TN Insurance Bulletin (1985-08-08): Insurance Activities of Unlicensed Agency Personnel

JOHN C. NEFF

COIIIIISSIONER

TO:

FROM:

SUBJECT:

DATE:

STATE OF TENNESSEE

DEPARTMENT OF COMMERCE AND INSURANCE

114 STATE OFFICE BLDG.

NASHVILLE 37219

BULLETIN

All Insurers Doing Business in Tennessee

John C. Neff, Commissione~~

Insurance Activities of Un~~

Agency

Personnel

August 8 1 19.85

T.C.A. 56-6-102 provides in pertinent part:

(1) INSURANCE AGENT.

An insurance agent

is an individual appointed by an insurer

to solicit applications for a policy of

insurance or to negotiate a policy of

insurance on its behalf.

An individual not duly licensed as

an insurance agent or limited insurance

representative, who solicits a policy of

insurance on behalf of an insurer shall

be an insurance agent within the intent

of this Chapter ...

T.C.A. 56-6-103 provides in pertinent part:

License Required -

(a) No person within

this State should act as or hold himself

out to be an insurance agent or limited

insurance representative unless duly

licensed.

It has come to the Depart ment's attention that

there is disagreement and uncertainty in the industry

regarding proper interpretation of the above referenced

statutes with regard to unlicensed agency personnel. While

no hard and fas t rules can be set forth which will apply

to all situations, this Bulletin wi ll attempt to set

guidelines for proper conduct.

An understanding of the terms "solicit" and

"negotiate" is important to understanding the extent to

which unlicensed persons may participate in insurance

trans actions.

. ·'

:' .

ferenced

statutes with regard to unlicensed agency personnel. While

no hard and fas t rules can be set forth which will apply

to all situations, this Bulletin wi ll attempt to set

guidelines for proper conduct.

An understanding of the terms "solicit" and

"negotiate" is important to understanding the extent to

which unlicensed persons may participate in insurance

trans actions.

. ·'

:' .

...

'· ., •

"To solicit" has been defined as to seek or try

by persuasion; to ask, to request, plead or invite, e.g.,

to invite an individual to purchase an insurance contract.

"To negotiate" is to bring about mutual agreement,

to transact business, to communicate with another so as

to arrive at the settlement of some matter, to discuss or

arrange a sale.

"To negotiate" is to discuss .and settle

the terms, conditions, benefits, and rates of an insurance

contract.

The Insurance Code requires a . person to become

licensed and hold company appointments. in . order to solicit

or negotiate insurance contracts.

The public policy

behind the agent licensing statutes is to insure that

insurance agents demonstrate competency throu·gh passing

insurance examinations, and to create a formal agency

relationship making the insurance company responsible for

the acts of its duly appointed agents.

An unlicensed person can discuss insurance

matters in general, with regard to both coverages and rates.

However, if a general discuss'ion develops irito a "negotiation",

as it almost certainly will if an unlicensed person does

more than take information for an application, the matter

should be turned over to a properly licensed agent for

handling to .its conclusion.

Accordingly, an unlicensed

person should not discuss particular coverages requiring

explanation or negotiation, accept payments for coverage,

or do anything which will bind an insurer or lead the

applicant to believe that he or she is bound without dealing

directly with a licensed agent in person or by telephone

ld be turned over to a properly licensed agent for

handling to .its conclusion.

Accordingly, an unlicensed

person should not discuss particular coverages requiring

explanation or negotiation, accept payments for coverage,

or do anything which will bind an insurer or lead the

applicant to believe that he or she is bound without dealing

directly with a licensed agent in person or by telephone.

As stated previously, the Department can only

give guidelines since the propriety of an unlicensed persons

actions will depend upon the facts surrounding a specific

case.

Listed on the following page ·. are some examples of

insurance activities in which an -unlicensed person may or

may not engage.

If you are in doubt as to the propriety of

a particular action, you should contact the Department of

Commerce and Insurance for guidance.

To assure that there

is always a properly licensed individu•l in an agency to

assist the public, the Department urges companies to license

at least one member of each agency's office personnel.

JCN/cmf

Attachment

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AN UNLICENSED PERSON

(Employed by an Insurance Agent, Agency or Company)

MAY

Take factual information

for applications

Quote rates as general information

Receive requests for coverage for

transmittal to a licensed agent

Arrange appointments for a

licensed agent

Be remunerated on a "unit of time

or work" . basis

MAY NOT

Counsel or advise what coverages to b~y

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

license 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

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