State insurance departments are moving toward sending notifications to licensed resident and nonresident producers via email.  In addition, states are moving from mailing the license to the producer to allowing the producer to print his/her insurance license from the state’s website.

Why the change? 

Insurance department budget cuts, new technology, speed to market, making the licensing process more efficient and generating additional revenue have brought about these insurance licensing changes.

The Colorado Division of Insurance reports that it receives from the Post Office approximately 200 notices monthly that a renewal notice is undeliverable.  The Division, like many other state insurance departments, charges a penalty fee for failure to report an address change within 30 days. 

Based on an average of 200 notices per month at $100 each, the Division potentially earns $2,000.  If the penalty fee is not paid in a timely manner, an additional penalty fee is charged.  Some states double the penalty fee. 

In addition, if the renewal notice is not received (due to failure to report an address change), many producers’ licenses will not be renewed on time or will expire… generating additional costs.  If the producer is found to be selling insurance without a valid license, there is an additional penalty fee.

Let’s do the math.

  • A licensed insurance producer fails to notify the state insurance departments of an address change.  The producer has licenses in 48 states.  Assuming the average penalty fee is $50 per state, the producer now owes $2,400 in penalty fees.  
  • This same producer does not renew his/her insurance licenses due to failure to report an address change.  Assuming 10 state insurance licenses are not renewed and the average reinstatement fee is $100 each, the producer now owes $1,000.
  • This same producer, not realizing his/her insurance license expired, is found selling insurance without a valid license in 5 states.  Assuming the penalty fee for this is $500 per state, the producer now owes $2,500 in penalty fees.

 Would you prefer to spend $5,900 on fines and penalties, or put the money to better use?  It’s your choice!

The insurance licensing information provided on this blog is not legal advice and the reader is advised to consult an attorney regarding application of this information in any particular situation.

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