Producer License Verification Three Ways

By | November 19, 2021

This post is part of a series sponsored by AgentSync.

When a producer writes business or receives a commissions payout, the first thing an operations team needs to do is look to see two things; 1) is the producer appointed with the carrier to sell the product they sold in the state where the application was signed, and 2) is the producer licensed to sell the product they sold in the state where the application was signed.

That doesn’t sound so bad, but remember, these license details need to be verified for each producer every single time they write business and, in many states, every time they’re paid commissions. That’s a lot of verification checks. And if you’re reading this thinking, “Absolutely not, there’s no way to check licenses that frequently,” just know that you’re unnecessarily opening yourself up to regulatory risk.

Here’s why:

There are a few different ways to go about license verification. Done right, producer license verification can be a seamless check to protect against compliance mishaps (and yes, this means checking licensure of every producer every time they write business). Done wrong, producer license verification can be a never-ending project that drags on compliance teams, results in regulatory actions, and limits growth.

Let’s look at some of these options below.

The hard ways to approach producer license verification

Producer license verification checks aren’t anything new. So, it makes sense that there are manual legacy processes for license verification that include paper documents, spreadsheets, and re-keying data. These processes can do the job, and sometimes they can be done well. But the issue is that they’re often very time-consuming and can leave a company exposed to the risk of costly human error. Here’s what we mean:

1. Manual checks

Some companies require producers to send in a copy of their license in every state in which they’re licensed. That sounds reasonable enough: Share compliance responsibilities with the producers.

But there’s a cost associated with managing license copies: Producers need to pay for each license copy pulled through the producer database (PDB), plus companies need to employ a large enough team to accurately keep on top of producers and make sure they’ve sent in their most up-to-date licenses and process the license copies once received (all before greenlighting them to sell).

This strategy relies on the honor system, which raises a few red flags. What if there are changes to a producer’s license between when they wrote the business and when they receive commission payouts? Who’s making sure the license on file is accurate and up-to-date? What if a producer receives a regulatory action and has their license suspended? There’s no guarantee that the producer will cease writing business and update the carriers or MGAs they work with. That’s a lot of “ifs.”

When it comes to regulatory actions, all parties involved are at fault. With that in mind, manual checks expose companies to unnecessary risk. Not something we’d recommend.

2. PDB pulls through NIPR

Instead of turning to producers to pull their own license copies through the PDB, other companies will go directly to NIPR and pay a fee for a one-time PDB pull.

The problem is, sometimes it takes a little while for states to post updated licensing information to the PDB. As a result, if a company chooses to manage PDB pulls themselves but there’s a discrepancy between the licensing details a producer says they have and those posted to the PDB, then they’ll need to come back and pay for more PDB pulls until the state posts the updated information.

A waste of both time and money.

Also, we’ve found that some of the biggest violations in regulatory compliance occur when an agent gets paid a commission but isn’t licensed or appointed. While that may seem like a minor slip-up, these mistakes come with some big-dollar fines. Doing a one-time PDB check won’t tell you if something lapses months or years later.

The easy way to approach producer license verification

Not that we’re biased or anything, but there’s only one easy way to approach producer license verification, and that’s with licensing software, such as AgentSync.

3. Producer licensing software

With AgentSync, customers onboard their agents and get an immediate producer sync that shows exactly which licenses and appointments are active at that point in time. Plus, with our daily update and notifications dashboard, customers can see what changes have occurred since the last PDB update.

On top of that, AgentSync also syncs (we’re aptly named) with other systems to do things like automatically stop commission payouts that would violate licensing and appointment laws. Et voilà, problem solved.

If you’re interested in taking the easy path to effective license verification, check out a demo.

About Niji Sabharwal

Niranjan “Niji” Sabharwal is the co-founder and CEO of AgentSync, an insurance producer license management software. Niji believes solving problems at scale requires the right proportions of people, processes, and technology. He holds a B.A. in business economics from the University of California Santa Barbara. Contact Niji at More from Niji Sabharwal

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