Insurance 101: Regulating the Distribution Channel (and How AgentSync Can Help)

Previously, we elaborated on the distinction between partners in insurance distribution channels.

Now, let’s get more familiar with the regulators and agencies that house information about the rules and regulations around licensing as well as the license details for each firm and agent. We’ll also explain a little about some of the technical aspects of AgentSync that support an insurance business’s ability to keep licenses compliant.

State and territory governments

Each state sets its own rules and regulations for selling insurance for all insurance product lines.

With fifty states and six territorial governments, each with their own way of doing business, the rules for obtaining a license for a specific line of insurance can vary widely. It’s not just state legislatures, after all: Judicial rulings can change how those laws are interpreted. State insurance commissioners can issue guidelines and bulletins that shake up the process. Even procedural changes like new vendors for different state services can change the way business is processed in a given state.

Federal government

Since insurance is generally under the purview of state governments, not a lot happens at the federal level. When the fed does get involved, though, it is no small thing. The Affordable Care Act and the establishment of Medicaid and Medicare programs were all federal mandates, for example.

National Association of Insurance Commissioners

State insurance regulators created the National Association of Insurance Commissioners  (NAIC) in 1871 to address the need to coordinate regulation of multistate insurers. As you will quickly learn, very little progress has been made toward coordinating state regulations. 

The National Insurance Producer Registry (NIPR) was established in October 1996 as an independent non-profit affiliate of the NAIC. NIPR maintains the documented rules and regulations laid out by each  state as well as holding all license and appointment records via the NIPR Producer Database (PDB). NIPR also facilitates license/renewal, appointment/termination, and contact change request transactions for the states that have agreed to process transactions through NIPR’s Gateway. 

Each individual and agency licensed with the states receives a unique national producer number (NPN) that identifies them with NIPR and states. The intent was for the NPN to replace use of agents’ Social Security numbers (SSN), but not all states have gotten on board with that change, so many now require both an agent’s SSN and NPN to submit transactions.

AgentSync Support

The available integration with NIPR is where AgentSync comes in. First, AgentSync supports the NPN sync with NIPR to obtain the initial entity info report on a specific agent or agency. AgentSync also receives daily alerts from the NIPR PDB to ensure all information for each NPN is current. 

Since insurance carriers, agencies, and MGA/MGUs all have a responsibility to ensure agents are properly licensed and appointed, this is a valuable function. One which AgentSync performs very smoothly. AgentSync also supports the insurance distribution channel in a variety of other ways.

Insurance Carriers

In addition to ensuring the agent is properly licensed and appointed on a daily basis, insurance carriers can also submit appointment and termination transactions via AgentSync to the NIPR Gateway for processing by the states. Carriers also use several custom objects and processes within AgentSync to store and manage information about individual agents or agencies.  

For example:

• Agent ID: Insurance carriers assign an agent ID that represents each contract agreement that exists between the carrier and the agent. The agent can have multiple agreements with different uplines or contract terms with a carrier; therefore, an agent can have multiple agent IDs with the same carrier. When the agent sells insurance coverage to a consumer, the applicable agent ID is included on the new business application to identify to the carrier which contract the new business is being written under.  
• Continuing education: Insurance carriers will use continuing education objects available with AgentSync to track state and carrier product specific training required in order for the agent to be appointed with the carrier.
• Agent CSV import: Carriers can import up to 5,000 contact records into AgentSync and save manual data entry time.
• Just-In-Time (JIT) appointments: AgentSync is able to work with a carrier customer to integrate with the carrier’s policy admin system to automatically trigger when new business is received from an agent with a held JIT appointment transaction.
• Registry appointments: A “registry” appointment is used in AgentSync to identify the states that do not require appointment transactions to be submitted but do require the carrier to track all agents writing business for the carrier in their state. By creating registry appointment records, AgentSync allows the carrier to track and report on their associated agents as necessary in case a state requires a full list of agents to be submitted.
• Dashboards/reports: Carriers can use these tools to manage the agents/agencies who have requested to be appointed or are already appointed with the carrier.

Agencies

As with insurance carriers, regulators require agencies to ensure that the agent is properly licensed and appointed, as well as keeping affiliations up-to-date in applicable states. Agencies also have primary responsibility for submitting license/renewal transactions to keep licenses current, as well as requesting appointments from various carriers that the agent will write business for. 

In addition to submitting license/renewal transactions via the NIPR Gateway, agencies also use several custom objects and processes within AgentSync to store and manage information about an agent or agency.  

• Agent ID: Agencies use the agent ID object to identify each agent ID assigned to the agent/agency by various insurance carriers. As noted earlier, insurance carriers assign an agent ID that represents each contract agreement between the carrier and the agent. The agent can have multiple agreements with different uplines or contract terms with a single carrier; therefore, an agent can have multiple agent IDs with the same carrier.  When the agent sells insurance coverage to a consumer, the applicable agent ID is included on the new business application to identify to the carrier which contract the new business is being written under.  
• Continuing education: Agencies can use continuing education objects available with AgentSync to track state resident license CE requirements as well as state and carrier product-specific training required in order for the agent to be appointed with a carrier.
• Agent CSV import: Agencies can import up to 5,000 contact records into AgentSync and save manual data entry time.
• Producer Assignment/Producer Compliance Scorecard: Agencies can use these tools to identify and manage the states and lines of authority where an agent should be licensed.
• Bulk NIPR transactions: Agencies can process multiple transaction batches for up to 10 agents at the same time.
• Dashboards/Reports: Agencies can easily view and manage the licenses and appointments of agents/agencies who are contracted with the agency.

Managing General Agents

A Managing General Agent (MGA) is a specialized type of insurance agency/brokerage that performs certain functions for the insurer carrier. This can include binding coverage, underwriting and pricing, appointing agents, and settling claims. 

Because of the potential for confusion about what is or isn’t an MGA, the NAIC’s MGA Act was adopted (with some regional variations) across all states. It spells out what does and what doesn’t constitute an MGA, and the different standards they must comply with depending on their role and function.

To qualify as an MGA, the agency must meet annual business requirements set by the states. An MGA may work with multiple carriers but only act as an MGA for one of those carriers. Since MGAs can act as both an agency and a carrier, they will typically use all the AgentSync functionality that both agencies and carriers use, as outlined above.

Regardless of where one falls in the distribution channel – insurance carriers, MGA/MGU, or any sort of agency – all share the responsibility of maintaining license compliance for the agents under their purview. Find out how AgentSync can help you maintain that responsibility by booking a demo with us.