Chapter 15 - State Laws

Limited Representative

A limited representative is authorized by the Commissioner to solicit or negotiate contracts of insurance that are restricted in the scope of coverage they afford.

Supervised Examination

A timed, closed book examination that is monitored and graded by a disinterested third party.

False Financial Statements

Intentionally making a false statement about an insurer's financial condition or intentionally making a false entry or omitting a true entry in an insurer's document in order to deceive an examiner or public official.

Compliance Year

The second year of the biennial compliance period.

Unfair Methods of Competition

Unfair methods of competition and unfair or deceptive acts or practices are commonly known as unfair trade practices. All persons engaged in the business of insurance are prohibited from committing these acts.

Contract of Insurance

A contract of insurance is an agreement that obligates an insurer to compensate an insured when there is destruction, loss, or injury to something in which the insured has an interest.

Unfair Discrimination

Allowing individuals of the same class and equal life expectancy, of the same class and hazard, or of the same class and risk to be charged different rates for the same insurance coverage. It is not unfair discrimination if the rate differential is based on sound actuarial principles or is related to actual experience. An agent or representative may not discriminate in favor of any person.

Agent

An agent is a person licensed to solicit applications for or to negotiate a policy of insurance on behalf of an insurer. A person not duly licensed who solicits or negotiates a policy on behalf of an insurer is an agent within the intent of the law and becomes personally liable for all the duties, requirements, liabilities, and penalties to which an agent is subject. A company that compensates a person for soliciting insurance policies accepts and acknowledges the person as its agent in the transaction.

Blank Policies

An agent or limited representative who signs a blank contract or insurance policy is guilty of a Class 3 misdemeanor and upon conviction will be punished by a fine of $1,000 - $5,000.

Broker

A broker is a person who is licensed as an agent and obtains insurance for the insured through a duly authorized agent of an insurer licensed to do business in this state, but for which the broker is not authorized to act as an agent. A person not duly licensed who procures insurance for the insured is a broker within the intent of the law and becomes personally liable for all the duties, requirements, liabilities, and penalties to which a broker is subject.

Activities by Lenders and Temporary Contracts

A lender may not require the purchase of insurance from that lender or an affiliate of the lender as a condition to the making, renewing, or refinancing of any loan. A lender engaged in making or servicing real estate mortgage loans on 1-4 family residences must accept a temporary written contract of insurance issued by a licensed insurance agent, broker, or insurer as evidence of insurance. A lender is not prohibited from refusing to accept a binder as long as the refusal is reasonable. To be acceptable, the binder must include: The name and address of the insured The name and address of the mortgagee A description of the insured collateral A provision that it may not be cancelled within a term of the binder except with 10 days' written notice to the mortgagee The amount of insurance bound The binder must be accompanied by a paid receipt for one year's premium, except in the case of a policy renewal subsequent to the closing of a loan. The binder must also include an undertaking of the agent to use their best efforts to have the insurance company issue a policy.

Adjuster

An adjuster is an individual who, for a salary, fee, commission, or other compensation, investigates or reports to their principal with respect to claims arising under contracts other than life or annuities. An attorney who occasionally adjusts losses incidental to their profession or an adjuster of marine losses are not considered adjusters within the intent of the law.

Payment of Premium to Agent

An agent, broker, or limited representative who acts for a person other than themselves when negotiating a contract of insurance is considered the company's agent for the purpose of receiving the premium. Any producer receiving premiums through fraudulent representations is guilty of a Class 1 misdemeanor.

Embezzlement

An insurance agent, broker, or administrator who does any of the following with money or consideration received based on their performance will be guilty of a felony: Embezzles Fraudulently converts for their own use or withholds Disposes of Appropriates Lends Invests Embezzlement in the amount of $100,000 or more is a Class C felony; less than $100,000 is a Class H felony.

Marketing or Research Surveys

An insurer or its agents must clearly identify questions designed to obtain information solely for marketing or research purposes from those in connection with an insurance transaction.

Penalty

If the value of the money, goods, property, services, chose in action, or other thing of value is $100,000 or more, a violation is a Class C felony. If the value of the money, goods, property, services, chose in action, or other thing of value is less than $100,000, a violation of this section is a Class H felony.

Policy Forms

No policy form for insurance transactions may be used unless it has been filed with the Commissioner by the Bureau and it has either been approved or 90 days have elapsed and the form has not been disapproved.

Powers and Duties of the North Carolina Insurance Underwriting Association

The Association has the power to: Issue insurance Reinsure members and assess its members for providing reinsurance Cede reinsurance to its members and purchase reinsurance on behalf of its members Pledge the proceeds of assessments and other available Association funds as a source of revenue to secure financing arrangements necessary to fund deficits of the Association. This may include borrowing from member companies Publish all homeowners' rate filings with the Department of Insurance in the North Carolina Register

Correction of Recorded Personal Information

Within 30 days after an insurer receives a written request from a client to correct, amend, or delete personal information about the client, the insurer must either: Correct, amend, or delete the disputed information; or Notify the client of its refusal to make such corrections, the reason for the refusal, and the individual's right to file a formal statement with the insurance institution

Insurance Information and Privacy Protection Act

establishes standards for the collection, use, preservation, and disclosure of information gathered during insurance transactions,

Ethics Course

A continuing education course that deals with usage and customs among members of the insurance profession involving their moral and professional duties toward one another, toward clients, toward insureds, and toward insurers.

Continuing Education Course

A course that is directly related to insurance principles and practices or a course designed and approved specifically for licensees. This does not include a business course of a general nature or an insurance marketing or sales course. Courses must be for instructional purposes only and not for promoting the interests of, or recruiting employees for, any particular insurance agency or company.

License Qualifications

A person applying for an insurance producer license must submit an application to the Commissioner and declare that statements made on the application are true and complete to the best of the individual's knowledge. Before accepting the application, the Commissioner must find that the individual: Is at least 18 years of age Has completed at least 20 hours of prelicensing education for each license sought Has taken and passed a required licensing examination Paid the applicable fees Has not committed any act that would be grounds for license probation, suspension, revocation, nonrenewal, or denial

Insurance Producer

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

Records Maintenance/Inspection

All companies, agents, or brokers doing any kind of insurance business in North Carolina must make and keep a full and correct record of the business done by them. This includes: The policy/certificate of renewal number, date, term, amount insured, premiums The person(s) to whom it was issued Information from these records must be provided to the Commissioner on demand, and the original books of record shall be open to the Commissioner's inspection whenever they so request.

Examinations, Hearings, and Investigations

All examinations, hearings, and investigations may be conducted by the Commissioner personally or by one or more deputies, investigators, actuaries, examiners, or employees designated for the purpose. If the Commissioner or designee is of the opinion that there is evidence to charge any person or persons with a criminal violation, the Commissioner may arrest them with warrant or cause. The hearing will be at a time and place designated in a written notice given by the Commissioner to the person cited to appear. The notice must state the subject and specific charges, if any. The Commissioner must notify all interested parties of a hearing's time, place, and subject.

Broker Licensing

An applicant for a broker's license must already possesses an agent's license and maintain an agent's license throughout licensure as a broker. A broker's license will be issued only for the same lines of insurance authorized under the agent license. Suspension or revocation of the agent license will immediately suspend or revoke the broker's license as well. A broker's license must be renewed annually on April 1st. Prior to the issuance of a license as a broker, the applicant must post a $15,000 surety bond in favor of the state of North Carolina. The bond may not be terminated unless at least 30 days' prior written notice is given by the surety to the licensee and the Commissioner.

Resident License

An individual residing in this state will qualify for a resident license. A resident license will be void if the licensee applies for a license in and claims to be a resident of another state. Any licensee who ceases to maintain residency in this state must personally deliver or mail their insurance license to the Commissioner within 30 days after terminating residency.

Proof of Loss Forms

An insurer must provide claim forms to a claimant within 15 days of receiving notice of loss. If the insurer fails to do so, the claimant will be deemed to have satisfied the proof of loss requirements as long as the claimant provides the supporting documentation within the policy's time frame.

Referral of Business

An insurer, agent, or adjuster may not recommend the use of a particular service or source for the repair of property damage without clearly informing the claimant that they are under no obligation to use the recommended repair service. Gratuity or remuneration may not be received from a repair service for recommending that repair service to claimants. However, discounts agreed to by repair services are not prohibited.

False Statements in Applications

Any agent, physician, applicant, or person who knowingly makes any false or fraudulent statements or representations on an insurance application for the purpose of obtaining any fees or commissions from a company engaged in the business of insurance will be guilty of a Class 1 misdemeanor.

Report to the Commissioner

Any insurance company, employee, representative, or licensee who has reason to believe that any other person has violated the law or that any entity licensed by the Commissioner is financially impaired must inform the Commissioner and provide a complete statement of all relevant facts. The Commissioner may suspend, revoke, or refuse to renew the license of any licensee who fails to comply.

Judicial Review

Any order or decision made, issued, or executed by the Commissioner will be subject to a judicial review in the Superior Court if a petition is filed within 30 days from the date of delivery of the order or decision. The judicial review does not apply to an order regarding financial impairment or a decision that the premium rates charged or filed on any class of risk are excessive, inadequate, or unfairly discriminatory.

Appeal of Commissioner's Order

Any order or decision of the Commissioner is subject to judicial review. Whenever a Bureau rate is held to be unfairly discriminatory or excessive and no longer effective by order of the Commissioner, the members of the Bureau may continue to use that rate for the interim period pending judicial review. However, each member places in escrow the amount that is potentially unfairly discriminatory or the excessive portion of the premium collected during the interim period. Once the Court reaches a final determination, or a consent agreement or consent order between the Bureau and the Commissioner is reached, the Commissioner orders the escrowed funds to be distributed appropriately, either to the policyholders or the Bureau.

Acting without a License

Any person acting as or pretending to be a principal, agent, broker, limited representative, adjuster, or licensed motor vehicle damage appraiser by soliciting, investigating, or examining risks or collecting premiums will be deemed guilty of a Class 1 Misdemeanor. Any person who is not licensed and is required by law or administrative rule to secure a license shall, upon application, pay a fee of $50. If additional licensing for other kinds of insurance is requested, a fee of $50 shall be paid to the Commissioner upon application for licensing for each additional kind of insurance. All fees are nonrefundable.

Representing an Unlicensed Insurer

Any person who solicits, negotiates, or sells insurance for an unauthorized insurer is strictly liable for any losses or unpaid claims if an unauthorized insurer fails to pay any claim in part or in full. The person making the sale will be guilty of a Class 1 misdemeanor if they do not know the insurer is unauthorized and a Class H felony if they knew or should have known the insurer was not authorized.

Insurance Continuing Education Credit (ICEC)

Credit hour assigned to a course by the Commissioner after review and approval of course information.

Disclosure Authorization Forms

Disclosure authorization forms must comply with the state law by meeting the following requirements: Be dated Specify the types of persons authorized to disclose information about the individual Specify the nature of the information to be disclosed Name the insurance institution or agent and identify to whom the individual is authorizing information to be disclosed Specify the purpose for which the information is being collected Specify the length of time the authorization remains valid

Representation

Every agent or limited representative who solicits or negotiates an application for insurance of any kind, in any controversy between the insured or beneficiary and the insurer, is regarded as representing the insurer and not the insured or beneficiary. Every broker who solicits an application for insurance of any kind, in any controversy, between the insured or beneficiary and the insurer issuing any policy upon that application, is regarded as representing the insured or beneficiary and not the insurer. An insurer that delivers an insurance policy to a broker directly or through an authorized agent is deemed to have authorized the broker to receive payment of premium that is due at the time of policy delivery.

Notifications to the Commissioner

Every applicant for a license must provide the Commissioner with a residential address and email address. A licensee must notify the Commissioner in writing within 10 days of a change in residential address or email address. Violation of this requirement is subject to a $50 administrative fee. Notice may be given in writing or by using an online service approved by the Commissioner. If a licensee is convicted in a court of competent jurisdiction for any crime, other than a minor traffic infraction, the licensee must notify the Commissioner in writing within 10 days after the conviction. If the Commissioner is required to give notice to a licensee, the notice may be given personally or by first-class mail to the licensee's last known address.

Ethical Standards

Every insurance professional, when dealing with the public, must identify themselves and their occupation, carry their license for display upon request, and deal fairly and honorably. An insurance professional may not: Accept anything of value from a service provider for recommending the provider to claimants Buy salvage from a claimant Discourage a claimant from seeking legal counsel Delay settlement of a property damage claim because of the claimant's choice of auto repair shop Recommend an auto repair shop without stating that the claimant gets to choose the shop

Complaint Records

Every insurer or its agents must maintain a record of all written complaints for at least 5 years after the complaint's final disposition. For domestic companies, the complaint must be kept until the Commissioner has adopted a final report of a general examination that contains a review of those records for that calendar year, or for 5 years, whichever is later. These records may be subject to inspection and should contain at a minimum the: Insured's name Nature of the complaint Policy/claim number of the insured Final disposition of the complaint

License Denial

If the Commissioner finds that the applicant has not fully met the requirements for licensing, the Commissioner will refuse to issue the license and send written notification to the applicant and the appointing insurer of the denial, stating the grounds for the denial. A license applicant may request a review by the Commissioner within 30 days after receiving notice that the license application has been denied. An applicant who disagrees with the outcome of the review may request a hearing within 30 days.

Disapproval, Hearing, Order, and Adjustment of Premium

If the Commissioner finds that the filing does not comply with requirements, they must give notice to the Bureau within 50 days after the date of the filing. The notice to the Bureau must include how the filing fails to meet the requirements, and the Commissioner must set a hearing date within 30 days of the hearing notice being mailed to the Bureau. The Bureau must prove that their proposed rates are not excessive, inadequate, or unfairly discriminatory. The Commissioner must issue an order within 45 days after the completion of the hearing. If no order is issued within those 45 days, the filing will be deemed to be approved. In the event that no notice of hearing is issued within 50 days from the date of any such filing, the filing is deemed to be approved. For Workers' Compensation insurance and employers' liability insurance, the Commissioner has 60 days to give notice of a hearing.

Unauthorized Insurers

Insurers who have not complied with the laws of this state and have not been authorized by the Commissioner to do business are deemed to be harmful and contrary to public welfare of the citizens of North Carolina. Difficulties arise when unauthorized insurers are licensed in foreign jurisdictions and conduct a long-range business without having personal representatives or agents in proximity to insureds in North Carolina. Unauthorized companies are not subject to North Carolina insurance laws, which are designed to protect the insurance-consuming public.

Unauthorized Insurance Contracts

It is not lawful to transact insurance business for a domestic insurer in a state in which the insurer is not licensed.

Defamation

It is prohibited to make any false statement that is maliciously critical or derogatory of any insurer's financial condition with the intent to injure someone in the insurance business.

Punishment for Misstatements

Making willful misstatements of information in financial or other required statements is a Class I felony, punishable by a fine of not less than $2,000 and not more than $10,000

Misrepresentation and False Advertising

Misrepresentation - Producers are prohibited from making misleading or untrue representations or fraudulent comparisons of policies, misrepresenting a policy's terms or benefits, or making misleading representations about an insurer's financial condition. False Information and Advertising - Presenting any information or advertisement that is false or misleading about the insurance business, or about any person in the conduct of their insurance business.

Stock Options and Insurance Company Advisory Board Contracts

Producers may not give capital stock, benefit certificates or shares in a corporation, securities, special or advisory board contracts, or contracts promising returns and profits as inducements to purchase insurance.

Biennial Compliance Period

The 24-month period during which an agent or adjuster must comply with continuing education requirements.

Election

The Commissioner of Insurance is elected by North Carolina residents as the chief officer to head the North Carolina Department of Insurance. The Commissioner is elected for a 4-year term or until a successor is elected and qualified. If the Commissioner's office becomes vacant, the Governor must act as Commissioner for the remaining portion of the term.

Special Cases

The Commissioner will prepare courses to address and remedy deficiencies in licensee professional performance or conduct detected by the Commissioner through analyses of consumer complaints or from Departmental audits or examinations of insurance companies, licensees, or insurance agencies or brokerages. The Commissioner will require an individual licensee to take and complete remedial or rehabilitative courses if the licensee has committed any of the acts or omissions causing suspension, probation, revocation, or nonrenewal of licenses. The Commissioner will award 24 biennial continuing professional educational credit hours based on government service relative to insurance or finance, such as service as a legislator on a committee in the General Assembly that hears insurance and finance matters.

North Carolina Insurance Underwriting Association

The North Carolina Insurance Underwriting Association consists of all insurers authorized to write essential property insurance in this state on a direct basis, except: Town and county mutual insurance associations Assessable mutual companies An insurer who only writes insurance in this state on property exempted from taxation Every insurer writing property insurance in North Carolina must remain a member as long as the Association is in existence as a condition of its authority to continue to transact insurance business in this state.

Countersignature

There may not be requirement that a licensed resident agent or broker must countersign, solicit, transact, deliver, or process an application, policy, or contract on behalf of a nonresident agent, broker, or an authorized insurer. A licensed resident agent or broker is not required to share in the payment of commissions, if any, related to such business.

License Surrenders

When a licensee is accused of any act, omission, or misconduct that would subject the license to suspension or revocation of the license, the licensee may surrender the license for a period of time established by the Commissioner. The Commissioner must consent and approve of the surrender. A person or entity who surrenders a license is not eligible for a license and cannot submit a licensing application during the period of time the license is surrendered.

Disinterested Third Party

A person not concerned with the result of a pending course final examination, meaning the producer's exam results will not cause the disinterested third party to profit or take a loss.

Pretext interviews are

A pretext interview is an interview whereby a person, in an attempt to obtain information about a natural person, performs one or more of the following acts: Pretends to be someone he is not Pretends to represent a person he is not representing Misrepresents the true purpose of the interview Refuses to identify himself upon request No one engaged in the business of insurance may use or authorize the use of pretext interviews to obtain information in connection with an insurance transaction. However, if there is a reasonable basis for suspecting criminal activity, a pretext interview may be undertaken to obtain information from a person or institution that does not have a generally or statutorily recognized privileged relationship with the person about whom the information relates.

Fire Insurance Policies

All terms and conditions of coverage must be stated in a property insurance policy that offers coverage against loss by fire. Upon request, the following initial information must be added to a property policy and provided after any changes in the policy: Basis rate Deficiency charge (debits) Credits for improvements to the property Final rate at which policy was written If an insured notifies an agent of unoccupancy, an increase of hazard, or other insurance, the notice acts as an agreement between the insured and the insurer about the insurer's liability and is binding to the insurance company in the event of a later loss. Such notice may not affect the insurer's right to cancel the policy.

Coverage for Damage to Rental Vehicles Authorized

The Bureau is authorized to provide rates and policy forms for insurance against property damage to rented private passenger motor vehicles. Property damage includes damage or loss to the rented vehicle of at least $250. This includes loss of use and any costs or expenses related to the damage or loss that the renter is legally obligated to pay. The vehicle must be rented on a daily-rate basis for no more than 21 consecutive days.

Civil Penalties or Restitution for Violations

Violation of any provisions of the general statutes subjects the licensee to suspension or revocation, after notice and opportunity for a hearing. After a hearing, the Commissioner may, in addition to or instead of suspending or revoking a license, order payment of a monetary penalty. The penalty cannot be less than $100 or more than $1,000 and will be in addition to payment of any other penalty for a violation of the criminal laws of this state.

Appointment

An individual who holds a valid insurance agent's license may not solicit, negotiate, or otherwise act as an agent for an insurer without an insurer appointment. An insurer authorized to do insurance business in this state must appoint an individual as its agent. An agent may have only one appointment for each kind of insurance they are licensed for in North Carolina. An appointment continues in effect as long as the appointed agent is properly licensed and the appointing insurer is authorized to transact business in this state, unless the appointment is cancelled. To appoint a licensed individual as its agent, the appointing insurer must file a notice of appointment within 15 days after the first insurance application is submitted, and must pay the appointment fees as required by the Commissioner. The insurer must submit a renewal fee for each appointed agent by line of insurance prior to April 1 of each year.

False Statements to Procure or Deny Benefits

Any person who presents a written or oral statement that contains false or misleading information material to a claim to procure or deny benefits is guilty of a Class H felony. The person must have the intent to injure, defraud, or deceive an insurer or insurance claimant. Each claim is considered a separate count. Upon conviction the court may impose probation and order the defendant to pay restitution, including compensatory damages, attorney's fees, costs, and reasonable investigation costs.

Licensee Requirements

Every person holding a property, casualty, personal lines, or adjuster license must: Obtain 24 ICECs during each biennial compliance period Complete at least 3 ICECs in ethics during each biennial compliance period Complete at least 3 ICECs on flood insurance and the National Flood Insurance Program, or any successor programs, every other biennial compliance period A licensee must keep records of the courses they have attended within the past 5 years. A course may not be repeated for credit within a biennial compliance period. Licensees may receive ICECs for a course only during the biennial compliance period in which the course is completed. Nonresident licensees who meet continuing education requirements in their home states are deemed to meet North Carolina's continuing education requirements without taking any additional courses.

Statements in the Application

All statements or descriptions in any application for a policy of insurance, or in the policy itself, are deemed representations and not warranties. A representation, unless material or fraudulent, will not prevent a recovery on the policy.

Insurance Continuing Education Credit

If an approved course is taken in a classroom setting, each instruction period must be at least 50 minutes in order to count for one hour of CE credit. Independent study programs qualify for CE credit only when the examination is supervised by a disinterested third party. No examination administered or graded by insurance company personnel for its own employees is considered to be administered by a disinterested third party The examination supervisor shall submit to the provider a sworn affidavit that certifies the authenticity of the examination ICECs will be awarded once the supervised exam has been passed Courses are not approved for less than one credit hour.

General Regulations

No insurance company may conduct transactions in the business of insurance in North Carolina unless the insurer is certified and admitted by the Commissioner, or unless the insurance: Covers a nuclear electric generating plant Is reinsurance or marine, aircraft, or liability insurance Is obtained through a surplus lines insurer Is otherwise legal and happens to cover a group, in another state, with insured members who are North Carolina residents No agent or broker may conduct, or aid in the conducting of insurance transactions for any company not certified or admitted. To do so may incur penalties, restitution, or both. An insurance contract issued by an unauthorized insurer will be considered valid. The insurer must defend an insured if the insured is sued. However, the unauthorized insurer may not bring suit for a claim until a license is procured. The Commissioner may issue an emergency Cease and Desist Order without a hearing to any company that is or is suspected of transacting insurance without authorization. After a hearing the Commissioner may remove or uphold the order.

Investigations of Complaints

A citizen of this state may file a complaint that a company authorized to do business in this state has violated any provisions of these laws. The Commissioner must investigate the citizen's complaint against an insurer and may examine the insurer's books, records, and documents. The Commissioner may request information for an investigation from any person. Any person, employee, or agent acting without malice, is not subject to civil liability for libel or slander by providing to the Commissioner reports or other information relating to any known or suspected fraudulent insurance claims or transactions. If the complaint is justified, the insurer must pay investigation expenses and any appropriate fines.

Termination of Appointment

An insurer that terminates a producer's appointment must notify the Commissioner within 30 days after the termination's effective date. Upon written request, the insurer must provide additional information, documentation, or records pertaining to the termination or activity of the producer. The insurer must give the producer a copy of the termination notice within 15 days after notifying the Commissioner of the termination. If the producer is terminated for a cause that is grounds for suspension, revocation, or nonrenewal, the notice must be sent to the producer's last known address by certified mail and with a return receipt requested. The producer has 30 days after receiving the termination notice to file written comments with the Commissioner and insurer. These comments will be included with any report distributed or disclosed about the producer as permitted by law. An insurer or producer failing to report a termination, or reporting a termination with malice, may, after a notice and hearing, be fined or have its license suspended or revoked.

Individual Biennial Compliance Period

Every person with an even-numbered birth year must meet continuing education requirements in an even-numbered compliance year. Every person with an odd-numbered birth year must meet continuing education requirements in an odd-numbered compliance year. Every licensee must complete the 24 ICECs by the last day of their birth month in the compliance year. A member of a professional insurance association may receive up to 4 ICECs during the biennial compliance period based solely on membership in that association. The association must: Have been in existence for at least 5 years Be approved as a continuing education provider Have been formed for purposes other than providing continuing education Only whole ICECs may be carried over from one biennial compliance period to the next biennial compliance period. There is no limit on the number of ICECs that can be carried over.

Restraining Orders

Whenever it appears that any person has violated, is violating, or threatens to violate any provision of state insurance law, the Commissioner may apply to the superior court of the county where the violation is occurring or suspected, for a restraining order and injunction to restrain the violation. If the court finds any provision of North Carolina insurance statutes has been violated, is being violated, or is threatened, it shall issue a restraining order prohibiting the violations. This order may be issued regardless of whether criminal prosecution is instituted. The conviction of any licensee for any criminal violation of state statutes results in automatic suspension of the producer's license, until the Commissioner reinstates it.

Business Entity Licensing

A business entity is defined as a corporation, association, partnership, limited liability company or partnership, or other legal entity. It does not include a sole proprietorship. A business entity engaged in selling, soliciting, or negotiating insurance contracts must obtain a license. Every member of a partnership and every officer, director, stockholder, and employee of the business entity personally engaged in this state in selling, soliciting, or negotiating policies of insurance must qualify as an individual licensee. Licenses are not required for officers, directors, or employees of insurers or insurance producers if these persons do not receive commissions from policies written or sold to insure risks within North Carolina. Licenses are not required for those who gather information for, enroll individuals in, issue certificates for, or help administer group or blanket plans.

General Licensing Requirements

A licensed agent, broker, or limited representative may not sell, solicit, or negotiate any policy or transmit an application or premium for an unauthorized insurer that is not licensed to do business in this state. An agent or broker must qualify for a license in one or more of the following kinds of insurance in order to sell, solicit, or negotiate these kinds of insurance: Property Casualty Personal lines Limited lines Life Accident and health or sickness Medicare Supplement and Long-Term Care if licensed for accident and health or sickness Variable life and variable annuity products An individual who holds a property, casualty, or personal lines insurance license may apply for an adjuster license without having to take the adjuster exam if the property, casualty, or personal lines insurance license is surrendered within the previous 60 days. The license must state the name and identifying number of the licensee, date of issue, kinds of insurance covered by the license, and any other information deemed necessary. The license authorizes a person to act as an agent until the license is otherwise suspended or revoked, at which time the license must be returned to the Commissioner. The Commissioner may issue duplicate licenses for any lost, stolen, or destroyed license issued upon written request from the licensee and payment of appropriate fees.

Adverse Underwriting Decisions

An adverse underwriting decision is any of the following with respect to insurance transactions involving individually written insurance coverage: Declining insurance coverage Terminating insurance coverage Declining by an agent to make an application requested by an applicant Placing a risk with a residual market policy, an unauthorized insurer, or an insurer specializing in substandard risks Charging a higher rate based on information that differs from that which the applicant provided The following actions are not considered adverse underwriting decisions: The termination of an individual policy form on a class or statewide basis A declination of insurance coverage solely because the coverage is not available on a statewide basis The rescission of a policy In the event of an adverse underwriting decision, the insurer must give a written notice that either provides the applicant or insured with the specific reason(s) for the adverse underwriting decision in writing or advises that they may request in writing to receive the specific reasons, and provides the applicant or insured with a summary of their rights established under state law. The applicant has 90 days to request reasons for the adverse underwriting decision and the response must be made within 21 days of being received. An insurance institution or agent may not seek information in connection with an insurance transaction concerning any previous adverse underwriting decision or previous insurance coverage obtained through a residual market mechanism, unless the request was previously obtained directly through the residual market mechanism. An insurer may not base an adverse underwriting decision on a previous adverse underwriting decision.

Association Application for Insurance on Beach Area Property

An application for essential property insurance from the Association must state whether there are any unpaid premiums due for prior insurance. If the property is insurable, and once the applicant has paid any remaining premium balance, the Association may issue insurance on that property and offer: Additional extended coverage Optional perils endorsements Business income and extra expense coverage Crime insurance Separate policies for windstorm and hail insurance A policy from the Association must be offered for a 3-year term, a 1-year term, or a shorter term and must be renewable as long as the property remains insurable. If the Association denies an application or refuses to issue a policy for insurable beach/coastal property, the property owner may appeal the decision to the Commissioner. An insurer's agent, although not an agent of the Association, may issue a binder for coverage from the Association. The Association may suspend an agent's privilege to issue these binders. The Association must file these policies with the Commissioner before use.

Coinsurance Clause

An insurance company or agent licensed in this state may not issue any property insurance policy that contains a clause requiring the insured to maintain a larger amount of insurance than what is expressed in the policy. A coinsurance clause or provision may be written in or attached to a policy when the words "Coinsurance Contract" are stamped on the declaration page. If there is a difference in rate for the insurance with or without the coinsurance clause, the rates must be provided upon request.

Commissions

An insurance company or producer may not pay a commission, service fee, or other valuable consideration to a person other than a licensed insurance producer for selling, soliciting, or negotiating insurance. The payment of renewal or other deferred commissions to a person who held a license at the time of the original sale is permissible. A person may not accept a commission, service fee, brokerage, or other valuable consideration for selling, soliciting, or negotiating insurance if that person is required to be licensed but is not. Commissions, fees, or other valuable consideration for the sale of insurance may be assigned or directed to be paid: To a business entity by an owner, shareholder, member, partner, director, employee, or agent of that business entity To a producer in connection with renewals of insurance business originally sold by or through the licensed person or for other deferred commissions In connection with the indirect receipt of commissions in circumstances in which a license is not required

Discriminatory Practices Prohibited

An insurer may not base any standard or rating plan for private passenger automobiles or motorcycles on the age or sex of the person insured. An insurer may not refuse to insure or continue to insure an individual, limit the amount, extent, or kind of coverage available, or charge a different rate for the same coverage because of an individual's race, color, or national or ethnic origin. No company doing the business of insurance may discriminate in favor of any person. Discrimination between individuals of the same class and risk or hazard in the amount of premiums, rates charged for any insurance policy, the benefits payable, in any of the terms or conditions of the policy, or in any other manner whatsoever, is prohibited.

Twisting

An insurer may not willfully misrepresent, or incompletely compare, the terms, conditions, or benefits of any insurance policy in order to induce a policyholder to replace an existing policy.

General Regulations of Business

An insurer or agent may not knowingly overinsure property (i.e., issue more insurance on a property than the fair value of the property), or issue a policy with a term longer than 7 years. A property policy pays actual cash value at the time of total loss. However, the Commissioner may approve policy forms or endorsements that allow for replacement cost or functional replacement. Functional replacement means to replace the property with property that performs the same function when replacement with materials of like size, kind, and quality is not possible, necessary, or less costly than obsolete, antique, or custom construction materials and methods. Forms and rating plans may also provide for credits when functional replacement cost coverage is provided. When buildings that are insured against loss by fire and situated within the state are totally destroyed by fire, the company is not liable beyond the actual cash value of the insured property at the time of the loss or damage. The exception to this is if the policy was amended by endorsement to pay replacement/functional replacement costs. If the insured has paid a premium on a sum in excess of the building's actual value, they will be reimbursed the proportionate excess of premium paid plus interest figured at 6% per year from the date of policy issue.

Payment of Premiums

An insurer, agent, or broker may accept premiums by credit or debit card if the insurer complies with the prohibition against unfair discrimination and pays the fees charged by the credit card company for the payment of premiums.

Notice of Insurance Information Practices

Applicants for insurance must be given notice of the insurer's information practices at the time of policy delivery if the information is provided by the applicant or public records, or when the information is received if provided by someone other than the applicant or public records. In the case of a policy renewal, a notice shall be provided no later than the policy renewal date, except that no notice shall be required in connection with a policy renewal if personal information is collected only from the policyholder or from public records or a privacy information notice has been provided within the previous 24 months. The notice must be in writing and must state: Whether personal information may be collected from persons other than the insurance applicant The types of information that may be collected and sources and techniques used to collect such information The types of disclosures required, which ones require prior authorization, and the frequency they must be provided A description of the individual's rights and how they may be exercised

Producer of Record

Every insurance agency transacting insurance business in North Carolina shall appoint a producer of record. This person shall have the responsibility of seeing that all records are maintained as required and provided to the Commissioner as requested. Any person who is subject to and violates the record-keeping regulations may be subject to the following disciplines after a notice and hearing: For the first offense, the person may have their license suspended or revoked for not less than one month or more than 6 months For the second offense, the person may have their license suspended or revoked for one year Any person who refuses to provide records required by the Commissioner or who makes any false statements about records is guilty of a Class 1 misdemeanor and subject to license suspension or revocation.

Deviations

Except for Workers' Compensation loss costs filings, no insurer or its representative may knowingly issue, deliver, or permit the issuance or delivery of any policy that does not conform to the rates, rating plans, classifications, schedules, rules, and standards made and filed by the Bureau. An insurer may deviate from the rates promoted by the Bureau if the insurer has filed the proposed deviation with the Bureau and the Commissioner, and if the proposed deviation is: Based on sound actuarial principles; and Approved by the Commissioner Amendments to deviations are subject to the same requirements as initial filings.

Assumed Names

Excess Premiums - Knowingly charge, demand or receive a premium for any policy of insurance except in accordance with the applicable filing approved by the Commissioner. Rebates - Pay, allow, or give directly or indirectly as an inducement to buy insurance. This includes any rebate, discount, abatement, credit, or reduction of the premium named in a policy of insurance after the insurance has been effected. Also included is any special favor or advantage in the dividends or other benefits that accrue, or any valuable consideration or inducement that is not specified in the policy of insurance. Charges for Related Services - Knowingly charge or receive from an applicant for insurance any money or other consideration, such as money, in addition to the premium in return for the processing of applications or other forms or for the rendering of services associated with a contract of insurance, unless the applicant consents in writing before any services are rendered.

Hearings and Penalties

If there is reason to believe a person has violated any part of the Act, the Commissioner will issue and serve a statement of charges and notice of hearing to be held not less than 10 days after the date of service at a fixed time and place. If, after a hearing, it is determined that the person charged has engaged in conduct or practices in violation, the Commissioner may issue a cease and desist order to refrain from the conduct or practices constituting a violation. A violation of privacy regulation is punishable by one or more of the following penalties: License suspension or revocation A monetary fine up to $10,000 per violation A monetary fine up to $50,000 if the violations occur with a frequency that constitutes a general business practice A legal action regarding illegal disclosure of private information must be brought within 2 years from the date the alleged violation is or should have been discovered.

Licensee Exemptions

Individuals licensed for the first time in the current calendar year are exempt from the continuing education requirement for that year. Licensed insurance producers who are unable to complete continuing education requirements due to military service or long-term medical disabilities may request a waiver for continuing education requirements. The Commissioner will grant an exemption from ICEC requirements for up to one year if the individual provides a deployment notice from the Department of Defense or a notarized statement from a licensed physician stating that the producer is unable to do the work they are licensed to do and needs a long-term medical disability waiver. A licensee age 65 or older who has been continuously licensed in the line of authority for at least 25 years and either holds a professional designation for that line or certifies annually that they are an inactive agent taking no part in agency operations is exempt from the continuing education requirement.

Disclosure Limitations and Conditions

Insurers, agents, agency support personnel, or corporations may not disclose any personal information about an individual in connection with an insurance transaction without having the individual's written authorization before the disclosure occurs. This information may also be used in making legitimate business decisions, determining eligibility for benefits, or preventing criminal activity (such as fraud, misrepresentation, or concealment). Limited information that is reasonably necessary may be provided to the following: A medical institution to verify coverage or inform the individual of a medical problem of which they may not be aware A person making an inquiry when providing funeral services to the deceased insured Insurance regulatory authority Law enforcement or other governmental authority In response to a judicial or administrative order Anyone else, if required by law Disclosing information given by a consumer reporting agency other than an insurance agency is also permitted. An insurer or agent must notify a person at least 30 days before disclosing private information, and they must notify the Commissioner if a person's application for coverage has been denied.

Reciprocity in Producer Licensing

North Carolina complies with the reciprocity requirements in the federal Gramm-Leach-Bliley Act regarding all insurance licenses, except surplus lines licenses. A nonresident person will be granted a nonresident license if: The current home state license is in good standing A request for licensure and applicable fees are submitted to the Commissioner A copy of the application for licensure from the home state or a completed Uniform Application has been submitted to the Commissioner The home state awards nonresident producer licenses to residents of this state on a reciprocal basis The Commissioner will not assess a higher fee than resident producer fees, will waive license application requirements, and will accept home state continuing education requirements. A producer must report to the Commissioner any administrative action taken against the producer in another state or by another governmental agency in North Carolina within 30 days after final disposition. An individual licensed as an insurance producer in another state who moves to North Carolina and applies for a resident insurance producer license in this state for the same kinds of insurance is exempt from education and examination requirements if the license application is received within 90 days after the person's license in the former state is cancelled.

False Pretenses and Cheats

Obtaining property by false pretenses is an action or event in which a person obtains or attempts to obtain from any other person money, goods, property, services, chose in action, or other thing of value. The person trying to obtain the property using false pretenses must have an intent to cheat or defraud the other person. A chose in action is the right to sue a person to recover property, money, goods, or debts. Obtaining property by false pretenses is a felony. Intent is required. Evidence of nonfulfillment of a contract obligation standing alone will not establish intent to defraud.

Rebating

Offering any rebate, discount of premium, advantage, or valuable consideration not specified in the policy. This does not include: Bonuses paid to insureds or abatement of premiums in place of that bonus Reduction in premium for regularly mailing or bringing the premium to an office, saving the expense of agent 'house-calling' (this applies to industrial policies) Readjustment of group rates based on claims experience

Boycott, Coercion, or Intimidation

Producers are not allowed to be involved in an action that results in an unreasonable restraint of, or monopoly in, the insurance business. Example: Making the purchase of insurance from a particular source the condition to another business transaction.

Purpose

Property insurance for North Carolina beach area is necessary to enable homeowners and commercial owners to obtain financing for the purchase and improvement of their property. Present plans to provide adequate insurance on property in the beach and coastal areas have not been sufficient to meet the needs of this area. The state of North Carolina has an obligation to provide an equitable method whereby every licensed insurer writing essential property insurance in North Carolina is required to meet its public responsibility instead of shifting the burden to a few willing and public-spirited insurers. The North Carolina Insurance Underwriting Association formed the Coastal Property Insurance Pool to provide an additional way for insureds to purchase insurance on their beach area property. It is the market of last resort, not the first market of choice.

General Duties and Broad Powers

The Commissioner advises the Governor on insurance matters. The Commissioner's primary duties involve: Administering and executing the applicable laws in North Carolina and adopting rules to enforce and carry out the provisions of those laws Receiving and examining each financial statement required by law Conducting examinations, investigations, and hearings as necessary to administer state insurance laws Reporting to the Attorney General any violations of laws relative to insurance companies and the overall business of insurance Compiling and making available to the public a list of rates charged and explanations of coverages provided by insurers in connection with residential property and private passenger insurance Approving or disapproving rates, forms, classification plans, rating plans, plans of operation, and Safe Driver Incentive Plans Upon request by any citizen of North Carolina, providing a statement of the provisions of any insurance contract offered or issued to that citizen Seeking restraining orders, from the appropriate superior courts, against persons who are violating insurance laws

Temporary Licensing

The Commissioner may issue a temporary license, without regard to education, experience, or exam requirements, for up to 180 days: To the spouse, representative, or guardian of a deceased or disabled producer To a member or an employee of a licensed business entity if the designated producer dies or becomes disabled To the designee of a licensed producer entering the Armed Forces As the Commissioner deems appropriate to the public interest The Commissioner may restrict or revoke a temporary license to protect the public. A person holding a temporary license may not acquire any new insurer appointments. The Commissioner may require the temporary licensee to have a suitable sponsor who is a licensed producer or insurer and who assumes responsibility for all acts of the temporary licensee. A temporary license terminates upon the transfer of the business.

Suspension, Probation, Revocation, and Nonrenewal of License

The Commissioner may suspend, place on probation, revoke, or refuse to renew a license for any one or more of the following causes: Providing materially incorrect, misleading, incomplete, or false information on a licensing application Obtaining or attempting to obtain a license through misrepresentation or fraud Cheating on a prelicensing or continuing education exam Using dishonest or fraudulent practices or demonstrating incompetence, untrustworthiness, or financial irresponsibility in the conduct of business Being convicted of a felony or a misdemeanor involving dishonesty, breach of trust, or moral turpitude Forging another's name to an insurance application or document related to an insurance transaction Improperly withholding, misappropriating, or converting monies received while transacting insurance business Willfully failing to notify the Commissioner of insolvency, bankruptcy, or receivership proceedings being taken against a licensee within 3 business days after the proceedings begin Violating any state's insurance law or order of the Commissioner Intentionally misrepresenting the terms of an insurance policy or application Having an insurance producer license denied, suspended, or revoked in another state Knowingly accepting insurance business from an individual not licensed to broker that kind of business Willfully overinsuring property Committing any insurance unfair trade practice Soliciting, negotiating, or selling insurance for an unauthorized insurer, even if the licensee did not know the insurer was not authorized Failing to pay state income tax Failing to comply with a court order to pay child support The Commissioner may enforce penalties or take action against a person who is under investigation or has been charged with a violation even if the person's license has been surrendered or lapsed. The Commissioner will notify every appointing insurer about any suspension, revocation, nonrenewal, or surrender of a license.

Failure to Complete

The license of a person failing to meet continuing education requirements will lapse. The license will be reinstated when the person has completed the continuing education requirements and paid an administrative fee of $75. This must be done within 4 months after the end of the person's previous compliance year. If the person does not satisfy these requirements within 4 months after the end of the person's previous compliance year, they must complete the appropriate prelicensing education requirement and pass the appropriate licensing examination. Then the Commissioner will reinstate the person's license. The Commissioner may suspend, revoke, or refuse to renew a license if the producer: Fails to respond to Department inquiries within 7 calendar days Requests an extension or waiver under false pretenses Refuses to cooperate with the Department in an investigation or inquiry If the producer experiences a hardship, extensions of time to complete CE requirements may be requested during or before the last month of the current compliance year.

Nonresident License

To qualify for a nonresident license, a person must be currently licensed and in good standing as a resident agent in their home state. If the license in the home state is no longer in good standing, the nonresident licensee's license issued by the Commissioner will automatically lapse 30 days after the loss of the nonresident's home state license. A nonresident license may be reinstated within 30 days after lapse upon proof that the nonresident's home state license has been reinstated.

Penalties

Violation of the placement of business by unauthorized insurers may result in the following fines: For the first offense, a fine not more than $5,000 For the second and subsequent offenses, $10,000 for each violation Each day during which a violation occurs constitutes a separate violation

Notice of Coverage or Rate Change

Whenever an insurer changes the coverage, other than at the request of the insured, or changes the premium rate, the insurer must give the insured at least 15 days' advance written notice of the coverage or premium rate change. A copy of the notice must also be sent to the agent. This regulation applies to all policies and coverages except Workers' Compensation insurance and Employers' Liability insurance.