Here’s a source of angst for a lot of agencies out there. If your designated producer (DP) is not an owner of the agency… with headhunters and greener grass everywhere you look, what’s to keep them from going elsewhere? Let’s say, even if they are the owner of the agency…. well, they won’t live forever! So, here’s something I preach all the time… Preparation & Redundancy can save you from a crisis if you suddenly find your agency is without a designated producer.
If I had a dime for every time I got a call from one of our clients, or a prospective client saying, “Help, we just lost our DP!” Well, I wouldn’t be rich or anything, but I could put all those dimes in a very large jar! Then, if I had a quarter for every time they tell me the split was anything but amicable, “but don’t take them off our agency licenses… we’re going to continue using their licenses for a while.” Seriously??? Does the person who left pissed off know that? Wait, let me answer that, of course they don’t, and I’d bet all those quarters (and the dimes too) that they certainly wouldn’t agree to that plan.
So, how many exiting DP’s will ignore the writing on the wall?
Don’t kid yourselves, they know what you’re going to try to do. They know that the agency they just left high and dry will try to continue to use their licenses. On more than one occasion, before the agency could make the report, I’ve seen an exited DP alert the states themselves that they are no longer associated with their former agency/employer, AND insist the state remove that affiliation immediately. Now, each state has their own way of handling this. Some states will accept a signed letter from the individual and others require a particular form be completed to handle this, but either way it definitely does the trick… POOF, you now have no designated producer!
Now how long do I have?
Once a state is made aware that a licensed business entity has lost their designated producer, the agency typically has 30 days to replace that person, or the agency license will most likely default due to non-compliance regarding the designated producer. 30 days isn’t a lot of time to scramble to find a willing person who will accept responsibility for all of the agency licenses/business. Not to mention, you would want a designated producer with a clean background history.
Instead of scrambling if such an event were to occur at your agency, prepare now. Redundancy of licenses and affiliations can save your business. You definitely don’t want the alternatives:
- losing agency licenses due to lack of designated producer (you can’t place or renew business without an active license, just ask your carriers)
- being reported by the former DP to the states that you are still using their licenses without their permission (that’s fraud folks)
- being on any states’ radar for the above mentioned activities (“That would be awesome!” said no one ever)
Finally, a couple of caveats to be aware of:
First, some states will simply not allow multiple Designated Responsible Producers. You can have one and one only. If you are writing Property/Casualty as well as Life/Accident/Health, your DP better hold ALL of those major lines of authority in order for the agency to be compliant to sell.
Solution: Having the redundant person licensed and ready to go is key, then all that’s needed if such an event occurs is to affiliate them as the new DP. That’s much faster than looking for someone new, getting them licensed and then affiliating them as the DP (remember you typically only have 30 days to replace).
Second, some states require that your Designated Responsible Producer be an officer of the agency. They don’t necessarily have to have any ownership of the entity, but an officer title will be needed (i.e. President, Vice President, Secretary, Treasurer). This is a pretty small handful of states, maybe eight or nine have this requirement.
Solution: I’ve seen a lot of people slapped with an official “Vice President of (literally anything)” titles in a pinch. Vice President of Toilet Maintenance may even work, I’ve never seen anyone try it; but, I suppose anything is possible.
Hopefully your agency will never have to experience an unplanned exit of the agency’s designated producer. It definitely won’t make your top 10 list of fun experiences. But simply put, things happen and people leave. So, be as prepared as you can, and act swiftly!