Chapter 5: Florida Statutes, Rules and Regulations Common to All Lines

Code of Ethics Law

Rule 69B-215 F.A.C- life Underwriters ( For Agents)

Churning

Replacing policies within the she compensation, often by the sand producer, in order to generate commissions. Also, using policy values in an existing policy to purchase another policy or contact with the and insurer.

Financial Services Commission Duties

Supervises the Office of Insurance Regulation and the Office of Financial Regulation

Examination

The CFO and OIR have the right to examine insurers books and records at least once every 5 years or as frequently as deemed appropriate The cost of the examination is the responsibility of the insurer being examined.

Who administers the Insurance Laws of Florida

The Chief Financial Officer CFO, the Financial Services Commission and the office of Insurance Regulation

Public Adjuster

any person who, for compensation prepares complete or files an insurance claim form for an insured or third party claimant; may also be a compensated person who aids in negotiating or effecting the settlement of claims.

Controlled Business

•Selling insurance only to yourself or people you know or persons they or their spouses are in business with. •Cannot exceed 50% of the aggregate commission and compensation received within a 12 month period.

Concealment

•The intentional withholding of a material fact that is crucial in making a decision. •In insurance, it is the withholding of information that will result in an imprecise underwriting decision. Concealment may void a policy.

Appointment

•The licensed individual must be properly appointed by an insurer to transact insurance •Appointment means the authority given by an insurer or employer to transact insurance or adjust claims on behalf of an insurer or employer. •Agent has 4 years(48 months) to have a license appointed; if not adjoined in that time, license terminates.

Unfair Descrimination

Knowingly making our permitting and unfair discrimination between individuals with regards to the business of insurance.

Admitted/ Authorized Insurer

Licensed and authorized to transact business in Florida Gets a certificate of Authority

License Types

•Agent •Public Adjuster •All- lines Adjuster •Agency •Unaffiliated Agent

Agent

General lines agent, Life Agent, Health Agent, or Title grant

Insurance Agencies

•Any business location at which an individual engages in any activity for which an agents license is required must be licensed •A licensed agent must be designated to be in a full time charge of each licensed agency location and is deemed the "Agent in Charge" •Branch locations can have the same agent in Charge providing they are present when activities requiring licensure are occurring •Branch Locations are not required to be licensed if they transact business under the name and the federal tax ID of the licensed agency(effective October 15,2015)

Unfair claims Settlements

•Any form of misrepresentation or pertinent fact •Agent and insurer must acknowledge claim promptly •Insurer must process claim in a timely manner •Insurer cannot delay the payment benefit •Insurer must provide a reasonable explanation in writing if there is a reason for denial.

Scope

•Business of insurance is a public trust in which all agents have the common obligation to work together in the best interest of the insuring public.

Transacting Insurance

- solicitation or inducement to purchase (Presenting) - preliminary negotiations toward the sale of insurance(take app) - effecutuation of a contract of insurance( issue & deliver) - transaction of matters subsequent to effectuation of a contract of insurance or arising out of it( servicing the client after sale)

Agency

A business location at which an individual, firm, partnership corporation, association or other entity engages in any activity that by law can only be performed by licensed insurance agent; does not include and insurer or adjuster.

Transferring A License

A license in good standing cab be transferred from another state as long as it is in the same line of Authority and has been active for at least one year prior to relocation. •The agent must become a resident of Florida and submit an application and the appropriate fees within 90 days

Fraud Against the Public

CFO can turn the matter over to the attorney General prosecution

Chief Financial Officer

CFO is independently elected Member of the governors cabinet Head of the department of Financial Services Commission

Investigation

DFS and OIR may investigate any person who has violated or is violating the insurance code DFS can investigate the accounts, records and insurance affairs of any agent adjuster, insurance agency or other person subject to its jurisdiction. OIR can investigate the accounts, records, and transaction of insurers and or any company involved in doing business with a domestic insurer. ANY individual who willfully obstructs an investigation of guilty of a misdemeanor.

Nonadmitted/ Unauthorized Insurer

Does not come under jurisdiction of the CFO & Office of Insurance Regulation with regard to *Examination of its financial soundness examination and approval of tours of coverages offered *advertising through the mail IF found guilty aiding and abetting a non admitted insurer, 3rd degree felony; Liability for all unpaid claims; Suspension or revocation of all insurance licenses

Certificate of Authority

Issued by the office of insurance regulation Company is authorized, licensed, Admitted, or certified. Unauthorized Non admitted, Non certified or unlicensed not allow to sell policies in the state( do not come under the jurisdiction of the State of Florida.

Obstructing a DFS or OIR

Misdemeanor

Twisting

Misrepresentation by an agent to induce a policyowner to lapse an existing policy in order to switch users •Also called replacement •Twisting is prohibited

Fraternal Life Insurance Organization/Fraternal Benefit Societies

Operates as a corporation,Society,or association Is for the benefit of its members and beneficiaries Not for profit; Lodge system;Ritualistic; Elected form of Government Life insurance is in the form of a certificate of membership instead of a policy(Group Insurance)

Stock Insurers

Owned and controlled by stockholders Stockholders have voting rights(elects Board of Directors) Sell NonPar & Par Policies Dividends are a share of profit and ARE taxable

Purpose of Regulations

Public Interest =Public Trust(consumer Protection) Financial importance of Insurance industry on the National Economy Technical character of insurance contracts requires expert control.

Churning

Replacing policies within the same company, often by the same producer in order to generate commissions. Also, using policy values in an existing policy to purchase another policy or contract with the same insurer.

Coercion

To impose one's will on another. To say to a client that they must buy one product in order to qualify for another. •ex of Coercion(is a loan officer who claims you must buy mortgage life insurance in order to qualify for the loan)

Unaffiliated Agent

a licensed agent not appointed by any insurer but if self- appointed; acts as an independent consultant for a fee that must be established through a written contract with the parties involved.

Internal Replacement

churning is also called internal replacement and is prohibited unless agent can prove it is in the best interest of the applicant.

The aggregate liability of the FL life and Health Guaranty Association may not exceed the following.

°$100,000 in total net cash and cash withdrawal value for life insurance °$250,000 in net cash surrender and cash withdrawals for deferred annuities °$300,000 for all benefits including cash value , with respect to any one life.

Renewal and Termination of Appointments

• An agents appointment regains in effect until revoked suspended or terminated. •The insurer is responsible for renewing the appointment and paying the fee •Late renewal requests must be accompanied by a late filing fee paid by the insurer, not the licensee insurers may require appointee to take training and education courses •insurers cannot appoint or renew licenses that have not met continuing education requirement.

Rebating

• Any inducement offered in the sale of an insurance product that is not specified in the policy •Both the offer and the acceptance of a rebate are illegal •In FL, rebates must be reflected on the rebate schedule and cannot be unfairly discriminatory •Agents are required to maintain a copy of all rebate schedule for the most recent 5 years.

Acting as an Insurer without proper license

• Conviction up to third degree felony •Liability for all unpaid claims •Suspension or revocation of all insurance licenses

Code of Ethics

•"Right and Wrong" Appropriate & Inppropriate behavior by agents •Both NAIFA and HAHU issue their own •Incorporated into FL State Laws under Rule 69 B-215 •Violation of ethic can result in license suspension or revocation

Twisting and Churning

•1st degree misdemeanor •Administrative fine of $5,000 each of non willful •Aggregate fine $50,000 for non- willful violations •Administrative fine of $75,000 each if willfull •Aggregate fine $250,000 for all willful violation

Scope of License

•A life agents license covers all classes of life insurance except limited credit. •No agent shall transact business for any line for which they do not have a current license or appointment from an authorized insurer.

All Lines Adjuster

A self-employed person who works for insurers or adjusting firms to ascertain and determine the amount of claims, losses or damages payable under contracts and attempt to settle those claims.

Suspension, Termination Revocation of a License

Activities by an agent with may result in the Revocation or suspension of an agents license.

CFO Duties

Administers Regulation of the insurance agents, insurance fraud and insurance consumer protection Enforces the insurance code and carries out those duties set forth by the code.

Record Keeping

Agents are required to maintain records of transactions for three years.

Reporting of Actions

Agents must notify Dept of financial service of changes of name, address, business, phone or email within 30 days.

Unaffiliated Agent/ Appointments

An agent who acts as an independent consultant in the business of analyzing policies providing insurance advice or counseling or by making recommendations or comparisons of policies for a fee established or written contract signed by the parties •May not be affiliated with an insurer, insurer appointed agent, or insurance agency that employees or contracts with insurer appointed agents

False Advertising

Any form of communication used to broadcast information that is untrue, deceptive or misleading that applies to the business of insurance is our anyone connected with it False Advertising usually includes misrepresenting key facts and information about an insurer or a policy.

Commissioner of the Office of Insurance Regulation

Appointed by the Financial Services Commission

Continuing Education

Every 2 years each licensed agent in Florida must complete 24 hours of continuing education to renew their license and appointment. •As part of the the 24 hours of continuing ED, each licensee must compete a 5 hour course that is specific to the license held •This 5 hour course must also cover law updates, ethics, disciplinary needs, product suitability other related topics required by the Department. • Agents who have been licensed for more than 6 years must complete 20 hours of continuing education every 2 years including 5 hours update course. •Excess hours earned may carry over to the next compliance period. •The department may grant a CE extension of up to 1 year of good cause is shown. • A non resident agent may use the hours earned in his home state to meet the Florida CE requirement of the home state has reciprocity with Florida.

Misrepresentation

Examples: Guaranteeing policy dividends; using inaccurate numbers on a chart; false information about provisions or contact terms; Using term "Vanishing premiums " Implying " Flexible Premium" policies will fund themselves after the initial premium is paid.

Twisting

External replacement; Illegally inducing any person to lapse, forfeit surrender, convert, an existing policy to replace it with another insurers policy* Fine can be up to $75,000 per each willful violation.

Defamation

False or maliciously critical statement of •another person •product or business calculated to injure

Financial Service commission composed of

Governor, Chief Financial Officer CFO,Attorney General, Commissioner of Agriculture

Florida Life and Health Guaranty Association

Guaranty Associations protect policyowners, insureds, beneficiaries, and anyone entitled to payment under an insurance policy from incompetency and insolvency of insurers. •Payment limits are set by law The Association is funded by its members through assessments •The aggregate liability of the FL life and Health Guaranty Association may not exceed the following. °$100,000 in total net cash and cash withdrawal value for life insurance °$250,000 in net cash surrender and cash withdrawals for deferred annuities °$300,000 for all benefits including cash value , with respect to any one life.

Investigation

Has power to to conduct investigation that concerning Florida financial institutions codes or rules adopted by the Commissioner Failure to comply with a subpoena or order will result in a contempt of court and costs for the investigation are assessed against the person being investigated

Commissioner of Financial Regulations

Head of the office for Financial Regulation

Alien Insurer

Home office is chartered in any country other than the United States It is considered an alien insurer in ALL States & Territories.

Domestic Insurer

Home office is domiciled( incorporated;chartered) in the same state where policies are being sold

Foreign Insurer

Home office is located in a different state than where the policies are being sold. It is considered a foreign insurer in all states and territories other than its home state

Mutual Insurer

Incorporated insurer without permanent capital stock Owned and controlled by its policyowners Policyowners have voting rights(elects board of directors) Sells only Participating Policies Dividends are a return of premium and are not taxable.

Office of Office OIR Powers and Duties

Insurance company Regulation, including:licensing, rates policy, forms, market conduct, claims, certificates of Authority and solvency.

Legal Reserve Requirement

Insurers must maintain enough funds in the RESERVE account to cover future liabilities to policy owners;as promised in the insurance contract.

Fraud

Internal deception (lie) that results in injury for financial gain

Sliding

Representing to an applicant that a specific ancillary coverage or product is either: •Required by law when it is not •Included in the policy at no charge when there is a charge •Charging without the applicant informed consent

Power and Duties

Responsible for all activities of the financial services commission financial related to regulation of banks, credit unions, other financial institutions, finance companies and securities industry Includes a Bureau of financial investigation that investigates wrong doing and may refer suspicious violations of criminal law to state or federal law enforcement of prosecuting agency

Misrepresentation

Untrue, deceptive or misleading information in regard to the terms of an insurance contract, insurance company, insurance agent including the financial standing of any insurer. • Omission of a fact material. ° Innocent misrepresentation of a material fact is grounds to void a contract. Misrepresentations of immaterial facts makes contract void able.

Violating a Cease and Desist Order

•Administrative penalty up to$50,000 •Suspension or Revocation of the license or certificate of authority and/or •Any other relief as provided in the Insurance Code

Commissions

•Agents are compensated by a commission which is a percentage of the initial(first year) and subsequent premiums •Commissions may only be shared with another licensed and appointed agent

Examination Process

•An exam application may be submitted either before or after submitting the license application to the department. •An exam application must be accompanied by the exam fee •A notice containing the time and place of the examination will be emailed to the applicant. •The exam will be held at designated test site and will take place as soon as reasonably possible. •Any applicant who fails to appear, fails to complete or fails the exam may repay the required fee and retake the exam. •The department may require a licensee with a lapsed or suspended license to pay the exam fee and retake the exam before the license is renewed or reinstated •The license exam may not be taken by an applicant more than 5 times in a 12 month period.

Reporting of Actions •30 Days

•Being found guilty or pleading guilty, or no contest to a felony or crime punishable by imprisonment of 1 year or more in any jurisdiction • Any administrativeactin taken by any government or other regulatory agency that relates to insurance, securities, or activities, involving fraud, dishonesty,untrustworthiness, or breach of fiduciary duty

Failure to answer a subpoena or order of CFO

•Contempt of Court •$1,000 fine

Aiding and Abetting an Unauthorized Insurer

•Conviction of a third degree felony •Liability for all unpaid claims •Suspension or revocation of all insurance licenses

Persons Required to be Licensed

•FL law requires any individual who solicits insurance to hold a valid license issued by the Department of Financial Services

Agent Regulations

•Fiduciary Capacity •Commissions •Controlled Business •Record Keeping

License Process

•File a written application completed under oath and signed by the applicant. the application; must include full name, age, ss#,residence address, business address, mailing address, contact phone, and email address •Meet all required qualifications •Pay all application fees(non refundable) in advance to the department •Provide proof of completion or in process of completing pre-licensing, if required. •If an applicant is denied a license based on the application, the applicant must wait 30 days from the date of denial before applying again

Fiduciary Capacity

•Is someone of trust •Agents are legally obligated to treat applicants and insureds in an ethical manner •It is illegal for insurance producers to commingle premiums collected from applicants with their own personal funds

Knowingly making a false or fraudulent application for any license or violating any provision of the insurance code

•License Denial, Suspension, Revocation, Refusal and a fine of not less than$500 not more than $3500, and or imprisonment for not more than 6 months for each violation •In addition to a fine, CFO may access an amount equal to the amount of commission of agent earned.

Forms of Unfair Marketing Practices

•Misrepresentation •Concealment •False Advertising •Rebating •Coercion •Sliding •Churning •Twisting •Defamation

Fraudulent Insurance Claims and Applications

•Third degree felony

Forging signatures on an application or policy document

•Third degree felony •$5,000 for each if non willful violation •Aggregate fine $50,000 for non- willful violations •$75,000 if willfull violation •Aggregate fine$250,000 for all willful violations

Activities by an agent which may result in revocation or suspension of an agents license are -

•Unlawful Rebating •Twisting •Misrepresentation of a policy, agent, or insurer •Excessive Controlled Business •Fraud •Violating any rule of the CFO •Violating any provision of Florida Insurance Law •Incompetence of untrustworthiness •Violating the code Ethics •Sale of an unregistered security •Representing an authorized insurer •Sliding •Felony Conviction