Insurance Company Licensing: What to Expect

Whether you are submitting a primary application to license a new insurance company, seeking to expand coverage to additional states or adding a line of business so your company can write a new product, every insurance company’s goal is to obtain a speedy approval to begin binding policies as soon as possible.
All types of insurance company licensing share common characteristics. However, many companies proceed full-steam ahead without thoroughly understanding the challenges with licensing that can delay approvals and drain resources in the process.
Based on our extensive experience providing insurance company licensing support in all lines of business in every state, here are some of the top considerations to keep in mind as you submit your insurance license applications.

Expect slightly different requirements from each state.

About 80% of your licensing application information will be standard across the board. But the difference contained in the remaining 20% may jeopardize your approval. If you receive the same question from more than one state, it’s probably something you should address in all of your applications. All states grant the ability to withdraw your application without prejudice, so be proactive about amending your applications and re-submitting. If your company does not have the resources to review each individual application for state-specific requirements, consider working with a specialized consultant whose experience managing each state’s insurance company licensing process can limit unnecessary delays.

Details are critical.

Incomplete applications are a primary cause for delays, rejections or resubmission requests. Keep in mind that departments of insurance will not refund your filing fee once your check has been cashed.
Therefore, it’s smart to take the time to make sure that every question on your application is answered completely. If you don’t understand a question or a specific requirement, contact the state’s Department of Insurance directly and ask. Failure to submit complete, accurate information can cause your application to get kicked back, stalling your approval before the review process has even begun.

Consider your license’s capital requirements.

Your license approval may require your company to outlay a significant amount of additional capital. Your approval might stipulate that you meet certain capital requirements, such as increasing your capital and surplus or your statutory deposit. Consider your company’s process for informing your Board of Directors and the steps your financial department will need to take to ensure that you can access the requisite amount of funds.

Expedite approval of application fees with your finance department.

Your application is not considered complete unless it includes your full submission fees. Take your company’s accounting process into consideration, including the time between payment requisition and obtaining a check in hand. We’ve seen this process sidetrack our clients’ submissions, so our policy is to advance most fees when submitting applications on our clients’ behalf. This enables our clients to generate a single payment to us that covers every portion of their filing, including payment for our service.

Follow up with State Departments of Insurance.

Don’t just submit your application and wait. Though you might submit to multiple states at once, one of the challenges with licensing is that each state reviews applications on their own timetable. Follow up directly with each State Department of Insurance to make sure your application has been received and is getting the attention it deserves. If you lack the manpower for this level of involvement, partner with an insurance consulting services company that is experienced in following up with DOIs and has a tracking system in place.

Expect a mountain of paperwork and many, many man-hours.

Even with paperless submissions and electronic tools, licensing still requires copious amount of paperwork. California alone issues an 80 lb. box of paper.  Therefore, create efficiencies wherever possible. Submit forms via the UCAA electronic application, use digital tracking tools like StateFilings.com, or work with an insurance consulting services company who can manage your applications for you.

The Departments of Insurance make the rules. It pays to follow them.

Though there might be a rule or requirement that seems illogical to you, DOIs are not likely to change their processes anytime soon. Therefore, it’s in your best interest to supply the information they request on their timetable. Prepare to lose a few battles in the interest of winning the war.
Insurance company licensing is a lengthy and detail-intensive process that can take anywhere from six months to a few years. This is not an extensive list of challenges but by keeping the above in mind during your submissions, you can set achievable expectations and timetables.
If you have questions about insurance company licensing, call Perr&Knight at (888) 201-5123 x3 and we will discuss ways we can help streamline your licensing approvals.