North Carolina Insurance Law

Minimum limits of liability coverage in the facility

$30000 bodily injury per person $60000 bodily injury per accident (regardless the number of injured persons) $25000 property damage (30,60,25) The MIN coverage for medical payments $1000 The MAX covered for medical payments $2000 -medical payments is available for motorcycles

Appointment of an "agent"

- no individual who holds a valid agents license can sell insurance for a company that they are not appointed with -any insurer can appoint any person licensed as an agent by the state.

Licensee requirements

-24 CE hours every 24 months, based on birth month and year (biennium) -CE hours may be taken in ANY area of licensure, no minimum requirement -You are required to keep records of your CE classes for 5 years

The commissioner can make available to the public rates, deviations and explanations of coverage on:

-Residential properties and their contents with 4 units or less (dwelling and homeowners) -Private passenger, non-fleet (less than 5 autos) automobiles (personal auto insurance)

Powers and duties of Commissioner

-They don't make the law, they enforce all insurance laws and issue regulations -They require reports from companies, bureaus, orders and associations that disclose full information on their standing and condition. -Receive and examine each financial statement as required by law (every insurance company needs to submit these) -Report to the Attorney General any violation of the law. The commissioner may institute civil or criminal action by the Attorney General

Appointments continue:

-as long as the agent is properly licensed -as long as the insurer is authorized to transact business -until appointment is cancelled (agency parts with company) -the insurer must notify the department in writing WITHIN 30 DAYS of the cancellation

twisting

-comparisons made with false information No insurer shall make any written or oral statement that: willfully misrepresents, or willfully makes an incomplete comparison as to the terms, conditions, or benefits contained in the policy. (You cannot lie about a policy that you are proposing to them, trying to make them drop their current policy to go to you) For the purpose of inducing or attempting to induce a policyholder, to his or her determinant, to terminate, surrender, exchange, or convert any insurance policy.

duties of the guaranty fund

-cover claims existing at the time of insolvency and any claim that occurs within 30 days of insolvency -pay up to $300,000 for each covered claim. each covered claim is subject to a $50 deductible. -assess each member insurer in proportion of their net direct written premiums (each company shares in the loss)

Rate Bureau filing rates with commissioner

-filing is open for public inspection -within 50 days after date of filing, ____ may give notice of disapproval -if no action is taken within 50 days, rates are approved

Appeal of commissioners orders on rates

-if they disapprove the rate filing, the rate bureau may appeal the decision -If the rate bureau appeals, the proposed rates may be put into effect, however the excess premium will be put into into an escrow account by the insurance company, pending judicial review of the appeal -If the rate bureau loses appeal, excess premiums are refunded to policyholders with interest

North Carolina Motor Vehicle Reinsurance Facility (residual market, market of last resort)

-just writes liability insurance eligible risk: a person who is a resident of the state, owns a motor vehicle registered or principally garaged in the state, or has a valid driver's license and is required to show financial responsibility AKA the facility

Consumer division (if an insurance company charges a fee, they must)

-post a sign with large, bold print in a conspicuous location in your office stating that a fee may be charged. -obtain the customers consent- in writing each time a fee is charged -show the fee on a signed, dated receipt

The commissioner may issue a temporary license without an examination to:

-the spouse or kin, executor, employee in case of death or disability -a member, employee, or officer of a licensed business entity

Commissioner's election and term

1. elected by the people 2. four year term 3. takes office Jan 1 4. if leaves office or dies: governor becomes commissioner until a replacement is appointed 5. a member of the Council of State

if you move out of state, you have ___ days to surrender your license. If insurer cancels an appointment the department needs to be notified in writing within a certain amount of days.

30

you cannot issue a property policy for longer than __ years

7

how many days does the insured have to request an explanation for an "adverse underwriting decision"

90

Discriminatory practices prohibited

After September 1, 1975, no insurer shall base any rating plan for a private passenger autos or motorcycles on age or sex

Statements in Application not Warranties

All ____ or descriptions in any ____ for a policy of insurance, or in the policy itself, are representations. Recovery is not prevented unless it is a MATERIAL misrepresentation.

Records Maintenance

All companies, agents or brokers must keep a full and correct record of business done by them showing the: Number, date, term, amount of coverage, premium, to whom the contract was written: of every policy, certificate or renewal

The Beach Plan: North Carolina Insurance Underwriting Associations (risidual market)

All insurers authorized to write and engage in writing within the state, on a direct basis, except town and county mutuals, assessable mutuals, and those who only write insurance on property exempted from taxation must be a member -this plan does not appoint agents

keeper of records

Every agent shall appoint some person to see that the records are maintained

If you violate the records and reports section, the commissioner, after a hearing, may:

First offense- suspend or revoke license for not less than 1 month or more than 6 months (1-6 months) Second offense- license suspended or revoked for 1 year

Limit of liability on total loss

If a building is totally destroyed by fire and the insured has paid a premium for more than coverage than what was actually paid, the insured is eligible for a refund of excess premium with interest (6% per year from date of issue)

Coinsurance clause

If a policy contains a ____ the words " " must be affixed to the first page of the policy. The wording must be of size and in a location as specified by the commissioner

Embezzlement by insurance agents, brokers or administrators

If convicted you are guilty of a CLASS C FELONY if 100,000 or more If convicted you are guilty of a CLASS H FELONY if less than 100,000

Punishment for making false statements

If you are required to furnish a financial statement or other statement required by GS 58 and you willfully misstate the facts, you are guilty of a CLASS I FELONY and the entity on whose behalf the statement is made can be fined between $2000 and $10000

Contract of insurance

Insurer is bound to pay more money or its equivalent or do some act of value as an indemnity or reimbursement for the party having an interest. Insurance company has a duty to pay insureds claims

Books and papers required to be exhibited

It is the duty of any person having control of books and records to exhibit them to the commissioner or authorized employee upon demand If anyone refuses to provide, or knowingly or willfully makes a false statement regarding these records is guilty of a CLASS 1 MISDEMEANOR

admitted company

Licensed by the state of NC Authorized to do business in NC Insureds protect by Guaranty Fund- in an event that the company goes bankrupt, insureds can go to Guaranty Fund to get claim paid

Notification of criminal convictions and change of address

Licensee must notify commissioner in writing of change of residential or email address WITHIN 10 BUSINESS DAYS Licensee must notify Commissioner in writing if convicted of any offense other than a motor vehicle infraction. NOTICE MUST BE WITHIN 10 DAYS OF CONVICTION DATE

unfair (unethical) trade practices

Misrepresentations and false advertising of policy contracts (twisting) -false info and false advertising

a ____ to show accidents and violations must be obtained every year

Motor Vehicle Report

Certain insurance activities by lenders with customers prohibited

No ____ shall require the purchase of insurance from such a ____ or subsidiary as a condition to making, renewing, or refinancing a loan. (a bank can't have people get insurance through an agency that is facilitated with the bank.

commissioner

The CEO of the Insurance Department

Insurance Business Transactions: Records and Reports

The commissioner is empowered to make the promulgate reasonable rules and regulations governing the recording and reporting of insurance business by agents and brokers. Upon demand, these records must be made available to the commissioner or by his authorized employee.

Fire insurance policy

The inception and expiration date of this is 12:01 am at the location of the building

Workers Compensation assigned risk: Method of operation (residual market, market of last resort)

The purpose is to accept any workers comp risk that is "hard to place" by any P&C agent in the state The NC Rate Bureau binds coverage for 30 days

Restraining orders; criminal convictions

Whenever it appears to the commissioner that any person has violated, IS violating or threatens to violate any provision of law he may: -apply the superior court of any county of the violation for a restraining order -order an injunction to restrain such violation (stop what you're doing) If the court finds a provision has, is or will be violated, the court will issue a "Cease and Desist" order (same as injunction) conviction in any court of competent jurisdiction or a plea of guilty serves to automatically suspend a person's license until reinstated by the commissioner.

Consumer Division (accounting)

Your records must, at all times, show the money you have collected due to your insurers and the return premiums due the insured

pretext interviews

a person attempts to obtain information: pretends to be somebody he is not, pretends to represent someone he does not represent, misrepresents the true purpose of an interview, refuses to identify himself upon request. these are illegal unless done in relation to suspected criminal activity

Agent

a person licensed to solicit applications for, or negotiate a policy of insurance. They represent the insurance company in the transaction of insurance

Broker

a person who is a licensed agent that procures insurance on behalf of a third party (the insured). A broker represents the insured in the insurance transaction. To become one, you must post a $15000 bond in favor of the state

North Carolina Rate Bureau Function

a private organization that acts on behalf of all admitted insurance companies in NC

you must have an insurance license to.... Acting without a license- violation and penalty

advising, receiving, collecting or transmitting premiums, or any other act involved in soliciting business. SHALL BE GUILTY OF A CLASS 1 MISDEMEANOR

beach area

all areas SOUTH and East of the inland waterway; -all essential property coverage (including homeowners policies) can be written by the NCIUA in this area or wind and hail only can be written

Examinations, investigations and hearings; notice of hearing (notice of hearing from commissioner)

all hearings this law authorizes may be conducted personally by the Commissioner or by one or more deputies, investigators, actuaries, or employees designated for this purpose- 10 DAYS WRITTEN NOTICE MUST BE GIVEN

Consumer Division (premium payment receipts)

all premium payment receipts shall be dated and contain the name and address of the agency or agent or broker, and the name of the insurer (the insurance company) must be signed (full signature) by person accepting the payment.

Agents liability

an agent is personally ____ on all contracts of insurance placed with a carrier not authorized to do business with NC.

Alien Company

an insurance company domiciled (headquartered) outside of the USA. ex: Brazil, Italy, Japan

Domestic Company

an insurance company domiciled in North Carolina.

Foreign Company

an insurance company domiciled in any other state (but not in North Carolina)

adjuster

any individual who investigates or reports to his principal relative to claims arising under an insurance contract. You cannot hold an agents and ____ license at the same time

general obligations of insurers of NC motor vehicle reinsurance facility

any insurer must accept any "eligible risk" "ceded" to them all insurers share equally in the results of the "facility" same type of quality and service has to be given to ceded business *insurers do not have to notify the insured as to when they will be eligible for regular (non-ceded) insurance

membership of nc motor vehicle reinsurance facility

any insurer writing motor vehicle insurance in the state is required to be a member of the "facility"

False pretense and cheats

any person who knowingly and designedly, through false pretense: -takes money, goods, property, services, etc -with the intent to cheat or defraud Guilty of class C Felony >100000 guilty of class H Felony< 100000

exemption for exam

anyone who is licensed in another state and moves to NC. MUST APPLY WITHIN 30 DAYS after establishing residency any applicant for a P&C license that holds the CPCU

no agent may do business with

companies that they do not represent

Adverse underwriting decision

declining the insurance, terminating the insurance, placement in a residual market, using an insurer other than that requested by the insured, charging a higher rate based on information that differs from that provided by the insured

Classification and safe driver plan (casualty)

factors involved in rating a private passenger auto: farm, pleasure use only, distance to and from work (10 mi breaking point), business use -Principal (primary) and occasional operators -The # of years of driving experience, not the age of the driver. Less than 3 years driving is considered an Inexperienced operator and surcharge will apply (almost double the premium)

commissioner's examination powers (commissioners authorization)

has the ability to investigate every person engaged in the business of insurance in this State in order to determine if an unfair trade practice has been committed

non-resident agents

if a person lives in a county of another state that borders NC they can be licensed as a resident agent

Proof of loss forms

if it is required by the insurer, they must supply a blank form WITHIN 15 DAYS

False statement to procure benefit of Insurance Policy or Certificate

includes any application, notice, statement, proof of loss, bill of lading, receipt of payment, invoice, account that is intended to defraud an insurer -can be oral or written -also includes people who aid in deception -IF CONVICTED, YOU ARE GUILTY OF A CLASS H FELONY

Defamation

information which is false or maliciously critical relating to the financial condition of an insurer (talking badly about another insurance company)

essential property insurance

insurance against direct loss to property caused by the following perils: -standard fire policy perils -extended coverage perils -vandalism and malicious mischief

rebates

kickback commission

white list

list of authorized Non-Admitted companies

insurance license requirements

must be 18, be of good character, have prescribed education and training, pass the state licensing exam and pay the licensing fee

broker requirements

must have a valid agents license and post a $15000 bond in favor of the state

prohibited rebates and and inducements

no agent shall pay as an ____ to buy insurance any ___, discount, credit or reduction in premium.

NC "facility" termination of insurance "ceded" motor vehicle insurance can only be cancelled for the following reasons

non-payment of premium, named insured becomes a non-resident, agency contract with company is terminated

Unauthorized

not allowed to do business in NC agent is personally liable

non-admitted company

not licensed by the state of NC Authorized to do business in NC NO PROTECTION under Guaranty Fund

if an insured is at fault in an accident and is also convicted of a moving violation in connection with the accident,

only the higher surcharge between the accident and the conviction will be assessed

no agent may do business with a company not listed to do business in this state unless...

permitted under the surplus lines act

NC Rate Bureau makes and promulgates rates and forms for:

private messenger automobile (personal auto policy), Homeowner/dwellings (1-4 units), workers compensation (companies will go to ____ and ask if certain rates can be raised) and rates need to be approved by commissioner

Post Assessment Insurance Guaranty Association (Guaranty fund)

purpose: to protect citizens from the Insolvency (bankruptcy) of and admitted (licensed) insurer

residual market mechanism

reinsurance facility (NC motor vehicle reinsurance facility), joint underwriting association (beach/fair plans), assigned risk plan (workers comp)

continuing education

required to complete 24 hours every 24 months -an ethics class must be taken every 2 years (3 hr ethics course) flood class every 4 years (3 hr flood class)

Coastal area

the 18 counties contiguous to the ocean -wind and hail only and homeowners policies can be written by the NCIUA in this area NORTH AND WEST

association

the NC insurance underwriting association (NCIUA) aka the coastal property insurance pool (beach plan) NCJUA NC Joint Underwriting Association- the fair plan

cede

the act of transferring the risk from the insurer to the facility. The facility writes ceded motor vehicle insurance

the facility functions and administration

this is to assure the availability of motor vehicle liability insurance (there are limits in reinsurance facility)

Essential property insurance for beach area property (the beach plan)

to ensure the orderly growth and development necessary to the economic welfare of the "____ & ____ areas" all companies are members

purpose of insurance information and privacy act

to establish standards for the collection, use, and disclosure of information gathered in connection with insurance transactions.

Fair access to insurance requirements- the fair plan (residual market)

to make available property insurance to insurable property anywhere in the state except the beach area. All companies are members NCJUA NC joint underwriting association

License Surrenders

when a licensee is accused of a violation he may surrender his license (with the commissioner's permission) for a period of time established by the commissioner. If an insurance agent knows that they are in trouble they can give up their license in hopes for a lesser suspension time

obtaining information under false pretenses (lying to get info out of them)

you are guilty of a class 1 misdemeanor