The Dos and Don’ts of Unlicensed Customer Service Representatives & Employees

By: Judd Genda and Robert Procter | Axley Attorneys

For as long as there have been independent insurance agencies, agencies have relied upon customer service representatives (CSRs) and other unlicensed employees to assist in their day-to-day operations.  These unlicensed employees have become critical to the ongoing success of independent insurance agencies.  Some unlicensed employees simply greet clients and answer the telephone; others, typically referred to as CSRs, undertake additional duties.  The more experienced, helpful, and crucial these employees become to the operations of the agency, the more likely these key employees may inadvertently perform tasks that require an insurance license.

A “customer service representative” is an industry term to describe an employee that interacts with an agency’s customers at some level. Sometimes people believe that a CSR does not need to be licensed because he or she is referred to as a CSR rather than a producer or agent.  This is not correct.  Whether a CSR or any other employee needs to be licensed depends upon what activities they perform, and not whether they are called a CSR. In fact, Wisconsin insurance law does not define or otherwise address the role of a CSR.  Instead, the insurance law addresses when a person must hold an intermediary insurance license.

The question that any agency owner should ask is whether its CSR, or any other employee of the agency, should be licensed. The CSR, or any other employee, should be licensed if the person does or assists another in doing the following: (1) soliciting, negotiating or placing insurance or annuities on behalf of an insurer or a person seeking insurance or annuities; or (2) advising other persons about insurance needs and coverages.  While this requirement is, on its face, very broad, Wisconsin insurance law creates certain exceptions.

These exceptions include:

• An employee of a licensed intermediary, who devotes substantially all working time to activities other than those requiring licensure, and who receives no compensation that is directly dependent upon the amount of insurance business obtained.
• An employee of an insurance producer, provided the employee does not receive any commission on policies written or sold to insure risks residing, located, or to be performed in this state and the employee’s activities are executive, administrative, managerial, clerical, or a combination of these, and are only indirectly related to the sale, solicitation, or negotiation of insurance.

To be clear, CSRs and other unlicensed employees are not permitted to engage in the solicitation, negotiation, or sale of insurance, and should never receive commission for their work or otherwise have their compensation tied directly to the sale of insurance. However, CSRs and other unlicensed employees can engage in executive, administrative, managerial, and clerical activities that are only indirectly related to the solicitation, negotiation, or sale of insurance.

Here is where things become grey. When does an executive, administrative, managerial, or clerical activity cross over into an activity that would require a license? Obviously, answering the phone does not require a license.  However, answering the phone and telling the customer that he or she needs insurance coverage would require a license. This is true even if the CSR has answered the phone for 20 years and knows word for word what the licensed agent would tell the customer.

Unfortunately, there is no safe harbor list of what an unlicensed CSR or employee can do. It depends upon the facts.  You need to train your unlicensed CSRs and employees to recognize when they are approaching a grey area, and to make sure they get a licensee involved.

With that caveat, here is a list that should not be relied upon to protect you in all instances, but may offer some guidance as to activities an unlicensed employee may engage in, so long as the unlicensed employee is not compensated based upon sales, there is no discussion of coverage, and the employee is supervised by a licensee:

Dos:

• Answering phones
• Email a certificate of insurance
• Scheduling appointments (provided there is no discussion about insurance coverage, cost or related issues)
• Maintaining files and records
• Word processing and data entry
• Assisting with mail
• Accepting payments on existing policies that are made in the office in situations in which there are no coverage discussions

This is not intended as a comprehensive list of permitted activities, and there are certainly other activities that a CSR or other unlicensed employee may engage in without holding an intermediary license.  There are also ways of engaging in these activities that would likely require a license or as we call them the “don’ts”:

Don’ts:

• Answering the phone and accepting information that could bind coverage.
• Signing a certificate of insurance.
• Scheduling an appointment and urging the person to purchase a particular kind of insurance (for example, telling someone they need automobile insurance or life insurance)
• Offering advice to a customer concerning substantive benefits, terms, or conditions of a policy.

The activities of an unlicensed CSR or employee must be performed on behalf of a licensed intermediary.  The licensed intermediary supervising the unlicensed employee must make sure the employee is adequately trained and aware of the limits on his or her ability to act on behalf of the licensed intermediary.

It is difficult for an unlicensed CSR or employee to perform strictly administrative and clerical functions when the customer has access to the unlicensed CSR or employee by phone, email, or in person.  Eventually, the unlicensed CSR or employee is going to be asked about coverage or a claim. This is where it is important for you to have trained your unlicensed employees to refer the customer to a licensee before engaging in activities that would require the employee to be licensed.

Of course, all of these issues go away if your CSRs are licensed.  However, if you have unlicensed employees and you are uncertain whether the activities of such employees are permissible, it is best to discuss the situation with an attorney with experience handling insurance licensing or by calling the PIA Hotline at (608) 200-4221.