In business, risk transfer is everything. Whether you’re a bank lending money for a new car or a general contractor building a commercial building, you need to ensure that your clients carry their own insurance and the correct insurance. That verification transaction is the intersection of commerce and compliance. Every such transaction is an opportunity to earn a commission, but every transaction also opens the door to regulatory scrutiny.
The insurance sector has some of the most stringent rules of any industry, and yet there is just enough regulatory uncertainty to expose the uninitiated to significant legal and financial risk. Further complicating the landscape are widespread misconceptions and some intentionally misleading narratives perpetuated by those with ulterior motives.
One such pervasive myth we commonly see at JLH is the belief that just one license in each state is enough for many producers to conduct business in that state. This is not the case. Failure to maintain perfect alignment across producers, lines of business sold, and lines of authority the agency and producers are licensed to sell is one of the most costly mistakes an agency can make. It’s not a suggestion; it’s a legal requirement, the rules of which are different across every jurisdiction. The penalties for failure to comply can be steep.
The Cost of Widespread Misinterpretation
Many make the mistake of thinking that failing to be properly licensed is an administration error that can easily be resolved. However, one small mistake can cost thousands in fines, remediation, and lost business. Widespread misinterpretation of the regulations surrounding insurance licensing can cost millions, as demonstrated in the case of one insurance company in New York.
Worse, noncompliance doesn’t just impact one state, it can be “contagious.” Administrative or legal action taken against an agency in one state has to be disclosed in every state in which it holds a license. Every new license and renewal also brings extra scrutiny. Actions against your agency in one state won’t go unnoticed in another, potentially resulting in your previous revenue-diversifying business grinding to a screeching halt.
Lock the Door to Regulatory Uncertainty
Protecting your business requires a partner that is well-versed in the rules and regulations that could potentially harm your business. Hiring a compliance expert allows you to focus on your core business while maintaining compliance and growing your revenue streams. JLH holds the key to locking the door when insurance regulators come knocking.