TN Insurance Bulletin (1985-08-08): Insurance Activities of Unlicensed Agency Personnel

JOHN C. NEFF COIIIIISSIONER TO: FROM: SUBJECT: DATE: STATE OF TENNESSEE DEPARTMENT OF COMMERCE AND INSURANCE 114 STATE OFFICE BLDG. NASHVILLE 37219 BULLETIN All Insurers Doing Business in Tennessee John C. Neff, Commissione~~ Insurance Activities of Un~~ Agency Personnel August 8 1 19.85 T.C.A. 56-6-102 provides in pertinent part: (1) INSURANCE AGENT. An insurance agent is an individual appointed by an insurer to solicit applications for a policy of insurance or to negotiate a policy of insurance on its behalf. An individual not duly licensed as an insurance agent or limited insurance representative, who solicits a policy of insurance on behalf of an insurer shall be an insurance agent within the intent of this Chapter ... T.C.A. 56-6-103 provides in pertinent part: License Required - (a) No person within this State should act as or hold himself out to be an insurance agent or limited insurance representative unless duly licensed. It has come to the Depart ment's attention that there is disagreement and uncertainty in the industry regarding proper interpretation of the above referenced statutes with regard to unlicensed agency personnel. While no hard and fas t rules can be set forth which will apply to all situations, this Bulletin wi ll attempt to set guidelines for proper conduct. An understanding of the terms "solicit" and "negotiate" is important to understanding the extent to which unlicensed persons may participate in insurance trans actions. . ·' :' . ... '· ., • "To solicit" has been defined as to seek or try by persuasion; to ask, to request, plead or invite, e.g., to invite an individual to purchase an insurance contract. "To negotiate" is to bring about mutual agreement, to transact business, to communicate with another so as to arrive at the settlement of some matter, to discuss or arrange a sale. "To negotiate" is to discuss .and settle the terms, conditions, benefits, and rates of an insurance contract. The Insurance Code requires a . person to become licensed and hold company appointments. in . order to solicit or negotiate insurance contracts. The public policy behind the agent licensing statutes is to insure that insurance agents demonstrate competency throu·gh passing insurance examinations, and to create a formal agency relationship making the insurance company responsible for the acts of its duly appointed agents. An unlicensed person can discuss insurance matters in general, with regard to both coverages and rates. However, if a general discuss'ion develops irito a "negotiation", as it almost certainly will if an unlicensed person does more than take information for an application, the matter should be turned over to a properly licensed agent for handling to .its conclusion. Accordingly, an unlicensed person should not discuss particular coverages requiring explanation or negotiation, accept payments for coverage, or do anything which will bind an insurer or lead the applicant to believe that he or she is bound without dealing directly with a licensed agent in person or by telephone. As stated previously, the Department can only give guidelines since the propriety of an unlicensed persons actions will depend upon the facts surrounding a specific case. Listed on the following page ·. are some examples of insurance activities in which an -unlicensed person may or may not engage. If you are in doubt as to the propriety of a particular action, you should contact the Department of Commerce and Insurance for guidance. To assure that there is always a properly licensed individu•l in an agency to assist the public, the Department urges companies to license at least one member of each agency's office personnel. JCN/cmf Attachment / ( ~r:.,.. . .... ,. AN UNLICENSED PERSON (Employed by an Insurance Agent, Agency or Company) MAY Take factual information for applications Quote rates as general information Receive requests for coverage for transmittal to a licensed agent Arrange appointments for a licensed agent Be remunerated on a "unit of time or work" . basis MAY NOT Counsel or advise what coverages to b~y Urge or advise insuring with any particular company Indicate that requested coverage is or will be bound or issued Bind coverage (this includes accepting premium payments prior to the binding of coverage by a license agent) Solicit additional business when receiving payment Solicit sales for agent over the phone or otherwise Be remunerated on a "commission basis" i.e., contingent upon the specific sale of insurance or percentage of premium 1