Lesson 1
Business Entity Producer
A legal business entity, such as a corporation, partnership, limited liability company or the like, may also be a producer and conduct insurance business in this state. A business entity must get a producer's license in the business's name. The business must first have a licensed individual producer with a license for the same lines of insurance before applying for an producer's license for the business. Business entities have several other pieces of documentation required to accompany their application to the state
Active Military Service
A residential licensee may designate a person to handle their insurance business operations while they are actively serving
Individual Producer
An individual producer is a person licensed to quote insurance policies, market and sell insurance products, and consult others with regard to insurance. Most people in Louisiana are accustomed to calling these persons insurance agents, but the term referring to them is officially insurance producers.
Termination of Appointment
An insurer can terminate an appointment and has 30 days from the termination date to notify the Department. That time reduces to 15 days if the producer is being terminated due to fraud. The insurer sends notice to the producer of the termination within 15 days of sending notice to the Department. A producer has the right to send comments to the Department about the termination within 30 days of receiving the termination from the insurer
Appointments [Sec. 22:1558]
An insurer must appoint a producer to sell their products before the producer can start selling them. The insurer files a notice with the Commissioner within 15 days of the contract made with the producer. The Commissioner lets the insurer know the appointment is approved within 30 days of the notice if the Department finds the producer fit for appointment. If the producer is not eligible for appointment, the Department sends a notice to the insurer in 15 days.
Certificate of Authority
An insurer must first get a certificate of authority from the Commissioner to sell insurance products in this state. The certificate of authority makes the insurer an admitted company and proves that the Department of Insurance finds the company financially sound and structured well enough to meet the requirements of the state insurance code to conduct insurance business in Louisiana.
To apply for this licence, must
Be at least 18 years of age, Reside in or work mainly from an office located in Louisiana, Complete pre-licensing education required to prepare for state required exam, Paid their fees and submitted an application, Successfully pass their required exam with 70% or higher
Misrepresentation
Distributing misleading or false information and orally deceiving the public with regard to a policy's terms and benefits is illegal.
Consumer Reports
Equifax, Experian, Dun & Bradstreet, and agencies like these provide information regarding credit, character, and habits of a consumer.
Controlled business
If a producer only gets into the insurance business in Louisiana to sell only to themselves, their family and employer, they are writing controlled business. It is illegal to get an insurance licensed for the purpose of writing controlled business. The Commissioner determines controlled business by looking at a producer's book of business for a 12 month period. If during a year, a producer's commissions earned from policies sold to themselves, their family, and members of their employer are more than 25% of the total commissions for that year, it is considered controlled business.
Disability
If a residential licensee becomes disabled, their legally appointed representative, usually through power of attorney, is granted a temporary license to handle their business.
Reporting of Actions
If any court, judge, jurisdiction or governmental agency in Louisiana or anywhere takes any administrative action against a producer, that producer must report this final disposition or ruling to the Commissioner within 30 days of the disposition. District court convictions usually come with a bill of information on the case or an indictment sheet. All producers that undergo this process with any court must provide a copy of this document to Commissioner within 30 days from the date on the document.
Unfair claims settlement practices
If performed frequently enough to be considered a policy or practice of the company, not just an isolated act of an employee
Death
If a residential licensee dies, their representative may be granted a temporary license to wrap up their business.
Insolvency
If an insurer finds themselves insolvent or in financial difficulty, the Department of Insurance will take control of company financial management. If they believe the company can be put back in sound financial shape, they will try rehabilitation. If not, they will begin liquidation proceedings.
Temporary License
Temporary licenses are valid only for 180 days and may be granted three circumstances
Shared Commissions
NO license, NO commission! Paying and accepting a commission when you have no insurance license is illegal. Persons found breaking this law are fined between $1,000 and $5,000 and/or receive a maximum of 2 years in jail.
Renewal of Appointment
Renewal of company appointments is due on or before March 1 of every year. Each Company is sent an invoice. Renewal fee is $20.00 per appointment. Renewal lists received after March 1 will be charged a late fee of $10.00.
Examination of records
The Commissioner can examine anyone in the business of insurance in the state at anytime. The Department will review insurance companies for financial stability at least once every 5 years. An investigation may be prompted on an individual producer if 3 complaints are received on them within a 30 day period.
Insurance Fraud
The Department can conduct background checks on all applying to sell insurance in the state and may deny licenses or certificates of authority for felony convictions. If any violations are found, that information may be forwarded to the Department of Justice or any other law enforcement agency for further investigation or prosecution. Fraud is the intent to deceive by providing materially false information to someone in a business transaction
Duties and powers of the Commissioner
The Louisiana Department of Insurance Commissioner is James Donelon and he is responsible for enforcing the law as it pertains to the insurance business in this state. His primary goal is to protect the public and he is elected and holds office for a term of four years.
Transferring between States
There are 7 possible situations where agents move from one state to another state
Disciplinary Actions
There are certain disciplinary actions the Commissioner has the authority to take against anyone in the insurance business if they are found in violation of the Louisiana Insurance Code.
Cease and desist
This is the legal term for the order to STOP. It is an official legal document that will require an individual to stop doing something.
Boycott, coercion, or intimidation
illegal acts intended to stop fair trade or monopolize insurance business are prohibited.
Defamation
oral or written statements trying to injure a person or entity is prohibited, especially when it is critical of the financial status of a person or insurer.
McCarran-Ferguson Act
said the federal government had the right to regulate insurance only to the extent it is not regulated by state law. In effect, the insurance industry is exempt from most federal anti-trust laws.
Continuing Education Requirements
Producers must submit the correct amount of Continuing Education required hours to the Department every renewal period according the licenses they hold.
Fair Credit Reporting Act (FCRA)
This federal law was enacted in 1971 and is administered by the Federal Trade Commission. It makes clear that consumers have the right to know what information is being circulated about them and that the information is accurate and relevant for purposes that it is being accessed. Reports under this acts are divided into two categories:
Investigative Consumer Reports
Information from these reports may come directly from interviews with friends and neighbors and affiliates of the consumers and cannot be made without consent within 3 days of the request. When a consumer wants information in this report, it must be sent to them in 5 days by the insurer or reporting agency
Expiration
Licenses expire every 2 years, unless the Commissioner decides to revoke, non-renew or suspend the license. (Odd numbered years for P&C (i.e. 2013, 2015, etc.) by the last day of your birth month. Even numbered years for LH&A (i.e. 2012, 2014, etc.) by the last day of your birth month.
The Violent Crime Control and Law Enforcement Act of 1994 states that anyone that has committed a felony must receive written authority from a regulatory official, Commissioner, Deputy Commissioner, etc., before working in insurance that affects interstate commerce
called a 1033 waiver. This act makes it illegal for anyone convicted of crimes involving dishonesty or breach of trust to work in the business of insurance without fulfilling this requirement first. A felon violating this Act can be imprisoned up to five years.
Unfair discrimination
changing rates based on marital status, race, color, national origin, creed or ancestry within the same mortality class is illegal.
False financial statements
intentionally deceiving the public or a regulator as to the financial standing of an insurer is prohibited.
Hearings
When someone accuses a producer of violating the Insurance Code and demands a hearing, that hearing must be held within 30 days of the demand. It can be postponed if both parties agree to postpone it, but once the demand is on record, the hearing must happen in no more than 60 days of the original demand.
False advertising
Any advertising, print, multimedia, internet or otherwise, cannot deceive the public in anyway and misrepresenting terms, benefits, advantages, dividends, financial strength, or misrepresenting the intent of a policy, loans or assignments, or saying an insurance policy is the same as a share of stock are all prohibited acts.
Fraud and false statements
Any person intentionally making fraudulent or false statements in insurance transactions involving interstate commerce are subject to federal level fines and/or imprisonment for breaking this very specific federal law
Reapplication
If a producer's license is revoked, it may be possible to reapply. If a producer accepted the revocation without asking for a review or appeal of the decision, he may apply to the Commissioner for permission to reapply for a license after one year. If the producer appealed the decision, but the revocation was upheld, he may apply to the Commissioner for permission to reapply for a license after five years. If a license is reissued after revocation, if the producer is found guilty of another violation, he will be revoked without the right to apply for permission to reapply up to five years.
Rebates
Offering and accepting any incentives for buying a policy, including money, unauthorized discounts or money back, special favors or personal services, are all illegal acts.
Renewal
Producers can renew their license by sending their renewal application along with their renewal fees to the Louisiana Department of Insurance by the last day of their own birth month. The Louisiana Department of Insurance (LDI) now offers electronic online renewal. Any continuing education you have completed and was reported should be listed online at the time of your renewal. Any continuing education hours lacking or not yet reported, you should send a copy of the certificates to the Louisiana Department of Insurance (fax or mail). If they do not have a record of your continuing education prior to the expiration date, your license will expire and not yet be renewed.
Exceptions to licensing requirements
The Producer Licensing Model Act has a standard set of exemptions that most states follow. Generally, if someone solicits insurance, they do need a license
Non-Resident
Individuals not living in Louisiana and those without an office in Louisiana may get a Non-Resident license to sell insurance in this state. States that have reciprocal laws and privileges, meaning that the laws in both states are similar, will grant a non-resident license to an applicant as long as that individual's resident license is in good standing with their home state. To apply for a Non-Resident license, an individual completes a Uniform Application approved by the National Association of Insurance Commissioners (NAIC), the organization in charge of insurance laws for all states, and pay their fees. A producer moving from one state to another has 90 days after establishing legal residence to become a resident licensee. They will generally be exempt from having to take a new course or exam if they were in good standing in their home state with an insurance license for the same line(s) of authority they are applying for and the application is received within 90 days of the cancellation of their previous license
Assumed Names
a producer must notify the Department in writing BEFORE using a name other than their legal name, or the name that appears on their license, while doing business in this state. If it is a trade name for a business, you must also register the name with the Secretary of State before using it. If the producer is found using a name that has not been approved by the Commissioner prior to its use, they will be fined $250. The Commissioner will notify this producer to stop using this unapproved name, but if they continue, they can get fined up to $5,000.
Advertising
the state regulates the marketing and advertising of insurance policies. The insurer is held responsible for the content of advertisements. Ads cannot be misleading and cannot have illustrations that are considered deceptive. All ads used must be kept on file until the next time the state examines the insurer
Payment to unlicensed entities
Any unlicensed business entity paying or accepting illegal commissions will be fined between $2,000 and $50,000 and/or receive a maximum of 3 years in jail. Any violator involved with a license will have it suspended or revoked.
Change of Address
If a producer changes their mailing, work, or home address, the Department must be notified within 10 days of the change on an official "Change of Address" form available on the Louisiana Department of Insurance website or face a $50 fine
Term and Renewal
To maintain your license, every licensee must complete a certain number of hours in continuing education, maintain satisfactory conduct, and of course, send in the renewal application and pay renewal fees every renewal term. Your license is only issued once and you must renew it every term to keep it active. The final approval to renew your license rests with the Commissioner, as he decides to renew or not to renew.
Gramm-Leach-Bliley Act (GLBA)
officially titled the Financial Services Modernization Act of 1999, removed the barriers between commercial banking, investment banking, and insurance. Financial holding companies can combine any financial related activities. They still have to answer to regulators for each activity they participate in. The law set standards for financial privacy. First, the company's policies regarding customer information have to be disclosed at the beginning of the relationship. Second, any customer records to be shared with related companies or others must be disclosed to the consumer prior to releasing the information and allowing them to "opt-out". Health information rules are stricter, requiring the consumer to actually "opt-in" before health information can be shared.
Twisting
when a producer influences a consumer to replace a present policy with a different Churning - (related to twisting) using misrepresentation to replace a competitor's policy with one from a company represented by the producer to get the larger first-year commission, even if it is not in the best interests of the consumer
The Department of Insurance and the Commissioner can revoke, non-renew, suspend, or refuse to issue any producer's license, as well as charge fines for these violations
Failure to comply with state or federal laws to get a license, Giving false information on any license or renewal application, Not accounting for or sending in premium money or commingling funds, Committing fraud or practicing dishonesty with regard to insurance, Being careless or lacking ability to perform insurance related business operations, Falsifying a contract, binders, rider, plan benefits, or insurance applications, Unfair trade practices with regard to insurance, Pleading nolo contendere (no contest) or being convicted of a felony, being involved in a felony pretrial diversion or being convicted of misdemeanors with moral turpitude issues or public corruption, Cheating on an insurance exam or getting a license fraudulently, Going bankrupt with client or insurance company funds not yet transmitted or writing an NSF check to the insurance department, Forgery on any insurance document, Accepting insurance business from an unlicensed person knowingly, Getting a licensed solely to do controlled business, Having a license revoked from Louisiana or any other state, Violating any insurance laws, Not submitting evidence of identity or commission of a felony, Failing to pay court imposed child support, Failing to pay state income taxes, Hiring or contracting people in your insurance business who were convicted of a felony, Felony convictions for breaches of trust or being dishonest
Privacy of Consumer Financial Information
In this business, we become privy to lots of personal financial information on our clients. This Privacy regulation states that no information can be accessed by insurers without the person's consent and prevents insurers releasing this information to anyone without consent from the insured. Clients have the right to review a record of any disclosure made of their personal information