Chapter 1
Renewal requirement
CE of 24 hours (24 hours can be carried over to next period) and fees
reinstatement
Can be requested within 1 year of the renewal date -First 60 days- reinstatement will be retroactive -After 60 days- reinstatement will include the time lapsed in licensing
telephone consumer protection act (TCPA/Do not call list)
Allows consumers to include their telephone numbers on a list to which solicitation calls cannot be made by telemarketers o Organizations must review list ever 31 days o Cannot call residences before 8AM or after 9PM o Solicitors must provide name, name of person, or entity on whose behalf the call is being made, and telephone number and address at which person may be contacted o Cannot use artificial voice or recording
resident producer
An individual or business entity that sells, solicits, or negotiates contracts of insurance - Maintain a business/legal address in PA -Offer advice directly to prospects/purchasers (including explanation of terms and conditions of policies) -May work on behalf of insurance company or may obtain insurance from various insurance companies for purchases
nonresident producer
An individual who neither lives in PA nor has an office in PA and meets the following: -Licensed as a producer in home state -Has principal residence or place of business in home state (Home state being any US state or DC) -If they move to PA, they can apply for resident license in the same line of authority within 90 days
rate filing process
Insurer must file with PA Insurance Commission every manual, class rate, rating schedule, rating plan, and any modifications - Includes proposed effective date and indicates extend of coverage contemplated PA is a prior approval state- everything must be approved by commissioner before use For Forms, all policy forms, applications, and endorsements must be sent to commissioner for approval (assume approval 30 days after filing unless notice of disapproval is sent)
casualty (line of authority)
Insurance coverage against legal liability, including due to death, injury, disability, or damage to real or personal property
property (line of authority)
Insurance coverage for direct or consequential loss or damage to property of every kind
accident & health or sickness (line of authority)
Insurance coverage for sickness, bodily injury, or accidental death, including disability income
Life (line of authority)
Insurance coverage on human lives, including benefits of endowments, annuities, disability income, and accidental death/dismemberment
variable life and annuity (line of authority)
Insurance coverage provided under variable life and variable annuity contracts that involve investment in securities
purpose of licensing
To assure that the public is treated fairly and equitably by those who sell and distribute insurance
solicit
To attempt to sell insurance or ask or urge a person to apply for a particular kind of insurance from a particular insurance entity
solvency
insurance companies need to be able to pay present and future claims of policy holders and are financially sound
illegal inducement
it is illegal to offer any of the following to buy insurance: stocks, bonds, securities, dividends, items of value, or special favors.
exclusive general agent
licensee that: -Has been granted sole authority to act directly or indirectly as an insurance producer for a domestic insurer with respect to a specific portion of the insured's business or within a specific territory -Has authority to bind coverage -Either separately or together with affiliates or sub producers underwrites in any 1 year, direct written premium greater than or equal to 25% of surplus as regards policy holders reported in the last annual statement
Lines of authority
life accident & health or sickness property casualty variable life and annuity personal lines
three rules of rates
must be -adequate -not excessive -not unfairly discriminatory
acts that constitute insurance transaction
negotiate, sell, solicit
rebate (prohibited act)
no producer may directly or indirectly offer, give, or pay a rebate of or part of any insurance premium or the producers commissions/earnings or any special advantages of policy/age of issue/paid employment/ contract of services/ any valuable consideration violation= 3rd degree misdemeanor
insurance department enforcement option
notice hearing evidence penalties
licensing fees
o $55: Resident Insurance producers' license o $110: Non-Resident Insurance producers' license
motor carrier act minimum liability
o $750,000 for transporting non-hazardous property o $1,000,000 for transporting oil and hazardous waste o $5,000,000 for transporting hazardous substances (radioactive) o $5,000,000 for transporting explosives/poisonous gasses
applicant qualifications
o 18 years+ o Read and write English without visual/mechanical aids o Not committed any prohibited acts under licensing regulations o Paid all applicable fees o Posess professional competence and general fitness and integrity of character to satisfy the department o Pass appropriate exams unless exempt o Maintain a business or legal address in PA o Fingerprinted
appointment termination
o Insurers who terminate producers must notify department within 30 days o If due to prohibited act- copy of violation must be sent to producer within 15 days- then producer has 30 days to file comments to return to insurer o Insurers/producers who fail to report or report falsely can have license suspended/revoked or a fine of up to $5,000 per violation
representative of insurer (agent)
o Producer has a written contract under which they can sell, solicit, or negotiate insurance policies issued by appointed insurance entity o Annual appointment fee of $12.50 per producer o Producer remains appointed until insurer terminates or producers license is terminated/revoked
renewal fees
o Resident: $55 o Non Resident: $110 o Lapsed: $165
pollution MCS 90 endorsement
o Should be treated as a surety bond o Prevents insured from receiving a $10,000 per day penalty for knowingly not complying § Insured will not have to pay back costs even if they do not have pollution insurance coverage for a spill o For pollution coverage a motor carrier should purchase pollution coverage by endorsement or auto policy
representative of consumer (broker)
o When producer is not appointed at an insurer and acts on consumer's behalf o Must clearly disclose any fees to consumer
manager
person who negotiates and binds ceding reinsurance contracts on behalf of a domestic insurer or manages all or part of the insurance business of an insurer and does not act as an agent for such insurer
types of licenses
resident producer nonresident producer temporary license manager and executive general agents
duration of license
2 years
misconduct reporting timeframe
30 days after final disposition
penalties for prohibited acts if person knew
1. If person knew, no more than $5,000 per violation and no more than $50,000 in 6 months
activities that carry disciplinary actions
- Acting as a producer without a license (insurers are responsible for violations of employees) -Doing business with unlicensed people -Representing/advertising as a producer for a non-admitted insurer -Soliciting applications for insurance for non-existent entities -Rebating through giving back a portion of premium or other valuable consideration - Misrepresentation through false statements and --Twisting: making incomplete comparisons between policies -- Illegal Inducement: offering an illegal inducement that causes insured to enter into an agreement -Larceny
temporary license qualifications
- Surviving spouse or representative of a deceased individual producer or who becomes mentally/physically disabled - The designee of individual licensee who enters active service in US military - Persons involved with any other situation where public interest would be served
licensing prerequisites
-Must complete necessary pre-licensing requirements a. Minimum of 24 credit hours of pre-licensing course with 3 credit hours of ethics -Pass required exams or be exempt (complete pre-license course or be exempt) -Apply for a license by submitting the appropriate fee and forms to the insurance department
additional penalties for prohibited acts
1. Court could sentence person up to 6 months prison 2. If fail to comply with cease and desist a. Commissioner can file action for injunction in Commonwealth Court or Court of common pleas (no more than $10,000 for each violation)
penalties for prohibited acts if person did not know
1. If person did not know, no more than $1,000 per violation and no more than $10,000 in 6 months
commissioners general duties and responsibilities
1. Issue/suspend/revoke/non-renew licenses a. Take away for violations/unpaid fees/not earning CE credits 2. Regulate companies for solvency a. Instituting financial rehabilitation programs for insolvent insurers 3. Investigate complaints 4. Regulate rates, rating plans, forms 5. Collect fees a. Licensing, appointment, special taxes, and application fees 6. Regulate trade practices and claims practices 7. Report illegalities to attorney general
unfair claims practices (prohibited practices)
1. Misrepresenting important facts related to coverage at issue 2. Failing to act promptly on a communication dealing with a claim 3. Failing to have reasonable standards for prompt claims investigation 4. Refusing to pay claims without a reasonable investigation of all available info 5. Failing to deny or affirm coverage within a reasonable time after a proof of loss has been submitted 6. Failing to promptly settle claims fairly and equitably once the company's liability under the policy has become reasonably clear 7. Compelling insureds to institute litigation to recover amounts due by offering substantially less than amounts ultimately received 8. Attempting to settle a claim for less than the amount that a reasonable person would expect based on reference to printed material that may have accompanied or been a part of an application 9. Attempting to settle a claim on the basis of an application which was altered without notice to, or knowledge/consent of the insured 10. Making claims payments not accompanied by a statement setting forth the coverage under which payments are being made 11. Failing to promptly provide a reasonable explanation of the basis in the policy or law for denial of a claim or compromise offer 12. Telling the insured or claimant that the insurer has a practice of appealing arbitration awards in favor of insureds or claimants to persuade them to accept a lower settlement 13. Attempting to delay the investigation or payment of claims by requiring a preliminary claims report, and then requiring the subsequent submission of formal proof of loss forms, both of which contain substantially the same information
address change timeframe
30 days within address change
criminal conduct timeframe
30 days within being charged
twisting
A form of misrepresentation in which an agent persuades an insured/owner to cancel, lapse, or switch policies, even when it's to the insured's disadvantage.
Consent agreement
A written agreement in which an accused person does not admit or deny the changes but consent to payment of civil penalty -cannot be used in subsequent civil or criminal proceedings but notification shall be made to licensing authority
CAN SPAM Act (email marketing)
Business emails must include an opt out mechanism and must honor within 10 business days Businesses must do the following: o Make sure advertiser is identified in from line o Not use misleading subject lines o Include opt out and honor within 10 days o Include advertiser's valid physical postal address o If message is unsolicited- must be identified as an advertisement
temporary license
Can be issued to an individual due to the death/disability/active military service of a licensed producer Issued for no more than 180 days and are non-transferrable. They can be used until - Business is sold or transferred -Producer recovers and returns to business - New personnel are trained and licensed to operate business\
commissions and fees
Commissions may only be paid to licensed persons with 2 exceptions: -Nominal fee can be paid to unlicensed person for referring though not allowed to talk about the contract details -Renewal commission can be paid to person who was licensed at the time policy was written but license expired No extra fees can be charged unless disclosed in advance writing No commissions can be paid to those who's license is suspended/revoked
negotiate
Conferring directly with or offering advice directly to a purchaser or prospective purchaser of a particular contract of insurance concerning benefits, terms and conditions, provided that the person engaged in that act sells insurance or obtains insurance from insurers for purchasers
fraud and false statements
If you are engaged in insurance business and your activities affect interstate commerce and you knowingly engage in fraudulent activity o Penalties o Fines and up to 10 years in jail o If cause a company to be placed on conservation/rehab/liquidation- up to 15 years in jail o Attorney general can fine up to $50,000 or amount of compensation which person received /offered for prohibited conduct (whichever is greater)
federal terrorism risk insurance program (Terrorism Risk Insurance Act TRIA)
Ensures that terrorism insurance will be available though no coverage for nuclear, chemical, radiological, or biochemical attacks Covers all licensed primary or excess insurers, surplus line carriers, state workers compensation funds, and state residual market insurance entities § Includes coverage for acts of domestic terrorism and for federal funding to apply, the country would need to exceed $100 million in damages for terrorism in 1 year § Secretary of Treasury and Secretary of Homeland Security must certify an act of terrorism has occurred Does not cover § Federal/privately issued crop insurance § Private mortgage insurance/title insurance § Monoline financial guaranty insurance § Medical malpractice § Health or life insurance § National flood insurance program § Reinsurance Terrorism coverage must be offered to all policy holders with initial policy and renewals Program is triggered when losses from act of terrorism exceeds 20% of an insurance company's direct earned premium Government pays 85% of losses up to $100 billion and insurance company pays 15% additionally Act Reauthorized in 2015 to raise trigger amount, mandatory recoupment, private industry recoupment, and retroactively restore federal reinsurance backstop for all policy holders
insurance fraud protection act
Established procedures for creating, funding, and coordinating activities to prevent and combat insurance fraud and provide for the assessment of all licensed insurers to fund antifraud activities Members of insurance industry are required to report insurance fraud and are granted immunity Noninsurance members who violate this act are also subject to criminal prosecution *Preprinted applications must have fraud statements
sell
Exchanging a contract of insurance by any means for money or its equivalent on behalf of an insurance entity
misrepresentation (prohibited act)
False statements that cause someone to enter into a contract (oral or written), including misrepresenting: o Policy, benefits, terms and conditions o Policy dividend projections o Dividends to be share of surplus o Name/class/title of policy o For the purpose of inducing a lapse/forfeit/exchange/conversion/surrender of policy so insured buys new policy o Financial condition of any person/legal reserve system o Policy as being shares of stock o Any manner of advertisement/statements/announcements o False advertising
penalties for agency termination
Fines no more than $500 per violation Commissioner may o Revoke/suspend license of offending person o Refuse issue new license or renew license for up to 1 year o Impose civil penalties of no more than $500 per violation Exceptions where agents are not protected o Work for less than 4 years o Suspended or revoked license o Termination due to § Insolvency § Abandonment § Gross/willful misconduct § Failure to pay over insurers money demonstrated gross incompetence
Managers & Exclusive General Agents
Firms who work as independent contractors on behalf of a domestic insurer Produce insurance in specified geographic territory or to specific portion of insurers business and function on behalf of insurance companies providing services similar to a company branch office
waived from examination
Following are exempt from pre-licensing and producer licensing examination: o Business entity o Applicant for life or accident and health lines of authority who is CLU (chartered life underwriter) o Applicant for property, casualty, or accident and health lines of authority who is CPCU (chartered property and casualty underwriter) o Applicant for property, casualty, or accident and health lines of authority who is CIC (certified insurance counselor) o Applicant who possesses any other professional designation for which requirements are waived by commissioner o A person who is licensed in another state as insurance producer for same lines of authority for which desire to be in PA o Person who has a line of authority limited to a limited line- such as limited line credit insurance, or limited domestic mutual fire insurance coverage o Person who is already licensed in one or more lines of authority is exempt from pre-licensing requirement when taking exam and applying for additional line of authority
certificate of authority
Grants insurance company the ability to transact insurance as an admitted carrier Operating without one is a $500 fine per policy issued in violation
waiver of requirements
Inactivity due to military or extenuating circumstances can request to waive CE requirements of time where license lapsed and the lapsed license fees
prohibited acts
Licensees may not 1. Provide incorrect, misleading, incomplete, or false information to the department in a license application 2. Violate the insurance laws or regulations of PA or a subpoena or order of the commission or of another state's commissioner 3. Obtain or attempt to obtain a license through misrepresentation or fraud 4. Improperly withhold, misappropriate, or convert money or property received in the course of doing business 5. Intentionally misrepresent the terms of an actual or proposed insurance contract or application for insurance 6. Admit to or have been found to have committed any unfair insurance practice or fraud 7. Used fraudulent, coercive, or dishonest practices or demonstrate incompetence, untrustworthiness, or financial irresponsibility in the conduct of doing business 8. Have an insurance producer license or other financial service license, denied, suspended, or revoked by a governmental entity 9. Forge another persons' name on an application for insurance or any other document related to an insurance or financial service transaction 10. Cheat on an exam for an insurance producer license 11. Knowingly accept insurance business that was sold, solicited, or negotiated by an unlicensed insurance producer 12. Fail to comply with a court order imposing a child support obligation 13. Fail to pay state income tax or court order directly the payment of state income tax 14. Commit a felony or its equivalent 15. Commit a misdemeanor that involves the misuse or theft of money or property belonging to another person 16. Commit a violation of sub article b (regulation of insurance producers) 17. Commit fraud, forgery, dishonest acts or an act involving a breach of fiduciary duty 18. Transfer insurance coverage to an insurer other than the insurer expressly chosen by the insured without the consent of the insured 19. Fail to notify the department of a change of address within 30 days 20. Demonstrate a lack of general fitness, competence or reliability sufficient to satisfy the department that the licensee is worth of licensure. Rebates & Inducements Misrepresentation Defamation Unfair Discrimination Practices Agency Termination Boycott, Coercion, Intimidation Misappropriation of funds
defamation (prohibited act)
Making false or maliciously critical statements about an insurer (oral or written) and is a misrepresentation regarding their conduct of insurance which is untrue/deceptive/ or misleading
inducements (prohibited act)
No producer may directly/indirectly offer/give/promise/option/sell or purchase any stocks/bonds/securities/properties/dividends or other value as an inducement to purchase insurance violation= 3rd degree misdemeanor
fiduciary responsibility
Producers are required to act honestly and faithfully with all premiums collected and must keep all insurance premium funds separate from their own/other agency funds unless they have express consent to comingle funds They must maintain complete and accurate accounting of funds though those who make immediate remittance of premiums to their companies don't need to maintain separate accounts
personal lines (line of authority)
Property & Casualty insurance coverage sold to individuals and families primarily for noncommercial purposes
federal fair credit reporting act
Protects consumers from inaccurate and unfair information contained in files or reports of credit reporting agencies and is important to insure because insurers frequently will request financial information as a part of underwriting Notification of investigation must be sent to insured Penalty for fraudulent use of consumer information is no more than $5,000 or up to one year in prison (or both)
not excessive
Rate cannot be unreasonably high for type of insurance when company's losses and expenses are relatively low
Not unfairly discriminatory
Rate needs to be fair and legal for each class of business which reflects differences in loss exposures
boycott (prohibited act)
Refusal to have business dealings with other persons or entities until they comply with certain conditions
Motor Carrier Act (1980)
Requires coverage for bodily injury, property damage, and environmental restoration claims that arise from use and operation of an auto. Basically an incentive to maintain and operate vehicles on public highways safely Environmental restoration o Restitution for damage/destruction of natural resources arising out of accidental discharge/dispersal/release/escape into/on land/ atmosphere/ watercourse/body of water of any goods transported by auto
adequate
The rates will give insurance company enough money alongside investment earnings to pay projected losses and expenses
gramm leach bliley act
States have had to create minimum standards for maintaining privacy of information secured as a result of the application for/underwriting of and the continuing servicing of insurance and includes these requirements: 1. Insurers and producers required to advise prospects and customers whether and how any personal/private/financial information may be shared and with whom 2. Customers must be able to 'opt out' of sharing said info 3. Initial privacy notice must be provided to consumers at initial contact and notice must be sent annually 4. Agents and brokers must keep personal financial information secure and not share with unauthorized parties There is additional federal laws that regulate insurance business activities that affect interstate commerce, penalties for violations are up to $50,000 per violation or up to 15 years in prison Fraudulent activities which involve amounts less than $5,000 carry smaller penalties
coercion (prohibited act)
The application of physical/mental force to persuade someone to buy insurance
unfair discrimination practices
Unfairly discriminating by means of 1. Making/permitting unfair discrimination between individuals of the same class of equal expectation of life in the rates charged for life insurance/annuity/dividends/other benefits 2. Making/permitting unfair discrimination between individuals of same class of hazard in amount of premiums/policy/fees/rates charged on policy or benefits 3. Making/permitting unfair discrimination between individuals of same class of same hazard with regard to underwriting practices or eligibility by key demographic factors It is lawful to discriminate on loss exposure
agency termination (prohibited act)
Written notification of 90 days prior to termination must be provided by company to producer and commissioner the producer has 30 days to request review of termination If due to adverse experience: o Company should rehabilitate producer with reasonable attempts o Specify goals of rehab program o Notify that failure to reach goal = termination o Rehab period greater than or equal to 1 year o If goals met, termination not option for adverse experience o Duty of company to provide proof of rehab If producer terminated- agents policies are continued for 12 months
misappropriation of funds
You cannot improperly withhold, steal, convert money, or property received in course of doing business
penalties from insurance department
§ Denial/suspension/refusal to renew or revoke license § Civil penalty of no more than $5,000 for each action § Cease and desist order § Licensee who fails to provide written response within 30 days of receipt of written inquiry or fails to pay fees will receive notice. If not corrected within 15 days of notice- fine of $100/day § Courts may impose · Violations where person didn't know- penalty of no more than $1,000 per violation but no more than $10,000 per 6-month period · Violations where person did know- penalty of no more than $5,000 per violation but no more than $50,000 per 6-month period · Violations of orders of commissioner while order in effect penalty of no more than $10,000