Insurance Regulations (Chapter 10):
Before an insurance company can legally transact insurance, it must 1st obtain a:
"Certificate of Authority" from the Commissioner
The federal body that regulates interstate truckers is the:
"Federal Motor Carrier Safety Administration" (FMCSA)
The "Federal Trade Commission" (FTC) and the "Federal Communications Commission" (FCC) worked together in 2003 to create the:
"National Do Not Call Registry"
The aggregate industry insured losses resulting from certified acts of terrorism (in the new terrorism act) which will trigger the federal share of compensation under the program are now specified as follows:
-$100 million for 2015 -$120 million for 2016 -$140 million for 2017 -$160 million for 2018 -$180 million for 2019 and so on
The coverage provided in a DP form is up to:
-$250K in building coverage -$100K for PP
"Temporary Producer's License" may be granted under specific circumstances. These licenses last for:
-180 DAYS
If a member of the business entity wants to transact insurance, that person must:
-1st register with the Department of Insurance under the business entity's license and obtain an individual producers license
If, during any 12 MONTH period, the aggregate commissions earned from controlled business have exceeded:
-25% of the aggregate commissions earned on all business written by a producer during the same period, then the Commissioner will determine that the license has been used solely for writing controlled business
All books, records, documents, accounts and vouchers of the insurer must be maintained by the insurer for a period of:
-5 YEARS -OR until Commissioner's next examination- whichever is LATER
"Twisting":
-a misrepresentation, or incomplete or fraudulent COMPARISION of insurance policies that PERSUADES AN INSURED to their detriment, to cancel, lapse, switch policies, or take out a policy with another insurer
Individual producers engaged in the sale of annuity products must complete:
-a one time, 4 HOUR training course -this requirement is separate and distinct from the CE req. for a licensee -applies to both resident and nonresident producers
If producers/ business entities conduct business in LA but are NOT properly licensed in LA, it's illegal for them to:
-accept money or commissions related to the insurance that was transacted.
TRIA requires that:
-all commercial insurers offer insurance coverage for acts of terrorism. -the federal gov will then reimburse the insurers for a PORTION of paid losses of terrorism
The NAIC Property and Casualty Insurance Committee and its Terrorism Insurance Implementation Working Group (TIIWG) recently adopted a "Model Bulletin" including:
-an expedited filing form intended to help state insurance regulators advise insurers about regulatory requirements related to providing terrorism insurance under the revised program
"Inducement":
-an officer that tries to influence the other party
"Defamation" occurs when:
-an oral or written statement is made that's intended to injure a person engaged in the insurance business. -applies to statements that are maliciously critical of the financial condition of any person or company
Insurers/ insurance producers may not engage in any trade practice that's defined as:
-an unfair method of competition OR an unfair or deceptive act or practice in the insurance business
"Rebating":
-any inducement (bribe) 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 is illegal
How much can the Commissioner examine insurers for solvency and compliance with the Insurance Code?
-as frequently as deemed necessary -BUT at least once every 5 YEARS
Consumer reports can't contain certain info if the report is requested in connection with a life insurance policy/ credit transaction of less than $150K. The prohibited info includes:
-bankruptcies more than 10 YEARS old -records of arrest or conviction of crimes -any other negative info that's more than 7 YEARS old
A person who knowingly and willfully obtains info on a consumer from a consumer reporting agency under FALSE PRETENSES may:
-be fined and or imprisoned for up to 2 YEARS
Motor Carrier Regulations:
-both state/fed gov has implemented several regulations that pertain to trucking risks for truckers who travel across state lines and within the boundaries of a single state
The definition of "environmental restoration" in the MCS-90 is:
-broad and includes coverage for damage done by commodities transported by a motor carrier
"Moral Turpitude":
-conduct that is OPPOSITE of community standards of justice, honesty, or good morals
Unlike consumer reports, these reports can't be made unless:
-consumer is advised in writing of the report within 3 DAYS of the date the report was requested.
"National Do Not Call Registry" allows:
-consumers to include their phone number on the list to which solicitation calls can't be made by telemarketers
Key to trigger a flood policy coverage is for:
-damage to be caused by a flood, as defined by the NFIP. -water damage does NOT meet this definition and is not considered a flood
"Fair Credit Reporting Act":
-established procedures that consumer-reporting agencies must follow in order to ensure that records are confidential, accurate, relevant, and properly used.
Newer insurers may be examined more frequently:
-every 6 MONTHS for the 1st 3 YEARS -and once a year for years 4-6
A "1033 Waiver":
-federal laws make it illegal for anyone convicted of a crime involving dishonesty, breach of trust or a violation of the Violent Crime Control and Law Enforcement Act to work in the insurance business affected INTERSTATE COMMERCE without receiving written consent (1033 waiver) from an insurance regulatory official
To appoint a producer as its agent, the appointing insurer must:
-file a notice of appointment within 15 DAYS from the date the agency contract is executed
If a producer license has been revoke, the producer may:
-file another license application within 1 YEAR from the effective date of revocation -OR within 5 YEARS from the date of final court order if judicial review of revocation is sought
If a person FAILS to obey the Commissioner's subpoena or fails to produce records as required without cause, the person will be:
-fined at least $100 and no more than $2000 at the discretion of the court
Violations of regulations pertaining to commissions will result in:
-fines between $1K-$5K -&/or imprisoned for up to 2 YEARS
However, if the benefit pursued doesn't exceed $1K:
-imprisonment term can't exceed 6 MONTHS -or $1K for each count
The commission that's paid by each fire, casualty, surety, fidelity, guaranty, and bonding insurer doing business in LA must be:
-in uniform and equal as to ALL classes of producers of insurer throughout LA
"Producers":
-individuals or business entities that are licensed to sell, solicit or negotiate insurance -represent their insurance company, NOT their customers
"Investigative Consumer Reports" are similar to consumer reports in that they also provide:
-info on the consumer's character, reputation and habits
"Authorized Insurer":
-insurer who has received Certificate of Authority from Department of Insurance to transact insurance in LA
"Controlled Business":
-is insurance that covers the producer or the producer's immediately family or employer
If the Commissioner suspects that an insurer or its agent 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)
It's 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
A person who UNKNOWINGLY violates the Fair Credit Reporting Act is:
-liable in the amount equal to the loss to the consumer, as well as any reasonable attorney fees incurred in the process.
The MCS-90 endorsement ensures that:
-motor carriers comply with the federally mandated coverage for public liability, which includes BI, PD, and environmental restoration
This waiting period can be waived in certain circumstances surrounding:
-new or revised loans -map revisions -if a loan exists of a property that should've obtained flood insurance but didnt
"Commission":
-payment to agent by the insurance company for placing insurance, usually a percentage of a policy premium
"Privacy of Consumer Financial Information" regulation was designed to:
-protect the confidentiality of consumers' personal financial records because it assures consumers that their financial records can't be accessed without their consent -and prevents insurers (or other financial entities) from requiring the release of financial records as a condition of doing business
MCS-90 endorsement allows insurer to:
-seek reimbursement from the insured for the payment of a claim for public liability if the claim wouldn't have been covered under the policy WITHOUT the MCS-90 endorsement provision
If a person fails to appear and testify as ordered by the court, they are:
-subject to fine and imprisonment
A person who WILLINGLY violates this act enough to constitute a general pattern or business practice will be:
-subject to penalty of up to $2500
Commissioner has the power to:
-subpoena people -administer oaths -examine the business, conduct, or affairs of any company that's subject to the rules of the insurance code
After the 180 days, the person with the temporary producers license needs to:
-take a producer's exam and receive a standard license
The "Gramm-Leach-Billey Act" stipulates:
-that in general, an insurance company may NOT disclose non-public personal info to a non-affiliated third party except for certain reasons
"Certificate of Authority" indicates that:
-the Commissioner has examined the business and found it to be financially STABLE and organized in accordance with the Insurance Code
NFIP is administered by:
-the Federal Insurance and Mitigation Administration (FIMA) -which is a part of the "Federal Emergency Management Agency" (FEMA)
The "Fair Credit Reporting Act" also protects consumers against:
-the circulation of inaccurate or obsolete personal or financial info
"National Flood Insurance Program" (NFIP) was created by:
-the federal gov to fill the gap left by the private insurance industry -created in response to the rising cost of taxpayer funded disaster relief for flood victims and the increasing amount of damage caused by floods
"Commissioner":
-the head of the State Department of Insurance
RCBAP does NOT protect:
-the individual owner from loss to PP owned exclusively by the unit owner
The main difference in the "investigative consumer report" is that:
-the info is obtained through an investigation and interviews with associates, friends and neighbors of the consumer
An insurance producer can't legally act as an agent of an insurer unless:
-the insurance producer becomes an APPOINTMENT AGENT of that insurer
If the premium in a WYO policy is insufficient to cover losses:
-the insurers will be reimbursed for the excess costs by the NFIP
If the license is revoked a second time:
-the producer can't apply for a new license during the revocation period
If a producer commits another violation AFTER the license has been reissued following a revocation:
-the producer's license will be revoked for up to 5 YEARS
As part of the license renewal process, producers must comply with:
-the state continuing education (CE) requirements
"National Association of Registered Agents and Brokers Reform" (NARAB):
-this title of the program amends the Gramm-Leach-Billey Act to repeal the contingent conditions under which the NARAB may not be established -NARAB is prohibited from merging with or into any other private or public entity
"Terrorism Risk Insurance Act" (TRIA) purpose:
-to create a temporary federal program that would share the risk of loss from future terrorist attacks with the insurance industry
Purpose of the examination of insurers that the commissioner has the power to do: (including investigating the affairs of anyone in the insurance business, in order to determine if the person has been or is engaged in any unfair trade practices)
-to ensure that the companies remain SOLVENT -and conduct business of insurance in compliance with state laws and regulations pertaining to licensing, policy forms, rates, claims and market conduct
The coverage provided in the General Property Policy form is:
-up to $250K for building and $100K for PP for OTHER residential structures -up to $500K for building and $500K for business property for NON-RESIDENTIAL structures
The limits of the RCBAP coverage are:
-up to $250K multiplied by the number of units in the building for building coverage -up to $100K in PP per building
"Residential Condominium Building Association Policy" (RCBAP):
-used for residential condo buildings associations to cover the entire building under 1 policy, including ALL units, improvements within the units, and PP owned in common
"Consumer Reports" include:
-written &/ or oral info regarding a consumer's credit, character, reputation, or habits collected by a reporting agency from employment records, credit reports, and other PUBLIC sources
Underwriters will sometimes request additional info about a certain risk from an outside source. These reports fall into 2 categories:
1. "Consumer Reports" 2. "Investigative Consumer Reports" -both reports can only be used by someone with a legit business purpose, including insurance underwriting, employment screening and credit transactions
License renewal must be done by the last day of the producer's:
birth month
Any person who violates the state statutes about sharing of commissions, upon conviction, may be:
-Fined between $1000-$5000 -&/or imprisoned for a max. of 2 YEARS -& producer's license will be suspended or revoked
"General Property Policy Form" is used for:
-OTHER residential (more than 4 units) and non-residential structures and their contents
If the application for a license renewal is received AFTER the standard deadline, then:
-a $25 late fee will be charged.
"Business Entity":
-a corp, association, partnership, limited liability company, limited liability partnership or other legal entity. -can act as producers
Any person who knowingly commits insurance fraud will be guilty of:
-a felony and will be subject to a prison term of up to 5 YEARS or a fine of up to $5K for each count
Violators of this rule are subject to:
-a fine btwn $2K- $50K -&/or imprisoned for a max of 3 YEARS -& their licenses may be suspended/ revoked
Each policy form, including riders and endorsements, must be identified by:
-a form NUMBER in the lower left-hand corner of each page. -printed at least 10-point type
"Flood":
-a general/ temporary condition of partial or complete inundation of 2 or more areas of normally dry land area, -OR of 2 or more properties (at least 1 of which is the insured's property)
The Commissioner is in charge of:
1. Conducting legal hearings, regarding suspected violations of the insurance code 2. issuing cease and desist orders 3. examining insurers for solvency 4. issuing, renewing, suspending and revoking licenses
the federal regulations that apply to the following are established in the "Motor Carrier Act of 1980":
1. Contract carriers (hauls goods of others under contract) 2. Common Carriers (hauls goods for anyone for a fee) 3. Freight forwarders
NFIP consists of 3 components:
1. Insurance 2. Flood Management 3. Floodplain Mapping
Insurance Producers in LA may transact insurance in 1 or more of these lines of authority:
1. Life 2. Variable life and variable annuity products 3. Health and Accident 4. Property 5. Casualty (liability) 6. Personal Lines 7. Title 8. Credit (debt insurance; limited line) 9. Travel 10. Industrial Fire 11. Surety (insurance/ bond that covers obligations to pay debts) 12. Bail Bonds 13. Surplus Lines 14. Limited Lines 15. any other type of insurance as determined by the Commissioner
Certain restrictions of eligibility for the flood program apply to properties if located within areas defined by the fed gov as part of:
1. The Coastal Barrier Resource System 2. Otherwise Protected Area
National Flood Insurance is sold and serviced directly through either:
1. The NFIP 2. a "Write Your Own" (WYO) insurance program
Because adoption of NFIP was slow to take hold, the federal gov passed the "Flood Disaster Protection Act of 1973" which mandated flood insurance in these situations:
1. flood-prone areas as a condition for receiving loans through, or backed by, the fed gov 2. property owners who fail to buy flood insurance within 1 YR after it's available will NOT be eligible for full disaster relief funding. The amount of disaster relief will be reduced by the amount of insurance that could've been purchased
The exceptions to the Gramm-Leach-Billey Act:
1. insurance company clearly and conspicuously discloses to the consumer in writing that info may be disclosed to 3rd party 2. consumer's given the chance, before the time that info's disclosed, to direct that info NOT be disclosed to 3rd party 3.consumer's given an explanation of HOW the consumer can exercise a nondisclosure option
Rebates may include (but not limited to):
1. rebates of premiums payable on the policy 2. special favors or services 3. advantages in the dividends or other benefits 4. stocks, bonds, securities, and their dividends or profits
structures eligible for coverage in a DP form include:
1. single-fam structures 2. 1-4 fam structures 3. condo units 4. manufactured mobile/ trailer homes 5. townhouse/ rowhouse structures 6. timeshares
False or deceptive advertising specifically includes misrepresenting:
1. terms, benefits, conditions or advantages of policy 2. any dividends to be received from policy or previously paid out 3. financial condition of any person OR the insurance company 4. the true purpose of an assignment or loan against a policy
A temporary license may be issued to these people:
1. the surviving spouse, next of kin or employee of a licensed insurance producer who died or disabled (mentally or physically) 2. a member/ employee of a BUSINESS ENTITY licensed as a producer, upon the death or disability of a person designated in the entity application or the license 3. the designee of a licensed producer entering the active service in the U.S. Armed Forces 4. any other person deemed fit by commissioner
The Gramm-Leach-Billey Act requires 2 disclosures to a customer (a consumer who has an ongoing fiscal relationship with a financial institution):
1. when customer relationship is established (policy is purchased) 2. before disclosing protected info
If, however, the reason for the termination is due to the producer engaging in fraudulent activity, the Commissioner must be notified within:
15 DAYS after the effective date of the termination
The insurer then must mail a notice to the producer within:
15 DAYS after the notification is sent to the Commissioner -producer also has a right to send comments to Commissioner regarding the termination within 30 DAYS of receiving the notice
If the producer is determined to be INELIGIBLE for appointment, the Commissioner must notify insurer within:
15 DAYS of making decision
Producers who allow their license to lapse may reinstate the same license within:
2 YEARS upon proof of fulfilling all CE requirements through the date of reinstatement and by paying all overdue fees
Producers need to submit a license renewal application every:
2 years
All producers licensed in LA must complete how many hours of CE?
24 HOURS of approved CE instruction -or self-study prior to each license renewal
How many hours of CE must be on ethics?
3 HOURS
How many hours of CE on flood insurance is required for producers licensed to write property, casualty, property and casualty, or personal lines of insurance?
3 HOURS of CE on flood insurance
Upon purchase of a flood policy, there's a waiting period in place starting from the time of application and premium payment of:
30 DAYS
If an insurer terminates a producer's appointment, the Commissioner must be notified within:
30 DAYS after the effective date of the termination
If Commissioner decides to suspend/ revoke a license, the licensee must be notified in writing and the producer can request a hearing on the matter within:
30 DAYS of receiving the notice
Every licensee must notify the Commissioner of any changes to the licensee's residential, mailing, business, or email or phone number within:
30 DAYS of the change -same regulation applies to change in the licensee's name
A non-resident producer who moves from 1 state to another OR a resident producer who moves from LA to another must file a change of address form and provide certification from the new resident state within:
30 DAYS of the change of legal residence. -no fee or license application is required.
If a person aggrieved by the alleged violations demands a hearing, the hearing must be done within:
30 DAYS of the demand
Producer must report to Commissioner any administrative action taken against them in ANOTHER JURISDICTION or by another governmental agency in LA within:
30 DAYS of the final disposition of the matter
The insurer is also responsible for paying producer appointment fees. The Commissioner, upon receiving this notice, has:
30 DAYS to make sure the producer is suitable for appointment
To keep in compliance with the Do not Call rules, organizations must consult the registry every:
31 DAYS and any number on the registry must be dropped from the organization's call list
At Commissioners discretion, a licensed agent or broker who is a member of, and actively participated in, a STATE or NATIONAL insurance association may be granted:
4 CE CREDITS
The commissioner is elected for a term of:
4 YEARS
The consumer must be advised that they have a right to request additional info about the report and the insurer or reporting agency has:
5 DAYS to provide the consumer with the additional info
Any person who suspects that insurance fraud is being committed must report the fraud to the Department's Insurance Fraud Division within:
60 DAYS
The hearing may be postponed by MUTUAL CONSENT of the parties but may not be held more than:
60 DAYS from the date of the ORIGINAL demand for the hearing UNLESS all parties agree to that
The renewal window begins:
90 DAYS before expiration
Who may request a waiver of the license renewal procedures?
A licensed insurance producer who's unable to comply with license renewal procedures due to -MILITARY service -or other extenuating circumstances like long-term medical disability
The TRIA of 2002 has been amended several times and the final amendment is the "Terrorism Risk Insurance Program Reauthorization Act" of 2015 when has been FURTHER AMENDED & extended the "Terrorism Insurance Program" through:
December 31, 2020
Up to how many hours of excess CE may be carried forward to the next renewal period for producers licensed in any combo of the lines of health and accident, life, property, casualty or personal lines?
up to 10 HOURS of excess CE
Failure to file an address change within the required time will result in:
a $50 penalty per violation
An insurance license is usually not required if:
a person does NOT receive any commission for transaction
The "MCS-90" endorsement (developed by the FMCSA) must be attached to:
all motor carriers' policies under its jurisdiction
WYO retain part of the flood insurance premium to pay for:
commissions and administrative costs -the remaining premiums, plus investment are used to cover losses
Licenses that end (expire) in an EVEN NUMBER will expire in:
even-numbered years
A producer using a name that has NOT been approved will be:
fined up to $250
Any director, officer, agent or employee of the insurer who destroys any books and records without the Commissioner's authority may be:
fined up to $5,000
"Dwelling Form Policy" is used to:
insured residential structures and their contents
A person can't sell, negotiate, or solicit insurance unless
licensed
The act sets of the:
minimum financial responsibility requirements for for-hire interstate carriers and all carriers of hazardous property
The private insurers that participate in a WYO program write and service policies on a:
no risk-bearing basis through a special arrangement with the FIA
Producer doing business under any name other than their legal name is required to:
notify the Commissioner prior to using the assumed name
Likewise, licenses that end in an ODD NUMBER expire in:
odd-numbered years
If 10 DAYS after being notified by the Commissioner to STOP using the unapproved name and the producer continues to use the name:
producer will be subject to a fine of up to $5,000
Within 30 DAYS of a conviction in district court, a producer must:
report the conviction to Commissioner and provide a copy of the bill of info of indictment
If a license has been lapsed for more than 2 years:
the producer must apply for a new license
Federal regulations also apply to:
truckers, interstate or intrastate, that haul hazardous materials
It's illegal to use a producer's license for the sole purpose of:
writing controlled business
