A line of authority (LOA) is a specific type of insurance coverage that an agent or producer is licensed (authorized) to sell. Understanding the nuances and requirements of LOAs is crucial to operating within legal and professional standards. This guide will provide a foundational understanding of a LOA, its importance, and how to navigate the complexities of maintaining compliance.
Lines of authority designate the specific groups or categories of insurance products that a producer is authorized to sell after meeting state licensing requirements.
For example, a producer holding the Life line of authority can sell insurance policies providing financial support after a policyholder’s death, while someone with a Property LOA focuses on selling products that protect tangible assets like homes or businesses.
Understanding and obtaining the appropriate LOAs ensures compliance with state regulations and builds trust with clients who depend on knowledgeable and legally authorized insurance professionals.
For producers and agencies, lines of authority serve several essential functions:
The National Association of Insurance Commissioners has defined six major lines of authority which are the most common in the insurance industry. These groupings are designed to streamline the training, examination, and licensing process.
For example, rather than taking separate courses and exams for homeowners, auto, and workers compensation, a producer can take comprehensive casualty training and examination, which covers the essential concepts for all these products.
The 6 major lines of authority are:
These broad categories capture most of the insurance marketplace. There are, however, additional LOAs called limited lines of authority, that encompass small, unique, or emerging coverage needs.
Producers should also note that surplus lines, which caters to non-standard or high-risk markets, may in some states be reflected as a line of authority on a producer’s license. Generally, however, surplus lines is considered a license class.
In addition to the six standard LOAs, many states offer limited lines of authority, which authorize producers to sell specific, specialized types of insurance. There are over 50 different types of limited lines of authority, but the National Association of Insurance Commissioners’ Uniform Licensing Standards limits each state to nine or fewer including what the NAIC defines as core limited lines.
The core limited lines include:
Other examples of limited lines include:
Limited LOAs are attractive because they:
Producers pursuing limited LOAs must still meet state-specific licensing requirements and adhere to renewal and CE obligations. In some cases, and states, limited LOAs may allow an individual to obtain a license without going through the full licensing process for a state.
For instance, a veterinarian practice may have an employee licensed with a line of authority to sell pet insurance, but no other insurance products. Often, this license will cost less and have less stringent licensing and renewal requirements than a full property and casualty insurance license.
In other cases, the limited line will have specific certification requirements. For example, in California all individuals (resident and non-resident) must complete 3 hours of California-specific flood training before selling flood insurance.
As is always the case in the insurance industry, regulations vary by state so be certain to check with qualified insurance regulatory compliance professionals like the team at 3H Compliance Group.
To obtain an insurance license, producers must have at least one line of authority. In broad strokes, the steps to obtain and maintain an LOA look like this:
If a producer chooses not to renew an LOA in their home state, they must notify the department of insurance in all other states where they are licensed for that LOA. Failure to do so will result in rejection and delays of the renewal application.
As you might imagine, tracking multiple lines of authority across states and staying compliant with CE requirements are the most common challenges associated with LOAs.
Most states recognize the CE requirements of a producer’s home state when renewing an LOA. However, some states and LOAs may have unique requirements. For instance, California requires at least one CE hour on flood insurance to renew a property and casualty license if the producer is selling flood insurance.
Agencies of all sizes outsource license management to our team, so we’re well versed on the complexities of managing lines of authority and compliance requirements. If managing this process is becoming a nuisance, we invite you to contact us for a no-pressure discussion of your needs.
We use our own Creative Compliance Hub solution to stay in control – as do scores of agencies who choose to manage licensing in-house. As a centralized licensing management solution, Creative Compliance Hub makes it easy to track and manage multi-state licenses and LOA from a single platform.
Whether you manage licensing inhouse or outsource it, 3H Compliance Group’s innovative solutions make it easy for insurance producers and agencies to focus on growth – not the intricacies of compliance.
Understanding and managing insurance lines of authority is essential for compliance, professionalism, and business growth. By staying informed and leveraging solutions like our license managed services, or tools like Creative Compliance Hub, producers and agencies can navigate these complexities with ease.
Ready to simplify your licensing and compliance management? Contact us today to learn how we can help!