To start an insurance agency or brokerage in California, or to work as a producer in an existing business, you must first obtain one or more insurance licenses from the state. To do so, you must take the mandatory classes, submit to a background check and pass a state exam. If bankruptcy is part of your history, you may wonder how this affects your ability to get licensed.
If you have a history of bankruptcy, it will appear on the background check the state orders as a condition of licensing. You must provide your fingerprints and consent to a state and federal criminal background check that includes a search for any records you may have in the FBI database. The primary concern that California has regarding your background is criminal accusations or convictions. A felony or some misdemeanor convictions may prevent you from obtaining your license.
California distinguishes between your control over your personal finances and your business finances. While a bankruptcy may indicate a problem in your personal life, it does not necessarily mean you will carry that problem over to your customers' money. Since insurance producers have a fiduciary responsibility, meaning they must faithfully transmit payments from customers to insurance companies, the department of insurance is only interested in whether or not you will steal a client's money. Bankruptcy is not usually considered an indicator of illegal behavior.
To maintain your insurance license in California, you must report to the department of insurance any qualifying events that may change your background check status. Assembly Bill 2557 requires that certain types of bankruptcies must be reported. If, during the course of your bankruptcy, you discharge or attempt to discharge any funds or insurance premiums in your possession that you owe to an insurer, premium finance company or managing general agent, your license status may be affected as a result.
To sell insurance in California, you must be appointed to at least one insurer. An insurer appointment is an agreement between you and the company to sell or otherwise transact its products for profit. Insurers have discretion over the qualifications they require of their producers, and some may refuse to appoint you if you have a bankruptcy in your history. This does not affect your license, but may impact your ability to use your license for business purposes.