Insurance business licensing: 7 business changes that require an update

License regulations are being constantly updated. Each year, up to 65% of license registration requirements change, and enforcement actions against violations are increasingly enforced.

Many factors can trigger new license requirements, including changes to your business operations, locations, or offerings. A failure to comply can result in penalties, fines, interruption to business growth, and negative publicity.

Here are several examples of common business events that can trigger a license action.

1. Business entity name change

If you change the name of your business entity, you must inform the appropriate authority. Often this can be done online via your state’s website with an attached copy of the official documentation showing the name change, such as your Articles of Incorporation or Organization.

In New York, you must submit documentation verifying the entity name change (including amended filing receipts or business certificates) and the license(s) in the previous name.

Most states require notifications to be made within 30 days of the name change. You may also be required to update licenses for individual agents, so check with your state.

Finally, because the insurance industry is heavily regulated, you may be required to obtain the approval of the licensing board before you can change your entity’s name.

2. Business restructuring

If you restructure your business entity, check with the Secretary of State of your formation state to determine if a conversion filing is required or if the state requires the dissolution of the old entity and the formation of the new one.

Upon restructuring, you must update your professional licenses held at the state and local levels. Depending on the jurisdiction, this involves notifying the governing board via letter or submitting a new license application.

If your entity changes from a corporation to a limited liability company (LLC) or vice versa, you must apply for a new license (even if your FEIN remains the same).

3. Change of officers, directors, members, or managers

Any change in appointment of officers, directors, members, or managers of your insurance business may require state notification, especially if the change involves a Designated Responsible Licensed Producer/Person (DRLP).

As is often the case with business license regulations, the process varies by state.

In Alabama, for example, changes must be faxed to the department of insurance.

Louisiana has different requirements based on whether you are a resident or non-resident insurance agency. If your business is a resident producer agency, every member, partner, officer, director, or person who controls ten percent or more of the company is required to be affiliated under the entity license, regardless of whether that person holds a Louisiana producer license. This is in addition to the requirement of affiliation for every individual who solicits or negotiates insurance.

Non-resident business entities in Louisiana are required to file affiliations only for licensed personnel directly engaged in the solicitation or negotiation of insurance. Furthermore, in Louisiana, any change in your insurance agency’s affiliations must be reported within 30 days.

Note: Certain states have additional requirements, such as fingerprints and background checks.

4. Change in ownership

Since most business licenses and registrations are held in both the name of the business and the name of the owner(s), you will need to make sure that your licenses include the correct information.

While some authorities require brand new applications for licensure in the event of an ownership change, most require the disclosure of new company ownership via specific 'Change of Ownership' filings. These can include background checks for new owners, fees, and recommitment to the rules that govern the license.

5. Adding or changing a line of authority

If you add or remove a line of authority (adding a new type of insurance or removing an offering), you will typically need to complete a form to notify the insurance department in the state in which you are licensed.

6. Cancelling or surrendering a license

The process of voluntarily canceling or surrendering a business license can vary, but it usually involves a voluntary cancellation request. For example, North Dakota has a Voluntary Cancellation Request of Removal of Line(s) of Authority form.

However, some states require the licensee to submit a letter in writing requesting cancellation of the license(s) and the license returned with the request.

If you are dissolving a company or withdrawing from doing business in a state, there are additional steps involved. For more information, refer to this article on corporate dissolution vs. withdrawal.

7. Changes to address or contact information

If your business address or contact information changes, most states require notification within 30 days, although a few states have a shorter timeframe. In West Virginia, insurance agencies must report such a change in writing within 10 days.

Note: States typically required a business address to be a physical address, not a P.O. box.

The notification process for making this change varies by state. Some require submission through the NIPR or Sircon portal; others via the state website, email, or fax.

Note: If your address change involves a change to a different state, you may be required to cancel an existing license and file for a new one.

Mastering business license compliance for your insurance agency

Regardless of the size of your business, getting your business licenses in order – and ensuring ongoing maintenance – is crucial. To reduce risk from non-compliance, create a compliance plan and develop a strategy to ensure long-term protection of your license portfolio.

Learn more

It is easy for a business to lose track of certain changes in licensing requirements and very difficult to repair the damage from operating without the required license. Work with the experts at CT Corporation to streamline your business licensing and avoid critical compliance errors.

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