Who Is an Intermediary?

Wisconsin’s licensing framework starts with one big definitional question: who is an “intermediary”?

Because if you’re an intermediary, you need a license. If you’re not, you don’t.

The Definition

A person is an intermediary in Wisconsin if they (or assist another person to:

• Solicit, recommend, negotiate, or place insurance or annuities on behalf of an insurer or a person seeking insurance or annuities; or
• Advise other people about insurance needs and coverages. That covers most people you’d expect — agents soliciting policies, brokers shopping coverage, advisors offering recommendations. The statute then sweeps in partnerships, corporations, and any other entity engaged in those activities. The term “intermediary” includes agents, navigators, brokers, producers, surplus lines agents and brokers, managing general agents, reinsurance intermediary brokers and managers, and life settlement brokers.

Who Is Not an Intermediary?

There’s a real list of exemptions. None of the following are intermediaries under Wisconsin law:

• A regular salaried officer, employee, or representative of an insurer or licensed intermediary, as long as they spend substantially all their time doing things other than soliciting, advising, or negotiating insurance, and they don’t get paid based on the amount of insurance business obtained.
• A regular salaried officer or employee of a person seeking to procure insurance (such as a corporate risk manager), as long as their pay isn’t tied to the amount of insurance coverage procured.
• A person who gives incidental advice in the normal course of a non-insurance business or profession, as long as neither the person nor their employer gets paid for any insurance transaction that results.
• A person who, without special compensation, performs incidental services at someone else’s request — without offering insurance advice or the kind of technical services an intermediary would normally provide.
• A group policyholder doing administrative work in connection with the policy, as long as they receive no compensation beyond reasonably estimated actual expenses.
• A person who provides information, advice, or service primarily aimed at reducing loss or risk (think loss-control engineers).
• A person who gives advice or assistance without compensation, direct or indirect.
• Travel retailers and their employees, when they offer or disseminate travel insurance.
• Vendors and their employees, when they sell or offer portable electronics insurance.
• Persons whose activities are limited to marketing, selling, or offering warranty contracts, maintenance agreements, or service contracts.

Think about the pattern: The exemptions all share one feature — either the person doesn’t actually function as an insurance go-between, or they aren’t paid in a way that incentivizes selling insurance. The moment compensation gets tied to the amount of insurance sold, the exemption usually disappears.

The Major Types of Intermediaries

Insurance Agent

An intermediary is an insurance agent if they act as an intermediary in any way other than as a broker. The default. An agent typically represents one or more insurance companies.

Insurance Broker

An intermediary is an insurance broker if they act in procuring insurance on behalf of an applicant or an insured. A broker doesn’t act on behalf of the insurer except for collecting premiums or performing other ministerial acts. The distinction matters because an agent’s knowledge can be imputed to the insurer (more on that in Part 11), while a broker’s relationship is principally with the buyer.

Sidenote

Helpful to know

A licensed agent in Wisconsin may also act as a broker. The license itself is the same; what changes is the role in a particular transaction.

Surplus Lines Agent or Broker

A surplus lines agent or broker is separately licensed to place insurance with unauthorized (non-licensed) insurers. This is an additional license layered on top of a property & casualty license, and the annual fee is $100. The Commissioner can require a bond up to $100,000 to back the surplus lines license. We’ll come back to surplus lines in Part 14.

Intermediary-Corporations and Partnerships

Partnerships and corporations in the insurance business in Wisconsin may be licensed. An entity license is distinct from the personal licenses of the individuals who own or work for the firm.

Managing General Agent (MGA)

An MGA is a person who manages all or part of the insurance business of an insurer (or a separate division), acts as agent for the insurer, and meets specific volume thresholds — producing or underwriting at least 5% of the insurer’s policyholder surplus in gross direct written premium in any quarter or year, AND either adjusting/paying claims above 3% of policyholder surplus or negotiating reinsurance for the insurer. An MGA can’t just operate informally. Wisconsin requires a written contract between the insurer and the MGA spelling out responsibilities, underwriting guidelines, claim handling, fiduciary handling of funds, separation of duties, and termination rights. The contract must, for example, require that funds collected for the insurer be held by the MGA in a fiduciary capacity in a Federal Reserve member institution, limit the MGA’s retention of estimated claim payments to no more than three months’ worth, and prohibit the MGA from binding reinsurance, committing the insurer to syndicates, or settling large claims without prior approval.

Reinsurance Intermediaries

A reinsurance intermediary-broker places ceded reinsurance. A reinsurance intermediary-manager has significant authority over an insurer’s assumed reinsurance and acts as the insurer’s agent. Both are governed by ch. Ins 47, Wis. Adm. Code.

Life Settlement Brokers and Providers

A life settlement broker, on behalf of the owner of a life insurance policy and for a fee, offers or attempts to negotiate life settlement contracts between the owner and one or more providers or other brokers. These replaced the older “viatical settlement broker” license. Life settlement brokers must:

• Apply for licensure annually.
• Maintain professional liability insurance.
• Complete an initial training course on life settlements of at least eight hours, and at least four hours every twenty-four months thereafter, reported at no less than two hours each twelve months. A life settlement provider is, with limited exceptions, anyone other than the policy owner who enters into or effectuates a life settlement contract with an owner. Providers must apply annually and demonstrate financial responsibility through a surety bond or a $250,000 deposit of cash, certificates of deposit, or securities.

Navigators

A navigator is a person (or entity supervising one) who performs activities on behalf of the health insurance exchange and receives funding to do so. Navigators help consumers determine eligibility for public assistance programs through the exchange. Navigators are not insurance intermediaries and they cannot legally provide advice about which plan to choose or sell insurance — but an insurance intermediary can also apply to be licensed as a navigator. Navigator licensing requirements:

• At least 18 years old.
• Resides in Wisconsin and maintains principal place of business in Wisconsin.
• Has completed the training and course of study mandated by the exchange.
• Has passed a written examination and submitted fingerprints and a criminal background check.
• Has identified any supervising entity.
• Has paid the applicable licensing fee.