Last weekend, I attended an insurance agency function at which the Insurance Commissioner, Ralph Hudgens, spoke. In his speech, he mentioned that a new regulation governing the sale of insurance products by Professional Employer Organizations (“PEOs”) has been adopted by his office. That regulation will take effect on February 14, 2018. It amends Sections 120-2-3-.03 and 120-2-3-.05 of the Georgia Rules and Regulations. A definition of “negotiate” that is specifically directed at the activities of PEOs was added to Section 120-2-3-.03. A specific requirement that any business entity that employs an individual who is engaged in the sale, solicitation, or negotiation of insurance on behalf of that entity be licensed as an insurance agency was added to Section 120-2-3-.05.
The definition of “negotiate” in Section 120-2-3-.03 tracks the one found in the Insurance Code. It goes on to define a “purchaser” of insurance to include “current or prospective coemployers, or their employees, of professional employer organizations.” It also addresses when an employee of a PEO will be deemed to “negotiate” with such a purchaser about the purchase of insurance. Such a negotiation will occur if the PEO employee “offers advice or renders opinions as to the substantive benefits, terms, conditions, value, effect, advantages or disadvantages under any contract of insurance issued or offered by any insurer” to the PEO, which contract of insurance “covers or is proposed to cover” a coemployer or their employees of the PEO.
Under the new regulation, a PEO employee cannot discuss with a current or prospective customer for its services any of the terms or conditions of the insurance coverages provided through the PEO or the relative merits of such coverages compared to what the customer may already have, unless that employee has the appropriate insurance agent’s license. In addition, if such discussions are occurring, the PEO must obtain an insurance agency license.
This new regulation in intended to level the playing field for insurance agents who are competing with PEOs to place insurance coverages for their current or prospective customers. If a PEO wants its employees to be able to discuss the insurance coverages available through it with such customers, they must obtain an insurance agency license and the employees must obtain an insurance agent’s license; just like an independent insurance agent and agency does.
In his speech, Commissioner Hudgens encouraged anyone who has information about a possible violation of this new regulation to report it to his office once that regulation becomes effective. He stated an intent to make a serious effort to enforce the requirements of the new regulation. Insurance agents who have been complaining about unfair competition by PEOs in connection with the sale of insurance now have a way to stop such competition. If they don’t take advantage of it, nothing will change.
A big thank you for this new regulation goes to the Independent Insurance Agents of Georgia and its lobbyist, John Barbour. They were one of the leading organizations that lobbied successfully for its adoption through two administrative hearings and countless hours of meetings.