Avoiding Compliance Issues with your State Regulator
There are many producer compliance
issues my staff routinely addresses, ranging
from timely response to an OIC inquiry, updating a producer’s address in
the proper time frame, or naming a designated responsible licensed person
(DRLP) for a licensed insurance agency. Our approach to most producer
compliance issues has been to educate our licensees and assist them in meeting compliance standards rather than
beginning with fines and penalties. Here,
I will address two common compliance issues: the use of DBAs--that’s “doing
business as” for those not familiar with the term--and affiliations.
Let’s begin with DBAs. While not the
norm in the insurance industry, some agents and agencies use them. If you do
use a DBA, there are laws and rules you
need to follow to avoid compliance issues.
A Washington State insurance licensee
wishing to use a DBA needs to know the law in order to comply. The specific
reference can be found in Chapter 48.17.18 RCW:
“An insurance producer or title
insurance agent doing business under any name other than the insurance
producer's or title insurance agent's legal name is required to register the
name in accordance with chapter 19.80 RCW and
notify the commissioner before using the assumed name.” (Chapter 19.80 RCW
provides specific guidance for each type of entity.)
There is a two-step process you must
follow prior to using the DBA:
1) The trade name must be filed and
approved with the Washington State Department of Revenue’s (DOR) Business
Licensing Service.
2) The approved DBA must be submitted to
our office to be added to the insurance producer license.
DOR has an online application and requires
a $19 fee to file the trade name. Simply go to their website at www.dor.wa.gov, look for “add or change trade
names,” and follow the instructions. Once DOR has approved your trade name,
login to your OIC online account, select “change DBA” from the left-hand menu,
and follow the instructions. You will need to submit a copy of your approved
DOR registration and pay a $5 fee.
The second compliance issue I will
address is affiliations. Agencies are responsible for assuring all licensed producers
representing them are properly licensed and affiliated. This is defined in WAC
284-17-001:
“An affiliation is a type of
appointment whereby a business entity authorizes an individual insurance
producer or surplus lines broker to represent it when conducting insurance
business.”
In layman’s terms, an affiliation is
the legal tie an insurance agency files to show the named licensee represents
the insurance agency.
Let’s review some common compliance
questions regarding affiliations.
Are affiliations required in Washington State?
Yes, they are. Individual licensees
that represent a business entity or act on its behalf must be affiliated with
the licensed business entity. Each business entity must provide our office with
the names of all individual licensees authorized to represent the business
entity and act its behalf. The regulation reference is 284-17-473.
Who can file the affiliation?
This is the sole responsibility of
the insurance agency. An individual producer is not allowed to affiliate himself
or herself to an insurance agency. Once the agency has ensured the producer is
licensed for the proper lines of authority, the agency can file the affiliation
electronically through our online services at a cost of $20 per affiliation. It is important
to note that a licensed insurance agency must have at least one affiliated
individual licensee in order to transact business. Each agency is required by
law to name a designated licensed responsible producer (DRLP), who is responsible
for the agency’s compliance with the laws and regulations of this state. A
common agency oversight is not affiliating its DRLP.
By filing the affiliation for each of
the insurance agency’s producers and establishing the legal tie between the two,
the producer is allowed to use the insurer appointments held by the agency
rather than requiring each producer within the agency to obtain individual
direct appointments. Since the agency holds the direct appointment, commissions
are paid to the agency and then may be dispersed to the affiliated selling
producer.
When do affiliations renew?
Affiliations are a part of the
license renewal process for the agency. We will send an email to the business’
registered email address 60 days prior to the expiration date of the agency
license. The agency’s renewal notice will include a list of all affiliated
producers; the agency should review those for accuracy and pay the affiliation
renewal fees as part of the license renewal.
It is imperative that the agency’s registered
email address be kept current for two reasons:
·
This
is the email address where we will send all correspondence.
·
licensees
are required to notify us of a change in the registered email address within 30
days of a change.
Many of these types of compliance
issues are situational; however, having the basic understanding of what is
required by law or regulation is a great starting point. You can reach us at 360-725-7144
or through our
website. You can also follow us on Twitter and Facebook.
Jeff Baughman,
Producer Licensing & Oversight Program Manager,
Washington State Office of the Insurance Commissioner
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