State Regulation Of Insurance Part 2

Company Regulation: Unfair Claims Settlement Practices

*knowingly misrepresenting to insureds or third-party claimants the facts or policy provisions relevant to coverage, or providing deceptive or misleading information about such coverage; failing to promptly acknowledge communications about claims *failing to make a good faith effort to promptly and fairly settle claims for which the insured is clearly liable; *offering to settle claims for an amount less than the amount due on the basis that in order for the policyholder or claimant to obtain the full amount, *When an insurer has received a claim that it cannot contest on the basis of the supporting documentation, it must pay the claim within 40 business days of receiving the claim.

Producer Regulation: Representing an Unauthorized Insurer

A person who is not a surplus lines broker but transacts insurance on behalf of an insurer not licensed to do business in South Carolina commits a misdemeanor. *That person will be personally liable on all insurance policies he or she unlawfully sells on behalf of the unauthorized insurer. The person will be liable up to the limit of coverage in the policies.

Producer Regulation: Failure to Act as Fiduciary

A producer cannot represent an insurer, or act on behalf of an insurer, without being appointed by the insurer to act as its agent. It is illegal for a producer to obtain cash advances by making false statements. It is also illegal for a producer to refuse or fail to turn over or account for all money collected for an insurer. A producer who commits these acts is guilty of a misdemeanor. Upon conviction, the producer will be fined or imprisoned for up to two years.

Producer Regulation: Blank Forms

A producer cannot sign a blank application, contract, or insurance policy. A producer who is convicted of doing so will be fined up to $200 for each offense.

Company Regulation: Appointment

An insurer can appoint any number of producers it wants to transact insurance business on its behalf. The insurer appoints a producer by certifying that an applicant has been appointed to represent the insurer and that the insurer has investigated the producer and found him or her to be trustworthy and qualified. *The insurer must file a notice of appointment with the Director within 15 days of making the producer its agent or receiving the first insurance application from the producer. The insurer pays a fee for every appointment and for every appointment renewal.

Company Regulation: Policy Forms

An insurer cannot issue or sell an insurance policy or certificate unless it has been approved by the Director. *To be approved, a policy or certificate must not: contain provisions that are unfair, deceptive, ambiguous, misleading, or unfairly discriminatory or be solicited through deceptive or misleading advertising or communications.

Producer Regulation:Sharing Commissions

An insurer or producer cannot pay a commission, fee, or other consideration to a person for selling, soliciting, or negotiating an insurance contract in South Carolina if the person does not have a license to transact insurance. *Similarly, a person may not accept a commission, fee, or other consideration for selling, soliciting, or negotiating insurance in South Carolina if that person does not have a license to transact insurance.

Company Regulation: Captive Companies

By March 1 each year, a captive insurance company is required to report its financial condition to the Director, verified by two of the company's officers. As is the case with all insurers, the Director can examine the affairs of captive insurance companies at least once every five years, or more often if necessary. Examination documents and reports are confidential.

Producer Regulation: Records Maintenance

Producers must keep records of every insurance transaction for at least five years, with specific information about the insurance policies they deliver and renew and the persons insured. These records are open to inspection by the Director, who may request them at any time.

Company Regulation: Examination of Books and Records

The Director can examine the books and records of an insurer as often as necessary, but at least once every five years. The Director can also examine the books and records of an insurer seeking authority to do business in South Carolina. *The officers and employees of an insurer being examined must cooperate with the Director during the examination. Failure to cooperate with the Director's examination can result in the suspension or revocation of a producer's license or the insurer's certificate of authority. *The Department will notify the insurer of the examination findings and give it up to 30 days to respond to them. The Director will then order that the examination findings be filed, with or without corrections. If the insurer violated the law or a Department regulation, the Director can order the insurer to comply with the law or regulation.

Company Regulation: Solvency

The Director can suspend or revoke an insurer's certificate of authority if the insurer *is not financially solvent *has violated the law *poses a hazard to the public or its policyholders refuses to submit to examination by the Director or has not obeyed a lawful order of the Director. *The insurer is entitled to a hearing to determine whether the Director has grounds to suspend or revoke the insurer's license.

Company Regulation: Certificate of Authority

The Director issues certificates of authority to qualified insurers, which permits them to transact insurance business in the state. The certificate specifies the kinds of insurance that the insurer is authorized to transact in the state. * To qualify for a certificate of authority, an insurer must show the Director that it is financially able to fulfill its obligations to the state and its policyholders,

Company Regulation: Rates

The Director reviews the premium rates set by insurers and establishes standards and practices for insurers to follow when setting these rates.

Director's Powers and Duties

The head of the state's Insurance Department is the Director (sometimes also referred to as the Commissioner). The Director enforces the laws governing the insurance business in South Carolina. In carrying out his or her duties, the Director has the power to: *regulate the rates and services of every insurer as well as set reasonable standards and practices for insurers to follow when doing business in the state *enforce the insurance laws *issue regulations to administer the insurance laws *report criminal violations concerning the insurance business to the state Attorney General or other law enforcement officials *institute lawsuits necessary to carry out the Director's duties.

Company Regulation: Termination of Appointment

When an insurer terminates a producer's appointment, the insurer must notify the Department within 30 days of the termination. If the producer was terminated for cause (dishonesty, breach of trust or fiduciary duty, or commission of an illegal act), the Director may ask the insurer to give additional documentation related to the producer's termination. *Within 15 days after notifying the Director of the termination, the insurer must mail a notice of the termination to the producer at his or her last known address.