Insurance Licensing – For protection of consumers’ financial welfare in the event of unforeseen losses, insurance is of paramount significance and indispensable to both individuals and businesses. With an ever-increasing choice of financial products on the market, insurance regulation plays a pivotal role in insuring that agents and brokers meet minimum consumer protection and qualification requirements.
An insurance license is the vehicle through which state agencies protect the public against unscrupulous actors by requiring that insurance be sold by competent and trustworthy professionals.
Licensing laws enable consumers to purchase insurance that is appropriate and sufficient for their needs as well as reliable. Through the licensing system, states can effectively regulate the actions of insurance brokers and agents.
To sell, solicit, negotiate, or dispense advice concerning insurance products, insurance agents are required to be licensed in the state where they intend to work. All fifty states issue insurance licenses, and each state’s insurance department determines the eligibility criteria for the license.
Recipients of agent or broker licenses may be either individuals, corporations, limited liability companies, or partnerships. Insurance licenses are issued to both residents and non-residents, and the typical term is two years. The age minimum for individuals and sub-licensees is 18 years.
Electronic licensing applications are currently available in thirty-nine states and are generally processed within two to three days. The state’s licensing department determines whether the applicant may utilize electronic licensing based on his or her resident state.
Upon satisfaction of the state’s requirements, the applicant’s file is transmitted electronically to the state’s insurance department. It is incumbent upon every insurance agent and broker to acquire the necessary insurance license and to fulfill each state’s licensing requirements.
It is also the agent’s and broker’s obligation to comply with the initial and renewal licensing fees required by each state’s insurance department. Furthermore, it is the duty of insurance providers to abide by all pertinent insurance laws and regulations.
Prospective insurance agents and brokers will find a multitude of online services offering insurance licensing. These websites provide them the opportunity to apply for resident and non-resident licenses in all states and for all types of insurance.
They offer licensing solutions not only to individuals but also to insurance agencies and companies, investment firms, and banks. Online licensing services offer organizations guidance through the various state licensing criteria ranging from disclosure to compensation.
To obtain a non-resident insurance license, an applicant must possess an active resident license, and his or her licensing file must have been submitted by their home state to the National Insurance Producer Registry.
An online application, accompanied by instructions, expedites the non-resident licensing process. Prospective insurance agents and brokers can find online listings, on numerous websites, of states that authorize electronic applications for non-residents. There are many links providing state-specific requirements and information, as well as contact information for each state.
While licensing criteria vary from state and state, they usually include completion of certain pre-licensing insurance courses and a passing score on a state exam testing on insurance laws and insurance fundamentals.
Reciprocal licensing and state licensing standards are becoming increasingly uniform. The insurance industry is streamlining non-resident licensing by making it easier for agents licensed in one state to earn a license in other states.
Applicants may consult online charts listing types and descriptions of licenses to find out whether they are required to take a state-administered exam or whether they are exempt from having to do so.
To become a licensed insurance agent or broker, applicants must typically perform the following:
1. Fill out and submit an application
They may apply electronically or mail out an insurance license application. Forms and instructions may be downloaded from the state insurance department’s website or obtained by contacting a Licensing Services Bureau.
2. Complete requisite coursework
Prospective agents and brokers must satisfy the state department of insurance’s education requirements, which typically include completion of pre-licensing courses of a specific duration (i.e. 40 hours of licensing instruction).
Applicants may benefit from an exemption if, for instance, they can show that they have been an agent or broker for a certain period of time or steadily employed by an insurance company. In addition to coursework, applicants must pass state-sponsored exam(s) for the lines of insurance for which they are seeking an insurance license.
3. Undergo a background check
Prospective insurance agents and brokers must submit to a background check.
4. Pay a licensing fee
Applicants must pay a license fee, which can be found on the websites of different states’ insurance departments.
Typically, a resident license fee is $80 for individuals and for sub-licensees of corporations, limited liability companies, or partnerships for a term exceeding one year ($40 for a license issued up to one year). For each license type and each state application, a transaction fee in the amount of $7.27 is charged.
Applicants must apply for a particular type of license depending on the kind of insurance he or she intends to sell. Agents wishing to sell property and casualty insurance as well as life and health insurance will have to obtain separate licenses. Some of the most common types of insurance licenses include the following:
Fire and casualty agent-broker
Public insurance adjuster
Limited lines agent
General lines- life, accident and health
Personal lines (auto insurance and homeowners)
Workers’ compensation adjuster
General lines- property and casualty
Additionally, the majority of state licensing departments require completion of continuing education courses covering consumer protection, insurance laws, technical aspects of insurance, and ethics.