It’s a question we often hear from our licensing trainees, “What’s limited about limited lines?” With over fifty different limited lines of authority currently being offered in various states, it would seem to be the most unlimited type of insurance license. So what are limited lines? What distinguishes them from the more well-known “major” lines of authority? And what are the advantages (and disadvantages) to holding a limited lines license?
Major Lines vs Limited Lines
In its 2011 revision to the Producer Licensing Model Act (PLMA), the National Association of Insurance Commissioners (NAIC) defined six major lines of authority for insurance:
- Accident and Health or Sickness
- Variable Life and Variable Annuity Products
- Personal Lines
(Remember that surplus lines, the various adjuster licenses, etc. are considered distinct license types, not lines of authority.)
PLMA also allows states to offer a number of other lines of authority that enable licensees to offer a more strictly limited range of insurance products. These are the limited lines.
Standard-33 caps the number of limited lines a single state may offer at nine. This total must include the so-called “core” limited lines:
- Car Rental
Detailed definitions for each of these “core” limited lines appear in Appendix A of the Revision. States must align their own definitions with these models. Interestingly, prior revisions included surety as a core limited line. Now, however, the push is to include surety in the (major) Casualty line of authority.
For the remaining “non-core” limited lines, states have much greater freedom in defining the products and services covered by the line. As long as the state’s licensing process follows the requirements outlined, the state can define the limited line to accommodate as niche a market as it chooses. Portable electronics, self-service storage, funeral and burial expense, and pet insurance are just a few examples.
The Advantages of Limited Lines Licensing
Limited lines are largely exempt from the compliance requirements associated with major lines. In most states, resident agents do not have to complete a pre-licensing course or take an examination before applying for a limited line of authority. This exemption is not universal, though. A few states even require exams for certain limited lines, but not for others. Alaska, for example, requires prospective licensees to pass an examination to apply for its title, bail bond, crop, portable electronics adjuster and limited lines credit licenses; but not for its motor vehicle rental agency, travel or portable electronics producer licenses. Additionally, some states that do not require exams still require insurers to educate agents about their limited lines products before appointing them.
An agent who holds only a limited line of authority also is usually exempt from continuing education requirements in his/her resident state. This is especially true if the resident state didn’t require pre-licensing courses or an exam. Please remember, however, this exemption applies only to the limited line, not for any major line of authority that the producer may hold. Limited lines licenses may also be exempt from other licensing requirements such as fingerprints, biographical affidavits, and/or background checks.
The Downside to Limited Lines
Early efforts to increase uniformity focused on the more widely held major lines. Limited lines have received more attention recently, but state requirements – even for lines that have the same name – still vary widely. This makes nationwide licensing for limited lines more complex. This lack of uniformity can also affect reciprocity among the states.
Still, a few simple steps can overcome these difficulties:
- Research each state’s limited lines definitions and requirements thoroughly. Don’t assume that because you did x, y and z to get your limited line license in one state that other states will be the same. Check each state’s insurance department website for specific information. Drill down all the way to the state code, if necessary, to ensure that the limited line of authority covers the products you intend to sell. And the best time to do this, especially if you’re planning on nationwide licensing, is before you start your resident application. You don’t want the project you’ve spent so much time and money on derailed by issues in a few key states.
- Seek knowledgeable advice. State regulators, licensing services, specialist legal counsel and insurers all can provide useful information about limited lines licensing. But remember, in the end, it’s YOU, the license holder, whom the state holds responsible for appropriate licensing.
- Stay up-to-date about state regulations. Of course, this is good advice for any aspect of insurance licensing. 2017 was a big year for changes to state regulations concerning limited lines, and it seems likely that additional states will explore simplifying their limited lines offering to bring them into line with the Model Act in 2018.