Question from an IIABNY member: I'd like some clarification on the whole broker vs. agent licensing situation. Since Regulation 194 I am receiving more and more demands from insurers for individual appointments.
1) What is the difference between an agent and a broker?
2) If you are licensed as a broker (BR) and then complete an app for an agent (PC), are you now licensed as both or is the BR license replaced by the PC?
3) I always thought an agent’s license indicated exclusivity to a single insurer. As an independent agency, I’ve always only had employees with BR licenses. Now some of our surety companies are requesting a PC license in order to submit an agency agreement and receive appointment. Can’t they just appoint the agency’s PC license?
4) Last question, can WE as an independent insurance agency appoint agents? I have two resident Florida producers looking to be appointed. Wouldn’t they need to be appointed by a carrier? If not, do they have to be appointed by a resident Florida insurance agency? (I understand this is probably a question the Florida insurance department, but figured you may have advice in this area to some degree even as it applies to New York, such as adding sublicensees).
Answer: I’ll take your questions in order:
1. In legalese, New York Insurance Law Sect. 2101 defines them like this:
(a) In this article, "insurance agent" means any authorized or acknowledged agent of an insurer, fraternal benefit society or health maintenance organization…and any sub-agent or other representative of such an agent, who acts as such in the solicitation of, negotiation for, or sale of, an insurance, health maintenance organization or annuity contract, other than as a licensed insurance broker… (emphasis added)
(c) In this article, "insurance broker" means any person, firm, association or corporation who or which for any compensation, commission or other thing of value acts or aids in any manner in soliciting, negotiating or selling, any insurance or annuity contract or in placing risks or taking out insurance, on behalf of an insured other than himself, herself or itself or on behalf of any licensed insurance broker… (emphasis added)
In English, an insurance agent is the legal representative of the insurer, while a broker is the legal representative of the buyer.
2. Someone who holds a BR license and who subsequently obtains a PC license holds both licenses simultaneously (with the accompanying privilege of paying both licensing fees.) One does not necessarily replace the other, though the producer always has the option of letting one of them lapse. Many of our members hold both licenses out of necessity. For example, to be a Travelers agent, you must hold a PC license and Travelers must file a certificate of appointment with the Insurance Department, naming you as one of their appointed agents. However, if you need to place business through a managing general agent or wholesale broker (in cases where none of the companies you represent will offer coverage), you must hold a BR license.
3. The holder of a PC (agent) license is not necessarily exclusive to one insurer, though she can be. Nothing in state law prohibits multiple insurers from filing certificates of appointment with the Insurance Department appointing the same agent. (Note: Our peers in other countries have systems that make much more sense. In other countries, “brokers” are the equivalent of our independent agents; “agents” are the equivalent of what we think of as captive agents.) That said, I don’t believe it’s necessary for every producer in the agency to have a PC license. It should suffice for the business entity (the agency) to hold a PC license while most producers have BR licenses. The insurer appoints the agency (holder of the PC license with one or more sublicensees listed on it); individual producers (holding BR licenses) in essence “broker” submissions through the agency, which places the risks with the appointing insurer. It is perfectly legal for an agent and a broker to share commissions for the placement of a risk if the agent is an agent of the insurer providing coverage.
4. There is no provision in New York law for an agent to file a certificate of appointment for another agent. You can certainly contract with sub-producers, but that is an arrangement that does not directly involve New York Insurance Law. Florida producers who wish to submit business to you for placement with your markets should probably obtain New York non-resident BR licenses. They don’t need New York licenses for commercial P&C risks that are domiciled in Florida and have New York exposures, but they must have the licenses for any other types of New York risks (life, health, personal lines, etc.). Regarding Florida requirements, the 2011 Licensing & Surplus Lines Laws For The 50 State, District of Columbia, Territories, and Possessions by David D. Thamann, J.D., CPCU, ARM states, “Resident and nonresident insurance representatives (individuals and entities) may transact insurance only after appointment by an insurer or appointing entity as specified under Florida Statute.” I’m not sure what he means by “appointing entity”; you may need to check with the Florida Department of Financial Services for clarification on that. They’re on the Web at www.myfloridacfo.com, and their phone number is 850-413-3135.
