DELAWARE LAWS, RULES & REGULATIONS: Life, Accident and Health, Property and Casual Insurance

Lines of Authority

-Life insurance -Variable life and annuities -Sickness, accident, and health -Title insurance -Property insurance -Casualty insurance -Fidelity and surety coverage -Marine and transportation -Personal lines property and casualty insurance

Limited Lines of Authority

-Life insurance or annuity products used to fund a pre-arranged funeral program -Travel accident and baggage -Credit insurance lines

Advertising False Information

-May not make any untrue, deceptive, or misleading statements regarding the business of insurance -Applies to the following: newspapers, magazines, notices, and letters; statements made on radio or televions; any other way information is presented

Unfair Practices (continued 1)

-Unfair discrimination in property and casualty insurance: must use same rates for individuals of same class - Rebates: may not offer anything of value to a prospective insured as inducement to purchase insurance - Failure to maintain complaint handling procedures: must maintain complete record of all complaints since date of last examination

Fair Credit Reporting Act (Cont)

-When an applicant is denied coverage due to information obtained from a third party source, the applicant will be informed of the source. -Insurer must permit an applicant to refute any adverse information -Applicant can obtain a copy of report if declined -If the applicant feels information is incorrect, the applicant can send a brief statement with the correct information to the reporting agency

Disclosure letters and forms

-buyer's guide, policy summary, and/or Outline of Coverage - Must be signed by both agent and client - Describes product being sold and suitability for client - Disclosure letter with proposal summary is mailed to client after sales presentation

Nonresident licensing

-must be currently licensed and in good standing in home state -proper requests and fees have been submitted -application has been submitted Home state must have reciprocal agreement regarding nonresident licensing

Notice of Address Change

30 days -Licensee must notify the Commissioner of change of name or address

Producer/Agent

Agent of Insurer - Licensed producer appointed by and represents insurer - Sells, solicits, or negotiates applications and policies - Able to issue conditional receipts BROKER - Licensed producer who represents the insured for compensation

Limited Producer

Authorized by Insurance commissioner to sell, solicit, or negotiate limited lines insurance - Credit insurance - life Insurance or annuity products used solely to fund a pre-arranged funeral program - Travel and accident insurance - Any other limited lines permitted under state laws

Unfair Practices: Defamation; Boycott, coercion, and intimidation; interlocking ownership

Defamation - Oral or written statement that is false or derogatory as to the financial condition of insurer Boycott, coercion, and intimidation - Unreasonable restrain of or any monopoly of any business of insurance Interlocking ownership/management - Insurers may not own capitol stock or common management with other insurers if it will create a monopoly or lessen general competition

Commissioner Powers and Duties

-Enforcement of laws -revokes licenses -Regulate companies for solvency and most insurance rates -Collect fees and issues licenses -Issue cease and desist orders -Conduct hearings due to complaints

Unfair Practices (cont 2)

- Twisting: making misleading written or oral statements about a policy to induce a policyholder to surrender, retain, exchange, or convert an insurance policy - Churning: encouraging a policyholder to replace a policy to generate more commission - Commingling: policyholder premiums may not be combined with personal funds

Insurance Fraud Prevention Bureau

-A division of the Department of Insurance -Investigates complaints of fraud committed by insurers and/or insureds -$10,000 maximum fine for each act of fraud -$550 annual fee for insurance companies for operation of the Delaware Insurance Fraud Prevention Bureau

Agent's Ethical Responsibility

-Acts and knowledge of agents are considered acts and knowledge of insurer -Agent is granted authority through agency agreement (contract) -Relationship between agent and insurer is based on agency law

Fair Credit Reporting Act

-All insurers and their producers must comply with this act regarding information obtained from a third party concerning the applicant -A Notice to the Applicant must be given to all applicants that report(s) will be ordered concerning their past credit history and any other pertinent information; consumer reporting agencies include credit agencies, Equifax, Medical Information Bureau, et cetera

Exams and Exemption

-All resident applicants must pass a written exam -Scores are valid for 12 months Licensing exam exemptions inlcude the following: -If licensed in same line in another state; must be within 90 days of cancellation of previous license - If moving from another state and apply within 90 days - Title insurance (if an attorney) - Travel accident and baggage license - Automobile club license

Special Qualifications

-Applicant's criminal history must be obtained from the State Bureau of Identification -Every variable annuity producer license appplicant must hold a license as a life insurance agent and must be registered with FINRA -Anyone selling, soliciting, or negotiating limited lines credit insurance must be provided a program of instruction from the insurer

GLBA (cont 2)

-CONSUMERS must be allowed to opt out of the institution's disclosure of nonpublic information to nonaffiliated third parties -In addition, CUSTOMERS must be allowed to opt out of the institution's disclosure of nonpublic infomration to affiliated third parties; the FAIR CREDIT REPORTING ACT is responsible for the opt-out opportunity, but the privacy notice must inform the customer of this right under the GLBA; the customer cannot opt-out when the information is legally required to be disclosed

Publicized Founded Complaints

-Complaint: an expression of grievance against an insurer -Consumers have access to complaints against insurers -Tracking and resolution of complaints -COMPLAINTS LACKING MERIT: case not deemed to have been founded - RESOLVED IN FAVOR OF CONSUMER: complaint may be resolved without undergoing formal proceedings - REFERRAL FOR FORMAL PROCESS: initiation of proceeding to make formal determination as to whether complain is founded; Department must notify insurer unless complaint is resolved within 60 days

Agent Liability (E&O coverage)

-E&O is errors and omissions coverage -Agent may not exceed authority given by insurer; any misconduct makes agent personally liable to insurer for damages incurred -Agents have duty to act in fiduciary capacity in dealing with insurers and insured

Agent Authority

-Express authority: insurer specifically instructs agent to do something -Implied authority: authority to act on behalf of the insurer based on prior experience or conduct -Lingering implied authority: agent retains signs or evidences of authority (letterhead with company logo, company applications) -Apparent authority: another person's belief that the agent has authority

Privacy Act of 1974

-Governs use of government records on individuals -Policy objectives: instrusiveness should be minimized; fairness should be maintained; legitimate expectation of confidentiality that is enforceable should be create

Commissioner Hearings

-Hearings may be held for any purpose within scope of DE laws - Notice of hearing: hearing must be filed within 90 DAYS or oder; Commissioner must hold hearing within 30 DAYS after filing; commissioner must give written notice of hearing (date, time and place) at least 20 DAYS in advance; commissioner orders can be appealed

Cease and desist order

-If a person is found to engage in an unfair trade practice after a hearing, the Commissioner mayy issue a cease and desist order -Violation of a cease and desist order can result in the following: 1.A penalty of up to $11,500 for each violation; 2. Suspension or revocation of the person's license; 3. Any other penalty deemed reasonable or appropriate

Fraud and False Statements

-If found guilty, certain types of false or fraudulent statements have been specifically outlined in federal law as punishable by the following penalties: a fine, imprisonment for up to 10 years, or both - Imprisonment can be ordered for up to 15 years if the false statements jeopardized the safety and soundness of an insurer and were a significant cause of the insurer being placed in conservation, rehabilitation, or liquidation by the courts.

Termination, Suspension, and Fines (cont)

-If license is suspended or nonrenewed, license may make written demand within 10 days for hearing. Hearing will be held within 20 days - Person may be subject to a fine not less than $200 and not more than $20,000 for each violation - Payment will be due within 30 days of order - If license has been revoked or suspended on two occasions, it will not be renewed

Surplus Lines Broker

-Individual, partnership or corporation - Aids in negotiating insurance contracts with companies not licensed (unauthorized or nonadmitted) to transact business in Delaware

Regulation of Nonpublic Information

-Individuals must be provided with notice about privacy policies and practices -Describes under what conditions a licensee may disclose information to affiliates and nonaffiliated third parties -Provides methods for individuals to prevent disclosure of information; opt out: direction by consumer that licensee may not disclose personal financial information

Commissioner Election and Term

-Insurance Commissioner is the chief officer of the Insurance Department - Elected to a 4 year term

Agency license

-License inssued to a sole proprietorship, partnership, assocation, corporation, or other business entity - At least one person in the agency must hold an individual license and be responsible for all transactions completed

License Requirements

-License remains in effect unless revoked or suspended, as long as fee is paid and continuing education requirements are met - If license lapses, it may be reinstated within 12 months from due date of renewal fee. Penalty is double the unpaid renewal fee if reinstate within 6 months of due date. There is a civil fine of $200 to $1000 if reinstated between 6 and 12 months after due date.

Unfair Claim Settlement Practices

-Misrepresenting facts or policy provisions relating to coverage -Failing to do the following: acknowledge adn respond promptly to communications from an insurer regarding claims; investigate claims after receiving notices of loss; pay claims without conducting an investigation; settle claims fairly and promptly

License prerequisites

-Must be at least 18 years old -Have not committed an act that is grounds for denial, suspension, or revocation - Paid fees - Successfully passed examination for lines of authority; Licensees who have taken and passed the ethics portion of the exam are not required to take it for each new line of authority

Unfair Trade Practice Penalties

-Penalty for unknowingly committing unfair trade practice: $1000 for each violation, not to exceed an aggregate penalty of $100,000 - Penalty for knowingly committing unfair trade practice: $10,000 for each violation, not to exceed an aggregate penalty of $150,000 in any six month period -Suspension or revocation of the person's license

Insurance Producer

-Person required to be licensed to sell, solicit, or negotiate insurance contracts or annuities -Insurance agent, insurance broker, and insurance consultant may be used interchangeable with insurance producer

Appointment of Producer

-Producer must be apppointed by insurer to act as appointed agent -Insurer must file a notice of appointment within 15 days from the date the agency contract is executed or the first insurance application is submitted

Termination of Appointment

-The insurer must notify the Commissioner within 30 days of termination of an agent's appointment -Copy of notification must be provided to producer within 15 days of notifying the Commissioner - Producer may file written comments regarding termination within 30 days after receiving notice

Insurer's Certificate of Authority

1.For filing application for initial certificate of authority, including all documents submitted as part of such application-$700 2.Issuance of certificate of authority-$100 3.Annual continuation, including filing of annual statement-$100 4.Reinstatement-$100 5.Amendment-$100

Continuing Education (CE)

24 credit hours every two years - 3 hours in ethics - 3 hours in long-term care Penalties - Failure to complete continuing education requirements; up to $2000 fine and suspension of license for one year - Submission of false or fraudulent information, up to $15,000 fine and permanent loss of license

Continuing Education (cont)

5 hours may be carried over to the next reporting period - This does not include the ethics requirement CE exemptions - An individual contniously licensed for 25 years or longer or who holds a professional designation will receive an automatic credit of 12 hours in each reporting period; automatic credits may not be applied to ethics, long-term care, or flood insurance contracts

Coercion of Debtors

A bank or financial institution may not require a borrower to purchase insurance coverage from a particular agent, broker, or insurer

Business Licensing Requirements

A firm, corporation, partnership, association or other business entitty must be licensed if: - commissions are paid to the firm - the firm is the producer of record - policies issued to the insured contain instructions to contact the firm for insurance servcies, and - Insurance business is transacted or solicited under a trade name

Professionalism

Agents must - place the client's interest beyond one's own self-interest -sell based on the client's needs -be dedicated to the industry and supportive of all its member companies and representatives -obtain the industry education necessary to provide clients with appropriate recommendations, and - Offer quality plans and represent quality companies

USA PATRIOT Act (cont)

Anti-money laundering provisions requires the insurer to report the following types of suspicious activities -Receipt of any cash payment in excess of $10,000 -Greater interest in the early termination features of a product rather than its potential performance -Fictitious identification or reluctance to provide identification -Maximum borrowing against a product's value soon after it is purchased

License Fees (cont)

Brokers - Permanent License - $75 Consultant - Permanent License $75 Surplus Lines Broker - $200, permanent license Fraternal representative - $75, permanent license - $25, one-time appointment of rep in each society Business entity - $75, initial license (resident and nonresident) - $50, resident renewal; due biennially on Feb 28 in even years - $75, nonresident renewal; due biennially on Feb 28 in odd years

Market Conduct Examinations

Commissioner examines domestic insurers at least every 5 years -May also examine: agents, solicitors, brokers, general agents, adjusters, insurer representatives, any other Dealware resident conducting insurance business Examinee assumes all reasonable and proper costs

Termination, Suspension, and Fines

Commissioner may revoke, deny, or nonrenew a license for any one or combination of following: -incorrect, misleading, incomplete, or materially untrue information on application - Violation of insurance laws -Obtaining a license through misrepresentation or fraud -improper use of money or property -felony conviction -unfair trade practices or fraud -failing to pay child support -Failing to pay state income tax

Gramm-Leach-Bliley Act (GLBA)

Consumer - An individual who obtains, from a financial situation, financial products or services that are to be used primarily for personal, family, or household purposes - Also means the legal representative of such an individual Customer - A consumer that has developed an ongoing relationship with a financial institution - Must be given an initial and annual privacy notice

Fraud and False Statements (Cont)

Fraudulent actions, statements, or reports include the following: -Overvaluing of any land, property, or security -False financial condition or solvency of a business in insurance -Willfully embezzling, abstracting, purloining, or misappropriating any moneys, funds, premiums, et cetera -Corruptly influencing, obstructing, or impeding the due and proper administration of the law under which any proceeding is pending

General Penalties

In addition to any other sanctions, each violation of Delaware insurance law may result in the following: - $2,300 maximum fine (each violation) -One year in prison -Both a $2,300 max fine and one year in prison -$6900 max fine for corporations (each violation) Also subject to fines or imprisonment are the following: Director, Officer, Manager, Employee, Representative of corporation found in violation

Misrepresentation/False Advertising

Insurers and producers may not misrepresent the following - Benefits, advantages, conditions, or terms - Dividends or shares of surplus to be received - The financial condition of a person - The nature of an insurance policy or class of insurance policies

Definitions of Life and Health Insurance

Life Insurance -Coverage on human lives -Includes endowment benefits, additional benefits in the event of accidental disability or dismemberment, and optional settlement of life insurance products HEALTH INSURANCE - Insurance of human beings against bodily injury, disablement, or death by accident or accidental means, or the expense thereof, or against disablement or expense resulting from sickness, and every insurance pertaining thereto

Insurance Ethics

Market conduct -INsurers and agents must conduct insurance fairly and responsibly -Market conduct examinations occur when State Insurance Department investigators examine business practices and operations of an insurer and its agents

Temporary Producer License

May be issued to surviving spouse, employee, or other designee if a producer dies, becomes disabled, or enters active military service - Temporary licenses may not exceed 180 days without requiring a license examination Commissioner may revoke licenses if the interest of the insureds or public are endangered

GLBA (cont)

Privacy notice must explain - What information the company gathers about the customer - Where this information is shared, and - How the company safeguards that information The initial privacy notice must be given to the customer no later than when the customer relationship began

License Fees

Producers and agents - $75, permanent license (resident and nonresident) - $25, one-time appointment of agent, each insurer - $50, resident license renewal - Due biennially on Feb 28 in even years - $75, nonresident license renewal - Due biennially on Feb 28 in odd years

Prohibited Acts

Prohibited political contributions/penalty - Insurers may not use money or property to promote Insurance Commissioner candidates - One year in prison and/or $1000 maximum fine Illegal dealing in premiums/excess charges for insurance - May not collect additional premium or charge for insurance which has not been provided

USA PATRIOT Act

Purpose: -To deter terrorist activity both globally and in the United States -Establishes measures to prevent, detect, and prosecute international money laundering and financing of terrorism

Recordkeeping and Compensation

Recordkeeping; records must be maintained for THREE YEARS Compensation - Insurers may only pay commission to licensed and appointed insurance producers - Renewal commission may be paid if person was license at time of sale

Suitability and Binding Coverage

Suitability: Purchase recommmendations that are based on information provided by an applicant, insured, or client concerning their financial situation, needs, and objectives Binding coverage - Binder may be written or oral; if oral, need name(s) of insured, date and terms of coverage - Provides temporary coverage until policy is issued - Coverage usually lasts no more than 30 days

Licensing exemptions

The following individuals are not required to have a producer's license - Director, officer, or employee not engaged in selling (administrative or operational duties only) and not earning a commission - Person who obtains information for group insurance - Employees of insurers engaged in rating or classifying risks - Person whose activities are limited to advertising - Risk Managers

Charter Documents

filing amendments to a certificate of incorporation, articles of incorporation, charters, bylaws, power of attorney (as to reciprocal insurers) and to other constituent documents of the insurer $10