Why MGAs Should Proactively Verify Product Data


This post is part of a series sponsored by AgentSync.

Despite common misconceptions in the industry, managing general agents and insurance companies (MGAs and MGUs) are also on the hook in a variety of ways to proactively verify product authorization.

Insurance companies are often burdened with product compliance with assignments, and agencies typically work closely and personally with producers and their licensing compliance, but because MGAs and MGUs occupy the middle of the insurance distribution channel, there is common misconception They need to concern themselves with any aspect of product compliance.

Before we get into the reasons to stay ahead of product verification, keep in mind that we are strong advocates of compliance, but our blog is not yours. Therefore, perform your due diligence on your regulatory requirements.

MGA must verify product data

If you’ve heard Reagan’s favorite Russian proverb, “Trust but verify,” you probably understand that just saying your product is licensed in five states and is designated with your three favorite carriers doesn’t make it so. Sometimes they simply missed the deadline for renewal. Sometimes the error is not easily handled.

No matter why the producer’s self-reported information is incorrect, if MGA does not take steps to protect itself from bad data, you are taking an unnecessary risk. Let’s look at some of the reasons why MGA or MGU Insurance can proactively check product data against a source of truth:

Carrier contracts may hold MGAs responsible for product management

While all MGAs or MGUs are required to write and insure a certain amount of business on behalf of their carrier partners, there are many other duties they can perform such as paying claims or scheduling producers. Whatever duties the MGA undertakes, they must be specified in your contract with each insurance company.

Depending on the contract, you may be required to keep appointments on behalf of your carrier partner. If this is the case, your MGA is primarily responsible for maintaining the insurance company’s oversight of product compliance. If you are an MGA or MGU and you are interested in helping us understand more about your duties and responsibilities, Please take part in the anonymous MGA Essentials survey.

whether product management It is your responsibility or not, by proactively verifying your product license and appointment data, you protect your carrier in a way that reduces your risk. This is a valuable service, and one that gives you an edge in their distribution channel.

Product license verification protects custom commission payments

Almost every state and territory has a product code that is modeled in some way National Association of Insurance Commissioner (NAIC) Product Licensing Model Act, either in its current form or in previous versions. It clearly states that no one can pay commissions to someone who works outside the full license.

It’s easy to read because “paying commissions is a carrier problem”, but if you make money from your producers’ sales through custom commissions – where the carrier-producer contract “allocates” a portion of your end-producers’ commissions – then the license is tied to your living.

As a fun thought exercise, let’s imagine you hire an agency with bestselling producers who know how to convey a product. Then, a few weeks or months after that pipeline opened, the carrier realizes that these insurance agents have some spotty compliance. What does losing commission do to your pipeline?

Verification of insurance license to grow and retain principal and dependent partners

Whether you’re talking to carriers or agencies, data is important. Everyone wants to know where to sell and to whom. But if you haven’t been checking product licensing and appointment data, you’re guessing you have a lot of dealerships that are probably good to sell in more or less no matter how many states. This is not data.

The ability to speak your own product licensing facts and appointments is an attractive feature in a partnership. Checking makes you less risky for your partners and also speaks volumes about the quality of business you will bring into their distribution chain.

Mergers and acquisitions, production totals, and producer management

The MGA space is one of the disorders. Currently mergers and acquisitions An essential part of the landscape in the MGA spaceAnd, like growing your own insurance distribution network, being a party to M&A is about good data. You may have heard horror stories of announced mergers and acquisitions that dip back or drastically change price points halfway through. Often it is a matter of internal data that does not match the public perception.

Checking product information for potential buyers not only ensures the level of compliance risk, but also saves you from the risk of discrediting the transaction.

Proactive risk protection with agency partners

Let’s take a minute Mario Puzo here and pretend you’re Michael Corleone. When do you want to know Fredo is gone? Is it after the assassination attempt? Or is it before?

If you’re going to forgive The Godfather’s references, the point here is that some unwary agency isn’t worth the risk they’re bringing. But you may not realize it until it’s too late and your name appears in a deposit that explores the named sales funnel in unsuitable sales.

By proactively verifying the license of an insurance product, you are not only defeating the risks that each product may present. It also collects data that can clearly show you if you have an agency with a high-risk culture, an agency that poses a threat to your growth and reputation.

If you are ready to avoid grief, see How can AgentSync help verify appointment information and insurance product license.

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