Georgia’s YAC – Another Great Year

Last week, I took the time to listen to a webinar involving Georgia’s Young Agents Committee.  The Immediate Past Chair, Kelli Dean, the Chair, Jarrett Bridges, the Vice Chair, Robbie Moore, and the Secretary-Treasurer, Jimbo Floyd, participated in the webinar, which was broadcast nationwide by the IIABA.  They described all the activities of Georgia’s YAC during 2014 that lead to it being named the Outstanding Young Agent’s Committee of the year during the Young Agents Leadership Institute at the IIABA Fall Conference last September. (Click here for my blog post about the award.)

In the 2013-2014 year, the Georgia YAC departed from precedent and used an overnight retreat of its board members to set their goals for that year, instead of having the Chair determine them.  This lead to increased “buy-in” by the board members for those goals, which was evidenced by the fact that every one of them was not only achieved, but surpassed.  The Board decided to focus on three areas, raising awareness of InsurPac, increasing their registered membership by 35%, and increasing attendance at the annual Sales and Leadership Conference by 10%.

Using the slogan “Commit to the I”, the committee encouraged its members to sign up for a recurring monthly contribution to InsurPac, instead of a one time contribution, and was able to get 24 members to do so.  Those members, along with others who contributed, including 100% of the Board members, enabled Georgia’s YAC to surpass its annual goal for InsurPac by over 70% within the first 45 days of 2014.  They had similar success with increasing the registered membership.  Sixty-five new members were added for an increase of 59%.  They weren’t quite as successful with attendance at the Sale and Leadership Conference, but 15 first time attendees were among the 102 agents and company partners who did come.

The key to the committee’s success was focusing on creating relationships among the Board members, in particular, and the membership in general.  They did not look at each other as competitors, but as friends working to achieve a common goal, while having fun.  As they have done in the past, the committee made extensive use of social media to communicate with their members and encourage participation in their events.  If you are interested in the details on how this was done, click here for a link to the webinar. (It’s toward the bottom of the page.)

As I said in my post back in September, the future of the Big I is in good hands with these outstanding young agents and its strong Young Agents Committee in general.

Is an Agent Required to Maintain a Trust Account?

This is the second of the two questions referred to in my first post of 2015 that I was asked by a caller to the Free Legal Service Program that I run for IIAG.  The short answer to it is No, but it is not an unqualified No.

The statute that governs this subject is O.C.G.A. Section 33-23-35.  On the one hand, it states that “all funds representing premiums received or return premiums due the insured by any agent or subagent . . . shall not be commingled with the licensee’s personal funds.”  From this statement, it would seem that the portion of premium payments that do not represent commission due the agent cannot be deposited into the bank account used by him or her to pay their other bills.  But the very next sentence of the statute says, “Nothing contained in this Code section shall be deemed to require any agent or subagent to maintain a separate bank deposit for the funds of each principal, if the funds so held for each principal are reasonably ascertainable from the books of accounts and records of the agent or subagent.”

So it is permissible for an agent to commingle their funds with funds belonging to an insurance company or insured, but only if their accounting methods will allow the amount due to each such company or insured to be “reasonably ascertainable.”  What that phrase means  would be up to the Insurance Commissioner’s Office to decide, as there have not been any court cases that addressed that question and there are no regulations that define it.  However, its meaning would likely be influenced by the duty of an agent and subagent to “promptly” account for and pay to the insurance company or insured the money owed them.

To be safe, an agent that does not maintain a separate account for premium payments should be able to tell from their accounting records at any time how much of the money in their operating account or accounts belongs to each insurance company and insured with whom they deal.  Given the complexity of the accounts current calculations that must be done for each such insurance company, being able to satisfy the statutory duty will require a sophisticated accounting system or software program.

The importance of being able to satisfy that duty is made clear by the last paragraph of the above code section.  The first sentence states, “Any violation of this Code section shall constitute grounds or cause for action by the Commissioner, including, but not limited to, probation, suspension, or revocation of the license.”  The Commissioner is also given the authority to impose fines and other penalties for such violations and a willful violation of the code section that involves an amount greater than $500 is declared to be a felony.

Although the commingling of premium payments due an insurance company or insured with an agent’s personal funds is permissible under the Georgia Insurance Code, the better practice would be to maintain a separate account for such payments.  Doing so will eliminate the possibility of inadvertently using such payments to pay other bills, which could expose the agent to disciplinary action by the Commissioner’s Office, and will make keeping track of how much is owed each insurance company or insured easier.

A Holiday Wish Come True

My readers may remember that in my last post of 2014, I made some Holiday wishes.  To my surprise, one of those wishes came true at the end of last week.  In two days, the Congress enacted a bill that renewed the terrorism reinsurance program and created a mechanism for the nonresident licensing of agents and agencies without having to go through the insurance commissioner’s offices of each state.  If Congress could act as quickly to deal with other problems facing our nation, 2015 may turn out to be a very good year.

The Terrorism Risk Insurance Program Reauthorization Act of 2015 made some changes to the previous program.  The federal government’s share of any losses related to terrorist acts will gradually decrease to 80%, the trigger for the program will gradually rise to $200 million in such losses, and the amount that insurance companies must pay back to the federal government will gradually rise to $37.5 million, which amount will then increase every year based on a formula in the Act.  Other more technical changes were also made in the program.  The IIABA has prepared a summary of the Act’s provisions which can be read by clicking here.

As you might suspect from the name, the National Association of Registered Agents and Brokers Reform Act authorizes the creation of an entity known as the National Association of Registered Agents and Brokers (“NARAB”).  Membership in this entity will enable an agent or agency to conduct business in states other than their home states without having to obtain a non-resident license from the insurance commissioners of those other states or a certificate of authority from their secretaries of state.  Instead, the agent or agency will just pay NARAB the licensing fee required by those other states and it will notify the insurance commissioners of those states that the agent or agency is now authorized to conduct insurance business in them.  The insurance commissioners of those states do have the ability to contest the fact that an agent or agency has satisfied the NARAB’s membership criteria, but they cannot object to the conduct of business in their states by the agent or agency on the grounds that their licensing criteria have not been satisfied.

The best way to think of NARAB is as a nationwide Insurance Commissioner for licensing, except that membership in it is voluntary.  NARAB will establish its own criteria for membership, which must at least meet the standards for personal qualifications, education, training, and experience that are found in the National Association of Insurance Commissioner’s (“NAIC”) Producer Licensing Model Act and will require, at a minimum, that the agent or agency’s license in their home state be in good standing.  There will, of course, be a fee to join NARAB and membership will have to be renewed every two years.  NARAB will have the authority to discipline its members for violations of its rules, and its members will also be subject to the disciplinary powers of the insurance commissioners of each state in which they are authorized to do business for the violation of their rules.  Those agents and agencies that don’t want to deal with the NARAB’s rules will still be free to get non-resident licenses directly from the insurance commissioners of each state.

Unfortunately, it will take some time before agents and agencies can apply for membership in the NARAB (the Act calls for NARAB to be operational two years after its actual creation which is still some months away).  Perhaps the most significant hurdle for the NARAB will be the necessity to raise the funds required to set it up, as the Act prohibits the use of federal funds for this purpose.  Stay tuned for further developments.  In the meantime, IIABA has created a summary of the Act’s provisions and a member guide that explains those provisions in more detail for those who are interested.





Who Can Be The Owner Of An Insurance Agency?

Over the Holidays, I received a couple of calls on the Free Legal Service program I operate for the members of the Independent Insurance Agents of Georgia that were about some basic issues involved in conducting the business activities of a Georgia insurance agency.  I will address the issues raised by one caller’s question in this post and the issues raised by the other caller’s question in a later post.  The first caller asked whether a person had to have an insurance agent’s license to be the owner of an insurance agency.  The answer to that question is No.

In fact, it is possible under the Georgia Insurance Code that none of the owners of an insurance agency have an insurance agent’s license.  That Code only requires those persons associated with an insurance agency who “sell, solicit, or negotiate insurance contracts” to have such a license or that of a limited subagent or counselor.  As long as an owner of the agency does not take part in the sale, solicitation, or negotiation of an insurance contract, as those terms are defined in the Code, the owner is not required to be licensed in any way by the Insurance Commissioner’s Office.  However, such an owner’s name, date of birth, social security number, and residence address must be provided to that Office to obtain a license for the agency.  For some reason, the same information must also be provided for each officer and director of an agency who does not have a license issued by that Office.

Under the Georgia Insurance Code, the only prohibition on who can be an owner of an insurance agency involves a person who has had a license refused, revoked, or suspended by the Insurance Commissioner’s Office.  Even then, if the agency is a corporation, such a person could be an owner of the agency, as long as they did not own 10 percent or more of its issued and outstanding stock.  However, such a person could not be an officer or director of the agency under any circumstances.  This Code section does not refer to limited liability companies, so it is unclear whether a person who has had a license refused, revoked, or suspended by the Insurance Commissioner’s Office could be a less than 10 percent owner of an insurance agency that is organized as a limited liability company.