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Exploring the Limits: What Non-Licensed Insurance Agency Employees Can and Cannot Do

In the ever-evolving world of insurance regulatory compliance, it can be challenging for agency owners and management to stay abreast of the constantly changing regulatory landscape. Insurance agencies are particularly vulnerable to rules and regulations that govern the activities of their non-licensed insurance agency employees, such as administrators and customer service representatives. Understanding the laws that govern non-licensed personnel is therefore paramount to protecting your agency from exposure by remaining compliant. The following, which should not be construed as legal advice, outlines some general guidelines pertaining to the type of activities non-licensed employees may undertake.

To the extent that specific situational advice is sought, I suggest you consult your insurance regulatory compliance attorney – or reach out to us here at 3H .

Authorized Non-licensee Activities

Non-licensed employees’ interactions with prospects or customers is generally permissible in so far as it is administrative in nature and free from the application of judgment or interpretation as to the terms of an insurance policy or coverage. Permissible activities generally include:

  • Answering administrative questions such as whether a premium has been received or reporting the expiration date of a policy as shown in the agency files.
  • Describing claims procedures to a customer (as may be read from agency files or a script and may only be done in the absence of judgment or interpretation).
  • Conveying basic information to existing clients at the direction of licensed agent (e.g., “Agent Smith asked me to tell you he received your paperwork on your new car, and it is covered under your existing policy effective immediately”; “Agent Smith asked me to let you know your claim has been allowed in full and you should receive your check in XX days.”).
  • Scheduling appointments (provided there is no discussion of coverage, cost, or related issues).
  • Referring prospects or customers to a licensed agent or producer; (e.g., upon receipt of inquiry, non-licensed employees may say, “Our sister company, XYZ Insurance Agency, offers [type of coverage]. May I connect you with a licensed agent who can speak with you specifically about that product?).
  • Word processing and data entry.
  • Assisting a licensee with advertising or mailing campaigns.
  • Accepting payments on existing policies that are made in the office (provided there is no discussion of coverage).
  • Securing expiration dates from prospects limited to the date the policy expires and the current carrier, and whether they would be interested in speaking to a licensed agent of producer.
  • Taking loss information from customers and reporting this information to the claims department.
  • Handling changes to existing policies that do not involve any discussion of coverages, or require the binding of additional coverages, increasing or decreasing coverages, removal of coverages, or the addition of vehicles.
  • Informing insureds as to coverages indicated in the policy record.
  • Receiving requests for coverage for transmittal to the licensed agent or producer (may not suggest coverage or provide advice).

Please note that the above is not a comprehensive list of non-licensees’ authorized activities. Should you encounter a specific item/activity not covered above, please consult your own insurance regulatory compliance attorney, or reach out to us here at 3H.

Prohibited Non-licensee Activities

Non-licensees are not permitted to perform any of the following activities:

  • Comparing insurance products.
  • Advising customers as to insurance needs or insurance matters.
  • Interpreting policies or coverages.
  • Binding new, additional or replacement coverage for new or existing customers.
  • Binding coverage on or recording additional property under existing policies.
  • Soliciting the sale of insurance by telephone, in person, or by other communication.
  • Interviewing customers for the purpose of developing information as part of the completion of an insurance policy application.

Conclusion:

It is crucial for agency owners and management and non-licensed insurance agency personnel to understand what a non-licensed individual is legally permitted and not permitted to do. While, as shown herein, there are many activities that non-licensed personnel can perform, there are also some clear boundaries that should not be crossed. If you have questions about what activities your non-licensed staff can perform, please call us or submit the form below and one of our specialists will be in touch.

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