P&C Exam: Chapter 14
Types of Insurers: Authorized Insurer
company that has been allowed to conduct insurance business in this state; aka admitted insurer or licensed insurer; receive a "certificate of authority" to do business in this state
Massachusetts Law and Regulation Pertinent to Casualty Insurance: Comparative Negligence
damages payable to an injured party will be determined/decided by a court of law in proportion to the degree of negligence imputed to those persons responsible for the BI or PD; if a driver is found to be 90% at fault, then he is liable for 90% of the damages; therefore, MA is a modified comparative negligence State; recovery is comparative as long as you are less than 50% at fault AND less at fault than the other drive
Massachusetts Law and Regulation Pertinent to Casualty Insurance: Subrogation
describes the liability of persons other than an insured; an employee shall still be entitled to compensation and other applicable benefits where the injury for which compensation is payable was caused under circumstances creating liability in some person other than the insured
Massachusetts Law and Regulations Pertinent to Property Insurance: Massachusetts Standard Fire Policy
insurers may only issue fire policies on forms approved by the State of MA; MA standard fire policies will go into effect at 12:01 AM on the policy's inception date; standard fire policy provides coverage against the perils of fire, lightning, and removal
Illegal/deceptive practices: False Financial Statements
it is illegal to knowingly make, publish, disseminate, circulate, or deliver to any person, or place before the public, any false material statement of fact as to the financial condition of any person; or knowingly make any false entry of a material fact in any book, report, or statement
Qualifications for a license: Adviser
may also be an individual, partnership, firm, or corporation; must submit to the DOI: a letter of interest describing their background, a resume describing credentials and work history (for the preceding 10 years), and a written contract describing advising services; must be 18 years or older; must pass a written exam; must have never had a license revoked/suspended; must be honest/competent/trustworthy as indicated by 3 references of MA
Types of Licenses: Temporary License
may be issued to a surviving spouse or to a court-appointed designated person when a licensed individual dies, becomes mentally/physically disabled, or enters the armed services; lasts for 180-day period and does not require a State examination; does not allow the holder to write new business but only to receive renewal commissions; may not continue once the owner disposes of the business; if an individual designated in a business entity license dies/becomes disabled, a temporary license may be issued to a member/employee of that business entity; Commissioner can issue a temporary license wherever he/she deems necessary
Qualifications for a license: Non-Resident
must be currently licensed in good standing in his/her home State, must not have committed any act for which the license could be denied/suspended/revoked, must pay appropriate fee and provide required information by Division of Insurance; a non-resident producer who moves to the Commonwealth must submit an application within 90 days of establishing legal residency to become a resident licensee
Illegal/deceptive practices: Unfair Discrimination
no insurer may discriminate unfairly in the assessment of premium rates
Maintenance, Duration, Termination, and Expiration of Licenses: Business Entity and Non-Resident Business Entity
these licenses will renew 1 year from the original date of licensure; renewal fee is $75/member or partner covered by the license
Maintenance, Duration, Termination, and Expiration of Licenses:
Notice of license renewal will be send by the DOI 30-45 days prior to the license renewal date
Types of Licenses: Business Entity Producers
a corporation may also secure an insurance license to conduct insurance transactions in this State
Disciplinary Actions: Penalties
licensee may have his/her license suspended or revoked, be subject to a monetary penalty and be required to make restitution to the aggrieved party
Maintenance, Duration, Termination, and Expiration of Licenses: Address Change
whenever a licensed individual/business changes his/her/its business, residence, or email address, the DOI must be notified of the change within 30 days; if a producer is moving to another State, he/she must inform the DOI in writing within 30 days; if a non-resident producer is moving to another State other than MA, he/she must inform the DOI within 30 days; if non-resident producer is moving to MA, he/she has 90 days to inform DOI, cancel current home State license and apple for a license in this State - this person will also need a letter of clearance or certification letter from the Insurance Dept of the current home state to verify that the license is being relinquished
Unfair/Deceptive Insurance Practices: Unfair/Deceptive Acts or Unfair Methods of Competition
Any licensee/insurer engaging in these activities will be subject to a monetary fine and license suspension/revocation after a hearing; any person engaging in such activities may be subject to a monetary penalty/fine of not more than $1,000; Commissioner may order the offender to make restitution to the insurer/policyholder who suffered a loss; court may award punitive damages in addition to the amount of the claim not exceeding 25% of the claim
Massachusetts Law and Regulation Pertinent to Casualty Insurance: Liquor Liability
MA law identifies this type of insurance as one which provides for legal liability against loss or damage arising out of death or injury to any person due to carelessness in the same, disbursement or providing of alcohol by any person covered under a liquor liability policy; an insurer must provide 30 days-notice of cancellation when terminating this type of policy due to non-payment of premium; if a policy is cancelled or non-renewed for any other legitimate reason as allowed by MA law, the insurer must provide 60 days-notice
Qualifications for a license: Producer License Requirements
MA resident (no specific period of time for residency), 18 years or older, pass the State examination in lines of authority for which the individual applied, must be deemed competent/trustworthy/honest, pay appropriate license fee
Types of Licenses: Producer
a resident individual may secure a producer license in this State if he/she satisfies all MA requirements; the Commonwealth is now issuing producer licenses in the following lines of authority: life insurance, accident and health or sickness insurance, property insurance, casualty insurance, personal lines, limited lines credit insurance, and variable life and annuity products
Types of Licenses: non-resident producer
an individual may secure this type of license if they are licensed in their home State and satisfy all MA requirements for a non-resident license
Types of Insurers: Unauthorized Insurer
an insurer that is not allowed/permitted to transact insurance in this state; any licensee solicitating/negotiating insurance on behalf of an unauthorized insurer will be subject to license suspension/revocation; aka non admitted insurer
Types of Insurers: Foreign Insurer
authorized in the State but its charter and principal office is located in another state (i.e. Vermont Mutual)
State Regulation: Commissioner's General Powers and Duties
Commissioner of Insurance is to administer and enforce the insurance laws that are in effect today; it is not the power/duty of this office to propose legislation, make laws, or pass laws; Commissioner's duties/powers include: · Issue insurance-related licenses or a certificate of authority to an insurer · Suspend the applicable license/certificate of authority, or place the guilty party on probation after a hearing if a licensee or insurer breaks any State laws - hearing of offending party should be held no less than 21 days following notice · Approve insurance policy forms and premium rates - MA is a "file and use" State; all rates must not be excessive/unfairly discriminatory · Examine the books and records of insurers who are authorized currently and who wish to do business in this State to make sure they are in sound financial condition; Commissioner regulates an insurer for solvency · Hold public hearings to review illegal acts be licensees/insurers · Require an affidavit of domestic insurers which will verify its financial condition in at least in every fifth year after it becomes authorized · Examine and audit insurers at his/her discretion; examination expenses incurred by the Division are paid by the insurer being examined and must be paid within 30 days of receiving notice of the charges · Determine, set, or compute the reserves of life insurers - reserves are computed by 12/31 every year · Make rules/regulations regarding producer licensing examinations · Regulate insurance advising · Issue a cease and desist order to producers when applicable
Illegal/deceptive practices: False Advertising Regulations
Commissioner shall regulate all advertising in this State w/ regard to the sale or marketing of insurance, annuities, and endowments; insurers are required by the State to keep a copy of all their advertisements for a period of 4 years; insurer/its representatives may not disseminate nor distribute false info in any of its advertisements
Types of Licenses: Life Settlement Broker
an applicant for a Life Settlement broker license must file: (1) a complete life settlement broker application; (2) a check payable to the Commonwealth of Massachusetts; (3) an anti-fraud plan that meets the requirements State law; and (4) if the applicant is a business entity, it must be organized under the laws of the MA/foreign entity authorized to transact business in the Commonwealth; a life settlement is an agreement between an policyowner and life settlement firm where the owner sells the policy for any reason to the firm for a % of the face amount
Massachusetts Law and Regulation Pertinent to Casualty Insurance: Assigned Risk Pool
an assigned risk pool must be compromised of all insurers who market WC in this State as a condition of doing business; purpose is to provide coverage for those employers who are unable to obtain WC coverage in the normal market; an employer may be eligible for coverage in the Assigned Risk Pool if his/her application for WC insurance has been declined by 2 insurers within 5 days of applying to the Pool; as soon as application is accepted/premium is paid, coverage becomes effective within 5 days of applying to the Pool
Continuing Education
Licensee's must complete 3 credit hours of continuing education in ethics - credit hours must be completed every 3 years on the producer's birth date · During the first 3 years of licensure, a resident producer must complete 60 credit hours of approved study · During the next 3 years and each subsequent 36-month period, the licensee must complete 45 credit hours of approved C.E. · Surplus/excess credit hours may be carried over to the ensuing 3-year period only · If a licensee fails to comply with this State C.E. law requirements, his/her license will be suspended until they comply, although extensions may be granted by the Commissioner
License Process
common content to be reviewed includes but is not limited to: Massachusetts producer licensing information; the powers and duties of the Insurance Commissioner; illegal sales practices; the fiduciary responsibilities of producers; advertising regulations and; types of insurers
Massachusetts Law and Regulations Pertinent to Property Insurance: Cancellation / Non-Renewal
MA law specifies that a property insurance policy may be terminated by an insured at any time; the insured will receive a short rate return of premium; insurer may cancel/non-renew the policy under special conditions as well such as: · Insurer may cancel the policy by informing the insured in writing, including the reason for cancellation - letter can be delivered by first class mail and a postal receipt must be posted for proof · For non-payment of premium, 10 days written notice of cancellation must be provided to the insured by the insurer · When the policy has been in effect for less than 60 days, the insurer may cancel for any reason, other than non-payment, by providing 5 days written notice; if the policy has been in effect for 60 days or more, it may be canceled with 5 days written notice if: o Discovery of fraud or material misrepresentation by the insured in obtaining the policy o Discovery of willful/reckless actions or omissions by the insured which increases the hazard insured against (i.e. leaving a structure vacant and open for vandalism) o Physical changes in property insured, which result in the property becoming insurable o Conviction of a crime arising out of an act which increases the chance of loss under the policy (i.e. illegally setting off fireworks) o A determination made by the Commissioner that a continuation of the policy will violate or place the insurer in violation of the law · If an insurer non-renews a property insurance policy it must provide the insured with 45 days written notice of non-renewal · Mortgage Notice - if an insurer cancels a property insurance policy, it must provide a mortgagee or lienholder with 20 days written notice of cancellation; if the insurer intends to non-renew, it must provide the mortgagee within 10 days written notice of non-renewal · City or Town Liens - if, prior to a claim payment, the insurer receives notice of an impending OR existing lien against an insured premise, it must delay payment until the matter is settled · Vacancy - in addition to the standard fire/HO policy (i.e. vandalism), the insurer is not liable for loss caused by fire or lightening occurring while a described building is vacant beyond a period of 60 consecutive days for residential purposes of 3 units or less; or 30 consecutive days for other residential purposes of more than 3 units · Loss Payment - once an insurer receives written proof of loss from an insured, it must pay the claim within 30 days; interest payable at a rate of 1% over the prime interest rate shall be assessed if the claim remains unpaid by the insurer; once the proof of loss is sent to the insurer, the latter has the option of repairing/replacing the damaged property w/ the kind and quality as long as 15 days-notice of such decision is provided to the insured (measured from the day the insurer receives the written proof of loss) · Replacement Cost - if an insured has a replacement cost option but selects an ACV settlement at the time of loss, he may still make a claim for the additional amount as long as he notifies the insurer of his intent to do so within 6 months after the date of loss; the insurer will not pay on a replacement cost basis for any loss/damage unless the repairs/replacement are made within a reasonable time, but no more than 2 years after the loss/damage
Massachusetts Law and Regulation Pertinent to Casualty Insurance: Worker's Compensation
State law identifies/describes the provisions/regulations of this Act · Purpose - to make available a program of income and medical benefits if an employee is injured on the job; all employers must provide this protection to their employees by either purchasing insurance or self-insuring by depositing with the State Treasurer an amount of securities or a bond in an amount not less than $20,000 · Requirements and Coverage - an entity must be in business for 5 years before it may self-insure; coverage is compulsory if the employer has 1 or more employees; WC coverage provides: (1) unlimited loss expenses; (2) lost wages (66 2/3% for total permanent and 60% for partial or temporary); (3) rehabilitation expenses; (4) dependent and funeral expenses up to $4,000 · Pain and suffering are not covered · Insurer must provide 10 days written notice of cancellation to insured · Dependent benefits paid for surviving children when a parent dies within the scope of their employment continue until the child becomes 18, is a full-time student, or are unable to work because of a physical/mental disability · All injuries must be reported by the employer to the WC insurer and the DIA; employer must report an injury within the statute of limitations (4 years); State law also requires a 5 day waiting period before benefits for disability are payable (retroactive period according to WC is 21 days); an insurer must begin to pay benefits after 14 days of the employee's injury
Insurance Fraud Regulations: Fraud
an insurance producer/other person who knowingly and willingly makes false statements or representations in connection to any application for insurance may be guilty of fraud; any person who makes false statements, engages in concealment, withholds material information for the purpose of obtaining any fee/commission/money/any benefit, or uses the funds of another for his/her own use may be guilty of fraud; an individual guilty of fraud may be fined for between $100-$500, receive a prison sentence of not less than 1 month nor more than 1 year, or both · Can be contrasted with perjury - involves making a false statement as part of a sworn statement; insurance claims are considered to be sworn statements; a person guilty of perjury may receive a fine of not less than $100 and not more than $1,000, or prison for a term not more than 1 year
Massachusetts Law and Regulations Pertinent to Property Insurance: Application and Binding Requirements
anyone who wishes to secure fire coverage must complete an application on forms approved by the State; application shall be made part of the entire contract; a new application for fire/property coverage must be completed when an initial policy is going to be issued; an endorsement/change to the policy must be made in all the following situations including but not limited to: (1) the name of the insured changes, (2) when a mortgagee changes, (3) when the coverage limit is increased, or (4) when the insured has a change of address; if there is a delay in the issuance of a policy, a binder may be extended for up to 30 days; premium credits are provided for exposures that are described as highly protected risks (i.e. sprinkler system or burglar alarm)
Types of Insurers: Alien Insurer
a company whose principal office and charter is located in another country; can be authorized in MA if requirements are met (i.e. Continental Reinsurance Company)
Additional State Regulatory Information: Sharing Commissions
a licensed person is permitted to share commissions with any other producer, company, or corporation as long as such entities are licensed in the same line of insurance as the business being solicited; no commissions may legally be shared w/ an unlicensed person; whoever violates this law may be fined between $50-$500
Maintenance, Duration, Termination, and Expiration of Licenses: Reinstatement and Renewal of Producer License
a producer's license is good for 3 years and renews on the holder's birthday; triennial fee is $225; producer's license will expire if the fee is not paid - this will cause all appointments w/ the insurers to be cancelled as well; a producer who allows his/her license to lapse may within 12 months from the due date of the renewal fee reinstate the license without the necessity of passing the state examination, but a penalty in the amount of double the renewal fee is required; candidate must pass the State examination again if the license is not reinstated within 12 months after its lapse · No insurance sale activities can commence until license is obtained by an individual; a producer who is unable to comply due to military service or some other extenuating circumstance may request a waiver of those procedures · Once licensed, a producer is eligible to become a member of the Insurance Services Office (ISO) which is the entity that provides support services and develops the standard insurance policy forms utilized by most insurance companies · Exemptions - certain applicants are exempt from paying the license fee and lead paint surcharge including (1) a person who is a MA resident and veteran; (2) a person who is blind; and (3) a widow/widower of a licensee; proper documentation must be submitted by the aforementioned applicants
Massachusetts Law and Regulations Pertinent to Property Insurance: Massachusetts Amendatory Endorsements (DP-01-20; HO-01-20)
added to DF or HO policies issued in MA; purpose of the DP-01-20 is to make a policy conform with State regulations; the HO-01-20 endorsement identifies the variations in MA with regards to the homeowners program; additional property regulations in this State specifies that if there is a dispute between an insurer and an insured when a homeowners loss is being settled, an appraisal process will be utilized to determine the settlement - sometimes referred to as reference in MA since State regulations specify that if the insured and the insurer fail to agree on the amount of a loss, the matter will be referred to as a three member board of referees who will determine the settlement and their decision is binding on all parties; once the dispute is settled, the insurer will generally pay the claim within 10 days
Illegal/deceptive practices: Failure to Maintain Complaint Record
all insurers are required to maintain proper and adequate complaint handling procedures for the benefit of the public; failure to do so may result in a monetary fine or insurer license suspension; the Investigation Division is the agency of the DOI which will receive consumer complaints with regards to an insurer's failure to maintain/handle consumer complaints; producers and adjusters must maintain any complaints received for a period of 2 years with a record of their disposition
Insurance Information and Privacy Protection Act: IIPPA
designed to protect the public against the publishing or making public personal information of an individual; whenever an application is completed, a policy is delivered of a policy is renewed and personal information is collected from an insured or applicant, a written notice should be provided to them; when new insurance is being sought, the notice must be provided at the time of policy delivery at the latest; State provides an individual w/ the ability to access the personal information compiled by an insurance company/organization - once a request is made, the insurance organization must provide the individual w/ the information in writing/by phone/mail within 30 days; insurer must also notify the individual of any other person to whom such information was provided during the previous 2 years, once requested, the insurance organization has 30 days to make corrections/to inform the individual that it is refusing to do so
State Regulation: Producer Regulation
following are regulations governing insurance producers and the transactions in which they engage in this state: · Impersonation - a licensee who advertises/markets himself/herself as something they are not has engaged in personation; anyone engaging in this unfair practice may be fined from $10-$100 and the guilty party will be subject to license suspension/revocation · Larceny - a producer engaged in negotiating, selling, or renewing an insurance policy who commits larceny shall be subject to a fine/prison; premiums collected and personal funds may not be comingled in the premium trust account; premiums may be deposited in a premium trust account by an independent producer, if premiums are not paid to the insurer within 30 days after their receipt, then a written demand will be sent - if ignored, it constitutes larcenous activity; monetary penalty for larceny is no more than $1,000 · Unlicensed Persons Compensation - insurer/producer should not pay a commission, service fee, brokerage fee, or other consideration to a person for selling insurance unless such person is dually licensed; anyone violating this regulation may be fined between $50 and $500
Additional State Regulatory Information: Contractual Relationships of Producers with Companies
if an insurer decides to cancel or alter an agency agreement with an agent, it must provide at least written notice of at least 6 months/180 days; bilateral contract - an agency contract negotiated between the insurer and an independent agent where both parties contribute to the agreement · Insurer generally provides an independent agent w/ 45 days-notice if it decides to non-renew an auto/HO policy of one of the agent's clients - once the agent receives notice from the insurer, he/she must notify the insured within 15 days to ensure that this notice was received; producers are generally required to return all company and other sales material to the insurer
Types of Insurers: Domestic Insurer
insurer that is chartered and formed under the laws of this State; a domestic company generally has its principal/home office in this State as well; examined every 5 years by Commissioner to ensure financial stability
Types of Licenses: Public Insurance (Fire) Adjuster
· a fire adjuster is a person who represents a policyholder in the negotiation of a loss payable by a fire insurance policy; a fire loss adjuster settles/adjusts losses on behalf of the public; State requires that the adjuster be at least 21 years of age or older, pass a State exam, submit a letter of interest to the Division of Insurance, have at least two years of experience adjusting property losses, submit 2 passport-sized photographs taken within 60 days of the application date and be competent and trustworthy o License is good for 3 years from its date of issue; in order for the license to be renewed the holder must pay the appropriate fee every three years and complete 15 credit hours of approved continuing education
State Regulation: Company Regulation
laws and regulations governing the operation of insurers and their transactions: · Certificate of Authority - Commissioner must conduct an extensive examination determining that an insurer is financially sound and qualified to transact insurance business · Solvency - Commissioner regulates an insurer for solvency; he/she may also examine the affairs of any person engaged in the insurance business in order to determine if that person has/is engaging in any unfair/deceptive practice · Rates - insurer will file/submit proposed premium rates to be charged for specific plans to the Commissioner and then may use them unless they are found to be unfair · Policy Forms - regulation of policy forms protects the public against the possibility of unfair provisions in the insurance contract · Examination of Books and Records - examine to ensure solvency, determined by financial statement analysis · Producer Appointments - an insurance producer shall not act as an agent of an insurer unless the insurance producer becomes an appointed agent of that insurer; to appoint a producer as its agent, the appointing insurer shall file (in the format approved by the Commissioner) a notice of appointment within 15 days from the date the agency contract is executed or the first insurance application is submitted; an insurer shall pay an appointment fee for each insurance producer appointed by the insurer · Termination of Producer Appointment - insurer/authorized representative of the insurer that terminates a business relationship with a producer shall notify the Commissioner within 30 days following the effective date of termination; within 15 days after making the notification required by state law, the insurer shall mail a copy of the notification to the producer at his/her known address
Disciplinary Actions: Probation, Suspension, Revocation, Refusal to Issue or Renew
license may not be suspended until after a hearing has been held in order to allow the licensee to defend himself/herself; both the licensee and sponsoring insurer must be notified as well; length of suspension/revocation is generally the unexpired term of the license; Commissioner may place on probation/suspend/revoke/refuse to issue or renew an insurance producer's license for any one of the following acts: · Providing incorrect, misleading, incomplete or materially untrue information in a license application · Violating any insurance laws, or violating any regulation/subpoena/order of any Insurance Commissioner · Obtaining/attempting to obtain a license through misrepresentation/fraud · Improperly withholding, misappropriating, or converting any moneys or properties received in the course of doing insurance business · Intentionally misrepresenting the terms of an actual/proposed insurance contract or application for insurance · Having been convicted of a felony or being a prohibited person · Having admitted or been found to have committed any unfair trade practice · Using fraudulent, coercive or dishonest practices, or demonstrating incompetence/financial irresponsibility in the conduct of insurance business · Having an insurance license or its equivalent, denied, suspended, or revoked in any other State/province/district/territory · Forging another's name to an application for insurance · Knowingly accepting insurance business from an individual who is not licensed · Failing to comply with an administrative or court order imposing a child support obligation · Failing to pay State income tax or comply with any administrative/court order directing payment of State income tax · Cheating on a State pre-licensing exam Licensee may appeal a license application denial/non-renewal within 30 days of receiving written notice form the Commissioner; once received by Commissioner, he/she will have 20 days to hold a hearing
Qualifications for a license: Resident Business Entity
must pay the appropriate fees and provide any other info required by the Division of Insurance; must submit their articles of incorporation/organization along w/ the requested business entity name which includes the word insurance; must submit the appropriate application and a list of members who are covered by the license and possess the authority to solicit business on behalf of/in the name of the business entity; must designate a licensed producer responsible for the business entity's compliance with the insurance laws of the Commonwealth
Maintenance, Duration, Termination, and Expiration of Licenses: Assumed Names
no individual/business entity is permitted to advertise/conduct insurance transactions under a name that is not filed w/ the DOI; any party engaging in such activity will be deemed to be operating under an assumed name; any party must notify the Commissioner of any name under which he/she/it is doing business prior to using such assumed name
Illegal/deceptive practices: Defamation of Insurer
no person may make false or untrue statements regarding a competing insurer - any commends will be deemed to be defamation; false statements regarding the financial condition/authority of a competing insurer are generally viewed as defamation
Illegal/deceptive practices: Boycott, Coercion and Intimidation
no person/persons may enter into any agreement to commit any act of boycott, coercion, or intimidation which results or tends to result in the unreasonable restraint of or monopoly in the business of insurance
Maintenance, Duration, Termination, and Expiration of Licenses: Adviser
non-refundable license fee of an adviser must be paid every 3 years, fee is $200; anyone acting as an adviser w/o a license or during a license suspension may be fined between $50-500, receive a prison sentence of no more than 6 months, or both; not subject to the same education requirements as a producer
Disciplinary Actions: Hearings
notice of hearings concerning the suspension/revocation of a license are sufficient when sent to the offender registered mail to the last residence/business address on record w/ the Commissioner; whenever a person is suspected of committing an unfair trade practice, the Commissioner should send a notice of hearing to the offending party that will also include a statement of the charges against the offender; hearing should not be less than 21 days following the notice
Types of Insurers: Mutual Company
owned by its policyholders; issue participating policies which may permit policyholders to receive dividends if they are payable (differs from stock insurers according to ownership)
Types of Insurers: Stock Company
owned by its stockholders or shareholders and issues nonparticipating policies; stock insurers do not pay dividends to policyholders; surplus at year's end is divided among shareholders
Maintenance, Duration, Termination, and Expiration of Licenses: Reporting of Actions
producer must report to the MA Commissioner any administrative action against him/her by another State/governmental agency within 30 days of a final disposition of the matter; report shall include a copy of the order, consent to order and any other relevant documents as required by the Commissioner
Massachusetts Law and Regulation Pertinent to Casualty Insurance: Workers Compensation Trust Fund
special revenue fund in the State treasury, the proceeds of which may be expended by the Insurance Department, subject to appropriation, for the operating expenses of the Department; revenues shall be raised by an assessment on all employers subject to State law
Massachusetts Law and Regulations Pertinent to Property Insurance: Massachusetts Fair Plan
the Fair Plan will provide basic property (and liability in some cases) insurance for eligible risks against direct loss to property used for personal/commercial exposures; purpose of the Fair Plan is to make property insurance available to those in urban areas or others who cannot secure it in the normal/standard markets; all licensed insurers selling property insurance in this State must participate in the Fair Plan as a condition of doing business in MA; Plan will spread such risks proportionately among all insurers · Original purpose of the Plan was to provide insurance for urban areas that were unable to secure coverage in the normal market and to improve property conditions since inspections are required in order for coverage to be effective; Plan will not provide coverage for vacant, empty, damaged, or structurally inferior buildings; Fair Plan must inspect property and if it approves application then coverage will become effective · FAIR = Fair Access to Insurance Requirements · Eligible Property - includes real/tangible personal property at a fixed location in MA; property must meet the Association's underwriting standards · Ineligible Property - include those with unrepaired damage, any property with real estate tax delinquency for more than one year, a property with outstanding building code violations, a property which is more than 65% vacancy or unoccupied, or a property where a person having a financial interest has an outstanding indictment for the crime of arson or defrauding an insurance company; no producer has binding authority since all applications are subject to underwriting approval; all applications are required to include the signature of the producer/applicant · Whenever a person applies for commercial property coverage through the Fair Plan, arson questions must be answered on the application; this would include dwellings of more than 4 units as well
Additional State Regulatory Information: Massachusetts Insurer Insolvency or Guaranty Fund
the purpose of the Guaranty Fund is to protect policyowners, insureds, beneficiaries, or others against failure in the performance of contractual obligations due to the impairment of insolvency of the insurer issuing the policies; the Fund protects the insurance buying public against the insolvency of insures (pays the claims of persons whose insurers have become insolvent); three cases of assessments that may be levied on insurers when an insolvency arises including: · Class A assessment - to pay for administrative costs and general expenses · Class B assessment - for expenses incurred in connection with impaired/insolvent domestic insurers · Class C assessment - for expenses incurred by insolvent foreign and alien insurers
Disciplinary Actions: Cease and Desist Order
when the Commissioner believes that a licensee has/is engaging in any unfair sales practice, he/she will issue a cease and desist order until a hearing can be held; if licensee is found guilty then he/she might have to compensate the insurer/policyholder for any loss/damage suffered; anyone who violates this order may be fined up to $10,000 per violation and be subject to license suspension or revocation; anyone failing to appear if summoned by DOI may be subject to a $1,000 fine, up to 1 year in prison, and the revocation of any insurance license held
Types of Licenses: Special Broker
· an individual who places insurance business with insurers that are not authorized to transact business in this State; aka a surplus lines broker, this license may be secured by an individual of full age who has been deemed suitable by the Commissioner; this type of broker may negotiate insurance for many types of insurance except accident and health, WC, compulsory motor vehicle liability, or life insurance o Whenever a special broker procures any insurance w/ an unauthorized insurer, he/she must file with the Commissioner an affidavit stating that the full amount of insurance secured was not procurable, after a diligent effort, with a standard insurer; a special broker should also keep a separate account of the business transacted o He/she shall report annually in January of each year of all transactions, premiums collected and returned, and of any policies cancelled during the year ending the preceding December 31st; anyone who fails to file such reports are subject to a fine between $100-$500, imprisonment for up to a year, or both o This type of license may be issued to an individual, partnership, corporation, or firm; the holder must also post a surety bond to guarantee performance as well; license shall be issued for a 1-year term; affidavit must be filed by this individual to the Commissioner describing the business within 20 days of the interaction
Types of Licenses: Adviser
· an individual who provides insurance advice for compensation (in the form of a prearranged fee, whose amount must be disclosed to the client in writing prior to the consultation); also referred to as an insurance consultant, counselor, specialist, analyst, or policy holder adviser; licensed attorney or CPA acting within the scope of his/her profession may provide advice related to insurance without having an adviser license o An adviser may also be an individual, partnership, firm, or corporation; requirements to become an adviser are: (1) must submit to the Division of Insurance a letter of interest describing their background, a resume describing credentials and work history (for preceding 10 years), and a written contract describing advising services; (2) must be age 18 or older; (3) must pass a written examination; (4) must have never had an insurance license revoked/suspended; and (5) must be honest, trustworthy, and competent as indicated by three references provided to the Commonwealth o Non-refundable license fee of an adviser must be paid to the Commonwealth every three years and is $200; anyone acting as an adviser without a license or during a license suspension may be fined between $50-$500, receive a prison sentence of not more than 6 months or both
Illegal/deceptive practices: Embezzlement
· any producer who embezzles funds from an insurer, including premiums or any other funds, will be subject to a prison sentence in State prison for a term of up to 5 years
Types of Licenses: Reinsurance Intermediary
· license can be secured by an individual/firm that negotiates reinsurance contracts w/ reinsurers on behalf of an insurer; needs to be a licensed producer and maintains and office in this State, or is licensed as a producer in another State and their home State has reciprocity with the Commonwealth of Massachusetts; Commissioner may require that such an intermediary post a surety bond and maintain an E&O policy o Every applicant for this license must have been licensed as an insurance producer for the lines for which he/she intends to transact business as an intermediary for a period of at least three years prior to applying for such license; application shall state all business affiliations of the applicant for the preceding ten years; applicant must pass a written exam and be deemed trustworthy/competent o License is good for three years from the date of issue; anyone acting as an insurance intermediary without a license shall be subject to a fine of not more than $1,000, imprisonment for up to 6 months, or both o A nonresident licensee may secure this license if qualified, if licensed is in good standing in his/her own State and must name the Commissioner as agent for services of process; even though this individual is negotiating a reinsurance agreement on behalf of ceding company, he/she has no power to bind coverage on behalf of the ceding company; for any other violation committed by the licensee the Commissioner may impose a penalty of up to $10,000 and require the licensee to make restitution if applicable
Illegal/deceptive practices: Rebating
· no insurer, licensee, policy owner, or beneficiary shall offer anything of value to a prospective insured or policyowner that is not specified in the contract in return for the purchase of an insurance policy o Offeror - the licensee offering a rebate, offeree - the person knowingly accepting the rebate o A person engaging in rebating may be fined, receive a prison sentence for no less than a month nor more than a year, or both
Illegal/deceptive practices: Misrepresentation
· unfair marketing practice that involves a licensee or any insurance company office/representative making false written or oral statements which misrepresent the terms, conditions, privileges, or benefits provided by a policy; any licensee who includes/omits a statement tending to mislead/deceive a member of the public has engaged in this unfair act o False/misleading statements regarding the benefits of a policy are considered misrepresentations o Making an illegal/unfair comparison of policies in order to persuade a person to lapse/surrender his current insurance plan in force and purchase a new one from the producer is another description of misrepresentation - aka twisting o Anyone engaging in misrepresentations of a material nature may be fined no more than $1,000 or receive a prison sentence of not more than 6 months o If twisting/other types of misrepresentation cause a person to lapse his current policy in force, he/she may take action against the parties involved - the aggrieved person has 2 years after the new policy is secured to follow this course of action
Illegal/deceptive practices: Unfair Claims Settlement Practices
· various unfair claim practices, could lead to license suspension, these include: o Misrepresenting insurance policy provisions/pertinent facts concerning coverages provided o Refusing to pay claims without conducting an equitable and fair investigation based on all available information o Failing to effectuate a prompt, fair, and equitable settlement of claims in which liability has become reasonably clear o Failing to adopt and implement reasonable standards for the prompt investigation of covered claims or failing to affirm/deny coverage for a claim within a reasonable time after a proof of loss has been submitted to the insurer o Failing to acknowledge and act reasonably and promptly upon communications with respect to claims o Seeking to pay an insurance claim that is less than the actual amount o Failing to provide claim or proof of loss forms in a timely fashion o Forcing an insured to institute legal action to recover amounts due under a policy by offering less than the amounts ultimately recovered in actions brought by an insured o Unfairly refusing to pay claims or making known to an insured that the insurer has a policy of contesting claims by going to arbitration, which may induce the claimant to accept a lower amount to which he/she is entitled o Failing to settle claims properly after relevant information has been collected by the insurer o Failing to promptly provide a reasonably response to an insured/beneficiary with relation to the facts or applicable law regarding denial of a claim
