Helping out someone with a criminal record might be a good deed that could cause a serious problem for an agency. Under the federal “Violent Crime Control and Law Enforcement Act of 1994,” it is a federal crime for a person to engage or participate in the business of insurance, if that person has ever been convicted of a state or federal felony involving dishonesty or breach of trust. In addition, there exists a separate crime for an agent who hires that employee and “willfully permits the participation of such a person in the business of insurance.”
The statute broadly defines the insurance business to mean: “the writing of insurance or the reinsuring of risks by an insurer.” But, take note, the act is not limited to just insurers. The act applies to “all acts necessary or incidental to such writing or reinsuring and includes activities of persons who act as, or are, officers, directors, agents, or employees of insurers or who are other persons authorized to act on behalf of such persons; . . .”
It is the “other persons authorized to act on behalf of such persons” that can get agents into serious hot water.
Basically, if an agency knowingly hired a person with a felony conviction that involved “dishonesty or breach of trust” they would run the risk of violating federal law. The statute would probably also be violated if the agency maintained that person’s employment if they learned of the conviction after the person had been hired.
Insurance companies routinely check criminal records of potential employees to ensure that they do not run afoul of this law. Agents, however, tend to rely more on the licensing of producers where the standard NAIC application asks criminal history questions in compliance with this federal statute. But, in this case better to be safe than sorry under this statute and so agents should consider checking the criminal records of all employees.
Persons with such felony convictions can legally work in the insurance industry if, and only if, they obtain the “written consent of any insurance regulatory official authorized to regulate the insurer, which consent specifically refers to this [statute].”
The Massachusetts Division of Insurance Bulletin “1998-11 The Federal Violent Crime Control and Law Enforcement Act of 1994” sets out the procedures for a person applying for a waiver to work in the insurance business. This procedure involves making an application to an advisory committee that reviews applications and allows applicants to meet with them and explain why they believe that the Commissioner should grant them written consent.
Between 2008 and 2009, this so called “1033 committee” received three applications for written consent to engage or participate in the business of insurance as an unlicensed employee, as opposed to an insurance licensee. Based upon the recommendation of the committee, the Commissioner gave her consent to one applicant but denied the other two .