Ruling on Unlicensed Agency Personnel

A recent administrative decision from the Department of Commerce and Insurance leaves no question that agents may be held liable for using unlicensed personnel in their offices. The case involved an Allstate agent who was participating in certain incentive and referral programs offered by the company.

The administrative judge found that the agent paid commissions to unlicensed employees and allowed unlicensed employees to engage in insurance sales activities. Based on those findings, the judge ordered that the agent's license be suspended for sixty (60) days and further ordered that after the period of suspension is completed, the agent's license be placed on probation for six (6) months. The judge also assessed a civil penalty against the agent in the amount of two thousand dollars ($2,000.00).

In the decision, the judge attempted to address the question of what duties unlicensed personnel are permitted to perform and what type of compensation they are permitted to receive. Quoting extensively from an August 8, 1985 bulletin issued by Commissioner John C. Neff, the judge set forth a list of what an unlicensed employee may and may not do, which provided as follows:

AN UNLICENSED EMPLOYEE MAY:

     - Take factual information for applications
     - Quote rates as general information
     - Receive requests for coverage for transmittal to a licensed agent
     - Arrange appointment for a licensed agent
     - Be remunerated on a "unit of time or work" basis

AN UNLICENSED EMPLOYEE MAY NOT:

     - Counsel or advise what coverages to buy
     - 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 licensed 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

This decision merely underscores the importance of licensing your agency employees. For any agency employees who deal with clients over the telephone, it is virtually impossible to avoid the pitfalls of the "May Not" list. In light of this decision, Insurors of Tennessee encourages you to sign your agency staff up for pre-licensing education courses.