North Carolina Designated Agent Bond: A Comprehensive Guide
April 27, 2022
This guide provides information for insurance agents to help their customers obtain a North Carolina Designated Agent bond
At a Glance:
- Average Cost: $100 per year
- Bond Amount: $10,000
- Who Needs it: All designated agents for the North Carolina Reinsurance Facility
- Purpose: To ensure the public will receive compensation for financial harm if the agent violates the terms of their designated agent appointment
- Who Regulates Designated Agents in North Carolina: The North Carolina Department of Insurance
North Carolina Statute 58-37-5 authorizes the creation of the Reinsurance Facility, an entity comprised of all carriers licensed to write auto insurance in the state. The purpose of the facility is to ensure that all persons are able to obtain auto insurance by spreading out the liability for riskier policyholders among all of the state’s carriers. To gain the ability to write their riskier business through the facility or its members, eligible licensed fire and casualty insurance agents can request to become appointed as designated agents. However, agents must purchase and maintain a $10,000 surety bond before obtaining their designated agent appointment.
What is the Purpose of the North Carolina Designated Agent Bond?
North Carolina requires licensed fire and casualty insurance agents to purchase a surety bond before becoming appointed as a designated agent with the Reinsurance Facility. The bond ensures that the public will receive compensation for financial harm if the agent fails to abide by the regulations outlined in North Carolina statute 58-37-35. Specifically, the bond protects the public if the agent engages in any acts of fraud or breaches any contracts made with either the insured or carrier. In short, the bond is a type of insurance that protects the public if the agent violates the terms of their designated agent appointment.
How Can an Insurance Agent Obtain a North Carolina Designated Agent Surety Bond?
BondExchange makes obtaining a North Carolina Designated Agent bond easy. Simply log in to your account and use our keyword search to find the “agent” bond in our database. Don’t have a login? Enroll now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone at (800) 438-1162, email, or chat from 7:30 AM to 7:00 PM EST to assist you.
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Is a Credit Check Required for the North Carolina Designated Agent Bond?
No, a credit check is not required for the North Carolina Designated Agent bond. Because the bond is considered relatively low risk, the same low rate is offered to all designated agents operating in North Carolina, regardless of their credit history.
How Much Does the North Carolina Designated Agent Cost?
The North Carolina Designated Agent bond costs just $100 per year.
Who is Required to Purchase the Bond?
North Carolina requires fire and casualty agents to purchase a surety bond as a prerequisite to obtaining a designated agent appointment with the North Carolina Reinsurance Facility. To paraphrase North Carolina Statute 58-37-35, a designated agent is an insurance agent that has the ability to write policies through members of the Reinsurance Agency. If the individual members are unable to write a policy, then the agent can obtain it through the facility itself.
How do North Carolina Insurance Agents Become Designated Agents?
Insurance agents in North Carolina must navigate several steps to become appointed as designated agents. Below are the general guidelines, but applicants should refer to the appointment statutes for details on the process.
Step 1 – Become a Licensed Insurance Producer
Applicants must obtain a North Carolina Insurance Producer License before becoming appointed as designated agents. To obtain their producer license, applicants must complete the prelicensing education requirements and then apply online through the NIPR. After the applicant has submitted their application, they will be contacted with instructions on how to schedule the required licensure exam. Additionally, a criminal background check and fingerprint check will be conducted on all license applicants.
For an overview of the licensure process, including a list of all applicable fees, applicants should refer to the Department of Insurance’s application checklist.
Step 2 – Meet the Required Standards
The Reinsurance Facility only issues designed agent appoints to licensed fire and casualty insurance agents that meet at least two of the following standards:
- Has been conducting business in a specific community for a period of at least one year
- Has generated at least $20,000 in gross premium off of the sale of motor vehicle insurance in the past 13 months
- Has served at least 200 eligible risks in the past 13 months
- Has evidence of a growth of eligible risks served and premium written throughout the agent’s career
- Has evidence the agent made available to eligible risks premium financing or any other plan for deferred payment of premiums
Step 3 – Contact the Reinsurance Facility
To become appointed as designated agents, applicants must contact the Reinsurance Facility, who will proceed to walk the applicant through the application process and answer any questions they may have.
Step 4 – Purchase a Surety Bond
Designated agents must purchase and maintain a $10,000 surety bond
What are the Insurance Requirements for Designated Agents in North Carolina?
North Carolina does not require agents to purchase any form of liability insurance as a prerequisite to obtaining a designated agent appointment. Designated agents must purchase and maintain a $10,000 surety bond.
How Do North Carolina Designated Agents File Their Bonds?
Designated agents should mail their completed bond forms, including the power of attorney, to the following address:
NC Department of Insurance
1201 Mail Service Center
Raleigh NC 27699-1201
The surety bond requires signatures from both the surety company that issues the bond and from the designated agent. The surety company should include the following information on the bond form:
- Legal name and address of entity/individual(s) buying the bond
- Surety company’s name and state of incorporation
- Bond amount
- Date the bond is signed
- Date the bond goes into effect
What Can North Carolina Designated Agents Do to Avoid Claims Against Their Bonds?
To avoid claims on their bonds, designated agents in North Carolina must ensure that they adhere to all regulations outlined in North Carolina Statute 58-37-35, including some of the most important issues below that tend to cause claims:
- Do not engage in any acts of fraud or misrepresentation
- Do not mishandle consumer funds
- Do not breach any contracts made with consumers
- Do not breach any contracts made with carriers
What Other Insurance Products Can Agents Offer Designated Agents in North Carolina?
North Carolina does not require designated agents to purchase any form of liability insurance as a prerequisite to obtaining an appointment. However, some agents may obtain this insurance anyway. Bonds are our only business at BondExchange, so we do not issue any other types of insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.
How Can Insurance Agents Prospect for North Carolina Designated Agent Customers?
North Carolina unfortunately does not provide a public database to search for active designated agents in the state. We suggest contacting the Reinsurance Facility directly to obtain this information. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.