Compliance Management Solutions Blog | 3H Corporate Services

18 Best Practices for Insurance Agency Compliance – Part 3 - Creative Compliance

Written by Gary Harker, Esq. | Mar 22, 2023 4:00:00 AM

It has been a pleasure sharing the insurance agency compliance best practices expertise of the 3H Corporate Services team. If you have not yet read Part 1 and Part 2 in the series, I encourage you to do so. Two final points worth mentioning before we embark on today’s post: 1) these collective tips and best practices are certainly valuable, but they don’t replace the importance of engaging an expert insurance regulatory compliance attorney; and 2) it’s important to have proper and well-documented protocols and procedures in place and equally important to ensure your organization is adhering to them.

With that said, let’s explore the final six best practices.

13.  Implement Sales, Marketing and Email Best Practices

All sales and marketing communication must be accurate, true, and not confusing to the general public.

Having said that, each state has its own minimum requirements when it comes to sales and marketing communications. Of these California’s requirements are perhaps the most restrictive. Accordingly, if you operate nationally and/or in the state of California, the following will apply in circumstances where sales and marketing communications are sent to a California insured:

  • A producer’s license number must be printed on a licensee’s business card and letterhead
  • The licensee’s individual license number must appear adjacent to or on the line below his/her name or title on email communications
  • Both the individual’s and agency’s license numbers must appear, adjacent to their names, if an individual licensee sends an email while working for a licensed agency, and both the individual’s and the agency’s names appear anywhere in the email

Furthermore, the license numbers must be in a type size that is no smaller than the largest of any street address, email address, or telephone number of the licensee. For example, if an email includes a 10-point street address, an 11-point email address, and a 12-point telephone number, the license number must be at least 12-point.

14.  Pay Attention to Your Agency Website(s)

Your agency’s website should not be overlooked and should be included in your compliance program.

A well-constructed website, amongst other things, should:

  • Comply with Unfair Trade Practices statutes nationwide
  • Include your agency’s Privacy Policy and Website User Terms
  • Contain a disclaimer if insurance products offered are not available in certain states
  • Only contain statements that are accurate, true, and not confusing to the general public
  • Contain your agency’s California license number if you are conducting business in California  

15.  Understand the Regulations Pertaining to the Use of Unlicensed Partner Websites

If you are utilizing an unlicensed partner’s website for promotional purposes, you need to be aware of the restrictions associated with doing so. These include:

  • Avoid content which rises to the level of solicitation
  • Avoid discussion of, or reference to, policy terms, conditions, and rates

Additionally, and consistent with the restrictions detailed in Part 2 of this series, any unlicensed partner may not receive compensation which is linked to the placement of insurance, or the commission received pursuant to the placement of insurance.

16.  Maintain Secretary of State (or analogous state agency) Registrations

Your agency must be registered with the Secretary of State (SOS) in each state where it is conducting business as determined by each state’s applicable laws. SOS registrations obtained must be maintained in good standing. To maintain good-standing status, periodic reports are required to be prepared and filed, when due, and a Statutory Registered Agent, where required, must be appointed, and maintained in each registered state. Knowing what needs to be filed when, and with whom, can be a time-consuming juggling act. Lapses are common and can result in revocation of authority to transact business.

17.  Maintain Department of Revenue Registrations

Make certain your agency is registered with the Department of Revenue in states where it is licensed and transacting insurance business, as required pursuant to each state’s tax code. As noted in Part 1 of this series, the filing footprint you establish can significantly impact filing fees and ongoing tax liabilities. I cannot overstate the value of consulting an experienced insurance regulatory professional. Feel free to get in touch and we can share how we have helped some clients save tens of thousands of dollars through prudent filing footprint strategies.

18.  File Surplus Lines Reports and Taxes on Time

You can avoid significant statutory fines and penalties by filing surplus lines policy placements, premium tax periodic reports, and premium taxes promptly. Filing requirements and deadlines vary from state to state so having the proper protocols in place is essential.

Conclusion

For the past 20 years we have helped hundreds of clients establish, enhance, and maintain exemplary compliance programs. The insurance compliance best practices we have shared here, and in Part 1 and Part 2 of this series, represent some of the most common areas where we see compliance protocol shortfalls. These 18 guidelines are hardly exhaustive, and every agency is unique. Your protocols need to be tailored to your specific agency’s circumstances.

I hope you have found these posts thought provoking and useful in considering your agency’s current compliance protocols, and any gaps related thereto. Of course, if you have any questions or need help getting started, please get in touch by submitting the form below or giving us a call today.

~Gary T. Harker, Esq., LL.M.