Do the people who work in my agency need insurance licensing? That sounds like a simple question, doesn’t it? But, when asked this question, Supportive Insurance Services usually answers, “Maybe.” To determine where or not someone needs insurance licensing you have to review the functions they are performing.
In February 2000, the National Association of Insurance Commissioners (NAIC) adopted the Producer Licensing Model Act (PLMA). One key component of this act was the definitions of when a person needed insurance licensing. According to the model law, “A person shall not sell, solicit or negotiate insurance in this state….unless the person is licensed….” The law also defined exemptions for insurance licensing.
Who Needs Insurance Licensing
Let’s start with who needs insurance licensing. If a person is going to “sell”, “solicit” or “negotiate” insurance they must be licensed. The model law also provided us with definitions of each of these terms.
- “Sell” means to exchange a contract of insurance by any means, for money or its equivalent, on behalf of an insurance company.
- “Solicit” means attempting to sell insurance or asking or urging a person to apply for a particular kind of insurance from a particular company.
- “Negotiate” means the act of conferring directly with or offering advice directly to a purchaser or prospective purchaser of a particular contract of insurance concerning any of the substantive benefits, terms or conditions of the contract, provided that the person engaged in that act either sells insurance or obtains insurance from insurers for purchasers.
So, if the staff in your agency are performing any acts as described above, insurance licensing is required. And once he/she has obtained their resident license, they will also need to be licensed in any non-resident states if they will be working with residents in those states.
Who Doesn’t Need Insurance Licensing
Now that we know what acts require insurance licensing, let’s look at when a license isn’t necessary. Fortunately, the PLMA also outlines exemptions for insurance licensing. A license isn’t required of the following:
- An officer, director or employee of an insurer or of an insurance producer, provided that the officer, director or employee does not receive any commission on policies written or sold to insure risks residing, located or to be performed in this state and:
- The officer, director or employee’s activities are executive, administrative, managerial, clerical or a combination of these, and are only indirectly related to the sale, solicitation or negotiation of insurance; or
- The officer, director or employee’s function relates to underwriting, loss control, inspection or the processing, adjusting, investigating or settling of a claim on a contract of insurance; or
- The officer, director or employee is acting in the capacity of a special agent or agency supervisor assisting insurance producers where the person’s activities are limited to providing technical advice and assistance to licensed insurance producers and do not include the sale, solicitation or negotiation of insurance.
- A person who secures and furnishes information for the purpose of group life insurance, group property and casualty insurance, group annuities, group or blanket accident and health insurance; or for the purpose of enrolling individuals under plans; issuing certificates under plans or otherwise assisting in administering plans; or performs administrative services related to mass marketed property and casualty insurance; where no commission is paid to the person for the service.
- An employer or association or its officers, directors, employees, or the trustees of an employee trust plan, to the extent that the employers, officers, employees, director or trustees are engaged in the administration or operation of a program of employee benefits for the employer’s or association’s own employees or the employees of its subsidiaries or affiliates, which program involves the use of insurance issued by an insurer, as long as the employers, associations, officers, directors, employees or trustees are not in any manner compensated, directly or indirectly, by the company issuing the contracts.
- Employees of insurers or organizations employed by insurers who are engaging in the inspection, rating or classification of risks, or in the supervision of the training of insurance producers and who are not individually engaged in the sale, solicitation or negotiation of insurance.
- A person whose activities in this state are limited to advertising without the intent to solicit insurance in this state through communications in printed publications or other forms of electronic mass media whose distribution is not limited to residents of the state, provided that the person does not sell, solicit or negotiate insurance that would insure risks residing, located or to be performed in this state.
- A person who is not a resident of this state who sells, solicits or negotiates a contract of insurance for commercial property and casualty risks to an insured with risks located in more than one state insured under that contract, provided that that person is otherwise licensed as an insurance producer to sell, solicit or negotiate that insurance in the state where the insured maintains its principal place of business and the contract of insurance insures risks located in that state.
- A salaried full-time employee who counsels or advises his or her employer relative to the insurance interests of the employer or of the subsidiaries or business affiliates of the employer provided that the employee does not sell or solicit insurance or receive a commission.
While most states have adopted provisions from the PLMA, not all states use the exact language from the model act. If you have state specific questions, we would suggest you contact an attorney.
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The insurance licensing information provided on this blog is not legal advice and the reader is advised to consult an attorney for questions regarding the legal ramifications of this information.