This post is part of a series sponsored by AgentSync.
The hidden costs of manual license verifications
Keeping insurance producers’ licenses and agreements in compliance is a critical responsibility shared by nearly everyone in the insurance distribution channel. However, lots of insurers are bogged down every year by inefficiencies in the licensing and contract renewal process. Add distribution partners that sell variable lines of insurance (such as variable annuities and variable life policies) to the mix, and the challenges multiply.
If an operator’s renewal process is full of outdated manual workflows, they may find themselves unable to process hundreds of thousands of renewals, delaying their revenue and causing frustration for manufacturers and customers alike.
The Manufacturer License Renewal Process for Carriers
License and agreement renewals occur either annually, every two years, or on some other basis, depending on the state(s) in which a manufacturer operates. As luck would have it. AgentSync has already taken the time to compile a list of 2024 provider agreement renewal and termination periods for your convenience. Side note: Many of the 2024 termination deadlines have already passed, renewal deadlines are still to come, and we will have an updated list for next year soon.
The renewal process itself is a tale as old as time. It all starts with the states compiling a list of the manufacturers and organizations that each carrier currently designates with. Next, it is the carrier’s job to review their agreements and decide which manufacturers they want to continue doing business with and which they want to terminate. To avoid paying to designate manufacturers they no longer wish to do business with, carriers must submit their terminations within their home country’s deadline.
After the notice period has expired, carriers typically have a few days before their state’s contract renewal invoice payments open. Once a state opens the invoice period, it is not exactly easy to make changes, so it is important that carriers terminate any inactive manufacturers in advance to reduce unnecessary costs.
License verification is a critical step in the renewal process
When it comes to deciding which downstream partners to reappoint or terminate, there is a lot to consider. While the general idea is simple enough – terminate any producer whose license is no longer valid – there are a number of other factors at play.
First, carriers need to know which of their producers and broker-dealers are licensed to sell insurance and securities, and in which states. There are more than a few reasons why an insurance or securities license may be invalid, so carriers need to know that their distribution partners have not done anything that could cause them to fall out of compliance or lose their license in the time since they last checked .
In addition to license validation, renewal is a good time for carriers to “trim the fat” so to speak, terminating any manufacturers that cost more than they’re worth working with. Paying to nominate hundreds of producers when only a dozen or so actually write business for you, or paying to nominate a single producer in each state when they only write business in a select few states, is just a waste of money .
The challenges of manual licensing and contract renewals
1. Data collection
As we mentioned, license verification requires collecting and comparing a LOT of data. To accomplish the task, insurers often have several full-time employees dedicated to checking and cross-checking government DOI websites, manufacturer databases, FINRA registrations, background check results, CE credentials, and more.
For carriers with only a handful of manufacturers or broker-dealers, this manual way of doing things may be feasible, but it’s still not ideal. And you can forget about trying to manage verifications by hand at scale. It’s pretty much a guaranteed time waster, waste of money and general headache.
2. Data validation
Once a carrier has collected the necessary data, how can they be sure it is accurate and up-to-date? Manual data tracking and collection means that organizations often try to verify one internal data source against another without any guarantee that either record even has the right information.
Plus, when you have multiple people manually entering manufacturer data into one or more different systems, there is a high chance of human error. Without a single source of truth, it’s pretty much inevitable that the accuracy of your data will be less than perfect.
3. Data analysis
When a manufacturer’s license and agreement data is in one spreadsheet or system, their policy data is in another, and their commission data is in yet another place, manually pulling all of that data into a single, unified view is difficult, to say the least. It is nearly impossible to determine the true costs an airline pays for each manufacturer and what the manufacturer delivers in return on a state-by-state basis when data is locked in manual, siled systems.
Generating a list of who needs to be terminated in which states by which deadlines requires hours and hours of manual work. This leaves carriers with no choice but to designate any manufacturer that raises their hand in each state. As a result, insurance companies end up paying a lot of fees for people who may never write business for them.
What a manual license verification and renewal process costs carriers
Manually verifying manufacturer and broker-dealer licenses and renewing agreements costs organizations more than they may realize. For starters, there are the obvious and direct costs of retaining more full-time staff for data collection and verification. With an automated solution, these employees can be redirected to more income-generating work.
But that is only the beginning. Consider the following direct and indirect costs of doing things by hand:
- Money lost on NIGO applications
- The cost of appointing producers who do not actually sell
- Lost revenue opportunities due to renewal backlog
- Missed partnership opportunities
At first glance, it’s easy to overlook how much inefficiency in your renewal cycle is actually costing you. But when you break it down, it’s clear that relying on manual workflows for critical aspects of your distribution channel management adds unnecessary costs to your bottom line and negatively impacts your ability to grow.
Overcome innovation inefficiencies with automated solutions
By adopting a modern solution that automates the flow of producer licensing and compliance data across all your systems, you reduce the manual effort on your team and eliminate inefficiencies in the renewal and appointment processes. Best of all, it will eliminate many of the costs associated with managing these workflows manually. Consider the benefits of using automation to:
Free your team from manual data collection and analysis
No one wants to spend their time buried in piles of paperwork or scrambling through government websites, internal spreadsheets and external databases just to validate a license or renew an agreement. Not only is it frustrating and time consuming, but it’s also a pretty poor use of talent.
An automated distribution channel management solution can provide carriers with real-time broker information directly from the industry’s source of truth at the click of a button, eliminating data silos and ensuring you have access to accurate, real-time data when you need it.
Reduce backlog
Bottlenecks in your renewal processes cause backlogs that prevent your distribution partners from, well, distributing. This causes frustration for manufacturers who wish to sell a carrier’s products but are unable to do so without a valid agreement. If a manufacturer is unable to sell your products, consumers will look elsewhere for their political needs, causing you to lose important business.
Speeding up the renewal process with an automated solution allows you to move manufacturers through the process quickly and with little or no roadblocks. When it comes to choosing who to partner with, manufacturers will prioritize carriers that enable them to sell faster, not those that block them from doing their jobs.
Cut costs
With an automated solution that weaves accurate, up-to-date producer data up and down your systems, generating a report on who is writing business and in what conditions is as simple as pressing a few buttons. This saves carriers with large distribution forces thousands of dollars in deal fees and allows them to focus their time, money and resources on their best results. Just think how much easier renewal time is for carriers with that level of visibility into their downstream distributors’ ROI.
Streamline contract renewals to keep your business running
Accurate tracking of active manufacturer agreements throughout the year enables carriers to make better business decisions after the renewal period and scale their business efficiently. If you want to make the contract renewal cycle easier for yourself and your downstream distribution partners, AgentSync can help.
Our modern distribution channel management solutions give carriers access to accurate manufacturer data when and where they need it, speed up the license verification process and simplify contract renewals to reduce backlogs. If you’re ready to unlock greater efficiencies in your day-to-day operations and become a better partner to your downstream distribution partners, learn how our solutions help carriers power their growth or contact an AgentSync expert today.
