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As your business evolves, whether through organic growth or M&A activity, you may find you hold insurance licenses you no longer need. The proper and timely cancellation of such licenses helps you avoid unnecessary compliance tasks and their associated costs.
Cancellation vs. Lapse
Many insurance professionals think it’s fine to allow unneeded licenses to lapse at the next renewal date. In fact, until state regulators terminate a license due to failure to renew, any compliance obligations remain in force. For certain license types, such as surplus lines, failing to meet requirements such as zero reports can result in significant fees and fines, even administrative actions. That’s why license cancellations are so important to your regulatory reputation.
Compliance Recommendations
Be sure you no longer need a license before cancelling it. It’s less costly to maintain your license in a state than to re-apply if your needs change frequently.
Also, surrender any unneeded non-resident licenses before you request the cancellation of your resident license. While a lapsed resident license will eventually result in the termination of non-resident licenses, it can take time. A compliance review can verify the status of your insurance licenses.
Finally, remember that cancellation of an entity’s license does not automatically terminate any associated business registrations. Applying for a license and registering as a foreign entity are typically separate processes. Equally, the license cancellation and the withdrawal or dissolution of a registration with the Secretary of State’s Office are distinct compliance tasks.