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Can someone tell me why is it such a big deal when person sells an insurance without having a proper license? Its not as if the insurance policy itself is frau

Can someone tell me why is it such a big deal when person sells an insurance without having a proper license? Its not as if the insurance policy itself is fraudulent. The buyer is buying the insurance policy and not the credentials of the broker. Other wise it seems to me that is requirement is just as unnecessary as requiring cosmetology license for hair braiding ( see http://www.texastribune.org/2015/04/06/bill-would-untangle-messy-hair-care-regulations/ http://www.texastribune.org/2015/04/06/bill-would-untangle-m...)

shanacarp 11y ago
It is for a similar reason why buying from a broker stocks, bonds, futures, ect have to pass the series 7 and 63/65/66 from FINRA. Insurance is a financial product, letting someone buy the wrong insurance because they misunderstand it and you will make more money from that purchase is a form of fraud.
jmount 11y ago
I think the broker does make a number of attestations that if not properly done are fraud and render the policy void (as the insurance companies wrote the law).
rosser 11y ago
At a guess (and completely a guess), legal compliance. Insurance laws can vary widely, and subtly state-by-state. A licensed broker will understand the relevant intricacies and be able to sell you a policy that is compliant with them. If you buy a policy from an unlicensed broker, and it turns out not to be in compliance, the carrier probably isn't obligated to pay out, whether you're paid up on your premiums or not. The carrier doesn't want to be at fault for not having to pay out, so they offload that onto the broker, and "protect" the consumer (really, though, themselves) with a licensure regime. Insurance companies, being in the business of managing and mitigating risk, have all kinds of meticulous i-dotting and t-crossing procedure and regulation. This is — again, at a guess — just another example of that.
ubernostrum 11y ago
Because even for people who are actual high-level experts on it, correctly representing what a policy does and does not offer, and explaining that in a way that's factually correct, compliant with the local laws governing insurance, and understandable without being misleading to a potential customer, is incredibly difficult, to such a degree that your comparison of it to hair braiding should be prima facie evidence of lack of good faith on your part.
- rosser 11y ago
  > your comparison of it to hair braiding should be prima facie evidence of lack of good faith on your part. I wouldn't go that far. It's just the naïveté of "Why there gotta be so many laws obstructing my disrupting?!" taken to its logical extreme.

shanacarp 11y ago

It is for a similar reason why buying from a broker stocks, bonds, futures, ect have to pass the series 7 and 63/65/66 from FINRA. Insurance is a financial product, letting someone buy the wrong insurance because they misunderstand it and you will make more money from that purchase is a form of fraud.

jmount 11y ago

I think the broker does make a number of attestations that if not properly done are fraud and render the policy void (as the insurance companies wrote the law).

rosser 11y ago

At a guess (and completely a guess), legal compliance. Insurance laws can vary widely, and subtly state-by-state. A licensed broker will understand the relevant intricacies and be able to sell you a policy that is compliant with them. If you buy a policy from an unlicensed broker, and it turns out not to be in compliance, the carrier probably isn't obligated to pay out, whether you're paid up on your premiums or not. The carrier doesn't want to be at fault for not having to pay out, so they offload that onto the broker, and "protect" the consumer (really, though, themselves) with a licensure regime. Insurance companies, being in the business of managing and mitigating risk, have all kinds of meticulous i-dotting and t-crossing procedure and regulation. This is — again, at a guess — just another example of that.

ubernostrum 11y ago

Because even for people who are actual high-level experts on it, correctly representing what a policy does and does not offer, and explaining that in a way that's factually correct, compliant with the local laws governing insurance, and understandable without being misleading to a potential customer, is incredibly difficult, to such a degree that your comparison of it to hair braiding should be prima facie evidence of lack of good faith on your part.

rosser 11y ago
> your comparison of it to hair braiding should be prima facie evidence of lack of good faith on your part. I wouldn't go that far. It's just the naïveté of "Why there gotta be so many laws obstructing my disrupting?!" taken to its logical extreme.