Financial advisors who specialize in insurance products or utilize insurance products as part of the wider array of business services offered have a tedious task on their hands. This tedious and vital task is to keep up with the changes in taxation norms, governmental benefit schemes, and other state and federal legislation.
Many state licensing authorities have compulsory continuous education requirements that emphasize technical nuances of insurance policies and laws. Apart from this, other niche areas such as consumer protection and insurance regulatory mechanisms also come under the purview of this.
What are the core issues plaguing the sector?
Be that as it may, even though insurance advisors know these regulations, compliances, and legal obligations, it can sometimes be an added burden. The sector’s latent problem is that most independent firms do not have the time, energy, or expertise to help their advisors. This adversely affects these advisors and brokers as they cannot keep track of their insurance as ca insurance license renewal continuing education credits and requirements.
Furthermore, many organizations do not have a proper desk that can track various rules and regulations of the federal and state governments. This lackluster inefficiency is not because of existing logistical concerns but because these firms do not have any legal liability. This absence of liability has led these organizations to shun all responsibilities and to pursue the same.
The reason why staying up to date is important as it clarifies the nuances in legal position and accordingly determines the modus of compliance by insurance agents. For instance, the California state regulation mandates a two hour and a four-hour ethics course that California advisors must know about.
Section 2188, et. seq. of the California Code of Regulations is undergoing an amendment to its basic structure. The proposed changes would require Life Agents and Fire/Casualty Brokerage-Agents to complete a 4-hour ethics training during their two-year license term. Analogous to this, Personal Lines Broker-Agents would have to complete a 2-hour training during their two-year license term.
The lapse in judgment is not restricted to the legalese only. Most advisors are unaware of the particulars of the courses, nor are their offices aware of the same. That is because they are not tracking the information at all. The problem in this situation can be easily identified with the help of a hypothetical case scenario.
Let’s assume that –
An Arizona based entity may not have heard about the latest rules and regulations of the California State for six months. In the interim, the advisor’s license is about to lapse. The problem is further complicated for those who join multiple firms independently.
Typically, advisors are offered the broker-dealer’s general agency. So, the advisor’s license is independent in the eyes of the law. This makes keeping tabs all by oneself extremely tough and complex. As a result of the ensuing mayhem, advisors begin to lose clientele. This is because the advisors are unable to satisfy the requirements of the Continuing Education Program credits.
As on date, about 21 states mandate their state-specific course for licensees seeking renewal. The other scenario is when these advisors cannot renew their licenses or have been unable to take the state-specific course.
It may seem thoroughly casual, but if an insurance agent or firm is busy building business and has not kept tabs on the legal position, it can pose a big problem. How? Because the moment the agent or the organization decides to write a big insurance business, they could get a wake-up call. This ignorance can not only jeopardize their legal position, but it can also impact the clientele.
In most cases, the legal exposition is clear as the legal maxim is that “Ignorance of Law cannot be a “defense (ignorantia juris non excusat). This means that the caveat is on the advisor. The legal presumption acts against his interests by the operation of the Doctrine of Constructive Notice.
This means that the law assumes complete knowledge of the legality and changes or alterations to the legal position on the part of the advisor. The advisor is assumed to keep himself updated on all the changes by taking the previous CE course and fulfilling its requirements.
However, the pertinent question is faced by the state. Should the state notify? Is it duty-bound to do so? No! The state never assumes the responsibility of notifying each advisor personally, only to reduce the potential liability of an advisor suing the state. Moreover, most regulators believe that it does not fall squarely within the state’s duties and obligations.
Though the legal problems of the Insurance Continuing Education courses are plenty, there is too little liability resting on not so many shoulders. Thus, agents should remain proactive and trace all developments in legal and regulatory mechanisms. This helps them in the long run by enabling them to keep a clear and transparent legal position and continue to offer their services.