Module 2 - Insurance Regulation

Who can get a license?

Individuals and business entities

Who has the authority to suspend or revoke a producer's insurance license?

The Director

An agent who knowingly violates Michigan licensing laws may be punished by a civil fine of up to

$5,000 per violation.

If a claim is not paid on a timely basis, the insurer will be charged an annual interest rate of

12%

Upon the death or disability of a licensed insurance agent, the Director may issue a temporary license to another person, without examination, for the purpose of continuing the agent's business. Generally, this temporary license shall be effective for

180 Days

How many hours of continuing education must licensed producers complete in Michigan?

24 credits of State-approved education credit every two years. Of the 24 credits, a minimum of 3 credits must be in ethics. The "other" 21 credits may be in accident & health, life, property, casualty, etc. If a licensee completes more than 3 credits in Ethics, any additional credits beyond the 3 required ethics credits will count toward the "other" 21 credits needed.

After receiving a claim, an insurer must let the claimant know what constitutes a satisfactory proof of loss within how many days?

30

If a producer moves, they must report their new address to the Commissioner within how many days after moving?

30

The Commissioner must decide whether to accept an application for an insurance license within

30 Days

Under the Essential Insurance Act for home insurance in Michigan, when an insurer decides to cancel a policy that has been in effect for more than 55 days, it must give the named insured written notice of termination at least

30 days in advance

Although the Director may conduct an examination of an insurer at any time, the Director is required to examine the books, records, documents, and affairs of every authorized insurer at least once every:

5 Years

The license issued by the Department of Insurance and Financial Services (DIFS) that gives an insurer the legal right to conduct business as an admitted or authorized insurer in Michigan is called

A Certificate of Authority

Under Michigan law, an insurance company formed in the state of Illinois and transacting insurance business in Michigan would be known in this state as

A Foreign Insurer

Which of the following statements about a counselor in Michigan is NOT correct? A person wishing to be a counselor must submit an application to the Commissioner. A counselor must have a license A counselor does not need a license. Before providing services, a counselor must have a written agreement signed byboth the counselor and the client

A counselor does not need a license.

XYZ Insurance Company is incorporated under the laws in Michigan and has an office in East Lansing. They want to expand their business into Detroit. If they do this they will be identified as

A domestic Company

Privacy (Gramm-Leach-Bliley Act)

A producer must give the applicant a notice at the time of application telling the applicant the types of financial information that is going to be collected or any other types of private information to whom the producer discloses this information.

Foreign Insurer

An insurance company that is incorporated in another state, Territory, or possession of the US

In general, the amount of a claim supported by a proof of loss must be paid within how many days after the insurer received the proof?

Claims must generally be paid within 60 days of receipt of the proof of loss.

Bob and Tom ran a small independent insurance business together. Bob decided to leave the small business and become an agent for a larger insurance company. Tom is spreading rumors about Bob with the intent of ruining his reputation. Tom's behavior is also known as

Defamation

A person who willfully makes false statements on an application for insurance is guilty of

Fraud

A person acting as a Michigan insurance producer must: Be at least 21 Y/O have a written appointment from each insurer the person will represent Have lived in MI for at least 2 yrs be employed by a MI insurance Co

have a written appointment from each insurer the person will represent.

Surplus lines insurance is

insurance in Michigan that is procured from or renewed with an unauthorized insurer.

Which one of the following is NOT covered by the Michigan Property and Casualty Guaranty Association? A claim that is greater than $10 A claim that existed within 30 days of the appointment of the receiver A claim for a loss that occurred before the insurance policy expired life insurance death benefit claim greater than $200,000

life insurance death benefit claim greater than $200,000

All of the following statements about the Michigan Property and Casualty Guaranty Association are true EXCEPT? The Association _____ protects insureds against insurer insolvency may not sue or be sued by any insurer or insured may cancel policies by mailing 10 days' written notice of cancellation to the last known address of the insured can investigate or defend a claim against an insured

may not sue or be sued by any insurer or insured.

Requirements to become a licensed producer are:

must be at least 18 complete an approved pre-licensing education course and pass the exam within one yr of completion Apply for license through NIPR Pay Application fee pass the exam not have committed any acts or grounds for denial, suspension, or revocation of a license

Business Entity License

must complete an application pay a fee name an individual with a resident producer license as the designated responsible licensed producer (DRLP)

The Director may suspend, revoke, or refuse to issue an insurance producer license, or may levy a fine or do both for all of the following reasons

on top of being convicted of a felony, forging a name, and cheating on the insurance licensing examination, other reasons include providing materially untrue information on a license application; violating an insurance law or order of the Director; obtaining a license through fraud; improperly withholding money received while transacting insurance; intentionally misrepresenting the terms of a policy or application; having an insurance producer license denied in another state; knowingly accepting insurance business from an unlicensed individual; failing to comply with a court order to pay child support.

A licensed insurance counselor may

provide advice concerning an insurance policy and charge a fee for that advice.

The purpose of the Michigan Auto Insurance Placement Facility is to

provide insurance for people who cannot obtain insurance through ordinary methods

Insurance that is procured from or renewed with an unauthorized insurer is called

surplus lines insurance

If, after a hearing, the Director believes a producer has violated licensing requirements, they can

suspend or revoke the producer's license

If an insurance producers fails to complete the continuing education requirement by the expiration date of their license

the producer will be given a 90-day grace period. During this period, the producer may not sell new policies or act as an insurance producer except to service existing contracts. If, after the end of the grace period, the producer has still not met the requirement, their license will be cancelled. The producer must reapply for licensure but will not have to take any pre-licensing education.

Domestic Insurer

An insurance company that is incorporated in the state.

Alien Insurer

An insurance company that is incorporated outside the United States.

Which of the following statements is TRUE regarding the Michigan Essential Insurance Act? An insurer cannot limit coverage, refuse to insure, or continue to insure unless the insurer has specific, written underwriting rules. Individuals convicted of a conspiracy to commit arson in the last five years are eligible. An eligible person of this Act must be the owner, occupant, or tenant of the dwelling. Individuals convicted of malicious destruction of property in the last 5 years are eligible.

An insurer cannot limit coverage, refuse to insure, or continue to insure unless the insurer has specific, written underwriting rules.

A defamatory statement is..

An oral or written statement that is false and malicious or derogatory concerning the financial or personal condition of a person engaged in the insurance business.

In addition to suspension or revocation of any insurance license, a person who knowingly violates insurance licensing laws may be fine up to what amount per violation?

If the person knew or reasonably should have known of the violation, the Director can assess a maximum penalty of $5,000 for each violation, up to a combined total of $50,000.

Making, publishing, disseminating or circulating any oral or written statement, pamphlet, circular, article, or literature that is false, maliciously critical of, or derogatory to the financial condition of any person and calculated to injure any person engaged in the insurance business is an

Illegal Practice

Chad has his car insurance through the Michigan Automobile Insurance Placement Facility. If he has a vehicle that is not being driven or moved on the highway; the insurer

May allow the insured to maintain only comprehensive coverage

One purpose of the Michigan Property and Casualty Guaranty Association is to

Pay covered claims for insurers that become insolvent or financially impaired

An insurance counselor

Provides advice or counsel regarding insurance policies, values, terms or provisions. Before rendering such services, they prepare a written agreement that includes the nature of the work to be done and the fee to be charged. The agreement must be signed by the counselor and the client.

Ingrid, an agent at XYZ Insurance Company, has a goal to write 10 Life Insurance Applications by the end of the year. In order to do this she is offering a $100 gift card to anyone who fills out an application with her. This is an example of

Rebating

Terrorism Risk Insurance Program Reauthorization Act of 2015 (TRIPRA) was previously known as

The Terrorism Risk Insurance Act (TRIA) of 2002

Which one of the following statements regarding the payment of commissions is CORRECT? A producer can provide financial rewards with a resident non-licensed individual for sales leads When an appointment is cancelled, the producer may still receive renewal commissions on any existing policies A producer may not share commissions with a nonresident licensed producer A producer may not share commissions with another resident licensed producer

When an appointment is cancelled, the producer may still receive renewal commissions on any existing policies

The Commissioner may issue, without examination, a temporary license to

a natural person upon the death or incapacity of an agent when it appears reasonably necessary to assure continued operation of the agent's business. In most cases a temporary license is issued for someone else to complete the affairs of the deceased (or physically or mentally handicapped) or someone who is in active duty with the armed forces. In Michigan this temporary license is effective for 180 days.

Publishing a written statement that is maliciously derogatory to the financial condition of a person and that is calculated to injure any person in the insurance business is an illegal practice known as

Defamation

When applying for a producer's license, a business entity must do all of the following, EXCEPT Designate an individual to comply w all laws Take and pass license examination Pay required fee Complete an application

Take and pass license examination

TRIPRA defines terrorism as

a violent act or an act that is dangerous to human life, property, or infrastructure that results in damage within the United States, or outside the United States, committed by either domestic or foreign terrorists.

Promising to enter a prospect into a drawing for a Las Vegas vacation if they purchase an insurance policy is:

an illegal inducement

Rebating is

an illegal inducement to buy insurance. It includes offering to pay part of the commission and giving gifts, services, or anything of value to an insurance prospect or policyholder.

Licensed producers of automobile and homeowners insurance may do any the following EXCEPT: channel an applicant away from an insurer to avoid submitting an application quote the lowest premium for homeowners or automobile insurance available from the producer's insurance company submit applications of eligible applicants for homeowners or automobile coverage to the insurer selected by the applicant explain how the insured can obtain information on premium calculation

channel an applicant away from an insurer to avoid submitting an application It is considered an unfair trade practice to channel an eligible applicant away from an insurer or coverage to avoid submitting an application.

A Domestic Insurer is

one formed under the laws of the state of Michigan. A foreign insurer is one formed under the laws of another state, territory, or possession of the United States. An alien insurer is one formed under the laws of any country other than the United States.