Guide to Insurance Licensing for the Non-Insurance Business
If you’re new to the world of insurance, the process of getting an insurance license may seem time-consuming and even a little intimidating, but it’s surprisingly easy if you work with the right partner. In this blog, we’ll go over what an insurance license is, why it matters, how to attain the right licenses for your business, and how to get the help you need along the way.
What Is an Insurance License and Why Is It Important?
Embedded insurance is a great opportunity to increase your revenue, diversify your offerings, and deepen customer relationships. To reap the full benefits, however, it’s recommended that your company get licensed.
An insurance license is a certification given by individual states that allows an individual or entity to sell, solicit, or negotiate insurance in that particular state. Each state requires a unique license. So, if you wanted to sell insurance in more than one state, you would need to obtain a license for every state you intended to sell in.
If you or your company were to attempt to sell or market insurance without a license, it would be considered illegally selling insurance. You could be subject to large fines and legal repercussions from your state’s insurance regulatory agency (and the agency of any other state you illegally sold insurance in). This makes obtaining a license the crucial first step in the insurance selling process. The good news is, when you work with the right digital insurance partner to get the licenses you need, all of those issues can be easily avoided.
There are many different types of insurance licenses available, for different kinds of insurance (for example, selling cyber insurance requires a different kind of license than selling pet health insurance). For this blog, we’ll be discussing two licenses you need to become a distribution partner who sells and markets property & casualty insurance on behalf of a carrier: the Individual License and Entity License.
Individual and Entity Licenses
What is an Individual License in Insurance?
An Individual License– also referred to as a “Producer” or “Agent” License– is given to an individual after they complete a pre-licensing course and pass the required tests in their resident state, which is a state where an individual has a residence or primary place of business. The purpose of this license is to educate the holder on the ins and outs of the insurance process and ensure that before selling, soliciting, or negotiating insurance, they are informed and responsible.
What is an Entity License in Insurance?
Once someone in your company has attained their Individual License, your company can apply for its Entity License, also known as an “Agency” License. This license is given to the company itself and allows it to sell insurance within the resident state.
For your company to sell and market insurance products on behalf of carriers, you need both an Individual License holder and an Entity License.
Who at Your Company Should Be Licensed?
When determining who should become licensed on the entity's behalf, the individual should be someone who holds a position of substance and is likely to stay at the company long-term. That usually means someone at the executive level, such as an owner, partner, director, or officer. Once this person has obtained their license, they will be known as the Designated Responsible Licensed Producer (DRLP), sometimes referred to as a “principal agent.” The DRLP needs to be licensed in all jurisdictions that the entity sells in.
The DRLP is usually responsible for compliance oversight of the agents operating under them. Because the DRLP is typically held accountable for all entity actions, this kind of oversight is a requirement in most states. When selecting a candidate to become the entity’s DRLP, they should be informed and willing to take responsibility.
Some companies have more than one licensed person working for them, but only one is required to sell. If you lose your DRLP and there isn’t another licensed person at the company, then someone else will need to step in or be elevated to a suitable position to hold the title of DRLP. Otherwise, the entity can’t continue selling insurance.
How Do You Get an Individual Insurance License?
The Individual License should be obtained in your resident state. We’ve outlined the general steps to follow below, but every state has unique requirements. Make sure that you know the steps that apply to your state.
Step 1: Complete the pre-licensing education course (varies by state)
The first step is to complete a pre-licensing education course. These courses require a specific amount of study time, which varies based on state. Each state’s requirements can be found here. We recommend taking the Kaplan self-paced online pre-licensing course for your resident state.
Step 2: Pass the practice exam
Once you’ve completed the pre-licensing education course, you must pass your resident state’s practice exam to receive a certificate of completion and qualify for the state insurance licensing exam.
Step 3: Complete the state insurance licensing exam (varies by state)
Sign up to take the insurance licensing exam within your resident state.
Step 4: Apply for your Individual Insurance License in your resident state
After passing the licensing exam, submit the licensure application and pay all applicable fees in your resident state. This can be completed on the state's Department of Financial Services or the Department of Insurance website. In many states, you must also provide fingerprints or other background information. Once approved, the individual insurance license will be issued.
How Do You Apply for an Entity License?
Once your DRLP has obtained their Individual License, your company can begin the process of attaining its Entity License.
Step 1: Create Insurance Agency Entity
Your first step is to create a registered insurance agency entity. To do this, you must choose an entity name and submit it for approval to the state government where your agency will be based (this must be a state where you have a business presence). The state will issue the entity a Federal Employer Identification Number (FEIN) and the business entity will be officially registered. Once registered, the entity can start submitting the required licensure paperwork with the state.
Step 2: Apply for the Entity License in Resident State
Next, the entity needs to select its Designated Responsible Licensed Producer (DRLP), and file the DRLP’s approved Individual License along with its entity application to its resident state. Once approved, the entity will receive its resident state license.
How Do You Register for a Country-Wide License?
You and your company might want to sell or market insurance in more than just your resident state. Once the individual and entity are licensed in their resident states, each can begin applying for non-resident licenses in other states.
However, technically a “country-wide license” doesn’t exist. There isn’t one license that covers the whole country. Every state has a unique license and different requirements for its applications, so the process of getting licenses in multiple states can be extensive and complicated. Because the DRLP needs to be licensed in all jurisdictions that the entity sells in, the process involves filling out an application, gathering various supporting documentation, and submitting it individually to each state for both the individual and the entity.
To sell nationwide, you would need to do this process multiple times to be licensed in all 51 U.S. jurisdictions—the 50 states and Washington D.C. Luckily, there is some reciprocity amongst the states, which means that if you get licensed in one state, you do not need to satisfy all the requirements like taking a pre-licensing course or licensing exam in all other states to become licensed there.
Is It Beneficial to Work with a Licensing-as-a-Service Company?
While reciprocity helps reduce the amount of work that is required to apply for individual and entity licenses in all 51 U.S. jurisdictions, that is still a lot of applications. If you choose to do these processes yourself, it can take a very long time, especially if you are unfamiliar with each state’s requirements. There are processing and wait times, and often you can go back and forth with each state because of missing or incorrect information, which can greatly increase your get-to-market time.
In addition to the application process, there are also unique renewal processes for each state —some are annual, some are every four years. Most states also require that individual license holders complete a certain number of hours of continuing education every renewal period, and the exact number of hours varies by state.
To mitigate such a lengthy and complicated process, third parties exist that offer licensing-as-a-service. When you work with a licensing-as-a-service company, you give your information to the company and then they handle the lifecycle of your licenses from applications to ongoing renewals.
Licensing-as-a-Service with Boost
Not all licensing-as-a-service companies are created equal. Some third parties can actually extend the process by not being clear about what information is required upfront. Ultimately, they can make the process more expensive, cumbersome, and time-consuming, delaying your go-to-market time and defeating their purpose altogether.
When you work with Boost Insurance, on the other hand, we have the experience and expertise to streamline these processes. In addition, it is our goal to get you to market as quickly as possible - that’s the Boost difference. Our in-house licensing experts will collect all your necessary information upfront, process it, and then submit the applications for you, country-wide, saving you a lot of stress and back and forth. Our licensing team knows all of the pitfalls and loopholes in each state. They also know what questions to ask ahead of time, so they can submit licenses and gain approvals quickly. We can get you to market, in as many markets as possible, selling Boost insurance products on our platform in as little as a month.
We will also handle the lifecycle of your licenses, keeping track of your renewals and updating you along the way. And, when you work with Boost, your licenses are not exclusive to Boost products. You can use your licenses for other insurance products as you choose.
If you want to learn more about getting your individual or entity insurance licenses through Boost’s licensing-as-a-service, contact us.
Disclaimer: The information set forth herein is intended for informational purposes only and may include links to internet websites maintained by third parties. Boost Insurance Agency, Inc. (“Boost”) assumes no responsibility or liability for any errors or omissions in the content of such third-party websites. Any timelines or requirements included herein are illustrative based on experience and subject to change. Boost cannot guarantee any state review timing.