By: Jason L. Perez
Department Authorized Insurance Education Provider
⭐️⭐️⭐️⭐️⭐️ | The Insurance School .com
Florida Insurance Pre-Licensing Course
Episode Seven(a)
DFS | Insurance AGENCY Licensing.
iLaw Episode Seven (a)
DFS | Insurance AGENCY Licensing.
Florida | CFO / DFS Regulatory Authority
– DFS.(L)IB1 [624.307] Authority to PUBLISH Information to Floridians.
• [ Identify ] Purpose of Insurance Licensing
[ Note ] Florida Insurance Agent Licensing
Insurance Agent Licensing
The Application
New/First time Applicants for licensing submit under oath, a complete and signed application. If necessary, an applicant may authorize a third party to complete, submit and *even sign the application on their behalf. Even if an authorized third-party completes the application, the applicant is liable for misrepresentations.
Same rules apply when you’re creating an agency.
ALL Authorized Licensees can create and build an agency. No special licensing requirements. No minimum time in the industry or production minimums. In fact, you can form an agency the moment you’re licensed and authorized to sell in Florida.
Insurance Licensing Applications ask for basic information…
[ Identify ] 69B-215.235 Use of Designations.
ü A designation is any combination of words, any acronym standing for a combination of words or any job title that indicates or implies that a licensee has special knowledge or training in advising or servicing consumers beyond the knowledge or training required for the license held.
Insurance Agency Licensing
* 5 Chapter 626; [.015] Terminology relevant to Licensing and Appointments, [.311] Scope of License, [.8305] Un-licensed transaction of Health Insurance, [.172] Insurance Agency Licensing, 6 EXAM 10.
An insurance Agency is typically a business location and not an individual although individuals may choose to incorporate themselves and assume a business name. Agencies are sales and marketing entities engaged in the business of insurance and therefore the officers, active agents and employees must all be licensed unless the work performed is administrative in nature.
ü The term Insurance Agency does not include Insurers and Adjusters.
Applying for an Insurance Agency License
* Qualified licensees can create an Insurance Agency by filing a written application with the Department which issues a license to each agency upon approval of their application.
Applications for creating an insurance agency must include the identities of each owner, partner, officer, director, president, senior vice president, secretary, treasurer, and limited liability company member who directs or participates in the management or control of the insurance agency.
Once an application is issued, each agency location must clearly display the license so it’s visible to anyone who enters the agency location.
The majority, if not all insurance related applications we’ll address within this course require signatures from the applicant however as with licensing and appointment applications, the parties to the Insurance Agency Application can have a third (3rd) party complete, sign and submit the application on the Agency’s behalf.
Regardless of who completes and submits the application to the Department or Office of Insurance Regulation, it is the responsibility of the applicants to ensure all the information contained within the application is accurate and free of material misstatements and misrepresentations.
The application for an insurance agency license must include,
Ø The name of any agency bank account, or otherwise.
Ø Home address of all entities and individuals required to be listed in the Agency Application,
Ø Agency name and principal business street address in addition to all relevant contact information such as the email address of the registered agent or individual authorized to accept service on behalf of the agency.
Ø Physical address of each branch agency, including its name, e-mail address, telephone number(s), and date that the branch location began transacting insurance.
Ø Name of the agent in full-time charge (Agent in Charge or AIC) of the agency office, including branch locations, and his or her corresponding location.
Ø Fingerprints of each entity party to the application which includes a sole proprietor, individuals listed within the application and individuals who directs or participates in the management or control of an incorporated agency whose shares are not traded on a securities exchange.
Ø Any additional information which enables the department to ascertain the trustworthiness and competence of the individuals listed on the application and to ascertain that such persons meet the requirements of this code. However, the department may not require that credit or character reports be submitted for persons required to be listed on the application.
® The Department has the right to disapprove the use of any true or fictitious name, other than the bona fide natural name of an individual. Once issued, the insurance agency license will remain in force until canceled, suspended, revoked, terminated or expires by operation of law.
Insurance Agencies
Insurance Agencies advertise insurance policies to the public. Like most other businesses, insurance agencies hire salespeople, customer service and administrative support.
Insurance agencies aren’t required to have a physical business location or even employees. An Independent Agent – Solopreneur can transform themselves into an agency and advertise to the public under their business name.
If an agency does hire UN-Licensed Employees like, a receptionist or administrators, those employees are NOT ALLOWED to perform insurance agent type activities.
• When unlicensed employees continuously perform duties considered to be the business of insurance, they’re in fact “unauthorized” and the consequences may lead to penalties for the Agency, Agent In Charge (AIC) and the employee…
Ignorance of the law is never a defense.
An insurance agency, regardless of how many “Branch locations” they have, must have proper full-time management in each location if, they intend on conducting insurance related business full-time at each location. This designated management is called an “Agent in Charge”.
When and Agency sells only one line of insurance, the Agent In Charge (AIC) of that agency must be properly licensed and appointed for that specific class of insurance. Agencies offering two or more types of insurance lines, require their Agent in Charge to be authorized/licensed for at least two (2) of the lines of coverage offered by the agency they manage#.
® Imagine for a moment we’re discussing an Agency which solicits, Health, Life, Annuities and Auto Insurance. The AIC is not required to possess all licenses but, must possess at least two licenses which correspond with the classes of insurance being offered.
The Agent in Charge is accountable for the actions of the personal under their management which means they’re accountable for the misconducts and violations which occur while they’re acting on behalf of the Agency.
On the flip side, Florida Code isn’t designed to punish innocent people. Unethical individuals are everywhere, and their tactics are typically creative and cleverly disguised which is why the Agent in Charge isn’t criminally liable for specific violations which occur on their watch unless they were aware or should have been aware of the violation and missed it because of gross negligence.
® If no Agent-In-Charge is appointed after 90-Days, the Agency License is Terminated.
Insurance Agency Management
Agent in Charge | Insurance Agency Management
A BLAST FROM THE PAST
Insurance Insights; Compliance Topic of the Month
Volume 6, No. 6 – June 2017
* Agent in Charge is defined by the Florida Insurance Code as; the licensed and appointed agent responsible for the supervision of ALL individuals within the agency environment they personally manage. Active management of an entity does not insinuate active participation by the Agent in Charge in any specific way, nor does suggest the AIC interacts with the general-public. The designation refers to Management only.
An Agent in Charge may represent more than one branch location provided regulated insurance activities such as binding coverage or soliciting prospects don’t occur while the Agent in Charge isn’t present. This type of arrangement wouldn’t be uncommon for an agency with two (2) or more locations where the primary branch performs typical insurance related sales activities while the second (2nd) location handles administrative and customer service type activities.
Authorized insurance agencies must be under the full-time supervision of a properly licensed, appointed and identified Agent in Charge. To qualify, an AIC’s licenses must correspond with the line(s) of insurance being transacted at the branch location they oversee. It’s not uncommon for an agency to have multiple branches. In these instances, either a single individual may be appointed the AIC over all locations or different AIC may be designated for each individual location.
Regardless, if one or more individuals are designated, an agency is required to identify a qualified Agent in Charge to the Department for each location which conducts the business of insurance. An AIC may be appointed to represent multiple branch locations as long as,
ü Insurance activities which requiring proper licensing as an insurance agent do not occur at the location(s) when the AIC or other appropriately licensed and appointed individual is not physically present and,
ü Unlicensed employees at the location(s) do not engage in insurance activities which require licensure as an insurance agent or customer representative.
To express similarities and the consistency of Insurance regulation, let’s take a moment to identify the supervisory entity for an Insurer and an Insurance Education Provider, known as the Managing General Agent and School Official.
Designating or Changing an Agent in Charge
* To designate an AIC, agencies must identify the individual to the Department by going to the Department website (www.MyFloridaCFO.com/Division/Agent) and logging in to the agency’s “MyProfile” account. From here the next steps are relatively easy, simply provide the agent’s name, license number, and physical address of the insurance agency location.
An agency may change an AIC at any time provided they utilize the Department website to report the change to the DFS within 30 days. Unlike the grace periods which pertain to the termination of an insurer appointment because of the potential impact on future revenue, the AIC designation change goes into effect immediately upon notification.
® Once again… Notice the need for up-dated information. 30 Day notice when it pertains to updating relevant contact information with the Department. Insurance Agencies, Insurers and Agents are all subject to the same 30 days grace period.
An insurance agency location is prohibited from conducting the business of insurance unless an AIC is designated and actively providing supervisory services to the agency during the hours of operation. For whatever reason, if an AIC were to end their affiliation with the agency, the agency would be required by Florida Insurance Code to designate another AIC within 30 days. If no new AIC is appointed the agency license will expire on the 90th day.
Agent In Charge
Supervising Un-licensed agency personnel.
I promised we’d stay focused on our re-occurring theme of proper Authorization and to stay true I’m going to reiterate; under no circumstance is an individual allowed to conduct the business of insurance without being properly authorized. Well, this isn’t completely true… exemptions do in fact exist. Un-licensed agency employees who work at a branch office under the care of an Agent in Charge, are on occasion going to inadvertently engage in activities defined as prohibited.
The AIC of an insurance agency is accountable for the misconduct of individuals under their supervision (licensed or un-licensed) acting on behalf of the agency. The AIC is not however, criminally liable for the misconduct unless they personally committed the act, had knowledge of the activity and did nothing or should have known of the activities/facts which constituted the violation.
Agency Employees
An agency employee is an individual who receives a salary, devotes their time toward administrative task and receives no commissions or bonuses for work performed. Since the employee is part of the insurance agency environment, it’s understood on occasion they may incidentally be required to accept an insurance application, provide a premium quote and/or receive premium payments in instances where a client comes into the office where they’re employed unannounced.
® The exemption for performing insurance related task only pertains to instances where an un-announced consumer enters a registered branch location.
Since the employee did not initiate contact with the individual, the contact is deemed inadvertent because it was the individual who initiated random/un-scheduled contact with the agency. In these instances (only), the employee would be within their scope of authority to take an application, quote a rate or accept a premium.
Agent in Charge (VS) Managing General Agent
10
* Managing General Agent (MGA); means any person managing all or part of an insurance business for an insurer.
Although specific responsibilities will vary between insurers, Florida Code acknowledges the responsibilities of an MGA as the management of a separate/individual divisions or departments of an entity such as the underwriting office, and sales. It’s not uncommon for a Managing General Agent to not be known as such within the organization which is why Florida Code defines performance criteria which would deem an individual as an MGA.
The first criteria used to determine MGA status pertains to sales volume. If an individual acting on behalf of an insurer either personally or indirectly through the combined volume of a sales team, produces or underwrites an amount of gross direct written premium equal to or more than 5 percent of the policyholder surplus (as reported in the last annual statement of the insurer) in any single quarter or year.
In addition to the gross volume conditions an individual must also perform or be responsible for at least one more of the following business activities.
ü Adjusts or pays claims.
ü Negotiates reinsurance on behalf of the insurer.
Individuals prohibited from being
a Managing General Agent…
ü Insurer Employee
ü A United States manager of the United States branch of an alien insurer,
ü An underwriting manager under the common control of the insurer who manages all the insurance operations of the insurer (pursuant to a contract), and whose compensation is not based on the volume of premiums written,
ü Administrators, (AND) The Attorney in Fact authorized by and acting for the subscribers of a reciprocal insurer under powers of attorney.
Furnishing Supplies to Unlicensed People.
• Un-licensed individuals distributing insurance related materials creates a Civil Liability.
It is prohibited for authorized entities to provide un-licensed individuals with forms or any other supplies which may be used to solicit business on their behalf.
An Authorized Entity such as; Insurer, Managing General Agent, Insurance Agency, Agent in Charge or an Independent Agent, whether directly or indirectly through a representative is prohibited from furnishing any blank forms, applications, stationery, or other supplies to be used in soliciting, negotiating, or effecting contracts of insurance on its behalf unless the supplies relate to a class of business for which the agent is licensed and appointed, whether for that insurer or another insurer.
– If a licensee were to represent an insurer who they were not authorized to represent to assist another agent, they’d also be subject to civil liabilities if any were to arise. The extent and manner of their liability would be the same as if the agent had been authorized by the insurer to act on their behalf.
Professional Limitations of Un-Licensed Agency Employee
Defining basic insurance related activities and the occasional exemption.
• The binding of insurance coverage is not considered an administrative duty. The implementation of an insurance strategy is a long-term financial decision. Consumers should have a competent licensed professional assisting them.
Un-Licensed employees are
prohibited from binding policies.
Unfortunately, ignorance is not a legal defense. Un-authorized insurance violations are punishable regardless of if intentional or not. Florida’s regulators make every effort to clearly define marketplace standards. The following segments will elaborate on a several Level One (1) type activity common to the business of insurance such as,
- What does the Department considers taking an application from a prospect and providing quotes?
- What constitutes incidental contact between Un-Licensed employees and people like clients or prospects who may walk into the agency unannounced.
To help better illustrate they type of issues which frequently arise, we’ll sprinkle in a few recent un-licensed agency personnel violations to discuss how they may have impacted the Agency and Agent in Charge. Sometimes contact between an un-licensed employee and a consumer occurs, if this contact is incidental then an exemption exists for light insurance related contact.
On the flip side,*IF the employee-initiated contact with the intention of enticing a consumer into the office then performed insurance related activities, the interaction can’t be deemed “Incidental”. Depending on the nature of the employee/client interaction either no violation has occurred or, both the AIC and employee are guilty of un-authorized insurance activities. Of course, the Agent in Charge would only be implemented if they were aware of the employees’ un-authorized activities.
® Let’s identify and discuss further what is meant by “incidental”.
Incidental Insurance Related Contact:
The three (3) unpredictable 10% or less rules.
It’s industry standard for Authorized insurance entities (including licensed agents) to employ unlicensed personnel to work in an administrative capacity. Typically, these employees perform receptionist, data processing, customer service and receptionist type task but on occasion may be required to accept a policy premium or assist with insurance policy relevant paperwork.
Regardless of whether the employee is in the presence of a licensee or Agent in Charge, they’re unlicensed and therefore prohibited from performing certain high level insurance related activities such as explaining or comparing policy benefits to prospective clients.
On the flip side, the Department and relevant regulatory entities understood “incidental contact” between unlicensed employees and consumer will occur, so it became necessary to define permissible the scope of these occasional interactions within the “Incidental” designation.
To qualify as incidental, work performed by employees must satisfy three (3) rules/requirements to deem the interaction between Un-licensed Employees and insurance consumer as Incidental.
1. The first is directly related to the employees’ job description and the amount of time they spend on a task typically reserved for a licensee.
a. Per legal definition, the time unlicensed employees spend on licensed producer related activities must consume no more than 10% of the employees’ total work time. This 10% is measured against the day-to-day activities of the employee.
2. The second requirement is simple. The exact amount and timing of the work being performed by the unlicensed employee must be unpredictable.
a. For instance, an agency/entity which accepts walk-in business may incur a situation where the Receptionist is the only person available when a prospect walks in to apply, or a client arrives to submit a premium payment.
The randomness of the client or prospects arrival was unscheduled and therefore impossible to predict. The Department deems the acceptance and conveyance of this information or payment to be Incidental and therefore permissible.
3. The third (3rd) requirement addresses the employee and agent workflow on an agency-wide aggregate level by supporting the randomness and maximum labor allotments of up to 10% which were identified within the other two (2) rules.
a. Basically, law states all work which is typically performed by a licensed producer can only be deemed incidental if the activity accounts for “10% or less of such work” when compared to the amount of such work done by the other agents, solicitors, and customer representatives in that office.
In the event the Department were to open an investigation into the activities of an agency’s unlicensed personnel where clear evidence of the “abuse/violation” isn’t verifiable, the Department has the authority to review the past 12 months’ worth of records. The following example is directly from statute…
« “If it were shown that over the course of a year an agent’s receptionist spent just 20 minutes a day doing work under the incidental exception, except that for four weeks during the year while the agent was hospitalized or on vacation the receptionist spent almost full-time taking applications and giving quotes, then this activity would still qualify as “incidental”.
® (Note that an agent’s illness or vacation does not expand the types of activities unlicensed staff may conduct.)”
Taking an Insurance Application:
* Completion of an insurance application must be performed by an Authorized licensee.
Insurance is a complex topic with seemingly limit-less customizable options and features for consumers to choose. The insurance application process which is the “gateway” to obtaining coverage is often overlooked as a formality and not overly important since you’re simply collecting basic personal information… Not True!
Completing an insurance application is a crucial part of the discovery process and designed to be interactive. In sales, it’s best to guide prospects (and/or clients), involving someone in the insurance buying process is significantly more effective than attempting to sell a value proposition. Being a resource to the public means you’re persuading prospects through involvement.
The insurance marketplace is an environment where licensees (sale-people) have a legally defined responsibility to accurately represent all marketplace entities involved (Consumers, insurers, and insurance agencies – if not independent).
Take for instance the appointment process, upon appointment a professional obligation to the insurer is created, as is when an individual chooses to get a job and accepts their job description.
To over-simplify things… The primary reason for an insurer to authorize an independent representative is to attract and identify potential clients. Therefore, we’re considered a trusted liaison… as stated within the Agent Code of Ethics. A liaison’s responsibility is to convey information accurately, which makes the collection of accurate information of the utmost importance.
In addition to providing basic information, a completed insurance application expresses a consumers’ willingness to explore their options further and move forward with the client – insurer relationship.
The insurance application signals the end of “courting” process and the beginning of a formal insurance underwriting. Compromising the discovery process has the potential to disrupt the insurance buying process which potentially opens the door for unnecessary miscommunications and underwriting issues. Knowledgeable licensees are necessary to the process, a prospective client should have the confidence to ask specific questions and rely on the representations being made.
#(iQ11)
® Representations are NOT Guaranteed to be True.
® Warranties are statements made on applications GUARANTEED to be TRUE!
It’s customary, not uncommon for consumers to require some clarification, perhaps they’d like to compare other coverages prior to moving forward. Regardless of the question, typically it will be insurance related and therefore must be guided by an authorized agent.
The definition of “Taking an application” couldn’t simpler, if you’re collecting the applicant’s information, filling in the blanks within the application then delivering it, you’re “Completing or Taking” an application.14 Only licensed insurance professionals can complete an application and provide sales support to prospective clients.
If a Managing General Agent or Agent in Charge were to allow an un-licensed employee to regularly perform task associated with completing an application, they’d be violating Florida’s Insurance Code and therefore subject to disciplinary actions.
Giving an Insurance Quote:
* We’re able to purchase insurance to protect against risk because, the probability of loss is statistically predictable. By referencing established underwriting guidelines form people fitting similar age, sex and physical health, we’re able to reasonably predict the cost of coverage.
ü To provide a quote, agents only need to collect basic information so, no formal underwriting is ever performed.
ü Since a quote is based on established guidelines, the Department doesn’t consider this information to be a professional judgment.
Statute goes on to explain how the delivery of a quote to a prospect doesn’t incinuate a policy is being processing, binded or interpreted. Nor does it suggest an application for coverage has been completed, policy benefits explained or insurance advice given.
It’s customary for insurance entities too utilize unlicensed employees for administrative type work. If discussing an actual branch location of an agency, it’s likely a prospect may randomly walk-in unsolicited to explore services offered or obtain a rate quote. Since the DFS doesn’t deem the delivery of a quote to be professional advice, an unlicensed employee may deliver a quote on occasions where an agent isn’t available.
This type of Incidental interaction is permitted however, providing quotes to prospects can’t be part of the employee’s job description.
ü These incidental encounters can’t occupy more than 10% of the employees’ time.
Insurance Careers Start Here
Neil Schwabe, M.G.A. LUTCF
Sarah Insure, Independent Broker
