., #300 Indianapolis, IN 46204, (317) 232-2389

Iowa, Lucas State Office Bldg., Des Moines, IA 50319, (515) 281-5705

Kansas, 420 S.W. 9th St., Topeka, KS 66612, (913) 296-3071

Kentucky, P.O. Box 517, Frankfort, KY 40602, (502) 564-3630

Louisiana, P.O. Box 94214, Capitol Sta. Baton Rouge, LA 70804, (504) 342-0856

Maine, State House Station #34, Augusta, ME 04333, (207) 582-8707

Maryland, 501 St. Paul Place, Baltimore, MD 21202, (410) 333-4056

Massachusetts, 470 Atlantic Ave., Boston, MA 02110, (617) 727-7189

Michigan, P.O. Box 30220, Lansing, MI 48909, (517) 373-0234

Minnesota, 133 East 7th St., St. Paul, MN 55101, (612) 296-6319

Mississippi P.O. Box 79, Jackson, MS 39021, (601) 359-3569

Missouri, P.O. Box 690, Jefferson City, MO 65102, (314) 751-4126

Montana, Mitchell Bldg., Helena, MT 59601, (406) 444-2040

Nebraska, 941 O St., #400, Lincoln, NE 68508, (402) 471-2201

Nevada, 1665 Hot Springs Rd., Carson City, NV 89710, (702) 885-4270

New Hampshire, 169 Manchester St., Concord, NH 03301, (603) 271-2261

New Jersey, 20 W. State St., #CN-325 Trenton, NJ 08625, (609) 292-4338

New Mexico, P.O. Box 1269, Santa Fe, NM 87504, (505) 827-4500

New York, Rockefeller Plaza, Bldg. 1, Albany, NY 12257, (518) 474-6630

North Carolina, P.O. Box 26267, Raleigh, NC 27611, (919) 733-7487

North Dakota 600 East Blvd., Bismarck, ND 58505, (701) 224-2440

Ohio, 2100 Stella Ct., Columbus, OH 43215, (614) 644-2665

Oklahoma, P.O. Box 53408, Oklahoma City, OK 73152, (405) 521-3916

Oregon, 21 Labor & Industries Bldg. Salem, OR 97310, (503) 378-4511

Pennsylvania, Strawberry Square, 13th Fl., Harrisburg, PA 17120, (717) 783-2181

Rhode Island, 233 Richmond St., #233 Providence, RI 02903, (401) 277-2223

South Carolina, P.O. Box 100105, Columbia, SC 29202, (803) 737-6110

South Dakota, 910 E. Sioux Ave., Pierre, SD 57501, (605) 773-3563

Tennessee, 500 James Robertson Pkwy., Nashville, TN 37243, (615) 741-2693

Texas, P.O. Box 149104, Austin, TX 78786, (512) 322-3503

Utah, State Office Bldg., #3110, Salt Lake City, UT 84114, (801) 538-3800

Vermont, 120 State St., Montpelier, VT 05602, (802) 828-3301

Virginia, Box 1157, Richmond, VA 23209, (804) 786-3741

Washington, Ins. Bldg., #A.Q. 21, Olympia, WA 98504, (206) 753-7307

West Virginia, P.O. Box 50541, Charleston, WV 25305, (304) 558-0610

Wisconsin, P.O. Box 7872, Madison, WI 53707, (608) 266-8699

Wyoming, 122 W. 25th St., Cheyenne, WY 82002, (307) 777-7401

This article was written by Marcus Ramsey, CPCU, principal of Ramsey Consulting Services, 14026 Donart Drive, Poway, CA 92064, (619) 748-6315.