The Free Legal Service Program I run for the IIAG has provided me with yet another topic for a blog post. The above question was recently asked of me by a caller to that program. You would think that there would be clear answer to this question, as it is a situation that has occurred often in the past and with the average age of agency owners continuing its climb toward 60, this situation will most certainly occur even more often in the future.
Unfortunately, there is no clear answer to that question, although I think I know what the Insurance Commissioner’s Office would say. The applicable statute is O.C.G.A. Section 33-23-4. On the one hand, paragraph (e) of that statute states that the “the payment or receipt of renewal or deferred commissions” by “any agency or a person” who has “ceased to be” an agent will not be prevented by the earlier provisions of the statute, which state that commissions generated by the sale of an insurance product can only be paid to a licensed agent, limited subagent, or counselor. If the payments to be made to a retired agent can be characterized as renewal or deferred commissions, which in many instances will be the case, it appears that the agent does not have to maintain a license to be eligible to receive them.
I say appears because the language of that section of the statute also refers to the payments being made to a “licensee” who has “ceased to be an agent, limited subagent, or counselor.” The use of the word “licensee” after having referred to “any agency or a person” implies that the person to whom the payment of renewal or deferred commissions is being made must still have a license of some sort issued by the Insurance Commissioner’s Office. This conclusion is supported by the next paragraph of the statute, which exempts an agent who has been licensed for 10 or more consecutive years from the requirement that they be appointed by a least one insurance company, as long as they are not performing the duties of an insurance agent “other than receipt of deferred or renewal commissions.”
Similar language is also found in the section of the Georgia Insurance Code that governs the continuing education requirements for licensed insurance agents. Agents who meet the same criteria stated above are not required to satisfy any continuing education requirements. There would be no reason for the above statutory sections if a person who was no longer performing the duties of an insurance agent could receive renewal or deferred commissions without having to maintain a license of any kind.
One may ask what kind of license must such a person maintain if they are not required to be appointed by an insurance company or to satisfy any continuing education requirements. The answer is found in a regulation first adopted by the Insurance Commissioner’s Office in 1996 and then readopted in 2003. It describes the requirements for the issuance of a “nonactive license.” Such a license must be renewed and “all renewal fees” paid annually. So it appears a retired agent must continue to pay the Insurance Commissioner’s Office an annual fee for the privilege of receiving “deferred or renewal commissions.”
If such an agent doesn’t want to have to pay a fee for that privilege and run the risk of losing that privilege if their nonactive license is revoked or suspended, which presumably it can be for the same reasons as the license of an active agent, it would be better if whatever payments are to be received from their former agency as a result of their retirement be structured so they cannot be characterized as “deferred or renewal commissions.”