PC State Law - Terminology & Random Questions - MI P&C Licensing

Review Question: The minimum auto liability insurance limits in Michigan are: A. 10/20/15 B. 20/40/10 C. 20/20/20 D. 10/40/15

B. 20/40/10 The required auto liability insurance limits in Michigan are 20/40/10: $20,000 per person and $40,000 per occurrence for two or more persons in any one accident for bodily injury, and $10,000 per occurrence for property damage.

Business Entity (Qualifications)

Business Entity A business entity applying for a resident insurer producer license will not be approved unless the Commissioner finds that the business entity has: -Paid the applicable fees -Designated an individual licensed producer responsible for the business entity's compliance with Michigan's insurance laws, rules, and regulations -Not committed any act that would result in license revocation or other sanction

Review Question: How much will a disabled employee earn in disability benefits if his/her wage is less than it was before the injury? A. 80% of the difference between the old and new wage B. 80% of the employee's original average weekly wage C. 80% of the state average weekly wage D. 90% of the state average weekly wage

A. 80% of the difference between the old and new wage If an employee remains employed and his/her average weekly wage is less than before the date of injury, the employee will receive weekly benefits equal to 80% of the difference between the weekly wage before the date of injury and the weekly wage which the employee is able to earn after the date of injury. The benefit may not exceed 90% of the state average weekly wage.

Aftermarket Crash Parts Regulation

Aftermarket Crash Parts Regulation After Market Parts (also referred to as after crash parts) are replacement parts that are not made by or for the original equipment manufacturer. If an insurer specifies that nonoriginal equipment (aftermarket parts) are to be used in repairing the insured's vehicle, the insured must be notified beforehand as part of the estimate. The written estimate must clearly identify each aftermarket part intended to be used.

Lines of Insurance

An individual insurance producer may receive a license in 1 or more of the following lines of insurance: -Life -Accident and health or sickness -Property -Casualty -Variable life and variable annuity products -Personal lines -Credit -Any other line of insurance permitted under state laws or rules

Applicability

Applicability Every policy of automobile insurance or home insurance issued, or renewed in Michigan must conform with the provisions of this act.

Review Question: How many days' notice must an insurer provide before canceling an auto policy that has been in effect for longer than 55 days? A. 10 B. 20 C. 30 D. 60

C. 30 No cancellation is effective unless a written notice of cancellation is mailed to the insured at least 20 days prior to the effective date of cancellation.

Review Question: Which of the following is not a type of no fault insurance in Michigan? A. Personal protection insurance B. Property protection insurance C. Uninsured motorist D. Residual liability insurance

C. Uninsured motorist UM/UIM insurance is not provided regardless of fault.

Review Question: Death benefits are payable for what duration following an injured employee's death? A. 50 weeks B. 100 weeks C. 250 weeks D. 500 weeks

D. 500 weeks Compensation for the death of an employee must be paid to the deceased employee's dependents for up to 500 weeks from the date of death.

Death Benefits (Benefits Provided)

Death Benefits Compensation for the death of an employee must be paid to the deceased employee's dependents in the amount of 80% of the average weekly wage of the employee, for up to 500 weeks from the date of death.

Cease and Desist Order (Disciplinary Actions)

Disciplinary Actions Cease and Desist Order: If the Commissioner determines that a person has engaged in an unfair method of competition, or an unfair or deceptive act or practice, the Commissioner will issue an order requiring the person to cease and desist from engaging in the method of competition, act or practice. If the Commissioner orders a person to cease and desist, the person may file a notice of appeal and may appeal any final order. If a person knowingly violates a cease and desist order, the Commissioner may order a civil fine of up to $10,000 for each violation, or a suspension or revocation of the person's license, or both. Fines may not exceed an total of $50,000.

Eligibility for Automobile Insurance

Eligibility for Automobile Insurance Any qualified applicant has the right to request or assignment in the Facility. At least once each year, each designated participating member must notify all persons insured through the member on behalf of the facility, of the statutory eligibility standards for obtaining automobile insurance from insurers in the voluntary market.

Exclusive Remedy (Michigan Worker's Disability Compensation Act 15.5 WORKERS' COMPENSATION INSURANCE)

Exclusive Remedy The right to recover compensation is an employee's exclusive remedy against an employer or co-employee unless the injury is caused by the employer's or co-employee's willful misconduct, in which case the injured employee has the option of either claiming compensation or suing the employer or co-employee.

Selected Dwelling Endorsements Special Provisions - Michigan 15.6 OTHER COVERAGES AND OPTIONS

15.6 OTHER COVERAGES AND OPTIONS Selected Dwelling Endorsements Special Provisions - Michigan All Dwelling Policies issued in Michigan must include the Special Provisions endorsement, which amends the policy in the following ways: -The insured's spouse is added to the definition of "named insured" -the subrogation provision is amended so that the insured's right to recovery may not be waived -Losses are payable 30 days after insurer's receipt of proof of loss, rather than 60 -The mortgagee clause is amended to conform with Michigan Public Act 217, regulating the licensure of electricians

Producer Appointment (15.1 INSURANCE REGULATION Company Regulation)

A producer may not act as an agent unless he/she is appointed as an agent by the insurer.

Review Question: How much will an employee's dependents receive in benefits after the employee's death from a covered injury? A. 75% of the employee's average weekly wage B. 80% of the employee's average weekly wage C. 75% of the state average weekly wage D. 80% of the state average weekly wage

B. 80% of the employee's average weekly wage Compensation for the death of an employee must be paid to the deceased employee's dependents in the amount of 80% of the average weekly wage of the employee.

Review Question: For the purposes of Workers Compensation, which of the following is not considered an employer in Michigan? A. A public employer B. A private employer who employs 2 or more employees C. A private employer who employs at least one employee for at least 13 consecutive weeks at least 35 hours per week D. A farming employer who employs 3 or more employees for at least 35 hours per week , 13 weeks a year

B. A private employer who employs 2 or more employees The definition of employer includes every private employer who usually employs 3 or more employees.

Covered Injuries

Covered Injuries An employee must be compensated for any of the following: - Personal injury by accident arising out of and in the course of employment -Mental conditions and conditions of the aging process, if contributed to by employment -An occupational disease which is due to causes and conditions characteristic of and peculiar to a particular trade, occupation, process or employment

Disability Benefits

Disability Benefits If disability is established, payment of weekly wage loss benefits will be determined as follows: If an employee receives a bona fide offer of reasonable employment from the previous employer, another employer, or through the Michigan Employment Security Commission and the employee refuses that employment without good and reasonable cause, the employee will be considered to have voluntarily removed him/herself from the work force and is not entitled to any wage loss benefits under this act during the period of such refusal. If an employee remains employed and his/her average weekly wage is less than before the date of injury, the employee will receive weekly benefits equal to 80% of the difference between the weekly wage before the date of injury and the weekly wage which the employee is able to earn after the date of injury. The benefit may not exceed 90% of the state average weekly wage. If an employee remains employed and his/her average weekly wage is equal to or more than before the date of injury, the employee is not entitled to any wage loss benefits for the duration of such employment.

Employment Covered (Michigan Worker's Disability Compensation Act 15.5 WORKERS' COMPENSATION INSURANCE)

Employment Covered The definition of employer includes: All public employers Every private employer who employs 3 or more employees Every private employer who employs less than 3 employees, if one of the employees has been employed for at least 13 consecutive weeks and has worked at least 35 hours per week Every person engaged in farming who on any 13 days during a year employs 3 or more employees for at least 35 hours per week (does not include farmers or farm labor) Every person engaged in farming who on any 5 days during a year employs 1 or more employees for at least 35 hours per week

Endorsements

Endorsements Amendment of Policy Provisions — Michigan (PP 01 80) All Personal Auto policies issued in Michigan must include the Amendment of Policy Provisions endorsement, which amends the policy in the following ways: -The insured's spouse is added to the definition of "named insured" to include the insured's spouse. -The subrogation provision is amended so that the insured's right to recovery may not be waived -Adds definition of minimum liability limits (20/40/10) -Adds to the definition of an owned auto any vehicle leased for over 30 days -Payment for prejudgment interest is moved from the insuring agreement to supplementary payments -Adds exclusion for intentionally causing bodily or property damage in excess of the minimum limits of liability. -Adds insurer's right to recovery -Modifies cancelation and nonrenewable provisions to conform to Michigan law Amends Insuring Agreement to provide compensatory damages when the insured is entitled to recover from an operator of an uninsured vehicle.

Information Security Program

Information Security Program Each licensee must implement a comprehensive written information security program that includes administrative, technical, and physical safeguards for the protection of customer information.

Inspection of Dwellings

Inspection of Dwellings If an insurer uses an inspection of a dwelling to determine whether the insured or applicant is eligible for home insurance, criteria for selecting dwellings for inspection may not be based upon any of the following: -Location -The age of the dwelling or its structural components -The market value, unless the value is used as a minimum value above which all dwellings will be inspected -The amount of insurance, unless the amount is used as a minimum above which all dwellings will be inspected -Race, color, creed, marital status, sex, national origin, residence, age, disability, or lawful occupation

License Duration (Maintenance and Duration)

License Duration An insurance producer license will remain in effect (unless revoked or suspended) as long as education requirements are met.

Medical Benefits (Benefits Provided)

Medical Benefits Immediately after a work injury, the employer must furnish to the employee all medical care, services, and supplies as the nature of the injury requires.

No-Fault Automobile Coverage

No-Fault Automobile Coverage In addition to the Michigan financial responsibility requirements, an owner or registrant of a motor vehicle required to be registered must maintain security for payment of benefits for personal protection insurance, property protection insurance, and residual liability insurance. This security may be maintained as part of the personal auto policy, or by other methods approved by the Secretary of State, such as bonds or self-insurance.

Occupational Disease

Occupational Disease If an employee is disabled or dies due to an occupational disease, the employee or his/her dependents are entitled to compensation and/or death benefits. No compensation is payable for an occupational disease if the employee willfully and falsely represents that he/she has not previously suffered from the disease which is the cause of the disability or death. The total compensation due is recoverable from the employer who last employed the employee in the employment of which the disease was due and in which it was contracted. A claim must be made within 2 years of the date the employee or his/her survivors had knowledge that the occupational disease or death was work related.

Personal Injury Protection

Personal Injury Protection Personal protection insurance benefits are provided without regard to fault, and include the following: -Allowable expenses incurred for reasonably necessary products, services and accommodations for an injured person's care, recovery, or rehabilitation -Burial expenses for at least $1,750, but not more than $5,000 -Loss of income from work an injured person would have performed during the first 3 years after the date of the accident if he/she had not been injured -Expenses up to $20 per day for obtaining ordinary and necessary services an injured person normally would have performed, providing during the first 3 years after the date of the accident A person who is 60 years of age or older who would not be eligible to receive work loss benefits may waive coverage for these benefits in exchange for reduced premium rate to a person who waives coverage for work loss benefits.

This endorsement to the personal auto policy provides the following benefits: Personal Injury Protection Coverage — Michigan (PP 05 90)

Personal Injury Protection Coverage — Michigan (PP 05 90) This endorsement to the personal auto policy provides the following benefits: -Medical and funeral expense coverage -For the primary insured, a work loss benefit for up to 85% of the insured's lost income, subject to the limits stated in the endorsement, and a replacement services benefit

Property Protection Coverage - Michigan (PP 05 91)

Property Protection Coverage - Michigan (PP 05 91) This endorsement provides $1 million of property protection coverage. This coverage applies only to accidents that occur in Michigan. Any legal action against the insurer must begin within 1 year after the accident.

Rental Vehicle Coverage

Rental Vehicle Coverage Coverage for a rented auto is provided by endorsement. It must provide the highest liability coverage that the PAP provides for covered autos. Under Michigan law, renting a vehicle for 30 days or more makes you an 'owner' and thus your existing PAP will not automatically cover the vehicle.

Residual Liability Insurance

Residual Liability Insurance Residual liability insurance covers bodily injury and property damage equivalent to that required as evidence of automobile liability insurance under the financial responsibility laws of the place in which the injury or damage occurs.

Respiratory and Heart Disease (Occupational Disease)

Respiratory and Heart Disease Occupational disease includes respiratory and heart disease for the employees of fire and police departments

Second Injury Fund

Second Injury Fund If an employee has a permanent disability in the form of the loss of a hand, arm, foot, leg or eye and subsequently has an injury arising out of and in the course of his employment which results in another permanent disability in the form of the loss of a hand, arm, foot, leg or eye, at the conclusion of payments made for the second permanent disability, the employee is presumed to be totally and permanently disabled. The employee will be paid compensation for total and permanent disability after subtracting the number of weeks of compensation received by the employee for both the losses. The payment of compensation will be made by the second injury fund, and will begin at the conclusion of the payments for the second permanent disability.

Total Incapacity (Benefits Provided)

Total Incapacity The benefit for total disability is 80% of the employee's weekly wage, not to exceed 90% of the state average weekly wage, for the period of disability, not to exceed a total of 800 weeks.

Exemption for Nonresidents (Licensing Exam)

Exemption for Nonresidents An applicant for an insurance producer license in Michigan who was previously licensed for the same qualifications in another state is not required to complete any prelicensing education or examination. To qualify the applicant must be currently licensed in the originating state, or have applied for a Michigan license within 90 days of the cancellation of the applicant's previous license.

False Report of Death or Sickness

False Report of Death or Sickness Any agent, physician, insured or other person who presents to an insurer a false certificate of death, sickness or disability is guilty of a misdemeanor and is liable for a fine of up to $1,000, or to imprisonment in the county jail of up to 3 months.

Licensing Exam

Licensing Exam Applicants for a resident producer license must pass a written examination. Before taking the exam, the applicant must complete a prelicensing course no more than 12 months before submitting the application for examination. The Commissioner may waive the exam or prelicensing requirements for an applicant who: -Applies for a limited license -Has been a licensed insurance producer within the preceding 12 months -Has obtained the CPCU, CLU, CIC or other professional designations -Has an associate's, bachelor's, or master's degree with a concentration in insurance from an approved institution

Penalties

Penalties In addition to a cease and desist order, the Commissioner may: -Order payment of an administrative penalty of up to $500 per violation, not to exceed $2,500 for the same violation -Order payment of an administrative penalty of up to $2,500 per violation (not to exceed $25,000 for the same violation) if the person should have known that his/her actions could result in license suspension or revocation Violation of the statutes regulating rearing and misrepresentation is a misdemeanor, subject to a fine of not up to $100 per rebating or inducement violation, or up to $1,000 for each misrepresentation violation. Both types of violation are also subject to imprisonment in the county jail at the discretion of the Commissioner. The amount of the insurance will be reduced in the proportion as the amount or value of any rebate.

Review Question: How much notice must a Michigan insurer provide before canceling an auto insurance policy? A. 10 days B. 20 days C. 30 days D. 45 days

A. 10 days No policy of casualty insurance (except Workers' Compensation and mortgage guaranty insurance) may be issued in Michigan without the provision that the policy may be canceled at any time by the insurer by mailing at least 10 days' written notice of cancellation.

Review Questions: Which of the following is not a limited line of insurance in Michigan? A. Life B. Credit C. Marine D. Legal Expense

A. Life Limited lines include Marine insurance, Credit insurance, Surety and fidelity insurance, Legal expense insurance, Livestock insurance, Malpractice insurance, and Plate glass insurance.

Review Question: Which of the following is not a required provision for fire policies in Michigan? A. Mandatory replacement cost valuation B. Minimum coverage of direct loss from fire or lightning C. The policy is void in case of fraud D. Liability is shared on a pro rata basis with other policies

A. Mandatory replacement cost valuation Coverage must be provided for no less than the actual cash value (not replacement cost) of the property at the time of the loss.

Termination of Appointment (15.1 INSURANCE REGULATION Company Regulation)

An insurer who terminates an appointment, employment, or other relationship of a producer must notify the Commissioner within 30 days after the effective date of the termination. Within 15 days after notifying the Commissioner of termination of appointment, the insurer will mail a copy of the notification to the producer. If a producer's authority to represent an insurer is terminated, the responsibility of an insurance producer having property rights in the renewal will continue until the existing policies of insurance are canceled, replaced, or have expired.

Assumed Names (Maintenance and Duration)

Assumed Names An insurance producer doing business under any name other than the producer's legal name is required to notify the Commissioner prior to using the assumed name.

Automobile Repair Rights

Automobile Repair Rights An insured may not be unreasonably restricted from using a particular person or business for an automobile repair, glass repair, or replacement service. An automobile insurer must disclose whether it has an agreement with any repair or replacement facility and must inform an insured that he/she is under no obligation to use a particular repair or replacement facility.

Review Question: The fine for a knowingly violating a cease and desist order is what amount per infraction? A. $5,000 B. $10,000 C. $25,000 D. $50,000

B. $10,000 If a person knowingly violates a cease and desist order, the Commissioner may order a civil fine of up to $10,000 for each violation, or a suspension or revocation of the person's license, or both. Fines may not exceed an aggregate of $50,000.

Review Question: A premium discount offered to an insured over age 50 who has completed a traffic accident prevention course will be effective for how many years? A. 1 B. 3 C. 5 D. 10

B. 3 An automobile insurer may offer a premium discount to insureds 50 years of age and older who successfully complete a traffic accident prevention course, for 3 years after completion of the course.

Review Questions All of the following would be eligible to have their prelicensing requirements waived by the Commissioner except an applicant who: A. Applies for a credit insurance producer's license B. Has been a licensed insurance producer within the preceding 36 months C. Has obtained the CPCU designation D. Has a bachelor's degree with a concentration in insurance from an approved institution

B. Has been a licensed insurance producer within the preceding 36 months The Commissioner may waive the exam or prelicensing requirements for an applicant who applies for a limited license, has been a licensed insurance producer within the preceding 12 months, has obtained the CPCU, CLU, CIC or other professional designations, or has an associate's, bachelor's, or master's degree with a concentration in insurance from an approved institution.

Review Question: Which of the following is not a prerequisite to apply for a producer's license in Michigan? A. Being at least 18 years old B. Having a high school diploma C. Completion of the prelicensing course D. Passage of the licensing exam

B. Having a high school diploma There is no requirement other than an applicant possess a diploma or degree.

Review Question: Under the Essential Insurance Act, rates may be which of the following? A. Excessive B. Profitable C. Inadequate D. Unfairly discriminatory

B. Profitable Rates must not be excessive, inadequate, or unfairly discriminatory.

Review Question: Producer B tells applicants that if they buy their auto insurance with her agency, she'll refund the first month's premium. This is an example of what Unfair Trade Practice? A. Defamation B. Rebating C. Twisting D. Misrepresentation

B. Rebating Rebating is the offer of any rebate of premiums due, any special favor in dividends or other benefits, or any valuable consideration or inducement not specified in the policy.

Board of Governors (Michigan Laws, Regulations, and Required Provisions 15.2 PROPERTY AND CASUALTY INSURANCE BASICS)

Board of Governors The fund exercises its powers through a board of governors, composed of 5 member insurers and 2 persons representing the general public, appointed by the Commissioner to serve for terms of 3 years.

Review Question: How many days after appointing an agent must an insurer notify the Commissioner of the appointment? A. 5 B. 10 C. 15 D. 20

C. 15 An insurer must file a notice of appointment within 15 days after the contract is executed or the first application for insurance is submitted.

Within how many days must a producer notify the Commissioner of a change of address? A. 10 B. 20 C. 30 D. 40

C. 30 Licensees must notify the Commissioner of any change in mailing or electronic mail address within 30 days after the change.

Commission for Disability Policies (Producer Regulations)

Commission for Disability Policies An agent may not receive a commission for a disability policy issued to an individual eligible for medicare, unless the amount of the commission paid in the first year of the policy is not more than the amount that the agent receives for the policy in each of the 2 subsequent renewal periods.

Covered Claims (Michigan Laws, Regulations, and Required Provisions 15.2 PROPERTY AND CASUALTY INSURANCE BASICS)

Covered Claims Covered claims (other than a Workers' Compensation claim or a claim for personal protection insurance benefits) may not exceed $5 million (this figure may be adjusted for inflation.) Obligations to refund unearned premiums may not exceed the first $500 of unearned premiums per claimant from any single insolvent insurer.

Review Question: Which of the following is not grounds for license revocation? A. Providing materially untrue information in the license application B. Violating a cease and desist order C. Committing an Unfair Trade Practice D. Overinsuring a property risk

D. Overinsuring a property risk Overinsuring a risk is not grounds for license revocation.

Disputes Between Insured and Insurer

Disputes Between Insured and Insurer A person who has been denied automobile insurance or home insurance or has charged an incorrect premium is entitled to a conference with the insurer, and to a hearing before the Commissioner if the conference with the insurer fails to resolve the dispute.

Fire Policies (Cancellation and Nonrenewal)

Fire Policies All fire policies may be canceled at any time at the request of the insured. Cancellation by the insurer must be preceded by providing notice to each named insured and/or any mortgagee at least 10 days' notice before the cancellation.

Grace Period

Grace Period A producer has a 90-day grace period from the expiration date of his/her license within which to meet his/her continuing education requirements or the license will be canceled. During the 90-day grace period, the insurance producer may not solicit or sell new policies of insurance, bind coverage, or otherwise act as an insurance producer except to service policies previously sold and receive commissions on policies previously sold.

Lapsed Policies

Lapsed Policies An automobile insurer may not deny or limit coverage, charge a reinstatement fee, or increase the premiums solely because a person failed to maintain insurance during the 6-month period immediately preceding application if the person was on active duty in the armed forces of the United States for at least 30 consecutive days and that the vehicle was not driven or moved during the 6-month period immediately preceding application.

Limited lines insurance is any of the following:

Limited lines insurance is any of the following: -Marine insurance -Credit insurance -Surety and fidelity insurance -Legal expense insurance -Livestock insurance -Malpractice insurance -Plate glass insurance A Limited lines producer is authorized by the Commissioner to sell, solicit, or negotiate limited lines insurance.

Long-Term Care Education Requirements

Long-Term Care Education Requirements Each producer whose duties include transacting long-term care insurance must complete a program of instruction before selling, soliciting, or negotiating long-term care insurance.

Michigan Automobile Insurance Placement Facility

Michigan Automobile Insurance Placement Facility The Michigan Automobile Insurance Placement Facility is available for individuals who have been unable to obtain auto insurance through normal markets. Every insurer authorized to write automobile insurance in Michigan must participate in the Michigan Automobile Insurance Placement Facility for the purpose of: -Providing the guarantee that automobile insurance coverage will be available to any person who is unable to procure that insurance through ordinary methods -Preserving the benefits of price competition by encouraging maximum use of the normal private insurance system

Misrepresentation in Insurance Applications

Misrepresentation in Insurance Applications No licensee may furnish a fee, commission, money, or other benefit in exchange for false or fraudulent representations on an application for insurance.

Nonresident Producer

Nonresident Producer A nonresident insurance producer who satisfies the continuing education requirements in the producer's home state also satisfies the Michigan continuing education requirements if the nonresident producer's home state recognizes the satisfaction of its continuing education requirements imposed on producers from this state on the same basis.

Producer (Qualifications)

Producer An application for a resident producer license will not be approved unless the Commissioner finds that the applicant: -Is at least 18 years of age -Has not committed any act that would result in license revocation or other sanction -Has completed a prelicensing course for the lines of insurance applied for -Has paid the applicable fees -Has successfully passed the examination for the lines of insurance applied for

PC State Law Overview

The purpose of this chapter is to acquaint the student with the insurance regulatory and licensing process in the state of Michigan and inform the student of the ethical standards and practices expected of the insurance professional. The primary purpose of licensing is to protect the general public. Note: Information in this chapter modifies or amends information from previous chapters.

Authority of Terminated Producer (15.1 INSURANCE REGULATION Company Regulation)

When an insurance producer's authority to represent an insurer is terminated, the producer may continue to service existing policies of insurance until they are canceled, replaced, or have expired. An insurer may not cancel or refuse to renew a policy because of the termination of an insurance producer's contract. Following termination of the producer's appointment, he/she may continue to represent the insurer in servicing existing policies, but may not bind a new risk, renew a policy, nor increase the obligation of the insurer under the policy without the approval of the insurer.

Written Agreement Between Counselor and Client

Written Agreement Between Counselor and Client Before rendering services, an insurance counselor must prepare a written agreement, signed by both the counselor and the client, outlining the nature of the work to be performed by the counselor and the fee. The agreement must clearly state that the counselor's fee may not be waived under any circumstances and disclose that the counselor will receive a commission from the insurer on any insurance placed by the counselor acting as insurance agent. The counselor must retain a copy of each agreement for 2 years after completion.

Review Question: How many credit hours of continuing education must a producer complete to maintain his/her license during each renewal period? A. 12 B. 24 C. 36 D. 48

B. 24 To maintain a producer's license, each licensee must complete a minimum of 24 credit hours of approved insurance continuing education courses every 2 years.

Insurers (Suspension, Revocation, Refusal to Issue or Renew)

Insurers When it appears to the Commissioner that any person has committed a violation of insurance law which makes the continued operation of an insurer contrary to the interests of policyholders or the public, the Commissioner, after giving notice and an opportunity to be heard, may suspend, revoke or refuse to renew the insurer's license or authority to do business in Michigan.

Special Provisions - Michigan Selected Endorsements 15.3 HOMEOWNERS POLICY

15.3 HOMEOWNERS POLICY Selected Endorsements Special Provisions - Michigan All Homeowners Policies issued in Michigan must include the Special Provisions endorsement, which amends the policy in the following ways: -The insured's spouse is added to the definition of "named insured" -The subrogation provision is amended so that the insured's right to recovery may not be waived -Losses are payable 30 days after insurer's receipt of proof of loss, rather than 60 -The mortgagee clause is amended to conform with Michigan Public Act 217, regulating the licensure of electricians -The policy may be cancelled by the insurer for any reason when it has been in effect for less than 55 days, rather than 60. Coverage will not become effective until other coverage has terminated if policy replaces coverage under other policies terminating. -The insurer's limit of liability for damages does not include prejudgement interest -The exclusion for controlled substance is amended to include coverage for an insured who can show he/she was unaware of their use of the controlled substance -If there is other liability insurance, the insurer's limit of liability is its pro rata share of the loss

Motor Vehicle Financial Responsibility Law 15.4 AUTOMOBILE INSURANCE

15.4 AUTOMOBILE INSURANCE Motor Vehicle Financial Responsibility Law No vehicle may be registered in the name of any person required to file proof of financial responsibility for the future unless such proof is furnished for the vehicle. Proof of financial responsibility may be given by filing a certificate of insurance. The required auto liability insurance limits in Michigan are 20/40/10: $20,000 per person and $40,000 per occurrence for two or more persons in any one accident for bodily injury, and $10,000 per occurrence for property damage.

Review Question: Producer A tells his clients, falsely, that a rival insurer does not pay claims in a timely fashion. This is an example of what Unfair Trade Practice? A. Defamation B. Rebating C. Misrepresentation D. Unfair Discrimnation

A. Defamation Defamation includes making any false or maliciously critical statement regarding the financial condition of any person or business entity, with the intent to injure.

Review Question: Which of the following is not considered an Unfair Trade Practice? A. Representation B. Rebating C. Twisting D. Churning

A. Representation While there is an unfair trade practice called misrepresentation, representation is simply the assertion of a material fact on a policy application.

Notice of Appointment (15.1 INSURANCE REGULATION Company Regulation)

An insurer must file a notice of appointment within 15 days after the contract is executed or the first application for insurance is submitted. Upon receipt of a notice of appointment, the Commissioner will determine within 30 days whether the producer is eligible for appointment. If the producer is not, the Commissioner will notify the insurer with 5 days after the determination is made. An insurer must pay an appointment fee and remit an annual renewal fee for each appointed producer. Notification of the appointment or termination of the appointment of managing general agent must be submitted to the Commissioner within 30 days after entering into a contract or termination.

Assessment (Michigan Laws, Regulations, and Required Provisions 15.2 PROPERTY AND CASUALTY INSURANCE BASICS)

Assessment Member insurers are assessed amounts necessary to administer the program and pay covered claims, up to a maximum of 1% of each member insurer's net direct premiums written in Michigan during the previous calendar year. The Commissioner may exempt a member insurer from an assessment, or may defer the assessment, if it would cause the member insurers to carry amounts of capital or surplus less than the minimum required to keep its certificate of authority. Assessments are made separately on the basis of 5 separate categories: -Workers' Compensation insurance -Automobile insurance -Title Insurance -Fire, allied lines, farm owner's multiple peril, homeowner's multiple peril, inland marine, earthquake, and credit insurance All other insurance, except life and disability, which is excluded from association coverage

How many credit hours of CE must be devoted to ethics during each renewal period? A. 1 B. 3 C. 5 D. 10

B. 3 Each licensee must complete a minimum of 24 credit hours, 3 hours of which must be in ethics, of approved insurance continuing education (CE) courses every 2 years.

Review Question: Charging different rates or providing different benefits to insureds of the same actuarial class or hazard category is which of the following? A. Sliding B. Unfair discrimination C. False statement D. Defamation

B. Unfair discrimination It is an unfair trade practice to charge different rates for individuals of the same class and life expectancy for life and health insurance policies.

Boycott, Coercion, Intimidation

Boycott, Coercion, Intimidation It is an unfair practice in the business of insurance to enter into action resulting in an unreasonable restraint of trade, or monopoly in, the business of insurance.

Duties of Agents

Duties of Agents An agent must, as a condition of licensure, do all of the following: -Provide each eligible person seeking automobile insurance or home insurance the lowest available premium quotation for the forms or types of insurance offered by the insurers represented by the agent -Inform the eligible person of the number of insurers that the agent represents -Refrain from channeling an eligible person away from an insurer or coverage with the purpose of avoiding the obligation to submit an application, or to accept an eligible person -Upon request, submit an application to an insurer selected by the eligible person -For renewal of automobile insurance, provide the following annually: -An explanation of the insurance eligibility point system -A statement that if the insured may qualify for insurance from more than one insurer, and possibly at a lower rate -A statement that the agent will, upon request, furnish quotations from all insurers represented by the agent

Exceptions

Exceptions The Commissioner may waive the continuing education requirements for an insurance producer: -Who is unable to comply with the continuing education requirements due to military service -For whom the Commissioner determines that enforcement of the requirements would cause a severe hardship -Who is licensed to write only travel or baggage insurance policies and whose employment is for a purpose other than the sale of those policies -Who is licensed to write only limited line credit insurance

License Not Required (Producer Regulations)

License Not Required A producer's license is not required of employees, officers, and directors who do not transact insurance, do not receive commissions, and who engage in the following capacities: -Executive, administrative, managerial, or clerical tasks indirectly related to the transaction of insurance. -Underwriting, loss control, inspection, or the processing, adjusting, investigating, or settling of a claim on a contract of insurance -Providing technical advice and assistance to licensed insurance producers -Securing and furnishing information for the administration of group insurance -Performing administrative services related to mass marketed property and casualty insurance -Administration of a program of employee benefits for the employer's or association's own employees who are not compensated by the company issuing the contracts -The inspection, rating, or classification of risks, or the supervision of the training of insurance producers -Advertising -Counsel to an employer concerning its insurance interests

Twisting

Twisting No insurer, officer, director, agent or solicitor, may make any misrepresentation of policies for the purpose of inducing an insured to lapse his/her existing insurance therein, and to take out a another policy in its place. Violators are subject to license revocation, and may not seek a new license for one year following the violation.

Types of Licensees

Types of Licensees An insurance producer is a person required to be licensed under Michigan law to sell, solicit, or negotiate insurance. An insurance counselor is a person who provides advice, counsel, or opinion with respect to benefits promised, coverage afforded, or terms of a policy of insurance or annuity. A person cannot hold him/herself out as an insurance counselor unless he/she is licensed as an insurance counselor. A business entity is a corporation, association, partnership, limited liability company, limited liability partnership, or other legal entity, subject to licensure when acting as a producer.

Review Question: What is the minimum amount of earned premium that must be refunded in Michigan when a CGL policy is canceled? A. $25 B. $50 C. $75 D. $100

A. $25 No policy of casualty insurance (except Workers' Compensation and mortgage guaranty insurance) may be issued in Michigan without the provision that that the minimum earned premium on any policy canceled, other than automobile insurance, will be at least the pro rata premium or $25, whichever is greater.

Acting Without a License (Producer Regulations)

Acting Without a License No one may transact insurance unless he/she is licensed for the line(s) of insurance being sold, solicited, or negotiated. The Commissioner may issue a cease and desist order if the Commissioner finds that a person is conducting transactions of insurance for which a certificate of authority or license is required without having obtained a certificate of authority or license.

Review Question: The Michigan Property and Casualty Insurance Guaranty Association will pay the unearned premium of an insolvent insurer up to what amount for a single claim? A. $250 B. $500 C. $1,000 D. $1,500

B. $500 Obligations to refund unearned premiums may not exceed the first $500 of unearned premiums per claimant from any single insolvent insurer.

Review Question: Which of the following is not a required objective of an insurer's information security program? A. Ensure the security and confidentiality of customer information B. Protect against any anticipated threats or hazards to the integrity of the information C. Provide for prosecution of those who violate privacy protections D. Protect against unauthorized access to the information that could result in substantial harm or inconvenience to any customer

C. Provide for prosecution of those who violate privacy protections The insurer's responsibility in safeguarding consumer privacy involves administrative, technical, and physical safeguards for the protection of customer information. Prosecution of violators is the responsibility of law enforcement.

Casualty Insurance (Cancellation and Nonrenewal)

Casualty Insurance No policy of casualty insurance (except Workers' Compensation and mortgage guaranty insurance) may be issued in Michigan without the following provisions: -The policy may be canceled at any time at the request of the insured -The policy may be canceled at any time by the insurer by mailing at least 10 days' written notice of cancellation -The minimum earned premium on any policy canceled, other than automobile insurance, will be at least the pro rata premium or $25, whichever is greater -An insurer may refuse to renew a malpractice insurance policy only by mailing to the insured at least 60 days' written notice of refusal to renew

Change of Name and Address (Maintenance and Duration)

Change of Name and Address When applying for a license to act as an agent, solicitor, counselor, or adjuster, an applicant must report his/her mailing and electronic mail addresses to the Commissioner. Licensees must notify the Commissioner of any change in mailing/electronic mail address or name change within 30 days after the change.

Commissions (Producer Regulations)

Commissions No insurer or producer may pay a commission, service fee, or other valuable consideration to a person for selling, soliciting, or negotiating insurance if that person is required to be licensed and is not so licensed. Nor may anyone accept a commission, service fee, or other valuable consideration for selling, soliciting or negotiating insurance if that person is required to be licensed and is not so licensed. Renewal or other deferred commissions may be paid to a person who is no longer actively licensed if the person was licensed when the transaction of insurance occurred. An insurance agent may pay a commission or other valuable consideration to any person who does not transact insurance in this state unless the payment or assignment violates state law.

Consumer Privacy Regulation

Consumer Privacy Regulation Violation of privacy requirements is an unfair method of competition or an unfair or deceptive act and practice in the conduct of the business of insurance. These requirements are:

Continuing Education Requirements

Continuing Education Requirements To maintain a producer's license, each licensee must complete a minimum of 24 credit hours, 3 hours of which must be in ethics, of approved insurance continuing education (CE) courses every 2 years.

Counselor (Qualifications)

Counselor An application for an insurance counselor license will not be approved unless the Commissioner finds that the applicant: -Possesses a good business reputation good moral character -Has not committed any act that would result in license revocation or other sanction -Has completed a prelicensing course for the lines of insurance applied for -Has paid the applicable fees -Has successfully passed the examination for the lines of insurance applied for

Review Question: The Michigan Property and Casualty Insurance Guaranty Association will pay the obligations an insolvent insurer for an auto policy up to what amount for a single claim? a. $500,000 b. $1 million c. $2 million d. $5 million D Covered claims (other than a Workers' Compensation claim or a claim for personal protection insurance benefits) may not exceed $5 million A. $500,000 B. $1 million C. $2 million D. $5 million

D. $5 million Covered claims (other than a Workers' Compensation claim or a claim for personal protection insurance benefits) may not exceed $5 million.

Review Question: How many days after terminating the appointment of an agent must an insurer notify the Commissioner of the termination? A. 10 B. 15 C. 20 D. 30

D. 30 An insurer who terminates an appointment, employment or other relationship of a producer must notify the Commissioner within 30 days after the effective date of the termination.

Review Question: Which of the following is not an example of declination? A. Refusal by an agent to submit an application on behalf of an applicant B. Refusal to issue insurance upon receipt of an application for insurance C. Offering insurance at higher rates with a different insurer than that requested D. Offering coverage with more favorable terms or conditions than those requested

D. Offering coverage with more favorable terms or conditions than those requested Declination includes offering coverage with less favorable, not more favorable, terms or conditions than those requested.

Declination of Insurance

Declination of Insurance Upon making a declination of insurance, an agent or insurer must inform the applicant of the reason for the declination. A written explanation must be provided within 90 days after request. A refusal, by an insurer or agent, to provide upon request an application form or other means of making an application or request for coverage will be considered a declination. Declination also includes: -Refusal by an agent to submit an application on behalf of an applicant to any represented insurers -Refusal to issue insurance upon receipt of an application for insurance -Offering insurance at higher rates with a different insurer than that requested -Offering coverage with less favorable terms or conditions than those requested

Defamation

Defamation includes making any false or maliciously critical statement regarding the financial condition of any person or business entity, with the intent to injure. Any person who defames the financial condition of an insurer doing business in Michigan, is guilty of a misdemeanor punishable by imprisonment for not more than 1 year or a fine of up to $1,000.

Definitions (Michigan Laws, Regulations, and Required Provisions 15.2 PROPERTY AND CASUALTY INSURANCE BASICS)

Definitions An insolvent insurer is an insurer against whom a final order of liquidation has been entered with a finding of insolvency. A member insurer is an insurer required to be a member of the association. All property and casualty insurers that are admitted to transact insurance in Michigan are member insurers under Michigan law.

Disclosure of Policy or Account Numbers

Disclosure of Policy or Account Numbers A licensee may not disclose, other than to a consumer reporting agency, a policy number, account number, or access code for a consumer's policy or account to any nonaffiliated third party for use in telemarketing, direct mail marketing, or email marketing. An exception to this provision will apply if a licensee discloses a policy or account number or other access number or access code: To the licensee's service provider solely in order to perform marketing for the licensee's own products or services, as long as the service provider is not authorized to directly initiate charges to the account To a licensee who is a producer solely in order to perform marketing for the licensee's own products or services To a participant in an affinity or similar program where the participants in the program are identified to the customer when the customer enters into the program.

False Statements

False Statements No one may willfully withhold information from, or give false or misleading information to, the Commissioner, any statistical agency, rating organization, data collection agency, or insurer, that might affect rates or premiums. A violation of this section is subject to a fine of up to $1,500. It is an unfair practice in the business of insurance to file a false financial statement with public officials, or record a false material fact in a book or record with the intent to deceive.

Fees (Producer Regulations)

Fees Licensees and applicants for licensure must pay the following fees to the Commissioner: -Application fee for license as resident agent, nonresident agent, surplus lines agent, solicitor, counselor, or adjuster (not transferable or refundable) $10 -License examination fee for license as resident agent, surplus lines agent, solicitor, counselor, or adjuster (not transferable or refundable) $10 -Solicitor's license $10 Annually -Insurance counselor license $10 Annually -Adjuster's license $5 Annually -Surplus lines agent license $100 Annually

Fiduciary Responsibility

Fiduciary Responsibility An agent or solicitor is a fiduciary for all money received or held by the agent in his/her capacity as a producer, and must abide by the following practices: -No agent/solicitor may accept payment of a premium for a Medicare supplemental policy or certificate in the form of a check or money order made payable to the agent instead of the insurer. -Upon receiving payment of a premium for a Medicare supplemental policy or certificate, an agent/solicitor must immediately provide a written receipt to the insured. -An agent/solicitor must use reasonable accounting methods to record funds received in his/her fiduciary capacity including the receipt and distribution of all premiums due each insurer. -An agent/solicitor must record return premiums received by or credited to him/her which are due an insured. The records must be open to examination by the Commissioner. -An agent/solicitor may not reward or remunerate any person for procuring or inducing business, furnishing leads or prospects, or acting in any other manner as an agent. -A person may not sell or attempt to sell insurance by means of intimidation or threats, whether express or implied. -A person may not induce the purchase of insurance through a particular agent or from a particular insurer by means of a promise to sell goods, to lend money, to provide services, or by a threat to refuse to sell goods, to refuse to lend money, or to refuse to provide services. -An agent/solicitor may not be a party to a contract under which the agent assumes any responsibility or obligation for payment, from his/her commission or any allocation of premium to him/her by the insurer, of any losses on insurance policies sold by the agent unless the claim adjusting is done by insurance company adjusters or licensed independent adjusters.

Insurance Fraud Regulation

Insurance Fraud Regulation It is an unlawful, fraudulent practice to knowingly make a material misrepresentations or concealments in an application for the issuance or renewal of an insurance policy, or in a claim for benefits under an insurance policy. It is also a fraudulent practice to: -Solicit or accept insurance risks by or for an insolvent insurer -Conceal the records of an insurer, reinsurer or other licensee -Divert the monies of an insurer, reinsurer, or other licensee A person who commits a fraudulent insurance act is guilty of a felony punishable by imprisonment for up to 4 years, a fine of up to $50,000, or both, and must pay restitution. A person who enters into an agreement, combination, or conspiracy to commit fraud is guilty of a felony, punishable by imprisonment of up to 10 years, or by a fine of up to $50,000, or both.

Licensees (Suspension, Revocation, Refusal to Issue or Renew)

Licensees The Commissioner may suspend, revoke or nonrenew any license issued to a licensee who: -Provides incomplete or materially untrue information in the license application -Violates any insurance law, regulation, subpoena or order of the Commissioner, or of another state's insurance -Obtains a license through fraud or misrepresentation -Improperly withholds any monies or properties received in the course of doing business -Misrepresents the provisions, terms and conditions of an insurance policy -Has been convicted of a misdemeanor or felony -Commits any unfair trade practice -Has a license denied, suspended or revoked in another state -Forges another person's name in an application or document related to insurance -Cheats on an examination -Knowingly accepts business from a producer who is not licensed -Fails to comply with an administrative order for child support -Fails to pay single business tax

Mandatory Fire Policy Provisions

Mandatory Fire Policy Provisions Each fire insurance policy issued in Michigan must contain provisions specifying the following: -Coverage for no less than the actual cash value of the property at the time of the loss -Coverage for direct loss by fire and lightning and pro rata coverage for 5 days for insured property removed to another location if it is moved to preserve it from damage by a covered peril -Misrepresentation, fraud, or concealment will void the polic -List of property not covered under the policy -List of perils not covered under the policy -Conditions which suspend or restrict coverage -Requirements for waiving or changing a provision under the policy -That the insurer's liability will not be greater than the pro rata share with other insurance for the peril involved. -The notification requirements in case of loss -That if the insured and insurer fail to agree on the actual cash value or amount of the loss, either party may make a written demand that the amount of the loss or the actual cash value be set by appraisal

Rebating and Illegal Inducement

Rebating and Illegal Inducement Rebating is the offer of any rebate of premiums due, any special favor in dividends or other benefits, or any valuable consideration or inducement not specified in the policy. A producer whose license is revoked for rebating may not apply for a new license for one year following the violation. It is an unfair trade practice to offer any of the following as an inducement to purchase or renew an insurance policy: -Employment -Shares of stock or other securities issued or at any time to be issued -An advisory board contract promising special profits -Any prizes, goods, wares, merchandise or tangible property valued at more than $10

Misrepresentation; False Information and Advertising

Misrepresentation; False Information and Advertising Misrepresentation is the issuing of any statement that falsely represents the benefits, advantages, conditions or terms of any insurance policy. Publishing or disseminating in any fashion, or through any media, any untrue, deceptive, or misleading statement about the business of insurance or, with respect to any person, in the conduct of the person's insurance business, or misrepresents the identity of the insurer. A person who knowingly makes any misrepresentation in the sale of insurance is guilty of a class 5 felony. If an insurer falsely represents that its financial standing is greater than its actual amount, every director or officer will be deemed guilty of a misdemeanor punishable by a fine of $100, imprisonment of up to 3 months, or both. No insurer doing business in Michigan, or its officers or agents, may issue any false or misleading advertisement concealing its true identity, subject to a fine of up to $500.

Notice of Denial (Suspension, Revocation, Refusal to Issue or Renew)

Notice of Denial Before denying an application for a license, the Commissioner must notify the applicant or licensee of the denial in writing, including the reason for the denial. Not later than 30 days after this notice, the applicant or licensee may request a hearing before the Commissioner to determine the reasonableness of the Commissioner's action.

Notice of Hearing (Suspension, Revocation, Refusal to Issue or Renew)

Notice of Hearing When a person has engaged in an unfair or deceptive act or practice, and the Commissioner determines that a hearing would be in the interest of the public, the Commissioner will give notice in writing to the person involved, including the general nature of the complaint and the proceedings contemplated. If an unfair or deceptive practice is not specified in the insurance code, the Commissioner may still serve upon the violator a statement of the charges and a notice of a hearing of at least 15 days.

Objectives of Information Security Program

Objectives of Information Security Program A licensee's information security program must be designed to do all of the following: Ensure the security and confidentiality of customer information Protect against any anticipated threats or hazards to the integrity of the information Protect against unauthorized access to the information that could result in substantial harm or inconvenience to any customer

Premium Discount Plan

Premium Discount Plan An insurer may establish and maintain a premium discount plan if the plan is consistent with the purposes of this act and reflects reasonably anticipated reductions in losses or expenses.

Premium Discount for Senior Citizens

Premium Discount for Senior Citizens An insurer may establish or maintain for home insurance a premium discount plan for senior citizens in this state who are at least 55 years of age or older, if the plan is uniformly applied by the insurer throughout this state. An automobile insurer may offer a premium discount to insureds 50 years of age and older who successfully complete a traffic accident prevention course, for 3 years after completion of the course.

Property and Casualty Guaranty Association (Michigan Laws, Regulations, and Required Provisions 15.2 PROPERTY AND CASUALTY INSURANCE BASICS)

Property and Casualty Guaranty Association The purpose of the Guaranty Association is to establish a method to pay claims that are unpaid as a result of the insolvency of a member insurer.

Ratemaking Standards

Ratemaking Standards Rates must not be excessive, inadequate, or unfairly discriminatory. A rate is considered to be excessive if it is unreasonably high for the coverage provided, and a reasonable degree of competition does not exist for the insurance to which the rate is applicable. A rate is considered to be inadequate if: -It is unreasonably low for the insurance coverage provided, and its continued endangers the solvency of the insurer -Use of the rate has the effect of destroying competition among insurers, creating a monopoly, or causing a kind of insurance to be unavailable to a significant number of applicants who are entitled to procure it A rate for is unfairly discriminatory in relation to another rate for the same coverage if the differential between the rates is not reasonably justified by differences in losses or expenses, or by differences in the uncertainty of loss for the individuals or risks to which the rates apply.

Report of Actions (Maintenance and Duration)

Report of Actions Within 30 days of occurrence, a licensed agent must report any disciplinary action by the insurance regulatory agency of any other state or territory of the United States; each disciplinary action on an occupational license held by the licensee; each judgment or injunction entered against the licensee involving fraud, deceit, misrepresentation, or violation of any insurance law. Such information is confidential by law and is privileged. Failure to report as required may, after notice and hearing, result in suspension or revocation of the violators license or certificate of authority, or subject the violator to civil fines.

Standards for Safeguarding Customer Information

Standards for Safeguarding Customer Information The Gramm-Leach-Bliley Act requires state insurance regulatory authorities to establish appropriate standards relating to all of the following administrative, technical, and physical safeguards for the following reasons: To ensure the security and confidentiality of customer records and information To protect against any anticipated threats or hazards to the security or integrity of such records To protect against unauthorized access to or use of records or information that may result in substantial harm or inconvenience to a customer To release private or privileged health or medical information in Michigan generally requires the informed, written consent of the patient or his or her authorized representative.

Summary Suspension (Suspension, Revocation, Refusal to Issue or Renew)

Summary Suspension Without prior hearing, the Commissioner may order summary suspension of a license if he or she finds that protection of the public requires emergency action. If requested, the Commissioner may conduct a hearing on the suspension not later than 20 days after the suspension.

Unfair Discrimination

Unfair Discrimination It is an unfair trade practice to charge different rates for individuals of the same class and life expectancy for life and health insurance policies.

Unfair Sex/Race Discrimination

Unfair Sex/Race Discrimination Insurers may not restrict the amount of benefits payable on the basis of age, sex, race, creed, national origin or marital status, except to the extent the amount of benefits, term, conditions, or type of coverage vary as a result of the application of rate differentials.

Unfair and Prohibited Insurance Trade Practices

Unfair and Prohibited Insurance Trade Practices The following acts are defined by statute as unfair methods of competition and unfair or deceptive acts or practices, and are strictly prohibited.