If you or your agency have ever been subject to an insurance licensing
administrative action, you are well aware of the potential
consequences. Not only can they be costly due to fines and penalties, but depending on the situation, you may also need to hire legal representation.
What is an administrative action?
An administrative action can be in the form of a consent order, stipulation, final order, revocation, suspension, cease and desist order, probation, license surrender or administrative fine. They can be issued in the name of an individual, agency or jointly in the name of both. Administrative actions can be issued for many reasons. A few of the ones seen most often are:
- Failure to pay surplus lines premium taxes
- Incorrect answers on insurance licensing application
- Failure to respond to an insurance department’s request for information
- Failure to report an address change within a specified time frame
An individual or agency
will receive a notice of a pending administrative action or a request for information issued by a particular
state. The notice will generally give the licensee a chance to respond within a specified time period. Once received, it is imperative the receiver respond to the notice on a timely basis. If additional time is needed, contact the insurance department and ask for additional time to respond.
After all the facts of the case have been reviewed, the insurance department will notify the licensee of their findings. A formal action will be issued or the file will be closed. If a fine is due, the licensee should pay the fine within the time period indicated on the notice.
What most producers and insurance agencies don’t realize is that once a state has issued an administrative action, the action must also be reported to most states where the producer and agency currently hold a license. The majority of states require an action taken by one state must be reported to other states within 30 days. The action will also be reported to the National Association of Insurance Commissioners Producer Database (PDB). All states have access to the PDB and receive notices of new actions.
As we frequently tell our clients, insurance licensing administrative actions have a snowball effect. If the action isn’t reported to other states within 30 days, additional administration actions may be (and usually are) issued. And when additional actions are issued, they too must be reported to all states.