Chapter 26 - Florida Laws & Rules Pertinent to Life & Health Insurance

Do all fraternals provide life insurance exclusively for their members?

No. Today, a number of larger fraternal insurance organizations have adopted operating characteristics similar to commercial life insurance companies (stocks and mutuals) and provide insurance to nonmembers.

*What is twisting?

This is a misrepresentation made by an insurance agent to induce a policy holder to lapse a policy in order to switch insurance companies. It involves the failure to disclose all relevant facts. In addition, the practice of "stripping policies of their cash value to make other investments" falls in the category of twisting.

*What is "rebating"?

This is the act of refunding part of the commission, premium, services or anything of value to the purchaser as an inducement to buy an insurance policy. The act, if not done strictly according to Florida statutes, is in violation of the Code of Ethics and Florida law.

To what does the term "legal reserve requirement" refer?

The law requires life insurance companies to charge themselves a minimum liability amount on their financial statements for all business in force. This liability represents future liabilities to policy owners. The Insurance Code has a standard valuation provision which dictates the assumptions and procedures insurance companies must use in establishing the size of their legal reserve.

Are financial Institutions allowed to sell all types of insurance throughout Florida?

As a result of two U.S. Supreme Court decisions, banks are allowed to sell all types of insurance anywhere in the state. The VALIC case (NationsBank of North Carolina v. Variable Annuity Life Insurance Co.) permitted the sale of annuities and the Barnett case (Barnett Bank of Marion County, N.A. v. Nelson, Florida Insurance Commissioner) permitted the sale of all other lines of insurance.

Unauthorized Entities: Basic History, Overview, and Rationale

One of the main problem areas involving unauthorized insurance has been health insurance. However, unauthorized insurance has more recently invaded other lines, too including workers compensation insurance. While the insurance market has always been cyclical (hard and soft), the hard cycles have more recently spawned more fraudulent activity than seen in the past. Making matters worse, the perpetrators have become more sophisticated and have created more complex schemes.

What is the operating objective of a stock life insurance company?

The operating objective of a stock life insurance company is to produce a profit for its owners, the stockholders.

*What should the public know about the nonadmitted insurance company?

The public should be aware that a nonadmitted insurance company does not come under the jurisdiction of the Florida Office of Insurance Regulation with regard to examination of its official soundness, nor the examination and approval of types of coverage offered, nor of its advertising through the mail.

*What are the two most prominent categories of life insurer investments? Why?

!!Bonds and mortgages!! are the two most common types. Life insurance company liabilities to policy owners are long term by nature. !!Bonds and mortgages!! are long-term investments that match up well with insurers' long-term liabilities. At the same time, these categories of investments provide the degree of safety of principal, yield and liquidity desired by insurers.

*Florida Law (626.431) further states:

"An individual who fails to maintain an appointment with an appointing entity writing the class of business listed on his license during any 48-month period shall not be granted an appointment for that class of insurance until he qualifies as a first-time applicant."

*The MEWA Issue (Multiple-Employer Welfare Arrangement)

*In general, the Florida Insurance Code defines a MEWA as an employee welfare benefit plan or other arrangement that is established or maintained to provide one or more of various insurance benefits (including health insurance) to the employees of two or more employers. According to this definition, a MEWA cannot be a single employer plan so as to exempt it from state insurance regulation. (HUH?...this means they ARE state regulated)

*Possible Consequences for Aiding and Abetting an Unauthorized Insurer

1) *Conviction of a !!third-degree felony!! or 2) Liability all unpaid claims 3) Suspension or revocation of all insurance licenses`

*Possible Consequences for Acting as an Insurer without Proper License

1) *Conviction on charges of up to a First Degree felony 2) Liability of all unpaid claims 3) Suspension or revocation of all insurance licenses *Note...Most penalties in this course are misdemeanors...However, these are felonies...The state may ask "which of the following is NOT a penalty....read it carefully.....if they ask it this way, the answer would be a misdemeanor...

The specific duties of the office include the following:

1) Agent Licensing 2) Rate-making supervision 3) Policy forms approval 4) Market conduct investigation 5) Issuing insurer certificates of authority 6) Assessing insurer solvency 7) Regulating viatical settlements 8) Regulating premium financial arrangements 9) Administrative supervision

Insurance is administered by the following:

1) Chief Financial Officer 2) Financial Services Commission 3) Office of Insurance Regulation Commissioner

*What is a fraternal life insurance organization?

A fraternal life insurance organization operates as a corporation, society or association to provide life insurance primarily for the mutual benefit of its members and beneficiaries. It has a lodge or social system with certain rituals and a representative form of government. It does not operate for a profit and as an insurer is !!organized under a special section of the Insurance Code!!. Life insurance issued by a fraternal is in the !!form of a certificate of membership instead of a policy.!!

*What would cause the Chief Financial Officer or Office of Insurance Regulation to conduct a hearing?

A hearing can be held whenever they have !!reason to believe!! that: 1) Any person has engaged or is engaging in any unfair method of competition, any unfair or deceptive act or practice regarding insurance. 2) Any person is engaging in the business of insurance without being properly licensed. 3) A proceeding in respect thereto would be in the interest of the public Note: If the CFO "feels" or hears" is not good enough.....Must have reason to believe...

What is a mail order insurance company and can such a company solicit insurance in Florida?

A mail order insurance company is one that operates principally by mail without personal agent solicitation of prospects. Florida law prohibits unauthorized mail order insurers from soliciting in Florida. The transaction of insurance, including the application for insurance, must be taken by and the policy delivered through a licensed and appointed Florida agent.

Registration

A registration is perpetual (not renewed). A registered agency is not subject to compulsory or discretionary refusal, suspension, or revocation as described in Florida Statutes. However, if any of the principals of the registered agency are found to have violated any part of the insurance code, the agency must obtain an agency license.

How are insurance agents compensated?

Agents are generally compensated by the payment of commissions that are a certain percentage of the initial (first year) and subsequent (renewal) premiums.

fully insured health

Alternatively, the employer could establish a fully insured health plan in which a licensed insurer would bear the financial risk for the payment of covered claims.

*What is an "admitted" life or health Insurance company?

An admitted insurance company is one which the Office of Insurance Regulation has licensed to transact business in Florida under the provisions of the state laws.

*What penalties are provided for the violation of any of the provisions of the agents' qualification laws of this state?

An individual who knowingly makes a false or otherwise fraudulent application for any license or who violates any provision of the Insurance Code shall, upon conviction, and in addition to any denial, suspension, revocation or refusal to renew or continue any license, be punishable as a misdemeanor by a fine of not less than $500 nor more than $3,500 or by imprisonment for not more than six months or by both, for each violation. In lieu of the above, the Chief Financial Officer may, at his discretion, impose an administrative penalty of up to $50,000, if a cease and desist order is violated.

*What constitutes an insurance agency?

An insurance agency is any business location at which an individual, firm, partnership, corporation, association, or other entity (other than an insurer or an adjuster) engages in any activity or employs individuals to engage in any activity, which by law may be performed only by a licensed insurance agent.

Coercion

Coercion is illegal. It is defined as intimidation. Ex. A bank can not make you buy life insurance from them as a stipulation for them lending you money. They can make purchasing it a condition of the loan, but again, they can not make you buy it from them.

*What is "defamation"?

Defamation is a tort to the person. Defamation of character includes both libel (written) and slander (spoken) of a person.

Does the Office of Insurance Regulation, based on the Insurance Code, become specifically involved with the assets of life insurance companies?

Does the Office of Insurance Regulation, based on the Insurance Code, become specifically involved with the assets of life insurance companies?

Who administers the insurance laws of Florida?

Financial Services Commission and the Commissioner of the Office of Insurance Regulation

*What four principal matters are dealt with by state Insurance laws?

Florida insurance laws deal with the following areas: 1) organization of the Department of Financial Services and the powers and duties of the Chief Financial Officer, the Financial Services Commission and the Office of Insurance Regulation; 2) organization of insurance companies, their powers and limitations, and the requirements in regard to their financial condition and operations; 3) qualifications, licensing and appointment of agents; and 4) rights of policyowners and beneficiaries. *Note: The state is not concerned with the commissions a company pays.

*What is the Florida law regarding an agent's change of address?

Florida law requires that whenever an agent changes his or her name, residence address, business street address or mailing address, or contact telephone numbers, including a business telephone number, or email address, the Department of Financial Services must be notified, in writing, within 30 days.

*What are the general types of assets in which life insurers are allowed to invest?

In general, the funds of life insurance companies may be invested in obligations of the federal, state or local governments, corporate bonds, real estate mortgages, real estate, corporate stocks and policy loans.

*What constitutes defamation?

Knowingly making, publishing, disseminating or circulating, directly or indirectly, or aiding, abetting, or encouraging the making, publishing, disseminating or circulating of, any oral or written statement, pamphlet, circular, article, or literature which is false or maliciously critical of or derogatory to any person and which is calculated to injure such person.

Licensure

Licensure is required for agencies that were in business on or after January 1, 2003, or the agencies that were in business prior to January 1 , 2003, and do not meet the criteria listed above for registration. A licensed agency is subject to compulsory or discretionary refusal, suspension, or revocation as described in Florida Statutes. An agency license must be renewed three years from the original issue date. There is no application fee associated with the issuance or renewal of the agency license.

ERISA

Problems with unauthorized health-insuring entities started in earnest around 1974 with the enactment of the Employee Retirement Income Security Act, otherwise known as ERISA. ERISA gave the United States Department of Labor responsibility for the enforcement of this body of statutory law. Within the Department of Labor, the Pension and Welfare Benefits Administration has direct involvement. ERISA deals with employee health and welfare benefit plans. Stated differently, it deals with matters relating to employer-sponsored health-insurance-type plans and with retirement plans. Insurance regulators' concern is with the health insurance aspect. This discussion is limited to that aspect of ERISA.

How does Florida law define "rejected business" as it applies to life insurance?

Rejected business is a risk that the agent's own insurer is authorized to write but rejects for underwriting reasons, or is willing to accept only on a substandard basis, but which will be accepted by another authorized insurer at a lower rate.

Why should an agent be familiar with the insurance laws and licensing requirements of the state of Florida?

Since the life insurance business is regulated by state law, it is essential that an agent be completely familiar with the insurance laws of the state in which he or she solicits business.

How does an association operate?

Some fraternal life insurance organizations operate as associations. As such they do not operate for a profit and are organized under a special section of the Insurance Code.

Major Regulatory Premise

State regulation of the business of insurance is in the public interest. The McCarran-Ferguson Act codified this premise into federal law in 1945.

What is a "rule" and what is its effect?

The Florida Insurance Code provides that the Department of Financial Services and the Office of Insurance Regulation may adopt reasonable rules necessary to effect any of their respective statutory duties. In addition to any other penalty provided, willful violation of any such rule may cause suspension or revocation of an insurance company's certificate of authority or an agent's license.

*What roles does the Office of Insurance Regulations play?

The Office of Insurance Regulations (OIR) is responsible for all activities of the Financial Services Commission relating to the regulations of insurers and other risks-bearing entities. The head of the office is the Director or Commissioner of Insurance Regulation.

*Where do the figures showing the amount of a life insurance company's legal reserves appear on its balance sheet? Why?

The legal reserves for a life insurance company appear as a liability on its sheet. The legal reserve is a measure of the insurance company's future liability on an insurance contract. It also establishes a measure of the amount of assets the company must have to meet those future liabilities.

Will an annual premium at 3 percent reserve interest assumption be greater or smaller than at a 3 1/2% percent reserve interest assumption? Explain.

The premium would be greater at 3 percent interest since more money must be invested at 3 percent to earn the same amount that a smaller premium invested at 3 1/2 percent would earn.

pre-emption.

The primary legal and factual issue involved in the unauthorized health insurance problem is the claim that a health plan and the entity sponsoring it are not subject to state insurance regulation. This concept is referred to as pre-emption.

What are the major areas in which the Chief Financial Officer and the Office of Insurance Regulation are involved with regulating insurance companies?

The several major areas of regulation are as follows: 1) organizing and licensing of companies, including establishment of the initial financial requirements for insurance companies; 2) policing against unauthorized insurance activities; 3) continuing regulation of insurance company activities, !!including policy forms and provisions and rates!!(although direct rate regulation is not applicable to life insurance) 4) supervising the methods of obtaining business, including licensing of agents and control of unfair trade and advertising practices: 5) monitoring the financial condition of insurers, including specification of appropriate investment categories and appropriate methodology for developing liabilities: 6) rehabilitating or liquidating insurers where necessary

Why is the insurance business subject to governmental supervision and control?

There are at least three important reasons: 1) The public interest makes it a public trust. 2) The financial importance and extent of the operations of the insurance companies affect the state and national economy. 3) The technical character of the insurance contract requires expert control

*A PEO-sponsored health plan is not exempt from state insurance regulation under ERISA for at least two reasons: (This means they ARE state regulated)

There is no true employer/employee 1) relationship between the employee and the PEO for the reasons stated above; and 2) Section 468.529(1) of the Florida Statutes prohibits PEOs from sponsoring self-insured health plans. Because potential exemption from the Insurance Code arises only in the context of a fully self-insured plan, the exemption cannot exist with respect to a PEO-sponsored plan under current law.

What is a "leeway" or "basket" provision?

This refers to a section of the Insurance Code which allows domestic insurance companies the flexibility to loan or invest funds to a stipulated percentage of their admitted assets in loans or investments not otherwise allowed by law.

*May an agent write business for a company for which he or she is not appointed?

Usually no; however, an agent is permitted to place business with another company if his or her own company rejects the applicant or if the amount is in excess of that which his or her own company will write. This is called excess or rejected business. No additional license is required, and commissions can be paid under what is known as a "single case agreement." This is governed by Florida's "exchange of business" law.

*What is meant by a stock company doing business on a "mixed plan"?

When a stock life insurance company issues both participating and nonparticipating policies, it is referred to as a company doing business on a mixed plan.

*Must branch locations of an insurance agency also be licensed?

Yes, if the branch location holds itself out as a place where a consumer can purchase insurance, it must separately secure an agency license. However, if the location only serves as a place for an agent to meet with consumers with whom the agent has made a prior appointment, the location is not an insurance agency. The agent cannot transact other insurance at the location that is unrelated to the consumer with the prior appointment.

Can the Chief Financial Officer and Office of Insurance Regulation carry out an examination of records?

Yes. The statutes provide the Office of Insurance Regulation and the Department of Financial Services with an absolute right to examine the affairs of every person involved in the business of insurance to see if they are engaged in any unfair trade practices. In addition, the law requires agents to keep records for at least !!three!! years if the transaction pertains to premium payments. These records may be examined by the Office and the Department at any time.

If the PEO or the purveyor of the supposed ERISA plan contends that each employer establishes its own, separate ERISA plan, it must be analyzed under the MEWA criteria stated above.

he keys to this analysis focus on these considerations: 1) If there exists risk-bearing activity, including financial responsibility for the payment of claims of the employees and/or their dependents of two or more unrelated employers, the plan is a MEWA or an insurer, and is subject to state insurance licensure and regulation. Stated otherwise, the entity that is financially responsible for the payment of the resulting claims must be licensed by the Office of Insurance Regulation; and 2)If there is commingling of funds of multiple unrelated employers, at any level (primary insurance, re-insurance, or stop-loss insurance), the plan is subject to state insurance regulation.

*Professional Employer Organization (PEO)

is the current nomenclature for what has been called an Employee Leasing Company. It presents special issues and has been targeted by purveyors of illicit insurance. Although there is purported to be a "co-employer" relationship established between the employer and the PEO, in reality, the PEO handles administrative functions

A self-insured plan

one in which the employer would itself, from its own funds, bear the financial responsibility for the covered health claims of its own participating employees. By self-insuring, the employer could make the benefits more affordable. This is because the employer would not incur the insurer's costs of doing business, including its profits, which are otherwise incorporated into the premium that would be charged for insurance coverage. Other such costs include maintaining statutory reserve requirements, regulatory compliance expenses, etc. one in which the employer would itself, from its own funds, bear the financial responsibility for the covered health claims of its own participating employees. By self-insuring, the employer could make the benefits more affordable. This is because the employer would not incur the insurer's costs of doing business, including its profits, which are otherwise incorporated into the premium that would be charged for insurance coverage. Other such costs include maintaining statutory reserve requirements, regulatory compliance expenses, etc.

Can an insurer deny coverage to a firearm owner?

An insurer issuing any type of policy under Chapter 627 (life or health insurance policies) may not deny coverage, increase premiums, or otherwise discriminate against an insured or applicant on the basis of the lawful ownership or possession of a firearm.

What is the license application process for agents, customer representatives, adjusters, service representatives, amnaging general agents, or reinsurance intermediaries?

Applicants for an insurance license must file a written application, completed under oath and signed by the applicant, meet the required qualifications, and pay all applicable fees in advance to the department. Applicants must also provide proof that they have completed, or are in the process of completing, any required prelicensing education.

*What is sliding and does it apply to all Insurance products?

Sliding is an unfair trade practice that applies to all insurance products. Florida law states that sliding is the act or practice of: 1) Representing to the applicant that a specific ancillary coverage or product is required by law in conjunction with the purchase of insurance when such coverage or product is not required; 2)Representing to the applicant that a specific ancillary coverage or product is included in the policy applied for without an additional charge when such charge is required; or 3) Charging an applicant for a specific ancillary coverage or product in addition to the cost of the insurance coverage applied for, without the informed consent of the applicant.

A notice to the current insurer of a replacement of a current life insurance policy is not required in a transaction involving:

1) An application to the current insurer that issued the current policy when a contractual change or conversion privilege is being exercised; 2) a current policy or contract that is being replaced by the same insurer; 3) a term conversion privilege that is being exercised among corporate affiliate.

*What kinds of activities by an agent may result in the revocation or suspension of an agent's license?

1) Lack of one or more of the qualifications for license or appointment 2) Material misstatement, misrepresentation, or fraud in obtaining the license or appointment or in attempting to obtain the license or appointment 3) failure to pass to the satisfaction of the department any required examination 4) if the license or appointment is willfully used, or to be used, to circumvent any of the requirements or prohibitions of the Code 5) Willful misrepresentation of any insurance policy or annuity contract either in person or by any dissemination of information or advertising 6) When acting as a claims adjuster, materially misrepresenting to an insured or interested party the terms and coverage of an insurance contract in order to effect settlement of claim on less favorable terms than those provided under the contract 7) Demonstrated lack of fitness or trustworthiness to engage in the business of insurance 8) Demonstrated lack of reasonable adequate knowledge and technical competence to engage in the transactions authorized by the license or appointment 9) Fraudulent or dishonest practices in the conduct of business under the license or appointment 10) Misappropriation, conversion, or unlawful withholding of moneys belonging to insurers or insureds or beneficiaries or to others and received in conduct of business under the license or appointment 11) Unlawfully rebating, attempting to unlawfully rebate, or unlawfully dividing or offering to divide the agent's commission with another 12) Having obtained or attempted to obtain, or having used or using, a license or appointment as agent or customer representative for the purpose of soliciting or handling "controlled business" 13) Willful failure to comply with, or willful violation of, any proper order or rule of the department or willful violation of any provision of this code 14) Having been found guilty of or having pleaded guilty or nolo contendere to a felony or a crime punishable by imprisonment of one year or more which involves moral turpitude, without regard to whether a judgment of conviction has been entered 15) Fraudulent or dishonest practice in submitting an application for workers' compensation coverage containing false or misleading information as to employee payroll or classification to avoid or reduce the premium 16) Sale of an unregistered security 17) In transactions related to photocell settlement contracts: 18) Commission of a fraudulent or dishonest act 19) No longer meeting the requirements for initial licensure 20) Having received a fee, commission, or other consideration for viatical settlements that involved unlicensed viatical settlement providers or persons who were not licensed life agents 21) Dealing in bad faith with viators 22) Any cause for which issuance of the license or appointment could have been refused 23) Violation of any lawful order or rule of the department, commission, or office 24) Failure or refusal, upon demand, to pay to an insurer money held in trust and belonging to the insurer 25) Violation of the provision against twisting 26) Engaging in unfair methods of competition or in unfair or deceptive acts or practices otherwise being a source of injury or loss to the public 27) Willful overinsurance of any property or health insurance risk 28) If a life agent, violation of the code of ethics 29) Cheating on a license examination or violating test center or examination procedures 30) Knowingly aiding, assisting, procuring, advising, or abetting any person in the violation of or to violate a provision of the insurance code or any order or rule of the department, commission, or office

*Does the agent have fiduciary responsibilities?

Under the law of agency, an agent is the lawful representative of the principal, which in this case is the insurance company. Thus, the payment of premiums or other sums to the agent is the same as paying them to the insurance company. Because of this, the agent has the fiduciary responsibility to turn the funds over to the insurance company immediately, and not to use them for his or her own purposes.

How can a mutual insurance company be defined?

The mutual life insurance company is owned and controlled by its policyowners. These policyholders elect a board of trustees or directors to manage the firm. The savings and earnings of a mutual insurance company are returned to the policyowners in the form of dividends or retained as surplus to meet future obligations.

What is the operating objective of a mutual life insurance company?

The operating objective of a mutual insurance company is to provide insurance to its owners, the policyowners, at the lowest possible net cost.

What is the solicitation of insurance?

The solicitation of insurance is the attempt to persuade any person to purchase an insurance product by: 1) describing the benefit or terms of insurance coverage, including premiums or rates of return 2) distributing an invitation to contract to prospective purchasers 3) making general or specific recommendations as to insurance products 4) completing orders or applications for insurance products; or 5) comparing insurance products, advising as to insurance matters, or interpreting policies or coverages 6) offering or attempting to negotiate settlement a viatical contract on behalf of another person When soliciting or selling insurance products, agents shall clearly indicate to prospective insureds that they are acting as insurance agents with regard to insurance products and identified insurers.

*How is a "stock" life insurance company defined?

The stock life insurance company is one that is owned and controlled by stockholders. The stockholders provide the capital and share in profits or losses. A board of directors is elected by the stockholders to operate the firm. A stockholder may or may not be a policyholder. The stock life insurance company may issue either participating or nonparticipating policies or both.

What is the process for suspension or revocation of associated licenses?

Whenever the license, eligibility to hold a license, or appointment of an agent or customer service representative is suspended, revoked, or refused renewal, the department shall suspend or revoke all other licenses, appointments, or eligibility held by the licensee or appointee under this code.

*Can the same licensed insurance agent be designated as the agent in charge for more than one agency location?

Yes. A licensed agent may be the agent in charge of additional branch office locations of the agency as long as insurance activities requiring licensure as an insurance agent do not occur at any location when the agent is not physically present.

*What are the duties of the replacing insurer regarding the replacement of life insurance?

1) Inform its field representatives of the requirements of these rules 2) Require a statement signed by the applicant as to whether or not the purchase of new insurance will involve the replacement of existing insurance 3) Where replacement is involved, require a statement signed by the agent acknowledging such fact 4) Require from the agent a copy of a completed "Notice to the Applicant Regarding Replacement" and a copy of all sales proposals used in the sales process 5) When requested, send a completed Comparative Information Form to the applicant within 5 working days after the date of the application 6) Immediately send to the existing insurer a copy of the "Notice to the Applicant Regarding Replacement 7) With or prior to delivery of the new insurance policy, provide the applicant a Buyers Guide and Policy Replacement 8) Maintain copies of the "Notice to the Applicant Regarding Replacement" and requested Comparative Information Forms, and all sales proposals used, together with a replacement register, cross-indexed by replacing agent and existing insurer, for a period of 3 years or until conclusion of the next regular examination of the insurer, whichever is later

Association Plans are not exempt from state insurance regulation for at least two reasons:

1) There is no employer-employee relationship 2) They must be fully insured (therefore, at a minimum, the insurer IS subject to regulation)

What insurance activities are Certified Public Accountants (CPAs) allowed to perform within the practice of public accounting?

Florida law specifically exempts licensed CPAs from the insurance licensing requirements when performing certain insurance-related activities in the practice of their profession. While practicing the profession of public accountancy, CPAs may perform such insurance-related activities as advising clients of the need to obtain insurance, the amount of insurance needed, or the line of coverage needed. A CPA cannot directly or indirectly receive or share in any commission, referral fee or solicitor's fee for performing these activities. If a CPA wishes to engage in any other insurance activities, he or she must obtain a license to transact insurance.

*What are an agent's duties with regard to replacing a life insurance policy?

Where replacement is or may be involved, the agent shall: 1) Submit as part of the application a statement signed by the applicant as to whether or not such insurance will replace existing insurance, and where replacement is involved, a statement signed by the agent acknowledging that the agent knows that replacement is involved. 2) Present to the applicant, not later than at the time of taking the application, a "Notice to Applicant Regarding Replacement of Life Insurance." The Notice must be signed by the applicant and the agent and left with the applicant. 3) Leave with the applicant the original or a copy of all Sales Proposals used for presentation to the applicant. 4) Submit to the replacing insurer with the application, a completed copy of the "Notice to Applicant Regarding Replacement of Life Insurance" and a copy of all Sales Proposals used for presentation to the applicant.

Must an insurance agency have an agent in charge?

Yes. Although an agent in charge does not have specific statutory duties or responsibilities, a licensed agent must be designated to be in full-time charge of each licensed agency location.

Must insurance agencies be licensed in Florida?

Yes. Any business location that conducts activities for which an agent's license is required must be licensed. Florida does provide for registration in lieu of licensure for certain agencies that were in business before January 1, 2003. *Note.....If in business before 1993, agencies are registered, after 1993 agencies are to obtain an "agency license". There is NO cost for the license and it must be renewed every three years.

What are the general powers and duties of the Chief Financial Officer and the Office of Insurance Regulation? The broad general powers and duties include the following:

1) They enforce the Insurance Code and carry out those duties set forth in the code. 2) Their powers and authority may be expressed or implied in the Insurance Code 3) They may, at their own expense, conduct any investigation of insurance matters expressed in the code, determine if a person has violated the code or obtain information to administer the code. 4) They can collect, propose, publish or disseminate information regard duties imposed upon it by the code. 5) They shall have additional powers and duties as provided by other laws of the state.

What types of life insurance contracts are written by fraternals?

Fraternals write the same types of life insurance contracts as are written by ordinary or industrial life insurance companies.

*Who administers the insurance laws of the state of Florida?

The Chief Financial Officer (CFO), *Jeff Atwater regulation of insurance agents is directly administered by the Chief Financial Officer, as is insurance fraud and insurance consumer protection.

Registration is offered to agencies that were in business prior to January 1, 2003, and which qualify as one of the following:

1) An agency wholly owned by licensed and appointed Florida insurance agents 2) An incorporated agency whose voting shares are traded on a securities exchange 3) An agency whose primary function is offering insurance as a service or member benefit to members of a nonprofit organization 4) An agency subject to supervision and inspection as a branch office under the rules of the FINRA

What is meant by "transacting insurance?

The term transacting with respect to the business of insurance includes any of the following provisions of the Insurance Code: 1) solicitation or inducement to purchase insurance; 2) preliminary negotiations toward the sale of insurance; 3) effectuation of a contract of insurance; and 4) transaction of matters subsequent to effectuation of a contract of insurance and arising out of it.

*Are insurers limited as to the dollar amount that can be placed in different types of investments?

Yes, in certain investments, for example, corporate stocks. Also, the law places severe limitations on investments in medium to lower quality obligations.

Can an alien insurer sell, solicit, or issue, in this state, life insurance policies or annuity contracts covering persons who, at the time of issuance, are nonresidents of the United States.

Yes, provided the alien insurer is authorized to sell, solicit, or issue, in it's country of domicile, the kinds of insurance proposed to be offered and meets certain other conditions, such as being granted eligibility by the OIR.

The Financial Services Commission is composed of

1) the Governor, 2) the Chief Financial Officer (CFO), 3) the Attorney General and 4) the Commissioner of Agriculture.

Misrepresentation is cited as an unethical, and thus illegal, practice in the Code of Ethics of the Florida Association of Insurance and Financial Advisors. In this context, what constitutes misrepresentation by an agent?

A misrepresentation involves an untrue, incomplete or misleading statement. Thus, the Code of Ethics enumerates that no agent shall make, issue or circulate any estimate, circular or statement which misrepresents the terms of any policy issued or to be issued or the benefits thereof. Also, an agent shall not make any misrepresentation as to the financial condition of any insurance company, or as to the legal reserve system upon which any life insurance company operates, or use any name or title of any policy which misrepresents the true nature thereof. Finally, an agent shall not make, publish, disseminate, circulate or place before the public any advertisement, announcement or statement containing any assertion, representation or statement with respect to the business of insurance or with respect to any person in the conduct of insurance business that is untrue, deceptive or misleading.

*What are insurers required to disclose to prospective purchaser at the time of application for a life insurance policy or annuity?

An insurer must provide a buyer's guide and a policy summary to any prospective purchaser upon request OR, prior to accepting the applicant's initial premium or premium deposit, the insurer must provide to each prospective purchaser a Buyer's Guide and a Policy Summary, unless the Policy or Policy Summary has a 14-day "free-look" provision, in which event the Buyer's Guide and Policy Summary must be delivered with the policy or prior to delivery of the policy. With respect to annuities, the insurer shall provide to each prospective purchaser a Buyer's Guide to Annuities and a Contract Summary as provided in the National Association of Insurance Commissioners (NAIC) Model Annuity and Deposit Fund Regulation and the policy must provide a 14-day "free-look" period.

*What is the Florida law requiring insurance agents to obtain continuing education?

Florida law (Sec. 626.2815) requires continuing education for all agents of 24 hours every two years and provides for certain exceptions. For compliance periods beginning January 1,1998, a person who has been licensed for a period of six or more years must complete only 20 hours every two years, but these hours must be in intermediate or advanced level courses as approved by the Department of Financial Services. Each agent must complete, as part of his or her required number of hours every two years, a minimum of three hours of C. E. on the subject of ethics approved by the department. Any person who holds a license to solicit or sell life insurance must complete a minimum of three hours in continuing education on the subject of suitability in annuity and life insurance transactions. If agents do not have any active insurance or annuity contracts, they will be exempted, but may be to provide an attestation regarding their sales inactivity during the biennium.

*Do the Florida statutes allow an Insurance agent to write "controlled business"?

Florida statutes 626.784 and 626.830 do not permit an individual to hold an agent's license if that person does not hold himself or herself out to the general public as an insurance agent but instead uses the license principally for soliciting, negotiating or procuring controlled business. Controlled business means life or health insurance contracts covering himself herself or members of his or her family; officers, directors, stockholders, partners or employees of a business in which he or she or a member of his or her family is engaged; or the debtors of a firm, association or corporation of which the agent is an officer, director, stockholder, partner or employee. An agent can write contracts on the type of business that is considered controlled business provided that the amount of other similar business written is at least equal to the amount of controlled business written. Failure to do so would subject the agent's license to revocation. *(This means that no more than 50% of your business can be "controlled".

What special problems in the investment of their funds do life insurance companies face that are not faced by other large investors?

Government regulation limits the choice of investments, and companies must earn enough interest to maintain reserves.

Can a captive insurer offer life or health insurance policies?

No, captive insurers may write any and all lines authorized under the insurance code other than life, health, workers' compensation, employer's liability, and personal motor vehicle or personal residential property.

Must individuals who perform only clerical duties for an agent or agency be licensed as an agent or customer service representative.

No, individuals who devote full time to clerical work, even if they occasionally take applications, quote, or receive premiums, are not deemed to be agents so long as their compensation does not include commissions and is not related to the production of applications, insurance, or premiums

What role does the Office of Financial Regulation play?

The Office of Financial Regulation (OFR) is responsible for all activities of the Financial Services Commission relating to the regulation of: 1) banks 2) credit unions 3) other financial institutions 4) finance companies, and 5) the securities industry The head of the office is the Director or Commissioner of Financial Regulation

*What penalties can be imposed upon an agent by the Chief Financial Officer?

The failure to answer a subpoena or an order of the Officer can result in a $1,000 fine. If there is a violation of a cease and desist order, the fine can be up to $50,000. Willful violation of the Insurance Code is a misdemeanor of the second degree. An agent who exhibits fraudulent conduct in committing the practice of twisting or churning can be charged with a first degree misdemeanor if he or she displays fraudulent conduct and may be subject to a $5,000 fine for each non-willful violation or $75,000 for each willful violation. Willfully submitting signatures on an application or policy-related document is a third-degree felony and is subject to $5,000 for each non-willful violation and $75,000 for each willful violation.

*What are the definitions of the following life insurance classifications: "domestic," "foreign" and "alien"?

The following definitions apply: 1) A domestic insurance company is one which is domiciled and incorporated under the laws of the state in which its home office is located. 2) A foreign insurance company is one whose home office is located in another state. It is considered a foreign insurance company in all states other than its home state. 3) An alien insurance company is one that is chartered and organized in any country other than the United States. It is considered an alien insurance company in all states.

Are life insurance companies' financial conditions constantly reviewed by the Office of Insurance Regulation?

Yes. Each insurance company must file a complete set of !!annual!! financial with the office on a standardized form and compiled according to specific procedures. These are reviewed by the office. Also, the insurance company's complete financial and operating situation is subject to !!examination!! by representatives of the office at least every !!three years!!.

Are there specific regulations in Florida of which a life insurance agent should be aware?

Yes. While a life insurance agent should be generally familiar with all Florida insurance regulations, the following three are of particular importance: 1) the Florida Life Insurance Solicitation Law; 2) the Florida Replacement Rule; and 3) the Code of Ethics of the Florida Association of Insurance and Financial Advisors as incorporated into Florida law.

*What is the Florida law on rebating?

1) No agent shall rebate any portion of his commission except as follows: -The rebate shall be available to all insureds in the same actuarial class -The rebate shall be in accordance with a rebating schedule filed by the agent with the insurer issuing the policy to which the rebate applies. -The rebating schedule shall be uniformly applied in that all insureds who purchase the same policy through the agent for the same amount of insurance receive the same percentage of rebate. -Rebates shall not be given to an insured with respect to a policy purchased from an insurer that prohibits its agents from rebating commission s. -The rebate schedule is prominently displayed in public view in the place of doing business and a copy is available to insureds on request at no charge -The age, sex, place of residence, race, nationality, ethnic origin, marital status or occupation of the insured or location of the risk is not utilized in determining the percentage of the rebate or whether a rebate is available. 2) The agent shall maintain a copy of all rebate schedules for the most recent 5 years and their effective dates. 3) No rebate shall be withheld or limited in amount based on factors which are unfairly discriminatory. 4) No rebate shall be given which is not reflected on the rebate schedule 5) No rebate shall be refused or granted based upon the purchase or failure of the insured or applicant to purchase collateral business.

What changes to the Florida continuing education statutes will take effect October 1, 2014

Agents must complete a five-hour update course every two years, as part of their biennial requirement, which is specific to the license held by the licensee. The content of the course must address all lines of insurance for which examination and licensure are required and include insurance law updates, ethics, disciplinary trends, industry trends, suitability, and any other topics determined by the department. A licensee with multiple licenses must complete an update course specific to at least one of the licenses held.

*Is the Office of Insurance Regulation, based on the Insurance Code, concerned only with the types of investments made by insurance companies?

No. The Office is also concerned with the !!quality!! of the investments made by insurance companies as evidenced by minimum corporate bond ratings specified by law, earnings requirements specified for public utility bonds and legal requirements that real estate mortgage investments be limited to first mortgages.

Since a mutual insurance company has no stockholders, does this mean it is not a corporation?

No. Mutual life insurance companies are corporations and, by law, must be incorporated in order to write insurance.

Are all replacements of existing life insurance with new insurance "twisting"?

No. Only those cases where life insurance replacement takes place on the basis of incorrect or incomplete representations are twisting.

*If a life or health insurance agent works out of his home, is the agent's home an insurance agency that must be licensed if the agent does not hold the home out as being a business location at which consumers can purchase or inquire about insurance products?

No. The home would not have to be licensed as an insurance agency. However, this does not apply to Florida resident property and casualty agents because they are by law required to maintain an office that is accessible to the public.