Who Needs a Michigan License
Michigan’s producer licensing law is chapter 12 of the Insurance Code, MCL 500.1200 to 500.1247. It decides what you can’t do until you hold a license and what it takes to get one. This lesson covers the activities that require a license, the people exempt from it, the steps for a Michigan resident, the lines a license can carry, and how business entities and nonresidents are licensed.
Some sections of chapter 12 still say “commissioner.” The Director of the Department of Insurance and Financial Services (DIFS) holds that authority now, so this lesson says “the Director” throughout.
The Licensing Requirement
The core rule is one sentence: a person “shall not sell, solicit, or negotiate insurance in this state for any line of insurance unless the person is licensed for that qualification” (MCL 500.1201a(1)). Two limits are built into it. The rule turns on what a person does, not on a job title. And a license reaches only the qualifications it lists.
A person who must be licensed for these activities is an insurance producer (MCL 500.1201(g)). Many sections use the older word “agent,” which means the same thing throughout chapter 12 apart from its section on lenders (MCL 500.1201(a)).
Solicitation doesn’t require a completed sale. Suppose Tessa, a salaried receptionist at an agency, takes a caller’s number and passes it to a licensed producer. That is clerical work. If she instead tells the caller, “You should apply for Fernbrook Mutual’s term policy,” she has urged a person to apply for a particular kind of insurance from a particular company. She is now soliciting, and she needs a license.
Negotiation has a limit that is easy to miss: advice about a contract counts only if the adviser sells insurance or obtains it for purchasers. Other advice isn’t left unregulated, because giving an opinion on a policy’s benefits or terms is the licensed work of an insurance counselor (MCL 500.1232).
A license is the state’s permission, not an insurer’s. It “does not create any actual, apparent, or inherent authority in the holder to represent or commit an insurer” (MCL 500.1201(h)). Authority to act for an insurer comes from that insurer.
Who Is Exempt
Chapter 12 doesn’t require an insurer itself to hold a producer license, but that freedom doesn’t extend to its officers, directors, employees, subsidiaries or affiliates (MCL 500.1202(1)). They need a license unless they fit an exemption in MCL 500.1202(2).
| Who | Exempt when | Citation |
|---|---|---|
| An officer, director or employee of an insurer or producer | Receives no commission on policies covering Michigan risks, and the work is executive, administrative, managerial or clerical and only indirectly related to sales; relates to underwriting, loss control, inspection or claims; or is technical help to licensed producers as a special agent or agency supervisor | MCL 500.1202(2)(a) |
| A person assisting with group or mass-marketed programs | Receives no commission for furnishing information for group or blanket coverage, enrolling people or issuing certificates, or performing administrative services on mass-marketed property and casualty insurance | MCL 500.1202(2)(b) |
| An employer or association, its officers, directors or employees, or trustees of an employee trust plan | Administers a benefit program for its own employees or those of its subsidiaries or affiliates, and isn’t compensated in any manner by the insurer | MCL 500.1202(2)(c) |
| Employees of insurers, or of organizations employed by insurers | Inspect, rate or classify risks, or supervise producer training, and don’t personally sell, solicit or negotiate | MCL 500.1202(2)(d) |
| An advertiser | Only advertises, without intent to solicit in Michigan, in media not limited to Michigan residents, and doesn’t sell, solicit or negotiate coverage on Michigan risks | MCL 500.1202(2)(e) |
| A nonresident placing multistate commercial coverage | Sells a contract covering commercial property and casualty risks in more than one state, is licensed in the state of the insured’s principal place of business, and the contract insures risks there | MCL 500.1202(2)(f) |
| A salaried full-time employee | Advises the employer on its own insurance interests, and doesn’t sell, solicit or receive a commission | MCL 500.1202(2)(g) |
Incidental Sellers
Some businesses offer a narrow product only alongside their main transaction. A person is exempt if that person’s only sale of insurance is one of these:
- Travel or auto-related insurance sold with a motor vehicle rental agreement of no more than 90 days, or with a car sharing program agreement (MCL 500.1202(2)(h)).
- Portable electronics insurance sold with a portable electronic device (MCL 500.1202(2)(i)).
- Travel insurance sold with planned travel (MCL 500.1202(2)(j)). Major medical plans for trips lasting longer than 6 months aren’t travel insurance (MCL 500.1202(3)(e)(i)).
- Stored property insurance sold with a self-service storage rental agreement of no more than 1 year (MCL 500.1202(2)(k)), covering tangible personal property with an insured value of no more than $10,000 (MCL 500.1202(3)(c)).
The portable electronics and stored property exemptions depend on written disclosure at the time of solicitation. It must warn that the coverage may duplicate the customer’s homeowners, renters or other insurance, and summarize the material terms and the claims process. The portable electronics disclosure must also say that enrollment isn’t required to buy the device and that the customer may cancel at any time.
Fraternal Producers, Reciprocals and Surplus Lines
A person acting only for an authorized fraternal benefit society needs no license if less than 50% of the person’s time goes to soliciting and procuring its contracts. The law conclusively presumes the 50% mark is reached by someone who, in the preceding calendar year, was paid for procuring more than $50,000 of life insurance for a society, or any other kind of its insurance on more than 25 individuals (MCL 500.1203(1)).
An attorney-in-fact of a reciprocal or inter-insurance exchange may act as a producer for it (MCL 500.1203(2)). Excess and surplus lines agents and brokers are licensed under chapter 19, and chapter 12 doesn’t apply to them except for MCL 500.1204e and 500.1206a (MCL 500.1201a(2)).
Qualifying as a Resident Producer
A resident files the uniform application and declares, under penalty of refusal, suspension or revocation of the license, that its statements are true, correct and complete to the best of the applicant’s knowledge and belief. The Director can’t approve it unless the applicant (MCL 500.1205(1)):
- Is at least 18 years of age.
- Has not committed any act listed in MCL 500.1239(1).
- Has completed the required prelicensing course for each qualification sought.
- Has paid the applicable fees.
- Has passed the examination for each qualification sought.
The Director may also require documents needed to verify the application (MCL 500.1205(3)), and must find that the applicant has good moral character (MCL 500.1239(3)). Chapter 12 borrows that term from the state’s occupational licensing law for former offenders (MCL 500.1200). It means “the propensity on the part of an individual to serve the public in the licensed area in a fair, honest, and open manner” (MCL 338.41(1)). A conviction alone isn’t conclusive proof of bad character. A licensing agency may consider one as evidence of character only if it is a felony and one of four listed connections applies, such as a direct and specific relationship to the licensed activities or a demonstrable risk to the public safety (MCL 338.42(2)). The agency must notify the applicant, who may rebut that evidence (MCL 338.42(5)). The separate conviction grounds in MCL 500.1239 still apply.
Program of Study
You can’t take the examination until you have completed a program of study registered with the Director, and the certificate you file must show you finished it not more than 12 months before your application for examination is received (MCL 500.1204(2)). Minimum hours are set by MCL 500.1204a(1)(b):
| Program | Minimum hours |
|---|---|
| Life | 20 |
| Accident and health | 20 |
| Life and accident and health combined | 40 |
| Property | 20 |
| Casualty | 20 |
| Personal lines | 20 |
| Property and casualty combined | 40 |
The combined property and casualty program also satisfies the personal lines requirement. Every program must include instruction in ethical practices in marketing and selling insurance (MCL 500.1204a(1)(c)). The rules go further. In a 20-hour property, casualty, life or accident and health program, 14 hours cover the principles of that line and 6 hours cover professional ethics and the requirements of Michigan’s insurance laws (R 500.3(2), (3); R 500.4(1), (2)). The combined programs divide their 40 hours into 34 and 6 (R 500.3(4); R 500.4(3)).
Hours may be classroom, online, self-study or any combination (MCL 500.1204a(2)). The program rules describe the required hours as “instruction and final examination” (R 500.3(2) to (4), R 500.4), and self-study, online and combination students must pass a final examination at the end of the course (R 500.5(2) to (4)).
The Director may waive the examination or program of study for a person who applies for a designated limited license, was a licensed producer within the preceding 12 months, holds a listed designation such as chartered life underwriter or chartered property and casualty underwriter, or has an associate’s, bachelor’s or master’s degree with a concentration in insurance from an approved institution (MCL 500.1204(2)). These waivers are discretionary, so a designation doesn’t excuse you automatically.
The Examination
The entry-level examination tests the qualification you seek, a producer’s duties and responsibilities, and Michigan’s insurance laws and regulations (MCL 500.1204(3)). The fee is nonrefundable (MCL 500.1204(5)). If you fail or don’t appear as scheduled, you must reapply and remit all required fees and forms again (MCL 500.1204(6)). Improperly using notes or other reference material is itself a ground for refusal or discipline (MCL 500.1239(2)(d)).
Lines of Authority
An individual producer may be licensed for one or more of these lines (MCL 500.1206(1)):
| Line | Coverage |
|---|---|
| Life | Coverage on human lives, including endowment benefits and annuities; may include benefits for death or dismemberment by accident and for disability income |
| Accident and health or sickness | Coverage for sickness, bodily injury or accidental death; may include disability income |
| Property | Direct or consequential loss or damage to property of every kind |
| Casualty | Legal liability, including for death, injury, disability or damage to real or personal property |
| Variable life and variable annuity products | Variable life insurance contracts and variable annuities |
| Personal lines | Property and casualty coverage sold to individuals and families for primarily noncommercial purposes |
| Credit | Limited line credit insurance |
| Other | Any other line permitted under state laws or rules |
A personal lines producer can write a family’s home and auto coverage, but a bakery’s business coverage isn’t primarily noncommercial, so selling it would fall outside that license.
Limited lines insurance includes marine, credit, surety and fidelity, legal expense, livestock, malpractice and plate glass insurance (MCL 500.1201(k)).
Business Entities
A corporation, partnership, limited liability company or other legal entity acting as a producer needs its own license (MCL 500.1201(d), 500.1205(2)). The Director must find that it has paid its fees, has not committed any act listed in MCL 500.1239(1), and has designated an individual licensed producer responsible for its compliance with Michigan’s insurance laws, rules and regulations.
Licensing Birchline Agency, LLC doesn’t license its staff. Each person there who sells, solicits or negotiates still needs an individual license under MCL 500.1201a(1).
Nonresidents
A person’s home state is the state or territory, or the District of Columbia, where the person has a principal place of residence or business and is licensed as a producer (MCL 500.1201(e)). A nonresident receives a Michigan license, unless denied under MCL 500.1239, if the person is currently licensed as a resident and in good standing in the home state, has submitted the proper request, the fees and the home-state or uniform application, and has a home state that awards nonresident licenses to Michigan residents on the same basis (MCL 500.1206a(1)). When the home state reciprocates, the Director waives every other requirement (MCL 500.1204e(1)). A limited lines producer receives the same scope of authority the home-state license grants (MCL 500.1206a(5)).
A person previously licensed elsewhere for the same qualifications needs no prelicensing education or examination if currently licensed there, or if the application arrives within 90 days of cancellation and the applicant’s good standing is certified or shown in the database (MCL 500.1206b(1)). A licensed producer who moves to Michigan must apply for a resident license within 90 days after establishing legal residence, and generally repeats neither step for qualifications already held (MCL 500.1206b(2)).
Lesson summary
- MCL 500.1201a(1) requires a license to sell, solicit or negotiate insurance in Michigan, and the license covers only the qualifications it lists.
- Soliciting needs no completed sale, and negotiating applies only to a person who sells insurance or obtains it for purchasers.
- A license gives no authority to represent an insurer (MCL 500.1201(h)).
- The exemptions in MCL 500.1202(2) are narrow, and many of them disappear if the person receives a commission.
- A resident must be at least 18, complete a registered program of study within 12 months before the examination application is received, pass the examination, pay the fees, and show good moral character.
- Single-line programs run 20 hours and combined programs 40 hours, and R 500.3 and R 500.4 set the ethics and Michigan law requirement.
- A business entity needs its own license and a designated licensed producer responsible for compliance.
- A nonresident in good standing is licensed on a reciprocal basis, and a producer moving to Michigan applies within 90 days after establishing legal residence.