State Insurance Regulation
Every producer who is licensed in Colorado and not otherwise exempt must complete 24 credit hours of approved courses every two years after the producer's initial renewal:
- At least 18 hours must be in approved courses for the type of license for which the producer is licensed. - At least 3 hours must be in ethics. - A maximum of 6 of the 24 credit hours must be in approved courses on subjects designated by the Commissioner whenever he or she determines that continuing education in certain subjects is needed to protect insurance consumers.
Each agency must designate and register the following:
- Responsible Producer - All licensed officers, directors, partners, or owners - Producer for each line of authority held by the agency - Employees
Producers must treat premiums and returned premiums in a fiduciary capacity in the following way:
- Upon receipt, the producer must treat premiums as trust funds and segregate them from personal funds. - The producer must keep an accurate record of all fiduciary funds. - The producer must not treat premiums as a personal or business asset. - The producer's financial statement should not reflect fiduciary funds as an asset or as income. - A producer may not use fiduciary funds as collateral for a personal or business loan. - A deposit of such funds into a bank account must be into a separate insurance trust account until actually remitted.
The Commissioner can impose such disciplinary measures if he or she finds one or more of the following:
- any incorrect, misleading, incomplete, or materially untrue information in a license application; - any cause for which issuance of the license could have been refused had it then existed and been known to the Commissioner at the time of issuance; - violation of, or noncompliance with, any insurance law or violation of any lawful rule, order, or subpoena of the Commissioner or of the Insurance Department of another state; - obtaining or attempting to obtain a license through misrepresentation or fraud; - improperly withholding, misappropriating, or converting to the licensee's or applicant's own use any money or property belonging to policyholders, insurers, beneficiaries, or others received in the course of the business of insurance; - misrepresentation of the terms of any actual or proposed insurance contract or application for insurance; - conviction of a felony or misdemeanor involving moral turpitude; - commission of any unfair trade practice or fraud; the use of fraudulent, coercive, or dishonest practices or demonstrating incompetence, untrustworthiness, or financial irresponsibility in Colorado or elsewhere; - suspension, revocation, or denial of an insurance license in any other state, province, district, or territory; - forgery of another's name to an application for insurance or to any document related to an insurance transaction; - cheating on an examination, including, but not limited to, improperly using notes or any other reference material to complete an examination for an insurance license; - failure to fully meet licensing requirements; - knowingly accepting insurance business from a person who is not licensed; - failing to comply with an administrative or court order imposing a child support obligation; or - failing to pay state income tax or comply with any administrative or court order directing payment of state income tax.
A person may be licensed as a surplus lines producer if he or she:
- holds either a Colorado insurance producer license or a resident surplus lines license or the equivalent issued by another state or territory which offers Colorado surplus lines producers' nonresident licenses on a reciprocal basis; and - is considered competent and trustworthy by the Commissioner.
The Commissioner may, after due notice and a hearing, take the following disciplinary actions:
- place a producer on probation; - suspend, revoke, or refuse to issue or renew a producer license; - order restitution to be paid by a producer; or - assess a civil penalty
Insurance agencies and business entities must notify the Commissioner of any change concerning:
- the entity name; - officers, directors, partners, or owners; - a merger; or - the entity ceasing doing business in Colorado.
License Contents and Continuation Due Date
A Colorado insurance producer license remains in effect unless revoked or suspended, as long as the continuation fee is paid and education requirements are met on or before the due date. The license contains the following information: - name, address, and personal identification number of the licensee; - the trade name under which the licensee acts, if applicable; - date of issuance; - general conditions relative to expiration or cancellation; - the line(s) of insurance covered by the license; and any other information the Commissioner deems necessary.
Violation of Cease and Desist Orders
A person who violates a cease and desist order may be subject to a fine of up to $10,000 for each act or violation by an insurer; or a fine of up to $500 for each act or violation by an individual. The Commissioner may also suspend or revoke the violator's license.
Amending Licenses
A producer may add to his or her line(s) of authority by completing the requirements necessary for the additional line(s) and paying the appropriate fee. A producer may delete lines of authority by completing the proper forms and returning the license to the Commissioner.
Letter of Certification of Licensure
A producer may request a letter of certification from the Commissioner. If a letter of certification from another state for a nonresident license in Colorado is submitted, it must be dated no more than 90 days before it is received by the Division.
Letter of Clearance
A producer may request a letter of clearance from the Commissioner. Before issuing a letter of clearance, the producer must surrender his or her license for cancellation.
Temporary License
A temporary license is valid for up to 180 days. It may be issued to a qualified person when a producer becomes disabled or deceased or enters active service in the armed forces.
Fees Charged by Producers
Agreements between insurers and producers include a commission schedule that lists the producer's compensation for soliciting and acquiring business.
Fiduciary Duties; Commingling of Funds [Sec. 10-2-704; Reg. 1-2-4]
All premiums belonging to insurers, and all unearned premiums belonging to insureds, received by a producer are treated in a fiduciary capacity. All returned premiums received from insurers or credited to a licensee's account must be remitted to or credited to the account of the person entitled within 30 days.
Disclosure
All surplus lines insurance contracts obtained or delivered in Colorado must include the following language: "This contract is delivered as surplus line insurance under the Nonadmitted Insurance Act. The insurer issuing this contract is not admitted in Colorado but is an approved nonadmitted insurer. There is no protection under the provisions of the Colorado Insurance Guaranty Association Act."
Insurance Producer License
An applicant for a producer license must submit an application form and pay the required fee. No firm, partnership, association, or corporation may be licensed as an insurance producer with bail bonding authority.
Prelicensing Education
An applicant for a producer licensure authority must pay all required fees and satisfactorily complete approved prelicensure education as follows: - Property or Casualty Insurance (or Both): At least 50 hours of an approved course or program for certification in property or casualty insurance (or both) with at least 3 hours pertaining specifically to ethics - Life Insurance: At least 50 hours of an approved course or program for certification in life insurance with at least 3 hours pertaining specifically to ethics - Health Insurance: At least 50 hours of an approved course or program for certification in sickness and accident insurance with at least 3 hours pertaining specifically to ethics
Application for License
An applicant for a resident insurance producer license in Colorado must meet the following requirements: - be at least 18 years of age; - not have committed an act which is grounds for license denial, suspension, or revocation; - be a resident of the state or a resident of another state and meet the requirements for nonresident licensing; - satisfied minimum prelicensure education requirements; - paid the appropriate fees; - successfully passed the examination, or satisfied examination qualification requirements, for the line or lines of authority for which application is made; and - be competent, trustworthy, and of good moral character and good business reputation.
Producer Licensing Requirements
An insurance producer is a person who solicits, negotiates, effects, procures, delivers, renews, continues, or binds: - policies of insurance for risks residing, located, or to be performed in the state; - membership in prepayment plans; and - membership enrollment in health care plans. As of January 1, 2014, the term insurance producer includes public adjusters.
Lines of Authority
An insurance producer may receive qualification for a single license to include one or more of the following lines of authority: - life: coverage on human lives, including endowments and annuities, and may include accidental death or dismemberment and disability income; - accident and health: coverage for sickness, bodily injury, or accidental death and may include disability income; - variable life and variable annuity products: coverage provided under variable life insurance contracts and variable annuities; - property: coverage for direct or consequential loss or damage to property of every kind; - casualty: coverage against legal liability, including that for death, injury, or disability, or damage to real or personal property; - limited lines credit insurance; - crop hail; - title; - surplus lines; or - personal lines: property and casualty insurance sold to individuals and families for primarily noncommercial purposes.
Assumed Names
An insurance producer who uses an assumed name, including a trade or fictitious name, when conducting business must register the name with the Commissioner before using the assumed name.
Termination of Appointment
An insurer that terminates its business relationship with a producer must notify the Commissioner within 30 days after the effective date of the termination if the reason for the termination is one for which the Commissioner may deny, suspend, revoke, or terminate a license.
Reporting of Unauthorized Insurance
Anyone investigating or adjusting an insurance loss or claim is required to immediately report to the Commissioner discovery of an insurance policy or contract which has been entered into by an insurer not authorized to transact business in the state.
License Examination
Applicants for producer licensure must pass an examination for each line of authority sought. Candidates must pay a fee to the test administrator for administering the examination plus a license fee due the state.
Certificates of Authority
Both foreign and domestic insurers must obtain from the Commissioner a certificate of authority to transact insurance business in the state. A certificate of authority expires on June 30 of each year and must be renewed annually.
Surplus Lines [Secs. 10-2-408; 10-5-103, 111; Reg. 2-4-1]
Certain types of insurance that cannot be obtained from admitted insurers are treated as surplus lines and may be obtained from nonadmitted insurers, subject to the following conditions: - The insurance must be obtained through a licensed broker. - The full amount of insurance required must not be available from admitted insurers who are authorized to transact and are transacting that kind of insurance in Colorado. The broker or producer must search to find admitted insurers and must keep a written record documenting diligent search efforts for at least three years from the effective date of the coverage. - Insurance must not be placed with a nonadmitted insurer for the purpose of securing a lower premium rate than that which would be accepted by an admitted insurer unless the premium rate quoted by the admitted insurer is more than 10 percent higher than that quoted by the nonadmitted insurer.
Continuing Education [Sec. 10-2-301; Amended Reg. 1-2-4]
Every producer licensed in Colorado and not otherwise exempt must complete 24 credit hours of approved continuing education courses every two years before renewing a license.
Conduct of Examinations
Failure to cooperate with the Commissioner's examination can result in the suspension, revocation, denial, or nonrenewal of a license or authority. The Commissioner and examiners can issue subpoenas, administer oaths, and examine persons under oath.
When Fees May Be Charged
Fees may be charged only under the following circumstances: - When the client signs a disclosure statement in advance stating that the client is under no obligation to purchase any insurance product from the producer in exchange for receiving the services; and - where it is clear that no insurance product sale related to the services will take place.
Nonresident Producers (Continuing Education)
If a nonresident producer has satisfied the continuing education requirements of his or her home state, the producer will satisfy Colorado's requirements if the nonresident producer's home state similarly recognizes the satisfaction of Colorado's continuing education requirements as meeting the home state's requirements for Colorado producers who are nonresidents in that state.
Producers Working for Companies with Home Offices in Colorado
If a producer works for a company with a home office located in Colorado and the company provides an approved course of study for its producers, this will satisfy the continuing education requirement.
Termination of Producer Appointment for Cause
If an insurer terminates employment or a contract with a producer for cause (for example, for dishonesty, breach of fiduciary duty, or committing an illegal act), it must notify the Division within 30 days.
Validity of Insurance Contracts
If an unauthorized insurer operating without a certificate of authority fails to pay any claim or loss within the provisions of its contract, anyone who assisted directly or indirectly in the securing of the contract is also liable to the insured for the full amount of the claim or loss.
Unfair Methods of Competition, Unfair or Deceptive Acts or Practices
If the Commissioner believes that a person is engaging in an unfair method of competition or an unfair or deceptive act or practice or has violated the Colorado Insurance Code or a rule of the Commissioner, he or she may, after proper notice, hold a hearing on the matter.
License Suspension and Revocation [Secs. 10-2-401, 801, 803]
If the Commissioner decides not to renew or continue a license or denies an application for a license, he or she will notify the applicant or licensee why such action was taken and advise the applicant or licensee, in writing, of the reason for the denial or nonrenewal of the license. If the Commissioner revokes a producer's license or if a producer surrenders the license to avoid discipline, the producer cannot apply for another producer license for two years.
Commissions and Fees [Sec. 10-2-702; Reg. 1-2-9]
In Colorado, insurers and producers may not pay a commission or other valuable consideration for selling, soliciting, or negotiating insurance to anyone unless, at the time services were performed, that person was a duly licensed insurance producer in the state.
List of Contractually Authorized Producers
Insurance companies must maintain a current list of producers contractually authorized to accept applications on their behalf.
Continuation of Producer License
Insurance producer licenses are perpetual licenses subject to payment of a continuation fee by the last day of the producer's birth month during the second year after issuance and then by the last day of the producer's birth month every other year thereafter. Producers will be notified to continue their licenses 90 day before their renewal month.
Unauthorized Companies; Penalties
It is unlawful in Colorado for any person, company, or corporation to obtain, receive, or forward applications for insurance to any insurance company not legally authorized to do business in the state. The following are exempt from this rule: - reinsurance provided by an authorized insurer; - nonadmitted insurance, and - pre-need funeral contracts. A violation of this provision is a Class 1 misdemeanor punishable by up to six months' imprisonment, a $500 fine, or both; or a maximum of 18 months' imprisonment, a $5,000 fine, or both.
Nonresident Producers
Nonresidents may not be subject to license examination if their state has a reciprocal agreement with Colorado.
Change of Address
Producer licensees must inform the Commissioner in writing of any change of address within 30 days after the change. This includes an email address.
Report of Administrative and Criminal Prosecutions
Producers are responsible for reporting to the Commissioner any administrative action taken in another jurisdiction, or by another governmental agency. Such actions must be reported within 30 days after the final disposition of the matter.
Exemptions
Producers licensed to only write one or more of the following authorities are exempt from continuing education requirements: - travel ticket selling, - bail bonding, - title, - limited lines credit, and - crop hail.
Continuing Education Credits Earned in Excess of Required Minimum
Producers may accumulate no more than 12 continuing education hours over the required 24-hour minimum during the 120 days before the licensing continuation date. These excess credit hours may be applied to the next continuing education period.
Permitted Fees
Producers may charge fees for specific services that exceed the scope of those pertaining to acquiring and maintaining policies. These services include: - risk management services, - financial planning, - investment counseling, - qualified retirement plan design or administration, estate planning, - third party employee benefit plans, and - other services for which no commission is received from an insurance company.
Reinstatement Due to Failure to Continue License
Producers who do not renew their license by the expiration date will be required to reinstate their licenses at the normal cost. The producer may reinstate the license within one year from the expiration date of the license.
Exemptions from Producer Definition
Regularly salaried officers, directors, and employees of insurance companies and insurance producers are not considered producers and, therefore, do not have to be licensed.
Reinsurance Brokers
Reinsurance intermediary brokers must complete their required continuing education through professional seminars or curriculum within the reinsurance field.
Variable Products Line of Authority
Resident producers applying for, renewing, or continuing the Variable Life and Variable Annuity Products line of authority, in addition to holding the life authority, must provide evidence that they are currently registered with a Financial Industry Regulatory Authority (FINRA) member firm and have passed the tests to be so registered. Nonresident producers applying for, renewing, or continuing the Variable Life and Variable Annuity Producers line of authority must meet the requirements of their resident state and have a current registration with a FINRA member firm.
Investigation of Unfair Methods of Competition and Deceptive Practices
The Commissioner has the power to examine and investigate the affairs of every person engaged in the business of insurance in the state to determine whether the person has engaged in any unfair method of competition or in any unfair or deceptive act or practice prohibited by law.
Investigations
The Commissioner may investigate the business affairs and conduct of every person applying for or holding a producer license to determine whether a violation of the insurance laws or rules of the state has taken place or whether the person has engaged in unfair or deceptive acts or practices in any state. A person who violates Colorado's insurance laws or rules may also be subject to a civil penalty of up to $3,000 for every violation.
Unauthorized Entities [Secs. 10-3-903 to 904.5, 906, 908]
The Commissioner may issue an emergency cease and desist order when he or she believes that the alleged conduct - is fraudulent; - creates an immediate danger to the public safety; or - can reasonably be expected to cause significant, imminent, and irreparable public injury.
Records and Requests for Information
The Commissioner may request any of the following documentation from companies, agents or brokers within a specified time period: - operations and management documentation, including internal audits, anti-fraud plan and certificates of authority; - policyholder information, including policy transactions, correspondence and annual policy reports; - producer licensing records, including license(s) held, appointments and terminations; - marketing, sales and advertising materials; - claims policies and procedures including claims paid; and - underwriting policies and rating plans and rates.
Prohibited Fees
The following are activities for which producers cannot charge a fee from a client: - inspections; - quoting premiums; - issuing policies, certificates, and endorsements; correspondence, bookkeeping, and clerical work; - issuing proof of insurance cards and notices; and - taking loss information. Insurance producers also cannot charge fees for overhead expenses.
Nonresident Producers
The licensing requirements for a nonresident applicant with a valid license from his or her home state will be waived if the applicant's home state awards licenses to residents of Colorado on the same basis. -nonresident producer must maintain a license in good standing in the home state and file a current certification of his or her license status with the Commissioner. In addition, the nonresident must submit a proper request for licensure and pay the required fees.
Colorado Producer Licensing Model Act [Regulation 1-2-10]
This regulation sets forth the terms and conditions for licensing insurance producers and insurance agencies and establishes the fees required.
Responsible producer
a licensed producer who is an officer, partner, or director and who will be responsible for compliance with the laws and rules of Colorado;
Producer for each line of authority held by the agency
at least one individual who holds a valid insurance producer license for the line(s) of authority for which the agency is licensed
Employees
each employee acting as and licensed as an insurance producer with the agency.
All licensed officers, directors, partners, or owners
each person who, as an officer, director, partner, owner, or member, is acting as and is licensed as an insurance producer, as well as disclosing officers, partners, and directors, whether or not they are licensed a producers
Financial Statements
every year a financial statement showing the: amount of all premiums collected or contracted for during the previous year; amounts actually paid policyholders on losses and as returned premiums by property and casualty companies; amount of insurance reinsured in other companies, both authorized and not authorized, and the premiums paid; and amount of reinsurance accepted from admitted companies and the premiums received on residents and risks in the state. (Financial statements are due each year by March 1)
Cease and Desist Orders
he or she will give the person a copy of the findings and order the person to cease and desist from engaging in the act or practice. if the act or practice violates the Insurance Code or a rule or order of the Commissioner, he or she may impose one or more of the following sanctions: - a fine of up to $3,000 for each act or violation, not to exceed an aggregate penalty of $30,000; - a fine of up to $30,000 for each act or violation committed by an insurer, but not to exceed an aggregate penalty of $750,000 annually if the insurer knew, or should have known, he or she was committing an unfair method of competition or an unfair or deceptive act; - suspension or revocation of the person's license if the person knew, or should have known, he or she was committing an unfair method of competition or an unfair or deceptive act; or - if applicable, payment of a contractual claim to an insured or beneficiary if the act caused the failure to pay the claim.
Examinations
is a formal financial examination or market conduct examination, as well as an informal investigation, to determine compliance with the law.
Insurance Commissioner
is the head of Colorado's Division of Insurance. The Commissioner is appointed by the governor, subject to confirmation by the senate. It is the duty of the Commissioner to issue certificates of authority to insurance companies; require every domestic insurer to keep its books in such a way that its annual statements may be readily verified and that the company can be ascertained as solvent and having complied with provisions of the law; issue licenses to insurance producers; conduct investigations and examinations; supervise the business of insurance in the state; work toward informed choices of insurance needs and options; and consider whether rates are excessive, inadequate, or unfairly discriminatory.
Authority, Scope, and Scheduling of Examinations
the Commissioner considers the following: the results of financial statement analyses and ratios; changes in management or ownership; actuarial opinions; reports of independent certified public accountants; complaint analyses; underwriting and claims practices; pricing; policy form compliance; and other relevant criteria.
