MN Insurance Regulation: Lesson 6
Advertising Standards
- cannot contain deceptive words that mislead client Ex: " investment plan" to describe LI
Unfair Claims Settlement
- claims handled promptly - cannot refuse settlement if claimant retains attorney - demand irrelevant info that has nothing to do with loss - reasonable standards for prompt investigation of a claim - refusing to pay claim without conducting an investigation - offering poor settlement (prop and caus) - making settlement on one part of a claim by agreeing to settle on another part of the claim. - denying claim without disclosure - denying claim because you did not use the right form - refusing to pay as you may collect elsewhere - requiring inspections at specific places or unreasonable distances - failing to reply to client claims within 10 days - making a claim without telling client why.
Criminal Penalties
- levied by comissioner - First offense is a misdemeanor; each subsequent is a gross misdemeanor: except acting with no license, falsifying applications or forging a signature.
Prohibited Practices: Agents
- misrepresentation - defamation - boycot, coercion or intimidation - discrimination - rebating- giving something of value with condition on purchase. Able to give client $25 gift/year. *$60- $200 per violation - twisting: replacing policy to detriment of client
Education & Exam
- must be 18 - complete 20 hours of education per line of insurance - pass licensing exam - complete licenses application online with Sir con - pay applicable fee - Apply for permanent license within 3 years of passing exam
Compensation of Licenses
- no comissioner received if no license - reasonable service fees charged - retired agents do not have to hold license to collect referred comissions
Company Appointments
- once agreement is approved by insurance company, approval is sent to agent and permission is given to sell - company has 15 days, after 1st sale to send notification of appointment to the Commissioner - 30 days to notify Commissioner of appointment terminations -15 days after notifying Commissioner, insurer sends written notice to terminated producer - terminated agent has 30 days after receiving termination notice to submit comments which become part of file - Any insurer that fails to file a company appointment is penalized $25 per offense (each policy sale is an offense) Maximum is $300/producer.
Grounds for Disciplinary Action
- providing incorrect or incomplete info - violating insurance laws of ANY state - attempting to to obtain license through fraud - withholding or misappointing money received - misrepresenting terms of actual or proposed policy - convicted of a felony - committing unfair trade practice or fraud - dishonest practices - demonstrating incompetence through untrustworthy Ness or financial irresponsibility - cheating on license exam - failing to pay appointed child support or state income taxes
Fair Credit Reporting Act
- when credit report is ordered, applicant must be notified both verbally and in writing - entitled to a free copy - if error is found, notify reporting agency who must respond within 30 days. - adverse info remains in report for 7 years (late payment history) - bankruptcy info remains for 10 years.
Laws Regulating Conduct: Insurance Company
- written complaints retained 4 years - Policy Forms and Apps 3 years - Claim records 3 years - advertising materials 3 years - policies must be understandable to average person (8th grade reading level) and pass Fletcher scale anaysis - not refuse to insure National Guard or armed services member due to status as a member, if coverage lapsed or terminated while on active duty can be reinstated w/in 90 days of non active status
Gramm- Leach Bailey Act
-Company must disclose their privacy policy and how clients personal information is used and shared with 3rd parties. - provide when policy is issued (delivered) - issued at least once a year thereafter.
Temporary License
180 day license issued by the Commissioner if agent dies (to spouse, designee, or employee of business entity)
Law of Agency
* Agent- someone who acts on behalf of another (producer) * Principal- party whom the action is taken (company)
Notification Requirements
- 10 days for name/address change - 30 days Administrative action is taken against you by a government agency - 30 days Criminal prosecution against you (pre trial hearing date) - 10 days if criminal conviction (felony, gross,misdemeanor, or one involving moral turpitude. - Change of Assumed Name
Producer Responsibilities
- Fudiciary responsibility to the insurer ( must protect the insurer's interest) - Uphold high standards of honor when dealing with the applicant: act fairly and honestly, disclose all info
License Expiration
- Good for 2 years. - First year licensee, license period of at least 12, but less than 24. Expires on the last day of your birth month. - $50.00 per line of authority, plus technology fee
Department of Commerce
- Governs the MN industry - Headed by the Commissioner of Commerce
Required Conduct: Agents
- License display in office - policies delivered or mailed within 30 working days of agents receipt - delivery of funds within 5 days - receipt issued - financial and complaint records retained 6 years - Suitability - Oral binders followed up in writing to insured within 5 days - accept loan from client, provided it is in writing
Who must be licensed
...
Company Appointment
Admitted carriers grant permission to producers, giving them authority to solicit business on their behalf
Disclosure Requirements
Agents and insurance compsnies legally obligated to disclose certain information to prospects and clents.
Fines
Comissioner also has option to fine a producer up to $10, 000 per violation, per day of a written order
Denial of Licensure
Commissioner refuses to issue new license to a person who has previously committed an act that would have resulted in disciplinary action if person had been licensed at the time. Also concealment.
Revocation
Commissioner revokes for serious misconduct. Prohibited to sell for at least 2 years, but at that point you can reapply and take test again. Then must obtain a,performance bond of at least $20, 000 with the state and filed with the comissioner.
Suspension
Commissioner takes license away for min 3 months, but up to 2 years. May not sell during suspension. Returned at a hearing.
Commissioner of Commerce
Empowered to enforce and establish rules - conduct investigations - Examine books without court order - publish info collected - require reports of all sales transactions.
Censure
Formal reprimand of a producer. Becomes a permanent part of producers record, but does not affect ability to remain license
Certificate of Authority
Given to admitted and approved insurance company to transact business in state
Managing General Agent
Hires producers, supervises a territory, manages agents activities, must be licensed.
Mc Carren- Ferguson Act
Individual states govern insurance industry, not Feds.
NON-RESIDENT producer
Issued to already licensed resident producer in good standing in the persons home state.
Agency Agreement
Legal agreement establishing relationship between the principal and agent; also outlines the powers and responsibilities of the agent.
Resident producer
License is issued in the state they do business in.
Express Authority
Powers given to the agent as part of the agency agreement (written down)
Implied Authority
Powers not given by the agency agreement, but necessary to complete the functions allowed in the agreement (not written down) Ex: collecting premiums, meeting clients in home
Apparent Authority
Powers not given by the agency agreement, but that a reasonable person would presume the agent has Ex- something that makes the consumer believe you can work there- letterhead or business card
1995 Agent Disclosure Law (Business card Law)
Prior to personal solicitation(Sale), must disclose the following: - Producers Name - Company you represent - fact that the producer is in the insurance business - if initial contact is by phone, info can be verbally disclosed - Any marketing material must identify the insurer