LAH - Chapter 18
consultant (an insurance consutant)
(for a fee) advice, recommendations, and information regarding the terms, conditions, benefits, coverage, or premiums for insurance policies
Licensing Process
an applicant for resident producer license in NY must - be at least 18 years of age - complete 40 hours of prelicensing education - be trustworthy and competent - not have committed any act that is grounds for denial, suspensions, or revocation - have passed the state exam for the lines of authority in which licensure is sought - submit the application with fees - pass state examination
Producer (an insurance producer)
an insurance agent, broker, reinsurance intermediary, excess lines broker, or other person requires to be licensed in New York to sell, solicit, or negotiate insurance
Stock Insurance Company
an insurance company that is owned and controlled by stockholders (shareholders) the stockholders provide the capital and share in profits or losses
solicitation and sales presentation
producers must provide applicants and prospects with the approved NAIC Buyer's Guide producers must also provide a Policy summary to applicants
false advertisin
publishing or circulating to the public any misleading, untrue, or deceptive advertisements or announcements regarding the business of insurance is prohibited
an individual convicted of a felony involving dishonesty may engage in the business of insurance ONLY after
receiving written consent from the state insurance regulatory agency and a 1033 waiver
the following acts, omissions, or practices are defined as unfair and deceptive claim settlement practices when knowingly committed or performed with such frequency as to indicate a general business practice, and are prohibited:
1. Misrepresenting to insured's pertinent facts or policy provisions relating to coverage at issue 2. failing to acknowledge and act reasonably promptly upon communications with respect to insurance claim 3. failing to adopt and implement reasonable standards for prompt investigation and processing of insured's claims 4. failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements are completed and submitted by insured's 5. not attempting in good faith to effect prompt, fair and equitable settlements of claims on which liability has become reasonably clear; refusing or delaying a settlement solely because there is other insurance available to partially or entirely satisfy the claim loss; the claimant who has a right to recover from more than one insurer has the right to choose the coverage from which to recover and the order in which payment is to be made 4. compelling insured's to initiat suits to recover amounts due under an insurance policy by offering substantially less than the amount ultimately recovered in those suits
a temporary license may be granted to
1. next of kin or executor of a licensed producer who dies or is mentally or physically disabled in order to sell the producer's insurance business or allow enough time for the producer to recover from a disability and return to business 2. a member or employee of an agency that is licensed as an insurance producer 3. a person designated by a licensed producer who is entering the armed services. The license is valid for up to 6 months and may be renewed for additional 6 months periods. A temporary license will expire 60 days after a producer is discharged from military duty
the Superintendent may place on probation, suspend, revoke, refuse to renew, or deny a license to any person who has:
1. provided incorrect misleading, incomplete or untrue information in the license application 2. violating any insurance laws, regulations, subpoena, or orders from the Superintendent 3. obtaining to obtain a license through fraud or misrepresentation 4. intentionally misrepresent the terms of an insurance contract 5. been convicted of a felony 6. committed any insurance unfair trade practice 7. using fraudulent, coercive, or dishonest practices or demonstrating incompetence, untrustworthiness, or financial irresponsibility in this or any other state 8. having an insurance license denied, suspended, or revoked by another state 9. forging a name to an insurance document or application 10. cheating on an insurance document or application 11. knowingly accepting insurance business from an unlicensed individual 12. failing to comply with a court order imposing child support 13. failing to pay state income tax 14.
reinstatement
a licensee who has allowed his or her licensed to lapse within the last year can apply for reinstatement with an application and reinstatement fee
cease and desist order
a person who is charged with engaging in an unfair method of competition or committing an unfair or deceptive act or practice is entitled to a hearing before the Superintendent. The person must be notified of the time and place of the hearing at least 10 in advance
Life Settlement Broker
a person who is paid to solicit and negotiate life settlement contracts
Producer Appointments
a producer cannot act as a producer for an insurer unless he or she is appointed to work for that insurer. Insurers are responsible for submitting an appointment notice to the Superintendent within 15 days from the date the agency contract is executed or submission of first insurance application
Shared Commissions
a producer may share a commission with another agent when the other producer is licensed in the same line of business
(unfair trade practices) Rebating
it is illegal to offer a prospective client something of value that is not specified in a contract to induce the purchase of an insurance policy this does not include sharing commissions with other licensed and appointed producers
insurance companies are classified according to the location of its corporation Regardless of where the insurance company is incorporated,
it still has to get a Certificate of Authority before transacting insurance within a state
New Residents
licensed producers moving to New York from another state have 90 days within cancelling their previous license to apply for a resident license here after 90 days, the applicant must complete pre-license education and pass the state exam in New York
the Fraud and False Statements federal law
makes it illegal to lie, falsify, or conceal information (orally or in writing) from a federal official
Cold Lead Advertising
marketing that fails to disclose that the purpose of the marketing is insurance sales solicitation made by a producer or insurance company this practice is prohibited
Direct response (direct response solicitation)
means any offer by an insurance company to persons in this state (either directly or through a third party) to effect life or health insurance coverage which enables the individual to apply for the insurance on the basis of the offer
violation of licensing regulation are generally considered
misdemeanors the superintendent may impose a penalty of up to $500 for each violation; or $1,000 if the violation was willful
a license will be considered to be used for writing controlled business if
more than 10% of a producer's commissions are earned from such a business in a year
under Consumer Information Privacy regulation, producers and insurers must provide applicants and policyowners with a notice of its information practices at the time of
policy application, delivery, renewal, and when personal information is collected producers and insurers must receive a signed disclosure authorization form from appicants and policyowners before such private or persona information can be used
(Regulations) address change
producer must report a change in address (including email) to the Superintendent within 30 days of the change - a nonresident producer who moves from one state to another must file a change of address within 30 days of moving
Continuing Education
resident producers must complete 15 hours of continuing education every 2 years to keep their license active
a producer's license must contain
the producer's name and address, date of issuance, authorized lines of authority, expiration date, any other information required by the Superintendent
Consumer privacy regulations permit
the release of an insured's financial information when an unauthorized agency makes a written request to the insurer during an insurance fraud investigations
what is the objective of a Stock insurance company
to produce profits for the owners, the stockholders
a life settlement agreement contract
an agreement in which a life insurance policyowner sells his or her interest in a policy in exchange for an amount that is less than the expected death benefit
Fiduciary Responsibility
producers have an obligation for all funds collected from clients. producers must not mingle these funds with their own personal funds unless the insurer or principal agrees if agents do not immediately remit funds they receive to the insured or insurer, they must deposit funds in a trust account
Policy Records
producers must keep insurance transaction records available for inspection by the superintendent for a period of at least 6 years after the date a policy is no longer in force or until the next examination report, whichever is longer
Negotiate, Sell, Solicit - producer must be licensed to sell, solicit, and negotiate insurance in New York
- negotiation insurance involves discussing or offering advice to prospective purchasers regarding the benefits, terms, or conditions of an insurance policy by a person who sells insurance - selling insurance involves exchanging an insurance policy for money on behalf of an insurer - soliciting insurance involves attempting to sell insurance or urging a person to apply for a specific type of insurance from a particular insurer
a person or entity who license has been revoked cannot obtain another license for
1 year
(Producer Compensation Transparency) a producer must disclose the following information to purchases at the time of application:
1. a description of the role the producer plays in the sale of insurance 2. whether the producer will be compensated by the insurer or another third party for selling insurance 3. that the producer's compensation may vary depending on the contract and insurer the purchaser selects the volume of business, and the profitability of the contracts the producer sells 4. that the purchaser may ask the producer to provide information about the compensation the producer will receive from the sale as well as the compensation the producer would have received based on alternative quotes presented
a producer must apply for license renewal no later than
60 days before the date on which it expires
under Consumer Information Privacy regulation, producers and insurers must provide applicants with a written statement concerning
an adverse underwriting decision producers and insurers cannot ask applicants for information pertaining to a prior adverse underwriting decision, unless the inquiry also requests the reasons for the adverse decision
Stock insurance companies that issues both participating and nonparticipating policies are referred to as
a company dong business on a mixed plan
Alien Insurance Company
a company that is chartered and organized in any country other than the US it is considered an alien company in all states (a company chartered in Canada would be an alien company in NY)
Domestic Insurance Company
a company that resides and is incorporated under the laws of the state in which its home office is located a company domiciled in New York would be a domestic company in NY
Foreign Insurance Company
a company whose home office is located in another state. it is considered to be a foreign company in all states except for its home office (a company domiciled in Pennsylvania would be a foreign company in NY)
Business Entity
a corporation, association, partnership, limited liability company, or limited liability partnership, and may be licensed as an agent
Fair Credit Reporting Act (FCRA)
a federal law that regulates the use and disclosure of consumer credit information
Under Fair Credit Reporting Act, what are the credit reporting agencies required to provide
information about a consumer stored in the agency's files
(Regulations) Reporting of actions
a producer must report to the Superintendent any administrative action taken against the producer in another jurisdiction r by another governmental agency in New York or any criminal prosecution in any jurisdiction within 30 days of the final disposition of the matter. the report will include copies of any relevant legal documents
Mutual Life Insurance Companies
an insurance company owned and controlled by its policyowners these policyholders elect a board of trustees or governing body to manage the firm the profits of this type of insurance company are returned to the policyowners in the form of dividends or retained as surplus to meet future obligations
Unauthorized Insurer
an insurance company that has been denied or not yet applied for a Certificate of Authority and may not sell insurance in this state any producer that sells an insurance policy for an unauthorized insurer runs the risk of being responsible for unpaid claims
(Regulations) assumed names
an insurance producer doing business under any name other than the producer's legal name shall notify the Superintendent before using the assumed name
Termination of producer appointment
an insurer that does this must notify Superintendent within 30 days of the date of _. Within 15 days of such notice, the insurer must mail a copy of the notice to the terminated producer, after which the producer will have 30 days to submit written comments to the superintendent
adjuster
any individual who, for a fee, investigates and settles on behalf of an insurer a claim arising from an insurance contract
Reporting fraud
any person who knows or suspects that an insurance transaction or life settlement may be fraudulent must report it to the Superintendent within 30 days
Fraternal Benefit Society
are a corporation, society, or order that have a representative form of government and are organized through a lodge system exist for the benefit of its members and their beneficiaries
nonresident producers are not required to complete New York continuing education requirements as long
as their home state requirement are met
under Consumer Information Privacy regulation, how many times should insurer or producer notify its current customers of its privacy policies or practices?
at least once every year
Aiding unauthorized insurers
no one is allowed to act as an agent for any insurance company or health maintenance organization that is not licensed or authorized to do business in New York
Commissions
no person shall pay or accept commission to/from an unlicensed individual for the purpose of selling or negotiating insurance business agents may not charge any fee that is not disclosed in the written agreements
do nonresident producer applicants take the New York state licensing exam
no, but they must not have committed any act for which the license could be denied, suspended, or revoked
another word for Unauthorized insurer
non-admitted company
Licensing Home State (a producer's home state)
refers to the state or territory of the US where he or she - maintains his or her principal place of residence or business - is a licensed producer
Broker
sells and negotiates insurance on behalf of the insured
hearings
the Superintendent can administer oaths, examine witnesses, and receive evidence during a hearing a written or oral report must be made to the Superintendent stating the findings
(cease and desist order) if Superintendent has found that the producer has committed the alleged acts or practice
the Superintendent can order that the producer cease and desist from committing the act
examination of record
the Superintendent may conduct a financial examination of any insurance company as often as deemed appropriate. An insurer must maintain required records for a period of 6 years - the Superintendent has the ability to examine the business records of authorized insurers and agencies because of the powers granted through state statutes
Temporary License
the Superintendent may issue this type of license for a maximum period of 90 days without requiring an examination
Probation, suspension, revocation, refusal to issue or renew of licenses
the Superintendent must give written notice to an applicant or license if he or she decides to not renew or deny an application for a license and must hold a hearing within 10 days.
(Business Entity) at least one individual licensee must be designated responsible for
the business entity's compliance with the insurance laws and rules of this state
superintendent of Insurance
the head of the Department of Insurance appointed by the Governor to a 4-year term
Violation of the Fraud and False Statement federal law includes
1. any person engaged in interstate insurance business who engages in intentional unfair or deceptive insurance practices or overvalues an insurance product in a financial report or document presented to a regulatory official 2. embezzling money from an insurance company, 3. misappropriating insurance premiums, 4. and writing threatening letters to insurance offices
a producer or insurer cannot disclose a consumer's policy number to nonaffiliated third parties. The exceptions to this include
1. member in an affinity program that was identified to the consumer upon entering the program 2. consumer reporting agency 3. service provider marketing on behalf of the insurer
inquiries
a producer must respond to inquiries from the Superintendent within 15 days. the Superintendent may impose a fine of up to $500 per day for each day that a producer fails to respond
Commingling
a producer who has combined premiums collected with personal funds has engaged in commingling, which is a prohibited act
Nonresident producers
a producer who holds a resident license in a different state may apply for this license in New York, as long as both states have reciprocal agreement to apply, nonresidents must submit an application form, proof of resident license in good standing, and fees within 90 days of the cancellation of the applicant's previous license
another word for authorized insurer
admitted insurance company
License display
agent must display the license of the supervising person responsible for each place of business in a headquarters location and each satellite office
cyber Security Requirement for Financial Services Companies
agents, brokers, and insurance companies and all covered entities must implement and maintain: 1. a documented Cybersecurity policy 2. approved by a senior officer 3. addressing policies and procedures for the protection of its information systems and non-public information
Licensed Renewal
all producer licenses are renewable every two years by the end of the producer's birthday
statements in application
all statements or descriptions in any application for a policy of insurance, or in the policy itself, are representations and not warranties a representation unless material or fraudulent, will NOT prevent a recovery on the polciy
Authorized Insurer
an insurance company that has qualified and received a Certificate of Authority from the Insurance Department to sell insurance in this state
why are Stock insurance companies considered nonparticipating
because the policyowners do not share in the profits of the company
why Mutual insurance companies considered participating
because the policyowners do share in the profits of the company
insurance companies are also subject to the FCRA
because they use consumer credit reports during underwriting and risk selection
controlled business
can be defined as policies written on people that the licensed producer has direct influence over: including family, employers, and/or any company to which the producer has stock control. Obtaining a license for the primary purpose of writing controlled business is prohibited
Under Fair Credit Reporting Act, what is the law for adverse information that has been removed from the agency's files
cannot be reinstated without notifying the customer within 5 days furthermore, agencies cannot store adverse information about a consumer for longer than a set of period of time For example, information about late payments and final judgement can only stay on a credit report for up to seven tear, bankruptcies - 10 years, and tax liens seven years from the date paid
any documents or evidence in the Commissioner's possession and used in conjunction with an insurance fraud investigation are
confidential other documents, evidence, etc. that do not relate to such investigation are public records
policy summary
contains specific information of the provisions, benefits, and coverage of the policy applied for
Under Fair Credit Reporting Act, insurer must notify consumers when an adverse underwriting decision has been made based on a
credit report, and include the name of the credit reporting agency they used as the basis for the decision
Buyer's Guide
enables applicants to compare different life insurance policies and help them choose which policy is best for their needs
what is the fine for violating the Fraud and False Statement
fine up to $50,000 imprisonment up to 15 years and/or license revocation
Medical examinations and lab tests including HIV
for underwriting an individual policy, insurers may require proposed insureds to undergo an HIV test, but only in conjunction with other medical tests the basis for requiring an HIV test cannot be proposed insured's sexual orientation the insurer must obtain written consent from the proposed insured in order to conduct the HIV test New York law requires the Human Immunodeficiency Virus (HIV) consent form to disclose the types of individuals or organizations that may receive a copy of test results
any person or entity who solicits, negotiates, or sells insurance for an unauthorized insurance company is
guilty of misdemeanor and will be liable for any losses or unpaid claims
(hearings) If the Superintendent determines that a civil penalty should be imposed,
he or she may enforce the judgment, without a court preceding, within 120 days
Use of Senior-Specific Certifications and Professional Designations
insurance agents must not use a senior-specific certification or professional designation to mislead a purchaser that the insurance agent has special certification or training servicing seniors in connection with the marketing solicitation, sale, advice or purchase of an insurance policy or annuity product, either directly or indirectly
solvency
insurers must file an annual statement with the Superintendent by March 1. the report must show the insurer's condition at the end of the preceding year - a insurer that fails to file an annual statement or replay within 30 days to an inquiry from the superintendent about the report will be fined up to $250 per day of delay - insurers are also required to file an annual financial statement within 5 months after the end of each year
before initiating an investigative consumer report, producers and insurers must notify applicants and policyowners that they may be
interviewed for the report, and that they may receive a copy of the report
(unfair trade practices) defamation
it is an illegal practice to make any public statement or advertisement that contains false information or unsubstantiated criticisms about an insurance company intended to harm or malign
(unfair trade practices) misrepresentation
it is an illegal practice to misrepresent any fact about an insurance policy, such as policy terms, benefits, value, cost, effective date, or existence of a contract of insurance
unfair discrimination
it is an illegal practice to unfairly discriminate against a person in any way on an insurance-related matter an example would be charging a different rate for someone in the same actuarial class. Fair discrimination is necessary for the issuance of life insurance policies, which is based on mortality
Insurance Frauds Prevention Act
it was enacted by the New York state due to the merger of the insurance and banking departments in 2011, the Superintendent established a financial frauds and consumer protection unit in the Department of Financial Services (DFS) entrusted to keep battling fraud - the Superintendent has broad authority to investigate fraud and to turn over evidence to authorities - the Superintendent may also bring a civil penalty to anyone who commits fraud, not exceeding $5,000, plus the amount of a claim
what is the rpimary pupose of the Fair Credit and Reporting Act
to protect consumers with guidelines regarding credit reporting and distribution credit reporting agencies, such as Experian, Equifax, and TransUnion are regulated by the FCRA
what is the objective of a Mutual life insurance companies?
to provide insurance to its owners, the policyowners, at the lowest net cost
(unfair trade practices) twisting
unfair trade practice of replacing an insurance policy form one insurer to another based on misrepresentation