Chapter 26

Financial services commission composed of

-Governor -CFO -Attorney General -Commissioner of Agriculture

OIR responsibility

-Licensing of insurance companies -Establishing initial financial requirements of insurance companies -Policing against unauthorized insurance activities -Ongoing regulation of insurance company activities, including policy forms and provisions and rates -Assisting in rehabilitating or liquidating insolvent insurer (although DFS will actually be appointed as liquidator/rehabilitator)

Department may do the following during investigation:

-administer oaths -examine witnesses -receive evidence -subpoena witnesses -compel attendance and testimony -require by subpoena the production of books, records, filed, documents, etc, that has evidentiary relevance to inquiry -anyone who willfully obstructs investigation is guilty of misdemeanor

How often must the OIR examine domestic insurers?

-at least once every 5 years -if domestic company has had certificate for less than 3 years, OIR will examine company at least once every year

Offices overseen by CFO

-division of accounting & auditing (Bureau of Unclaimed Property) -division of insurance agent and agency services -division of insurance fraud -division of consumer services -Officer of the Insurance Consumer Advocate

General duties and powers of DFS

-enforce insurance code -powers & authority may be expressed or implied in insurance code -conduct investigations for code violations -department and OIR may each employ actuaries. Actuaries must be members of society of actuaries or the casualty actuarial society

CFO regulates

-insurance agents (licensing) -insurance fraud -insurance consumer protection

allowed rebating

-must be available to all insured in actuarial class -must follow rebating schedule filed by agent with insurer -must be uniformly applied to all insureds who purchase same policy -all insureds who buy same policy for same amount of insurance get same rebate % -not offered when insurer prohibits its agents from rebating -rebating schedule must be prominently displayed in public view at agent's place of business -must maintain copy of rebate schedules for most recent 5 years and their effective dates

unlawful rebate

-paying, as inducement to purchase the contract, any unlawful rebate of premiums payable, any advantage in the dividends or benefits; or -giving, as inducement to purchase the contract, any stocks or other securities of any insurance company or anything of value whatsoever not specified in the insurance contract

guaranty fund does not apply

-portion of variable life insurance or annuity not guaranteed by an insurer -portion of any policy under which the risk is borne by the policyholder -fraternal benefit societies -health maintenance insurance -dental service plan insurance -pharmaceutical service plan ins -ambulance service assoc ins -pre-need funeral or service contract ins -prepaid health clinic ins -port of policy/contract that exceeds association limits -a policy or contract providing Medicare Part C or Part D benefits

OFR purpose

-provide for safe conduct of financial institutions -maintain public confidence in financial institutions -preserve the financial institution system in FL -protect interests of depositors and creditors of financial institutions

ethics

-understanding and observing laws governing insurance -presenting accurately and completely every fact necessary to client's decision -being fair in relations with colleagues and competitors -always placing policyholder's interests first

Chief Financial Officer

(CFO) is an independently elected state office. - a member of the Financial Services Commission (helps administer laws) - head of the Department of Financial Services

Office of Financial Regulation

(OFR) responsible for all activities of the Financial Services Commission relating to regulation of banks, credit unions, other financial institutions, finance companies, and securities industry. -the head OFR is the Commissioner of the OFR

Office of Insurance Regulation

(OIR) responsible for all activities pertaining to regulation of insurers and other risk-bearing entities.

Controlled Business

- Pertains to taking out life insurance or annuity contracts covering the agent or family members, employees, stockholders. Agent can write controlled business provided the premiums of other policies sold to public during any 12 month period are great than or equal to the amount of controlled business written. (can not have more controlled than non-controlled business)

Penalty for pocketing premium

-$300 or less = 1st deg misd -more than $300, less than $20k = 3rd deg felony -$20k or more, less than $100k = 2nd deg felony -$100k or more = 1st deg felony

OIR policy approval authority

-All policy documents given by an insurer to a consumer must be approved by the OIR. -All forms must be filed at least 30 days in advance of delivery -If the filed form has not been approved or disapproved by OIR within 30 days, it is considered approved -Health insurance ratings are also closely monitored. Insurer must file copies of all rating forms with OIR

Fidicuary

a person in a position of special trust and confidence

sliding

agent puts additional coverages (ancillary coverages) on a policy that brought an extra cost to policyowner, but agent was not being honest about doing so. **think sliding in extra stuff** -telling applicant that a specific ancillary coverage or product is required by law, when it is not -telling applicant a specific ancillary coverage or product is included in the policy applied for without an additional charge, when there is one -charging applicant for a specific ancillary coverage or product in addition to the cost of the insurance coverage applied for, without informed consent

advertising file

all insurer must maintain a complete file that is available for inspection by OIR containing: -all printed, published, prepared advertisement of individual policies -typical advertisements of its blanket and group policies in FL -record for each advertisement indicating the manner and extent of distribution and form number of advertised policy -all advertisements must be available in file for period of four years or until next examination of insurer

agent record retention

every agent transacting any insurance policy must maintain or have readily accessible for a period of at least 5 years after expiration, records of all transactions for the department

OIR examination

examination which may include examination of the affairs, transactions, accounts, and records relating directly or indirectly to the insured and of the assets of the insurer's managing general agents and controlling or controlled person.

Permanent revocation

if a license as an agent, customer rep, or eligibility to hold such license has been revoked from the solicitation or sale of an insurance product to a person 65 years of age or older, department may not grant or issue any insurance license to individual

penalties

unfair methods of competition fines: -2,500 but not greater than 10,000 for non-willful violations -20,000 but not greater than 100,000 for willful violations twisting and churning = 1st deg misd admin fines not greater than 5,000 for non-willful and 75,000 for each willful fraudulent signatures = 3rd deg felony fines not greater than 5,000 for each non-willful and 75,000 for each willful

churning

using the values in an existing life insurance policy or annuity to purchase another insurance policy or annuity contract with that same insurer for purpose of earning additional premiums and commissions (internal replacement)

misrepresentation

when an agent tries to make himself, company, or products look better than what they actually are for the purpose of making a sale.

Cease and desist order

A stop order issued when the OFR has reason to believe a financial institution is engaging or has engaged in: -unsafe or unsound practice -violation of any law relating to operation -violation of any rule of the commission -violation of any order of the office -breach of any written agreement with the office -willful failure to provide information or documents to the office or any appropriate federal agency upon written request

Financial Services Commission

Supervises the OIR & OFR, and helps administer state insurance laws. Composed of: -Governor -CFO -Attorney General -Commissioner of agriculture

unfair claims practices

-using an application or document that was altered without knowledge or consent of insured during claim settlement -not adopting standards for the proper investigation of claims -not acting promptly on claims -failing to affirm or deny full or partial coverage of claims upon written request of insured within 30 days after proof-of-loss statements -failing to provide reasonable explanation in writing for denial of claim or offer of compromise settlement

How long does a company have to respond to the department once a consumer complaint has been filed?

20 days

insurance guaranty fund accounts

3 guaranty fund accounts: -health insurance account -life insurance account -annuity account

If agent pleas guilty or nolo contendere to a felony, must notify the department in writing within?

30 days

How long can you go without an appointment before losing license?

48 months (4 years)

twisting

A form of misrepresentation in which an agent persuades an insured/owner to cancel, lapse, or switch policies, even when it's to the insured's disadvantage. (external replacement)

Who oversees the insurance industry?

Commissioner of the Office of Insurance Regulation and the CFO from Department of Financial Services.

Investigation

DFS and OIR may investigate all different lines of agents and representatives, records, documents and transactions that are applicable to an investigation into the violation of insurance code.

designation

Department does NOT endorse any professional designation -any combination of words, any acronym or job title that indicates or implies that a licensee has special knowledge or training in advising or servicing consumers beyond training required for license held -

Agent charged with felony

Department may temporarily suspend the agent's license until the agent is convicted or adjudication is withheld

OIR is an office within?

Department of Financial Services; headed by the Chief Financial Officer (CFO)

Administration (insurance law)

Enforcement of insurance laws within the state. Administered (enforced) by CFO, Commissioner of OIR, and Financial Services Commission

How often must an agent be reappointed?

Every 24 months (2 years)

denial suspension or revocation of license

License may be suspended, revoked, application denied, or refusal to renew if: -violation of insurance code/laws -failure to pay to insurer any money belonging to insurer (pocketing premiums) -engaging in twisting -unfair or deceptive acts/practices -willfully over-insuring any property or health insurance risk -found guilty or nolo contendere to a felony -violation of code of ethics -cheating on exam -failure to notify department in writing within 30 days of pleading guilty or nolo contendere to a felony -knowingly aiding or abetting any person in the violation of the insurance code, order, rule of Department, Commission, or OIR -failure to comply with child support enforcement program

OFR investigation

OFR may conduct investigations, within or outside this state, to determine whether a person has violated or is about to violate any provision of the Florida codes or rules. During this investigation, OFR has power to: -administer oaths and affirmations -take testimony and depositions -issue subpoenas requiring person to appear before the office and bring any documents deemed necessary for inspection

What state office regulates insurance?

Officer of Insurance Regulation (OIR) ; which is run by the Commissioner of the Officer of Insurance Regulation

Bureau of Financial Investigations

Part of the Office of Financial Regulations (OFR); it investigates suspected wrongdoing inside and outside of Florida

Certificate of authority

Required certificate which gives insurance companies permission to do insurance business here in the state. -engaging in insurance activities w/o this certificate is a 3rd degree felony

certificate of authority

Required certificate which gives insurance companies permission to do insurance business here in the state. -engaging in insurance activities w/o this certificate is a 3rd degree felony

agent

a general lines agent, life, health, or title agent, but does not include customer or service representative

Excess business

When an agent writes business with another company for which that agent is not otherwise appointed, if the agents own company rejects the applicant or if the amount is in excess of that which his or her own company will write.

Insurance agency

a business location where someone is engaging in any activity that by law may be performed only by a licensed insurance agent

commission for examining

allows a licensed health agent to receive commissions for providing advice, counsel, or recommendations regarding any health insurance or health benefit plans. Must be based upon a written contract between agent and party being charged. Must clearly define amount and inform person "any commission received by the agent from the insurer will be rebated to that party within 30 days of receipt by agent from insurer. A copy must be kept for 3 years after service performed

injunction

an injunction issued by the circuit court and demands that a person do a certain thing or refrain from doing a certain thing

fraud

an intentionally deceptive act, or any who intentionally submits false material facts to an insurer

certification

any designation that indicates or implies that any individual or organization meets certain established criteria beyond the criteria required for license held

fraudulent signature

any one who willfully submits fraudulent signatures on an application or other policy-related document commits a 3rd deg felony

How long should an agent or agency keep records pertaining to a premium payment?

at least three years after payment

boycott, coercion, and intimidation

boycott, coercion, and intimidation result in, or tend to result in, the unreasonable restraint of, or monopoly in, the business of insurance

advertisement

communication in: -newspaper, magazine, other publication -pamphlet, letter, poster -radio or TV station does NOT include: -material solely for training and education of employees/agents -internal communications with insurer's organization -individual communications of a personal nature with current policyholders regarding existing coverage -correspondence between prospective group or blanket policyholder and insurer in course of negotiating a group or blanket contract

Insolvent insurer

insurer against which an order of liquidation with a finding of insolvency has been entered by a court of competent jurisdiction (no coming back)

Impaired insurer

insurer deemed by the department to be potentially unable to fulfill its contractual obligations and not an insolvent insurer. (impaired insurers may be repaired)

Authority of CFO

investigate insurance companies and producers, issue cease and desist orders, impose penalties, and seek a court injunction

defamation

knowingly spreading any kind of oral or written statement which is false or maliciously critical of or derogatory toward any person and which is calculated intentionally to injure person

false advertising

knowingly spreading statements before the public: in a newspaper or publication, form of notice, pamphlet or poster, over radio or tv, in any other way an advertisement, announcement, or statement containing any assertion, representation or statement with respect to the business of insurance that is untrue, deceptive, or misleading

Unlicensed entities

no person may directly or indirectly act as agent for, or otherwise represent or aid on behalf of another, any insurer not authorized to transact insurance in FL

Division of consumer services

offers a variety of information and resources to educate consumers regarding numerous insurance and financial topics. Function regulated by this division: -inquiries and complaints from consumers -any licensed person must respond to division within 20 days after receipt of request for info regarding complaint -report violation of rules and laws to appropriate division or office -prepare and disseminate info appropriate to consumer -provide direct assistance to consumers who request advocacy

authorized and unauthorized companies

or admitted/non-admitted companies; companies that are either authorized (admitted) or unauthorized (non-admitted) to conduct insurance business in FL

cease and desist order penalty

penalty for violation of cease and desist order may result in maximum fine of 50,000 and suspension or revocation of certificate of authority or license

unfair discrimination

people who represent the same risk to insurer must be rated the same. knowingly allowing any unfair discrimination between individuals of essentially the same health hazards, actuarial class, life expectancy, etc in life or health insurance or annuity rates, dividends, benefits, or any other terms of the contract. **no insurer in the state may refuse to issue policy or charge higher premium on life or health insurance solely because person has sickle-cell trait

Department of rehabilitation and liquidation

plans, coordinates, and directs the receivership processes on behalf of the Department

Specific duties of OIR

policy approval, marketing, premium regulation, assessing insurer solvency, issuing insurer certificates, etc

insurance guaranty fund

protects policyowners and consumers in the event the insurer becomes insolvent. All insurance companies doing business in FL must be members

guaranty fund to residence of other states

residents of other states are only covered by guaranty fund if: -insurers that issued policy or contract are domiciled in FL -other state has associations similar to the FL association -such person are not eligible for coverage by such associations

Insurance transaction

solicitation, negotiations towards the sale, or effectuation of a contract

public adjuster

someone other than a licensed attorney who represents the public, meaning the individual insured (third-party claimant). Someone who helps the individual insured in negotiating the settlement of claims covered by insurance contract

all-lines adjuster

someone who represents the insurer during the settlement of claims and whose job it is to help determine the amount of the claim payable under the contract. The all-lines adjuster may be self-employed, employed by an insurer, or an independent adjusting firm.

unaffiliated agent

still a licensed agent, but is an agent who does not (and may not) have a current affiliation with an insurer or agency. This person is self-appointed. Acts as an independent consultant in the business of analyzing policies, providing advice or counseling, or making specific recommendations or comparison of products for a fee. -fee must be established in writing and signed by both parties -may not receive commission from any insurance company whose products is being compared/recommended -may continue to receive residual commissions from sales made before becoming unaffiliated as long as those are disclosed to the client when discussing policies form that entity

hearing of misconduct

the Department and OIR may conduct a hearing whenever they have reason to believe any person has engaged in unfair method of competition or deceptive acts or practice

Division of investigative and forensic services

this division encompasses all law enforcement and forensic components within DFS Investigates: -insurance fraud -worker's comp fraud -fire, arson, explosives invest and analysis theft/misuse of state funds

purpose of licensing

to help protect the general public by requiring a minimum level of insurance knowledge and competence of the licensee before conducting business in the area of insurance