Licensing

How to Navigate Licensing for Insurance Startups

by DJ Lopez

Navigating the world of insurance licensing can be daunting, especially for insurance startups. A non-negotiable foundation for compliant and successful insurance operations involves obtaining and maintaining proper licenses. This article outlines the complexities of insurance licensing and provides insights from our team of experienced compliance professionals to help your startup thrive.

Maintaining current licenses is more than a formality – it safeguards your business

Soliciting, negotiating, or selling insurance products requires proper licensing to operate legally. Without the appropriate licenses in place, you risk facing penalties, fines, reputational harm, and legal consequences.

Insurance is heavily regulated, and licensing requirements differ significantly by jurisdiction. To operate legally and expand your market reach across state lines, you must secure and uphold the appropriate insurance licenses. This not only ensures compliance with varying state regulations but also reduces your risk, safeguards your reputation, and fosters trust with your customers. 

Maintain good standing and facilitate growth 

All carriers require individuals and entities that solicit, negotiate, or sell insurance on their behalf to maintain active licenses. Failing to maintain appropriate and active licenses may result in losing valuable agency appointments with a carrier. This limits the range of products your entity can offer and may jeopardize future growth opportunities and possibly your entity’s financial status.

Licensing criteria frequently includes background verifications, educational requirements, and additional qualifications. Verifying that your entity and those who solicit, negotiate, or possess the appropriate active licenses assures your customers that they are interacting with competent, ethical experts who understand the nuances of numerous insurance requirements. A strong reputation can lead to increased client trust, referrals, and business growth – all crucial for a startup’s success.

Time-consuming, detail-heavy 

Monitoring and maintaining licenses and appointments can be time-consuming, particularly if your business operates across multiple states. This effort is magnified when managing licenses for multiple producers. The sheer scope of the administrative load often leads to license and appointment gaps, which leads to compliance risks.

Entities that initially manage licensing renewals through calendar reminders and Microsoft Excel spreadsheets can run into problems as their workforce grows and business evolves. Expanding workloads, knowledge gaps, and the risk of critical information loss due to staff turnover make maintaining accurate and up-to-date licenses challenging. Simple desktop tools quickly become insufficient to track renewals accurately.

The value of outsourcing to experts

Perr&Knight has developed a suite of licensing and appointment services born out of decades of supporting entities across the country. Our insurance licensing department is staffed by experts who understand the state-by-state nuances and is supported by License Reporter, an encrypted, innovative online database, available 24/7.

The onboarding process is easy for our clients. We work closely with the appropriate client contacts to collect all the necessary information for current producer licenses, providing the appropriate forms. We collect these forms and then enter the data into License Reporter.

Working with Perr&Knight and using License Reporter streamlines the licensing process. We provide detailed progress reports showing renewal statuses to assure all stakeholders. The insurance compliance professionals in our licensing department also oversee employment changes when agents leave or new staff members join the team, ensuring a smooth transition for new staffers with no disruptions.

In addition to day-to-day licensing management, we also focus on identifying potential roadblocks that could affect agent licensing down the line. This proactive approach helps you avoid future issues by ensuring all licenses are current and your agents have the appropriate licenses to sell the policies your business offers. 

In a regulation-heavy sector like insurance, businesses operating across state lines face a patchwork of varying licensing standards that can quickly become overwhelming. The cost of non-compliance is steep, from tarnished reputations to significant financial setbacks. Perr&Knight’s experienced insurance compliance consultants can help your entity stay on the right side of the law so you can focus on better serving your clients and scale your business with confidence.

Contact Perr&Knight today to learn more about our insurance licensing services.

Buying a Shell? Make Sure You’re Getting What You Paid For

by Perr&Knight

It’s a busy time for insurance companies considering acquiring a shell as a means of starting a new company or growing their operations. Many insurers are aware that reactivating operations in a shell company that has been granted licenses but isn’t currently writing policies is a shortcut to quickly enter into new jurisdictions or lines of business.
However, investing in a dormant shell without thoroughly exploring its limitations can create expensive headaches down the line. Here are some key issues to consider before inking the deal on a shell company to make sure you’re getting what you are paying for.

Mapping: A Crucial Step

Purchasers run into challenges by not recognizing that states all have their own lines of business (LOBs) definitions and associated requirements. What works in one state or for one line of business is not guaranteed to suffice in another. NAIC, Annual Statement, and Certificate of Authority lines all vary by jurisdiction.
There are multiple ways to define a line of insurance: what you are reporting under vs. what you are filing under vs. what you are actually offering. Each state is entirely different, and it is easy to get lost (or stuck) in the weeds. Detailed mapping ensures you can see the full picture of the LOBs you are acquiring and their levels of completion in the eyes of each state’s Department of Insurance (DOI).
Partnering with insurance company licensing and state filings experts alleviates the crucial but time-consuming task of LOB mapping. At Perr&Knight, our licensing and filings departments are deeply familiar with each state’s unique nuances, so we can produce valuable charts that provide an “apples-to-apples” comparison of all the information.
Before purchasing a shell, clients tell us which products they are considering and which coverage they plan to offer. We help map annual statement lines, product filing lines, and Certificates of Authority lines to ensure the company has everything they need to write their planned business.

The Seasoning Conundrum

Many companies buy shell carriers because they are facing seasoning issues that limit their expansion goals. “Seasoning” means state DOIs are essentially saying, “Figure this out in your own state before you try to figure it out in ours.”
Some states want direct written premium seasoning: even if the company didn’t exist previously in the state, the company must have written that specific line before being permitted to do so in a new state.  New insurance companies facing operational seasoning issues can circumvent this conundrum by acquiring a shell and re-activating its licenses in the desired state. Ascertaining whether there will be seasoning issues and related challenges such as capital and surplus issues or special deposit requirements will help your company navigate seasoning requirements more smoothly.
Partner with insurance company licensing and state filings experts to proactively identify potential roadblocks and develop a plan to address each. This allows you to gauge whether a particular shell will pay off, or if you will be required to invest more than originally anticipated.

Correct Form A Filings are Crucial

Even if your company is currently licensed countrywide, you must obtain approval from your resident state for the shell purchase by filing Form A. You must file Form A before adding any lines or expanding into a new state.
Once approved, then comes the time-consuming process of filing change-of-ownership and post-purchase notifications in all other states. Once again, partnering with experts to manage the process saves time and ensures correct form filing.

Control Costs by Partnering with Insurance Company Licensing and State Filings Experts

While your company’s general counsel may offer support for performing due diligence on your proposed shell acquisition, they likely don’t possess the necessary experience to anticipate red flags and hot button issues for the various state DOIs. As they sort out the complexities, it could add cost to the licensing process.
Working with an experienced partner like Perr&Knight – whose licensing and state filings teams are dedicated solely to supporting insurance companies – delivers better value for a more reasonable cost.

Manage Your Expectations

Buying a shell company is a smart move for insurance carriers looking to expand. A previous company has already cleared the way into a new market, which should theoretically make things easier for you. However, like many aspects of the insurance industry, states are slow and regulatory difficulties can stall – or completely derail – companies that aren’t prepared.
When acquiring a shell, it’s important to set reasonable expectations. Though faster than launching a new line of business from scratch, navigating the nuances of each state’s filing process is both detailed and time-consuming. There are no shortcuts.

Are you evaluating whether or not a particular acquisition is right for your company? Let our licensing and state filings experts make sure you are getting what you’re paying for. 

Monitor Agent Licensing in Real Time with License Reporter

by Diane Karis

Maintaining current licensing information for insurance-producers is a crucial but time-consuming task. Many agencies are still tracking upcoming renewals and expirations on spreadsheets housed on internal servers or individual computers. This approach might work reasonably well, provided agents are licensed in a limited number of jurisdictions.
However, when more agents are added to the roster (or an agency expands their services into more territories, or the one person who has been tasked with monitoring renewals for the last decade leaves the organization), keeping track of the details can quickly devolve into a paperwork nightmare.
Perr&Knight has been offering renewals as part of our insurance licensing services for years. Our team submits, monitors and tracks producer licensing in all jurisdictions across all lines of business. Eight years ago, we developed software enabling us internally to track and monitor licensing status. We have recently released an updated version that our insurance licensing clients now have the ability to access via online portal.

Introducing the new License Reporter

LicenseReporter.com is Perr&Knight’s online license reporting solution for our current insurance licensing services clients. This web-based software permits clients to log in via any web-enabled device to check the status of recent, past, and upcoming renewals. While our licensing department team continues to manually manage the submission of forms to state Departments of Insurance (DOI) on behalf of insurance agents and agencies, LicenseReporter.com enables our clients to access a transparent view of the various licensing processes.
Using LicenseReporter.com, license and appointment data can be searched by a range of key criteria, including:

  • Agent Name
  • Agency Name
  • Agency & Affiliated Agents
  • State
  • Expiration Dates (date range)
  • Line of Authority
  • License Type

Increase transparency, reduce risk

LicenseReporter.com provides a new level of transparency into the insurance licensing and renewals timeline on a nationwide scale. By increasing insight into the licensing process, agencies establish more control, thus reducing the risk of information falling into a black hole or becoming trapped in administrative purgatory upon in-house staff turnover.
LicenseReporter.com was developed to increase efficiency for Perr&Knight’s insurance licensing services teams, but also provides the following valuable benefits for our clients:
Eliminate email back-and-forth – Answer questions immediately by letting HR managers or licensing analysts view the current status of all submissions, 24/7, from any web-enabled device
Reduce the risk of accidental expiration – Ensure all agents are operating with current licenses
Become aware of upcoming renewals – Monitor upcoming renewals
Ensure correct jurisdictional licensing  – Confirm agents are properly licensed in all areas before expanding business into new territories
Access proof of current license –  LicenseReporter.com enables us to attach relevant documents, including a copy of the agent’s current license, or web verification from the state, saving space in the file cabinet and the time required to access a copy of the license, if necessary

Who should use Perr&Knight’s producer licensing and appointment services?

We manage licensing services for agencies of all sizes and scope. However, for certain agencies, our licensing services (including LicenseReporter.com) can be especially beneficial. These agencies include:

  • Insurance start-ups
  • Insurtech companies
  • Agencies with limited in-house support
  • Agencies operating in 5 or more states

Peace of mind managing license renewals

We developed LicenseReporter.com to solve an important issue that drains valuable time and resources from insurance agencies. By offloading the licensing process onto Perr&Knight’s experienced producer licensing services team then monitoring progress via online portal, insurance agencies can make sure all agent licenses are up to date while freeing their internal teams from managing minutiae.

Is your agency staff getting buried by license renewals? Let our licensing department lighten your burden.

Producer Licensing: Unglamorous and Unavoidable

by Diane Karis

Producer licensing is not complicated but too many agents put it on the backburner. Since it doesn’t bring in revenue, in the rush of day-to-day business, insurance licensing falls to the bottom of the list of priorities. The very skills that make a successful insurance producer are the traits that can cause them to deprioritize unglamorous tasks like filing paperwork and remembering to issue fees. True, there’s no creativity in this primarily “busy work” task, but failure to renew licenses can lead to significant challenges down the road.

Game Over – For Now

Ignoring license renewals creates complications and headaches that require time and money to sort out.  If a producer’s license lapses, it’s basically game over–for now. That agent can’t legally sell insurance. Your insurance agency could be exposed to hefty penalties and the producer could lose their agency appointment. You can also run into problems if the producer’s license is reinstated but his or her appointments have not. Therefore, helping agents to renew on time is simply smart business practice.
These challenges with licensing are not insurmountable. However, like almost everything that falls under the umbrella of regulatory compliance, it’s easier–and more cost effective– to get ahead of the game than to play catch up.

Challenging for Agencies of All Sizes

Managing producer appointments is a time-consuming task for agencies–especially if your agents operate regionally. Every state has a specific process for renewals and you must adhere to each set of requirements carefully. It’s not possible to cut corners. We notice that startups are most susceptible to challenges with licensing since the administrative load is so overwhelming when starting a new agency.  However, mid-size agencies who have been operating for years also have a hard time managing producer appointments after growing their staff or undergoing a territory expansion from a few states to ten or more.

The Benefits of Outsourcing

For some agencies, the smartest solution is to offload this time-consuming, detail-heavy task to an insurance support services company to manage on your behalf. We offer this service at Perr&Knight because we’ve seen the complications–most of them avoidable–that happen when agencies fall behind. Our suite of producer licensing services includes:

  • Submission of name and address changes
  • Tracking of upcoming renewals
  • Issuing of renewals reminders
  • Completion of paperwork for all 50 states and electronic submission (where applicable)
  • Issuing fee reminders to producers

Many agencies try to assist their agents by handling licensing renewals in-house. It’s a viable solution for small agencies but we’ve seen many instances where agencies grow and a single individual (or even small department) just can’t keep up with the paperwork. As a result, licenses lapse.
Another common scenario is when an individual who is overseeing renewals changes jobs or retires–and takes their knowledge, calendar and renewals status with them. This is where an outside insurance support services partner can alleviate the burden by supervising your producers’ licenses for you.
Failure to submit insurance licensing renewals on time seems like minor hiccup but it’s an oversight that can snowball quickly. Licenses are a necessary part of maintaining compliance and lapsed licenses can jeopardize your ability to operate at all. Managing producer appointments falls into the pesky category of “things that don’t make your agency money, but can cost you money if overlooked.” Helping your producers stay on top of their license renewal lessens their load, so they can focus on what they do best: selling insurance.

Get help with your insurance licensing renewals. Contact Perr&Knight to find more about our support services.

Speed-to-Market Tips for New Product Development

by Karen Barrett Daley

Speed to market is always important when it comes to introducing new insurance products. In general, all companies require efficient insurance product development, but in certain cases it’s non-negotiable, such as when a company wants to enter into an emerging market and quickly gain market share, when program business is being moved between carriers and they can’t risk a lapse in coverage, or if an existing carrier is trying to accommodate a large account that has an immediate additional coverage need.
As decades-long providers of insurance product consulting for hundreds of insurance companies across every jurisdiction, we have determined the actions that can significantly impact the speed at which a new product is rolled out.

Here are some important tips to accelerate new product development:

Know your market.

Understanding your market means a couple of things. First, know who your competitors are. Examine who’s writing, what they’re covering and charging, their profitability and their market share. Next, get to know the environment from a regulatory standpoint. Look closely at how the Departments of Insurance (DOIs) treat the line of business in the states in which you will be writing.

Confirm that your company is licensed to write the new product.

Sounds obvious, but plenty of insurance companies rush past this step and pay for it later. Amending your certificate of authority is a lengthy process and, as such, needs to be addressed early on by someone familiar with the company licensing process. Double check first, so as not to waste time and resources on stalled product development.

Flesh out your coverage and check for consistency.

Once you have conducted research and developed product concepts, draft the policy forms, then calculate the rates and premium that will be charged. Make sure your form contains clear, unambiguous and, if possible, tested language, your rates balance competitiveness and adequacy, and your rates and forms are consistent, i.e. that they make sense together.

Ensure your product is compliant in the states you want to write.

It is unlikely that all states will allow you to write the exact product you want.  Rather, you will likely need to modify the product, at least a little bit, in each state in which you write.  Before filing or implementing your product, conduct a thorough compliance review on both rates and forms, making adjustments as necessary. Shortcutting this crucial step in the product development process will likely result in delays, rejections or time-consuming questions from DOIs.

Be smart about your state filings.

Before starting the mechanics of the filing submissions, you should strategize about how to optimize the outcome of your state filings.  Learn about and consider incorporating any rating flexibility that is available in your states to create a more robust rating manual. Take advantage of confidentiality rules to prevent competitors from seeing every aspect of your rating model or underlying support. Determine the priority order of filing submissions by considering DOI turn-around times, filing laws, filing support requirements, desired launch dates and projected premiums by state.
When it comes to releasing a new product quickly, the single most important rule is this: approach insurance product development in an organized manner. Cutting corners will almost always result in re-work and undue delays on the back-end.
Product development is a process that requires expertise in many different insurance-related specialties and extensive industry knowledge. If your in-house teams are not equipped to handle the time-consuming specifics or manage the critical details, partner with an insurance product consulting firm whose industry, marketplace and compliance experience can get your product to market quickly and cost-effectively.

To learn more about how Perr&Knight helps insurance companies release new products intelligently, download our Product Expansion Services brochure.

Insurance Company Licensing: What to Expect

by Diane Karis

Whether you are submitting a primary application to license a new insurance company, seeking to expand coverage to additional states or adding a line of business so your company can write a new product, every insurance company’s goal is to obtain a speedy approval to begin binding policies as soon as possible.
All types of insurance company licensing share common characteristics. However, many companies proceed full-steam ahead without thoroughly understanding the challenges with licensing that can delay approvals and drain resources in the process.
Based on our extensive experience providing insurance company licensing support in all lines of business in every state, here are some of the top considerations to keep in mind as you submit your insurance license applications.

Expect slightly different requirements from each state.

About 80% of your licensing application information will be standard across the board. But the difference contained in the remaining 20% may jeopardize your approval. If you receive the same question from more than one state, it’s probably something you should address in all of your applications. All states grant the ability to withdraw your application without prejudice, so be proactive about amending your applications and re-submitting. If your company does not have the resources to review each individual application for state-specific requirements, consider working with a specialized consultant whose experience managing each state’s insurance company licensing process can limit unnecessary delays.

Details are critical.

Incomplete applications are a primary cause for delays, rejections or resubmission requests. Keep in mind that departments of insurance will not refund your filing fee once your check has been cashed.
Therefore, it’s smart to take the time to make sure that every question on your application is answered completely. If you don’t understand a question or a specific requirement, contact the state’s Department of Insurance directly and ask. Failure to submit complete, accurate information can cause your application to get kicked back, stalling your approval before the review process has even begun.

Consider your license’s capital requirements.

Your license approval may require your company to outlay a significant amount of additional capital. Your approval might stipulate that you meet certain capital requirements, such as increasing your capital and surplus or your statutory deposit. Consider your company’s process for informing your Board of Directors and the steps your financial department will need to take to ensure that you can access the requisite amount of funds.

Expedite approval of application fees with your finance department.

Your application is not considered complete unless it includes your full submission fees. Take your company’s accounting process into consideration, including the time between payment requisition and obtaining a check in hand. We’ve seen this process sidetrack our clients’ submissions, so our policy is to advance most fees when submitting applications on our clients’ behalf. This enables our clients to generate a single payment to us that covers every portion of their filing, including payment for our service.

Follow up with State Departments of Insurance.

Don’t just submit your application and wait. Though you might submit to multiple states at once, one of the challenges with licensing is that each state reviews applications on their own timetable. Follow up directly with each State Department of Insurance to make sure your application has been received and is getting the attention it deserves. If you lack the manpower for this level of involvement, partner with an insurance consulting services company that is experienced in following up with DOIs and has a tracking system in place.

Expect a mountain of paperwork and many, many man-hours.

Even with paperless submissions and electronic tools, licensing still requires copious amount of paperwork. California alone issues an 80 lb. box of paper.  Therefore, create efficiencies wherever possible. Submit forms via the UCAA electronic application, use digital tracking tools like StateFilings.com, or work with an insurance consulting services company who can manage your applications for you.

The Departments of Insurance make the rules. It pays to follow them.

Though there might be a rule or requirement that seems illogical to you, DOIs are not likely to change their processes anytime soon. Therefore, it’s in your best interest to supply the information they request on their timetable. Prepare to lose a few battles in the interest of winning the war.
Insurance company licensing is a lengthy and detail-intensive process that can take anywhere from six months to a few years. This is not an extensive list of challenges but by keeping the above in mind during your submissions, you can set achievable expectations and timetables.
If you have questions about insurance company licensing, call Perr&Knight at (888) 201-5123 x3 and we will discuss ways we can help streamline your licensing approvals.