North Carolina Regulations For Life (Chapter 5)

Restitution

Restoration to the original condition or repayment.

Under which of the following circumstances would a pretext interview be permissible?

The insurer suspects criminal activity and fraud.

Insurance agents licensed in this state (NC) must complete continuing education every 2 years by

The last day of the licensee's birth month in the compliance year.

Sell

To exchange a contract of insurance by any means, for money or its equivalent, on behalf of an insurance company. Sell does NOT mean a referral to a licensed insurance agent or broker that does not include a discussion of specific insurance policy terms and conditions.

How long does the grace period last under a standard life policy issued in this state?

31 days. The insured is entitled to a grace period of 31 days for the payment of any premium due (except for the first payment), during which time the death benefit coverage will continue in force.

Business entity

A corporation, association, partnership, limited liability company, limited liability partnership, or other legal entity.

Business Entity

A corporation, association, partnership, limited liability company, limited liability partnership, or other legal entity. This does NOT include a sole proprietorship.

License

A document issued by the Commissioner authorizing a person to act as an insurance agent for the kinds of insurance specified in the document. The license itself does not create any authority, actual, apparent, or inherent, in the holder to represent or commit an insurance carrier.

Know This!

A domicile refers to the location where an insurer is incorporated, not necessarily where the insurer conducts business.

Cease and desist

To stop or discontinue.

Limited Licenses for Rental Car Companies

A producer licensed in limited lines for rental car companies means the producer is only authorized to sell certain coverages relating to the rental of motor vehicles. For example, the Commissioner may issue a limited license to a rental car company. The applicant must file a written application with the Commissioner, and a statement that the applicant is trustworthy and competent to act as its insurance agent for this limited purpose.

Insolvent

Unable to meet financial obligations.

If a licensee is convicted of a criminal violation, the licensee's insurance license is

Automatically suspended.

Which of the following must an insurer obtain in order to transact insurance within a given state?

Certificate of Authority.

When an insurer requires a written proof of loss after notice of such loss has been given by the insured or beneficiary, the company must

Furnish a blank form to be used for that purpose.

What does the Guaranty Association guard against?

Insurer insolvency. All admitted insurers must be a member of the Insurance Guaranty Association as a condition of their license. The Insurance Guaranty Association is in existence to protect policyowners and beneficiaries against losses caused by the insolvency of an insurance company.

Home office

Insurer's headquarters, principal place of business.

Exempt

Not subject to an obligation.

Statute

A formal written law enacted by legislature; insurance statutes can be found in the state Insurance Code.

A top agent for a national insurer is competing in a company contest for a grand prize of $25,000. The agent found that prospects like getting "rebates" from other consumer services companies, so the agent decided to pay the applicants first month's premium as an incentive for buying the policy. This would be considered

A rebate or refund of premiums and is a violation of marketing laws.

What is an alien insurer?

An alien insurer is an insurance company that is incorporated outside the United States.

Inducement

An offer that attempts to influence the other party.

Adjuster

Any individual who, for salary, fee, or commission, investigates or reports to his principal relative to claims arising under insurance contracts other than life or annuity. An attorney-at-law who adjusts insurance losses from time to time, incidental to their practice, or an adjuster of marine losses are NOT deemed to be adjusters.

What are the penalties for violating rules regarding records and reports?

Any person caught violating rules regarding records or reports may face a penalty after both notice and hearing are provided. For the first offense, a person may have his or her license suspended or revoked for between 1 and 6 months. For the second offense, a license may be suspended for 1 year.

Coercion

Forceful act or threat aimed to influence a person to act against his or her will.

Brokers Bond

In order to receive a broker's license, the applicant must file a bond with the Commissioner for at least $15,000, or in lieu of a bond, deposit with the Commissioner the equivalent amount in cash or certificate of deposits. A bond cannot be terminated unless at least 30 days prior written notice is given by the surety to the licensee and the Commissioner. If a broker's license is terminated, the Commissioner must notify the surety within 10 business days.

Education and Training

Individuals applying for a single-line license, such as Life, Accident and Health or Sickness, Property, Casualty, or Personal Lines, must first complete 20 hours of prelicensing education. Each resident applicant for a Medicare supplement and long-term care insurance license must complete 10 hours of instruction, which must include the principles of Medicare supplement and long-term care insurance and federal and North Carolina law relating to this insurance.

Surplus lines

Insurance not available from authorized insurers; placed with non-admitted insurers who specialize in offering insurance to the high-risk market.

Authorized insurer

Insurer who has received a Certificate of Authority from the department of insurance to transact insurance in this state.

Who may request a waiver for continuing education requirements?

Only a licensed insurance producer who is unable to comply with continuing education requirements due to military service, or long-term medical disability may request a waiver for continuing education requirements. The Commissioner may grant an exemption from CE requirements for up to one year if the producer submits the following documents: - Deployment orders from the United States Department of Defense; or - A notarized statement from a licensed physician stating the producer is unable to do the work he or she is licensed to do.

Any inducement offered to the insured in the sale of an insurance policy that is not specified in the policy is an unlawful practice known as

Rebating. Both the offer and acceptance of a rebate are illegal.

Disclosure

Revealed information to help someone make an intelligent and educated decision.

Important Note

The court may award the prevailing party compensatory damages, attorneys' fees, costs, and reasonable investigative costs. If the prevailing party can demonstrate that the defendant has engaged in a pattern of violations, the court may award three times the monetary damages.

Uniform Application

The current version of the NAIC Uniform Application for resident and nonresident agent licensing.

Which of the following terms is used to describe a person, other than a viator, that enters into or effectuates a viatical settlement contract?

Viatical settlement provider.

Licensees granted exemption prior to October 1, 2010, would continue to be exempt from continuing education requirements if a licensee:

- Is age 65 or older; - Has been continuously licensed in the line of insurance for at least 25 years; or - Holds a professional designation (such as CLU, LUTCF, CFP, or AAI) or certifies to the Commissioner annually that he or she is an inactive agent who does not solicit insurance applications or participates in the day-to-day operations of an agency

If an insurer accepts premium payments by credit card, who is responsible for paying the fees charged by a credit card company?

Insurer accepting payment. Credit card payment fees are the responsibility of the insurer. In fact, it is one of the conditions for permitting the insurer to accept payments by credit card.

Agent's Liability

Any person representing an insurer is personally liable on all contracts of insurance unlawfully they make for any company not authorized to do business in the state. Unlawful solicitation, negotiation, or transaction of insurance with an unauthorized insurance company in North Carolina is a Class 1 misdemeanor if the individual did not know that the insurer was unauthorized. It is a Class H felony if the individual should have known that the insurer was unauthorized. Each illegal transaction is a separate offense.

What constitutes a Class H felony?

Any person who, with the intent to injure, defraud, or deceive an insurer, presents a written or oral statement as part of, in support of, or in opposition to, a claim for payment knowing that the statement contains false or misleading information concerning any fact or matter important to the claim is guilty of a Class H felony. In addition, any person who assists or conspires with another person to knowingly defraud or deceive an insurer is guilty of a Class H felony.

Solicit

Attempting to sell insurance or asking or urging a person to apply for a particular kind of insurance from a particular company. Solicit does NOT mean a referral to a licensed insurance agent or broker that does not include a discussion of specific insurance policy terms and conditions.

Every insurer transacting business in North Carolina must appoint an employee or associate responsible for maintaining records and reports. What happens if they fail to maintain records?

Failure to maintain records may result in license suspension or revocation for no less than 1 months to no more than 6 months for the first offense and 1 year for the second offense. Refusal to provide records may result in a Class 1 misdemeanor.

A private investigator has been hired by an insurance company to obtain a character report on an insurance applicant. The investigator contacts the applicant and requests an interview stating that he is conducting a research for a publication. The applicant permits the interview and unknowingly gives information that will be used in the underwriting decision. Which of the following does this scenario describe?

Pretext interview. This is where a person, in an attempt to obtain information about a natural person, pretends to be someone he is not or pretends to represent a person he is not in fact representing.

Negotiate

The act of conferring directly with, or offering advice directly to, a purchaser or prospective purchaser of a particular contract of insurance concerning any of the substantive benefits, terms, or conditions of the contract, only if the person engaged in that act either sells insurance or obtains insurance from insurers for purchasers. Negotiate does not mean a referral to a licensed insurance agent or broker that does not include a discussion of specific insurance policy terms and conditions.

General License Requirements

- Life: coverage on human lives, dismemberment by accident and benefits for disability income; - Accident and Health or Sickness: coverage on sickness, bodily injury, and accidental death and may include benefits for disability income; - Variable Life and Variable Annuity: prerequisite is to hold an active Life license and active FINRA registration; no additional examination is required; - Medicare Supplement and Long-Term Care: licensee must also hold an Accident and Health or Sickness license, complete 10 hours of prelicensing education, and pass a separate exam; - Property: direct or inconsequential loss or damage to property of any kind; - Casualty: coverage of legal liability, including death, injury or disability, or damage to real and personal property; - Personal Lines: property and casualty insurance coverage sold to individuals and families for primarily noncommercial purposes; - Limited line insurance; or - Any other kind of insurance permitted under state laws or administrative rules.

What is a domestic insurer?

A domestic insurer is an insurance company that is incorporated in this state. In most cases, the company's home office is in the state in which it was formed — the company's domicile. For instance, a company chartered in Pennsylvania would be considered a Pennsylvania domestic company.

For licensing purposes, what is a nonresident producer?

A nonresident producer is an individual who is domiciled and licensed as a resident producer in a state other than North Carolina. A nonresident license in North Carolina will grant the same rights and privileges afforded a resident licensee and, subsequently, is subject to the same revocation, suspension and formal proceedings. A person who is not a resident of this state may receive a nonresident producer license if he or she meets the following qualification: - Is currently licensed as a resident and is in good standing in his or her home state; - Has submitted the request for licensure in the form prescribed by the Commissioner and has paid the applicable fees; - Has submitted or transmitted to the Commissioner a copy of the application for licensure that the person submitted to that person's home state, or in lieu of the same, a completed Uniform Application or Uniform Business Entity Application; and - Lives in a home state that awards insurance producer licenses to residents of this state on the same basis (reciprocity). Note that reciprocity does not apply to surplus lines licensees.

Application for License

A person applying for a resident insurance agent license must make application to the Commissioner on the Uniform Application. The applicant must meet the following requirements: - Is at least 18 years of age; - Has not committed any act that is a ground for probation, suspension, nonrenewal, or revocation; - Has satisfied any applicable requirements (educational requirement); - Has paid the applicable fees; and - Has successfully passed any examinations. A business entity selling, soliciting, or negotiating insurance must obtain an insurance agent license. The business entity must pay the applicable fees and designate a licensed agent as responsible for the business entity's compliance with the insurance laws and administrative rules.

Limited Lines Agent

A person authorized by the Commissioner to sell, solicit, or negotiate limited lines insurance.

Agent

A person licensed to solicit applications for, or to negotiate a policy of, insurance. A person NOT duly licensed who solicits or negotiates a policy of insurance on behalf of an insurer is an agent and becomes liable for all the duties, requirements, liabilities and penalties to which an agent of such company is subject. An agent represents the insurer and not the insured or their beneficiary.

A person who knowingly obtains information about an individual from an agent or the insurer under false pretenses has committed a(n)

Class 1 misdemeanor.

Maintaining a License

Each person who holds an insurance license in this state must complete 24 hours of continuing education (CE) every 2 years. Three of those hours must be completed on the subject of ethics. The licensees may apply the extra hours toward their next compliance period. There is no maximum number of carryover credit hours. Agents who hold an adjusters, property, or personal lines license must also complete 3 credit hours of an approved Flood course every other compliance period in addition to the ethics requirement. Nonresident licensees who meet continuing education requirements in their home states meet the continuing education requirements of this state. Nonresident licensees whose home states have no continuing education requirements must meet the requirements of this state. The licensees are required to complete continuing education by the last day of the licensee's birth month in the compliance year.

How is the Commissioner of Insurance selected for the office?

Elected in a general election (by the people) for a 4-year term. This is the chief officer of the Insurance Department.

What is a license suspension period for a second offense of violating state rules regarding records and reports?

Up to 1 year. For the first offense, a person may have his or her license suspended or revoked for between 1 and 6 months.

What is a foreign insurer?

A foreign insurer is an insurance company that is incorporated in another state, the District of Columbia, or a territorial possession. Currently, the United States has 5 major U.S. territories: American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands. For example, a company chartered in California would be a foreign insurer within the state of New York. A company chartered in Puerto Rico will be foreign in any U.S. state.

Insurance Producer or Producer

A person required to be licensed to sell, solicit, or negotiate insurance. Insurance producer or producer includes an agent, broker, and limited representative.

Broker

A person who, being a licensed agent, procures insurance for a party other than himself through a duly authorized agent of an insurer that is licensed to do business in North Carolina but for which the broker is not authorized to act as agent. A broker represents the insured or his beneficiary and not the insurer.

Examination

After completion and filing of the application, each applicant for license as an agent or an adjuster must pass an examination. If the licensee has been found guilty of any violation of any provision of the General Statutes, the Commissioner may require any licensed agent, adjuster, or motor vehicle damage appraiser to successfully pass a written examination, testing his/her competence and qualifications as a condition to the continuance or renewal of his/her license. If an individual fails the examination, the licenses will be revoked until the individual has passed an exam.

Commission

Payment to the agent by the insurance company for placing insurance, usually a percentage of the policy premium.

What is a fraternal benefit society?

A fraternal benefit society is an organization formed to provide insurance benefits for members of an affiliated lodge, religious organization, or fraternal organization with a representative form of government. Fraternals sell only to their members and are considered charitable institutions, and not insurers. They are not subject to all of the regulations that apply to the insurers that offer coverage to the public at large.

For licensing purposes, what is a resident?

A resident is a person who lives in North Carolina or any county outside this state that borders North Carolina. Any license issued to an applicant claiming residency in North Carolina will be void if the licensee holds a resident license in any other state, or claims to be a resident thereof.

What happens if a person is convicted of a criminal violation of the General Statutes?

The person's license will be automatically suspended until the license is reinstated by the Commissioner. The Commissioner can decide to reinstate the license at any time. As used in this regulation, "conviction" includes an admittance of guilt, a plea of guilty, and a plea of nolo contendere (acceptance of guilt without admission).

Restricted License for Overseas Military Agent

An individual may transact insurance under a restricted license as a foreign military sales agent representing a life insurance company in North Carolina, provided that the agent represents the insurance company only in a foreign country or territory and either on a United States military installation or with United States military personnel. The applicant must have the necessary training to serve as a life insurance agent and the insurance company. A restricted license can be renewed annually.

Subpoena

An order for someone to appear as a witness or submit testimony or evidence.

What is required for the Complaint Record?

Each insurer or its agents must maintain, for at least 5 years, a log of all written complaints listing the following: Department file number; Name of insured; Nature of the complaint, Department subject to the complaint; Policy or claim number of the insured; and Disposition of the complaint.

Home State

Means North Carolina and any state or territory of the United States in which an insurance agent maintains his or her principal place of residence or principal place of business and is licensed to act as an insurance agent.

Terminate

The cancellation of the relationship between an insurance agent and the insurer or the termination of an agent's authority to transact insurance.