Filing surplus lines is one of those things that those outside of the insurance world don’t appreciate. They don't realize what a complicated and time-consuming process it can be. Here are a few frustrations only those who file surplus lines taxes will truly understand. We hope they make you smile.
- Keeping track of the requirements of different states may cause your hair to go prematurely gray. Each state requires different, specific wording to be stamped on different documents. Sometimes they require it on the application, the affidavits and/or the policy. Not only does the wording need to be correct, they require the font to be bolded, a specific size, color and position within the policy depending on the state the business was written in.
- You may have a little antipathy toward Oregon because it is a very picky state. In Oregon, if you call your service charge a “stamping fee,” your filing will be rejected. It must be worded as a “Surplus Lines Service Charge.”
- You know that keeping records if filing in different states is complicated. It may or may not keep you up at night. Each state has a different requirement on what needs to be kept on file, and for how long. One state in particular requires the original, wet signature affidavit to be kept on file. Some states require you to keep records for 3 years, some for 5 years, and some for as long as 10 years!
- Filing reports with different states has been known to give you migraines; sometimes the migraines are metaphorical, but they exist nonetheless. Some states require you to file affidavits with the insurance commissioner no later than 20 days from the effective date of the policy. Some states require you to file a report with them each month by a specific day. And then some states require you to file 30, 60, or 90 days from the effective date as well as a report that is due on a specific day of the month. Some require a report even if NO business was written during a specific month, and others require monthly, quarterly, semi-annual, or annual filings—or a combination of the four.
- You have forgotten the names of all of your children. There just wasn’t room for all of the surplus lines requirements in your memory, so something had to go. Not only do you have to remember the dates for filing the reports, you have to remember another set of dates for making payments. Some states are reported monthly, but paid quarterly, while others require you to pay the tax with the department of insurance but the stamping fee to the stamping office. With all of that information to keep track of, it’s amazing you remember your name.
- Certain states have given you paper cuts. In many states, you can file electronically, but there are still a handful of states that require you to mail the reports to them. They often require the reports to be notarized as well. If you send a report to the state, and it arrives there by the due date but the state finds an error in the report, they will require you to send a correction. If the correction does not arrive at the state before the due date as well, the filing will be considered late, and you will be subject to penalties.
- Your legs are sore from jumping through hoops. The laws in each state are different surrounding writing surplus lines business. Most states have what is called an export list. An export list is businesses that are not known to be available in the admitted market. If you write business for a policy that is not included on the export list, you have to perform a diligent search. Generally, that means you have to have asked three admitted insurers to insure your business, and you need to be turned down by all three. Some states require you to record which insurers you asked, whom you asked within those agencies, and the date they turned you down. Some states also require a signed form from the insured that states that they are aware their policy was written by a surplus lines insurer and that they will not be covered by the guaranty fund for that state if the insurer is insolvent.
This list could go on for several more pages, but we know that you don’t have time to read all of this especially if you have surplus lines to file.
However, there is good news for agents who relate to a few or all of these frustrations: InsCipher is now available. InsCipher is a program developed by surplus lines veterans. Let InsCipher file your surplus lines taxes for you, so you can focus on more important things like your business and this thing we call life.
InsCipher is easy to use. An online portal will guide you through the information that you need to file your surplus lines. Once you have entered the necessary information, InsCipher will take it from there.