How Long Must Insurance Agents Keep Client Records?

As an insurance agent, maintaining proper records for your clients is a crucial part of running an ethical and compliant business. But with boxes of old files and documents piling up, you may wonder just how long you’re legally obligated to hold onto all that paperwork before hitting delete or taking it to the shredder.

The answer depends on a few factors, including:

• The type of document
• Your state’s record retention laws
• Your contractual obligations
• Prudent risk management

While requirements vary, most states mandate keeping key client records for around 5-7 years as a baseline. Let’s take a detailed look at record retention best practices for insurance agents.

Key Records Insurance Agents Must Keep

At minimum, agents should retain any client records related to transactions, communications, payments, policies, and claims. Key documents include:

• Applications – New policy, renewals, coverage changes

• Policy documents – Contracts, declarations, endorsements, cancellations

• Communications – Emails, letters, call/meeting notes

• Payment info – Bills, invoices, statements, checks, credit card authorizations

• Claims – Loss reports, adjustor notes, settlement records

• Licenses – Agent and agency licenses, appointments

• Complaints – Complaint details and resolution records

Maintaining organized records allows you to properly service client accounts, provide policy evidence, process claims, and prove you operated compliantly.

State Record Retention Laws

Most states have laws dictating minimum retention periods for certain client records held by insurance agents and agencies. These laws typically require keeping records for 5-7 years in some form.

For example:

• Georgia: 5 years for policies, premiums, commissions, and claim adjustments

• New York: 3 years for fee disclosures and compensation memos

• California: 5 years for agent licenses and company appointments

• Texas: 5 years for policy and contract documents

• Florida: 5 years for policies, applications, claims, and accounts

Check your state insurance department website to find specific record retention regulations that apply to your business. Failure to comply can lead to penalties.

Contractual Obligations

Beyond state laws, also review any contractual agreements you have with clients or insurance carriers regarding record retention.

For example, your agency agreement with a carrier may require keeping policy and claim records for a set time period, like 6 years or more. Or a client services agreement could specify retaining account documents for the lifetime of the relationship plus 7 years after.

Honor any retention terms you agreed to, as they tend to be longer than state minimums. Breaching contracts regarding records can cause legal headaches down the line.

Prudent Risk Management

Perhaps the best practice is retaining certain client records until the statute of limitations runs out for potential claims or lawsuits under your state’s laws.

• Contract claims: Typically 3-6 years

• Errors and omissions claims: Up to 5-7 years

• Breach of fiduciary duty claims: 6-7 years

• Fraud claims: 5-10 years

You worked hard to earn your client’s trust – don’t erode it by destroying documents too quickly. Limit risk by keeping records longer than the minimum required.

Key Documents to Keep for 10 Years or More

Some client documents warrant retention for 8-10 years or longer due to their significance, sensitivity, or relation to claims with long tails.

• Claims files – For claims with injury damage emerging over time, keep policy and claims records active through final settlements plus 7-10 years.

• Litigation records – Keep records relevant to any lawsuits or complaints until all appeals are exhausted, then 7-10 years after.

• Coverage denials – Keep denials of claims by carrier and related policy records for 10 years.

• Policies for minors – Keep policy documents until the minor insured turns 21 years old.

• High risk policies – Retain policy documents longer for unusual risks like asbestos, environmental, cyber or construction defects.

Use your judgment on documents that fall outside the scope of standard state record retention laws. When in doubt, keep records longer rather than shorter.

Best Practices for Record Storage

Maintaining decades of paper records fills up storage space quickly. Where possible, convert physical records to digital copies through scanning or photo imaging. This saves space while preserving important documents.

Key tips for digitizing paper records:

• Scan documents at high resolution (at least 300 dpi)

• Save copies in accessible formats like PDFs

• Organize digital files in a document management system

• Back up files to a secure cloud storage system

• Maintain physical records if required (e.g. “wet ink” originals)

• Periodically check digital records for accessibility and integrity

Adequately securing and backing up electronic records is crucial. Encrypt sensitive files and store them in a protected records database with limited access rights.

When Records Can Be Destroyed

It’s risky to destroy records before statutory retention periods expire. However, for documents more than 7 years old, safely destroying them in a compliant manner can be appropriate if:

• The state minimum retention period has passed

• No claims, complaints or lawsuits related to the records are pending

• No contractual obligations require further retention

• No minor clients or unusual loss exposures are involved

• Copies are preserved in a durable format like digital images

Seek legal counsel before mass purging records that may still hold business value or client interests. Be selective, prudent and well-documented in any disposal process.

The Case for Keeping Records Indefinitely

Some agencies adopt retention practices longer than industry norms. Reasons for indefinite retention include:

• Future claims risk – His policies have claims exposure over multiple decades

• Regulatory compliance – Holding records simplifies proving compliant behavior

• Client service – Fast document retrieval builds goodwill

• Business intelligence – Records contain useful analytics and insights

The downside is records maintenance costs. But cheaper digital storage makes near-indefinite retention more feasible than in the past. Weigh factors like client needs, corporate culture and operational efficiency when crafting retention policies.

Returning Records to Carriers and Clients

If your agency no longer needs certain records, one option is returning them to the appropriate parties rather than destroying them.

• Carriers – Forward the carrier’s policy/contract documents still in your possession.

• Clients – Return original personal records to clients if you have maintained copies.

Check with the state DOI first regarding any restrictions around sending client records to third parties. Getting formal acknowledgment of returned records is wise.

Notify Clients Before Record Destruction

If unable to return records to clients, provide reasonable notice before destroying documents like:

• Applications
• Inspection reports
• Medical records
• Claim investigation records

Attempt to directly contact the client regarding their rights to claim the records, allowing 30-60 days for a response.

Document all disposal processes for future reference if questions arise. Following prudent protocols protects your business reputation and mitigates legal risks down the road.

Summarizing Insurance Agent Record Retention

• Know your state’s record retention laws and comply at minimum

• Review all contractual storage obligations with carriers and clients

• Retain customer records for as long as claims can be filed

• Keep claim files, litigation records and key documents for 10+ years

• Digitize and securely back up paper records where possible

• Obtain legal advice before mass record destruction

• Return or notify clients before disposing of their records

The best retention policies balance legal requirements, client service and risk management. Your clients will thank you for keeping their records orderly and accessible as long as practicably needed. Protecting information that has been entrusted to you is the heart of maintaining strong agent-client relationships over time.