Chapter 8 Part 1
How does the OFR go about liquidating an insolvent insurance company?
Other carriers in the state will be asked to buy blocks of business.
What are four other powers of the DFS?(4)
Oversee the insurance industry based on the Insurance Code Organize and license insurance companies including establishing the initial financial requirements Guard against unauthorized insurance activities Regulate insurance company activities, policy forms, provisions, and rates
What are the types of licenses available?
Personal Lines Agent Adjuster Agency
What is the purpose of Agency Actions of the OFR?
to protect insurance consumers from unlawful or harmful business practices. It can bring about administrative actions and penalties when corrective action is required.
What happens if an agent fails to comply with the CE requirements?
will result in nonrenewal of the license. However, the department can grant an extension of time (up to 1 year) during which the requirements may be completed.
The State Legislature -
Makes and amends laws that comprise the Insurance Code
What are the four sections of the Market Investigations?
Property and Casualty Section Life and Health Section Investigations - Special Investigation Unit Market Analysis Section -
What is Public Law No. 15, 79th Congress of the United States,
declares that the business of insurance and every person engaged therein is subject to the laws of the several states
The Department of Financial Services Division
implements rules for enforcement of laws called "quasi-legislative or quasi-judicial power.
Reporting Administrative Actions
include actions relating to the: ◾Business of insurance. ◾Sale of securities. ◾Activities involving fraud, dishonesty, untrustworthiness, or breach of fiduciary duty. Any licensee must report any administrative action, including copies of the orders, reported by any governmental or regulatory agency in Florida or any other state or jurisdiction to the department.
Investigations - Special Investigation Unit
investigates allegations of unauthorized and illegal insurance activity and in-depth investigations of authorized insurers.
What does the Legislature declare it is doing by instituting Unauthorized Insurers Process Law
it exercises its power to protect its residents and to define what constitutes doing business in this state. It also exercises powers and privileges available to the state by virtue of Public Law No. 15, 79th Congress of the United States, .
What constitutes an insurance transaction?
"Transact" with respect to insurance includes any of the following, in addition to other applicable provisions of this code: Solicitation or inducement Preliminary negotiations Effectuation of a contract of insurance Transaction of matters subsequent to effectuation of insurance contract and arising out of it
Who does the Department of Financial Services Division work with to do its job?
(together with the Office of Insurance Regulation)
What penalties can the CFO of the DFS can impose for Failure to answer a subpoena or order?
- $1,000 fine
Communicating with the Department
A new residence address, principal business street address, mailing address, contact telephone numbers, including a business telephone number, or email address must be reported to the Department of Financial Services within 30 days.
Admitted (authorized) -
Admitted carriers are those that have been issued a license (certificate of authority) by conforming to Florida standards for transacting business.
What are the general duties and powers of the Department of Financial Services (DFS)
Agent and Adjuster Licensing and Investigations: - The DFS supervises methods of obtaining business, including agent licensing and control of unfair trade practices -The department may interrogate an applicant or agent
Application
An applicant must file a written application completed under oath and signed by the applicant. A third party may complete, sign, and submit the application on the applicant's behalf. If the applicant takes the licensing exam before submitting the application, an exam application must be submitted with the fees. Applications may be submitted online
What is the purpose of requiring an insurance license?
An applicant must obtain an insurance license in order to be familiar with the Florida insurance laws.
Continuing Education
Compliance with continuing education requirements must occur prior to the issuance, continuation, reinstatement, or renewal of any appointment. ◾New agents must take 24 hours of continuing education every 2 years (includes a 5-hour law and ethics courses pecific to the license held) ◾An agent licensed for 6 years or more must complete only 20 hours. However, the 20 hours must be in intermediate or advanced courses. ◾An agent who has been licensed for at least 25 years, a CLU or CPCU, has a B.S. in risk management or insurance with 18 or more semester hours in upper-level insurance courses, must complete 10 hours of CE every 2 years. ◾An agent who has both a license in life/health and property/casualty must complete half the CE hours in each line. ◾A personal lines agent must complete 1 hour of continuing education every 2 years on the subject of premium discounts available on property insurance policies based on various hurricane mitigation options and the means for obtaining the discounts. ◾A nonresident licensee must complete the required CE hours in the home state as long as the home state is reciprocal with Florida.
What 8 areas does the Commissioner of the Office of Insurance Regulation (OIR) Regulate
Licensing Rates Policy forms Market conduct Claims Certificates of Authority Protecting the public through oversight of insurance company solvency. Maintaining expertise related to life and health, property and casualty, specialty lines, and other insurance entities.
Certificate of Authority -
No person can act as an insurer and no insurer or its agents, attorneys, subscribers, or representatives can directly or indirectly transact insurance in Florida unless authorized by a Certificate of Authority, issued to the insurer by the Office of Insurance Regulation. No county, city, municipality, district, school district, or political subdivision can require any further authorization, permit or registration of any insurer, agent, or representative regulated under this code for conducting lawful insurance transactions granted by the state under this code.
Office of Insurance Regulation
Policy Approval Authority Prior approval Rates Forms Market Conduct Examinations
Director of the Office of Financial Regulation (OFR)
Regulating the following: - Banks, credit unions, savings association, international bank agencies - Financial service companies - Securities industry Includes the Bureau of Financial Investigations:
What are the state agencies that regulate insurance in the state of Florida?
The State Legislature The Department of Financial Services Division The Office of Insurance Regulation . The State Judicial System, which:
What is a limitation that applies to Public and All Lines adjusters?
The same individual cannot concurrently be licensed as a public and all-lines adjuster, nor can an all-lines adjuster may be appointed concurrently as an independent and a company employee adjuster
When is a Certificate of Authority not required?
When an insurer formerly authorized in this state needs to conduct investigations, settlements or litigations concerning claims on policies written in this state. For transactions pursuant to surplus lines coverages lawfully written by this state's insurance code. For authorized reinsurance transactions. For continuation and servicing of insurance or annuity policies/contracts remaining in force on residents of this state when the insurer is no longer transacting new insurance business in Florida. For investment by a foreign insurer in Florida real estate if the foreign insurer complies with the Florida laws relating to foreign business corporations. For life insurance policies or annuity contracts issued by an alien insurer which cover only persons who, at the time of issuance, are not residents of the United States and are not illegal nonresidents. However, the alien insurer must meet specific capital requirements.
What is the OFR's outreach program?
Within existing resources, the OFR develops and implements an outreach program for the purpose of encouraging the entry of additional insurers into the Florida market.
Nonadmitted (unauthorized) Carriers -
are not state licensed, so they are not regulated by Florida. They are not permitted to sell through the mail, and the Florida Guaranty Association does not extend protection for Floridians who buy from these companies.
Under what premise do som nonadmitted carriers claiming exemption from Florida State Law
as a result of ERISA regulations. Florida regulators take the position that ERISA, in most situations, does not allow nonadmitted companies relief from Florida law.
How can an appointee terminate an appointment?
by giving written or electronic notice to the appointing entity or to the department. The department will immediately terminate the appointment and notify the appointing entity of the termination. The termination is subject to the appointee's contract rights, if any.
What does the Market Investigations division do?
division of the Office of Insurance Regulation that conducts examinations and investigations of insurers (as often as it believes necessary) to ensure compliance with the statutes and rules. All accounts, records, documents, files, etc., must be freely available to the examiners. The costs of an examinations will be paid by the person or entity examined.
Prior approval
exists when insurers are not allowed to implement a rate or rate change until it has been approved by the insurance department. Florida requires the insurer submit the filing 30 days prior to use. The Office has 30 days to approve or disapprove or request a change to the filing. - If no decision is made within that time period the rate or form is approved.
Rates
for all insurance classes must not be excessive, inadequate, or unfairly discriminatory. Insurers must include rates, rating schedules, rating manuals, premium credits or discount schedules, and surcharge schedules with noted changes.
The Office of Insurance Regulation,
headed by the Commissioner of the Office of Insurance Regulation.
Unauthorized Insurers Process Law -
subjects certain insurers, their representatives or those aiding such insurers to the jurisdiction of Florida courts in lawsuits by or on behalf of insureds or beneficiaries under insurance contracts. This law also provides a process for residents of this state to assert their legal rights on policies issued or delivered by insurers not authorized to do business in this state.
Who does the office of Financial Services Commission appoint?(2)
the Commissioner of the Office of Insurance Regulation (OIR) Director of the Office of Financial Regulation (OFR)
If an insurance agent is working out of their home, do they have to obtain an agency license?
the home doesn't have to be licensed as an agency as long as it is not advertised to be a business location.
Division of Consumer Services
within the DFS is responsible for assisting consumers, answering general insurance and financial questions from its toll-free helpline, regional service centers, and website. The division provides consumer education and outreach assistance Receive and compile inquiries and complaints the DFS deems necessary to assist consumers Provide direct assistance and advocacy for consumers who request such services Report alleged violations of law by persons licensed by the DFS, OIR, or OFR to the appropriate regulator
When does an insurance company not need to give days notice when terminating an appointment?(2)
◾When termination is based upon a ground which would subject the appointee to suspension or revocation of his or her license. ◾The appointing contract allows for less days advance notice.
Bureau of Financial Investigations:
- Functions as a criminal justice agency - Conducts investigations to protect consumers from financial entities that violate state laws and rules
When restricting carrier investments to avoid high risk transactions, what are approved investments?
- Government paper - First mortgages in secured real estate - Policy loans - Small amounts of blue chip stock (allowed by the leeway or basket provision) - Investment quality corporate bonds ("junk bonds" are not allowed). Note: The two most common types of life insurance investments are bonds and mortgages which are long-term investments.
What are four things you should know about the CFO?
- Is elected and is part of Governor's Cabinet - Acts as head of Dept. of Financial Services - Is a member of the Financial Services Commission - Oversees Divisions of Insurance Agents, Insurance Fraud, Consumer Services and Office of Consumer Advocate
Premium Accountability
An agent, as a fiduciary, accepts premiums, return premiums, or other funds on behalf of the insurer and offers advice about financial security. As a fiduciary on behalf of the insurer, the payment of premiums to the agent by the insured is the same as giving the money directly to the insurer. The agent's fiduciary responsibility is to turn that money over to the insurer immediately.
Separate Account Requirements
An agent/agency must keep funds belonging to each insurer in a separate account so it can be properly audited. An agent must not commingle the insurer's premium with personal funds, or otherwise use it for personal purposes.
Insurance Contract
An agreement enforceable by law in which the insurer agrees to pay a certain amount of money upon the death of the insured, and the policyholder agrees to pay the premium.
Insurer -
Every person engaged as indemnitor, surety, or contractor in the business of entering into contracts of insurance or of annuity.
What Forms Require approval from the Office of Insurance Regulation?
Insurance policy or annuity contract form Printed application Group policy certificates Printed rider, endorsement, renewal certificate
When can an insurance company terminate an agent's appointment?
Subject to an appointee's contract rights, an appointing entity may terminate its appointment of any appointee at any time. The appointing entity must give the agent at least 60 days advance written notice of its intention to terminate the appointment.
Appointments
Subject to renewal or continuation by the appointing entity, the appointment of an agent will continue in effect until the person's license is revoked or otherwise terminated, unless written notice of earlier termination of the appointment is filed with the department. If a licensee is not reappointed by another company within 48 months, the license will lapse and a new examination must be taken for re-licensure.
What entity investigate Insurance Fraud?
The Bureau of Financial Investigations, which functions as a criminal justice agency within DFS, may conduct investigations within or outside Florida as the bureau deems necessary to aid in the enforcement of a suspected violation. If, during an investigation, the office has reason to believe any criminal law has or may have been violated, the office will refer any records to show such violation to state or federal law enforcement or prosecutorial agencies and provide investigative assistance to those agencies as required.
What entity handles Unclaimed Property?
The Department of Commerce Division of Unclaimed Funds handles unclaimed property.
How long must an agent keep a record of contracts that they transact?
The contract must be retained by the agent for 3 years.
Suspension, Termination, Revocation of License
The department may, in its discretion, deny an application for, suspend, revoke, or refuse to renew or continue the license or appointment of any applicant or agent. It may suspend or revoke a person's eligibility to hold a license or appointment if it finds that any one or more of the following applicable grounds exist: ◾Any cause for which issuance of the license or appointment could have been refused had it then existed and been known to the department. ◾Violation of any provision of this code or of any other law applicable to the business of insurance in the course of dealing under the license or appointment. ◾Violation of any lawful order or rule of the department, commission, or office. ◾Failure or refusal, upon demand, to pay over to any insurer he/she represents or has represented any money coming into his/her hands belonging to the insurer. ◾Violation of the provision against twisting, as defined in Unfair Trade Practices below. ◾In the conduct of business under the license or appointment, engaging in unfair methods of competition or in unfair or deceptive acts or practices, or having otherwise been a source of injury or loss to the public ◾Willful over-insurance of any property or health insurance risk. ◾Having been found guilty of or having pleaded guilty or nolo contendere (no contest) to a felony or a crime punishable by imprisonment of 1 year or more under federal or state laws, or under the law of any other country, without regard to whether a judgment of conviction has been entered by the court having jurisdiction of such cases. ◾If a life agent, violation of the code of ethics. ◾Cheating on an examination required for licensure or violating test center or examination procedures. Communication of test center and examination procedures must be clearly established and documented. ◾Failure to inform the department in writing within 30 days after pleading guilty or nolo contendere (no contest) to, or being convicted or found guilty of, any felony or a crime punishable by imprisonment of 1 year or more under the laws of the United States or of any state, or under the law of any other country without regard to whether a judgment of conviction has been entered by the court having jurisdiction of the case. ◾Knowingly aiding, assisting, procuring, advising, or abetting any person in the violation of a provision of the insurance code or any order or rule of the department, commission, or office. ◾Failure to comply with any civil, criminal, or administrative action taken by the child support enforcement program to determine paternity or to establish, modify, enforce, or collect support.
What is some of the information that the applicant must provide on the application?
The method for completing the prelicensing education must be stated on the application. The application will ask if the applicant has ever been refused an insurance license, voluntarily surrendered, or suspended or revoked in any other state. Details must be provided if any insurer or MGA claims the applicants is indebted to him.
How does an agent place business with another carrier if they have excess or rejected business?
This is done using "a single case agreement" that falls under the state's "exchange of business" law.
What are the licensing requirements for an agent?
Trustworthy and competent. A natural person at least 18 years of age. A United States citizen or legal alien who possesses work authorization from the United States Bureau of Citizenship and Immigration Services and a bona fide resident of this state. The applicant's place of business will be located in Florida and be identifiable and accessible by the public, and the applicant must be actively engaged in the business of insurance.
How many appointments can one agent hold?
Unless specifically prohibited, the same individual may at any one time hold any and all categories of appointments for which he/she has qualified and been licensed under this code. An agent must have a separate appointment as to each insurer by whom he/she is appointed as an agent.
What penalties can the CFO of the DFS can impose for Violation of cease and desist order ?
Up to $50,000 fine
What are the responsibilities of a Receiver?
the collection of assets or debts due to the company evaluating all known claims against the company. The goal of the division as the liquidator is to maximize the value of the assets of the liquidated company and distribute the assets equitably.
What are the OFR's duties regarding Investigation?
to determine violations of the Code, obtain information to administer the Code, and secure information useful in the lawful administration of any provision. The cost of investigations are borne by the state.
What must an agent do regarding Recordkeeping?
◾Keep, and make available to the department, books, records, and accounts as evidence of compliance with the insurance code. These records must be kept for at least 5 years after payment. ◾Maintain in his/her office, or have readily available by electronic means, records of policies in order to obtain all necessary information, including daily reports, applications, change endorsements, or documents signed or initialed by the insured concerning policies.
What penalties can the CFO of the DFS can impose for Fraudulent conduct in committing twisting or churning
1st degree misdemeanor (imprisonment up to one year) - Non-willful violation - $5,000 fine per violation - Willful violation - $75,000 fine per violation
What penalties can the CFO of the DFS can impose for Willfully submit fraudulent signatures -
3rd degree felony (imprisonment up to 5 years) - Non-willful violation - $5,000 fine per violation - Willful violation - $75,000 fine per violation
What is the penalty for any person who acts as an insurer, transacts insurance, or otherwise engages in insurance activities in this state without a Certificate of Authority?
3rd degree felony, punishable by fines up to $5,000 and up to 5 years imprisonment, only if the total premiums collected in the unauthorized transaction(s) are less than $20,000. 2nd degree felony, up to 15 years imprisonment, if the total premiums collected are between $20,000 and $100,000. 1st degree felony, a term not exceeding 30 years, if the total premiums collected are over $100,000.
Agency -
A business location where an individual, firm, partnership, corporation, association, or other entity, but not an employee, that engages or employs individuals to engage in any activity that may be performed only by a licensed insurance agent.
What knowledge, experience, and instruction is required to get a license?
A correspondence course in insurance, including 3 hours of ethics, within 4 years preceding the application date, at approved institutions of higher learning, and have at least 6 months of responsible insurance duties as a substantially full-time employee in all lines of property and casualty insurance. At least 1 year of responsible insurance duties as a substantially full-time employee in all lines of property and casualty insurance, but without the education requirement listed above. At least 1 year of responsible insurance duties as a licensed and appointed customer representative or limited customer representative in commercial or personal lines of property and casualty insurance and 40 hours of classroom courses approved by the department covering property, casualty, surety, health, and marine insurance. At least 1 year of responsible insurance duties as a licensed and appointed service representative in commercial or personal lines of property and casualty insurance, and 80 hours of classroom courses approved by the department covering property, casualty, surety, health, and marine insurance. Or teaching classroom courses in insurance (3 hours of which must be on ethics) at a school, college, or college extension division, approved by the department.
Personal Lines Agent -
A general lines agent who is limited to transacting business related to property and casualty insurance sold to individuals and families for noncommercial purposes.
How can a customer service representative receive an appointment?
A person holding a Florida general lines agent license A general lines insurance agency A surplus lines agent if the surplus lines agent obtained surplus lines licensure based upon licensure as a general lines. If the surplus lines agent obtained such licensure upon grounds of being a managing general agent, that surplus lines agent may not appoint a customer representative.
Commissions and Compensation/Charges for Extra Services
Agents are paid by commissions that are a percentage of the first year premium, and thereafter, a percentage of subsequent renewal premiums. A written contract between the agent and the party paying the negotiated fee must be signed by both parties and include the promise that any commissions paid by the insurer will refund the amount paid by the party within 30 days.
Who can an agent share commissions with?
An agent may not share a commission or any valuable consideration with anyone who does not have a license and appointment for the type of insurance sold. Commissions may be shared with a person who is licensed and appointed in the same line of business.
May an agent use another carrier for excess or rejected business?
An agent may use another carrier for excess or rejected business, which is defined as applications that are rejected or amounts requested that exceed what the "home company" will issue or cases that will not be issue at a standard rate.
When can an agent write excess or rejected business?
An agent may write excess or rejected business (business that was first rejected by the agent's company or accepted only on a substandard basis) with another company. One of the typical reasons for business to be rejected is because the risk limits are in excess of what the agent's company will accept. A licensed and appointed health insurance agent may broker rejected business to another agent appointed by the issuing insurer. The brokerage must be desired by both parties and in the best interest of the insured.
The State Judicial System
Decides conflicts between companies and policyholders Enforces the code by administering criminal penalties Decides if new laws are constitutional
What are the general duties and powers of the Office of Financial Regulation?
Enforcement of the Insurance Code and carrying out those duties. Collect, propose, publish or disseminate information regarding duties. Protecting the public against unauthorized behavior. All carriers must be audited at least once every 3 years. It can be more frequent if warranted. Monitoring marketing activity to avoid unfair trade practices such as twisting, unsupported replacement and illegal rebating. Protecting the public by trying to limit insolvencies via tracking reserves, restricting investments to prudent vehicles and confirm accuracy of financial statements. Taking over insolvent companies and attempting to restore financial integrity. If not successful, these companies will be liquidated. Subjecting all people and companies to audit. Records of business associated with premiums must be kept for 3 years. Restricting carrier investments to avoid high-risk transactions. Accounting procedures must conform to state guidelines. Calculate reserves that carriers are required to maintain. Order hearings to discover unfair competition, unethical marketing practices, nonconformity to license requirements and if the public trust has been violated.
What must every form submitted by an insurance company include regarding prior approval?
Every filing must include the effective date and character and extent of the changes.
Background Check
Applicants are required to submit a set of fingerprints and pay the fee to the department in order to investigate the applicant's qualifications. The fingerprints must be taken by a law enforcement agency or the exam center An applicant's social security number also must be provided on the application in order to verify child support enforcement.
Examination
Applicants must take and pass a written examination. License examinations may not be taken more than 5 times in a 1 year period. A lapsed or suspended licensee may have to retake the exam and pay the fees before the license can be reinstated.
Life and Health Section
Conduct exams and investigate business practices of authorized life and health insurers.
Property and Casualty Section
Conduct exams and investigate business practices of authorized property and casualty insurers.
Who makes up the Financial Services Commision (4 people)?
Governor CFO Attorney General Commissioner of Agriculture.
How Long does an appointing entity have to report terminating an appointment to the Insurance Department
Howhin 30 days after terminating an appointment. The written notice must include the reason(s) for the termination. Upon termination of the appointment of an appointee, whether by failure to renew or continue the appointment, the appointing entity must: ◾File with the department the information required under the regulation. ◾Subject to the exceptions provided under the regulation, continue the outstanding contracts transacted by an agent until the expiration date or anniversary date when the policy is a continuous policy with no expiration date.
Market Analysis Section
Identifies trends and analyzes patterns of insurer's data related to industry or marketplace issues.
Reporting Agent Crimes -
If an agent is declared guilty of any crime punishable by imprisonment for 1 year or more, it must be reported to the Insurance Department within 30 days. Where the crime occurred is irrelevant
What penalties can the CFO of the DFS can impose for Willful violation of the Insurance Code -
Misdemeanor of the 2nd degree (imprisonment up to 60 days)
What criteria must be met for an agent to receive an appointment?
Must be appointed with a carrier in order to earn a commission or deliver a policy. May present a proposal to a company that has not appointed him/her, if the sale is in the business for which he/she is licensed. If the policy is sold, the agent must obtain an appointment which then allows the carrier to issue the policy and pay a commission. May broker business, which means that it is placed through another agent who operates as a broker. Both broker and agent must be licensed in the line of insurance being sold.
What are three requirements n agency must fulfill?
Must complete an application for an agency license, which must be renewed every 3 years. Must have a licensed and appointed full-time agent in charge of each agency location. That fails to file an application for licensure may be levied an administrative penalty of up to $10,000.
What are the regulatory concerns with unlicensed (nonadmitted/unauthorized) companies transacting insurance business in Florida:
Potential for criminal activity Adverse economic impact on authorized insurers Potential for unpaid claims due to dishonesty and lack of sound actuarial decisions State or federal guaranty funds do not pay unpaid claims Future insurability issues for insureds Lack of oversight by state or federal regulatory agencies
Who is responsible for receivership of Insurance companies?
The Division of Rehabilitation and Liquidation of the DFS monitors the financial condition of insurers and rehabilitates or liquidates insurers as needed. It has the responsibility of performing the duties as receiver of any insurer placed into receivership in Florida. The division plans, coordinates, and directs the conservation, rehabilitation, and liquidation of insolvent insurance companies, unlicensed insurance companies, and unlicensed insurance entities.
Policy Approval Authority
The Office of Insurance Regulation (OIR) supervises insurers via approval of new rates and forms, which must be approved by the OIR.
What must happen by law regarding unclaimed property?
Written notice must be sent to apparent owner of unclaimed property, which refers to abandoned and remains unclaimed for 3-5 years. All unclaimed property must be turned over to the state. There are filing and reporting requirements if property remains unclaimed.
Adjuster - A
qualified individual may be licensed as a: Public adjuster - A person hired for a fee on behalf of an insured or third-party claimant to negotiate and settle a claim. All-lines adjuster - A person who is self-employed or employed by an insurer or an independent adjusting firm and determines the amount of a claim and settles the claim.
What are the penalties for an agent doing business with Non admitted carriers?
subject to a 3rd degree felony, personal liability for unpaid claims and may have their license suspended or revoked. Companies acting without a certificate of authority are subject to a 1st degree felony, liable for unpaid claims and may lose all licenses.
Who is responsible for the administration of state inusrance law?
the Chief Financial Officer (CFO) Financial Services Commission Director of the Office of Insurance Regulation.
