Producer Conduct and Responsibilities

Alabama P&C insurance producers have legal and ethical obligations that govern their professional conduct under supervision of the Alabama Department of Insurance (ALDOI).

Fiduciary Duties

Alabama producers owe duties to their clients and insurers:

Key Duties to Clients

Duties to Insurers (as Agent)

• Act within scope of granted authority
• Transmit information accurately between parties
• Collect and remit premiums properly
• Not bind coverage without authority
• Report material information about risks

Agency Relationships

Understanding agency relationships is critical:

Types of Authority

Agent vs. Broker

In Alabama:

• Agent represents the insurer
• Broker represents the insured
• Most P&C producers are agents of insurers
• Authority must match actions taken

Disclosure Requirements

Alabama P&C producers must disclose material information:

Required Disclosures

• Coverage limits and deductibles
• Policy exclusions and limitations
• Premium amounts and payment schedules
• Conditions that could void coverage
• Named storm or hurricane deductibles
• Surplus lines status when applicable
• Compensation arrangements if requested

When Disclosure Required

• At time of sale or recommendation
• When material policy terms change
• When replacing existing coverage
• When client asks specific questions
• At renewal if coverage changes
• When claim may be affected

Exam Tip: Producers have an ongoing duty to disclose - not just at initial sale but whenever circumstances change or information becomes relevant.

Premium Handling

Producers must handle premiums with strict accountability:

Premium Collection Rules

Trust Account Requirements

If holding premiums before remittance:

• Must be in separate trust or fiduciary account
• Cannot mix with personal or business operating funds
• Detailed records of all transactions required
• Subject to ALDOI examination
• Shortages may indicate conversion

Consequences of Premium Mishandling

• License revocation
• Civil penalties
• Criminal prosecution for conversion
• Restitution requirements
• Prohibition from industry

Record Keeping

Alabama requires producers to maintain accurate records:

Records to Maintain

Access and Examination

• ALDOI can examine records during investigations
• Must provide records upon lawful request
• Failure to maintain is license violation
• Records support defense against E&O claims

Continuing Education Requirements

Alabama mandates ongoing education:

CE Requirements

Ethics Training

The 3-hour ethics requirement covers:

• Legal and ethical standards
• Fiduciary duties
• Unfair trade practices
• Consumer protection
• Professional conduct

Exam Tip: Alabama requires 24 hours CE per biennium with 3 hours of ethics. This is tested frequently.

Company Appointments

Appointment Process

Termination Reporting

When appointment is terminated:

• Insurer must notify ALDOI within 30 days
• If terminated for cause, reason must be stated
• Producer may respond to for-cause termination
• Affects other appointments potentially

Errors and Omissions Insurance

While not legally required for all producers:

E&O Recommendations

• Highly recommended for all active producers
• Protects against professional liability claims
• Covers negligent acts, errors, omissions
• Some insurers require E&O as condition of appointment
• Minimum limits typically $1 million recommended

Common E&O Claims

• Failure to procure requested coverage
• Failure to explain policy terms
• Binding coverage without authority
• Missing coverage gaps
• Failure to process application timely

Professional Standards Summary

Do's

✓ Act honestly and in good faith ✓ Maintain competence through CE ✓ Disclose material information ✓ Handle premiums properly ✓ Keep accurate records ✓ Report changes to ALDOI

Don'ts

✗ Misrepresent policy terms ✗ Rebate (except minimal gifts) ✗ Twist or churn policies ✗ Commingle premium funds ✗ Bind without authority ✗ Discriminate unfairly