Laws and Regulation- General and Life Insurance Sheet

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II. LIFE INSURANCE BASICS 3.1 Insurable Interest (40 P.S. § 512) For insurance purposes, the amount of insurable interest an individual has on his/her own life is legally considered to be unlimited. 3.5 Viatical and Life Settlements Viatical Settlement Broker Authority and Licensing (40 P.S. § 626.3) Process No person can engage in the business of viatical settlements as a settlement provider or broker in this Commonwealth without obtaining an appropriate license from the insurance department and being considered to be worthy of such licensure. Application The application for a viatical settlement provider or broker license must be made to the insurance department by the applicant on the appropriate form. Fees The following licensing fees will be due at the time of initial and renewal application: For licensure as a viatical settlement provider - $300 For licensure as a viatical settlement broker - $100 Fees for initial and renewal licensure as a viatical settlement provider and broker may be adjusted annually at the discretion of the Commissioner by publishing a notice in the Pennsylvania Bulletin. Disclosure to Consumers (40 P.S. §§ 626.7, 626.206) With each application for a viatical settlement, a provider or broker must provide the viator with the following disclosures no later than the time the application for the settlement contract is signed by all parties. The disclosures must provide the following information: 1. Possible alternatives to viatical settlement contracts; 2. Some or all of the proceeds of the viatical settlement may be taxable under Federal income tax and State franchise and income taxes; 3. Proceeds of the viatical settlement could be subject to the claims of creditors; 4. Receipt of the proceeds of a viatical settlement may adversely affect the viator's eligibility for Medicaid or other government benefits or entitlements; 5. The viator has the right to rescind a contract for 15 calendar days from the receipt of the viatical settlement proceeds by the viator as provided in section - if the insured dies during the rescission period, the settlement contract must be deemed to have been rescinded; 21 6. Funds will be sent to the viator within 3 business days after the provider has received the insurer or group administrator's acknowledgment that ownership of the policy has been transferred and the beneficiary has been designated; 7. Entering into a viatical settlement contract may cause other rights or benefits, including conversion rights to be forfeited by the viator; 8. All medical, financial or personal information solicited or obtained by a viatical settlement provider or broker about an insured, may be disclosed as necessary to put into effect the viatical settlement between the viator and the provider and/or financing entities; and 9. All information provided by a viator or insured to a provider or broker will be shared with the insurer that issued the life insurance policy. Confidentiality A document in which the insured consents to the release of his/her medical records to a viatical settlement provider, broker and the insurance company that issued the life insurance policy covering the life of the insured will remain confidential. General Rules (40 P.S. § 626.8) A viatical settlement provider entering into a viatical settlement contract must first obtain: 1. Prior to or at the time of execution of the contract a witnessed document: a. in which the viator consents to the viatical settlement contract; b. represents that the viator has a full understanding of the contract, and has a full understanding of the benefits of the life insurance policy; c. acknowledges that he has entered into the viatical settlement contract freely and voluntarily; d. if applicable for the purposes of determining payments for persons who are terminally ill or chronically ill, acknowledges that the insured is terminally ill or chronically ill and that the illness or condition was diagnosed after the life insurance policy was issued; and e. acknowledges that he/she is of sound mind, under no constraint or undue influence. 2. If the viatical contract involves a life insurance policy that is being viaticated within the 2-year period commencing with the date of the issuance of the insurance policy or certificate, a document in which the insured consents to the tolling of the running of the policy's contestable period until after the insurer has completed its good faith investigation regarding the validity of the insurance contract. Definitions (40 P.S. § 626.2) Chronically Ill A condition which means a person: 1. Is unable to perform at least 2 activities of daily living including, but not limited to: eating, toileting, transferring, bathing, dressing or continence; or 2. Requires substantial supervision to protect the individual from threats to health and safety due to severe cognitive impairment. 22 Fraudulent Viatical Settlement Act An act or omission committed by any person who engages in the following: 1. Presenting false material information or concealing material information as part of, in support of or concerning a fact material to one or more of the following: a. An application for the issuance of a viatical settlement contract; b. The underwriting of a viatical settlement contract; c. A claim for payment or benefit pursuant to a viatical settlement contract; d. Premiums paid on an insurance policy; e. Payments and changes in ownership or beneficiary made in accordance with the terms of a viatical settlement contract; f. The reinstatement or conversion of an insurance policy; g. The solicitation, offer, effectuation or sale of a viatical settlement contract; h. The issuance of written evidence of a viatical settlement contract; or i. A financing transaction. 2. In the furtherance of a fraud or to prevent the detection of a fraud: a. Destroys, removes, conceals or alters the assets of a licensee; b. Misrepresents or conceals the financial condition of a licensee or insurer; c. Transacts the business of viatical settlements in violation of laws requiring a license, certificate of authority or other legal authority; or d. Files with the Commissioner, the Insurance Department or the chief insurance regulatory official or agency of another jurisdiction a document containing false information or otherwise conceals information. Terminally Ill This means having an illness or sickness that can reasonably be expected to result in death in 24 months or less. Viatical Settlement Broker A person that on behalf of a viator and for a fee, commission or other valuable consideration, offers to negotiate viatical settlements between a viator and one or more viatical settlement providers. Viatical Settlement Provider A person that enters into a viatical settlement contract other than the viator - the term does not include: Any licensed lending institution that takes an assignment of a life insurance policy as collateral for a loan; The issuer of a life insurance policy providing accelerated benefits pursuant to the contract; 23 An authorized insurer that provides stop-loss coverage to a viatical settlement provider, purchaser, financing entity, special purpose entity or related provider trust; or A natural person who enters into or effectuates no more than one agreement in a calendar year for the transfer of life insurance policies for any value less than the expected death benefit. Viatical Settlement Purchaser A person who gives a sum of money, as consideration for a life insurance policy or an interest in the death benefits of a life insurance policy Viator This is the owner of a life insurance policy who is terminally ill and enters or seeks to enter into a viatical settlement contract. 3.6 Classes of Life Insurance Policies Fixed Vs. Variable Life Insurance General Account vs. Separate Account (40 P.S. § 506.2; 31 Pa Ch. 82.41-.51) Any life insurance company may establish one or more separate accounts and may allocate any amounts to provide for life insurance or annuities (and incidental benefits) payable in fixed or variable amounts or both, and for any other investment purpose consistent with a company's investment powers. The separate accounts are subject to the following: The income, gains and losses, realized or unrealized, from assets allocated to a separate account must be credited to or charged against the account without regard to other income, gains or losses of the company; and The amounts allocated to each separate account established by the insurer, together with any accumulations, may be invested and reinvested in any class of investments which may be authorized in the written contract or agreement without regard to any investment limitations otherwise applicable to the investment of life insurance companies. Applicability The above requirements apply to the establishment and administration of variable life insurance separate accounts by a domestic insurer. Establishment and Administration A domestic insurer issuing variable life insurance must establish one or more separate accounts. If no law or other regulation provides for the custody of separate account assets and if the insurer is not the custodian of the separate account assets, contracts for custody of the assets must be in writing and the Commissioner has authority to review and approve both the terms of the contract and the proposed custodian prior to the transfer of custody. 24 Amounts in Separate Account The insurer must maintain in each separate account assets with a fair market value at least equal to the greater of the valuation reserves for the variable portion of the variable life insurance policies or the benefit base for the policies. Investments by the Separate Account Sales, exchanges or other transfers of assets may be made by an insurer between its separate accounts or between another investment account and one or more of its separate accounts if the transfer into or from a separate account is made by one of the following methods: A transfer of cash; A transfer of assets having a valuation which could be readily be determined in the marketplace; or Other transfers the Commissioner may approve. Valuation of Separate Account Assets Investments of the separate account must be valued at their market value on the date of valuation, or at the amortized cost if it approximates market value. Separate Account Investment Policy The investment policy of a separate account operated by a domestic insurer may not be changed without first filing the change with the Commissioner. A change filed under this section is effective 60 days after the date it was filed with the Commissioner. Conflicts of Interest Rules under the insurance laws or a regulation applicable to the officers and directors of insurance companies also apply to members of a separate account's committee or other similar body. Regulation of Variable Life Insurance (31 Pa. Code Ch. 82.1, .14, .81) Standards of Suitability An insurer seeking approval to enter into the variable life insurance business must establish, maintain and file with the Commissioner a written statement specifying the standards of suitability to be used by the insurer. Qualifications to Sell Variable Life Insurance No person may sell or offer for sale a variable life insurance policy unless the person is an agent and has filed with the Commissioner evidence that the person holds a license. 3.8 Producer Responsibilities 25 Advertising (31 Pa. Code Ch. 51.1-.36) Filings of Advertisements Required Filing Mail-order solicitations of individual accident and health contracts must be filed as follows: A mail-order solicitation for an individual accident and health contract must be properly filed with the Department as an ''Initial Filing of a Mail-order Solicitation,'' not later than the day of first publication of the advertisement; A mail-order solicitation which has been properly filed with the Department in accord with this subsection and advertisement for which has been changed in any way, must be filed in its changed form as an ''Amended Filing of a Mail-order Solicitation'' not later than the day of first publication of that changed advertisement; and Once a mail-order solicitation has been properly filed with the Department that same mail-order solicitation need not be filed with the Department upon each use for a period of 2 years from the date of that filing. An advertisement must be re-filed as a ''Renewed Filing of a Mail-order Solicitation'' not later than the date of first publication after the expiration of this 2-year period. Voluntary Review of Advertisements Voluntary review must occur as follows: Prior to first publication, a mail-order solicitation may be submitted to the Department as a ''Voluntary Submission of an Advertisement'' for voluntary review in regard to compliance with existing statutory requirements; and An advertisement submitted for the voluntary review will not be protected or insulated from an action that might be taken by the Department under existing statutory provisions of the law. Company's Responsibility and Control Every company must maintain complete control over the content, form and method of dissemination of advertisements of its contracts. The advertisements must be the responsibility of the company whose contracts are being advertised. Advertising File A company must maintain a complete file containing every printed, published or prepared advertisement of its individual contracts and typical printed, published or prepared advertisements of its blanket, franchise and group contracts disseminated in this or another state. Certificate of Compliance 26 A company required to file an annual statement must also file a Certificate of Compliance executed by an authorized officer of the company stating to the best of his/her knowledge, information and belief that the advertisements which were disseminated by the company during the preceding statement year complied with laws and regulations. Form and Content of Advertisements The format and content of an advertisement of an insurance contract must be sufficiently complete and clear to avoid deception or the capacity or tendency to mislead or deceive. Advertisements must be truthful and not misleading in fact or in implication. Misleading or Deceptive Statements An advertisement may not be used which, due to phrases, statements, references or illustrations or information omitted, has the capacity of deceiving purchasers or prospective purchasers regarding the nature of any contract benefit payable, loss covered or premium payable. Medical Examination An advertisement may not represent or imply that a medical examination is not required, without disclosing conditions pertaining to or involving the health of the insured, if the conditions might prevent the contract from being issued or the insured from receiving any or full benefits under the contract. Renewability or Cancellability An advertisement may not represent or imply that a contract may be continued in effect indefinitely or for a period of time, when the contract contains provisions for non-renewal or cancellation by the company, or may be terminated under any circumstances over which the insured has no control, during the period of time represented. Life and Health Insurance Guaranty Association (40 P.S. §991.1717) No person may make, publish, or disseminate before the public any statement which uses the existence of the life and health insurance guaranty association for the purpose of sales, solicitation or inducement to purchase any form of insurance. Life Insurance Disclosure Statement A life insurance agent, broker or insurer must provide a prospective purchaser with a written disclosure statement. A disclosure statement is a document which must describe the purpose and importance of the disclosure and describe the significant elements of the policy and riders being offered. The disclosure statement should include the following: A statement that the disclosure is for the insured's protection, provides basic information about the cost and coverage of the insurance, and should be read carefully by the insured; A statement that the disclosure statement may not be considered as an offer to contract or as altering or modifying any policy or rider that might be issued; 27 The name, age and sex of the proposed insured; Source of insurance, including the following: o The name of the agent or broker, home address or agency address and the home or agency telephone number of the insurance agent making the solicitation; and o The name and home address of the insurer to whom applications will be made, and a mailing address of the insurer's administrative office to which correspondence should be addressed. Information about the basic policy, rider or supplemental benefit built into the policy; Amount of coverage and benefits offered including: o The face amount of coverage; and o If the face amount of coverage changes, an explanation as to what changes will occur and when (i.e. ''coverage reduces $100 per month till age 65 when the coverage expires.''). Other Disclosures to Include: Retirement Income If the policy is one primarily designated to pay a guaranteed income, the monthly income payable for life with a 10-year period certain at the appropriate age Cash Surrender Value In policies which develop cash surrender values, the applicable amount of cash surrender value per $1,000 or face amount at the end of 5, 10 and 20 policy years and at age 65 should be disclosed. If a loan option is available, the annual percentage loan interest charge should also be disclosed. Premiums Changes in premiums over time including a cap on the premium charged should be disclosed. Dividends Payable If the company chooses to show illustrations, a statement must be included denoting that illustrated dividends are not a guarantee of what future dividends will be. If a payment of a dividend is contingent upon the payment of the next premium due, a statement to this effect should also be disclosed. Dividend illustrations used must be for policy years 10 and 20 per $1,000 or face amount. Illustrations (40 P.S. § 625.7-625.8) A producer may only use and must not withhold, alter, change or in any way modify the results of a life insurance or annuity illustration system provided by an insurer or approved in writing by an officer of the insurer. Life insurance and annuity illustrations may not be made part of any life insurance or annuity policy issued. 28 Policy Illustration Standards Each insurer marketing policies must notify the Commissioner indicating if a life insurance policy form is to be marketed with or without an illustration - for all life insurance policy forms being actively marketed, the insurer must identify in writing those forms and whether or not an illustration will be used with them; Any previous identification may be changed by notice to the Commissioner; If the insurer identifies a life insurance policy form as one to be marketed without an illustration, any use of an illustration with that specific policy form prior to the first policy anniversary is prohibited; If a life insurance policy form is identified as one to be marketed with an illustration, a basic illustration prepared and delivered is required, except that a basic illustration need not be provided to individual members of a group or to individuals insured under multiple lives coverage issued to a single applicant unless the coverage is marketed to these individuals; and Potential enrollees for policies and certificates on non-term group life must show potential policy values from sample ages and policy years on a guaranteed and non-guaranteed basis appropriate to the group and the coverage. An illustration used in the sale of a life insurance policy must satisfy the applicable requirements detailed above, be clearly labeled "life insurance illustration" and contain the following basic information: 1. Name of insurer; 2. Name and business address of producer, if any; 3. Name, age and sex of proposed insured; 4. Underwriting or rating classification upon which the illustration is based; 5. Generic name of policy, the insurer product name, and form number; 6. Initial death benefit; and 7. Dividend option election or application of non-guaranteed elements. When using an illustration in the sale of a life insurance policy, an insurer or its producers must not: Represent the policy as anything other than a life insurance policy; Use or describe non-guaranteed elements in a manner that is untrue, deceptive or misleading, or has the capacity or tendency to mislead; State that the payment or amount of non-guaranteed elements is guaranteed; Use an illustration that does not comply with the requirements of this act; Use an illustration that at any policy duration depicts policy performance more favorable to the policy owner than that produced by the illustrated scale of the insurer whose policy is being illustrated; Provide an applicant with an incomplete illustration; 29 Represent in any way that premium payments will not be required for each year of the policy in order to maintain the illustrated death benefits, unless the representation is true; Use the term "vanish" or "vanishing premium" or any similar term that implies the policy may become paid up to describe a plan whereby non-guaranteed elements are used to pay all or a portion of future premiums; Use a lapse-supported illustration; or Use an illustration that is not self-supporting. If an interest rate used to determine the illustrated non-guaranteed elements is shown, it may not be greater than the earned interest rate underlying the disciplined current scale. Surrender Comparison Index for Policies (31 Pa Code Ch. 83.51-.57) The Surrender Comparison Index is intended to provide the purchaser of life insurance with a means of making a cost comparison of the same type life insurance policies having the same premium payment period and pattern. A disclosure should be included indicating that a surrender comparison index will be provided upon delivery of the policy or earlier if requested. A provision for the election of earlier delivery should also be included in the policy. Any riders applicable to the surrender comparison index should be included as well as a brief explanation defining the surrender comparison index. Surrender comparison requirements are not applicable to the following kinds of insurance: Annuities; Group life insurance; Credit life insurance; Life insurance of less than $5,000; Life insurance on substandard risks; Life insurance issued in connection with qualified funded pension plans and qualified retirement plans; Life insurance issued as a result of a contractual policy change or conversion provision; Life insurance where the cost is borne in whole or in part by the employer of the insured; Policies having a varying face amount (resulting from other than the application of dividends); Variable life insurance; Family policies; or Term policies. Delivery of Surrender Comparison Index Disclosure The Surrender Comparison Index Disclosure must be given as a separate document upon delivery of the policy or earlier if requested by the life insurance applicant. If 30 requested earlier, the index disclosure must be provided as soon as reasonably possible. Penalties apply for failing to comply with surrender comparison disclosure requirements. Replacement (31 Pa. Code Ch. 81.1-.8) The purpose of replacement regulations is to regulate the activities of insurers, agents and brokers with respect to the replacement of existing life insurance and annuities, and protect the interest of life insurance and annuity purchasers by establishing minimum standards of conduct to be observed in replacement transactions. Replacement transactions are regulated by assuring that purchasers receive information in which a decision can be made in the purchasers' best interest, misrepresentation and incomplete disclosures are avoided, and penalties for compliance failure are established. Definitions Conservation An attempt by the existing insurer or its agent or broker to dissuade a policy owner from the replacement of existing life insurance or annuity Replacement A transaction in which new life insurance or a new annuity is to be purchased, and it is known to the proposing agent, broker or proposing insurer, that by reason of the transaction, existing life insurance or annuity has been or is to be one of the following: Lapsed, forfeited, surrendered, assigned to replacing insurer or otherwise terminated; Converted to reduced paid-up insurance, continued as extended term insurance or otherwise reduced in value by the use of non-forfeiture benefits, dividend cash values or other policy cash values; Amended so as to effect either a reduction in benefits or in the term for which coverage would otherwise remain in force or for which benefits would be paid; Reissued with a reduction in cash value; or Pledged as collateral. Replacing Insurer The insurance company that issues a new policy or contract, which is a replacement of existing life insurance or annuity Duties of Agents and Brokers The agent or broker who initiates the replacement application must submit to the insurer to which an application for life insurance or annuity is presented: A statement signed by the applicant as part of each application as to whether replacement of existing life insurance or annuity is involved in the transaction; and A signed statement as to whether the agent or broker knows replacement is or may be involved in the transaction. 3 4. Submit a copy of the notice regarding annuity contracts must mail to the contract holder, at least once in each contract year, a statement reporting the investments held in the separate account. prevent compliance with any specific provision of this chapter, such insurance company must so advise the Department in writing. Departmental Review

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III. LIFE INSURANCE POLICIES 4.5 Group Life Insurance Conversion to Individual Policy (40 P.S. § 532.7) If any individual insured under a group life insurance policy becomes entitled to have an individual policy of life insurance issued to him without evidence of insurability, then the individual must have an additional period within which to exercise his right, but nothing 32 contained may be construed to continue any insurance beyond the period provided in such policy. IV. LIFE INSURANCE POLICY PROVISIONS, OPTIONS AND RIDERS 5.1 Standard Provisions (40 P.S. § 510) No policy of life or endowment insurance may be delivered unless it contains the following provisions: Entire Contract (d) A provision that the policy constitutes the entire contract between the parties, but if the company desires to make the application a part of the contract, it may do so Right to Examine (Free Look) (40 P.S. § 510c(a)) Individual fixed dollar life insurance or endowment insurance policies may not be delivered unless they have prominently printed on the first page of such policy or attached thereto a notice stating that the policyholder is permitted to return the policy within at least 10 days of its delivery and to have the premium paid refunded if after examination of the policy, the policyholder is not satisfied with it for any reason. Payment Premiums (a) A provision stating that all premiums are to be paid in advance Grace Period (b) A provision that the insured is entitled to a grace, either of 30 days or one month, within which the payment of any premium after the first year may be made, subject, at the option of the company, to an annual interest charge of 8% for the number of days of grace elapsing before the payment of the premium during which period of grace the policy must continue in full force. Reinstatement (k) A provision that the holder of a policy is entitled to have the policy reinstated, upon written application, at any time within 3 years from the date of default in premium payments. Incontestability (c) A provision that the policy must be incontestable after it has been in force, during the lifetime of the insured, 2 years from its date of issue, except for nonpayment of premiums. Misstatement of Age (e) 33 A provision indicating that if the insured whose age is considered in determining the premium has been misstated, the amount payable or benefit accruing under the policy must be such as the premium would have purchased at the correct age. Payment of Claims (l) A provision, that when a policy becomes a claim by the death of the insured, settlement must be made upon receipt of due proof of death. Prohibited Provisions Including Backdating (40 P.S. § 511) No policy of life insurance may be delivered if it contains any of the following provisions: Any provision for forfeiture of the policy for failure to repay any loan on the policy or to pay interest on any such loan, while the total indebtedness on the policy is less than the cash value; Any provision limiting the time which any action at law or equity may be commenced to less than 2 years after the cause of action may accrue; Any provision which the policy declares to be issued or to take effect more than 6 months before the original application for the insurance was made; or Any provision for a mode of settlement at maturity of less value than the amount insured on the face of the policy plus dividend additions, if any, less the indebtedness to the company on the policy, and less any premiums that may by the terms of the policy be deducted. 5.8 Accelerated (Living) Benefit Provision/ Rider Conditions for Payment (31 Pa. Code Ch. 90f.3) The form discloses the conditions for payment of the accelerated death benefit. A licensed physician provides certification that the insured is diagnosed to have a life expectancy of the limited period of time as required by the form or the insured has suffered a medical condition which will in the absence of treatment result in death within a limited period of time as required by the form. Effect on Death Benefit (31 Pa. Code Ch. 90f.3) The form describes the effects of the payment of the benefit on the death benefit and accumulation value, cash value, loan balance and premium payment following payment of a benefit or at settlement of the life insurance proceeds based on a reduced life expectancy of the insured. Exclusions and Restrictions (31 Pa. Code Ch. 90f.4) The form may contain any of the following exclusions and restrictions: 1. War, declared or undeclared, or an act of war, whether or not serving in the military forces or a civilian noncombatant unit serving with the forces; 2. Active duty as a member of the armed forces of any nation; 34 3. Committing an assault or felony, whether sane or insane; 4. Participating in a riot or insurrection; 5. A fight in which the insured is a voluntary participant; 6. Suicide or attempted suicide, whether sane or insane; 7. Intentionally self-inflicted injury, whether sane or insane; 8. Engaging in an illegal occupation; 9. Travel or flight in an aircraft; 10. Voluntary taking or injection of drugs, unless prescribed or administered by a licensed physician; 11. Drug addiction; and 12. Chronic alcoholism. V. ANNUITIES 6.4 Annuity Products Market Value Adjusted Annuities (Modified Guaranteed Annuities) (40 P.S. § 71, 510a-510d) Standard Valuation Law The Standard Vaulation Law applies to Individual Deferred Annuities. It does not apply to any reinsurance, group annuity purchased under a retirement plan or plan of deferred compensation established or maintained by an employer or an employer organization. In the case of individual deferred annuity contracts issued, no contract can be delivered unless it contains the provisions which are as favorable to the contract holder, upon cessation of payment of considerations under the contract. Variable Annuities Assets in a Separate Account (31 Pa. Code Ch 85.21-.27) Any company issuing individual variable annuity contracts or individual variable accumulation annuity contracts must mail to the contract holder, at least once in each contract year, a statement reporting the investments held in the separate account. Any deficit which may arise in any separate account by virtue of mortality experience guaranteed by the life insurance company or by expense costs so guaranteed must be adjusted by transfers from unallocated surplus or contingency reserves not required by law so that the assets may at least be equal to the liabilities. Regulation of Variable Annuities (31 Pa. Code Ch. 85.1-.4) Foreign and Alien Life Insurance Companies 35 If the statutes or regulations of the place of domicile of a foreign or alien insurance company prevent compliance with any specific provision of this chapter, such insurance company must so advise the Department in writing. Departmental Review The Commissioner is authorized to cause frequent reviews of insurers in order to measure compliance with the receiving and investment requirements by any insurer issuing variable annuity or variable accumulation annuity contracts with guaranteed benefits.

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Pennsylvania State Laws and Regulations Life, Accident and Health Insurance 2 I. INSURANCE REGULATION 1.1 Licenses Process (40 P.S. §§ 310.3-310.14) Pre-licensing Examination Education Requirements Before submitting an application for the insurance producer licensing examination, an individual must complete a minimum of 24 credit hours of approved pre-examination courses. At least 3 of the 24 hours must be on ethics. Upon satisfactory completion of an approved pre-examination course of study, the individual must be issued proof of completion by the course provider. All license candidates must submit a completed application for examination indicating the lines of authority for which they want to be licensed, a copy of their approved pre-examination study certificate, and the nonrefundable examination fee prior to taking an insurance producer licensing examination. License Exam Exemptions No licensing exam or pre-examination education requirements are required if the candidate is a(n): business entity; person who possesses the professional designation of Chartered Life Underwriter® (CLU®) and is applying for life or accident and health line of authority; person who possesses the professional designation of Chartered Property and Casualty Underwriter (CPCU®) and is applying for a property, casualty, or accident and health line of authority; person who possesses the professional designation of Certified Insurance Counselor (CIC) and is applying for a life, accident and health, or property and casualty line of authority; person who possesses any other professional designation for which the requirements are waived by the Commissioner; person who is licensed in another state as an insurance producer for the lines of authority for which the person desires to be licensed in Pennsylvania; person whose line of authority is only limited line credit insurance; person who has a line of authority restricted to a limited line; individual whose line of authority will be restricted to domestic mutual fire insurance and will be with an insurer writing only coverage other than insurance on automobiles; and individual whose line of authority will be restricted to fraternal insurance. 3 Application Process An applicant with a principal place of residence or business within this Commonwealth may apply to the department for a resident insurance producer license. An applicant with a principal place of residence outside this Commonwealth may apply for a nonresident insurance producer license. All applicants must submit the following to the Pennsylvania Insurance Department: A completed application indicating the lines of authority for which the applicant desires to be licensed; The applicant's fingerprints in order for the Department to receive national criminal history records information from the FBI Criminal Justice Information Services Division; Documentation verifying that the applicant passed or is exempt from the insurance producer licensing examination; and The required license fee and fees for obtaining national criminal history records information. Business Entity Application Upon designating one or more individuals licensed as a producer to be responsible for the business entity's compliance with the state's insurance laws and regulations, a business entity may apply to the Department for an insurance producer license for the same lines of authority held by the designate licensees. Lines of Authority The licensed ability to sell, solicit or negotiate particular classes or types of insurance, including the following: 1. Life 2. Accident and Health/ Sickness 3. Property 4. Casualty 5. Variable Life and Variable Annuity products 6. Personal lines 7. Credit 8. Motor vehicle rental 9. Limited line License Fees Residents - A nonrefundable $55 fee must accompany an application Nonresidents - A nonrefundable $110 fee must accompany an application for a nonresident insurance producer license A nonrefundable $165 fee must accompany a late application for license renewal. 4 License Application The department will review each application and may conduct an investigation of each applicant who applies for a license. Issued licenses are valid for a period of two years. The department must issue a resident or nonresident insurance producer license to the applicant when the department determines that all of the following criteria have been met: 1. The applicant is at least 18 years of age; 2. The applicant has not committed any prohibited practice under the state's insurance laws; 3. The applicant has satisfied the pre-examination education requirements; 4. The applicant has passed or is exempt from the insurance producer licensing examination; 5. The applicant has paid all applicable fees; and 6. The applicant possesses the general fitness, competence and reliability sufficient to be worthy of licensure; and 7. Is able to read and write in the English language (though there is no requirement that the applicant speak English). Types of Licenses (40 P.S. § 310.1) Producer (40 P.S. §§ 310.3-310.5) A producer is a person who is licensed to transact insurance business as a nonresident or resident in this Commonwealth. A person may not transact insurance business, which includes selling, soliciting or negotiating a contract of insurance, unless the person is licensed as an insurance producer for the line of authority under which the contract is issued. The following persons are not required to be licensed as insurance producers: An insurer; An employee of an insurer or a rating organization employed by an insurer who is not engaged in the sale, solicitation or negotiation of insurance contracts, and who inspects, rates or classifies risks or supervises the training of insurance producers; An officer, director, or employee of an insurer or of an insurance producer as long as the individual does not receive a commission on policies written or sold to insure risks residing, located, or to be performed in Pennsylvania and their activities are executive, administrative, managerial, or clerical and are only indirectly related to the sale, solicitation, or negotiation of insurance; A person who, for no commission: o secures and furnishes written information for the purpose of group life o insurance, group property and casualty insurance, group annuities, group or o blanket accident, and health insurance; o performs administrative services related to the enrollment of individuals under plans; 5 o issues certificates under plans or otherwise assists in administering plans; o performs administrative services related to mass marketed property and casualty insurance; o provides risk management services to a business entity; or o performs administrative functions, provides clerical support, or enrolls renters on behalf of the rental company that offers insurance coverages in connection with and incidental to the rental of motor vehicles. An employer, including an association, or the trustees of an employee trust plan and their officers, directors, and employees who are engaged in the administration of an employee benefits program that includes insurance for the benefit of the employer's employees; and they are not compensated by the insurer issuing the insurance policy; A person engaged in the advertising of insurance if the person does not sell, solicit, or negotiate insurance for risks residing, located, or to be performed in Pennsylvania; and the advertising is distributed to persons residing both within and outside this state through the use of printed publications or other forms of electronic mass media; A nonresident person who sells commercial property and casualty insurance to an insured with risks located in more than one state, who is licensed as an insurance producer in the state where the insured maintains its principal place of business, and the insured risk is located in that state; A salaried full-time employee who counsels or advises his employer on the employer's insurance issues and does not sell or solicit insurance or receive a commission Nonresident (40 P.S. §§ 310.10) An individual who is currently licensed as a resident insurance producer in another state may apply for a nonresident insurance producer license in Pennsylvania for the equivalent lines of authority as the individual is licensed for in his/her home state. The individual must submit a completed application or an updated copy of the individual's home state application indicating the lines of authority for which the individual desires to be licensed, proof of the individual's current license and the required license fee. Upon receipt and review of all documents submitted, the insurance department must issue a nonresident insurance producer license to the individual for the equivalent lines of authority he/she currently holds. The department may deny the application if the licensee's home state does not award nonresident insurance producer licenses to resident licensees of Pennsylvania on the same basis. Reciprocity: The Department may waive the requirements for a person applying for a nonresident insurance producer license in Pennsylvania that possesses a valid insurance producer license from the person's home state if the person's home state awards nonresident insurance producer licenses to resident licensees of this Commonwealth on the same basis. 6 Limited Line: After application to the Department, a person licensed as a limited line credit insurance or other type of limited lines producer in the person's home state will receive a nonresident limited lines producer license, granting the same scope of authority as granted under the license issued by the producer's home state. Temporary (40 P.S. § 310.9) If the insurance department determines that the issuance of a temporary insurance producer license is in the public's interest, and the person requesting the license is worthy to receive a temporary license, the insurance department may issue a temporary insurance producer license to the following persons: 1. The surviving spouse or representative of a resident individual licensee who dies or becomes mentally or physically disabled; 2. An owner, partner or employee of a business entity licensee upon the death or disability of the designated licensee; 3. The designee of an individual licensee who enters active service in the armed forces of the United States; or 4. Any other person in an extenuating circumstance where the Commissioner deems that the public interest will best be served by the issuance of a temporary license. The temporary license is valid for a period of 180 days and is not transferable. The department may immediately and without notice revoke a temporary license if it is deemed in the public's best interest. Managers and Exclusive General Agents (40 P.S. § 310.31) No person may engage in any activities requiring a manager or exclusive general agent license without being licensed by the insurance department. Acting as a manager or exclusive general agent without a license is a third degree misdemeanor punishable by a fine of up to $1,000 per day. In some cases, the fine may be paid by the employing insurer. The following persons may not be required to be licensed as a manager or exclusive general agent: A licensee whose authority is limited primarily to the production of insurance business with limited underwriting authority; A manager or exclusive general agent operating under a management contract or exclusive general agency agreement entered into prior to December 22, 1965; or 7 Maintenance and Duration Renewal (40 P.S. § 310.8) Licenses are issued for a term of two years. A licensee may request renewal of his/her license by submitting a completed renewal form, the required fee and verification that the licensee has completed the continuing education required to the insurance department. A resident licensee that has not previously submitted fingerprints to the department must also submit the licensee's fingerprints and the required fee(s). Upon receipt and review, the insurance department must renew the license unless it determines that the licensee is not in compliance with this act. Renewal Fees: Resident renewal fee — $55 Nonresident renewal fee — $110 Lapsed license renewal fee — $165 Lapses A licensee who allows his license to lapse by failing to renew in a timely manner, pay the fee required, or complete the continuing education required may within one year of the license renewal date request the Department to reinstate the license. Persons requesting reinstatement of a lapsed license must submit a completed renewal form, the required fee, and verification that the person has completed all required continuing education for the previously licensed and lapsed periods. The Department will reinstate the license retroactively, with the reinstatement effective on the date the license lapsed, if the Department receives a request for reinstatement together with a completed renewal application, payment of the lapsed license fee, and proof of continuing education compliance within 60 days after the license lapsed. If a person applies for reinstatement more than one year after the lapse date, the person must reapply for the license. Extenuating circumstances: As a result of military service or other extenuating circumstance, a licensee who is unable to comply with the renewal requirements in a timely manner may request that the Department waive the continuing education requirements and fee. The request must include sufficient detail and supporting documentation to determine the necessity of the waiver. If the Department determines that there is good cause for noncompliance, the Department will grant the waiver and permit the licensee to request renewal of the license in accordance with this act. 8 Reporting of Actions (40 P.S. § 310.78) A licensee must report any administrative action taken against the licensee in another jurisdiction within 30 days of the final disposition of the matter. This report must include a copy of the order, consent order or other relevant legal documents. Within 30 days of being charged with criminal conduct, a licensee must report the charges to the insurance department. The licensee must provide the department with all of the following within 30 days of their availability to the licensee: 1. A copy of the criminal complaint, information or indictment; 2. A copy of the order resulting from a pretrial hearing, if any; and 3. A report of the final disposition of the charges. Assumed Names (40 P.S. § 319.7) An insurance producer must notify the Commissioner prior to using any assumed names. Address Change (40 P.S. § 310.11(19)) An insurance producer must notify the Department of any change of address within 30 days. Continuing Education (40 P.S. § 310.8(b)) As a requirement for license renewal, every licensee must successfully complete 24 credit hours of approved continuing education for each 2-year license period. A licensee may carry forward excess continuing education credit hours up to a maximum of 24 credit hours from one licensing period to the next licensing period. The following shall be exempt from the continuing education requirements: A licensee who was licensed as an agent or broker for a line of authority prior to January 1, 1971, and who has been continuously licensed as an agent, broker, or producer for the line of authority since that time; A licensee which is a business entity; A licensee who has only a limited line of authority; A licensee who has a line of authority limited to restricted fraternal; A licensee who has a line of authority restricted to limited line credit insurance if the insurer provided a course of instruction to each individual whose duties will include selling, soliciting, or negotiating the insurance; A nonresident licensee who has satisfied the continuing education requirements of the licensee's home state if that state recognizes the satisfaction of its continuing education requirements by a resident licensee satisfying the Pennsylvania requirement; A licensee whose line of authority is restricted to domestic mutual fire insurance and the licensee's appointment is with an insurer writing only coverage other than insurance upon automobiles. 9 Penalties - Failure to Comply with Continuing Education Requirements (§ 39.11) Insurance producers will be notified by the insurance department of the number of credit hours needed to satisfy the continuing education requirements 150 days prior to the expiration date stated on his/her license. An insurance producer's failure to comply with continuing education requirements will be deemed voluntary termination of the producer's license. An insurance producer who has not earned the required number of credit hours as of 60 days prior to the date of renewal will have his/her license terminated as of the expiration date. Termination will not occur if the insurance producer has successfully completed the required number of credit hours, but completion has not been reported by the sponsor to the Department. An applicant whose certificate or license was terminated will be required to complete the deficient number of credit hours prior to regaining a license unless the Commissioner grants a waiver for good cause shown. Disciplinary Actions Cease and Desist Order (40 P.S. §§ 310.91, 1171.9) Upon determination that a producer has violated an insurance law, rule or regulation, or has engaged in an unfair or illegal act, the Commissioner may issue an order requiring the person to cease and desist from engaging in such violation, or if such violation is a method of competition, act or practice, the Commissioner may suspend or revoke the person's license. The notice shall state the time and place for hearing, which shall not be less than 10 days from the date of the notice. At the time and place fixed for the hearing in the notice, the person will have an opportunity to be heard and to show cause why an order should not be made by the Commissioner to cease and desist from acts constituting a violation of this act and why administrative penalties should not be assessed. Upon a determination by hearing that this act has been violated, the Commissioner may issue an order requiring the person to cease and desist from engaging in such violation or, if such violation is a method of unfair competition, the Commissioner may suspend or revoke the person's license. If the alleged violator fails to comply with an order of the Commissioner following a hearing to cease and desist from unfair methods of competition or an unfair or deceptive act or practice, the Commissioner may file an injunction in the Commonwealth Court or the Court of Common Pleas of the county in which the violation occurred. 10 Revocation, Suspension, Nonrenewal or Denial of License (40 P.S. § 310.910) Violations & Hearings Upon evidence of a violation, the department must notify the person of the alleged violation. The notice will specify the nature of the alleged violation and will indicate a time and place, 10 days thereafter, when a hearing will be held. The insurance department will conduct the hearing. No person may be excused from testifying or from producing any books, papers, contracts, agreements or documents at any hearing on the ground that the testimony or evidence may tend to incriminate that person. After the hearing, if a violation is found, the Commissioner may, in addition to any penalty which may be imposed by a court, impose any combination of the following deemed appropriate: 1. Denial, suspension, refusal to renew or revocation of the license; 2. A civil penalty up to $5,000 for each action in violation of this act; 3. An order to cease and desist; or 4. Any other conditions as the Commissioner deems appropriate. Final Orders A decision of the insurance department from which no timely appeal is taken to the administrative hearings office will be a final order and must be enforceable by a court of competent jurisdiction. Fines (40 P.S. §§ 310.91, 1171.11) In addition to any penalties imposed, the court may impose the following monetary penalties: For each method of competition, act or practice in violation of this act which the person knew was a violation, a penalty up to $5,000 for each violation, but not to exceed a total penalty of $50,000 in any 6 month period; For each method of competition, act or practice in violation of this act which the person did not know was a violation, a penalty up to $1,000 for each violation, but not to exceed a total penalty of $10,000 in any 6 month period; or For each violation of an order issued by the Commissioner while such order is in effect, a penalty of no more than $10,000. A licensee who fails to provide a written response to the insurance department within 30 days of receipt of a written inquiry or who fails to remit valid payment for all fees due must correct the violation within 15 days of receipt of the notice. If a licensee fails to correct the violation within 15 days, the department may assess an administrative fine of $100 per day per violation. 11 1.2 State Regulation Commissioner's General Duties and Powers (40 P.S. §§ 310.2, 1171.7) Power of Commissioner The Commissioner may examine and investigate the affairs of every person engaged in the business of insurance in order to determine whether such person has been engaged in any unfair method of competition or in any unfair or deceptive act or practice prohibited by this act. The Commissioner has the power and authority to issue cease and desist orders, subpoena witnesses for hearings, revoke, suspend or nonrenew a license, and decline an application for a license. The Commissioner does not have the authority to write and change insurance statutes/law. The Commissioner must: License insurance producers; and Approve and administer or contract for the overall administration of the pre-examination program, pre-examination courses of study, insurance producer licensing examinations and continuing education programs. A pre-examination education program approved by the insurance department must include no less than 3 credit hours on ethics. Authorizations The Commissioner has the authority to do the following: Secure or require any documents or information, including fingerprints, necessary to verify the accuracy of information provided on an application; Participate with the NAIC in a centralized insurance producer license registry for purposes of submitting information on insurance producers; Approve forms to be used by individuals and business entities to apply to the department for an insurance producer license; and Approve additional limited lines of authority. Company Regulation Solvency (40 P.S. §§ 72, 112) Whenever any life insurance company does not have available the net value of all policies in force, after all other debts and claims against it, including 50% of capital, have been provided for, the Insurance Commissioner must notify the company and its agents to issue no new policies until its funds become equal to its liabilities. Rates (40 P.S. §§ 1181-1199, 1221-1238) The purpose of regulating insurance rates is to promote the public welfare to the end that rates imposed by insurers are not excessive, inadequate or unfairly discriminatory; to enable authorized insurers to meet all requirements of the 12 insuring public of this Commonwealth, and to authorize and regulate cooperative action among insurers in rate making. Scope of Provisions This Act applies to all classes and kinds of insurance which may be written by stock or mutual casualty insurance companies, associations or exchanges, including fidelity, surety and guaranty bonds, and all other forms of motor vehicle insurance and title insurance. Furnishing rating information Every rating organization and every insurer which makes its own rates must furnish to any insured affected by a rate made by it, all pertinent information as to such rate. Examination by Commissioner The Commissioner must make an examination of each rating organization every 5 years, and he may make an examination of each advisory organization, group, association or other organization. The reasonable costs of any examination must be paid by the organization examined upon presentation to it of a detailed account of such costs. Penalties for Violations The Commissioner may impose a penalty of no more than $50 for each violation, but if he finds the violation to be willful he may impose a penalty of no more than $500 for each violation. These penalties may be in addition to any other penalty provided by law. False or Misleading Information No person may withhold information from or knowingly give false or misleading information to the Commissioner, any statistical agency designated by the Commissioner, any rating organization, or any insurer which will affect the rates or premiums. Assigned Risks Agreements may be made among insurers with respect to the equitable apportionment among them of insurance which may be afforded applicants who are in good faith entitled to but who are unable to procure insurance through ordinary methods and insurers may agree among themselves on the use of reasonable rate modifications for insurance, such agreements and rate modifications to be subject to the approval of the Commissioner. 13 Policy Forms (40 P.S. §§ 477b, 510, 776.1-776.7) Approval of Policy Forms It is unlawful for any insurance company, association, or exchange, including domestic mutual fire insurance companies, to issue, sell, or dispose of any policy, contract, or certificate, covering life, health, accident, personal liability, fire, marine, title, and all forms of casualty insurance, or use applications, riders, or endorsements, until the necessary forms have been submitted to and formally approved by the Insurance Commissioner, and copies have been filed in the Insurance Department. Simplified Forms If an insurer elects to use a simplified application form, with or without a question as to the applicant's health at the time of application, but without any questions concerning the insured's health history or medical treatment history, the policy must cover any loss occurring after 12 months from any pre-existing condition not specifically excluded from coverage by terms of the policy, and the policy may not include wording that would permit a defense based upon pre-existing conditions. Unfair Claims Settlement Practices (40 P.S. § 1171.5(a)(10); 31 Pa Code Ch. 146) File and Record Documentation The claim files of the insurer will be subject to examination by the Commissioner. The files will contain notes and work papers pertaining to the claim in suitable detail so that pertinent events and the dates of the events can be reconstructed. Misrepresentation of Policy Provisions An insurer or producer may not fail to fully disclose to insured pertinent benefits, coverage or other provisions of an insurance policy or contract when dealing with claims. Failure to Acknowledge Pertinent Communications Every insurer, upon receiving notification of a claim, will within 10 business days, acknowledge the receipt of the notice unless payment is made within the period of time. If an acknowledgment is made by means other than writing, an appropriate notation of the acknowledgment will be made in the claim file of the insurer and dated. Standards for Prompt Investigation of Claims Every insurer will complete investigation of a claim within 30 days after notification of claim, unless the investigation cannot reasonably be completed within the time. If the investigation cannot be completed within 30 days, every 45 days thereafter the insurer will provide the claimant 14 with a reasonable written explanation for the delay and state when a decision on the claim may be expected. Producer Regulation Fiduciary Responsibility (40 P.S. § 310.96) An insurance producer has the responsibility to hold a fiduciary capacity for all funds received or collected as an insurance producer and must not, without the express consent of the insurance entity, mingle the funds with the producer's own funds or with funds held by the insurance producer in any other capacity. Examinations of Books and Records (40 P.S. § 323.3) Every company or person subject to examination must keep all books, records, accounts, papers, documents and any or all recordings relating to its property, assets, business and affairs in such manner and for the time periods as the department so that authorized representatives may readily verify the financial condition of the company or person and ascertain whether the company or person has complied with the laws of this Commonwealth. Commissions and Fees (40 P.S. §§ 310.72-310.74) An insurance entity may pay a commission, brokerage fee, service fee or other compensation to a licensee for selling, soliciting or negotiating a contract of insurance. An insurance entity or licensee may not pay a commission, brokerage fee, service fee or other compensation to a person that is not a licensee for activities related to the sale, solicitation or negotiation of a contract of insurance. Additional Fees: A licensee may charge a fee in addition to a commission to a person for the sale, solicitation or negotiation of a contract of insurance for commercial business. The fee charged by the licensee must be disclosed in advance in writing to the person and must be reasonable in relationship to the services provided. No insurance producer may charge a fee for the completion of an application for a contract of insurance. Appointment of Producers (40 P.S. § 310.71) An insurance producer may not act on behalf of or as a representative of the insurer unless the insurance producer is appointed by the insurer. An insurance producer acting on behalf of or representing an insurance consumer must execute a written agreement with the insurance consumer prior to representing or acting on their behalf indicating the following: 1. Delineates the services to be provided; and 2. Provides full and complete disclosure of the fee to be paid to the insurance producer by the insurance consumer. 15 Termination of Appointment Once appointed, an insurance producer must remain appointed by an insurer until such time as the insurer terminates the appointment in writing to the insurance producer or until the insurance producer's license is suspended, revoked or otherwise terminated. Appointment Fee An appointment fee of $12.50 will be billed annually to the insurer for each producer appointed by the insurer during the preceding calendar year regardless of the length of time the producer held the appointment with the insurer. The fee must be paid in full within 30 days. Unfair Insurance Practices (40 P.S. §§ 1171.4- 1171.5) No person must engage in any trade practice which is defined or determined to be an unfair method of competition or an unfair or deceptive act or practice in the business of insurance. Unfair methods of competition and unfair or deceptive acts/practices include the following: 1. Making, publishing, issuing or circulating any estimate, illustration, circular, statement, sales presentation, omission comparison which: a. Misrepresents the benefits, advantages, conditions or terms of any insurance policy; b. Misrepresents the premium overcharge commonly called dividends or share of the surplus to be received on any insurance policy; c. Makes any false or misleading statements as to the dividends or share of surplus previously paid on any insurance policy; d. Is misleading as to the financial condition of any person; e. Uses any name of any insurance policy misrepresenting the true nature; f. Is a misrepresentation for the purpose of inducing the lapse, forfeiture, exchange, conversion or surrender of any insurance policy; g. Is a misrepresentation for the purpose of effecting a pledge or assignment of any insurance policy; or h. Misrepresents any insurance policy as being shares of stock. 2. Making an advertisement or statement containing any representation with respect to the business of insurance which is untrue, deceptive or misleading. 3. Making any oral or written statement which is false or maliciously critical of the financial condition of any person, and which is calculated to injure such person. 4. Entering into any agreement to commit any act or boycott, coercion or intimidation resulting in unreasonable restraint of the business of insurance. 5. Knowingly filing with any supervisory or other public official, any false material statement as to the financial condition of a person, or knowingly making any false entry in any book, report or statement of any person. 16 6. Issuing or permitting agents, officers or employees to issue company stock or other capital stock, or benefit certificates or shares in any common-law corporation promising returns and profits as an inducement to insurance. 7. Unfairly discriminating by means of: a. Making or permitting any unfair discrimination between individuals of the same class and equal expectation of life in the rates charged for any contract of life insurance; b. Making or permitting any unfair discrimination between individuals of the same class and of the same hazard in the amount of premium, policy, fees or rates charged for any policy or in the benefits payable; or c. Making or permitting any unfair discrimination between individuals of the same class and the same hazard with regard to underwriting standards and practices or eligibility requirements by reason of race, religion, nationality or ethnic group, age, sex, family size, occupation, place of residence or marital status. 8. Knowingly permitting or offering to make any contract of insurance with a rebate of premiums payable on the contract, which is not specified in the contract. 9. Canceling any policy of insurance covering owner-occupied private residential properties that have been in force for 60 days or more or refusing to renew any policy unless the policy was obtained through material misrepresentation, fraudulent statements, omissions or concealment to the acceptance of the risk or to the hazard assumed by the company. Rebating (40 P.S. § 310.45, 1171.5(a)(8)) No insurance producer may offer, promise, allow, give, set off or pay a rebate of a premium payable on the contract or on the producer's commission, earnings, profits, dividends or other benefit founded for services of any kind, or any other valuable consideration or inducement, to or for insurance on a risk which is not specified in the contract of insurance. Misrepresentation (40 P.S. § 310.47-.48; 1171.5(a) (1),(2)) No insurance producer may: 1. Issue, circulate, or use a written or oral statement misrepresenting the terms of a contract of insurance issued by the insurer; or 2. Make an estimate with intent to deceive of the future dividends payable under the contract of insurance. No insurance producer may misrepresent an incomplete comparison of contracts of insurance for the purpose of inducing an insured of another insurer to lapse, forfeit or surrender his contract of insurance and to take out a contract of insurance insuring against similar risks with the licensee or solicitor's insurer. 17 Twisting (40 P.S. §§ 310.47, 473) No insurance company, association, or exchange, and no member, officer, director, or any other person in its behalf, may make any misrepresentation or incomplete comparison of policies, oral, written, or otherwise, to any person insured in any company for the purpose of inducing or tending to induce a policyholder in any company to lapse, forfeit, or surrender his insurance, and to take out a policy of insurance in another company, association, or exchange insuring against similar risks. False Advertising (40 P.S. § 1171.5; 31 Pa. Code Ch. 51) The compliance standards are a guideline to Departmental enforcement of existing statutory provisions relating to the use of deceptive, misleading or false statements, practices or procedures. If a company feels that the provisions of these guidelines are especially burdensome when applied in a particular instance, that company may properly file a Voluntary Submission of an Advertisement under this subchapter. Defamation (40 P.S. § 1171.5(a)(3); 31 Pa. Code Ch. 51) An advertisement may not make unfair or incomplete comparisons of policies or benefits, and may not disparage competitors, their policies, services or business methods, and may not falsely or unfairly disparage or minimize competing methods of marketing insurance. Boycott, Coercion or Intimidation (40 P.S. § 1171.5(a)(4)) Entering into any agreement to commit any act or boycott, coercion or intimidation resulting in unreasonable restraint of the business of insurance is prohibited. Misappropriation of Funds (40 P.S. §§ 310.11(4), 310.42) It is prohibited to improperly withhold, misappropriate or convert money or property received in the course of doing business. Unfair Discrimination (40 P.S. § 1171.5; Pa Code § 145.4) It is illegal to discriminate unfairly between individuals of the same class and life expectation for ether rates charged, benefits payable or any other conditions for a life insurance or annuity contract. It is also illegal to discriminate between individuals of the same class or essentially the same hazard with regard to underwriting standards and practices or eligibility requirements because of race, religion, nationality, ethic group, age, sex, family size, occupation and place of residence or marital status. Illegal Inducement (40 P.S. §§ 310.46; 1171.5(a)(8)) No insurance producer may offer, promise, give, option, sell or purchase any stocks, bonds, securities or property, or any dividends or profits accruing as an inducement to purchase a contract of insurance. 18 Privacy of Consumer Financial Information (40 P.S. § 310.77(a); 31 Pa. Code §§ 146a.1-.44) A licensee employed by a financial institution that solicits the sale of annuities or life insurance on or from the physical premises of the financial institution must provide a person applying for a contract of insurance a written disclosure at or prior to the time of application for the insurance or annuity. The disclosure must include a notice with all of the following: 1. The insurance or annuity is not a deposit; 2. The insurance or annuity is not insured by the Federal Deposit Insurance Corporation (FDIC); 3. The insurance or annuity is not guaranteed by the financial institution or an affiliated insured depository institution; and 4. The insurance or annuity is subject to investment risk, including potential loss of principal, when appropriate. Privacy of the Consumers Financial and Health Information A licensee must provide a notice of his or her privacy policies and practices to customers and consumers. A licensee may not disclose nonpublic personal financial information about a consumer to a nonaffiliated third party unless all of the following conditions are met: 1. The licensee has provided to the consumer an initial notice; 2. The licensee has provided to the consumer an opt out notice; 3. The licensee has given the consumer a reasonable opportunity to opt out of the disclosure; and 4. The consumer does not opt out. Insurance Fraud Regulation (40 P.S. §§ 325.1-325.62; 18 Pa. C.S. § 4117) Any insurers, agents, or employees acting in the course and scope of his/her employment must be immune from civil or criminal liability arising from the release of written or oral information to entities authorized to receive information by federal or state law or by insurance department regulations. Any person having knowledge of or who believes that insurance fraud is being committed may send a report of information pertinent to the knowledge and belief to the insurance department. 19 1.3 Federal Regulation Fair Credit Reporting Act - Title 11 Information (15 USC §§ 1681-1681d) Any consumer reporting agency that furnishes a consumer report containing information regarding any case involving the consumer arising under Title 11 must include an identification of the chapter of Title 11 under which such case arises if provided by the source of the information. If any case arising or filed under Title 11 is withdrawn by the consumer before a final judgment, the consumer reporting agency must include in the report that the case was withdrawn upon receipt of documentation certifying the withdrawal. Information Excluded from Consumer Reports No consumer reporting agency may make any consumer report containing any of the following items of information: 1. Cases under Title 11 that antedate the report by more than 10 years; 2. Civil suits, civil judgments, and records of arrest that, antedate the report by more than 7 years; 3. Paid tax liens which antedate the report by more than 7 years; 4. Accounts placed for collection or charged to profit and loss which antedate the report by more than 7 years; or 5. Any other adverse item of information, other than records of convictions of crimes which antedates the report by more than 7 years. Fraud and False Statements (18 USC §1033, 1034) Any person who makes a false statement or documentation that affects interstate commerce with intent to deceive an insurance regulatory official, agency or agent who is examining the affairs of that person, will be punished with a fine or imprisonment for no more than 10 years, or both, except if the fraud jeopardizes the security or soundness of an insurer, then the terms of imprisonment will be 15 years. 20