Insurance Regulations - B. State Regulation
Policy form (3 of 3)
-all provisions apply to policy form also apply to riders, endorsement, and applications -all forms must meet the following requirements: 1. see notes
embezzling funds
-face aforementioned fines and imprisonment -if less than $5,000, less than 1 yr prison
Producer appointments
An insurance producer cannot act as an agent of an insurer unless the producer becomes appointed by that insurer.
1033 waiver
a written consent from an insurance regulatory official to allow an individual convicted of felony to work in the business of insurance. -Section 18 -1033 violation result in fine up to $50,000 for each violation (interstate commerce)
False Advertisement
any untrue, deceptive, or misleading statements
personal or privileged information
cannot be disclose without written authorization of an individual
Personal information collected
must be made available to the individual to whom it refers to within 30 business days.
With adverse underwriting decision, an insurer must provide the application
the specific reason for the adverse underwriting decision -a summary of rights
Filings (1 of 2)
-Every insurer must file with the Commissioner all rates, every rating plan, and every modification at least 15 days prior to the effect date of such plan. -Commissioner may delay the effective date for a max. of 30 additional days to exam the filing. -if such filing is made by a medical malpractice insurer regarding medical malpractice insurance, the Commissioner may delay the effective date for a max. of 90 days.
Premiums for Small Business (2 of 2)
-If a small employer does not meet an insurer's minimum participation requirement, the insurer may rate each employee separately, on a individual basis -Rate adjustments established by an insured must apply to both individuals and groups. Industry-wide rate adjustments must apply to all eligible groups in the industry.
Penalty for rate violation
-Max. $500 for each such violation, in addition to other penalties indicated by law. -license may be suspended if fail to Commissioner order's time limit -license maynot be suspended until appeal of the order has expired.
General duties and powers of Commissioner
-administer and enforce insurance provisions -prosecute the offender -investigate -Examination of books and records at any time, but at least every 5 years, cost is paid by the company being examed -foreign and alien insurer, an examination report from the accredited Dept. of Insurance or their state of domicile or port of entry may be accepted -refusal of examination may results in suspension, refusal or nonrenewal of license, fine up to $1000 or prison up to 1 yr.
Unknowingly violates the Fair Credit Reporting Act
-liable for the loss to the consumer as well as attorney fees
Violation: An unlicensed person impersonating an agent, broker or adjuster
Fine: $10-$100
complaint
any written communication primarily expressing a grievance
coercion
is to require, as a condition to a loan, that the applicant purchase insurance from a specific insurer
It is illegal to be involved in any activity of boycott, coercion, or initimidation
that is intended to restrict fair trade or to create a monopoly
Filings (2 of 2)
-A filing and any supporting information must be open to public inspection after the filing becomes effective. -an insurer may satisfy its filing obligations by becoming a member of, a subscriber to, a licensed rating organization which makes such filings, and by authorizing the Commissioner to accept such filings on its behalf.
Disciplinary Action -hearing
-Commission may issue a statement of charges against a producer and hold a hearing -a hearing may be held 21 days after the date of notice. -should a nonrenewal or denial of a license, w/in 3o day of notice, the individual may make written demand for a hearing.
These conditions must be met in order for the Commissioner to issue a Certificate of Authority to an insurance company
-Complied with the laws of the state -Adopted a proper system of accounting -Employed a competent accountant, claim manager, and underwriter -Filed an affidavit stating the company is w/o liabilities(not including reasonable organization expenses), employed a competent actuary, and that officers and directors are of good repute and competent to manage.
Premiums for Small Business (1 of 2)
-Insurer must establish a base rate premium for each class of business. -Group rates charged for any group or individual may not exceed 2x the lowest rate that the insurer charges for the same business classification in that geographic area.
Adverse underwriting decision with respect to insurance transactions are as follows:
-a declination of insurance coverage -a termination of insurance coverage -failure of an insurance representative to apply for insurance coverage with a specific insurance institution which the insurance representative represents and which is requested by the applicant -an offer to insurer at higher than standard rates
Solvency
-an insurer has assets to meet its financial obligations. -should an insurer become insolvent, Commission will give insurer 3 months to improve the situation -if not resolved after 3 months, Commissioner may apply to the Supreme Judicial Court to become the receiver of the company and the company may be restrained from further business.
Policy Forms -copies must be be submitted to the Commissioner (1 of 3)
-any policy form used by the company -a form of any rider, endorsement or application used in connection with policy forms; -copies of any circular or other advertising matter the company issues -if copies are not sent upon Commissioner's written request w/in 30 days, fined $100-$500.
unfair discrimination
-discrimination in rates, premiums, or policy beliefs for persons w/in 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 condition is made for a business or required by law.
Fair Credit Reporting Act
-ensure that records are confidential, accurate, relevant and properly used. -protects consumers against the circulation of inaccurate or obsolete personal or financial information.
producers or insurer making statement that misrepresent the terms of a policy
-fine up to $1,000 or less than 6 months of prison -insured may recover all premium paid - if action is brought within 2 years
Policy Form ( 2 of 3)
-for insurance policy form to be delivered to more than 50 policyowners, the policy form must be on file for at least 30 days before it can be delivered, unless the Commissioner approves the form in writing before the 30 days. -If the policy form has been on file for at lease 30 days, an approval by the Commissioner is not required prior to its use. -Every policy form filed with the Commissioner must be accompanied by a certificate stating that the Flesh scale readability score is achieved.
Notice of information practices must be brought to the insured
-no later than at the time the application for insurance is made -In the case of policy renewal, no later than the policy renewal date -In the case of policy reinstatement or change in insurance benefits, no later than the time a request for a policy reinstatement or change in insurance benefits.
Willingly violates the Fair Credit Reporting Act
-penalty up to $2,500
Notice of information practices not required in connection with policy renewal
-personal information is collected only from the policyholder or from the public records -a notice meeting the requirements has been given within the previous 24 months
Adverse underwriting decision cannot be on the basis of whole or part of
-previous adverse underwriting decision -person information received from an insurance support organization whose primary source of information is insurance institutions. -the basis of sexual orientation
Causes for probation, suspension, revocation, refusal to issue or renew license
-providing incorrect, misleading, incomplete, or materially untrue information in the license application -violating any insurance laws or any regulation, subpoena or order of the Commission -see notes for the rest
Rates
-rate regulation is to promote the public welfare, to assure that they are not excessive, inadequate, or unfairly discriminatory. -not intended to prohibit or discourage reasonable competition or to prohibit or encourage uniformity in insurance rates, rating systems, rating plans, or rating practices.
Rabating include:
-rebates of premiums -special favors or services -advantages in the dividends or other benefits -stocks, bonds, securities, and their dividends or profits
Cease and Desist Order
-such an order is issued after the hearing (producer found guilty) for engaging in the act of violation. -license may be suspended or revoked for repeated claims and may be fined up to $1,000. -Commission may order recovery of any actual economic damage and award punitive damage up to 25%. -violation of the Cease and Desist Order, fines up to $10,000 for each violation.
False advertisement include misrepresentation in any of the following:
-terms, benefits, conditions, or advantages of any insurance company -any dividends to be received from the policy, or previously paid out; -the financial condition of any person or the insurance company -The true purpose of an assignment or loan against a policy -representing the insurance company as a share of stock
Nongroup, Guaranteed Issue
-these health plans may establish rates based on age. -an insured may establish rate adjustments ranging from .8 to 1.2 for each of the 5 geographic rating ares determined by the commissioner. -new rate = base rate x rate adjustment
the commissioner has ___days to verify that the insurance producer is eligible for appointment
30 days
Should an insurer terminates an appointment, the insurer must notify the commissioner within
30 days from the effective date of termination
If the commission determines that the producer is ineligible, the commission has to notify the insurer within
5 days
Violation: an agent trying to obtain any premium payment by fraudulent representations
Fine: $100-$1000 Imprisonment: 1 year
Violation: Knowingly paying an unlicensed person acting as a producer
Fine: $50-$500
Violation: Engaging in unfair or deceptive acts in connection with insurance transactions
Fine: up to $1000 per act
Violation: Any other violation, not specified for a penalty
Fine: up to $500
Impersonation
a person not licensed as an insurance producer, broker, or adjuster may not represent himself or herself as being one. Penalty: $10-100
Pretext interview
an interview by a person who attempts to obtain information about a natural person and commits one of the following acts: - pretends to be someone he/she is not' -pretends to represent a person he/she is not in fact representing -misrepresents the true purpose of the interview -refuses to identify himself/herself upon request. insurers may not use or authorize use of pretext interview, except in the cases of criminal activity or fraud.
Rebating
any inducement offered to the insured in the sale of insurance products that is not specific to the policy. -offer and acceptance of it is illegal
False Financial Statements
are those intended to deceive public officials or the general public about the financial condition of an insurer.
Insurance producers procure payment of premium by fraudulent representation
fine $100-1000 or up to 1 year in prison
compensating an unlicensed person who acted as an insurance producer
fine $50-500
Obtaining information under false pretense
fine max. $10,000 or max 1 yr in prison
making false statement affect interstate commerce
fine or up to 10 yrs prison
Compliant records
must be kept for a period of 2 years, include: -the total number of complaints -classification by line of insurance -nature, disposition, and time of processing of each complaint.
defamation
occurs when an oral or written statement is made that is intended to injure a person engaged in the insurance business. Include any maliciously critical statements of financial condition of any person or a company.
Claims practices that are illegal
see notes
Investigative consumer reports
similar to consumer reports, except the info is obtained through investigative and interviews with associates, friends and neighbors -consumer must be advised in writing within 3 days of the request of the report -insurer has 5 days to provide the consumer any additional information should he/she request it.
Misrepresentation
to issue, publish, or circulate any illustration or sales material that is false, misleading, or deceptive as to policy benefits or terms, etc. (see notes) FINE $1000 or up to 6 months imprisonment Recovery of premium less indebtedness to the insurer when an action against the insured was brought within 2 years
making false statement that jeopardized the security of the accompanied insurer
up to 15 yrs. in prison
Consumer reports and investigative consumer reports
used by underwriters to check on individual risk -can be used for a legitimate business purpose- including insurance underwriting, employment screening, and credit transactions.
Larcerny
when a producer fails to pay the premiums collected to the insurance company after written demand is made, and applied the premium for a purpose other than the premiums
the appointment insurer must file a notice of appointment
within 15 days from the date contract is executed or application is submitted.
Consumer reports
written or oral information regarding a consumer's credit, character, reputation, or habits from employment records, credit reports, and other public sources.