Insurance agencies may also be required to hold licenses or registrations for “Managing General Agent”, depending on the nature and extent of their activities. While such a term is used in bulk in the insurance industry as a notion of business, it has a highly technical definition among the administrative laws of these states. They shall relate to the total amount of the annual premiums produced by the Agency for a given insurance undertaking and to the performance by the Agency of certain material tasks outsourced to the insurance undertaking, such as. B the commitment of a reinsurance transferred or the adjustment of insurance rights. In addition, the management of contracts of general representatives is highly regulated by State law and must include a large number of specific legal provisions. While the purchase or sale of an insurance company is initially subject to a robust regulatory control and authorization process, in accordance with the laws of the home state of the insurance undertaking, the process of acquiring an insurance agency is generally subject to less regulatory oversight. Nevertheless, some jurisdictions expect them to be informed of the acquisition through informal positions. At least one state – Texas – requires prior notification and exercises the power to approve the agreement or authorizes the parties to consider the authorization as “accepted” if no notification of refusal has been sent within a prescribed period. An indirect change in the control of an insurance agency may also be subject to these regulatory requirements, in particular where the Agency is licensed in all states. The change of senior management and/or directors of the Agency generally requires better regulatory publicity. Agencies have also increasingly entered into “marketing agreements” with insurance organizations to offer agencies additional compensation for the marketing of insurance products. Although not allowed per se, agencies are limited in the amount of commissions they can receive on certain insurance lines (typically in Medicare- und Titelversicherungs). A marketing agreement that only serves to circumvent such rules and regulations may be considered a violation of certain state and federal laws.
Any potential purchaser of an insurance agency is likely to suspect that the Agency must hold certain licenses, both local and non-resident. But what exactly are the licenses to hold and who should own them? An agency typically requires an insurance, brokerage, or producer agency license when that agency sells, resells, and/or negotiates insurance (some states do not have requirements for entity licensing). This requirement also applies where the Agency operates as a wholesaler in a State, providing insurance mediation between a consumer`s retail insurance broker and an insurance company. Insurance agencies survive and thrive on their commissions. As insurers become more and more demanding, the trend is to move away from traditional “flat” commissions based exclusively on a percentage of the premium generated and instead move to “conditional commissions” based on other metrics. This may include the amount of activity placed with an insurer, the results of policy resistance and the “claims rate” or performance of the risks placed. Depending on the size and complexity of the business book purchased and the relative knowledge of the buyer and seller, the buyer may only need the collaboration of the seller after the sale or require greater support. The agreement should require the participation of the seller and determine the extent and duration of the cooperation. Alternatively, the buyer and seller may agree to enter into an advisory agreement setting out specific obligations and indemnities.
While most countries provide for exemptions from the licensing requirements for insurance manufacturers for persons who perform only administrative tasks and are not compensated on the basis of insurance sales, many agencies employ or tolerate “customer representatives”. It is important that a potential buyer takes appropriate due care to determine whether these individuals should and should have an appropriate license based on the scope of their business.. . .