Florida Statutes, Rules, and Regulations

Department of Financial Services

-Approves issue of licenses to agents -Regulates insurance claims - Investigate allegations of ethics violations - Administers justice within the domain of insurance

Financial Services Commission

: responsible for final approval of rules developed by each office. All regulatory decisions are vested with the offices. (a) Office of Financial Regulation (OFR) - regulates the banking, finance and securities industries in Florida. (b) Office of Insurance Regulation (OIR) - regulates insurance companies. Members: - Governor - Attorney General - Chief Financial Officer - Commissioner of Agriculture

Certificate of Authority

A "license" is authority granted by the commissioner pursuant to this code authorizing the licensee to engage in a business or operation of insurance in this state other than as an insurer, and the certificate by which such authority is evidenced.

License Requirements

All licensed agents are required to take a certain amount of Continuing Education each 2-year period. These amounts are subject to change from time to time and should be checked by visiting the DFS web site. Currently, every agent must do 24 hours every 2 years, with 5 hours on a subject specific to their license. The 5 hour course will include subject such as insurance law updates, ethics, premium discounts, and insurance product suitability.

Chief Financial Officer

An elected official. Is the head of the Department of Financial Services (DFS).

Insurance Contract

An insurance contract is a "contract under which one party (the insurer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder."

License Types

Commercial Lines Personal Lines General Lines Limited Lines Life-Only Fire and Casualty Accident and Health

Alien Company

Domiciled in another country

Foreign Company

Domiciled in another state or US territory (not a foreign country).

Ethics

Ethics essentially means "doing the right thing." Agents are in a position of trust, both in reference to the companies they represent and to the customers they advise. Any violation of that trust to serve the agent's own interest is a breach of ethics. The subject of ethics can be explored further in CE and designation programs such as CIC, CPCU and ChFC.

Unfair Discrimination

Means discriminating against people based on race, gender, age, marital status, sexuality, etc. where there is no actuarial basis for discriminating, and/or where the law protects said people from discrimination.

Coercion

Means finding ways to force the public to do business with you instead of other people.

Misrepresentation

Means lying or deceiving a person about any of the benefits terms o conditions of an insurance contract.

Defamation

Means saying bad or mean things about people.

Insurance Transaction

Means solicitation, negotiation, and putting into effect of insurance policies. It also includes actions after the policy goes into effect, such as issuing endorsements.

Sliding

Means telling the insured that an optional coverage is either required by law or included in the policy at no charge. It also means adding a coverage to a policy without disclosing the coverage was added for additional premium.

Stock Company

One that issues shares of stock to shareholders. Its purpose is to make a profit for the shareholders.

Controlled Business

Policies written for your own family, your business, or other entities or organizations that you have a financial interest in. What you can not do is open an agency with the intention of selling more than 50% of the insurance to yourself and family and your own corporations. In FL, "controlled business" (writing insurance on things you have a financial interest in) is not OK if it is more than 50% of the insurance you write.

Unfair Claims Practices

Practices involve lying, concealing data, or intimidating people in an attempt not to pay claims. Also failing to make timely progress and to uphold the contract qualify as unfair claims practices.

Investigation

Process through which an insurance company or examiner obtains necessary information to evaluate a claim.

Office of Insurance Regulation

The Commissioner of Insurance is in charge of the Office of Insurance Regulation (OIR). They are in charge of examining insurance company financials (books and records), and approving companies to do business in the state. In this regard, they issue a Certificate of Authority to an insurance carrier.

Twisting

The act of inducing or attempt to induce a policy owner to drop an existing life insurance policy and to take another policy that is substantially the same kind by using misrepresentations or incomplete comparisons of the advantages and disadvantages of the two policies.

Fiduciary Capacity

a fiduciary prudently takes care of money or other asset for another person. One party, for example a corporate trust company or the trust department of a bank, acts in a fiduciary capacity to the other one, who for example has entrusted funds to the fiduciary for safekeeping or investment.

Agent

a person employed to sell insurance policies.

Fraternals

insurance issued by a fraternal order or association to its members, formerly meeting its obligations by assessments upon members at the time obligations arose but now generally by a legal reserve.

Insurance Guaranty Fund

A fund administered by a U.S. state to protect policy holders in the event that an insurance company defaults on benefit payments or becomes insolvent. The fund only protects beneficiaries of insurance companies that are licensed to sell insurance products in that state.

Appointments

Agents are appointed by insurance carriers, which is to say they are authorized by a carrier to write insurance policies "on company paper." Agents who have binding authority and do not need approval from a company employee to secure coverage are said to "have the pen" with that company. That is, their signature binds the company to a contract. Customer Representatives - people with the 4-40 license - are only allowed to transact insurance inside the office, supervised by a 2-20 General Lines Agent. A Genral Lines Agent or a Surplus Lines Agent must appoint and supervise the Customer Representative. Paying a commission or a performance incentive/bonus to a 4-40 can result in license suspensions, fines, and/or loss of agency license. It has been a common problem in the industry and should be treated with care.

Maintaining a License

All are required to take a certain amount of Continuing Education each 2-year period. Amount are subject to change from time to time and should be checked by visiting the DFS web site. Currently, every agent must do 24 hours every 2 years, with 5 hours on a subject such as insurance law updates, ethics, premium discounts, and insurance product suitability.

Licensing

Anyone who solicits or advises on insurance in Florida must be licensed. See FS 624.425 (specifying that companies can not sell except through a Florida agent) and 626.112 (specifying that individuals may only solicit insurance if they are licensed and appointed by a company).

Domestic Company

Domiciled in FL

False Advertising

False advertising or deceptive advertising is the use of false or misleading statements when promoting a product. It may include misrepresentation of the product at hand, which may negatively affect many stakeholders, especially consumers. Advertising has the potential to persuade people into commercial transactions that they may have otherwise avoided.

Unlicensed Entities

In addition to the information on unauthorized entities discussed in the Health chapter, it is important to read FS 626.901, which is printed in the study manual. You can always find out if a company is authorized to do business in Florida by checking with the DFS. And you should do so form time to time, as a company's authority to do business in Florida can be revoked.

Office of Financial Regulation

In charge of examining insurance company financials (books and records) and approving companies to do business in the state. The issue a Certificate of Authority to an insurance carrier.

Fraud

Is intentional deception for ones own gain. It is a criminal act and is likely to result in fines and imprisonment.

Financial Services Regulation

Key Function: provides regulatory oversight for Florida's financial services providers. Mission: to protect the citizens of Florida, promote a safe and sound financial marketplace, and contribute to the growth of Florida's economy with smart, efficient and effective regulation of the financial services industry.

Mutual Company

Owned by policyholders. Rather than pay dividends to stockholders, it pays excess profits back to policyholders.

Rebating

Returning a portion of the premium or the agent's/broker's commission on the premium to the insured or other inducements to place business with a specific insurer. Rebating is illegal in the majority of states. Insurers must use filed rate credits or have supporting methodology.

Agent and Adjuster licensing and investigations

Under the CFO, the DFS approves issue of licenses to agents, regulates insurance claims, investigates allegations of ethics violations, and administers justice within the domain of insurance.

Insurer

a person or company that underwrites an insurance risk; the party in an insurance contract undertaking to pay compensation.

Adjuster

an insurance agent who assesses the amount of compensation that should be paid after a person has made a claim on their insurance policy.

Risk Retention Group

is an alternative risk transfer entity created by the federal Liability Risk Retention Act (LRRA). RRGs must form as liability insurance companies under the laws of at least one state—its charter state or domicile.

Insurance Fraud

is any act committed with the intent to obtain a fraudulent outcome from an insurance process. This may occur when a claimant attempts to obtain some benefit or advantage to which they are not otherwise entitled, or when an insurer knowingly denies some benefit that is due.

Reinsurance

is insurance that is purchased by an insurance company (the "ceding company" or "cedent" or "cedant" under the arrangement) from one or more other insurance companies (the "reinsurer") directly or through a broker as a means of risk management, sometimes in practice including tax mitigation and other reasons described below.

Churning

means excessive trading by a broker in a client's account largely to generate commissions. Churning is an illegal and unethical practice that violates SEC rules and securities laws.

Office of Financial Regulation

regulates the banking, finance and securities industries in Florida.