General WI Insurance Laws
What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act?
$2500 An individual who willfully violates this Act enough to constitute a general pattern or business practice will be subject to a penalty of up to $2500.
What is the maximum annual billing for an insurer
1% of net premiums earned All domestic insurers subject to this rule will be billed an amount equivalent to the insurer's share of the estimated cost of conducting the examination during that year. This amount is determined by a formula related to premiums written in the state. The maximum annual billing for any insurer cannot exceed 1% of net premiums earned.
Insurance regulations in this state require prompt initiation and completion of claims investigations, and delivery of necessary claims forms and assistance to the insured and claimants. What constitutes prompt action?
10 days According to the WI Insurance Code, "prompt or promptly" means within 10 consecutive days of receipt of a communication concerning a claim.
An agent offers a client free tickets to a sporting event in exchange for the purchase of an insurance policy. What is the agent guilty of?
Rebating When producers give or promise anything of value that is not specified in the policy, they are guilty of rebating.
The Federal Fair Credit Reporting Act
Regulates consumer reports. The Federal Fair Credit Reporting Act regulates consumer reports, also known as consumer investigative reports, or credit reports.
The insurer decided to cancel an insurance policy prior to its expiration due to nonpayment of premium. When can cancellation take place?
10 days after the notice was delivered to the policyholder Any midterm cancellation based on permissible sounds may only be effective if a written notice was given to the policyholder at least 10 days prior to cancellation.
Any licensed person whose activities affect interstate commerce and who knowingly makes false material statements related to the business of insurance may be imprisoned for up to
10 years Anyone engaged I noted business of insurance whose activities affect interstate commerce, and who knowingly makes false material statements may be fined, imprisoned for up to 10 years or both. If the activity jeopardized the security of the accompanied insurer, the punishment can be up to 15 years.
If reasonably possible, a notice of proof of loss claim must be provided to the insurer within what period of time after the time required by the policy?
12 months A notice of proof of loss claim must be provided as soon as reasonably possible to the insurer and within 1 year after the time required by the policy.
An insurer terminates an agent's appointment. Within how many days of termination must the intermediary be notified?
15 When the appointment of an individual agent is terminated, the insurer must notify the intermediary in writing, prior to or within 15 days of filing the termination notice.
An agent who has had formal disciplinary action taken against them by a state regulatory agency must notify the commissioner of this within
30 days Agents must also notify the Commissioner with 30 days of any felony or misdemeanor conviction (other than motor vehicle or fish and game violations) or any formal disciplinary action taken by any state regulatory agency.
In this state, insurers must pay a claim within how many days of receiving proof of loss?
30 days Unless otherwise provided by law, every insurer must promptly pay every insurance claims. A claim is considered overdue if not paid within 30 days after the insurer received full or partial written notice. If the insurer an not provide reasonable proof that the claim is not their responsibility, payment is not required.
If a consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply?
5 days Consumers must be advised that they have a right to request additional information concerning investigative consumer reports, and the insurer or reporting agency has 5 days to provide the consumer with the additional information.
According to the rule of readability of insurance policies in this state, what is a required minimum score on the Flesch reading ease test for Medicare supplement policies?
50 Minimum standards for policy readability approval is a minimum score of 40 on the Flesch (a formula used to determine the ease of reading) reading ease test or equivalent. The minimum score for Medicare supplement policies is 50.
An insurer decides to renew a life policy but at a higher premium rate, starting on the renewal date. How many days in advance must the insured be notified?
60 days The insurer may offer to renew policy other than a personal lines property and casualty policy on less favorable terms or at higher premiums, only if the insurer notifies the policyholder at least 60 days prior to the renewal date, the terms and premiums take effect on the renewal date and within 60 days prior to the renewal date, the terms and premiums take effect 60 days after the renewal date.
An insurance policy is considered a "new policy" if it has been in effect for what maximum time period?
60 days A new insurance policy is one that has been in effect for less than 60 days since the issue.
The XYZ Insurance Company markets standard accident and health policy as a Medicare supplement policy. the company is guilty of
Misrepresentation Misrepresentation is saying a policy is something it is not.
Under the Fair Credit Reporting Act (FCRA), individuals rejected for insurance to information contained in a consumer report
Must be informed of the source of the report Under the Fair Credit Reporting Act, if an insurance policy is declined or modified because of information contained in a consumer report, consumer must be advised and provided with the same name and address of the reporting agency.
An insurance agent's responsibilities include all father following EXCEPT a) Represent the client b) Perform faithfully c) Represent the insurer d) Perform professionally
Represent the client An agent's license authorizes the licensee to represent the insurer, not the client.
Insurance producers must ensure that contracts they recommend are in the best interest of the insured. This is called
Suitability Insurance producers must adhere to the concept of suitability by ensuring that, to the best of their belief, the purchase, sale or exchange of a policy is in the best interest of the insured.
An agent who has had formal disciplinary action taken against them by a state regulatory must notify the Commissioner of this within
30 days
Which of the following persons is NOT required to complete CE?
A limited lines intermediary with 40 years of continuous licensure Agents who hold ONLY a limited line insurance license are exempt from CE, including credit insurance, legal expense, managing general agent, title insurance, any resident agent that has completed the original prelicensing requirement (not additional lines), and a nonresident agent who furnishes an original letter of certification not more than 90 days old, which provides evidence of compliance of CE requirements.
All of the following would be considered rebating EXCEPT a) An agent offers tickets to a baseball game as an inducement to buy insurance. b) An agent misrepresents policy benefits to convince a policy owner to replace policies c) An agent offers the use of his lake house to a client as an inducement to buy an insurance policy from him d) An agent offers to share his commission with a policyholder
An agent misrepresents policy benefits to convict a policy owner to replace policies Rebating occurs when an insured is offered something of value in order to induce the sake of an insurance product. Both the offer and acceptance of a rebate are illegal.
Who is considered a nonresident agent ?
An agent who resides and is licensed in another state , but who is authorized to transact insurance in this state
If an insurance company wishes to order a consumer report on an applicant to assist in the underwriting process, and if a notice of insurance information practices has been provided, the report may contain all of the following information EXCEPT the applicant's a) Habits b) Prior Insurance c) Ancestry d) Credit history
Ancestry
If an insurer holds a Certificate of Authority , it is known as what type of insurer ?
Authorized or admitted
If an insurer meets the state's financial requirements and is approved to transact business in the state , it is considered what type of insurer ?
Authorized or admitted
In WI, producers are permitted to share or split commissions, providing that
Both are properly licensed for the line of insurance For producers to receive commissions from the sale of insurance, they must be properly licensed for that line of insurance.
If the Commissioner / Superintendent finds a licensee engaging in an unfair method of competition or an unfair practice , what order will be issued ?
Cease and desist order
A state - issued document empowering an insurance company to become an admitted insurer is called what ?
Certificate of Authority
What document is required for an insurance company to transact insurance ?
Certificate of Authority
If an insurer develops a new policy form, which authority must approve it?
Commissioner Unless specifically exempt under the statutes, no policy form may be used in WI unless it has been filed with and approved by the commissioner.
What are producers required to do in order to renew their license ?
Complete continuing education hours and pay a renewal fee
Which of the following would be considered an illegal inducement to purchase insurance?
Confirming future dividends in a life insurance proposal A participating life insurance policy may pay a portion of its net earnings to a policyholder, but dividends cannot be greater.
Which of the following includes information regarding a person's credit, character, reputation, and habits?
Consumer report Consumer reports include written and/or oral information regarding a consumer's credit, character, reputation, and habits collected by a reporting agency from employment records, credit reports, and other public sources.
Who is an insurnace agent?
Correctly ? A person authorized to sell , solicit and negotiate insurance contracts
If a producer makes maliciously critical statements about another insurer , what is this illegal practice called ?
Defamation
Two individuals who are in the same risk and age class are charged different rates for their insurance policies due to an insignificant factor . What is this called ?
Discrimination
According to the Fair Credit Reporting Act, all of the following would be considered negative information about a consumer EXCEPT a) Failure to pay off a loan b) Disputes regarding consumer report information c) Tax delinquencies d) Late payments
Disputes regarding consumer report information As defined by the Act, negative information includes information regarding a customer's delinquencies, late payments, insolvency or any other form of default. Customer disputes are not considered negative information, and, in fact, must be included in consumer reports.
All of the following could be considered rebates if offered to an insured if noted sale of insurance EXCEPT a) An offer to share in commissions generated by the sale b) Dividends from a mutual insurer c) An offer of employment d) Stocks, securities, or bonds
Dividends from a mutual insurer. Dividends paid to policyholders of a mutual insurer are not considered to be a rebate because the policy specifies that hey might be paid.
Insurers are classified according to their domicile . What are the three types of insurers ?
Domestic , foreign , and alien
When the Commissioner examines an insurer, who pays the examination costs?
Examinees The reasonable costs of examinations must be paid by the examinees.
Which of the following are the authorities that an agent can hold?
Express and implied
An intermediary's license remains in effect for how long?
Indefinitely An intermediary's license remains in effect until is revoked, suspended, or limited by the commissioner or when it is voluntarily surrendered by the agent.
In general , who can be excluded from producer licensing and examination requirements ?
Insurance company officers , directors , or any other employees who do not transact insurance and who do not receive commissions for their services ( usually , their responsibilities include administrative , executive or clerical ) .
On its advertisement , a company claims that it has funds in its possession that are , in fact , not available for the payment of losses or claims . What is the company guilty of ?
Misrepresentation
What illegal act does a producer commit when the producer represents a policy in a more favorable light than the policy really is ?
Misrepresentation
An agent who includes a statement or omits a statement which, when taken in context of the whole presentation, may tend to mislead or deceive the persons addressed has committed
Misrepresentation Making false or misleading statements with the intent to defraud another is misrepresentation.
Under which of the following would the Commissioner grant a requested rehearing?
New evidence is discovered. After an aggrieved person requests a re-hearing, the Commissioner may grant a re-hearing only if there was a material error of law or fact, or if new evidence is discovered.
When does an agent's license expire?
On the last day of the month of the agent's birth every other year (every 2 years). Licenses will expire on the last day of the month of the agent's birth every other year.
Who may share in the commission from the sale of an insurance policy ?
Only producers properly licensed for the type of insurance transaction
Which of the following is NOT correct regarding false statements by a person engaged in the business of insurance? a) Only written statements can be considered fraud b) Omissions (left out) of material fact on insurance application are fraud c) False statements about financial condition of an insurer are unlawful d) Statements made with the intent to deceive are unlawful
Only written statements can be considered fraud According to Title 18, Sections 1033 & 1034 of the US code, any oral or written statements by any person engaged in the business of insurance that are false or any omissions of material fact are considered unlawful insurance fraud.
Who owns stock companies ?
Stockholders
In comparison to consumer reports, which of the following describes a unique characteristic of investigative consumer reports?
The customer's associates, friends, and neighbors provide the report's data. Both consumer reports and investigative consumer reports provide additional information from an outside source about a customer's character and reputation, and both types of reports are used under the Fair Credit Reporting Act. The main difference is that the information for investigative consumer reports is obtained through an investigation and interviews with associates, friends and neighbors of the consumer.
Knowledge and actions of an agent are deemed to be of
The insurer
An agent makes a sales pitch that contains blatant lies about the insurer and its competitions. Who will ultimately be held legally responsible for this?
The insurer Every insurer is bound by any act of its agent performed in this state that is within the agent's apparent authority. In other words, the insurer is liable for the acts of its agents.
Who is responsible for the costs associated with the examination of insurers ?
The insurer who is being examined
If an insurance premium is paid by the policy owner to the agent, and the agent fails to remit that premium to the insurer, which of the following statements is true?
The policy will not lapse since payment to the agent is the same as payment to the insurer. Sine the agent is a representative of the insurer, payment to the agent represents payment to the company. After a hearing, the agent's license could be revoked for engaging.
To whom may a certificate of authority be issued ?
To an insurer authorized to transact business in this state
Which of the following is statement made in an insurance application by the insured that is the absolute truth?
Warranty A "warranty" is a statement made in an insurance application by the insured that is the absolute truth. The validity of the contract parties agreeing that the policy will not be binding unless the statement is literally true.
When would a misrepresentation on an insurance application be considered fraud ?
When it is intentional and material
When is controlled business legal ?
When the commissions from controlled business do not exceed the aggregate commissions on all the other business specific limits may vary from state to state )
When can the Commissioner or Director examine insurers ?
Whenever deemed necessary , but at least once every few years ( please check your state regulations for specific time requirement )
Any person who violates an insurance statute or rule of WI can be fined up to
$10,000 Any person who violates an insurance statute or rule of WI can be fined up to $10K or imprisoned for up to 3 years and 6 months, or both. These penalties apply unless a specific penalty is provided elsewhere in the statutes.
A resident agent must pay a biennial regulation fee of
$35 Each licensed individual agent must pay a biennial (every 2 years) regulation fee of $35 if a resident and $70 if a nonresident.
An intermediary holding a WI insurance license in any major lien of insurance must complete how many credit hours of continuing education every 2 years?
24
Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report
Must be informed of the source of the report. Under the Fair Credit Reporting Act, if an insurance policy is declined or modified because of information contained in a consumer report, the consumer must be advised and provided with the name and address of the reporting agency.
Who must be notified of a producer's change of address ?
The Department of Insurance ( Commissioner / Director / Superintendent )
Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information?
The Fair Credit Reporting Act
An applicant is denied insurance because of information found on a consumer report. Which of the following requires that the insurance company the applicant with the same name and address of the customer consumer reporting company?
The Fair Credit Reporting Act The Fair Credit Reporting Act governs that information can be collected and how the information can be used.
When an insurer is given an order of liquidation, which of the following will protect the insured's unpaid claims?
The Wisconsin Insurance Security Fund The WI Insurance Security Fund was created to provide insureds with protection against an insurer's liquidation. The Fund's money is generated by assessments against all insurers licensed to do business in WI, with limited exceptions. The Fund is administered by a board of directors that includes the Attorney General, the State Treasurer, and the Commissioner.
What type of licensee represents the insurance company ?
The agent
What is the purpose of a cease and desist order ?
To prevent a producer or insurer from further violating laws for transacting insurance
Which type of misrepresentation persuades an insured , to their detriment , to cancel , lapse or switch policies from one to another ?
Twisting
The rule relating to insurance policy readability applies to which of the following?
All insurance polices issued in this state The rule relating to the readability of insurance policies went into effect in 1980 and applies to consumer insurance policies issued or delivered in WI.
Carl's application for a life policy was rejected because of information disclosed in an inspection report. Carl reviewed the consumer reporting agency's file and found they had incorrect information concerning his personal life. Carl can legally require the reporting agency to
Reinvestigate An applicant must be allowed to examine the information of their file. If. inaccurate, the agency may be required to reinvestigate.
Policies issued in this state must be presented in a meaningful sequence, be appropriately captioned, must provide definitions where appropriate, and must be printed in specified type. All these requirements refer to the rule of
Readability The rule relating to the readability of insurance policies went into effect in 1980 and applies to consumer insurance policies issued or delivered in WI.
An agent offers a client free tickets to a sporting event in exchange for the purchase of an insurance policy . What is the agent guilty of ?
Rebating
What are the most common penalties for violations of insurance statutes ?
A cease and desist order , a fine , and license suspension or revocation
An agent is acting ethically in all the of following situations EXCEPT a) working within the conditions of his/her contract b) representing the insurer, not the insured c) keeping customers' best interests in mind d) always representing the insured
Always representing the insured. An agent will always be deemed to represent the insurer, not the insured. If an agent is working within the conditions of the contract, the insurance company is fully responsible for his/her actions. However, when making a sale the agent should keep the customers' best interest in mind.
Which of the following terms describes a situation in which an agent and policyholder act together to defraud the insurer?
Collusion "Collusion" is when an agent and policyholder or insured act together to deceive or defraud the insurer. The sections on specific knowledge do not apply in this case nor if the policyholder or insured knew that the agent was acting beyond the scope of their authority.
Which of the following authorities decides whether a person's license should be revoked?
Commissioner After a hearing, the Commissioner may revoke, suspend or limit in whole or in part the license of any intermediary, if the licensee is found unqualified, not of good character or has repeatedly or knowingly violated insurance statutes or regulations.
How long are oral contracts valid in WI?
30 days Binders and oral contracts are valid in WI for up to 30 days.
Every producer must maintain a place of business in this state
Accessible to the public. The place of business must be where the licensee principally conducts transactions under the license.
Which of the following changes does NOT need to be reported to the Commissioner within 30 days?
Each commission paid to a licensee who has held a license less than 1 year. Commissions paid to a new licensee do not need to be reported to the Commissioner within 30 days, but major changes in a business or an intermediary's resident/nonresident information should be quickly communicated to the Commissioner.
All of the following are purposes of insurance EXCEPT to a) Protect the best interests of the public b) Limit the adverse effects of competition on the cost of insurance c) Regulate insurance marketing practices d) Earn commissions
Earn commissions The purpose of insurance is to protect the public and to limit the high cost due to market competition.
The requirement that agents must account for and promptly remit all insurance funds collected is known as what type of agent responsibility ?
Fiduciary
After the original hearing and a final order is issued, an aggrieved person may request a re-hearing within
20 days An aggrieved person may request a re-hearing within 20 days after the original hearing and a final order is issued. This petition does not suspend or delay the effective date of the order unless the petition is granted or the order is superseded, modified, or set aside.
Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained?
3 days Investigative consumer reports cannot be made unless the consumer is advised in writing about the report within 3 days of the date the report was requested.
A claim is considered overdue if NOT paid within how many days after the insurer receives written notice?
30 days Unless other provided by law, every insurer must promptly pay every insurance claim. A claim is pondered overdue if not paid within 30 days after the insurer received full or partial written notice. If the insurer can provide reasonable proof that the claim is not their responsibility, payment is not required.
What type of insurer is formed under the laws of another state ?
Foreign
A banker is already to close on a customer's loan. The bank is prepared to offer the loan but only if the customer purchases an insurance policy from the bank in the amount of the loan. This is an example of
Coercion This is an example of the illegal practice of coercion.
Insurers must report or list all appointments and all terminations of appointments to what authority?
Commissioner Each insurer must report or list all appointments and all terminations of appointments to the Commissioner.
In any case where there is a controversy or dispute between the insurance company and the insured, the soliciting agent is the agent of the
Company An agent's license authorizes them to represent an insurance company, not the insured.
An insurance company assures its new policyholders that their premium costs will not increase for a period of at least five years. However, due to increasing financial strain, they plan to raise premium costs for all insureds by 10% over the next two years. What term best describes this act?
Fraud According to the Title 18, Sections 1033&1034 of the US code, any oral or written statements by any person engaged in the business of insurance that are false or any omissions of material fact are considered unlawful insurance fraud. This includes statements made on an application for insurance, renewal of a policy, claims for payment or benefits, premiums paid, and financial condition of an insurer.
What documentation grants express authority to an agent?
Agent's contract with the principal The principal grants authority to an agent through the agent's contract
What is controlled business ?
Correctly Insurance on the producer's own life or property , or the lives or property of the producer's family or business associates
All of the following violations may result in an agent's imprisonment EXCEPT a) Failing to report to the department a criminal prosecution taken against the agent in another jurisdiction b) Embezzling funds from the insurer c) Knowingly obtaining information about a consumer under false pretenses d) Engaging in the business of insurance after being convicted of breach of trust
Failing to report to the department a criminal prosecution taken against the agent in another jurisdiction While the agents are required to notify the department about any administrative action or criminal prosecution taken against them, that act alone will not result in imprisonment. All the others are violations that may be punished by imprisonment.
An insurer devises an intimidation strategy in order to corner a large portion of the insurance market. Which of the following best describes this practice?
Illegal It is illegal to participate in any boycott, coercion, or intimidation that is intended to restrict fair trade or create a monopoly.
Under the Fair Credit Reporting Act, if the consumer challenges the accuracy of the information contained in his or her report, the reporting agency must
Respond to the consumer's complaint. The consumer has the right to request the information on the report, the reasons for turn down and any adverse underwriting decisions. The reporting agency is required to respond to the consumer's complaint, and, if necessary, to reinvestigate the report.
