Life and Annuity Agents; Property Casualty Agents; Health Insurance Agents; Surplus Lines Agents
Issue: Increasingly, insurance agents have come under focus for their actions or inactions. Examples include allegations of failure to recommend coverages or failure to add requested coverages. You are invited to watch the video below on my agent liability expertise, followed by career highlights.
Mr. Hager has pervasive and extensive experience as to insurance agent liability. As Insurance Commissioner and First Deputy Insurance Commissioner, he oversaw regulation of all phases of agent responsibility and duties. His professional experiences also include substantive and pervasive intersection with the insurance agent community and standards of practice that come to bear on an agent.
Overall. Much like medicine has moved from a “local” standard to a “national” custom and practice and professional standard with the onset of immediate electronic availability of research and information via digitization and the Internet (i.e., how a particular type of lung cancer is treated in one state is the same as how that type of lung cancer is treated in a distant state and local – and thus the treating physician is held to that national standard by expert testimony) so also has the conduct and therefore the assessment of an insurance agent’s work moved from a “local” standard to a “national” standard. This is so for the following reasons:
- Agent Contracts. The contracts between insurance companies and insurance agents are identical or near identical from state to state and throughout the U.S., meaning the duties and obligations of the agent under their contracts with their insurers are identical throughout the U.S. (The only variation is cancellation and other provisions adjusted to local law. The obligations of the agent under such contracts are identical state to state.)
- Insurance Policies are the Same. The U.S. insurance marketplace is a national market. This is so because the insurance policies used by an insurer from state to state are identical. (The only variation is cancellation and other provisions adjusted to local law. The policy language etc. otherwise is uniform throughout the U.S.) For example, Allstate’s HO3 Homeowner’s policy is identical in language in every state in the U.S. in all of its substantive features, such as the coverage language and obligations of the insured. On the life and annuity side, Met Life’s insurance and annuity policies are near identical from state to state. Thousands of analogous examples exist. Indeed, most all policy forms today are submitted into a single national receptor operated by the NAIC with policy review conducted at the national level, with local nuances confirmed.
- Product Offerings the Same. In addition, insurance companies offer nearly the same range of products (i.e., policy forms and coverage types, e.g., homeowners, auto, life, annuities) from state to state. (Of course, insurers decide of their own volition which combination of policies that they choose to offer in which states.)
- Insurance Companies are the Same. In addition, the insurance companies operating state by state overlap at the rate of about 80 percent. Again this is so because the U.S. insurance market is a national market with insurers operating easily over state borders and states accommodating that movement because without insurers, there is no market. The variations are local companies such as state mutual insurers and smaller state or regional insurers. Even at that, the local insurers use the same policies forms as national insurers.
- Policy Forms: Generated Nationally. It is no coincidence that policy forms are identical state by state. This is so because in the U.S. policy forms are generated by industry trade associations like Insurance Services Office (“ISO”) for most property casualty polices and by NCCI for most all workers compensation policies with insurance companies routinely adopting those policy forms as their own or simply piggy backing on ISO or NCCI’s filing of those forms in the various states. Similarly, life insurance policies and annuities show substantially similar language from state to state.
- Insurance Regulation Substantially Similar. In addition, the various state Insurance Codes as to agent regulation overlap at the rate of perhaps 95 percent. This is so because much of insurance regulation today is generated through NAIC model acts that are in turn adopted by the various states.
- Various States: Regulation of Agents is in Accord. Most states are in lock step with the balance of the states as to the regulation of insurance agents. For example, the providers of continuing education for agents are national providers (for example, Sircon).
- Various States – National Database. Similarly, no one can be licensed as an agent in most states, either as a resident or non-resident unless they are first registered in the national NAIC Producers Data Base and have an identification established in that data base. This is so because there is one national clearing house for initial registration.
- Various States in Accord – Nationally. A review of the various State Departments of Insurance as to insurance agent regulation makes clear that regulating agents is a national undertaking. The immediately below material is taken directly from the website of a State Department of Insurance, and although different states can have a different take on substantially similar material, the below material underscores the national nature today of agent regulation.
“In conjunction with Sircon, we have arranged for resident producers and adjusters to take advantage of a new, web-based, personal compliance tool called ProducerEDGE. This service is available at no extra charge.”
“Some easy and convenient features include: ”
- “Quick Links: Apply, renew and print your licenses from any or all 50 states in one convenient location.”
- “View every license [in every state] you hold, see your license numbers, types, lines of authority and expirations.”
- “Receive automatic renewal reminders and status update notices [as to every state in which you hold licenses] to help you keep compliant.”
- Agents from throughout the U.S. can be easily licensed in the home state. To underscore all of this, the same website provides the pathway for any non-resident agent (the example below happens to relate to life agents) licensed anywhere in the U.S. to immediately become licensed as a life insurance agent as follows: (quoting from the website):
- “Complete the Producer license application online at Sircon Licensing.
- The license fee is $50 per line of authority plus (if one or more major lines or farm property and liability is applied for) a $25 Technology Surcharge.
- Applicant must appear on NAIC Producer Database as with an active Resident license in good standing in another state for each line of authority applied for.
- An individual may obtain a producer license before being appointed by an insurance company, but an appointment is required in order to transact business in the state. Appointments and terminations must be submitted electronically by the Insurance Company that appointed the Agent. Agents who want their appointments terminated must contact each company that appointed them, and request that the company terminate the appointment. The insurance company must terminate the appointment electronically. …”
What this means is that most states consider a life insurance agent licensed in any other state to have the requisite characteristics to sell life insurance in their state, meaning that state itself, as a state, recognizes that the standard to judge agents is a national standard. (The example here happens to be life insurance agents but of course the same can be said for property casualty agents.)
Separate and apart from the above, which shows a national standard as to which, as an expert, I have testified in any number of states as an expert on an insurance agents obligations and responsibilities, I also have specific agent expertise as follows:
A. Expertise as to Insurance Agents and Brokers and Surplus Lines Agents as a Regulator:Prosecution. I have had extensive and substantive experience relating directly to the duty of care that comes to bear on insurance agents and agencies and brokers and surplus lines agents in their various relationships with personal and commercial lines property casualty insurers and life, health, disability and annuity insurance companies (collectively, “insurance companies”). As an Assistant Attorney General, I have prosecuted insurance agents and brokers and surplus lines agents for violations relating to their duty of care. In this regard, I have initiated revocation actions against the producer’s license and prosecuted those actions to completion.
B. Expertise as to Insurance Agents and Brokers and Surplus Lines Agents as a Regulator: Pre-Licensure Background Investigations. As an insurance regulator (Commissioner of Insurance and First Deputy Commissioner of Insurance), along with my staff, I have screened hundreds of thousands of agents and brokers for character and background (separate and apart from subject matter testing).
C. Expertise as to Insurance Agents and Brokers and Surplus Lines Agents as a Regulator: Formulating Licensing Exams. As to subject matter, I have formulated producer-licensing exams in the first instance. Upon passage of the exam, I have licensed hundreds of thousands of insurance producers.
D. Expertise as to Insurance Agents and Brokers as a Regulator and Surplus Lines Agents: Appointments. In addition to licensure, all insurance agents (and other producers of insurance) require a formal appointment by an insurance company before they can represent that company. The appointment must be filed with and approved by the Commissioner of Insurance as a condition precedent to representing that insurer in the state. As Commissioner of Insurance, I oversaw this appointment process and approved hundreds of thousands of such appointments by insurance companies of their agents and brokers.
E. Supervision of the Relationship Between Insurers and Producers. I have supervised as well the ongoing relationship of all insurance companies with all of their appointed producers of insurance including surplus lines agents.
F. Expertise as to Insurance Agents and Brokers and Surplus Lines Agents as a Regulator: Continuing Education. I have had full responsibility for continuing education for licensed insurance agents (approving CE courses in the first instance for acceptable content; overseeing the administration of such courses and granting and denying credit for such courses).
G. Expertise as to Insurance Agents and Brokers and Surplus Lines Agents as a Regulator: Administrative Law Judge. I have sat as the Administrative Law Judge in such actions as to agents and brokers and entered findings of facts and conclusions of law in scores of cases in which the producers were prosecuted for violations relating to standards of care in connection with insurance matters.
H. Expertise as to Insurance Agents and Brokers and Surplus Lines Agents: Legal Representation. As a lawyer, I have defended agents, brokers and MGAs against allegations (in administrative law forums) of violations of their duty of care.
I. Expertise as to Insurance Agents: Industry CEO. As President and Chief Executive Officer of a major U.S. Property Casualty insurance organization (NCCI) doing business in some 40 states, I have had substantial working relationships with the U.S. insurance agent and agency community including surplus lines agents. Almost all insurance is sold or produced by producers of insurance.
J. Expertise as a Member of the State Legislature. I am currently an elected Member of the Florida House of Representatives, where I serve from House District #89 (Palm Beach to Boca Raton). Among other roles, I am a Member of the House Insurance Committee and Vice Chairman of that Committee, which has statutory oversight of insurance agents. As a Member of that Committee, among other things, I have sponsored or co-sponsored any number of items of legislation relating to insurance agents.