AD BANKER Chapter 15 State Laws
Consultant
A Consultant is an individual, firm, limited liability company, or corporation which, for a fee, advises or counsels anyone as to his/her insurance needs under any insurance policy or contract. "Consultant" does not include licensed attorneys, actuaries, certified public accountants, medical bill analysts, or any other person who gives or offers incidental advice to the public in the normal course of normal business activity other than insurance consulting.
Maintaining a License
All insurance agents, brokers, consultants or adjuster licenses will continue in force unless non-renewed, expired, suspended, revoked, or terminated, but are subject at all times to annual payment to the Commissioner of the a continuation fee, accompanied by a written request for the continuation. A licensee who allows his/her license to lapse may reinstate the same license within 12 months after the due date of the renewal fee without the necessity of passing a written examination. However, a penalty in the amount of double the unpaid renewal fee will be required for any renewal fee received after the due date.
Return of License to Commissioner
All licenses are the property of the State of Arkansas. Upon any expiration, termination, suspension, or revocation of the license, the licensee must immediately return it to the Commissioner. For any license lost, stolen, or destroyed, the Commissioner may accept the affidavit of the licensee or concerning the facts of the loss, theft, or destruction. Any licensee who ceases to maintain residence in this state must deliver his/her insurance license to the Commissioner within 10 days after terminating residency.
Adjuster
An adjuster is a person or business entity who investigates and negotiates, on behalf of the insurer, settlement of claims arising under insurance contracts. The adjuster evaluates the merits of a claim and determines the insurance proceeds that might be payable.
Producer Appointment/Termination of Contract
An insurance producer may not act as an agent of an insurer unless the producer becomes an appointed agent of that insurer. An insurance producer who is not acting as an agent of an insurer is not required to become appointed. To appoint a producer as its agent, the appointing insurer must file a notice of appointment within 15 days after the date the agency contract is executed or the first insurance application is submitted. Upon receipt of the notice of appointment, the Commissioner must verify that the insurance producer is eligible for appointment within 30 days.
Self Incrimination
Any person who asks to be excused from attending, testifying, or producing any documents in connection with any examination on the ground that the testimony or evidence required may tend to incriminate him/her must give the testimony or produce the evidence, but will be granted immunity for any penalty or forfeiture because of the testimony or evidence he/she provides. However, the person is not exempt from prosecution or punishment for any perjury committed, and his/her license may still be suspended or revoked.
Fraud Reporting
Any producer who has reason to know that an insurer is not licensed must report the insurer to the Department. Any producer who knows or has reason to know that a health plan is not licensed in accordance with the Arkansas Insurance Code shall immediately report the health plan to the Insurance Department.
Termination
Each appointment will remain in effect until the agent's license terminates unless written notice of earlier termination of the appointment is filed with the Commissioner by the insurer or agent.
Place of Business/Maintenance
Every resident agent or resident broker shall have a place of business in Arkansas or in a city whose border passes through Arkansas that is accessible to the public and where the licensee principally conducts transactions under his/her license. The agent/broker license shall be conspicuously displayed. The agent/broker must keep all records pertaining to transactions under his/her license for at least: 5 years from the date the record was created; or 1 year following the final settlement or final adjudication of a criminal proceeding, civil litigation, or an administrative proceeding
Unfair Methods of Competition Rebating
Offering any rebate of premiums payable, any special favor in dividends or other benefits, or any valuable consideration or inducement not specified in the policy.
Change of Address
Producers must promptly notify the Commissioner in writing of any change of address within 10 days of that change of address.
Exemptions/Exceptions
The licensing examination is not required for nonresident agents or brokers, or for any of the following types of insurance: Transportation Credit Funeral Mortgagor's decreasing term life or disability insurance to debtors
Hearings
Whenever the Insurance Commissioner has reason to believe that any person has engaged in any unfair method of competition or any unfair or deceptive act or practice, he/she may issue a statement of the charges and notice of a hearing to be held at least 10 days after the date of notice. At the hearing, the person will have an opportunity to be heard and to show cause why a cease and desist order should not be made by the commissioner. Upon the hearing, the commissioner: May administer oaths, examine and cross-examine witnesses, and receive oral and documentary evidence Will have the power to subpoena witnesses, compel their attendance, and require the production of books, papers, records, correspondence, or other documents that the commissioner deems relevant to the inquiry
Insurance transaction
includes any: Solicitation Preliminary negotiations Execution of an insurance contract Transaction of matters arising out of the contract
Authorized Insurer
means one duly authorized by a subsisting certificate of authority issued by the commissioner to transact insurance in Arkansas. An unauthorized insurer is one not authorized by a subsisting certificate of authority issued by the commissioner to transact insurance in Arkansas.
Commissions
An insurer or producer may not pay a commission, service fee, brokerage, or other valuable consideration to a person for selling, soliciting, or negotiating insurance in Arkansas if that person is required to be licensed and is not so licensed. No person may accept a commission, service fee, brokerage, or other valuable consideration for selling, soliciting or negotiating insurance in Arkansas if that person is required to be licensed and is not so licensed. Renewal or other deferred commissions may be paid to a person for selling, soliciting, or negotiating insurance in Arkansas if such person was licensed when the sale, solicitation, or negotiation of insurance occurred. Any insurance agent may pay or assign a commission, service fee, brokerage, or any other valuable consideration to an insurance agency or any financial holding company which does not sell, solicit or negotiate insurance in Arkansas unless such payment or assignment violates a state provision.
Business Entities
Any business entity that acts as an insurance agent, and holds a direct agency appointment from an insurance company, must obtain an insurance agent license. Business entities must identify a licensed agent as a compliance officer who will be responsible for the business entity's compliance with the insurance laws, rules and regulations of Arkansas. The business entity must ensure that each officer, director, partner, and employee of the business entity who acts as an insurance agent is licensed as an insurance agent, and disclose this information to the Department.
Examination
Any individual applying for an agent's license must be given an exam to determine whether he/she possesses the competence and knowledge of the kinds of insurance and transactions under the license for which he/she has applied.
Lines of Authority
Any person who meets the requirements will be issued an insurance agent license. The lines of authority are: Life Accident and health or sickness Casualty Property Variable life and variable annuity products Personal lines Credit Unless suspended, revoked, or refused renewal, an insurance agent license remains in effect as long as education requirements for resident individual agents are met and the requires fee is paid by such insurance agent's due date.
Qualifications
Anyone at least 18 years of age who wants to transact business as an insurance agent must submit a license application to the Commissioner of Insurance. The applicant must also: Pay appropriate nonrefundable application fee Pass a 20-hour prelicensing course for each class of insurance he/she wishes to transact Pass a licensing examination for each class of insurance he/she wishes to transact
License Restoration or Reissue
The Commissioner may not again issue a license under the Arkansas Insurance Code to any person whose license has been revoked until after 3 years and not until: The person has paid in full any fines or penalties imposed at the time of revocation The person has paid restitution of actual losses to affected persons The person again qualifies for license in accordance with the applicable provisions of the Arkansas Insurance Code If a business has its license suspended or revoked, no member, partner or employee shall be licensed or be designated in any license during the suspension/revocation period unless the Commissioner determines that such person was not personally at fault and did not acquiesce in the matter which resulted in the license suspension/revocation.
Hearings/Notice of Hearings/Orders
The Commissioner may hold a hearing for any purpose within the scope of the Insurance Code. The Commissioner must hold a hearing within 30 days of its request and must give a notice of the date, time, and location of the hearing 10 days in advance. The Commissioner must make an order on the hearing within 30 days after it concludes. Any person who is aggrieved by an order of the Commissioner may appeal such order. The appeal must take place within 30 days after the notice of appeal has been received by the Commissioner. Penalties Unless a greater penalty is provided by another law of Arkansas, any person who violates any provision of the Insurance Code is subject to one or more of the following: Refusal, suspension or revocation of license or Certificate of Authority A fine of up to $1,000 for each violation Order for restitution of actual losses to affected persons
Arkansas Property and Casualty Insurance Guaranty Association
The purpose of the Guaranty Association is to establish a method to pay unpaid claims resulting from the insolvency of a member insurer. All property and casualty insurers that are admitted to transact insurance in Arkansas are required to be member insurers of the Association. Member insurers are assessed the amounts necessary to administer the program and pay covered claims. The Association will cover claims existing prior to the determination of insolvency or arising within 30 days after the determination of insolvency. The maximum amount the guaranty association will pay for a covered claim is $300,000. It will also cover up to $25,000 per policy for the return of unearned premiums. The Arkansas Property and Casualty Advisory Association is comprised of 8 insurers appointed by the Commissioner, who are tasked to provide fair representation for insures in matters concerning premium income, geographic location and segments of the industry represented in Arkansas. Covered claims do not include the following: Claims by a third-party liability claimant whose net worth exceeds $50 million in the year preceding the date the insurer becomes insolvent Any amount awarded as punitive or exemplary damages Any amount due to any reinsurer, insurer, insurance pool, or underwriting association as subrogation recoveries Supplementary payment obligation such as adjustment fees and expenses, attorney's fees and expenses, court costs, interest, and bond premiums incurred prior to the determination of an insurer's insolvency
Combination License
A licensed agent may also be licensed to act as a broker for insurers for which he/she is not currently licensed as agent. A licensed broker may be licensed as and be an agent as to insurers appointing him or her as agent. The sole relationship between a broker and an insurer as to which he/she is currently licensed as an agent, will be that of insurer and agent and not that of insurer and broker.
Domestic Insurer
formed under the laws of Arkansas. A foreign insurer means one formed under the laws of any jurisdiction other than Arkansas. An alien insurer means one formed under the laws of any country other than the United States, its states, districts, territories, and commonwealths.
Producer
A producer is a person or business entity who solicits, negotiates, effects, procures, delivers, renews, continues, or binds an insurance policy (including annuities) for risks residing, located, or to be performed in Arkansas.
Resident/Nonresident
A resident producer is one whose residence is in Arkansas, or who may vote in Arkansas, who is licensed as a resident insurance producer by the commissioner. A nonresident producer is one licensed in and a resident of another state. The agent must make application and be in good standing in their home state and their home state must award nonresident agent licenses to residents of Arkansas on the same basis.
Fiduciary Capacity
All funds, fees or premiums received by a licensee are trust funds for which the licensee is accountable to the insured, insurer or any other person so entitled. Any licensee who diverts or appropriates trust funds to his/her own use will be guilty of theft of property and be punished as provided by law.
Continuing Education
Every 2 years (biennially), agents must complete 24 hours of continuing education courses in the line(s) for which they are licensed, 3 hours of which must be in ethics. For good cause, the Commissioner may grant an extension of up to 1 year to complete the continuing education requirements. A person teaching any approved course or program of instruction will be credited the same number of hours as a person taking and successfully completing the course. Subject to the Commissioner's approval, an agent/broker's active annual membership in local, regional, state, or national professional insurance organizations or associations may be approved for up to 2 annual hours of instruction. Educational requirements are obtained and reported annually to the commissioner on or before the birthdate of the licensee. Failure to report or obtain the mandated educational requirements along with the fee imposed in a timely manner will result in the additional following fines: If within 30 days after the due date, a fine of $25 will be imposed automatically If within 60 days after the due date, a fine of $50 will be imposed automatically If within 90 days after the due date, a fine of $100 will be imposed automatically If after 90 days from the due date, the license will become automatically suspended Reinstatement of the license requires payment of a fine of $150 if reinstated within 1 year from the due date of the education. If after 1 year from the due date, reinstatement is not available. Should a license be desired, the licensee must again proceed to become licensed as if never having held a license in addition to obtaining the education due when the license was suspended and paying the fine of $150. Exemption from Continuing Education Requirement The continuation education requirements do not apply to any of the following: Licensees for any kind of insurance for which an examination is not required. Any limited or restricted license the Insurance Commissioner may exempt Anyone who is at least 60 years of age Anyone who has held an active license as an agent, solicitor, consultant, or broker for a period of at least 15 consecutive years. Nonresident producers Licensed insurance consultants Any person called to active duty in any branch of the United States military services
Unfair Methods of Competition Misrepresentation
Making, issuing or circulating any statement that misrepresents the benefits, advantages, conditions or terms of any insurance policy. This includes: Misrepresenting the dividends or share of the surplus to be received on any insurance policy Using any name or title that misrepresents the policy's true nature. For example, representing a standard whole life policy as a "savings plan." Misrepresentation for the purpose of effectuating a pledge or effecting a loan against any insurance policy Misrepresenting any insurance policy as being shares of stock
Renewal, Suspension or Revocation of License
The Commissioner may suspend, revoke or refuse renewal of any license issued for any one of the following causes: The licensee provided incorrect, incomplete or materially untrue information in the license application The licensee has violated any insurance law, regulation, subpoena or order of the Commissioner, or of another state's insurance commissioner The license was obtained through fraud or misrepresentation The licensee improperly withheld, misappropriated or converted any monies or properties received in the course of doing business The licensee misrepresented the provisions, terms and conditions of an insurance policy The licensee has been convicted of a misdemeanor or felony The licensee admitted to or was found to have committed any insurance unfair trade practice The licensee had an insurance agent license denial, suspension or revocation in any other state The licensee forged another person's name in an application or document related to insurance The licensee improperly used notes or reference material to complete an examination The licensee knowingly accepts business from a producer who is not licensed The licensee failed to comply with any order imposing a child support obligation on him/her The licensee failed to pay state income tax or an order directing payment of such tax The licensee intentionally omitted material facts during the presentation of an insurance policy The licensee made misleading representations or incomplete policy comparisons in order to induce someone to surrender an existing policy The licensee violated any subpoena or order of the Commissioner or of the regulatory official of insurance in another state The licensee has used fraudulent, coercive, or dishonest practices or demonstrated incompetence, untrustworthiness, lack of good personal or business reputation, or financial irresponsibility The licensee has failed to provide a written response after receipt of a written inquiry from the Commissioner within 30 days after receipt thereof In addition to or in lieu of revocation or suspension the Commissioner may discipline with one of the following. Order payment of an administrative penalty of up to $1,000 per violation or up to $5,000 for the same violation if the person should have known that his/her actions could result in license suspension or revocation Order restitution of actual losses to affected persons The Commissioner may suspend or revoke the license of an insurance agent who places excess lines risks without first obtaining an excess lines license. The Insurance Commissioner may suspend a license for up to 3 years. Upon the suspension or revocation of a license, the Commissioner shall immediately notify the licensee and the insurers he/she represents. The insurer(s) shall retrieve all solicitation materials, policy applications, binders, and all other materials that are the insurer's property.
General Duties and Powers
The Commissioner of Insurance has general supervision, control and regulation of persons and companies authorized to transact the business of insurance in Arkansas. He/she has the authority to make any rules necessary to enforce the insurance laws of Arkansas. The Commissioner regulates premium rates, policy forms, insurer solvency and receiverships, as well as other matters relating to the regulation of insurance. The Commissioner also issues the proper insurance license for agents, brokers and Certificates of Authority for the insurers who qualify to conduct business in the state of Arkansas. The Commissioner may conduct insurer and agency audits, examinations, and investigations and enforce any provision of the Insurance Code.
Appointment
The Commissioner of Insurance is appointed by the Governor with the advice and consent of the Senate. At the time of taking office, the Commissioner must execute a $50,000 bond to the State of Arkansas for the faithful performance of his/her duties.
Examination of Records
The Commissioner of Insurance may examine the transactions, accounts and records of each insurer as often as he/she feels is necessary, and no less often than at least once every 5 years. The Commissioner must also examine each insurer applying for a Certificate of Authority to transact insurance business in Arkansas. The Commissioner has the authority to examine or investigate any person necessary or material to the examination of an insurer. The Commissioner may subpoena witnesses, administer oaths and require the disclosure of books and records with respect to an examination. In lieu of making his/her own examination of any foreign or alien insurer authorized in Arkansas, the Commissioner may accept a full report of the most recent examination of a foreign or alien insurer as prepared by its state of domicile's insurance department.
Temporary License
The Commissioner of Insurance may issue a temporary insurance agent license for a period not exceeding 180 days, without requiring an examination, in the following circumstances: The surviving spouse or court-appointed personal representative of a licensed insurance agent who dies or becomes mentally or physically disabled, while new agents are being trained as a replacement, the business is being sold, or until a disabled agent can return to the business Any member or employee of a business entity licensed as an insurance agent, upon the death or disability of an individual, designated in such business entity's application or the insurance agent's license The designee of a licensee who is entering active service in the armed forces of the United States Any other person deemed necessary by the Commissioner
Marketing Practices Unfair Claim Practices
The following are considered acts constituting improper claim settlement practices: Misrepresenting to claimants pertinent facts or provisions in the insurance policy that relate to any coverage at issue Failing to promptly acknowledge communications pertinent to a claim Failing to use reasonable standards in the prompt investigation of claims Failing to attempt to promptly and fairly settle claims in which liability is clear Compelling an insured to file suit by offering substantially less than what a lawsuit would award Refusing to pay claims without conducting a reasonable investigation Failing to affirm or deny coverage on a claim within a reasonable time after receiving a proof of loss Attempting to settle a claim for less than the amount to which the claimant believed he/she was entitled by reference to written or printed advertising material accompanying the application Attempting to settle a claim based on an application that was altered by the agent or company without notice to, or consent of, the insured Making claim payments that are not accompanied by statements indicating the coverage under which payments are being made Delaying the investigation or payment of a claim by requiring the claimant to submit both a formal proof of loss form and subsequent verification when both submissions contain the same information Failing to promptly explain the denial of a claim or an offer of compromise in relation to the facts and applicable law Making known to claimants a policy of appealing arbitration awards that favor claimants, for the purpose of compelling them to accept a lesser settlement than that awarded Failing to promptly settle claims (where liability is clear) under one section of the policy coverage in order to influence settlements under other sections Failing to acknowledge and act promptly upon communications regarding claims Upon receiving notification of a claim, every insurer must acknowledge the receipt of such notice within 15 working days. An insurer must advise the claimant of the acceptance or denial of the claim within 15 working days after receipt of proofs of loss. Every insurer must complete investigation of a claim within 45 days of notification, unless the investigation cannot reasonably be completed within such time. If an investigation cannot be completed within the 45-day time period, insurers must notify claimants that additional time is required and include the reasons for the delay.