Managing producer compliance and credentialing is inherently complicated—that’s why we’re working to make it easier. In this blog series, a team of Vertafore regulatory experts explore topics in compliance and the impact on insurers. Learn what state changes to pre-license education requirements mean for carriers and their distribution networks.
Several states are revisiting their pre-license education requirements or eliminating them entirely
In recent months, several states have eliminated their pre-license education requirements. Alabama is the latest, and Washington and Louisiana prior to that. When this happens, states don't always offer much in the way of a rationale, except Washington did tell us there's no statistical difference between the exam pass rates for states that require pre-licensing education and those that don't. Currently there are 34 states with no pre-license education requirements.
Even without these requirements, new agents are still showing up prepared for their exams, and states are saving costs.
Most people are more responsible and resourceful than we give them credit for. They’ve still got to study; they've still got to prepare for their exams. Whether or not the state makes them sit in a class or take a course, if they want to be in this industry then they’re going to learn the information they need to learn. That is the guiding principle. The better trained, informed, educated, and dedicated our industry professionals are, the better our consumer protections will be.
When states with pre-license education requirements compare their pass rates to states without those requirements and see that new agents are passing their exams at a similar rate, then those states start to wonder whether those requirements are necessary. It's an unnecessary administrative cost to the state. States have to track who has completed the coursework, who’s passed, and who’s ready to sit for the exam. The test providers have to take extra steps, too, like verifying certificates of completion before prospective agents can take the test. A lot of those headaches go away for both the state and education providers when requirements are eliminated.
The impact on carriers isn’t severe, but it’s something else to keep track of.
Many carriers—probably most—don't want to talk to agents if they don't have a license yet. Some carriers, when they have new products that require a different licensure, may assist agents in getting that license. In that case, the carrier can become the force that’s driving whether someone takes a course. Overall, it doesn’t impact the daily work of carriers too much, but with so many states revisiting their education requirements it can be a lot of changes for carriers to keep track of. Compliance means everything.
More states are likely to follow.
It's a trend that we'll have to watch. Already there were many states that didn't require pre-license education, but 16 states are currently facing this decision. So, we will likely continue to see changes in the short-term. The dynamics are different state to state.
Girtha Perkins
Senior Regulatory Compliance Analyst
Girtha's work with Vertafore began in 1997 (at a company then known as Pictorial), in the outsourcing division as a licensing administrator. She was the first administrator cross-trained for all software services. She has held an agent’s license in Indiana and Michigan, yet her deep knowledge of insurance licensing extends to all 50 states. Read more.