This post is part of a series sponsored by AgentSync.
Insurance agents are expected to be upstanding citizens, and for good reason. Insurance agents are responsible for helping consumers select and purchase some of the most important products they can buy. Because of this, each state’s insurance department has rules regarding the types of conduct that a licensed insurance agent can get into trouble for, which can result in consequences such as license revocation, fines, and even criminal prosecution.
For a comprehensive look at all the ways a producer can lose their license, See this articleAlso, see our coverage for more information on how states will respond if new criminal charges or convictions are filed against already licensed producers. here.
But what about administrative penalties? While they may not seem as serious as criminal charges, administrative penalties are a very real and potentially career-ending concern for insurance agents.
Read on to learn more about what state administrative actions are and the steps licensed producers should take if they face administrative action.
What are administrative actions in insurance?
Administrative actions are disciplinary actions taken by a state insurance department against a licensed insurance agent, agency, or other business entity. Administrative actions can range from fines and penalties to the suspension, revocation, or refusal to renew an insurance agent’s license. Insurance agents and agencies face administrative actions as a result of violating state insurance regulations that govern their conduct. Again, see the standard list. 14 Reasons Any of these reasons could be grounds for administrative action: A producer could lose their license (although some states have added other reasons).
Who enforces administrative actions against insurance agents?
Each state’s insurance department is responsible for enforcing its rules and taking administrative action against insurance agents or licensed entities that violate the rules. Each state’s insurance department or division has the authority to investigate complaints, conduct audits, and impose penalties as it deems appropriate to protect consumers and maintain the integrity of the insurance market.
According to Chapter 17 According to the National Association of Insurance Commissioners (NAIC) State Licensing Handbook, states must consider many factors when determining whether to impose administrative action against an insurance agent.
Things to consider are:
- For non-resident producers, if the producer’s state of residence or the Financial Industry Regulatory Authority (FINRA) has already taken action against the producer
- If administrative action indicates that a producer may be at risk to consumers
- The allegations involve fraud, theft, financial fraud, or other conduct that requires immediate license suspension or revocation for consumer protection.
- If circumstances require that producers voluntarily return their licenses,
- Whether producers properly reported the conduct or did not report it
- Whether the insurance agent has had any criminal or administrative penalties in the past but failed to disclose this during the background check for the insurance application
How does a state insurance department know about administrative actions taken against a producer?
To begin with, if an insurance agent’s home state takes administrative action, the state’s insurance department is already well aware of the action. Insurance agents are responsible for reporting any administrative actions taken by other states or jurisdictions outside their home state.
In such cases, the producer’s country of residence can become aware of the act if:
- The NAIC’s Personal Information Collection System (PICS) notifies state insurance departments that nonresident producers have not previously disclosed criminal charges or administrative actions.
- The insurance agent will send a letter to the state insurance department notifying them that they have been sued by another state or by FINRA.
- The state insurance department receives notice from the state Department of Justice that an insurer has been arrested or convicted.
Conversely, producers are also responsible for reporting actions taken in their state of residence to any other states in which they are licensed. We will discuss in more detail below how producers can do this.
Administrative and criminal measures
Criminal charges and convictions are different from administrative penalties, but they are not entirely separate. That is, experiencing the former will have a significant impact on receiving the latter. In other words, administrative penalties can result from an insurance agent committing a crime. They can also be a penalty for violating codes of conduct specific to the insurance industry, even if the violation is not a criminal offense.
If a licensed insurance agent is accused of a crime, they are responsible for reporting the allegations to the insurance department of their state of residence, and insurance agents in non-resident license states are also responsible for reporting to the DOI, and must continue to report the outcome of the allegations to the DOI, regardless of whether the outcome of the allegations is guilty or not guilty, as the outcome will affect the state’s decision regarding maintaining the agent’s license.
If a producer is found guilty of a crime, he or she may face not only criminal penalties but also administrative action from the insurance departments of his or her state of residence and non-resident state.
In some cases, administrative measures Penalties For violating insurance regulations. While what the producer did may be “illegal,” the consequences are strictly related to insurance licensing and may not involve prison time.
To whom must producers report administrative actions?
According to the National Association of Insurance Commissioners State Licensing HandbookProducers must report administrative actions to the states they are licensed in. For some producers, this list may be short, but for others it may extend to all 50 states and some U.S. territories.
“Article 17 (#218) of the Model Producer Licensing Law A producer must report to every state in which the producer is licensed any administrative action taken against the producer in another jurisdiction or by any other governmental agency in this state within 30 days of the final disposition of the matter. A producer must also report any criminal prosecution brought against the producer in any jurisdiction within 30 days of the date of the first pretrial hearing.”
Reporting administrative actions is very important, and producers who fail to do so may face further disciplinary action, including loss of license in several states.
In some circumstances, certain violations may negate the ability of an insurance agent to retain their license and continue to sell insurance. However, it is always better to honestly report the violations to the state insurance department and explain why you should be able to retain your license, than to willfully not report the violations.
How do producers report administrative actions?
All 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands have adopted the NAIC’s Producer Licensing Model Act (PLMA), which requires producers to report both criminal and administrative actions taken against them to the states in which they hold licenses within 30 days.
While each state has different ways for insurance agents to do this, the easiest and most efficient way is through the National Insurance Agents Registry (NIPR). Attachment Warehouse – Reporting ActionsWhen producers upload documents to the Attachment Warehouse – Reporting Actions section, the information is sent to all states the producer holds a resident or non-resident license in. This method allows producers to quickly and easily meet reporting requirements by uploading documents in one place and allowing NIPR to distribute them to each state.
Stay up to date on government actions to protect your agents and carriers from unintentional non-compliance (and much more)
AgentSync can’t stop insurance agents from violating the rules, but it can help prevent agents from violating the rules when they’re not ready to sell insurance. We do this through daily, two-way synchronization with industry trusted sources that contain up-to-date details of insurance agents who have received administrative action in every jurisdiction.
Having accurate data on all producers at all times helps prevent non-compliant sales, helping insurers and agents reduce costs and reputational damage.
If you would like to find out how your organization can benefit from automated and streamlined producer compliance, including transparent knowledge of your compliance risks based on accurate data directly from the source of truth, Get a demo For more information, please click here.
