Broker licensing, long a complicated subject, has been thrust into the spotlight here on the AgentSync blog once more as North Carolina drops its broker-specific licensing.
In many ways, North Carolina’s change will bring about more consistency between states when it comes to broker licensing. However, broker licensing is so nuanced even state to state that “more consistency” only goes about as far as you can throw it.
Before you go all-in on our content, please keep in mind: We’re not your compliance department. This isn’t legal advice. If you need legal advice, please consult an attorney. Otherwise, enjoy our cute and slightly snarktastic blog for its informative aspects.
Broad variation in broker licensing across states
Broker licensing is a source of consternation for those who like consistency and clarity in the insurance industry. To be clear, in this case, we’re talking about run-of-the-mill producers acting as product-agnostic intermediaries working on behalf of consumers, not to be confused with surplus lines brokers.
In some states, you need a specific license to operate as a broker. In most states, you can act as an insurance broker if you have a producer license. Some states require all producers to have carrier appointments, regardless of whether they’re brokers or not. Others prohibit someone acting as a broker from holding an appointment. And at least one state prohibits any type of activity that is held out as being an impartial broker service at all.
In fact, variations and nuances in broker regulation are so intriguing, we added it as a category for each jurisdiction in our Compliance Library (check out State Broker License Rule in applicable states).
North Carolina broker license discontinued
July 14, 2022, the North Carolina Department of Insurance issued a notice to all producers that, as of July 7, 2022, the DOI would no longer offer broker licenses, and that it would cancel all broker licenses as soon as is practicable.
If this seems like an abrupt way to retroactively inform someone that their license was no longer, it’s worth visiting the original broker regulation. Prior to the statute change, North Carolina required those with broker licenses to first hold insurance producer licenses. So, all brokers were definitely licensed insurance producers, although not all licensed insurance producers were brokers. Sort of a square-and-rectangle situation.
For producers who hope to continue working as brokers in the state of North Carolina, they may continue to operate as per usual, by providing broker services without being appointed to a carrier, and by going through a producer who is appointed by the desired carrier.
Per the North Carolina DOI notice:
“An Insurance Producer has always been able to act as an agent for companies with whom they are duly appointed. An Insurance Producer may now procure insurance for parties other than themselves through a duly authorized agent of an insurer without holding a Broker license.”
How does this affect those previously licensed as brokers?
For producers who also held a broker license, very little will actually change. Although the North Carolina DOI will cancel all broker licenses, the state made it very clear that the action will not be reported to other states as an “administrative action.” I.e., if you hold a broker license in another state, the cancellation of this license shouldn’t affect your license in other states or in any way reflect negatively on your professional reputation and record.
Previously, the North Carolina broker license included a provision that stated: “an applicant for a broker license must … file an application with a surety bond or cash, CDs, or securities as provided by statute.” The new regulation has rescinded this requirement, making it somewhat less restrictive to be a broker in the state.
“The changes also eliminate the requirement that resident Brokers maintain a bond. Resident licensees may notify their bond company to cancel the bond effective immediately,” the DOI news release said.
The future of insurance broker licensing in North Carolina
While this change may eliminate some confusion for carriers, agencies, and producers working across state lines, this may not be the final word on North Carolina’s insurance broker rules.
Other states have retooled regulations after running into situations where the pipeline of broker fees and agent commissions create a conflict of interest for all the involved insurance professionals. Consumers often don’t understand who operates under what function and who makes what when it comes to more complex insurance distribution relationships.
Additionally, judicial rulings in different states have come to opposing conclusions about whether an insurance broker should be held to a fiduciary standard on behalf of clients. For instance, in California, judicial precedent holds brokers to a fiduciary duty, meaning they must legally put their clients above their own commission interests.
Whether shifting broker regulations in North Carolina will make adjustments to tackle these emerging issues remains to be seen. For carriers, MGAs, and agencies that hope to stay on top of the changing regulatory landscape for insurance licensing, see how AgentSync Manage can help.