Chapter 5. Georgia Laws, Rules, and Regulations Common to All Lines

What acts are considered as transacting insurance in Georgia?

- solicitation and inducement - preliminary insurance negotiations - effectuation (execution) of insurance contracts - transactions of matters arising out of the effectuation of insurance contracts

After notice, hearing, and a cease and desist order of the Commissioner, anyone who violates the order may be subject to the following penalties:

1. A fine of up to $10,000 for each violation 2. Suspension or revocation of such a person's license 3. Any other appropriate relief

Stock companies

Companies owned by the stockholders whose investments provide the capital necessary to establish and operate the insurance company, and who share in any profits or losses. Usually issue nonparticipating policies.

Foreign insurer

insurance company that is incorporated in another state, the District of Columbia, or a territorial possession (American Samoa, Guam, Northern Mariana Islands, Puerto Rico, and US Virgin Islands)

Surplus line policy

policy placed with an insurer that is not licensed (or 'admitted') in this state, but is nonetheless eligible to provide insurance on property or liability insurance protection to citizens of this state through specially licensed agents or brokers known as surplus lines brokers

Nonparticipating policies

policyowners do not share in profits or losses, but taxable dividends are paid to stockholders. Not guaranteed as they are based on company profit.

Insurance fraud (in Georgia)

If a person does any of these things knowingly or willingly: - makes or helps make false or fraudulent statement or representation of any material fact or thing in: written statement, filing of a claim, application for insurance policy, etc - receives money for purpose of purchasing insurance and converts it to his or her own benefit - issues fake or counterfeit policies, certificates of insurance, insurance binders - lies and says a policyholder died so they can get their money and benefits

When do certificates of authority expire?

Midnight on June 30th of the year after issuance

How and when must an insurer apply for a renewal of their certificate of authority?

Must file a copy of their annual statement for the previous year on March 1st

Mutual companies

Insurance organizations that have no capital stock, but are owned by the policyowners. Usually issue participating policies.

Limited subagent license maintenance

required to complete 5 hours of continuing education every 2 years, ethics requirement is waived

Disclosure

revealed info to help someone make an intelligent and educated decision

Reciprocity

the exchange of resources, goods, and services among people of relatively equal status; meant to create and reinforce social ties

Fiduciary responsibility

the legal responsibility to act solely in the best interest of another party. "Fiduciary" means trust, and a person with a fiduciary duty has a legal obligation to maintain that trust

Domicile

the location where an insurer is incorporated, not necessarily where the insurer conducts business

Promulgate

to make public, to put into action (ex: laws or court decrees)

Cease and desist

to stop or discontinue

Insolvent

unable to meet financial obligations

License maintenance

- expire every 2 years, on last day of the licensee's (license holder) birth month. - 24 continuing education credit hours every 2 years, including 3 credit hours in ethics education

What are the penalties of insurance fraud?

- imprisoned for a term of at least 2 years, no more than 10 years - fine of up to $10,000 - both of aforementioned things

License revocation, suspension, denial, or refusal to renew reasons

- violating insurance provisions - being found untrustworthy or incompetent (lol) - misrepresenting material facts in any form filed with Commissioner - failing exam - cheating on exam - you get the point melissa Cannot file new application for 5 years following aforementioned actions.

What are the different limited lines insurance licenses available in Georgia?

1. Individual credit insurance licenses (ex: credit life, credit casualty, credit unemployment) 2. Limited lines licenses issued to rental companies (like renting vehicles) 3. Limited lines licenses for portable electronics (coverage for repair, replacement of said electronics due to loss, theft, broken, etc) 4. Insurance for personal property in self-storage facilities 5. Travel insurance

What are the 6 classes of insurance in Georgia?

1. Life, accident, and sickness 2. Property, marine, and transportation 3. Casualty 4. Surety (an entity or an individual who assumes the duty of paying the debt in the event that a debtor fails or is not able to make the payments) 5. Title 6. Health Maintenance Organizations

What are examples of rebates? (Illegal, do not do)

1. Rebates of premiums payable on the policy 2. Special favors or services 3. Advantages in the dividends or other benefits 4. Stocks, bonds, securities, and their dividends or profits

If the Commissioner suspects that a violation has been committed, and issues a statement of charges and holds a hearing, within how many days will the hearing be held?

30 days. Notice must be given at least 15 days in advance.

How long does the Commissioner have to approve an application for a certificate of authority

90 days

How does one qualify for a certificate of authority?

An insurer must have: 1. Minimum of $1.5 million in capital stock or surplus 2. After authorization, must maintain surplus equal to the larger portion of $1.5 million or 50% of paid-in capital stock 3. Must deposit trust with the state in $100,000 for one class of insurance, and $25,000 for each additional class of insurance

Participating policies

Insurance that pays dividends to policyholders.

Unfair claims settlement practices

Insurers delaying or denying claims without a good reason.

How are dividends generated?

When premiums and earnings combined exceed the actual costs of providing coverage, creating a surplus. They are not guaranteed.

In Georgia, if you transact insurance without a license for that line of authority, what happens?

You will be guilty of a misdemeanor, and punished by a fine of up to $1,000, or by confinement in jail or institution for up to 12 months, or both. If it goes over $1,000, it is considered a felony.

Statute

a formal written law enacted by legislature; insurance statutes can be found in the state Insurance Code

Temporary license

a license to operate for up to 6 months, renewable from time to time for periods of 3 months for a maximum of 15 months from the date of first issue

Counselor

a person trained to counsel, advise, or render opinions as to the benefits under any insurance contract issued.

Adjuster license

acts on behalf of the insurer or insured to investigate, settle, or adjust claims arising under insurance contracts

Inducement

an offer that attempts to influence the other party

Moral turpitude

conduct that is contrary to community standards of justice, honesty or good morals

Dividend

considered a return of a portion of the premiums paid for an insurance policy, nontaxable.

Agent responsibilities

duty of loyalty, duty of obedience, duty of care. Must notify Commissioner of any changes to personal information within 30 days of the change.

Nonresident producer

individual who is domiciled (lives in) and licensed as a resident producer in another state.

Resident surplus lines broker

licensed to place insurance not available in the domestic state through insurers licensed in states other than where the broker operates

Examination of Records

The Commissioner can examine anyone in the business of insurance in the state at any time, and will review insurance companies for financial stability at least once every 5 years. If Commissioner thinks the records are inadequate, the person will be given 60 days to correct them.

Controlled business

any coverage written on a producer's own life, health or property, and/or that of the producer's immediate family or business associates. Licensee is not allowed to collect commissions on controlled business above the state-specified limit. No more than 25% of the agent's volume of insurance per calendar year can be issued on controlled business.

Insurance Agent

any individual who sells, solicits, or negotiates insurance. Also means an individual insurance producer.

Rebating (illegal, do not do)

any inducement (influence) offered to the insured in the sale of insurance products that is not specified in the policy. Both the offer and acceptance of a rebate are ILLEGAL.

What are the exceptions to who can transact insurance of any one kind or combination?

Reciprocal and Lloyd's insurers cannot transact life insurance, title insurers cannot transact any other kind of insurance but title

Commissioner of Insurance

head of State Department of Insurance, carries out and enforces provisions of the Insurance Code. Is elected for 4 years. If Commissioner cannot serve, Chief Deputy Commissioner steps in. Must have a $15,000 bond approved by Commissioner.

Domestic insurer

insurance company that is incorporated in this state.

Alien insurer

insurance company that is incorporated outside of the US

Authorized insurer

insurer who has received a Certificate of Authority from the department of insurance to transact insurance in this state (Georgia)

Home office

insurer's headquarters, principal place of business

Commission

payment to the agent by the insurance company for placing insurance, usually a percentage of policy premium