Do CSR’s Have to be Licensed – Update

In November, I wrote a post on the above question that concluded to be safe any CSR or other employee of an agency who had contact with a customer regarding the renewal of their insurance policy should obtain an agent’s license from the Insurance Commissioner’s Office for the type of insurance in question.  Last week during a conference call with the attorneys for independent insurance agents associations in some other states, I asked the question in more general terms, what activities required an insurance agent’s license.  As a result of the discussion that followed, I learned about some informal guidance that had been issued by the National Association of Insurance Commissioners (“NAIC”) in connection with the Producer Licensing Model Act that had been adopted by that organization in 2000.

The guidance is in the form of a matrix that characterizes various actions by persons in an insurance agency as requiring or not requiring an insurance agent’s license to perform.  It goes into some detail about what particular actions associated with the solicitation, sale, and negotiation of an insurance purchase and the servicing of an existing insurance policy can be performed by a person who does not have an agent’s license and which actions require such a license.  While the guidance is only informal and not intended to be a definitive statement, the provisions of the Model Act that are relevant to that subject are almost identical to the corresponding provisions in the Georgia Insurance Code.  I have posted the guidelines on my website for easy reference. (Click here to see them.)

The Michigan Department of Insurance and Financial Services has posted similar guidelines for telemarketers and CSR’s online.  These guidelines are even more specific than those of the NAIC regarding particular tasks that can and cannot be performed without a license.  The pertinent provisions of the Michigan Insurance Code are very similar to those found in the Georgia Insurance Code, but again these guidelines should not be taken as definitive by Georgia insurance agencies.  However, they, along with the NAIC document, do offer guidance that Georgia agencies would do well to consider in the conduct of their business activities.

 

Stated Value Policy: What is it and How it Can be a Trap For the Unwary

One of the many reasons that I enjoy working with my insurance agency clients is that I am always learning something new about the insurance business.  One new thing that I recently learned involved what are known as “Stated Value” or “Valued Policy” insurance policies.  They are policies that provide coverage for buildings in a specified amount, which amount will be paid upon the complete destruction of the building without any requirement on the part of the insured that it prove the building was actually worth the policy amount.

Whether or not a policy will provide the above type of coverage is determined by a state’s Insurance Code.  Georgia has such a statute in its Insurance Code.  If the requirements in it are met, the policy in question is automatically a “Stated Value” one.  To be such a policy, it must be issued to one or more individuals for a one or two family residential building or structure located in Georgia.  The “Stated Value” coverage is only for a total loss of the building or structure due to fire.  Any other cause for the loss will not entitle the insured to receive the policy amount without having to prove the building or structure was, in fact, worth that amount.  Of course, there would be no coverage if the insured or one acting on their behalf was criminally responsible for the fire or fraudulently obtained the policy.  There are three other exceptions that involve the existence of multiple policies on the same building, a blanket policy that covers two or more buildings for a single amount of insurance, and a builder’s risk policy for the building.

Even if there is “Stated Value” coverage, the Georgia statute permits a reduction in the policy amount for “any depreciation in value occurring between the date of the policy or its renewal and the loss” and permits the insured to recover only the “actual loss sustained” up to the policy amount if the “loss occurs within 30 days of the original effective date of the policy.”  One enterprising Georgia homeowner tried to convince the Georgia appellate courts that the addition of a replacement cost rider to his homeowner’s policy should result in an increase in the “Stated Value” of the policy to the amount that it would cost to rebuild his home.  The homeowner’s argument was rejected by the Georgia Court of Appeals in a very short opinion.

The existence of a “Stated Value” policy in Georgia provides a possible E&O exposure for the unwary insurance agent.  As noted in my blog post a few months ago on the duties owed by insurance agents to their customers, although normally an insurance agent owes a primary duty to the company he or she represents and has no duty to the insured, an insurance agent can create a duty to the insured by agreeing to perform a service for the insured that was not included within the services he or she was expected to perform on behalf of the insurance company.  Assisting a customer in determining the value of their residence or even worse suggesting to the customer what value they should use for the face amount of their homeowner’s policy will most likely expose the agent to liability if the “Stated Value” of the policy turns out to be less than the actual value of the residence on the policy date and there is a loss.  For this reason, an insurance agent should be very careful about what is said to the customer about this subject and should include a disclaimer of responsibility for the determination of the face amount of such a policy in their application process.

Georgia YAC and the U.S. Senate

On the face of it, the Georgia Young Agents Committee and the U.S. Senate don’t appear to have much in common.  But last week, they were both involved in significant events.  You may remember that Georgia’s YAC became the first state Young Agents Committee to win two national awards at the IIABA’s Fall Leadership Conference last September.(Click here to read my blog post about those awards.)  Last Tuesday, just as the snow was beginning to fall in the Atlanta area, the Immediate Past Chair, Brooks Zeigler, the Chair, Kelli Dean, and the Vice Chair, Jarrett Bridges, along with Stacie King of the Big I’s office, participated in a webinar that was broadcast nationwide by the IIABA.

In the webinar, they explained what Georgia YAC did to win those two national awards, Outstanding Membership Development and Communications.  After listening to their presentation, it was clear that their ability to significantly increase YAC’s membership was largely due to their development of a plan to stay in regular contact with Georgia’s young agents through a variety of mediums.  Brooks Zeigler made the point  that getting people to join YAC was a lot like selling insurance.  The YAC developed a plan to touch each member and potential member as often as possible and with each touch provide information about the benefits of membership.  They used personal contact by board members and officers at the local level and their meetings, along with e-mails and text messages that were individually directed to members and potential members, to keep YAC and its benefits in front of their target audience, much like a good insurance salesman handles his or her customers and potential customers.

If only our Congress could learn how to communicate with us as well as Georgia’s YAC communicates with is members and potential members.  However, at the end of last week the U.S. Senate did finally take action on two subjects of importance to the insurance industry.  It passed the ““Homeowner Flood Insurance Affordability Act of 2013”, which made changes to the Biggert-Waters Act of 2012 that overhauled the National Flood Insurance Program, to delay some of the increases in premiums for flood insurance that were mandated by that Act.  But perhaps of more importance to insurance agents was the inclusion in the Affordability Act of a provision that approves the creation of a nationwide system for the licensing of agents and brokers.  Known as the National Association of Registered Agents and Brokers Reform Act (“NARAB II”), this legislation will streamline the process of obtaining non-resident licenses for agents and brokers, thereby making the sale of insurance across state lines easier. (Click here to read more about this legislation.)

Unfortunately, as seems to be the case with most of what now happens in Washington, the passage of the Affordability Act does not mean a delay in some of the premium increases for flood insurance or the creation of a nationwide reciprocal licensing system for agents and brokers will actually occur.  The House of Representatives must still approve this legislation and the prospects for that happening are unclear.  The sticking point will not be NARAB II, as the House of Representatives overwhelmingly approved that Act last September. (Click here for my blog post about it.)  Instead, there is some question over whether the House of Representatives will go along with the Senate’s changes to the National Flood Insurance Program.  Stay tuned for further developments.