As an insurance agency, it’s important to conduct background checks on prospective hires so that you can make smarter hiring decisions and reduce your liability risks.
This guide explains everything you need to know about insurance background checks.
Key Takeaways
- Conducting background checks on prospective hires protects consumers, ensures regulatory compliance, reduces liability and fraud risks, and protects your reputation.
- Common searches in an insurance background check include identity verification, criminal history search, employment verification, education verification, professional license verification, and credit history.
- You can get an insurance background check by partnering with a reputable background check company, such as iprospectcheck.
What is an Insurance Background Check?
An insurance background check is an investigation into an applicant’s criminal history, employment, education, professional license, financial history, and other relevant details.
Employers use these checks to verify that candidates have the necessary qualifications, experience, and integrity required for their position.
Why Should You Run Background Checks on Insurance Hires?
1. Protect Consumers
Insurance professionals have extensive access to consumers’ personal identity information (PII) and financial information.
Depending on the insurance lines they represent, they might also have access to consumers’ health data.
Due to this access, it’s important to conduct background checks on insurance professionals to ensure they do not have any history that could pose a risk to your clients.
2. Ensure Regulatory Compliance
Insurers must comply with state regulations in each state in which they operate.
Many states require insurance companies to conduct background checks on new hires.
This is important to prevent companies from hiring individuals with breach of trust or fraud convictions, which should prevent them from working in the insurance industry under both 18 USC § 1033 and many states’ laws.
Additionally, insurance agencies that hire barred individuals risk penalties and fines.
3. Reduce Liability and Fraud Risk
Pre-employment background checks can show whether an individual has a history of financial irresponsibility or legal issues that could pose an increased risk for both the insurance agency and its customers.
Screening out people who could increase the company’s exposure helps to reduce liability and fraud risks.
4. Protect Reputation
Insurance agents and other professionals are public-facing, so the customers with whom they interact associate their conduct with the company.
Hiring someone later found untrustworthy can result in reputational damage and regulatory scrutiny for the insurer or agency.
5. Verify License and Qualifications
Insurance professionals typically require professional licenses issued by the states in which they do business.
They must also complete continuing education units each year to maintain their licenses in good standing.
Verifying an insurance agent’s license and disciplinary status ensures they are a suitable candidate for the role and lack licensure problems.
Know Before You Hire
What’s Typically Included in a Background Check for the Insurance Industry?
Identity Verification
Identity verification is a preliminary search conducted by consumer reporting agencies (CRAs) when they complete employment background checks.
This search reveals the following details:
- Full legal name
- Address history
- Birth date
Identity verification helps confirm the individual is who they claim to be and identifies other jurisdictions the CRA needs to search for information.
Criminal History
Most state departments of insurance require insurance professionals to submit fingerprint-based criminal records checks to obtain licenses.
Employers likewise request criminal background checks, which show the following information about an applicant’s pending charge or past conviction:
- Jurisdiction of the offense
- Case number
- Offense date
- Nature of offense
- Severity level (petty offense, misdemeanor, or felony)
- Disposition
- Disposition date
- Sentence information (when available)
This information enables employers to check whether an applicant has a conviction that bars them from working in the insurance industry or that could pose risks to the company and its clients.
Credit Checks
Pre-employment credit checks are commonly requested by insurance companies.
These are soft checks that won’t harm the individual’s credit score.
A pre-employment credit check shows the following details:
- Full legal name and aliases used
- Address history
- Debt-to-income ratio
- Available credit
- Debt collection accounts
- Payment history
- Bankruptcies within the past 7 to 10 years
- Other indicators of financial stress or misconduct
This information helps employers gauge financial reliability and determine whether an applicant could pose a fraud risk.
Professional License Verification
Professional license verification for insurance professionals verifies an applicant’s license and checks whether they are in good standing.
Insurance license verifications are conducted through the National Association of Insurance Commissioners (NAIC), the National Insurance Producers Registry (NIPR), and state departments of insurance and show the following information:
- License validity
- License number
- Licensee’s name
- License type
- Issuance and expiration dates
- Revocations or suspensions
- Other disciplinary records
Employment Verification
Employment verification discloses the following information about an applicant’s past jobs:
- Employer names and addresses
- Employment dates
- Titles and job duties
Employers use this information to confirm what applicants have listed in their applications and on their resumes.
Education Verification
Education verification discloses the following information about an applicant’s education:
- School name(s) and address(es)
- Enrollment dates
- Any diplomas or degrees conferred
This information enables employers to confirm their applicants’ reported education and their qualifications for the job.
How to Run a Background Check on Insurance Professionals
1. Create a Thorough Background Check Policy
Create a thorough background check policy that adheres to federal and state laws.
Include the specific searches your agency performs, when in the hiring process they should be performed, and the steps the hiring personnel should take before, during, and after the background check.
2. Train HR Staff
Thoroughly train the HR staff who will conduct background checks about all applicable background check and hiring laws, and the steps they should take during the hiring process.
Provide a checklist to your HR staff to ensure they don’t miss anything when conducting background checks.
3. Partner With a Reputable Background Check Company
Choose a reliable background check company with extensive experience working with insurance companies that is familiar with relevant regulations and laws.
At iprospectcheck, we regularly complete insurance professional background checks and stay up to date with all relevant laws, helping insurance companies maintain regulatory compliance.
4. Adhere to Notice and Consent Rules
Follow the FCRA’s notice and consent rules. Disclose to your candidates that your company performs background checks in writing on a separate form.
Obtain their written consent before initiating a background check.
5. Time Your Checks Wisely
Some state and local governments have passed ban-the-box laws that require employers to wait until the later stages of the hiring process before inquiring about criminal history.
Even if you don’t operate in a jurisdiction with a ban-the-box law, it still makes sense to wait until the final stages of the hiring process to complete a background check.
This helps to save your company time and money you would otherwise spend on unnecessary background checks.
6. Review the Results Carefully
Once you receive the results, carefully review them. If you’re satisfied, schedule onboarding with your new hire.
If you have concerns, proceed to the next steps.
7. Assess Convictions Records
If a candidate has a conviction, assess it as it relates to the job and workplace safety before basing a decision not to hire them on that information.
8. Complete the Adverse Action Steps (if Necessary)
When the results of a background check make you want to deny employment, you must complete the following adverse action steps:
- Send a pre-adverse action notice to the candidate and include a copy of the report with the problematic information highlighted. Include a copy of the form “A Summary of Your Rights Under the FCRA”.
- Give the candidate a reasonable time to respond with evidence that the information is wrong or that they have rehabilitated. A reasonable time is typically five business days.
- Send a final adverse action notice together with a copy of the candidate’s FCRA rights if you make a final decision not to hire them.
Important Laws and Regulations
Federal Laws
Fair Credit Reporting Act
The Fair Credit Reporting Act (FCRA) is a major consumer privacy law that applies to consumer reporting agencies (CRAs) that conduct background checks and the employers that hire them.
Under the FCRA’s seven-year reporting rule, CRAs can’t report the following information for jobs paying less than $75,000 when the information is seven years old or older:
- Arrests that didn’t result in convictions
- Paid tax liens
- Debt collections
- Civil lawsuits and judgments
- Chapter 13 bankruptcies (Chapter 7 can be reported for 10 years)
Notice that the FCRA does not prohibit CRAs from reporting conviction records, no matter how old they are.
The seven-year rule also doesn’t prevent CRAs from reporting the above-listed information for jobs paying more than $75,000.
When employers work with third-party background check companies, they must disclose to their applicants in writing on a separate form that they conduct background checks and obtain written consent before they can initiate them.
When an employer receives negative information on a background check that makes them want to deny employment to an applicant, they must complete the adverse action process before finalizing the decision.
Title VII of the Civil Rights Act of 1964
Title VII of the Civil Rights Act of 1964 is a federal anti-discrimination law that prohibits workplace discrimination based on an applicant’s or employee’s protected characteristics.
The Equal Employment Opportunity Commission (EEOC) has provided guidance to employers under Title VII about how they must handle conviction information when they learn about it on a background check.
Before you deny employment to an applicant with a criminal record, you must assess the offense as it relates to the job duties and workplace safety.
Fair Chance to Compete for Jobs Act
The Fair Chance to Compete for Jobs Act (FCA) is a federal fair chance hiring law that applies to federal agencies and private companies that contract with the federal government.
Under this law, federal agencies and contractors must wait until after making a conditional job offer before performing criminal background checks.
Federal agencies can’t contract with companies that inquire about criminal history earlier in the hiring process.
18 U.S.C. § 1033
Under 18 U.S.C. § 1033, individuals with felony convictions for fraud, embezzlement, theft, or other similar crimes that affect interstate commerce are barred from working in the business of insurance.
However, an individual affected by this law can work within the insurance industry if they receive written permission from a state insurance regulatory official.
McCarran-Ferguson Act of 1945
The McCarran-Ferguson Act of 1945 was passed by Congress in reaction to a US Supreme Court decision in United States v. South‐Eastern Underwriters Association, 322 US 533 (1944), which held that the business of insurance is involved in interstate commerce and thus subject to federal regulation.
The McCarran-Ferguson Act, which is still effective today, overturned the court’s decision statutorily.
This law requires states to regulate insurance companies and the insurance industry rather than the federal government.
As a result, insurance industry-specific regulatory requirements for background checks fall under state laws rather than the federal government.
State Laws
Fingerprint-based Background Checks
State insurance background check regulations vary.
However, many states require fingerprint-based background checks and financial checks for licensing, and insurance companies typically likewise require them.
Ban the Box Laws
Some state and local governments have enacted ban-the-box laws, which require employers to wait until later in the hiring process to inquire about criminal history.
Consult legal counsel to find out whether any ban-the-box laws apply where your insurance company operates.
Pre-Employment Credit Check Restrictions
Some states restrict employers from using pre-employment credit checks to make hiring decisions.
However, states that have pre-employment credit check restriction laws provide exemptions when the checks are required by other laws or related to the job duties.
For example, California has the California Consumer Reporting Agencies Act, which bans the use of credit reports by most employers.
However, insurance companies may meet an exception when they use them on applicants for managerial roles, those with access to sensitive financial and identity information, and those who have a fiduciary duty.
Employers that use pre-employment credit checks must follow the FCRA’s and the state’s disclosure and notice requirements.
Turn to iprospectcheck as Your Trusted Partner for Insurance Background Checks
Insurance companies must be careful when hiring professionals to avoid legal and regulatory issues.
Conducting thorough pre-employment background checks on insurance professionals enables you to confirm your candidates are qualified, experienced, and suitable for the positions.
To learn about iprospectcheck’s background check and clinical services, call us today for a free quote: (888) 509-1979.
DISCLAIMER: The resources provided here are for educational purposes only and do not constitute legal advice. Consult your counsel if you have legal questions related to your specific practices and compliance with applicable laws.
FAQs
How long does a background check take for an insurance job?
How long an insurance background check takes depends on the searches you request.
Standard searches come back within a few hours to a couple of days, but complex searches can take longer.
Can I work in insurance with a misdemeanor?
Federal law prohibits insurance companies from hiring agents with felony fraud or theft convictions.
Most states also prohibit individuals from working in insurance when they have misdemeanor convictions involving moral turpitude.
However, not all misdemeanors will preclude you. Check with your state’s Department of Insurance to learn more.
How far back do insurance background checks go?
How far back insurance background checks go is controlled by state and federal law.
For jobs paying less than $75,000 per year, CRAs can’t report the following information when it’s more than seven years old:
- Arrests not resulting in convictions
- Paid tax liens
- Civil lawsuits and judgments
- Debt collections
- Chapter 13 bankruptcies (Chapter 7 can be reported for 10 years)
Some states also have laws restricting criminal history to seven years.
When are background checks conducted in the insurance industry?
In the insurance industry, background checks are commonly conducted at the following times:
- Pre-employment: Insurance companies perform background checks on job candidates to verify criminal history, licensing status, employment history, education, and other relevant details before making a hiring decision.
- Licensing and renewal: State Departments of Insurance (like the California Department of Insurance) conduct thorough fingerprint background checks before issuing or renewing licenses for agents, brokers, and adjusters.
- During employment: Ongoing checks may be required during license renewal cycles, after role changes, or when required by new regulations or employer policies.
- Underwriting insurance policies: Insurance carriers may run background checks on individuals or businesses applying for coverage to assess risk, especially for policies involving high-value assets, life insurance, or commercial liability.
How can I check my own background before applying to an insurance agency?
To understand what an insurance agency might see when they complete pre-employment screening, you can run a background check on yourself from a reliable provider.
At iprospectcheck, we offer employer-quality personal background checks to individuals.
