April 2018  |  Volume 30, Number 4

Many independent insurance agencies and brokerages rely upon customer service representatives (CSRs) and other unlicensed employees to assist in their day-to-day operations.  As a result, our clients will often ask us what tasks their unlicensed CSRs may engage in and what tasks may only be performed by someone who is licensed in the agency or brokerage.  In this issue of The E&O Report, we will review the rules that insurance agencies and brokerages should be aware of and follow in order to be compliant with New York Law relating to this issue.   

 As an initial matter, New York Insurance Law does not define or otherwise address the role of a CSR.  Instead, the Insurance Law only addresses when a person must hold an insurance agent's or broker's license.  Therefore, from the point of view of the Insurance Law and the New York Department of Financial Services (NYDFS), there is no difference between a CSR, a secretary, a receptionist, or any other unlicensed person working in an insurance agency or brokerage.

With that in mind, CSRs and other unlicensed employees are typically limited to providing technical advice and assistance to licensed insurance producers and are not permitted to engage in the sale, solicitation or negotiation of insurance.[1]   However, a CSR can engage in administrative, managerial, and clerical activities which are only indirectly related to the sale, solicitation or negotiation of insurance.  A CSR can also engage in activities relating to underwriting, loss control, and claims processing.

 While there is no comprehensive list of activities a CSR or other unlicensed employee can engage in, the NYDFS has approved the following list of activities as activities that an unlicensed employee may engage in, at least so long as the unlicensed employee is not compensated based upon sales, there is no discussion of coverage and the employee is supervised by a licensee and/or sub-licensee holding the appropriate license:

• Answering phones;
• Scheduling appointments (provided there is no discussion about insurance coverage, cost or related issues);
• Maintaining files and records;
• Referring a prospect or customer to agent or a licensed sales producer, where appropriate;
• Word processing and data entry;
• Assisting with advertising and mailing campaigns;
• Accepting payments on existing policies that are made in the office in situations in which there are no coverage discussions;
• Securing expiration dates from prospects limited to the date the policy expires and the current carrier, and whether they would be interested in speaking to the agent or a licensed sales producer;
• Taking loss information from customers and reporting this information to the claims department;
• Handling changes to existing policies that do not involve any discussion of coverages or require the binding of additional coverages, increasing or decreasing coverages, removal of coverages, or the addition of vehicles;
• Informing insureds as to coverages indicated in the policy record; and
• Receiving requests for coverage for transmittal to the agent or a licensed sales producer.[2]

This is not intended as a comprehensive list of permitted activities and there may be other activities that a CSR may engage in without holding an appropriate license.  However, as a general rule, a CSR should never receive commission for their work or otherwise have their compensation tied directly to sales.  There are also ways of engaging in these activities that would likely require a license (e.g. answering the phone by asking if the caller would like to buy insurance or discussing coverage). 

 When a CSR engages in these approved activities, he or she must do so on behalf of a licensee and/or sub-licensee.  The licensee and/or sub-licensee supervising the unlicensed employee must make sure the CSR is adequately trained, trustworthy, and aware of the limits on his or her ability to act on behalf of the licensee and/or sub-licensee.

 There are, of course, some cases where it is not clear whether a CSR requires a license to engage in a particular activity.  Some agencies and brokerages avoid this problem by just ensuring that all of their CSRs are also licensed.  However, if you find yourself in one of these cases where you are unsure whether the activities of an employee are permissible, it is best to discuss the situation with an attorney with experience handling insurance licensing, such as the attorneys in our office.

As with all licensing issues, every state has its own particular laws.  If your agency or brokerage is placing coverage for risks in other states, it is prudent to make sure that you understand the licensing requirements of that particular state.  Doing so will help ensure that the activities of employees are in compliance with the state requirements.

​ 

Submitted by:

Robert Walker Lewis, Esq.
Keidel, Weldon & Cunningham, LLP

[1] Under certain limited circumstances, an unlicensed employee of an insurance agency can engage in these activities.

[2] See, New York Department of Financial Services Office of General Counsel Opinion 12-1-2004 (#3)​. This Opinion was issued by the Department based upon an inquiry that was made by Big I NY.​