This article was originally published in Law360 on April 24, 2023 and is republished here with permission.

Each state Department of Insurance requires that insurance producers — brokers and agents — keep their information up to date in the DOI's records by timely notifying the DOI of any changes to the producer's information, usually within 30 days of the change.

However, after the acquisition of an insurance producer business entity, there can be several types of changes to the producer's information, which creates the often daunting task of notifying each DOI where the entity is licensed of each change in a timely manner.

Although there was a slight downturn in insurance producer acquisition activity in 2022,¹ experts predict that insurance producer transactions will be the first to recover in the insurance space as 2023 continues.²

This article will cover best practices for submitting common insurance producer business entity information changes in connection with insurance producer mergers and acquisitions, such as (1) name, (2) ownership, (3) director and officer, and (4) designated responsible licensed producer changes.

Immediately Prior to Closing

Although producer information changes generally cannot be filed until a transaction has closed — with Texas ownership and D&O changes being the exception — it is essential to be prepared and organized prior to closing for what is to come in order to timely complete the changes after closing.

The key pieces of information that should be gathered prior to, or immediately before closing, include:

• Identifying the states where producer information change filings will be required; and 
• Identifying what information is required for each filing.

As a starting point, filings will be required in each state where the producer is currently licensed, unless the producer plans to surrender certain licenses upon closing.

However, not every state requires ownership and D&O changes be reported. For example, the DOIs in Indiana, Kansas and Washington have expressly stated that they do not keep track of owner and D&O information for insurance producers.

Once all relevant states are identified, it must be determined for each state: (1) the filing type, e.g., letter, form or online; and (2) information required to complete the filing. This process is often time-consuming and tedious because it requires cross-checking DOI websites, statutes, regulations and bulletins, and potentially contacting the DOIs directly if other available guidance is unclear.

Immediately Upon Closing

Immediately after closing, if changing the name of the producer, prioritize DOI name approvals and secretary of state, or SOS, filings, which must be completed prior to submitting any DOI notices in the relevant states.

Regarding DOI name approvals, several SOS offices require that the state DOI approve a producer's name before the SOS will update its records, especially if the word "insurance" is included in the name, e.g., Alabama, Georgia, New York and Pennsylvania. Accordingly, prior to submitting any SOS filings in these states, the DOI must approve the new name, even if the only part of the name changing is the corporate formation, e.g., Inc. to LLC.       

When completing SOS filings, there are a few DOIs that also require a producer's name change be completed with the applicable SOS office before the DOI will process the name change, e.g., Alabama, Idaho and Virginia. SOS filings often have the longest lead time for approval, so it is essential that these are submitted in a timely manner so that the DOI notice can also be timely filed.

Drafting

Once all the pieces are in place — meaning: (1) all states where filing(s) will be required are identified; (2) all filling requirements for each change type in each state have been identified; (3) all information required from the producer has been gathered; and (4) all prior approvals, i.e., DOI name approvals and SOS filings have been obtained — filings can be prepared en masse.

The drafting process can be monotonous, as it requires inputting the same information repeatedly for various forms and letters. However, it is essential to keep a close attention to detail to avoid any typos or other errors that could cause the DOI to reject the filing.

With forms in particular, it is important to use the most recent form version, and that all forms are read closely to avoid missing additional filing requirements listed on the form.

Filing

Once all forms and letters have been drafted and signed, and all other filing materials have been gathered, the notices are ready to be submitted to the applicable DOI. Most DOIs permit filings to be submitted electronically via email, but certain DOIs and filing types, e.g., name changes, which require fees must be sent via mail.

Further, several DOIs require information updates be submitted via a specific online portal, e.g., Sircon Corp., which is a multistate online portal for managing producer information, MyProfile in Florida and Kentucky Online Gateway, etc. Most online filing portals require an existing login, which the producer should have available.

Filings in the producer's resident state should be prioritized, particularly name change filings, as most other DOIs will not process a name change until the producer's resident license reflects the new name.

Follow-Up and Verification

Once all filings are submitted, DOIs may have follow-up questions or require additional information that was not previously identified.

Additionally, some DOIs will directly provide confirmation that the changes submitted have been processed. However, many will not provide direct confirmation, requiring confirmation instead from the DOI's public website or licensing platform, such as State Based Systems and Sircon.

It is important to verify that all changes submitted have been processed, particularly name changes and designated responsible licensed producer changes, because other entities, such as insurance carriers, and DOIs will rely on the online records for the producer's license information. However, most DOIs will not reflect ownership and D&O changes on their websites.

Conclusion

As insurance producer acquisition activity picks up this year, buyers should not lose sight of the important post-acquisition information change process.³ Although potentially time-consuming, the above can help alleviate frustration and avoid simple mistakes throughout the process.

Further, failure to properly prepare and submit post-acquisition insurance producer changes can result in administrative actions and fines from DOIs and/or cause business disruptions, e.g., failure to timely change the name on an insurance producer license, which are easily avoidable with some organization and expertise.

¹ https://www.insurancejournal.com/magazines/mag-features/2023/02/20/708133.htm.

2 https://www2.deloitte.com/us/en/pages/financial-services/articles/insurance-m-and-a-outlook.html.

³ https://www.pwc.com/us/en/industries/financial-services/library/insurance-deals-outlook.html.

[View source.]