Business licensing can be complex. In addition to state and jurisdiction licenses, in more regulated sectors, companies also need industry-specific licenses and requirements, making it overwhelming.
Types of insurance licenses
The insurance industry is highly regulated and requires a number of different licenses. Below are the most common types of insurance licenses of which businesses should be aware.
Agency and individual resident license
Insurance agencies and individual agents first need an agency or individual resident license from your home state, allowing you to operate your insurance business from within state lines.
Agency and individual non-resident license
An agency or individual non-resident license is needed for an insurance business to serve customers in multiple states. For example, if John Smith has an insurance agency in his home state of Delaware, but also wants to do business in Pennsylvania, New Jersey, and Maryland, those licenses would be referred to as the non-resident licenses. For each additional state where a business is licensed, there are additional fees and requirements.
Policy specific licenses
Many states have different types of insurance licenses based on the policy types the agent sells. These licenses often require additional fees and certifications. Some examples include:
- Fire and casualty
- Limited lines automobile
- Personal lines
- Life-only agent
- Accident and health
Fire and casualty is the most general and broad type of license, allowing the agent to offer policies such as automobile, personal property, and flood insurance. If you are starting an insurance business, this is a license you’ll require. The other types of licenses are more narrow in scope and will typically restrict what types of policies an agent can offer. For example, a life-only agent is exclusively for selling life insurance policies.
Another type of specialized license is a surplus line, which is when an insurer won’t accept the risk on a particular line of authority, meaning it doesn’t meet the established guidelines of the state. As a result, this requires a separate license—a special licensed producer or a surplus-line producer—that enables them to procure a policy that allows for more risk.
An adjuster license is another common type of license. An insurance or claims adjuster is someone who settles insurance claims—the person who physically visits clients to determine what the insurance will cost and cover. As a result, an adjuster needs a different license.
Third-party administrator (TPA) licenses are for a firms, brokers, or individuals that have various administrative responsibilities, usually involving claims. An example is if an employer self-insures their employees, they’d need a TPA license to be legally allowed to submit claims.
Finally, an appointments license links an individual or agency with a specific insurance company allowing them to sell that company’s policies. So for example, using John Smith as an example again, having the proper appointments license allows John to sell State Farm’s different insurance plans.
Knowing what types of insurance licenses a business is expected to have will make the research process easier and help ensure that your business stays in compliance.
CSC can help with researching, obtaining and renewing your business’s licenses, including insurance licenses. Learn more about our Insurance and TPA Licensing services today.