View this article online: https://www.insurancejournal.com/magazines/mag-features/2019/05/06/525609.htm
Harken back to 2002 — a time when iPhones, Android phones, even Blackberries, had yet to be introduced. Facebook, Twitter and YouTube were years away from their debuts, and streaming content on Netflix was still a fantasy — though there were approximately 9,000 Blockbuster Video stores open for business.
In 2002, just 9.1 percent of the world’s population used the internet (compare that to 56.1 percent today, according to United Nations data), and there were only 3 million websites. Somewhere in the neighborhood of 2 billion exist today.
A lot has changed over the last 17 years, but not everything. Regulations promulgated by the California Department of Insurance — those issued in 2002 governing conduct that unlicensed employees at insurance agencies and brokerages can engage in — remain unchanged.
This is despite all the technological advancements over the past decade-plus, and the new ways in which the business of insurance — particularly at the producer level — is done. These regulations have not kept pace with technology, and this has proven to be quite problematic.
Carriers have made it their mission to reduce costs associated with the acquisition and servicing of policies and claims management. Toward that end, insurers have spent millions of dollars on technology designed to improve website functionality.
The results have been impressive.
These days, agents and brokers can submit policy applications online, facilitate a variety of website-based endorsements and otherwise avail themselves of other paperless options that streamline and expedite the entire process and make insurance more economical.
But this new technological capacity raises questions about what activity requires an insurance license.
For instance, can a licensee get into trouble by directing an unlicensed customer service representative to make an endorsement to a policy on an insurance company website, even when the modification is as minor as adding or changing a lienholder on an auto policy, correcting an address, or fixing typos in a VIN number?
A strict reading of the applicable statute and regulations as currently written indicates that the answer to that question is “Yes.”
While these seemingly clerical tasks can easily be handled by a CSR, a licensed producer must carry them out because they are, in fact, policy endorsements. Yet this is unreasonable and results in an unnecessary barrier to the efficacies insurance companies have set in place by leveraging technology. Which only bolsters the case that the rules concerning what unlicensed CSRs can and cannot do on producers’ behalf or behest must evolve with the times and be changed.
Clearly, substantive policy modifications — such as increases in premiums or changes to coverage — should be made at the hands of licensed professionals. However, several day-to-day administrative policy adjustments that can be accomplished on carrier websites, while technically endorsements, should not require a licensed producer’s personal efforts. Unfortunately, the 17-year-old regulations suggest otherwise.
In California, a person shall not solicit, negotiate or affect contracts of insurance unless he or she holds a valid insurance license. There are exceptions to this rule applicable to employees of agencies and brokerages who do not receive commissions. One of these, as set forth in the California Insurance Code, includes clerical or administrative duties. But what tasks fit within this category?
When the CDI last addressed this query in pre-iPhone days, it contemplated relatively inconsequential responsibilities like distributing brochures, business cards or other advertising information; filling out applications for insurance coverage without any customer contact (other than to get hold of factual information requested by a licensee); obtaining underwriting information from third parties; preparing binders, certificates, endorsements, identification cards, policies and similar evidence of insurance under the supervision of a licensee (without signing these documents either in their names or in the names of licensees); scheduling appointments; accepting insurance premiums for delivery to licensees; and answering telephone calls, receiving faxes and written mail and opening emails.
Absent from the above representative list: effectuating policy endorsements that are clerical or administrative in nature — an absence that is out of step with “business as usual” as we now know it to be.
Imagine XYZ Insurance Services, a fictional agency in California that employs licensed and endorsed insurance producers selling personal auto insurance both in person and over the phone.
XYZ also has on its staff unlicensed hourly CSRs, who do not receive bonuses based on sales, and assist the company’s licensed professionals by servicing customer policies. On any given day, it is not uncommon for these CSRs to field calls from policyholders requesting a variety of policy changes.
In fact, when one such customer reports that his name as it appears on his declarations page is spelled wrong, the CSR on the line corrects it directly on the insurance company website. Then, when the insured asks a follow-up question about premiums, the CSR transfers him to the licensed producer handling his account.
This hypothetical scenario is not at all unusual, and at first blush does not seem to present any problems. Certainly, correcting a spelling error is routine and not akin to a discussion about coverage, rates, policy limits or anything else that would require a licensee’s involvement.
But the CSR’s conduct can nevertheless be characterized as transacting insurance without a license because a change has been made to a policy that rises to the level of an endorsement. Under the law in its current form, an unlicensed CSR cannot make such a modification on his or her own, thus subjecting XYZ to a complaint by the CDI and corresponding legal exposure.
In today’s insurance marketplace, it isn’t possible for an agency or brokerage to efficiently operate and compete if required to have licensed producers make every minor change to customer policies, such as the typo correction presented in the XYZ example. And given the statutory nod to unlicensed CSRs handling certain administrative and clerical tasks, the time is now for the law to be updated so that it catches up to currently available and widely used technology. As otherwise stated, the CDI and other similarly situated state insurance departments should promulgate new regulations allowing CSRs to freely assist licensees on non-substantive matters (read: those that fall short of explaining or interpreting policy language, recommending insurance products to customers, binding coverage and the like). The net effect would be for producers, through their CSRs, to lawfully take advantage of the convenience and efficiencies that carriers have built into their websites.
Going forward, unlicensed CSRs should not have to think twice about accessing customer accounts online to facilitate negligible policy revisions. They should be able to legally do so even on iPads or comparable tablets — you guessed it, more post-2002 creations.