In the insurance industry, ensuring the integrity and professionalism of employees and producers is critical. Background screening plays a crucial role in this process. We sat down with Kristi Kay and Kira Horn, Accurate’s insurance experts, to hear their insights on the unique challenges, and best practices in this industry.
Who is the candidate that is being screened?
Kristi Kay: In the insurance industry, candidates generally fall into two categories: employees and insurance producers, also known as agents. Employees hired by Human Resources and Talent Acquisition teams include roles like underwriters, claims representatives, actuaries, legal, compliance, IT, and various administrative positions. On the other hand, insurance producers are typically contracted rather than employed directly. These producers must be licensed to sell insurance, and their background screening is often managed by the licensing team.
Understanding these distinctions is crucial for effective background screening. While employees undergo a more traditional hiring process and background screen which may include a drug test, employment and/or education verification, insurance producers operate under different regulations, influencing how their background checks are conducted.
Kira Horn: It’s important to note that there are different types of insurance agents. Captive agents work exclusively for one insurance company, whereas independent agents can represent multiple companies.
What Credentials Are Essential for Insurance Producers?
Kristi Kay: Producers are required to be licensed if they sell, solicit, or negotiate on behalf of an insurance company. There are also different lines of authority. These indicate the types of insurance they can sell, such as life accident and health, or property and casualty.
Insurance companies typically verify that producers are licensed before investing in a background screen. That license verification and appointment processing is handled by a distribution management, contracting or appointment vendor. This process helps ensure that producers are fully qualified to sell insurance. Accurate partners with several different solutions in this space to streamline the end-to-end onboarding process.
Kira Horn: Beyond licensing, producers must often maintain Continuing Education (CE) credits to stay current with industry standards and regulations. This ongoing education helps ensure they remain knowledgeable and compliant with any new laws or best practices.
More information on Continuing Education (CE) requirements is here: https://web.theinstitutes.org/ceu/state-requirements
How Are HR Departments Structured to Meet Hiring Needs in Insurance Companies?
Kristi Kay: Human Resource departments in insurance companies are structured to handle a variety of roles. They typically manage hiring underwriters, claims representatives, actuaries, legal & compliance, IT, and administrative positions. Captive agents are also typically hired by Human Resources.
Kira Horn: The processes for hiring employees versus contracting agents are quite different. Insurance companies must manage these differences to ensure all candidates meet the same or similar qualifications and standards based on their role in the organization. For instance, claims adjusters are often employees and typically follow a similar screening process of other employees with the addition of verifying their credentials for adjusting claims.
What Legislation Is Relevant for Background Checks in the Insurance Industry?
Kristi Kay: The Violent Crime Control and Law Enforcement Act of 1994 (VCCA) is a critical piece of legislation for the insurance industry. It prohibits individuals with a history of dishonesty or breach of trust from engaging in the act of selling insurance. Many states, when issuing an initial license, perform minimal background checks, so it’s recommended that insurance companies conduct thorough background checks to do their due diligence and ensure compliance.
Kira Horn: In addition to the Fair Credit Reporting Act (FCRA), it is also important to stay updated with ever changing jurisdictional compliance regulations. Some jurisdictions may have additional requirements or restrictions on what can be included in a background check.
What Are Typical Package Elements for Producers for Property and Casualty vs. Life, Accident, and Health?
Kristi Kay: The background screening packages[KK2] for producers can vary based on the type of insurance they sell. For Property and Casualty (P&C) the package often includes[TO3] [KH4] :
- National Criminal (Accurate Reach)
- County Criminal Searches: To check for any local criminal records.
- Federal Criminal Searches
For Life, Accident, & Health (LAH), the package might also include:
- National Criminal (AccurateReach)
- County Criminal Searches
- Federal Criminal Searches: To identify any federal offenses.
- Credit Checks: To assess financial responsibility.
- Debit balance checks to determine if a producer has failed to pay back advanced commissions when leaving a prior insurance organization
- Sanctions & Exclusions Lists (i.e.: OIG, GSA, SAM)
Kira Horn: Ensuring that the right searches are included in your packages helps evaluate more conclusively that your producers are trustworthy and responsible which is crucial for maintaining client confidence and protecting the company’s reputation.
How Has the Training and Licensing Process Evolved Over the Years?
Kira Horn: Traditionally, insurance companies provided initial license training for new hires. Over the past 20 years, companies have shifted away from this, with companies expecting producers to be licensed before they join. However, due to a shortage of new entrants in the industry, companies are starting to provide initial license training assistance to attract new talent.
Kristi Kay: This shift is partly due to the insurance industry’s competitive nature. Companies must attract top talent, and offering licensing support can be a significant incentive. Additionally, as regulatory environments become more complex, companies recognize the value of well-trained and licensed agents from the outset.
Kira Horn: Technology has also transformed the training and licensing process. Online courses and virtual training programs have made it easier and more efficient for producers to obtain and maintain their licenses, which can help streamline the onboarding process and retention of new producers.
What Advice Would You Give to Other Insurance Companies About Background Checks?
Kristi Kay: It is vital to regularly review and update your background screening program. Understand what each type of check can reveal, such as National criminal database searches, County criminal or Federal searches. Best practices vary, but companies should aim beyond minimal checks and align their background screening with risk tolerance and budget. This helps to protect the organization’s brand and reduce risk.
Kira Horn: Also, consider the changes in the industry. For instance, the use of credit checks has declined significantly over the years and has become less critical, since producers are rarely handling cash as they were in years past.
Kristi Kay: Ensuring compliance with all relevant laws and regulations is crucial. Partnering with Accurate can help you stay updated with legislative changes to maintain a robust and compliant background screening program. This proactive approach helps protect the company and its clients from potential risks associated with hiring or contracting unsuitable candidates.
A thorough background screening program is essential for protecting your company and clients. Contact one of our experts today to learn more about your background screening options.
