Agent responsibilities: fiduciary capacity, compensation, and ethics

Three duties that come with the license

A Florida license lets an agent handle other people's money, earn commissions, and speak for insurers. Each of those privileges carries a matching duty: act as a fiduciary with the money, take compensation only in the ways the law allows, and deal honestly with everyone in the transaction. Most disciplinary cases trace back to a failure in one of the three.

Who counts as an agent, and whom the agent represents

In Florida's licensing law, an agent means a general lines, life, health, or title agent, and the term includes an insurance producer. It does not include a customer representative, limited customer representative, or service representative. An agent acts for an insurer through an appointment -- the authority an insurer or employer gives a licensee to transact insurance on its behalf. That appointment is why the agent's words and acts matter so much: the agent is speaking for someone else.

Fiduciary capacity: other people's money

A fiduciary holds money or property for someone else and must put that person's interest ahead of personal convenience. When an agent collects a premium, the money belongs to the insurer (or, if it must be returned, to the insured) -- not to the agent. The standard rules that follow:

• Hold premiums in trust, keep them separate from personal and operating funds, and do not use them for the agency's own expenses.
• Remit premiums to the insurer, and return premiums to insureds, promptly.
• Keep accurate records so every dollar can be accounted for.

Taxes and fees collected from an insured are held the same way. In the surplus lines market, for example, the Florida Surplus Lines Service Office collects a service fee of up to 0.3 percent of gross premium, and that fee is paid by the insured. A surplus lines agent who fails to pay the surplus lines tax or service fee faces mandatory denial, suspension, revocation, or nonrenewal of the surplus lines appointment and all other licenses and appointments.

Compensation: licensed, appointed, and for the right line

Commissions are paid for transacting insurance, so they may only be paid to people authorized to transact it. The Florida surplus lines law shows the pattern plainly: a surplus lines agent may accept business from, and compensate, an originating agent only if that agent is a Florida-licensed general lines agent appointed and licensed as to the kinds of insurance involved. Paying or sharing commissions with someone who lacks the license and appointment is the classic compensation violation.

Ethics: tell the truth and act within your authority

• No misrepresentation. A general lines agent may not knowingly misrepresent any material fact to the surplus lines agent about the insurance or its eligibility for placement. More broadly, an agent must never misstate coverage, cost, or the insurer's financial standing to anyone.
• Do not promise what you cannot deliver. A surplus lines agent may not issue evidence of coverage, or represent that insurance has been granted, without prior written authority from the insurer, information from the insurer that coverage has been granted, or an actually issued and delivered policy.
• Delegate only in writing. A producing general lines agent may issue a surplus lines evidence-of-coverage document only with prior written authority from the surplus lines agent, and both sides must keep copies.
• Put the client first. Each quarter, a surplus lines agent's affidavit must describe the efforts made to place coverage with authorized insurers and the results -- an unauthorized market is a fallback, not a default.

A useful test: would the insured, the insurer, and the department all be comfortable seeing exactly how you handled this money and what you said? If not, stop.