Ch. 26- FL Laws and Rules Pertinent to Life and Health Insurance

What is an Admitted Life or Health Insurance Company?

One which the Office of Insurance Regulation has licensed to transact business in Florida under the provisions of state law.

What is a foreign insurance company?

One whose home office is located in another state. It is considered a foreign company in all states other than its home state.

What is a fraternal life insurance organization?

Operates as a corporation, society, or association to provide life insurance primarily for the mutual benefit of its members and beneficiaries.

Describe the duties of the state court system in regards to the insurance business.

1. Decide cases of conflict between insurance companies and policy owners. 2. Protect insurance companies and insureds by enforcing criminal penalties against those who violate the Insurance Code. 3. Consider cases brought by insurance companies and their agents who seek to overturn arbitrary or unconstitutional statutes or administrative regulations or orders

What four principal matters are dealt with by state insurance laws?

1. Organization of the Dept of Financial Services and the powers and duties of the CFO, the Financial Services Commission, and the Office of Insurance Regulation 2. Organization of insurance companies, their powers and limitations, and the requirements in regard to their financial condition and operation 3. Qualifications, licensing, and appointment of agents 4. Rights of policyowners and beneficiaries

What entities of state government are involved in the regulation of the insurance business in Florida?

1. State Legistature 2. Department of Financial Services (headed by the CFO) 3. Commissioner of the Office of Insurance Regulation 4. State court system

What is the Insurance Code?

A broad legal framework prescribing the general standards for the insurance industry.

What is a stock insurance company and what is its purpose?

A company that is owned and controlled by its stockholders; it's purpose is to produce a profit for the stockholders. A stockholder may or may not be a policy holder.

Conviction on all charges up to a first-degree felony, liability for all unpaid claims, and suspension or revocation of all insurance licenses are possible consequences of what?

Acting as an insurer without a proper license

Conviction of a third-degree felony, liability for all unpaid claims, and suspension or revocation of all insurance licenses are possible consequences of what?

Aiding and abetting an unauthorized insurer

What kind of policies can a captive insurer offer?

All lines authorized under the insurance code EXCEPT life, health, workers comp, employer liability, personal motor vehicle or personal residential property.

What is a mutual insurance company and what is its purpose?

An incorporated insurer without permanent capital stock; it's purpose is to provide insurance to its policyholders at the lowest possible net cost. The policyholders are members and elect the governing body.

How are life insurance companies' financial conditions reviewed?

Each company must file a complete set of annual financial statements with the Office of Insurance Regulation. These are submitted on a standardized form, compiled according to specified procedures, and reviewed by the Office. Also, the companies' complete financial and operating situation is subject to examination by representatives of the office at least every three years.

What does ERISA stand for?

Employee Retirement Income Security Act

What does ERISA deal with?

Employee health and welfare benefit plans; particularly, employer-sponsored health insurance and retirement plans

What is the main difference between the way life insurance companies invest their funds versus the way other large investors do?

Government regulation limits the choice of investments, and companies must earn enough interest to maintain reserves.

How does owning a firearm affect insurability?

It doesn't. Insurers may not deny coverage, increase premiums, or otherwise discriminate against an insured or applicant on the basis of lawful ownership or possession of a firearm.

Who can fraternal life insurance organizations provide insurance to?

Members and non-members. Contemporary fraternal insurers operate essentially like commercial insurers and provided the same type of policies as are written by ordinary or industrial life insurance companies.

Is a union generally an exception to the MEWA definition?

No, absent an express finding by the US Dept of Labor to the nature of the collective bargaining agreement, the plan remains subject to state regulation.

Are mail order insurance companies permitted in the state of Florida? Explain.

No, they are not. The transaction of insurance, including the application, must be taken and the policy delivered through a licensed and appointed Florida agent.

Are Association Plans exempt from state insurance regulation? Why or why not?

No, they are not. There is no employee-employer relationship and they must be fully insured (therefore, at a minimum, the insurer is subject to regulation).

Is a PEO- sponsored health care plan exempt from state insurance regulation? Why or why not?

No, they are not. There is no employer-employee relationship because the original employer maintains control over the daily HR functions and because FL statute prohibits PEOs from sponsoring self-insured insurance plans.

According to the Insurance Code, what is meant by "transacting" insurance?

Solicitation or inducement to purchase insurance, preliminary negotiations toward the sale of insurance, effectuation of a contract of insurance and of matters subsequent to such

Are Multiple-Employer Welfare Arrangement generally exempt from state insurance regulation? Why or why not?

They are not. Although they are never single-employer plans (by their very nature), ERISA applies regulatory authority over most employee welfare benefit plans that are MEWAs.

Are fraternal life insurance organizations for-profit or non-profit? Explain.

They do not operate for a profit and, as an insurer, is organized under a special section of the Insurance Code. The proof of benefits are issued in the form of a certificate of membership instead of a policy.

How long must agents keep records for?

Three years

What is the purpose of the Department of Financial Services?

To oversee the insurance industry in accordance with the provisions of the Insurance Code. They have broad administrative, quasi-legislative and judicial powers in order to carry out their responsibilities.

Who is responsible for the enforcement of the body of statutory law contained in ERISA?

US Department of Labor; specifically, the Pension and Welfare Benefits Administration

Is a mutual insurance company a corporation?

Yes and, by law, must be incorporated in order to write insurance.

If a PEO or the purveyor of the supposed ERISA plan contends that each employer establishes its own, separate ERISA plan, and any risk-bearing activity exists, is it subject to state regulation?

Yes, because the plan is a MEWA.

If a PEO or the purveyor of the supposed ERISA plan contends that each employer establishes its own, separate ERISA plan, and there is commingling of funds of multiple unrelated employers, is it subject to state regulation?

Yes, f there is commingling at any level (primary insurance, reinsurance, or stop-loss insurance).

Can alien insurers sell, solicit and issue policies to individuals who, at the time of issue, are non-residents of the United States.

Yes, provided they are authorized to do those things in its country of domicile.

Are insurers limited to the dollar amounts that can be placed in different types of investments? Explain.

Yes. Certain investments (like corporate stocks) are limited. there are also severe limitations on investments in medium to lower quality obligations.

Does the Office of Insurance Regulation become specifically involved with the assets of life insurance companies?

Yes. The Office is concerned with the type of investments that are made by insurance companies and the techniques they use for valuing their assets for financial statement purposes/

How does a Non-Admitted company differ from an Admitted one?

Non-admitted companies are not under the regulation of the Florida Office of Insurance Regulation with regard to examination of its financial soundness, nor the examination and approval of types of coverage offered, nor its advertising through the mail.

What are the general types of assets in which life insurance companies are allowed to invest?

Obligations to the federal, state, or local government; corporate stocks or bonds; real estate mortgages; real estate; and policy loans

What is a "Rule"?

That which is necessary to affect the statutory duties of the Department of Financial Services or the Office of Insurance Regulation. The willful violation of any rule, in addition to any other penalty provided, may cause suspension or revocation of an insurance company's certificate of authority or an agent's license.

What is a PEO?

Professional Employer Organization... i.e. and employee leasing company. The PEO handles the administrative functions and the employer continues to control the daily HR functions such as hiring/firing, evaluation, discipline, etc.

Rules beginning with 69B...

Regulate agents and are adopted by the Department of Financial Services

Rules beginning with 69O...

Regulate insurers and are adopted by the Office of Insurance Regulation

What did the McCarren-Ferguson Act codify and when?

State regulation of the business of insurance is in the public interest, 1945

Describe the position and duties of the Commissioner of the Office of Insurance Regulation.

The Commissioner of the Office of Insurance Regulation is appointed by the Financial Services Commission. This individual administers insurance company regulation, including licensing, rates, policy forms, market conduct, claims, certificates of authority, and solvency.

Who administers the Insurance Code?

The Department of Financial Services and the Office of Insurance Regulation.

Describe the duties of the Financial Services Commission.

The Financial Services Commission appoints the Commissioner of the Office of Insurance Regulation and administers banking and securities regulation through the appointment of the Director of the Office of Insurance Regulation and the Director of the Office of Financial Institutions and Securities Regulation (each of whom have independent regulatory authority and final agency action powers over their respective areas of regulatory responsibility).

Who is on the Financial Services Commission?

The Governor, the CFO, the Attorney General, and the Commissioner of Agriculture.

Describe the duties of the state legislature in regards to the insurance business.

The state legislature makes new laws and amends existing laws relating to insurance. This body of laws is known as the Insurance Code. The legislature also established by law the Department of Financial Services and the Office of Insurance Regulation to administer that code.

Why is the insurance business subject to governmental control?

The three main reasons are: 1. Public interest makes it a public trust 2. The financial importance and extent of the operations of the insurance companies affect the state and national economy 3. The technical character of the insurance contract requires expert control

Can the CFO and Office of Insurance Regulation carry out an examination of records? Why or why not?

Yes; they have the right to examine the affairs of every person involved in the business of insurance to see if they are engaged in any unfair trade practices.

What are the two most prominent categories of life insurer investments? Why?

Bonds and mortgages. Life insurance liabilities to policyholders are, by nature, long-term. Bonds and mortgages are long-term investments and provide the degree of safety of principal, yield, and liquidity desired by insurers.

What is an alien insurance company?

One that is chartered and organized in any country other than the US.

What is a domestic insurer?

One that is domiciled and incorporated under the laws of the state in which its home office is located.

What agency supervises the methods of obtaining business, including control of unfair trade and advertising practices?

The CFO and the Office of Insurance Regulation

When an insurer must be liquidated or rehabilitated, who is responsible for that task?

The CFO and the Office of Insurance Regulation

Who conducts investigations of insurance matters expressed in the Insurance Code?

The CFO and the Office of Insurance Regulation

Who organizes and licenses insurance companies?

The CFO and the Office of Insurance Regulation

Describe the position and duties of the CFO.

The CFO is an independently elected official and member of the Governor's cabinet. The CFO is head of the Dept of Financial Services and a member of the Financial Services Commission. Regulation of insurance agents is directly administered by the CFO, as is insurance fraud and consumer protection.

Who administers the insurance laws in the state of FL? (3)

The Chief Financial Officer (CFO), the Financial Services Commission, and the Commissioner of the Office of Insurance Regulation

Who heads the Department of Financial Services?

The Chief Financial Officer and the Commissioner of the Office of Insurance Regulation

What is the solicitation of insurance?

The attempt to persuade a person to purchase an insurance produce by describing the benefits and terms, distributing an invitation to prospective purchasers, making general or specific product recommendations, completing orders or applications for insurance products, comparing products, advising on insurance matters, interpreting policies, or offering or attempting to negotiate a viatical settlement contract on behalf of another person.

Besides being concerned with the types of investments made by insurers, what else does the Office of Insurance Regulation consider?

The quality of the investments made by the insurance company as evidenced by minimum corporate bond ratings specified by law, earnings requirements for public utility bonds, and legal requirements that real estate mortgages be limited to first mortgages.