Insurance Regulation

Unfair Discrimination

iscrimination in rates, premiums, or policy benefits for persons within the same class or with the same life expectancy is illegal. No discrimination may be made on the basis of an individual's marital status, race, national origin, gender identity, sexual orientation, creed, or ancestry unless the distinction is made for a business purpose or required by law.

Business Entity

means a corporation, association, partnership, limited liability company, limited liability partnership, or other legal entity. A business entity acting as an insurance producer must obtain an insurance producer license.

Counselor- An insurance counselor is a person licensed to perform the following duties:

-Audit or abstract insurance policies or annuities; -Provide advice, counsel, or opinions concerning benefits, coverage, terms, and advantages and disadvantages of a policy or annuity; -Advertise and solicit business as an insurance counselor.

Change of Name or Address

Licensees must inform the Commissioner of a change of legal name or address within 30 days of the change.

Coercion

is to require, as a condition to a loan, that the applicant purchase insurance from a specific insurer.

Continuing Education requirements do not apply to the following licenses:

limited life, travel, crop and hail, baggage, title, and limited credit insurance. CE requirements may be waived if the Commissioner determines that meeting this requirement would cause severe hardship. Severe hardship includes terminal illness, illness of self or spouse that requires an inordinate amount of care by the licensee, or military duty.

A licensee must provide a clear and conspicuous notice that accurately reflects his/her privacy policy and practices to all of the following:

-An individual who becomes the licensee's customer, no later than when the licensee establishes a customer relationship, except as provided in the code; -A consumer, before the licensee discloses any nonpublic personal financial information about the consumer to any nonaffiliated third party, if the licensee makes such a disclosure other than as authorized in the code.

It is unlawful to pay, offer or accept any of the following as an inducement to buy insurance:

-Any special favor or advantage in dividends or benefits; -Any stocks, bonds, securities, or accrued dividends or profits; -Anything of value not specified in the insurance contract.

In the state of Michigan, insurance producers may be issued licenses for one or more of the following lines of insurance:

-Life - coverage on human lives; -Accident and health or sickness - coverage for sickness, bodily injury or accidental death, and disability income; -Variable life and variable annuities - coverage under variable life and/or variable annuities; -Property - coverage for the direct and consequential loss or damage to property of every kind; -Casualty - coverage against legal liability; -Personal lines - noncommercial property and/or casualty coverage; -Credit - debt insurance (limited line); -Any other type of insurance permitted under the state regulations.

Types of Licensees

insurance professionals must be properly licensed for a specific line of authority in order to transact insurance. The purpose of licensing is to ensure that a producer meets educational and ethical standards required to fulfill producer's responsibilities to the insurer and to the public. An insurance producer is a person required to be licensed under the laws of this state to sell, solicit, or negotiate insurance.

Defamation

occurs when an oral or written statement is made that is intended to injure a person engaged in the insurance business. This also applies to statements that are maliciously critical of the financial condition of any person or a company.

Producer- The Commissioner will collect the following fees:

-$5 for agent appointment; -$25 filing fee for original authorization to transact insurance for each domestic, foreign, and alien insurer and each Health Maintenance Organization; -$10 application fee from each initial applicant for license as a resident, agent, nonresident agent, surplus lines agent, solicitor, counselor, or adjuster; -$10 solicitor's license; -$10 insurance counselor license; -$10 license examination fee; -$100 surplus lines agent license each year.

The Commissioner may waive prelicensing requirements or examinations for someone who:

-Applies for a limited license; -Has been a licensed insurance producer in the preceding 12 months; -Has obtained an approved designation (chartered property and casualty underwriter, accredited advisor in insurance etc.); -Has an associate's, bachelor's or master's degree with a concentration on insurance from an approved association. Unless a license is revoked or suspended, it remains in effect as long as education requirements are met by the due date.

The Commissioner may place on probation, suspend, revoke or refuse to issue a producer's license or may levy a civil fine for any of the following actions:

-Providing incorrect, misleading, incomplete, or materially untrue information in the license application; -Violating any insurance laws or violating any regulation, subpoena, or order of the Commissioner or of another state's insurance Commissioner; -Obtaining or attempting to obtain a license through misrepresentation or fraud; -Improperly withholding, misappropriating, or converting any money or property received in the course of doing insurance business; -Intentionally misrepresenting the terms of an actual or proposed insurance contract or application for insurance; -Having been convicted of a felony; -Having admitted or been found to have committed any insurance unfair trade practice or fraud; -Using fraudulent, coercive, or dishonest practices or demonstrating incompetence, untrustworthiness, or financial irresponsibility in the conduct of business in this state or elsewhere; -Having an insurance producer license or its equivalent denied, suspended, or revoked in any other state, province, district, or territory; -Forging another's name to an application for insurance or to any document related to an insurance transaction; -Improperly using notes or any other reference material to complete an examination for an insurance license; -Knowingly accepting insurance business from an individual who is not licensed; -Failing to comply with an administrative or court order imposing a child support obligation; -Failing to pay single business tax or comply with any administrative or court order directing payment of single business tax.

Fiduciary Responsibilities

An agent is a fiduciary for all money received or held by the agent in his or her capacity as an agent. Failure by an agent to turn over, in a timely manner, the money held in a fiduciary capacity to the persons to whom it is owed is evidence of violation of the agent's fiduciary responsibilities. The agent is required to use reasonable accounting methods to records the funds received in a fiduciary capacity, including the receipt and distribution of all premiums due to the insurer or insured. Except as provided in the Insurance Code, an agent cannot reward or remunerate any person for procuring or inducing business in this state, furnishing leads or prospects, or acting in any other manner as an agent. An agent may not sell or attempt to sell insurance by means of intimidation or threats, whether expressed or implied.

Twisting

is a misrepresentation, or incomplete or fraudulent comparison of insurance policies that persuades an insured/owner, to his or her detriment, to cancel, lapse, switch policies, or take out a policy with another insurer. Twisting is prohibited.

If a person knowingly violates a cease and desist order, the Commissioner may impose the following penalties:

-A civil fine of up to $10,000 for each violation (not exceeding $50,000); -Suspension or revocation of license; -Both.

Commissions

A producer may share commissions with another licensed resident or nonresident insurance producer. It is a violation for a producer to share commissions with a nonlicensed individual or to provide financial rewards or share commissions with person who may provide the producer with sales leads.

Continuing Education Requirements

Continuing education (CE) rules are established to protect the public by maintaining high standards of professional competence in the insurance industry, and to maintain and improve the insurance skills and knowledge of licensed producers.

License Requirements

Every license must contain the licensee's name, address, personal identification number, date of issuance, qualifications, expiration date, and any other information the Commissioner considers necessary. A person cannot accept a commission for selling, soliciting or negotiating insurance without being properly licensed. Renewal or other deferred commissions may be paid to a person if he or she was licensed at the time of the sale, solicitation or negotiation.

Penalties and Fines if Found Guilty

If any person is found guilty of misrepresenting terms of a policy or inducing a policyholder to lapse, forfeit, surrender, or replace insurance will be found guilty of a misdemeanor, and will be fined up to $1,000 for each violation, or at the discretion of the court, be imprisoned in a county jail.

Continuing Education Requirements for Michigan

In this state, producers must earn 24 hours of CE credits every 2 years from state-approved providers, with at least 3 hours in Ethics. A licensee's date of CE credit review is determined by the month and date of birth, at least 12 months after the issuance of the initial license. Producers born in an even- number year are required to complete the CE requirement in an even-number year; producers born in an odd-number year must complete their CE requirement in an odd-number of years. Note that the CE review date is printed on a producer's license document in the lower right-hand corner. Producers may also use the online Insurance Agent Locator to verify their review date. Nonresident licensees must comply with their home state's CE requirements in order to maintain licensure.

Resident

Those individuals who wish to transact insurance in Michigan that are not residents of the state may obtain a nonresident license if they hold a current resident insurance license for the same type of insurance in their home state and are at least 18 years old.

Rebating

is defined as any inducement 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.

Producer- Applicants for a resident producer license must meet the following requirements:

-Be a resident of the state of Michigan; -Be at least 18 years old; -Possess a reasonable understanding of the insurance laws of Michigan; -intend in good faith to act as a producer, be honest and trustworthy, possess a good business reputation, and possess good moral character to act as a producer; -Complete prelicensing education (or obtain a waiver if applicable); -Complete the application process; -Maintain at least one appointment at all times for each active qualification held; -Pass the applicable examination.

Any person found guilty of a violation of the Insurance Code of this state may be subject to the following penalties:

-Payment of a civil fine of up to $500 for each violation; -A civil fine for willful violations may be up to $2,500 for each violation (not to exceed $25,000); -A refund of any overcharges; -Restitution to the insured or other claimant to cover incurred losses, damages, or other harm attributable to the acts of the person found to be in violation; -The suspension or revocation of the person's license.

Temporary

A temporary license may be issued in certain emergency situations in order to best serve public interest. The Commissioner may issue a temporary producer's license without requiring a written examination to the surviving spouse of a deceased producer, if a producer becomes mentally or physically disabled, or to the designee of a licensed producer entering active service in the U.S. armed forces. These types of licenses are issued for a maximum of 180 days. If a license is needed beyond that time frame, the person will need to obtain a permanent license.

Termination of Appointment

An insurer that terminates the appointment, employment, contract, or other insurance business relationship with an insurance producer must notify the Commissioner within 30 days following the effective date of the termination. Upon the written request of the Commissioner, the insurer may be required to provide additional information or records. No later than 15 days after notifying the Commissioner, the insurer must mail a copy of the notification to the producer at his or her last known address. Within 30 days after the producer has received the notification, the producer may submit written comments to the Commissioner. If an insurance producer's authority to represent an insurer is terminated, the responsibility of a producer having property rights in the renewal will continue until the existing policies of insurance are canceled, replaced, or have expired.

Any person who commits a fraudulent insurance act is guilty of?

-a felony punishable by imprisonment for up to 4 years; -or a fine up to $50,000, or both, and will be ordered to pay restitution. A person who enters into an agreement or conspiracy to commit a fraudulent insurance act is guilty of -a felony, punishable by imprisonment for not more than 10 years -or by a fine of not more than $50,000, or both, and will be ordered to pay restitution. Any agents, insured, or other persons who make false, dishonest or fraudulent certificates or reports of death, sickness or disability of any kind in attempt to collect a claim payment from an insurer will be deemed guilty of a misdemeanor, and upon conviction, -the violator may be fined up to $1,000, -or imprisoned for up to 3 months, at the discretion of the court.

False Financial Statements

are those that are intended to deceive public officials or the general public about the financial condition of an insurer. This often occurs when an important fact about the financial status of an insurer is deliberately withheld in order to present the company in a more favorable light. An insurer required to furnish the annual audited financial report will require an independent public accountant to report in writing if it is determined that the insurer has materially misstated its financial condition. This report must be submitted within 5 business days to the board of directors or its audit committee. The insurer will furnish a copy of this report to the Commissioner within 5 business days of receipt of the report and will provide the independent public accountant making the report with evidence of the report being furnished to the Commissioner. If the independent public accountant fails to receive the evidence within the required 5-business day period, the independent public accountant will furnish a copy of its report to the Commissioner within the next 5 business days.

Unfair Trade Practices And Other Regulations

Insurers and insurance producers may not engage in any trade practice that is defined as, or determined to be, an unfair method of competition or an unfair or deceptive act or practice in the business of insurance. It is considered an unfair trade practice to knowingly commit an unfair method of competition or to engage in such actions with enough frequency that the commission of unfair marketing practices indicates a general business practice. If, after a hearing, the Department of Insurance determines that a producer or an insurer has committed an unfair trade or competition practice, the Department may issue an order requiring the person to cease and desist from engaging in the method of competition, act, or practice, and/or impose penalties for violation of insurance laws.

False Information and Advertising

Advertising covers a wide scope of communication, from publishing an ad in a newspaper or magazine, to broadcasting a commercial on television or the Internet. Advertisements cannot include any untrue, deceptive, or misleading statements that apply to the business of insurance or anyone who conducts it. The violation of this rule is called false advertising. It is prohibited to advertise or circulate any materials that are untrue, deceptive, or misleading.

Insurance Fraud Regulation

Fraudulent insurance acts include, but are not limited to, acts or omissions knowingly committed by any person with intent to injure, defraud, or deceive. Upon written request by an authorized agency to an insurer, the insurer or an agent authorized by the insurer to act on its behalf may release to the authorized agency, at the authorized agency's expense, any or all information that is considered important relating to any suspected insurance fraud. An authorized agency may release information on suspected insurance fraud to an insurer or an agent upon a showing of good cause within 30 days of the request.

Furthermore, the following individuals are NOT required to hold an insurance producer license:

-A director or employee of an insurer whose activities are limited to executive, administrative, managerial, or clerical; -The director or employee of a special agent assisting insurance producers by providing technical advice and assistance to licensed insurance producers; -A person who secures and furnishes information for group insurance or performs administrative services related to mass-marketed property and casualty insurance; -An employer or association engaged in the administration or operation of a program of employee benefits for the employer's or association's own employees; -Employees of insurers or organizations engaging in the inspection, rating or classification of risks, or in the supervision of the training of insurance producers and who are not individually engaged in the sale of insurance; -A person whose activities are limited to advertising without the intent to solicit insurance; -A nonresident who sells, solicits or negotiates a contract of insurance for commercial property and casualty risks to an insured with risks located in more than one state insured under that contract; -A salaried full-time employee who counsels or advises his or her employer relative to the insurance interests of the employer or subsidiaries.

A business entity application will not be approved unless the Commissioner finds that the business entity has complied with the following requirements:

-Paid the required fees -Designated an individual licensed producer responsible for the business entity's compliance with this state's insurance laws, rules, and regulations -Not committed any act that is grounds for denial, suspension, or revocation.

Rebates may include, but are not limited to, the following:

-Rebates of premiums payable on the policy; -Special favors or services; -Advantages in the dividends or other benefits; -Stocks, bonds, securities, and their dividends or profits. If any person is found guilty of rebating or illegal inducement, upon conviction of a misdemeanor, the person will be fined up to $100 for each violation.

Nonresident

A nonresident license is based on the resident license the person holds being in good standing. If the nonresident licensee should ever lose his/her home state authority, the Michigan license will be terminated immediately.

Counselor Requirements

An applicant for a counselor's license must possess a reasonable understanding of the provisions, terms, and conditions of the type of insurance he/she wishes to counsel, as well as a reasonable understanding of the Michigan Insurance Code, and possess a good business reputation and good moral character. To become a licensed insurance counselor, a candidate must submit an application to the Commissioner and pass a written examination. Persons who are admitted to the practice of law in Michigan are not required to obtain a license to transact insurance, but attorneys may not represent themselves to be licensed insurance counselors or consultants unless they possess said license. Before rendering any service, a written agreement must be prepared by a counselor and signed by both the counselor and the client. The agreement outlines the nature of the work to be performed by the counselor, as well as state his or her fee for the work. The agreement also states that the counselor's fee may not be waived and that the counselor will receive a commission from the insurer on any insurance he or she places. The counselor will keep a copy of the agreement for at least 2 years after the completion of the services.

Assumed Names

An insurance producer doing business under any name other than the producer's legal name must notify the Commissioner prior to using the assumed name.

Boycott, Coercion and Intimidation

It is illegal to be involved in any activity of boycott, coercion, or intimidation that is intended to restrict fair trade or to create a monopoly. This would include unfair behavior that influences not only clients, but competing agents and brokers.

Misrepresentation

It is illegal to issue, publish, or circulate any illustration or sales material that is false, misleading, or deceptive as to policy benefits or terms, the payment of dividends, etc. This also refers to oral statements. Committing this illegal act is called misrepresentation.

Rebates in Michigan

Note that in this state, articles of merchandise with an invoice value of $5 or less for life insurance agents and $10 or less for property and casualty agents are not considered rebates, and are allowed as gifts to insurance applicants or insured.

Cease and Desist Order

The Insurance Commissioner's role is to enforce insurance laws and to protect the public from unfair trade practices. If the Commissioner suspects that an insurer, its agents, or any licensed person has committed a violation or is engaged in an unfair trade practice, the Commissioner may issue a statement of charges and hold a hearing for any purpose deemed necessary (within the scope of the Insurance Code). If, after a hearing, the Commissioner determines that the person charged has engaged in an unfair method of competition or an unfair or deceptive act or practice, the Commissioner will issue a cease and desist order requiring the person to stop engaging in such method of competition, act, practice, or violation. At a formal hearing, the aggrieved party has the option of being represented by an attorney and attempt to prove that a cease and desist order shouldn't be issued. If criminal violations are uncovered during the investigation, the Commissioner must turn the investigation over to the Attorney General for prosecution immediately.

Process

pplicants for resident licenses in Michigan must successfully complete prelicensing education from an approved self-study or classroom course. The required hours for classroom instruction or its equivalent are 20 hours per single line of authority (such as life only), or 40 hours for combined courses (such as life and health). When an application for license is submitted, the applicant must pass an examination on the lines of authority applied for. The applicant must file a certificate of completion of the prelicensing courses taken to prove that the courses were not taken more than 12 months before the Commissioner received the application.

If a Producer has not met his CE requirements by the expiration date of the License:

the producer will have a 90-day grace period in which to meet the continuing education requirement. During the 90-day grace period, the producer may not solicit or sell new policies, but is allowed to continue to service the existing policies and receive commissions on policies previously sold for a period for up to 12 months. If a licensee fails to earn the required CE credits by the expiration of the grace period, by the required review date, the license will be cancelled. License reinstatement can occur up to 2 years following the termination, only if the licensee reapplies after complying with the CE requirement. After the 2 years have passed, a person may become licensed again by completing prelicensing education and passing the appropriate exam. Costs related to this section are paid by the Continuing Education fund, a self- supporting entity administered by the Commissioner.

False or deceptive advertising specifically includes misrepresenting any of the following:

-Terms, benefits, conditions, or advantages of any insurance policy; -Any dividends to be received from the policy, or previously paid out; -Financial condition of any person or the insurance company; -The true purpose of an assignment or loan against a policy. Representing an insurance policy as a share of stock, or using names or titles that may misrepresent the true nature of a policy also will be considered false advertising. In addition, a person or an entity cannot use a name that deceptively suggests it is an insurer.

Anyone who was previously licensed for the same qualifications in another state is not required to complete any prelicensing education or examination. This only available in the following situations:

-The application is received within 90 days of the cancellation of another license; -The prior state issues a certification that the applicant was in good standing; -The person is currently licensed in another state. If this person is currently licensed, they must apply to become a resident licensee within 90 days of establishing legal residence.

A licensee is not required to provide an initial notice to a consumer under the above if the licensee meets either of the following:

-The licensee does not disclose any nonpublic financial information about that consumer to any nonaffiliated third party, other than as authorized by the code, and the licensee does not have a customer relationship with the consumer; or -A notice has been provided to that consumer by an affiliated licensee, as long as the notice clearly identifies all licensees to whom the notice applies and is accurate with respect to the licensee and the other institutions. Numbers, Dollars, Days, and Dates

Producer Regulation- Acting Without a License

A person may not conduct insurance transactions or act as a producer, agent, solicitor, adjuster or counselor unless properly licensed as required by Michigan Law. An insurance producer license is not required of any officer, director or employee of an insurer or organizations employed by insurers, provided they are not directly or indirectly involved with the actual sale of an insurance contract and do not receive any commission.

Company Regulation- Producer Appointment

An insurance producer cannot act as an agent of an insurer unless the insurance producer becomes an appointed agent of that insurer. To appoint a producer as its agent, the appointing insurer must file a notice of appointment within 15 days of the date that the agency contract is executed or the first insurance application is submitted. Upon receiving the notice of appointment, the Commissioner will verify that the producer is eligible for appointment within 30 days. If the producer is determined to be ineligible for appointment, the Commissioner must notify the insurer within 5 days of the determination.

Maintenance and Duration

An insurance producer license remains in effect unless suspended or revoked, as long as it is properly renewed. A license is valid as long as the licensee remains in good standing with the Department of Insurance (DOI), all annual renewal and appointment fees are paid, and continuing education requirements are met. A producer who allows his or her license to lapse for a reason other than not meeting the continuation requirements may reinstate the same license without passing a written examination if he or she does so no later than 12 months after the date of the lapse.

Reporting of Actions

An insurance producer must report to the Commissioner any administrative action taken against the producer in another jurisdiction or by another governmental agency in this state within 30 days after the final disposition of the matter. This report must include a copy of the order, consent to order, or other relevant legal documents. Within 30 days after the initial pretrial hearing date, an insurance producer must report to the Commissioner any criminal prosecution of the producer taken in any jurisdiction, and provide a copy of the initial complaint filed, the order resulting from the hearing, and any other relevant legal documents. If an insurer terminates a producer, the Commissioner must be notified within 30 days. If additional information is discovered, the Commissioner should be notified immediately. Within 15 days of either action, copies of the applicable notice must be mailed to the producer.