Your Introduction to the Insurance Industry: Lines of Authority

Welcome to insurance!

Are you just getting started on your career in insurance? Congratulations! Careers in this industry can be majorly rewarding. But trying to level up your knowledge can make you feel like the dog that caught the car: What do you even do?

If you’re looking for a way to get smart quick, we’re here to help. After writing hundreds of posts on insurance, we’ve learned a thing or two. Consider this our roadmap to help you learn more about the inside of the industry. If you’ve read about the regulatory background of the industry and how products are distributed, we’re going to switch focus to talk about the basics of “lines of authority” and the current state of the industry.

Insurance lines of authority

Most of the industry falls under different lines of authority (LOAs). In many states, there are two general LOA categories that most licenses fall under. These two categories, often called “major lines” are usually life/health and property/casualty. 

Some states break these down even further into life, health, property, and casualty separately. Regardless of how a state breaks them down, though, these major lines often act as starting points for subsequent licenses and determining what a producer is licensed to sell both in their resident state and in any nonresident states they get licensed in.

The differences in how states “map” lines of business like pet insurance or auto insurance cause some chaos when it comes to producers who want a license that’s reciprocal across state lines. For instance, in one state, someone who wants to sell pet insurance may have to have a property and casualty license and then submit an application with a fee to specifically be authorized to sell pet insurance. In other states, however, anyone with a major lines license may be able to sell pet insurance as long as they’re appointed by a pet insurance carrier that has also provided them with a certain amount of product training.

State differences make it hard to say outright what falls under each LOA. However, generally what you’ll find is that things related to life insurance, Medicare Supplements or Advantage policies, long-term care insurance, annuity and other insurance-related retirement products, health care, disability, and other insurance covering the life and lifestyle of people will fall under the life/health LOAs. Coverage related to property, business, and general liability outcomes will more or less fall under the property/casualty LOAs:

Insurance 101: All About Lines of Authority

What is Covered Under Different Lines of Authority?

How AgentSync helps: Because LOAs vary by state, getting a license that allows you to sell the same thing across other states isn’t super easy. AgentSync humanizes our data, meaning our Manage product simplifies applying for licenses because we’ve mapped out LOA and line of business equivalents across states.

Life and health LOAs meet securities

Securities and FINRA

The life/health space in insurance also has a securities industry crossover. Life insurance carriers that build annuities may offer a securities-backed version: variable annuities and registered index-linked annuities (RILAs). These products are a both/and approach to life insurance and securities – they’re an insurance policy wrapped around an investment, and people who sell them have to possess both life insurance licenses and securities registrations. We call these people “variable lines brokers” and “dually licensed broker-dealers”:

Which FINRA Series Exams and State Insurance Licenses You Need to Sell Variable Lines

The Securities and Exchange Commission (SEC) regulates securities, broadly, but RILAs and variable annuities typically fall under the Financial Industry Regulatory Authority (FINRA), a self-governing entity that reports to the SEC and regulates securities brokers, broker-dealers, and firms that engage in public securities trading. If you’re thinking “wow, that adds a whole new level of complicated to compliance,” then you’re right.

Why Integrations Are Key to Maintaining Sanity in Variable Lines Compliance

How AgentSync helps: Manage with Enhanced Variable Lines Support layers FINRA data over the insurance data for a more comprehensive view of each broker-producer so our customers don’t have to move between multiple systems and hunt across the internet for vital data. They can keep up on the license status of someone with both an insurance license and securities license, including renewal dates and other requirements, all in the same spot.

Property and casualty and surplus lines

Not always, but often, states regulate their excess and surplus lines markets under the LOA of property and casualty licenses. Surplus lines are insurance policies or insurance carriers that aren’t regulated by the state government in the state they’re sold in. That doesn’t mean it’s the Wild West; surplus policies are policies that are regulated in the U.S., but they’re often uncommon and cover very specific use cases. 

This is why surplus policies are often regulated in state property and casualty markets, because use cases tend to be very niche and generally relate to specific businesses. For instance, Kansas may not find it useful to maintain infrastructure to review rate changes, underwriting, and actuarial principles for the kind of insurance policy a speedboat fleet business might need. So Kansas will allow that business to purchase a surplus policy, essentially an out-of-state insurance policy, sold by a carrier or MGA that can underwrite these very specific kinds of policies:

Surplus Lines 101: What is Excess and Surplus Lines Insurance?

Navigating insurance LOAs and why they matter

Negotiating state differences in what counts as a major LOA, what is a small line of business, and what gives you the ability to sell certain kinds of insurance based on training alone feels impossible. AgentSync’s Autopilot and Manage solutions make this a far easier lift for the carriers, MGAs, and agencies that need very specific LOAs mapped to each other.

For some pieces of the insurance industry, these differences are immaterial – the basics of maintaining producer and adjuster licensing often look the same from a broad perspective. But, as you examine the specifics of a single state, you may find more distinctions, from annuity training requirements for life and health producers to flood or earthquake trainings that keep property and casualty producers’ licenses in force.

In some ways, it’s sufficient to merely understand that state approaches to LOAs are hard to understand. But, as we’ll get into in the next blog in our Intro to Insurance series, the market sectors of property/casualty vs. life/health often react very differently to broad market conditions.
Until then, be sure to check out parts one and two of the series, or watch a demo with AgentSync if you’ve decided you need a partner in innovative solutions to compliance and producer management.