An insurance license is a career lifeline for producers and a prerequisite for the agencies that employ them. However, this precious credential can be suspended or revoked. In some instances, reinstatement may be possible for a revoked insurance license.
But this is a clear case where an ounce of prevention is worth a pound of cure. In this post, we'll explore the various reasons why an insurance producer might lose their license and offer guidance on how to ensure that you don’t.
Understanding the Stakes: What is a Producer License?
Before diving into the reasons for license loss, let's clarify what a producer license is. An insurance producer license is a state-issued credential that allows individuals to sell, solicit, and/or negotiate insurance products.
It's a fundamental requirement for anyone looking to work in the insurance industry as an agent or broker.
Producer License Denial, Nonrenewal or Revocation
In 2005, the National Association of Insurance Commissioners (NAIC) issued its Producer Licensing Model Act (PLMA). The act serves as a template for states, simplifying and organizing statutory language related to issuing and renewing insurance licenses. As of this writing, 43 US states and territories have adopted the PLMA.
Section 12 of the PLMA addresses insurance license denial, nonrenewal, and insurance license revocation. In general, the reasons can be grouped into several different buckets.
- Ethical breaches & fraudulent practices
- Failure to meet continuing education requirements
- Regulatory non-compliance
- Misrepresentation or non-disclosure
- Violation of insurance laws
- Inappropriate conduct
The 14 Reasons a Producer Could Lose Their Insurance License
Section 12 of the PLMA specifically addresses license denial, nonrenewal, or revocation and reads in part:
“The insurance commissioner may place on probation, suspend, revoke, or refuse to issue or renew an insurance producer’s license or may levy a civil penalty in accordance with [insert appropriate reference to state law] or any combination of actions, for any one or more of the following causes:
- Providing incorrect, misleading, incomplete, or materially untrue information in the license application;
- Violating any insurance laws, or violating any regulation, subpoena, or order of the insurance commissioner or of another state’s insurance commissioner;
- Obtaining or attempting to obtain a license through misrepresentation or fraud;
- Improperly withholding, misappropriating, or converting any monies or properties received in the course of doing insurance business;
- Intentionally misrepresenting the terms of an actual or proposed insurance contract or application for insurance;
- Having been convicted of a felony;
- Having admitted or been found to have committed any insurance unfair trade practice or fraud;
- Using fraudulent, coercive, or dishonest practices, or demonstrating incompetence, untrustworthiness, or financial irresponsibility in the conduct of business in this state or elsewhere;
- Having an insurance producer license, or its equivalent, denied, suspended, or revoked in any other state, province, district, or territory;
- Forging another’s name to an application for insurance or to any document related to an insurance transaction;
- Improperly using notes or any other reference material to complete an examination for an insurance license;
- Knowingly accepting insurance business from an individual who is not licensed;
- Failing to comply with an administrative or court order imposing a child support obligation; or
- Failing to pay state income tax or comply with any administrative or court order directing payment of state income tax.”
How Regulators Become Aware of Section 12 Violations
It’s difficult, if not impossible, not to mention illegal and unethical, to hide administrative actions and/or violations of the above 14 reasons from state regulators. After a license is issued, an insurance regulator may become aware of potential violations of Section 12 in several ways. These include:
- A regulator is notified of a violation by a consumer or industry professional.
- A licensed producer notifies the insurance regulator of pending criminal charges.
- An insurance regulator receives a notice from the Personalized Information Capture System (PICS) indicating that a nonresident producer failed to disclose criminal charges.
- A PICS Notice is received of previously unreported administrative action.
- A letter is received by a regulator from the producer informing of an administrative sanction by another state or FINRA.
- The insurance regulator receives subsequent arrest or conviction information from the state’s Department of Justice (DOJ).
Can a Revoked Insurance License be Reinstated?
It is possible for a producer’s revoked license to be reinstated or reissued. Reinstatement reactivates the license, which means it will expire at the end of the original license term. Reissuance means a new license is issued with a full license term.
But neither reinstatement nor re-issuance is automatic, quick, or easy. In most instances, if the license has been revoked or suspended by order, or forfeited in connection with a disciplinary matter, a producer must make a written request to the insurance commissioner in order to have a license reinstated or reissued.
Reinstatement or re-issuance requests for an insurance license revocation must include appropriate information to allow the insurance department to determine whether the basis for the action no longer exists and whether the public’s interest is served by granting the request.
The burden of proof to establish such facts is on the producer, and the producer will have a right to an administrative hearing if the reinstatement request is denied.
There’s no guarantee that a revoked license will be reinstated. And the process for doing so may be lengthy, complicated, expensive, and time-consuming. So, it’s in a producer’s best interest to stay in compliance.
How to Stay in Compliance
To protect your license and your career, consider the following steps:
- Stay Informed About Licensing Requirements: Regularly check your state's insurance department website for updates.
- Uphold Ethical Standards: Adopt a code of conduct that is beyond reproach.
- Commit to Continuous Professional Development: Stay ahead of industry trends and complete your CE requirements on time.
- Implement Compliance Systems: Use tools and processes to ensure you're always operating within the law.
- Regularly Review and Audit Practices: Conduct self-audits to identify and correct any potential compliance issues.
When it comes to compliance, “We’ve always done it that way,” is not a wise or safe practice. Operating from a position of ignorance, or perpetuating non-compliant practices is common. But regulators are unmoved by agents and agencies that operate with their heads in the sand.
Don’t let compliance be an afterthought. Be proactive.
Conclusion
For producers, maintaining an insurance license is essential. By understanding the potential pitfalls, such as insurance license suspension, and committing to the adoption of ethical practices and ongoing education, producers can ensure that their licenses remain in good standing. Remember, it's not just about following rules—it's about upholding the trust that clients place in you as an insurance professional.
Whether you're a licensing professional or a new or seasoned producer, staying vigilant about compliance is key. Producers who find themselves in situations where a license has been suspended or revoked, may, in some cases, be able to have their licenses reinstated. However, the process can be expensive, complex, and time-consuming, so it's always better to prevent issues before they occur.
Prioritizing ethical behavior, staying informed about regulatory requirements, and committing to professional excellence, can protect a producer’s license and good name, and their agency’s reputation.
Should you need support reviewing or forming your agency’s compliance program, or are interested in insurance licensing managed services, or compliance management software, please get in touch. We’d be delighted to assist you.
