Any individual who solicits insurance products must hold a valid license issued by the Department of Financial Services for that line of business. A licensed individual also must be appointed as an agent to represent an insurance or annuity company before he or she may “transact insurance”. In short, an agent must simultaneously hold a license from the state and an appointment from an insurance company to solicit or transact a line of insurance. One is not effective without the other.
In Florida, an agent's license does not have an expiration or renewal date – it may remain in force perpetually. (Of course, the Department may suspend or revoke an agent’s license for violations of the Insurance Code or Department rules.) If a licensee loses an appointment for any line of business, his or her license will remain valid for 48 months. However, the licensee may not engage in insurance activity for that line of business until a new appointment is obtained. If the agent remains unappointed for 48 months, the license lapses. Appointments are valid for two years, and must be renewed by the appointing company to stay valid.
Brokers vs. Agents
Agents represent the insurers that appoint them. Brokers legally represent the insurance purchaser (or prospective purchasers). A broker solicits and accepts applications for insurance and then places the coverage with an insurer. The business is not in force and the insurance company is not bound until it accepts the application. In practice, the regulatory distinction between brokers and agents is not significant, as Florida does not issue separate licenses for brokers. Instead, Florida-licensed agents may act as brokers for their clients. There is, however, a legal distinction between agents and brokers regarding their fiduciary responsibilities, and that is explored in greater detail in the next chapter.
Ongoing agent requirements
Florida law requires an agent to notify the Department of Financial Services in writing, within 60 days, of any changes to his or her name, residence address, business street address, mailing address, phone numbers or email address. Change of name/address forms are available on the Department website. (www.fldfs.com) The email address requirement was added in 2008. In the future, the Department will send all notices to agents via email, so it is important that agents update their contact information with the Department.
Under Florida law any agent who has been found guilty (or plead guilty or no lo contendere ("no contest")) to any felony or a crime punishable by imprisonment of 1 year or more must notify the Department in writing within 30 days.
To maintain a resident’s insurance agent license in Florida, the agent must complete continuing education every two years in courses approved by the Department. Agents licensed less than six years must complete at least 24 credits in courses rated basic, intermediate or advanced. Those who have been licensed for more than six years must complete only 20 credits every two years, but these credits must be in intermediate or advanced level courses. The rules provide additional reductions for persons with certain professional designations (CLUs, CPCUs, etc.) with 25 years experience. Customer service representatives must complete 10 credits of continuing education every two years.
Each licensee except a title insurance agent must complete a 5-hour update course every 2 years which is specific to the license held by the licensee. The course must be developed and offered by providers and approved by the department. The content of the course must address all lines of insurance for which examination and licensure are required and include the following subject areas: insurance law updates, ethics for insurance professionals, disciplinary trends and case studies, industry trends, premium discounts, determining suitability of products and services, and other similar insurance-related topics the department determines are relevant to legally and ethically carrying out the responsibilities of the license granted.
A licensee who holds multiple insurance licenses must complete an update course that is specific to at least one of the licenses held. Any remaining required hours of continuing education are elective and may consist of any continuing education course approved by the department.
Excess hours accumulated during any 2-year compliance period may be carried forward to the next compliance period.
A licensee may not transact insurance until he or she is appointed by an authorized insurer for the class of licensure held. For example, if an individual holds both a general lines (2-20) and a health agent (2-40) license and wishes to market all both types of products, he or she must be appointed by either an insurance company authorize by the Office to transact both lines of business or by separate companies for each line.
If a licensee loses an appointment for any line of business, his or her license will remain valid for 48 months. However, the licensee may not engage in insurance activity for that line of business until a new appointment is obtained. If the agent remains unappointed for 48 months, the license lapses.
Appointments need to be renewed every two years. If the agent fails to comply with continuing education requirements, the Department will not allow renewal.
Under the law of agency, an appointed agent is the lawful representative of the principal, which in this case is the insurance company. Payment of premiums or other sums to the agent is the same as paying them to the insurance company. Because of this, the agent has a fiduciary responsibility to turn the funds over to the insurance company immediately, and not to use them for his or her own purposes. If held by the agent, these funds should be held in a segregated account, i.e., separate from personal funds. Converting those funds to personal use is a crime known as embezzlement or conversion. Florida law requires agents to keep records for at least three years if the transaction pertains to premium payments.
Generally speaking, agents will show proposals for companies that have appointed the agent. Agents may, however, show proposals for other companies – provided the agent is licensed and appointed (by at least one insurer) for that particular line of insurance. The agent may furnish materials and show proposals for any company authorized to sell that line in Florida. However, if the agent actually writes the business, the company must formally appoint the agent when the agent submits the application. Furthermore, the company may not pay the agent a commission until the appointment is actually issued.
Agents may split their commissions with another agent who is Florida-licensed and appointed for that line of insurance. Splitting of commissions with non-licensed persons is considered “rebating”, which is permitted only under tightly regulated circumstances.
For example, John Williams holds a general lines and life insurance license and is an appointed general lines and life agent. While he feels comfortable discussing traditional life insurance as well as property and casualty insurance with his clients, when it comes to variable annuities he refers his clients to Maria Perez, a licensed life and variable annuity agent. Maria cannot pay John a referral fee or split the commissions on variable annuity products with John, since he does not hold a variable annuity license. (She could, however, split a commission on a fixed annuity, life insurance or property & casualty business with John, as he is licensed and appointed for those lines.)