By Paul Buse, President of Big I Advantage^®

Recently, I was involved in some conversations over an industry "disruptor" who's rai·son d'ê·tre rests on the tactic of selling insurance into a situation where the primary relationship with the insured is a non-insurance business relationship. As students of the industry, you may know that this tactic is not new. You might also have a sixth sense that such situations rarely go well for the buyer. Situations where sellers might be seen as having "control" over the buyer often have insurance inserted to the transaction as a "tie-in." Picture high commission, low loss ratios, and high profit products. Insurance sold to protect loan collateral, insurance on the life or disability of a borrower, product warranties and insurance on titles are examples where regulators watch sales approaches very carefully.

Here's where "Controlled Business Statutes" come in. Regulators realized it's not just tie-in sales but all sales where insurance is not the focus of the transaction usually are problematic. These laws expand the concept of "control" beyond whether or not a loan is made or a mortgage is approved. The earliest example I am aware of where an expanded idea that "control" is bad was when a large automobile manufacturer sought to form its own insurance agency to save themselves the commission paid to an independent agent. Regulators, at the time, didn't like such a "closed" agency as it would operate out of the public eye and insurance being an intangible product of public trust needs openness and transparency.

Here's some example language: "An insurance license should not be provided to anyone seeking to sell insurance on their own interests or those of other persons with whom he or she is closely associated in capacities other than that of insurance agent or customer representative."

These are the 23 states that have such statutes according to regulatory filing by a title insurance agency. Alaska, Arizona, California, Colorado, Connecticut, Hawaii, Idaho, Indiana, Kansas, Kentucky, Louisiana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, Oregon, Tennessee, Utah, Vermont, West Virginia, Wisconsin and Wyoming. I can tell you I know there are more than 23. Here's an example of one not on the list above.

CONTEST: If you email me (paul.buse@iiaba.net) the link to a controlled business statute in any state, I will put your name in a drawing for a Waterman Big I Advantage pen. This is a very nice pen, blue waterman box and probably made in France and everything. The logo is our original Big I Advantage logo and has the old IIAA logo built in. I will also enter your name in the drawing if you send me an atypical example of a controlled business scenario. That means, don't send in anything with banks, car dealers and or titles.