Chapter 1: Insurance Regulations

Resident agent/producer requirements

• good character: honest, trustworthy • residency compliant(Live in state) •Application Evaluated (License Application) •Pass the State Exam •Eighteen or Older

The commission refuses a license application, suspends or revokes a license due to violations

• proposing to deny the license application-10 days notice •The license is denied-five year waiting period to reapply for a producer license

The SCC/Insurance Commissioner• General empowerments

• regulates all companies in Virginia that make insurance transactions • issues rules and regulations • certificate of authority issued to insurers • enforces and administers insurance laws

Personal lines/property and casualty license renewal

• resident licensed agents must renew their license biannually (every 2 years) •Renewal application must be submitted with a nonrefundable processing fee • renewal day is based on agents month and year of birth (example. An agent born in an even numbered year renews by the end of the birth month of even numbered year)

Solicitation prior to appointment

An agent does not need to be appointed to solicit for an insurer, but must be appointed within 30 days of making their first sale for an insurer

Reinstatement

For agents whose license terminates due to failure to renew and/or complete CE: • May submit a renewal application within 12 months from the renewal date • Pay double the renewal processing fee

Non-resident agent/producer

Getting a nonresident license to service in other states; the producer must submit an application and be in good standing in their home state. It is not required to take an examination for the nonresident state

Federal Regulations

Making of any false material statement or report; the punishment for an offense is a fine as established of imprisonment for not more than 10 years

The insurer

Must file a notice of appointment with the commission 30 days from the agents first application or first policy sold

One license in a biennial period (every 2 years)

Must have 16 credit hours

The commission

Must notify the insurer if the appointment is valid or invalid; five days

Credits permissible from an insurer/insurance agency generated course

No more than 75% of credits

Rebating

Pay, give or allow any inducement to encourage a customer to purchase a policy (ex. Agent splitting their commission with a customer, anything of value)

Consultant

Provides insurance advice to a customer for a fee

Boycott

Refusing to use someone's business to force them to purchase a policy

Agent/Producer

Required to be licensed to sell solicit or negotiate insurance

Show cause order/due process

States the offense alleged gives the date of any hearings to be held and requires the offending party to explain why they should not be punished • The hearing must be held at least within 10 days of being served

Violations that may require restitution

Stealing, embezzling, or improperly holding onto money could result in imprisonment

Fair Credit Reporting Act

• The credit report must not include adverse information over seven years • bankruptcy on the credit report is not to be included after 10 years

Misrepresentation

A lie or leaving facts out about the policy

Fiduciary

A person in a position of trust who cares for her or ask on behalf of another; responsible for the money of insureds

If an agent has more than one type of license

24 credits/at least eight credits in each type or class of license

The SCC examines/audits a minimum of once every

5 years

Business Entity

Acting as an insurance producer requires they hold the proper insurance license •A sole proprietorship is not a business entity

Insurer's Obligations

Advise the consumer who was investigated that credit, insurance or employment was denied because of an unfavorable report • any in accuracies must be corrected by the credit bureau

Continuing Education

Agent/licensee files proof of continuing education compliance to the Virginia continuing education board and administrators • The Virginia continuing education board must approve all continuing education courses

Record Retention

All licensed agents are required to retain all insurance transaction records for three previous calendar years • must be made available for inspection to the commission and submitted promptly upon request within normal business hours

Agents contract with insurer versus agents appointment with insurer

An agent under contract with the insurer express authority outlining what they are authorized to do as their agent. The insured would not be held responsible if the agent did something outside their expressed power • once appointed the agent also has implied authority

Requirement to cease solicitation solicitation

An agent whose appointment has been terminated by the insured shall be prohibited from selling or soliciting applications/policies on behalf of that insurer

Referrals

Anyone may be compensated for referring a customer to a licensed agent or insurer provided there is no discussion about the policy a one time nominal fix dollar amount is paid in compensation does not require a purchase of an insurance policy

The SCC- Examination

Authority examines/investigates any licensed person or business in their state with no advance notice (all insurance records can be examined)

National Association of insurance commissioners (NAIC)

Committed to state regulation of insurance and standardization of laws and regulations among the states

Twisting

Convincing a policyholder to purchase a policy that is to their detriment through misrepresentation or doing incomplete comparisons

License

Document issued which authorizes a person to act as an insurance agent producer for the line(s) of authority on their license

The P & C insurance guaranty association

In case an insurance company becomes bankrupt it's a safety net for consumers. • protects insureds from insurers insolvency

Penalties for agent without valid appointments

Intentional/willful violator-$5000 each violation-no maximum Unintentional (aggregate) violator-$1000 each violation - maximum of $10,000

Unfair Discrimination

It is illegal to treat people differently for reasons that do not affect the risk; underwriting and reading is done based on the actuarial principles not unfair discrimination

Failure to complete continuing education

License will not be eligible for renewal unless CE requirements are satisfied. Agent will need to complete CE and request reinstatement within 12 months from renewal date

Felony convictions

Licensed agents must report: Any felony conviction is due to the commission within 30 days of the final disposition

Resident agent/producer

Licensed and maintains a principal place of residence or business in Virginia

cease and desist order

The Bureau of insurance may issue to stop the illegal activity and not repeat that action and states the violation in the order

Agent name/address change

The commission and all appointed ensures must be notified within 30 days when a name change (ex. Marriage or divorce), use of a fictitious name, or address change

Commingling

The illegal act of mixing or mingling personal and insurance funds in the same account

Assumed/fictitious name

The person must file a certificate in the clerks office of the circuit court/jurisdiction in which the fictitious name is to be used

How many credits are required for ethics

Three credit hours

Defamation

To knowingly or unknowingly publish, circulate, or encourage any oral or written statement that is false, malicious, or derogatory

false advertising

To knowingly publish, circulate, advertise or announce to the public any statement that contains any untrue misleading or deceptive statements

Unfair trade(marketing) practices

Unfair methods of competition or unfair and deceptive trade practices

coercion

Using threats to force the customer into purchasing the policy

Exemptions to the licensing rule (not required to hold a license)

• someone assisting in the completion of an application • Insurance administrative and clerical • HR • A salaried full-time employee who councils or advises his employer relative to the insurance interests of the employer or of the subsidiaries or business affiliates of the employer provided that the employee does not sell solicit or negotiate insurance or receive direct or indirect commission

Appointment procedures

•Appointments are issued by the insurer so agents can solicit for the company • The agent is violating insurance law and subject to penalties if soliciting or selling insurance after the appointment is invalid or terminated

Renewal

•Consultants renew their license every year and must complete continuing education

Fiduciary Responsibilities

•Depositing all premiums involved while dealing with insurance • The agents can withdraw commission • forward earned premium to the insurer

consultant

•Hired by a customer to offer advice for a fee •A consultant must enter into a written contract before providing any advice

Licensing Requirements

•Must have an insurance license to act as an agent/producer • receive or share commission with other agents/producers holding the same license •Bureau must give a 10 day notice to take away license

Act as an insurance agent/producer to:

•Sell-exchanging money for an insurance policy • solicit-attempting to sell or urge people to apply for an insurance policy • negotiate-discussing the benefits conditions in terms of a policy

License requirements

•Submit a consultant license application to the SCC •License application must be submitted within 183 days after passing the state exam