Affiliations (sometimes called corporate affiliations) establish the relationship between an agency and the individuals who represent it. They make it clear to regulators and consumers who is responsible for the products and service the agency provides. Departments of Insurance in roughly half the states require agencies to maintain affiliations. An affiliation typically remains in effect until terminated, as long as the agency’s license and/or the license of the individual (if applicable) remain active. They do not “renew” the way licenses or appointments do.
Of course, each state has its own procedure for handling affiliation requests. Increasingly, states allow agencies to make these requests online. But there are states that continue to use paper forms. In a few cases, nothing more than a simple email is necessary. (Your ILSA Compliance Coordinator knows what each state requires.) Failure to file an initial affiliation or to keep affiliate information up to date can result in fines and even administrative actions.
Several different “types” of individuals need to be affiliated.
Designated Responsible Licensed Producer
Almost all states require an agency to affiliate a Designated Responsible Licensed Producer (DRLP). This individual ensures the agency’s compliance with the laws, rules and regulations of the state. Departments of Insurance want the DRLP to have the authority to meet this responsibility. For this reason, many states require the DRLP to be an officer of the corporation or a manager of the LLC.
Every Line of Authority on the agency license must be matched by an LOA on a Designated Responsible Licensed Producer’s individual license. Fortunately, some states allow agencies to have more than one DRLP. In this case, individuals can divvy up the Lines of Authority. For example, John Doe may match the agency’s Property and Casualty lines, while Jane Roe secures the Life, Accident and Health lines. The Department of Insurance can cancel any lines not “matched.”
In addition to the DRLP, you need to affiliate the other licensed producers who represent your agency to clients. If a producer doesn’t yet hold a license in the state, you can include the affiliation on the license application form. For a licensed producer, you will need to submit a separate affiliation request. Again, you cannot affiliate the individual for any Line of Authority not held by the agency as well.
Agency Owners and Leadership
Some states also require affiliations for individuals with significant ownership of an agency, partners, officers, directors, LLC members, managers, and even licensing coordinators. These individuals do not have to hold insurance licenses. Some states treat these affiliations more like a change of Director & Officer notification than true “affiliations.”
Keeping Affiliations Current
It’s essential to keep affiliation information current. In 2017, the Virginia Department of Insurance terminated over 800 agency licenses for failure to maintain an appropriate DRLP.
Typically, the window to process affiliations is very short. Whenever you hire a new licensed producer, he/she needs to be affiliated to your agency within 30 days. Sometimes, individuals may still be waiting on a license to issue before they begin to represent your agency. In this case, file the affiliation within 30 days of the Department of Insurance issuing the individual’s license.
It’s just as important to terminate affiliations when individuals move on to other opportunities. These terminations also need to be filed within a 30 day window. And if you fail to terminate the affiliation of an officer, director or other individual with authority within your agency, you may be vulnerable to more than just for the fines and administrative actions for failing to keep your information current. If affiliated individuals incur administrative actions or criminal charges after they leave, you’ll need to report them for your agency. That’s a headache you definitely want to avoid!
If you are uncertain who your affiliated individuals are or need help updating affiliate information, contact the ILSA Licensing and Compliance Team today.