A not untypical marketing or servicing arrangement for an insurer soliciting employees for insurance coverage which is an employee benefit (purely for the benefit of the employees) may have a number of defined roles:
"External and Internal Sales Agents" who encourage employers to offer the benefit plan (sold by the insurer on a group basis).
"Customer Care Specialist" who answers general and specific questions about enrollment and application processing, usually to an existing employer group insured (purely an informational role).
"Client Manager" who in addition to answering questions about enrollment, etc., also modifies benefit plans by changing plan design. They are merely working on existing business.
"Marketing Manager" who assists employers already enrolled to place an advertisement on their website or otherwise provide information about a plan already in place.
"Strategic Partner" who is an employer that already provides the insurer plan, either embedded into the employer's insurance or non- insurance product or as an option in addition to the employer's product.
To review the public policy background, while compliance with procedures for licensing agents is expensive for insurers, "...state regulatory statutes are intended to safeguard the rights of those dealing with insurance agents, even though the statutes may also raise some revenue for the state or commonwealth."1
All states have some form of the National Association of Insurance Commissioners' Producer Licensing Model Act with some having slight variations. The 1999 federal Gramm-Leach-Bliley Act required enactment of the Model by a majority of states.2 The provision triggering the licensing requirement in the Model Act is that a person shall "not sell, solicit, or negotiate" insurance without a license.3 The issue is whether insurance agent licenses are required for representatives of the insurer in order to solicit employers for employee benefit coverage.
The intent behind the agent licensing requirement is to protect unsophisticated members of the public, not corporations offering employee benefits. In Standard Sec. Life Ins. Co. v. Bedel4 it was held that the "Superintendent of Insurance acted within broad boundaries of his authority in making [a] regulation exempting group life insurance from disclosure requirements particularly since group insurance policies, in contrast to individual policies, are administered by [an] employer or trustee who may be presumed to have considerably more expertise and sophistication in [the] area of insurance than [the] average consumer, [the] sale of group insurance policy is [a] commercial transaction as distinguished from sale of individual policy which is [a] consumer transaction, and individuals covered under group policy are therefore protected from possibility of "twisting" by [an] insurance agent."5
Another rationale behind the implicit group exemption in the model is that the ultimate person benefiting from the coverage -- the employee -- is not the person being solicited by the insurer. Under this rationale, it is as though the triggering typical model act provision reads as follows:
An insurer or insurance producer shall not pay a commission, service fee, brokerage, or other valuable consideration to a person for selling to, soliciting or negotiating insurance, with a person for whose benefit insurance is purchased in this state if that person is required to be licensed under this chapter and is not so licensed.6
The activity of an insurer representative which is clearly providing information to existing group policyholders or their employees or making policy changes does not require licensure. Florida's law defining "solicitation of insurance," by listing specific conduct requiring licensure -- a variation of the model -- is actually supportive; it is seemingly all inclusive; but it is prefaced by the requirement licensure is required only if there is an attempt to persuade to buy through the enumerated acts.7
In other words, the definition from Florida law merely defines when "solicitation" in fact takes place. It does not cover providing of information or making policy or benefit changes when no intent exists to effectuate a purchase (as indicated, defining "solicitation of insurance" as "the attempt to persuade any person to purchase an insurance product.")
Through case law, one Model Act state, New Hampshire. does have a broad definition of "negotiating" in its producer's license statute; that term includes acts within the common meaning of "advice" and "confer."8
But this case must be seen as limited to its facts, where a member of a consulting company assisted a new state governor in cost savings by determining savings in switching state employees to a self-insured medical and dental plan from the current fully-insured plan and helped manage the switch by gathering information about costs, plans, employees, monthly experience reports, claims data and quotes for various changes, as well as managing a short term renewal of an earlier plan.9 This rose to the level of acting as self-insurance broker, a sophisticated endeavor.
And, representatives of employers themselves signing up participating employees are exempt from licensing under an exemption in the model act for an "officer, director, or employee of such employer...in the administration or operation of a program of employee benefits...which program involves the use of insurance issued by an insurer."10
In essence, a strong case can be made in public policy, statutory language, and statutory construction that an exemption implicitly exists in the Producer Licensing Model Act for solicitation of group employer/policyholder for plans solely for the benefit of the policyholder's employees.