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.
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.
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.
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:
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:
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 In most instances, if the license has been revoked or suspended by order, or forfeited in connection with a disciplinary matter, a producer must make a written request to the insurance commissioner in order to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.
To protect your license and your career, consider the following steps:
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.
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.