Brokers are supposed to be independent to represent the insured, rather than the insurer; yet, the law in many states still requires insurers to appoint a broker as an agent actually to transact insurance with the insurer. This dual agency creates well-known conflicts and burdens. We contend that the requirement that insurers appoint agents in each state with the department of insurance (DOI) has outlived its usefulness and should be abolished for independent insurance brokers, at least those of a minimum size. Insurers with exclusive agents should retain the appointment requirement. Protection of the insured against rogue brokers is not accomplished by this appointment requirement. Protection against rogue brokers is already achieved by malpractice claims and malpractice insurance, which can be strengthened by requirements for higher malpractice insurance limits. Removing the appointment for brokers will further the goals of simplified regulatory burdens, business efficiency, and customer protection by removing one conflict of interest of the dual agency situation.

Harold Weston, Brenda Wells, & Christoph Schwarzbach, The Conflict and Burden of Insurer Appointments for Brokers and the Need for Regulatory Reform, 41 J. Ins. Regul. art. 3, doi:10.52227/25442.2022 (2022).