Why having the Proper Lines of Authority is important for both Carrier and Producer?
The hardest thing for any insurance company is trying to figure out how to onboard and appoint their producers in different lines of authority. Being able to keep up with all the different changes of lines of authority can be very daunting for the producers, but it’s very important for producers to maintain knowledge and training for the product they will sell to consumers. After all, would you want your grandmother to buy a long-term care or critical-illness policy from an agent who is only licensed to sell workers compensation? Of course not. States continuously monitor all the different types of policies that are being issued in their states and making efforts to ensure producers are properly licensed and trained to sell them.
The State Departments of Insurance know how difficult it is for producers to keep adding new lines to their existing license. Thus, revisions and clarifications are continuously being aligned to meet the Uniform Licensing Standards. By making uniformity standards, states are trying to make it easier to sell different insurance lines, like health & life, to be reciprocal to other states.
The Uniform Standards have the following broad categories:
(1) Licensing qualifications standards
(2) pre-licensing education requirements
(3) integrity and personal background checks
(4) application for licensure
(5) the appointment process
(6) continuing education requirements
(7) lines of authority limited lines and
(8) Surplus lines
For lines of authority, the states must adopt six major lines, defined in the Producer Licensing Model Act (PLMA):
(2) Accident and Health & Sickness
(5) Variable Life and Variable Annuity Products and
(6) Personal Lines. States have also added Medical Supplement,
(7) And Travel, Crop, Credit, Surety and
(8) Rental vehicles as additional limited lines.
I looked at every state on the National Association of Insurance Commissioners (NAIC) map and, for the most part, all states have included all six in their lines of authority that can be added to a producer’s license class. Because of the many insurance lines available, states can waive some trainings and testing requirements if the producer has already successfully completed similar testing in their home or reciprocal state. This was implemented in Section 9 of the PLMA: “An individual who applies for an insurance producer license in this state and who was previously licensed for the same lines of authority in another state shall not be required to complete any pre-licensing education or examination.” This can vary from state to state.
Once the producers get properly license with their different lines of insurance authority, they will need to find a carrier who can appoint them.
The requirements for insurance carriers to appoint also fall into the lines of authority. Carriers must also have insurance licenses that include lines of authority to sell insurance products for each state’s requirements. These lines are approved under their Certificate of Authority in most cases. The matrix for all the lines available can be found in the Uniform Certificate of Authority Application (UCAA) website that specifies each state’s specific requirements.
The UCAA lists all available lines for each state and includes
(5) Variable Life and Variable Annuities and
(6) Property. UCAA also includes clauses for insurance lines; such as Vehicle, Liability, Burglary and Theft, Credit and so on.
It is the Insurance Carrier’s Certificate of Authority that qualifies them to appoint the producer for their lines of authority in each state. Therefore, it is important for insurance onboarding and compliance software systems to be able to capture each authority lines from the carrier and producers, so the appointments process runs seamlessly and quickly.
Here is an example scenario for the appointment process between the carrier and producer:
The carrier requires appointments to sell Disability, Life, and Credit products. The producer is licensed in Disability and Life, and also in Travel, but not in Credit. The carrier will only appoint for Disability and Life. If producers want to sell Credit, they will have to get approved for Credit limited lines from their state.
Using an automated system that tracks producer license class by lines of authority, information automatically updates changes that can increase your company’s efficiency in the onboarding and appointment process and help avoid market conduct fines and sanctions. The carrier’s appointment is the final stamp of approval that states require before a policy is issued, and an agent is authorized to sell.
Contact VUE Software to see how we can help you navigate these lines of authority for the carrier and producer.