PIANY Prepares Advice as Governor Signs Producer Licensing Bill

October 24, 2003

The Professional Insurance Agents of New York is preparing an in-depth guide for members to explain the changes made by the state’s new producer licensing bill, S.5729, which was signed into law by the Governor on Oct. 21.

The new measures are a form of the model producer licensing act. The Full text of the bill can be obtained at: http://assembly.state.ny.us/leg/?bn=S05729. The PIANY noted that “many of the bill’s provisions will take effect upon signature, while others take effect Jan. 1, 2004.”

The organization said it has “generally supported passage of a New York version of the licensing model, and earlier this year “could sign off on a specific version of the bill.” Its endorsement was made “after David Isenberg and T.J. Derella succeeded in securing amendments to satisfy PIANY’s concerns in certain areas. Specifically, PIANY’s intervention ensured the continuing ability of unlicensed employees to perform certain functions. PIANY also secured greater clarity in new reporting requirements that will apply when business relationships between producers are terminated.”

The bulletin indicated that, “although the bill runs to 23 pages, producers will be glad to know that they do not face a disruptive upheaval in the familiar licensing system. Agent, broker licenses remain. S.5729 preserves New York’s traditional licensing categories, including those familiarly known as life agent, p/c agent, p/c broker and the newer life broker. Also, New York’s unusual “sublicensee” system would remain intact.”

The bill uses the term “producer” to cover both agents and brokers, depending on whom their principle is. Reinsurance intermediaries, excess lines brokers or other persons requiring a license are also included in the term.

The PIANY highlighted the following items from the bill:

No change in CE requirements—for now. S.5729 would not affect the current continuing education requirements for licensees. However, PIANY expects a separate move to increase New York’s CE requirements, currently 15 credit hours per biennial licensing period, to bring them more in line with those in other states. (Connecticut, for example, requires 24 credit hours every two years, while New Jersey requires 48 credit hours every four years.) PIANY, whose original position on continuing education was that it should be voluntary, will watch developments in this area closely.

No adverse change in “who must be licensed.” Much negotiation involving the NAIC model act centered on the question of who must be licensed. Under S.5729, New York’s agencies and brokerages should notice no practical difference in these requirements, despite some language changes. Earlier bill drafts could have affected existing employees. These earlier bills would have eliminated New York’s current provisions that explicitly allow agents’ and brokers’ employees to perform certain duties without requiring licensure.

New “lines of authority” for licensees. New York’s traditional division of licensees into “life” or “p/c” categories stays essentially the same. However, S.5729 introduces the model act’s term “lines of authority” to describe the kinds of insurance the licensee is authorized to transact.

“Personal lines” authority. The major change that the “lines of authority” provisions introduce is the ability to become licensed as an insurance agent (but not as a broker) only for personal lines. Specifically, the “personal lines” authority will apply to “property/casualty insurance coverage sold to individuals and families for primarily noncommercial purposes.” Such licensure would require only 40 hours pre-licensing instruction instead of the 90 now required for a property-casualty agent’s license.

Non-resident excess lines brokers. For the first time, S.5729 will permit nonresidents to become licensed as New York excess lines brokers, provided their home state likewise would license New York residents on a nonresident basis.

New reporting requirements. Currently only insurance companies have reporting requirements with respect to the termination of business relationships. When they terminate the appointment of an insurance agent, companies must report to the Insurance Department “the facts relative to such termination and the cause thereof.”
S.5729 will not require reporting of the reasons for termination unless the termination occurs “for cause.” Moreover, S.5729 will require not only companies but other licensees (including agents and brokers) to make such reports whenever they terminate “for cause” an appointment or other type of contract or business relationship with, or the employment of, any insurance producer.

Suspension/revocation. The circumstances that create a termination “for cause” are spelled out by S.5729 in greater detail than can be found in New York’s current law. S.5729 follows the model act in detailing the grounds for revocation or suspension of a producer’s license, which also become the grounds that constitute a termination “for cause.” However, the addition of more language is less significant that it might appear, since New York’s current law contains the broad, yet vague standards of “incompetency or untrustworthiness,” whereas the items enumerated in S.5729 are more specific in nature.

The PIANY is preparing a “resource kit” for its members that will more fully discuss the aspects and implications of the new law.

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