Proposed Producer Licensing Regulations would Hinder Calif. Policies

October 2, 2002

Proposed regulations in California that address exemptions for employees who make adjustments to insurance policies from general licensing requirements need to be stronger and broader.

“Unlicensed customer service representatives should not offer opinions, give advice or make recommendations, but they should be able to respond to routine requests and inquiries from existing policyholders regarding their existing policies,” Sam Sorich, vice president and western regional manager of the National Association of Independent Insurers (NAII), testified last week before the California Department of Insurance. “Otherwise, the regulation will prevent companies from providing the level of customer service expected by the public.”

Portions of the regulation amendments also could create a misperception that a licensed producer must handle any contact between a policyholder and a policyholder’s insurance company.
“The state department of insurance has urged insurance companies to create systems that quickly respond to customer inquiries and problems,” Sorich said. “It is common for policyholders, often at the suggestion of the department of insurance, to contact their companies to seek information about their insurance policies. Insurance companies would not be able to respond to these inquiries in an efficient manner if every person in the company’s customer service department had to be licensed as an insurance producer.

“Employees exempted from the producer license requirements should be able to implement policyholders’ requests for additions or deletions to existing insurance policies, coverage changes to existing policies and adding or deleting policyholders.”

Three reasons why the proposed producer license requirement exemptions are unauthorized and inconsistent with the state insurance code are:

· The obligation to have clerical changes reviewed and signed by licensed producers is not a requirement stated in the state insurance code.
· Limitations to “recording” requests for changes are inconsistent with an unlicensed employee’s authority to “make” clerical changes, according to the insurance code.
· Restrictions to additions or deletions to existing policies run counter to the concept of clerical duties.

“NAII’s recommended amendments make good sense, are consistent with statutory provisions and avoid the absurd results of the proposed version of the amendments,” Sorich said. “Some insurance companies today allow their customers to make changes to their existing policies through access to the company’s Web site. These changes are made without the intervention of licensed producers. It would be at odds with modern business practices to mandate that a licensed producer mediate just because a policyholder happens to decide to make a change to his or her policy by a telephone call versus an insurance company’s Web site.”

Also, requiring an unlicensed employee who accepts insurance premiums to deliver the premiums to a licensed producer is impractical and unnecessary, Sorich said. The accounting departments of insurance companies receive thousands of premium payments every day. The literal meaning of this provision would require the employees in an insurance company’s accounting department to deliver the premium payments to a licensed producer before processing the payments.

“This proposed requirement would accomplish nothing and would frustrate the company’s efforts to provide efficient, economical service to its customers,” Sorich said.

Explaining payment plan options should be permitted by unlicensed employees, as this information does not involve the terms of an insurance contract. A person who explains, interprets, offers opinions or makes recommendations on insurance coverage, exposures, limits, premiums, rate or deductibles is involved in negotiating insurance contracts and must be licensed, but articulating payment plans should not be included in the licensing requirements, Sorich added.

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