Keeping insurance producers’ licenses and appointments compliant is a responsibility shared by nearly every organization in the insurance product-to-sale pipeline. Yet, knowing when a license is due to be renewed, understanding continuing education requirements, and accounting for parent licensing can make it challenging to stay on top of licensing for a single producer, let alone multiple producers with multiple lines of authority (LOA) in multiple states.
The process of submitting licenses for renewal is itself often riddled with human errors – and some mystery. Agencies often submit appointment requests and state license renewals into somewhat of a black hole: They don’t know when the carrier receives and approves the licenses or when the paperwork should be submitted to the state or National Insurance Producer Registry (NIPR).
All of these factors make it difficult for MGAs and other insurance distribution partners to prioritize license compliance, and tempt them to kick the responsibility down the line. If agents sign contracts saying that licensing is their responsibility, then MGAs have nothing to worry about, right? Unfortunately, no matter how much legalese you enlist, time and time again we see that regulators hold everyone in the sales pipeline accountable if they pay out a commission to someone not properly licensed and appointed by the state.
It’s one thing to say, “insurance licensing is complex,” but let’s take a look at what actually goes on behind the curtain.
State roles in producer licensing renewals
Agents may operate under two types of state license: Resident and nonresident.
Most insurance licenses are reciprocal across states, meaning getting licensed under a particular LOA is much easier in other states once a person has already acquired that license in their home state. The insurance agent’s home state, or “resident state,” is also where they must complete their continuing education (CE) requirements.
Typically, as long as an agent stays up-to-date on their resident state’s CE requirements, the other states are satisfied. However, there are exceptions – you’ll find that there are always exceptions when it comes to insurance regulations. In the case of CE requirements, one exception is that New York and California both don’t accept other states’ CE credits specifically for insurance claims adjusters.
Most resident and nonresident licenses expire after two years, although, again, exceptions abound. For instance, while California’s insurance licenses expire two years from the original month of issue, Kansas renews licenses in odd-numbered years or even-numbered years based on the year of the licensed insurance agent’s birth but not earlier than two years from their initial date of licensure.
Agencies usually renew insurance licenses on behalf of agents. What this often looks like:
- An agency checks with an agent to see if they are aware of any pending or finalized regulatory violations.
- If the agent is in good standing, the agency submits a renewal application to the states with upcoming expiration deadlines.
- The resident state checks to see if the agent has met their CE requirements, and then other states verify the agent’s information through NIPR and approve their renewal applications.
As previously stated, though, once you’ve kicked off the process, it can be hard to figure out how far along the process your renewal has gone. This lack of transparency can be anxiety-inducing when you’re running up against renewal deadlines.
Handling insurance license expirations
If the agency or the producer doesn’t submit a renewal by the state deadline and it expires:
- Some states immediately terminate the license, saying you didn’t meet the deadline, and you have to start over as if you were a brand new agent to be appointed and licensed in that state.
- Some states give agents a grace period of 15 to 30 days for renewal (there are many variations here, with some states throwing in added fees for passing the deadline).
- Some states terminate your license after the deadline but still give you a reinstatement date during which you can reapply to have your license reinstated.
Another consideration when it comes to licensing renewal is dependent licenses. Depending on the state, some LOAs are reliant on others, such as surplus licenses that are contingent on also having a property and casualty (P&C) license in some states. In these instances, agents cannot renew dependent licenses until they have renewed the parent license, as well. In our surplus lines example, that means an agent must first obtain a confirmation that the state has renewed their P&C license before they renew their surplus license.
Some of these variations were the driving force behind AgentSync – manually keeping track of deadlines and dates of submission and fulfilling all the criteria for state license renewals is A. LOT. OF. WORK. AgentSync gets expiration dates directly from NIPR and automatically gives the agency a breakdown of which producers have LOA renewal deadlines coming up, making it easy to submit renewal requests.
While we hope our discussion has shed some light on the complexities of license renewals and compliance, this post is by no means a comprehensive examination of the insurance producer license cycle. Please do your due diligence regarding the basic licensing requirements of every state in which you operate. If you’d like to see how AgentSync can help you better maintain your insurance agents’ license compliance, watch a demo of how AgentSync works.