Minnesota Insurance Regulation

Who may be examined by the commissioner in Minnesota

1. Any company authorized to do business in Minnesota 2. Person who is involved in the formation of an insurance company 3. Licensed producer or solicitor or any person seeking a license 4. Person engaged in the business of adjusting losses or financing premiums

3 levels of authority

1. Express 2. Implied 3. Apparent

Penalties

1. First offense is a misdemeanor 2. Each subsequent offense is a gross misdemeanor

Any producer who charges service fees must disclose what 4 things in writing?

1. The services for which the fees are charged 2. The amount of the fees 3. The fact that the fees are charged in addition to premiums 4. That premiums include a commission

What 3 things must a producer disclose prior to a personal solicitation

1. Their name 2. The insurance company or agent they represent 3. The fact that they are in the business of selling insurance

A producer must notify the Commissioner within how many days of a change of name or address

10 days

The insurer must file a notice of appointment within how many days of from the date the agency contract is executed or submission of the first insurance application?

15 days

How long is a temporary insurance license valid for?

180 days

How many hours must the course of study consist of?

20 hours per major line of authority in which the producer seeks to be licensed. (Life, Accident & Health, Property, Casualty, Personal Lines)

An insurer that terminates an agent's appointment must notify the Commissioner within how many days following the effective date of the termination?

30 days

The Commissioner must examine Minnesota authorized insurers at least once every

5 years

Certificate of authority

A certificate that states that an insurance company has the authority to transact insurance business in the state of Minnesota

Alien company

A company that is incorporated in a country other than the United States but doing business in the states

Twisting

A form of misrepresentation in which the agent convinces the client to cancel already existing insurance and buy another policy from the agent, to the detriment of the insured

Nonresident license

A nonresident of Minnesota shall receive this license if the person is currently licensed and in good standing in the person's home state and has fulfilled all additional requirements

Penalty

A person who violates or aids and abets any violation of a written order may be fined up to $10,000 for each day the violation continues

Most widely known organizations that rate the financial strength of insurance carriers

A.M. Best, Inc. and Standard & Poor's

Which of the following is required to have a producer's license?

An employee who receives compensation based directly on sales

Education Requirements

An individual must complete a program of studies approved by the commissioner and pass an examination

Admitted carrier

An insurance company that has obtained a certificate of authority

Annuity training requirement

An insurance producer must compete a one -time, four hour annuity training course prior to selling annuities

Required Disclosures

Anytime a licensed producer has contact with a prospective client, the producer is legally obligated to disclose certain information

Casualty insurance

Coverage against legal liability, including that for death, injury or disability, or damage to real or personal property

Property insurance

Coverage for a direct or consequential loss or damage to property of any kind

Accident and Health insurance

Coverage for sickness, bodily injury, or accidental death, and may include benefits for disability income

Life insurance

Coverage on human lives including benefits of endowment and annuities, and may include benefits in the event of death or dismemberment by accident and benefits for disability income

Variable life and variable annuity products insurance

Coverage provided under variable life insurance contracts and variable annuities

At DEF Insurance Company, agents are employees of the company who are paid a salary plus commissions. This is an example of what type of insurance marketing system?

Direct writer

Requirements for producer license to remain in effect:

Fees are paid, continuing education requirements are met, and all necessary documentation is provided to the commissioner by the renewal date

How long is an insurance licenses valid?

For a period of 24 months and expires biennially on the last day of the producer's birth month

USA PATRIOT Act

Gives the federal government broad power to curtail attempts to launder money and finance terrorist activities. founded in 2001

Flesch scale analysis

Measures the ease of readability. All polices must pass this

Exam requirements

Must past written exam with a minimum passing score of 70%. Results are valid for three years from the date of the exam. Applicants complete the license application online through Sircon, $50 per line of authority and $25 technology fee

Foreign company

Other states besides the state in which the company is incorporated

Personal lines

Property and casualty insurance coverage sold to individuals and families for primarily noncommerical purposes

Broad powers (general duties)

The commissioner is empowered to create rules that assist with the enforcement of insurance laws, conduct investigations, examine records, and approve policy forms

Examination of Records

The commissioner may conduct examinations of insurance companies, licensed producers, or license applicants at any time for any reason related to the enforcement of insurance laws to ensure that companies are operating in a safe manner to protect the public interest

Failure to submit to an examination is grounds for suspension, refusal, or nonrenewal or a producer's license

True

In order to examine the records, the commissioner must provide note of the scope of the examination. A copy of the notice is sent to the examinee

True

Once notice of the scope has been given, the insurer or producer must give free access to all books, records, and documents in question

True

The commissioner must examine the affairs and conditions of every insurer licensed in Minnesota at least once every five years

True

The insurer has the right to request a hearing within 30 days of the order if they disagree with the commissioner's findings and the commissioner has another 30 days to hold the hearing

True

A.M. Best, Inc.

Uses nine alphabetical ratings for insurers to which it gives an assigned rating and uses other designations to evaluate financial health. A++ to F

Parent company rating

When the financial strength of the parent is used to evaluate a newly affiliated company

Domestic company

Where an insurance company is formed and incorporated. It's home state

If an insurance company fails to obtain a certificate of authority are their insurance policies still valid?

Yes. to protect the public, but the company will face severe penalties

fiduciary

a person who stands in a special relationship of trust to another person. Example: Agents have fiduciary duties toward their clients, especially regarding handling premiums

personal solicitation

a sale or attempted sale by a producer or a person acting on behalf of a producer

Examination report

a statement of finds and a summary of important points, recommendations, and suggestions. Can be used as evidence in any legal proceeding

solvency

ability to meet all financial obligations

open competition states

allow the companies to compete openly with the forms and rates they select, subject only to requirements of adequacy and nondiscriminatoni

National Do Not Call Registry

allows consumers to prohibit most telemarketing calls. Telemarketers are required to search the registry every 31 days and delete from their call lists phone numbers that are in the registry. The phone number will remain on the registry for 5 years from the ate it is registered unless the individual chooses to be taken off the registry or the phone number is disconnected

A person may not accept compensations for selling insurance in Minnesota unless the person is

an employee of a licensed producer

unfair discrimination

an insured cannot be given a lower or higher rate than another insured in identical circumstances. The agent cannot accept a bribe from a client to provide insurance or lower the premium

Boycott, coercion, and intimidation

any act of boycott, coercion, or intimidation resulting in an unreasonable restraint of, or monopoly in, the business of insurance

suspended license

any period of 3 months or longer. The producer may not sell or service insurance policies during the suspension

The actuarial department

collects and analyzes data to determine the rates to be charged for insurance

Forgery

committing forgery, whether or not the forgery is related to an insurance transaction

non-admitted carriers

companies without a certificate of authority. Surplus lines are an exception

Determining suitability of a recommended insurance purchase involves all the following EXCEPT

customer's residence location

Misrepresentation

falsely advertise the terms or benefits of a policy or the financial condition of the company. The agent must make complete, accurate statements about the product being sold

The commissioner may issue a temporary producer license for the following reasons EXCEPT

for a producer's disability

Cease and desist order

from transacting business that may harm the company's policyholders or the public

Surety Association of America

functions as a rating bureau for surety bonds

Rebating

giving or offering some benefit other than those specified in the policy, such as cash, gifts, or securities, to induce a customer to buy insurance. Example: lowering the price of the insurance in return for the business

Commissioner of Commerce

governor appointed. Has the power to examine and investigate the affairs of every person doing insurance business in Minnesota to determine whether the person has engaged in any unfair method of competition or any unfair or deceptive practice

service bureaus

helps the insurance company collect statistics. These organizations are made up of numerous individual insurance companies, gather, pool, and analyze statistics from all of the member companies

Managing General Agent (MGA)

hires producers, supervises a territory, is responsible for agent activities, and must be licensed as an insurance producer

Restore any deficiency order

if an insurance company's capital, surplus, or reserves become impaired

Misappropriation of funds

improperly withholding, misappropriating or converting funds belonging to a policyholder, beneficiary or other person

False advertising

making any oral or written statement with respect to the business of insurance, or with respect to any person in the conduct of the person's insurance business that is untrue, deceptive, or misleading

False financial statements

making or filing any false financial statement of an insurer with the intent to deceive

Defamation

making, publishing, or circulating any oral or written statement which is false, or is maliciously critical of or derogatory to the financial condition of an insurer, and which is intended to injure any person engaged in the business of insurance

non excessive

meaning the rates cannot be so high as to allow the company to make a windfall profit or make insurance an unrealistic purchase

Prohibited practices

methods, acts, and practices which are defined as unfair or deceptive

modifers

one of eight lowercase letters that may be added to assigned ratings, which are shown in upper case, to qualify the status of a rating. Example: B+w: Very good, but watch

Insurance Services Office (ISO)

one of the largest service bureaus. files both loss costs and standardized forms on behalf of its member companies

revoked license

prohibited from license reapplication for at least two years from the effective date of the revocation. To reapply, the producer must obtain a performance bond of at least $20,000 with the state of Minnesota as obligee

Minnesota Insurance Guaranty Association

purpose is to protect policyholders from an insurer's inability to pay claims due to insolvency or bankruptcy

National Council on Compensation Insurance (NCCI)

rating bureau with jurisdiction over workers' compensation

Discrimination of military personnel

refusing to insure or continue to insure the life of a national guard or armed forces reserve member due to that person's status as a member is an unfair and deceptive act unless the individual has received an order for active duty

Department of commerce

regulatory authority for the Minnesota insurance industry

loss costs

represent the key component of an insurance rate which is how much an insurance company needs to collect to cover expected losses

Gramm-Leach-Bliley Act

requires insurance companies to disclose their privacy policy, and how a customer's personal (non-public) information may be used and shared with affiliates and third parties. The act requires companies to provide their privacy policy when a policy is issued and at least once a year thereafter

Assigned ratings

shown in upper case letters

Rates

the basic charges an insurance company sets for various types of insurance

insolvency

the inability to pay debts when they are due

agency agreement

the legal agreement that establishes the relationship between the insurer and producer and outlines the powers and responsibilities of the producer

In addition to the application and fee requirements, all the following apply to a nonresident producer license EXCEPT

the person has a Minnesota resident producer license

Stock dividends from a stock insurer are taxable to

the shareholders

The Commissioner's investigatory powers extend

to every individual and business doing insurance business in Minnesota, whether they are licensed to do insurance business in Minnesota or not

appoint

when insurance companies allow producers to act on their behalf

file and use states

where a company may begin using forms and rates as soon as they have been filed. The state eventually reviews the filing and officially accepts or rejects it

use and file states

where insurers must file rates and forms within a certain period after they are first used

prior approval states

where the insurance company must obtain official approval before using new forms and rates

nondiscriminatory

where the insurer cannot charge different rates for the same class of insureds