Chapter 15 Part 2

Life and Disability Analyst

A Life and Disability Insurance Analyst is a person who, for a fee, advises an insured, beneficiary or person who:

Broker

A broker is someone who for compensation transacts insurance on behalf of another person, but not an insurer. There are no brokers for life or health insurance in California. All life licensees are agents when transacting life or disability insurance, regardless of the language the insurance company may use in its agency agreements, advertising, or other communication.

Life Agent Solicitation Prior to Appointment

A licensed life agent may present a proposal for insurance to a prospective policyholder on behalf of a life insurer for which the life agent is not specifically appointed. If the insurer issues the policy, the insurer has 14 days from when the application for life insurance was submitted to file a notice of Appointment with the Commissioner.

Disclosure of Policy Effective Date

A life agent, property and casualty broker-agent must provide at the time of application or receipt of premium the effective date of coverage, if known, or the circumstances under which coverage will be effective if there exists conditions precedent to coverage. This applies to all personal lines coverages, such as private passenger auto, homeowner and renter insurance, personal liability, and individual disability and health insurance.

California Annuity Suitability Education Requirements

A life-only agent who sells annuity products to individual consumers must complete an initial 8-hour training course prior to soliciting for sales. Agents must complete 4 hours of subsequent training every 2 years prior to license renewal.

Nonresident Agent

A person who does not reside in California but is licensed to represent an admitted insurer in this state.

Resident Agent

A person who resides in California and is licensed to represent an admitted insurer in this state.

Errors and Omissions (E&O) Insurance

Agents have a duty to carefully determine the insured's needs and suitability. Failing to meet these needs when making a recommendation can affect the insured's coverage or leave them without coverage due to the agent's neglect. The agent can be held legally responsible for neglect, errors, or omissions when making customer recommendations.

Internet Advertisements

All Internet advertisements directed to California insurance consumers must include the agent's California insurance license number in addition to the agent's principal place of business. Nonresident agents must clearly indicate their state of resident licensing.

Reporting of Administrative Actions and Criminal Convictions

All licensees and applicants for licenses issued by the CDI Producer Licensing Bureau are required to report any administrative actions or criminal convictions to CDI within 30 days of the final disposition of the matter. This requirement applies to both California resident and non-resident licensees and applicants.

Change of Address

All licensees are required to provide the Commissioner with a home address, business address, mailing address, and a valid e-mail address. In the event any or all of these addresses change, the change must be reported immediately to the Commissioner. Address changes are submitted electronically on the CDI website.

License Renewal

All licenses renew every 2 years on the last day of the month in which the license was originally issued. A licensee who has applied to renew a license will be entitled to continue operating under the existing license for 60 days after its specified expiration date, or until notified by the Department that the renewal application is deficient, whichever comes first. The applicant must satisfy all license renewal requirements, including:

Solicitors

An Insurance Solicitor is employed to aid a property and casualty broker-agent acting as an insurance agent or insurance broker in transacting insurance other than life, disability, or health.

Administrators

An administrator is any person who collects any charges or premium from, or who adjusts or settles claims on, residents of this state in connection with life, health or annuity insurance coverage and must hold a Certificate of Registration as an administrator issued by the Commissioner. An administrator must have a written agreement with an insurer. A copy of the agreement must be kept for 5 years after the agreement has ended.

Expired License

An application for renewal of an expired license without retesting may be filed after the expiration date until the same month and day of the next succeeding year, providing the delinquent fee for that year is paid.

Continuing Education Requirements

An individual licensed as a life-only or accident and health agent and also licensed as a property or casualty broker-agent, or an individual licensed as a property or casualty broker/agent must complete a minimum of 24 hours of instruction (including 3 hours of Ethics) prior to renewal of the license every 2 years.

Original License Appointment

An insurer filing a notice of appointment for an original license for an applicant declares that the applicant is of good reputation and worthy of the license.

Suspension or Revocation

Any licensed agent who has committed any offense denounced by the Code may have his/her license suspended or revoked by the Commissioner. A license may be suspended for up to 3 years. A license suspended for more than 2 years will require the agent to retake the prelicensing course and pass the qualifying exam. A license which has been revoked may not be reinstated within 1 year of revocation.

Transacting Without a License

Any person who acts, offers to act, or assumes to act in a capacity for which a license is required without holding a license is guilty of a misdemeanor, punishable by a fine of up to $50,000 and/or 1 year in jail. A person cannot transact business in any class of insurance without first being admitted as an agent for that class.

Restricted License

As a disciplinary measure when a violation of the Insurance Code would justify suspension, revocation or denial of license, the Commissioner may revoke the permanent license and issue a restricted license. A restricted license requires the agent to comply with all laws, and complete all CE requirements and license renewals on time for up to four years. The agent must request restoration of the permanent license once the terms of the restricted license have been completed.

Appointments

Before a licensed agent may transact insurance, the agent must first be appointed by an admitted insurer or a licensed agency which has a marketing agreement with one or more insurers. The insurer or authorized representative must file a Notice of Appointment with the Commissioner. The appointment becomes effective the date the notice is signed.

Fictitious Agency Names

Every individual and organization licensee and every applicant for a license must file with the Commissioner in writing the true name of the individual or organization and all fictitious names under which business will be conducted and, after licensing, must file with the Commissioner any change in or discontinuance of such names. The Commissioner may, in writing, disapprove the use of any true or fictitious name (other than the bona fide natural name of an individual) if the name:

Display of License

Every license to act as a property and casualty broker-agent must be prominently displayed in the licensee's office.

License Number Required on Documents

Every licensee shall prominently affix, type, or have printed on business cards, price quotations and printed advertisements in this state, his/her license number in type the same size as that indicated for address or telephone number.

Office Location

Every resident property and casualty broker/agent must maintain a principal office in this state for the transaction of business. The office address must be specified on all license and renewal applications.

Professional Organizations

Professional insurance organizations also have goals to enhance the competence and professional standard of conduct of its members who agree to uphold and be bound by the organization's Code of Ethics.

Inactive License

If renewal fees are paid and continuing education requirements are satisfied, but the agent has no active Notice of Appointment on file with the Commissioner, the license will be placed on inactive status. A license may be continued on inactive status as long as renewal fees are paid and continuing education requirements are satisfied. An inactive license will immediately be restored to active status upon submission of an Action Notice of Appointment.

Agent

In an insurance transaction, an agent represents the insurance company.

Life Licensee

Life Licensees are authorized to transact life and health insurance under one of the following:

California Long-term Care Education Requirements

Newly licensed agents who intend to market Long-Term Care insurance must complete an 8-hour course in Long-Term Care insurance in each of their first 4 years of licensing (two terms). After 4 years of licensing, the 8-hour LTCI course must only be completed once each license term prior to license renewal.

Alteration of Disability Application

No alteration of a written application for a disability policy can be made by any person other than the applicant without written consent. Any alteration made without consent by an officer or employee of the insurer is considered an act by the insurer and is a misdemeanor.

Free Insurance

No insurer or agent may participate in any plan to offer or effect any kind of insurance or annuities in this state as an inducement to the purchase or rental by the public of any property, real or personal or mixed, or services, without any separate charge to the insured for such insurance, nor can any agent, broker, or solicitor arrange the sale of any such insurance.

Insurance in Connection with Sales or Loans

No person engaged in the business of financing the purchase of real or personal property may require the purchaser of that property to obtain insurance for that property through a particular agent or broker. A lender cannot refuse to accept insurance provided by an acceptable insurer on the grounds that the insurance provides more coverage than is required.

Application

Once an application for license is filed, the Commissioner may make an investigation and require the filing of supplementary documents necessary to determine whether the prerequisites for licensing have been met. The application for a license may not be submitted prior to successfully passing the required exam(s), and is only submitted electronically through the Department of Insurance website.

Prelicensing Education

Prelicensing education is a requirement to obtaining an agent or broker license in California. The requirements include:

Pretext Interviews

Pretext interviews are prohibited in the transaction of all forms of insurance (but not in the investigation of a claim). A pretext interview involves an attempt to obtain personal, non-public information through deception, leading the person to believe the "interviewer" is someone other than a licensed agent or insurance company representative acting in an authorized capacity.

Termination of License

Termination of License A licensee may terminate his/her license by surrendering it to the Commissioner. If the license is in the possession of an employer or insurer, the agent may notify the Commissioner in writing of the intent to terminate the license and the inability to return the license.

Denial of License Application, Suspension, or Revocation

The Code identifies a variety of reasons for which a license application may be denied following a hearing into the allegations of the Commissioner. These same reasons may be used as the basis for suspending or revoking an agent's license after it has been issued, or if the applicant:

Denial of License Application, Revocation of a License Without a Hearing

The Commissioner has the right to deny an application without a hearing, or to revoke an agent's license if the applicant or agent has:

Recordkeeping Requirements

The Commissioner will specify the manner and type of records to be maintained by those licensees acting as insurance agents and brokers and the location where the records must be kept. Life and Disability insurance agents must maintain records in their place of business for at least 5 years and must be open to inspection or examination by the Commissioner at all times. Original (or certified copies) must be delivered to the Commissioner within 30 days of request.

Agent vs. Broker vs. Solicitor

The duties and responsibilities of a licensee will vary depending on the type of license held. The following requirements apply:

Ethical Conduct

The essential principles of Ethics in the insurance industry are:

Aiding a Non-Admitted Insurer to Transact

The following are considered misdemeanors with regard to a non-admitted insurer, except when performed by a surplus lines broker:

Exemption from Insurance Licensing Requirements

The following are exempt from insurance licensing requirements:

Methods of Reporting

To report information to CDI in writing, use the background change disclosure form available on the CDI website at www.insurance.ca.gov and select "Producer Background Information" under "Agents & Brokers." Additional information regarding this requirement, and the form, can be found by following the link or by typing "background change" in the search box on CDI's home page.

Life Settlement Broker

Under California law, a Life Settlement Broker is exclusively the representative of the policyowner who seeks to sell his interest in the policy. The Life Settlement Broker must be a licensed Life-Only agent for more than 1 year or have completed a 15-hour course in life settlements. A Life Settlement Broker must file an application and post a $10,000 surety bond. As a fiduciary, the Broker must disclose all purchase offers received to the policyowner.

Examination

Upon completing the required prelicensing education requirements, the applicant must pass a state licensing exam. The license exam must be passed within 12 months of the date of completion of the applicable prelicensing course.

Temporary Authority

Upon written notification to the Department of Insurance, in the event of the incapacity or death of an agent, the conservator, administrator, or executor of the agent's estate may be permitted to wind down the affairs of the agent, including receiving commissions for new business submitted by the agent prior to incapacitation or death, and any renewal commissions to which the agent would be entitled by virtue of the agent's contract with the insurer(s).

Noncompliance

Whenever the Commissioner may have good cause to believe that any property and casualty broker/agent has failed to keep or maintain the records required, the Commissioner may issue an order requiring the licensee to establish and complete those records within 60 days from the date of the order. Notice of the order may be given by certified mail addressed to the office of the licensee.