Subagents – What Are They and What Can They Do?

The subject of subagents has come up recently in a couple of conversations that I have had with participants in the Free Legal Service Program that I operate on behalf of the Independent Insurance Agents of Georgia.  One conversation was about ways that an agency could reward another business owner for making referrals to the agency and the other concerned whether a certain type of employee needed to have a license from the Insurance Commissioner’s Office.  This latter conversation involved the same type of issues as I discussed in my blog post in November about the licensing of CSR’s.

In both conversations, the use of a subagent’s license was discussed as a way to allow the sharing of commissions with the other business owner and avoiding any problems with the Insurance Commissioner’s Office over the work being done by the employees in question.  There appears to be a common perception that the requirements to obtain a subagent’s license are less rigorous than for a regular agent’s license.  A review of the applicable statutes and regulations issued by the Insurance Commissioner’s Office reveal that to be the case with respect to only one type of insurance.

The Georgia Insurance Code defines a subagent as “any licensed agent, except as provided in Code Section 33-23-12, who acts for or on behalf of another licensed agent” in connection with the sale of insurance products.  From this definition, it is clear that a subagent must be a regularly licensed agent, except as may be allowed in the code section referred to in the definition.  That code section provides for the licensing of credit insurance sales and the sale of insurance by rental car companies, sellers of portable electronic devices or services, the owners of self-service storage facilities, and travel agents.  It also authorizes the Insurance Commissioner to “provide by rule or regulation for licenses which are limited in scope to specific lines or sublines of insurance.”

The Insurance Commissioner has issued such a regulation, but it authorizes the issuance of a limited subagent’s license for only personal lines property and casualty and life, accident, and sickness insurance products.  It is easier to obtain a limited subagent’s license for these lines of insurance because there is no requirement that the licensee pass an examination, only that they take an “approved limited subagent prelicensing course” within 12 months of the date the application for such a license is submitted.  There are also some other requirements imposed on the agent for whom the limited subagent will be acting, the most important of which is that the agent will be held responsible for all the actions of the limited subagent.  That is also the case with respect to a regular subagent.

Unless the insurance products for which a referral fee is to be paid or that are being dealt with by an agency employee are personal lines products, the obtaining of a required insurance license will not be any easier for a subagent than obtaining a regular agent’s license.