Florida Legislature Relaxes Agency Licensing Requirements for Broker-Dealer Branch Offices Selling Insurance Products but Creates New Disclosure Requirements for Surrenders

by Eversheds Sutherland (US) LLP

Under current Florida insurance laws, branch offices of broker-dealers selling insurance products in Florida are required to either “license” or “register” as agency branches (in addition to satisfying insurance producer licensing requirements). However, Florida recently enacted changes to its insurance laws that could eliminate these requirements for broker-dealers.

The changes to the laws also create new disclosure requirements for surrenders of insurance products where no replacement is recommended. All of these changes to the Florida insurance laws are discussed in further detail below.

Broker-Dealer Branch Offices Selling Insurance Products

Under current Florida insurance laws, all branch offices of broker-dealers selling insurance products in Florida must be either “licensed” or “registered”1 with the Florida insurance department. The main difference between “licensing” and “registering” is that licenses must be renewed every three years, while registrations are perpetually effective.2 Florida insurance laws also currently require each branch office to have a designated agent-in-charge, and subject to a limited exception, prohibit the agent from supervising remotely.3

However, a bill adopted by the Florida legislature and signed by the governor – HB 6334 – relaxes the licensing requirements for branch offices of broker-dealers selling insurance products in Florida. Under this bill, the licensing requirement is eliminated for any branch office of a broker-dealer selling insurance that (i) operates under the same name and federal tax ID number as its home office, provided that such home office is a Florida-licensed agency, (ii) for which a licensed agent-in-charge has been designated, and (iii) for which the broker-dealer has submitted to the Florida Office of Insurance Regulation for inclusion in the licensing record of the broker-dealer’s home office the address and telephone number of the branch office within 30 days after insurance transactions began at the branch.5 The bill does not change the general requirement (with limited exception) to have a designated agent-in-charge who must supervise on-site at the branch.6

In addition, the bill eliminates the distinction between “licensing” and “registering,” leaving licensure as the only option.7 Licenses also no longer need to be renewed every three years and are now perpetual in duration.8 Any branch offices that are currently “registered” will have their registrations automatically converted into licenses.9

All of these changes to the laws relating to branch office licensing become effective January 1, 2015.

Agent-in-Charge Guidance

Current Florida insurance laws do not provide any guidance on the responsibilities of the designated “agent-in-charge” of a branch office. However, HB 633 amends the Florida insurance laws to include a definition for “agent-in-charge” that outlines expectations for this position. This definition provides as follows: “The licensed and appointed agent who is responsible for the supervision of all individuals within an insurance agency location regardless of whether the agent in charge handles a specific transaction or deals with the general public in the solicitation or negotiation of insurance contracts or the collection or accounting of moneys.”10 Like the changes to the laws relating to branch office licensing, this definition of “agent-in-charge” becomes effective January 1, 2015.

New Disclosures for Non-Replacement Surrenders

While HB 633 relaxes the licensing requirements for branch offices, it does impose new disclosure requirements on broker-dealers (and other licensed producers) when recommending surrenders of insurance products. The bill created F.S. 627.4553, which applies to recommendations to surrender annuities or life insurance policies containing a cash value where no replacement is recommended.11 In this circumstance, an agent is required to provide certain specified disclosures about the annuity or policy to be surrendered before the execution of the surrender. The disclosure must include information about: (i) the amount of any surrender charge, (ii) the loss of any minimum interest rate guarantees, (iii) the amount of any tax consequences resulting from the surrender, (iv) the amount of any forfeited death benefit, and (v) the value of any other investment performance guarantees being forfeited as a result of the surrender. This requirement is separate and distinct from disclosures required under Florida insurance laws in the event of a replacement of an annuity or a life insurance policy.

F.S. 627.4553 became effective July 1, 2014. The new provision calls for the Florida Office of Insurance Regulation to propose rules that implement this new disclosure requirement and provide for a standard form to be used by agents. However, as of the date of publication of this Legal Alert, the rules and form have not been proposed yet.

1 See F.S. § 626.112(7)(a).
2 See Florida Division of Insurance Agent and Agency Services, Frequently Asked Questions, at Question 5, available at: http://www.myfloridacfo.com/division/agents/licensure/general/faq.htm#.U-gLvPldX-5.
3 See F.S. § 626.747. An agent-in-charge may supervise remotely if (i) insurance activities requiring licensure as an insurance agent do not occur at the location(s) when the agent-in-charge is not physically present, and (ii) unlicensed employees at the location(s) do not engage in insurance activities that require licensure as an insurance agent or customer representative. Id.
4 Florida HB 633 is available at the following link: http://www.flsenate.gov/Session/Bill/2014/0633/BillText/er/PDF.
5 See Florida HB 633 at Section 7.
6 See Florida HB 633 at Section 6.
7 See Florida HB 633 at Section 7.
8 See Florida HB 633 at Section 15.
9 See Florida HB 633 at Section 7.
10 See Florida HB 633 at Section 6.
11 See Florida HB 633 at Section 27.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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