Insurance Regulations General Rules
Communicating with DOI
Agents must notify the DOI of a change in their mailing address, a felony conviction or administrative action taken against them.
Application Process
The application process for an insurance license includes a background check. The DOI has the right to refuse a license if the applicant has committed a felony, misdemeanor or been involved in dishonest activity that relates to the responsibilities of the license. Some states also require licensees to renew their licenses and pay a fee every renewal period
Certificate of Authority
the company's license to operate in the state. The state's Department of Insurance investigates the company to determine if they meet the qualifications and are both financially and operationally sound. The Department of Insurance then issues the company a Certificate of Authority and they can then begin doing insurance business in the state.
State Department of Insurance is Responsible for
1. Insurance Companies 2. Insurance Agents 3. Ratification - Approval of policy forms, endorsements, rates, filings, and rights. 4.Enforcement - Actions taken when companies and agents do not follow the law. The commissioner has the authority to take action to enforce the law (suspend, revoke, remove license of agent or a company's authority).
Fraud
A fraudulent insurance act is any illegal act that is committed while engaged in the business of insurance and intended to defraud. Example: Ben wrote a new policy for a customer and collected the insurance premium. However, he never turned in the insurance application to the company and kept the premium
Unfair Comparison
Agents and companies are not permitted to make unfair comparisons of policies, benefits, rates or compare non-comparable policies.
Limited License
Agents can be issued a license to sell only one type of insurance such as personal auto insurance only. Limited licenses are also issued for selling other single lines such as travel insurance, prearranged funeral insurance, title insurance or self-storage insurance. In some cases the agent may sell the limited line if he has a producer license for that type of insurance. For example someone with a life insurance producer may sell prearrange funeral insurance since it is a form of life insurance. A producer may also qualify to sell the product with a limited line license only
Pre-Licensing Education
Applicants for a license must learn the concepts, laws and practices of the profession and prepare for the license examination. Some states set requirements for the pre-licensing study
Agent's Responsibility for Licensing and Records:
Application process, examination, pre-licensing education, agents records
Misrepresentation
Cannot misrepresent or falsely advertise terms or benefits of a policy; must be accurate and honest.
Claims Settlement
Claims adjusters are also held to high ethical standards and are subject to disciplinary action if found engaging in unfair claims settlement practices. Some examples of unfair claims settlement practices: Misrepresenting material facts of the claim to claimants, denying claims without conducting reasonable investigations, or failing to implement standards for proper investigation of claims.
Twisting
Convincing the customer to cancel already existing insurance and buy another policy from the agent, to the detriment of the insured.
Examination
Each state requires applicants to pass a license examination for the license type desired. Exam content outlines are made available for review. Review the exam requirements for your state including the number of test attempts permitted.
Unfair Discrimination
Giving a lower or higher rate than another insured in identical circumstance or accepting a bribe from a customer to provide insurance or a lower premium
Rebating or Prohibited Inducements
Giving or offering some benefit other than those specific in the policy - gifts, cash, etc. - to get the customer to buy
False Advertising
It is illegal to create or circulate any advertisement about an insurance business or agent that is untrue, deceptive or misleading.
Agency / Managing General Agent
Managers of agencies or agents are also licensed professionals.
Defamation
Oral or written statement that is false and intended to defame the character of any insurer or agent
Customer/Insurance Service Rep
Persons who perform assigned duties related to property and casualty insurance are required to hold a customer or insurance representative license. The license authorizes them to explain insurance coverage, describe insurance products, quote premiums, and service policies. They may also issue binders with the approval of their managing agent.
Sliding
Sliding is when an agent slides in a coverage or product without the insured's consent or implies that the additional product is required by law when it's not. Example: Sally really improved her cross sell numbers when she included the premium for an umbrella policy in with the homeowner premium so customers thought it was just one policy. After all, she knew they needed the umbrella coverage.
Other Licenses
Some states also offer other licenses. Surplus Lines Agents sell more specialized insurance such as Lloyd's of London or other surplus lines that provide coverage for the unusual or high risk scenarios. Surplus Lines Agents must be licensed in their state to sell the lines of business they represent. Risk Managers are licensed but may not receive commission from the sale of insurance. Emergency or temporary licenses are issued only for a short period time and are used when insurance business has to transition to a family member because of death or disability of the agent. Insurance Consultants provide insurance guidance for a fee with respect to the benefits, advantages or disadvantages of insurance policies. Consultants charge for their expertise and advice.
Gross Premium Tax
Some states levy a tax that insurance companies must pay based on a percentage of the gross premiums earned.
Professional Behavior
The Insurance Commissioner may deny, suspend, terminate, or refuse to renew a licensee who violates the state insurance laws, has failed to maintain the qualifications of the license including continuing education, committed a felony or engaged in any unethical trade practices
Agent License (Producer)
The agent license has two types in some states - general lines agent and a personal lines only agent. The General Lines Agent is authorized to transact both personal and commercial insurance while the Personal Lines Agent is only authorized to transact non-commercial lines used in the personal insurance market such as auto, homeowners and personal liability, for example. Captive - These producers are employees of the insurance company and their compensation comes in the form of commission and/or salary from their employer. Independent - Independent agents/producers work for an agency and may represent multiple insurance companies. They receive commission directly from the companies they write insurance policies for and may have some ownership of the business they write.
Duties of the Commissioner
The commissioner is the state's Department of Insurance's chief executive and administrative officer. In broad terms, the commissioner and the DOI are tasked with: 1. Transacting insurance and company approval 2. Approve policy forms, rules, and rates 3. License approval 4. Examination of records 5. Investigate unethical conduct 6. Investigation 7.Penalties
Insolvent
Unable to pay debts owed, All property and casualty insurance companies operating in the state are required to be members of the association and commit to share in the losses resulting from a company becoming insolvent. This non-profit association helps pay the claims of insolvent insurers who are residents of the state at the time of the loss or the property is permanently located in the state. Some states have limitations on claims payments related to the total amount of the claim or the time period for filing. Unearned premiums for policies in force may also be considered within the association's guidelines. For example, 80% of the paid, unearned premium may be reimbursed to the policyholder by the Guaranty Association
Admitted
means the company has their certificate of Authority
non-Admitted
non-admitted or unauthorized insurer is not licensed in the insured's state but may be licensed in the state where the company is based. Surplus Lines insurers are an example of non-admitted insurers. Non-admitted insurer's policies are still valid but are subject to different regulations than admitted carriers. Lloyds of London is an example of a surplus lines insurer. It is foreign licensed but sells policies in the U.S. Non-admitted carriers to not participate in the state's guaranty fund and therefore are not backed by the state. However, they fill an important role in the insurance economy by offering insurance for specialty risks not served by standard insurance carriers.
License Approval
What was the term we used to describe an insurance company who has received their Certificate of Authority? Admitted. What do we call an individual who has been approved by the state to conduct insurance business? Licensed. Individuals who want to conduct insurance business must be licensed by the state's insurance department. Each state sets forth the license types and requirements. For example, if a person would like to become an insurance agent to sell policies for an insurance company such as Liberty Mutual, they would first have to meet the licensing requirements which includes passing the state licensing exam. Once they have obtained their agent license, then Liberty Mutual could file for their appointment. An appointment means they may represent that insurance company. Agents who work for independent insurance agencies may be appointed to represent multiple companies for a variety of products. An appointed agent is one who has obtained your license and the insurance company has authorized you to represent them in the business of insurance.
Continuing Education
Agents have a responsibility to stay current on the insurance laws and practices in their state. Each state establishes continuing education requirements including the number of CE hours per license renewal period. The requirements may also include specific topics as established by the state. Agents are responsible for ensuring that the state has received evidence of course completions. Failure to comply with the continuing education requirements can result in a disciplinary action such as an appointment or license termination.
Non-Resident
Agents may also apply for non-resident licenses once they have a licensing in their home state. Non-resident licensed agents have the same rights and privileges as a resident license holder. States often have reciprocal licensing agreements with other states which expedites the processing.
Maintaining License: Appointments
Agents must ensure that they are appointed by each company they represent. Appointments are filed by the company and remain in place until terminated or withdrawn. If an agent holds a license but is not appointed by any company for a period of time, their license may be terminated due to the inactivity.
Agents Records
Agents must maintain records of policy transactions either electronically or paper files including applications, endorsements and documents signed by the insured. Agents must also make their records available to the insurance commissioner or office of insurance regulation upon request.
Boycott, Coercion, Intimidation
It is illegal to boycott, coerce or intimidate anyone to result in an unreasonable restraint of or monopoly in the insurance business. Example: An agent decided to run a local independent agency out of town by organizing all of the groups he was affiliated with in town to spread the word that the agency principles were involved in the drug cartel. The accusation was false but resulted in the agency losing many customers. This is an example of the unfair trade practice of boycott.
Controlled Business
Licensees may not become licensed solely to insure property in which they have an interest. The interest may be directly or through family or employment relationships. Example: Bob's family is in the real estate business. Their firm includes residential development, real estate sales and mortgage brokerage. Bob would like to get his insurance license so that he can write the homeowner insurance on the properties they sell. This is considered controlled business and Bob may not get a license solely for that purpose
Adjuster
States require employees who investigate and adjust losses on behalf of the insurer to be licensed. Adjusting a loss involves determining how policy coverage applies and making the appropriate claims payments
National Associations of Insurance Commissioners (NAIC)
The commissioner is the state's Department of Insurance's chief executive and administrative officer. In broad terms, the commissioner and the DOI are tasked with: • regulating the business of insurance in the state, • ensuring that the laws pertaining to insurance are followed and enforced, • protecting and ensuring that consumers are treated fairly, and • maintaining fair competition in the insurance industry.
Ratify Policy forms, rules and rates
he state's Insurance Commissioner and the Department of Insurance have the responsibility to approve or ratify policy forms, rules, and rates. Who is responsible for writing the policy forms, determining rates, and establishing the underwriting rules? It's the Insurance company. The Commissioner and DOI don't make any of these, they just approve them.