Chapter 15 NC state laws
Offering a premium discount not specifically included in the policy is called: A Rebating B False information C Twisting D Misrepresentation
A Rebating
Adjuster
An adjuster is an individual who, for a salary, fee, commission, or other compensation, investigates or reports to their principal with respect to claims arising under contracts other than life or annuities. An attorney who occasionally adjusts losses incidental to their profession or an adjuster of marine losses are not considered adjusters within the intent of the law.
Termination of Appointment
An insurer that terminates a producer's appointment must notify the Commissioner within 30 days after the termination's effective date. Upon written request, the insurer must provide additional information, documentation, or records pertaining to the termination or activity of the producer.
Referral of Business
An insurer, agent, or adjuster may not recommend the use of a particular service or source for the repair of property damage without clearly informing the claimant that they are under no obligation to use the recommended repair service.
Payment of Premiums
An insurer, agent, or broker may accept premiums by credit or debit card if the insurer complies with the prohibition against unfair discrimination and pays the fees charged by the credit card company for the payment of premiums.
Acting without a License
Any person acting as or pretending to be a principal, agent, broker, limited representative, adjuster, or licensed motor vehicle damage appraiser by soliciting, investigating, or examining risks or collecting premiums will be deemed guilty of a Class 1 Misdemeanor.
Acting without a License
Any person acting or pretending to be an agent, broker, limited representative, or adjuster by examining or investigating, collecting or transmitting premium, or soliciting or executing any contract of insurance, violates the law and is guilty of a Class 1 misdemeanor.
All of the following are valid insurance rules, EXCEPT: A A lender may not require a customer to buy insurance from an affiliated insurer in order to get a loan B A home loan provider must require an issued policy as evidence of insurance, not a binder C An insurer may not charge different car insurance rates based on age D If premiums are paid by credit card, no service charge may be added to the insured for the service
B A home loan provider must require an issued policy as evidence of insurance, not a binder
Insurance Continuing Education Credit (ICEC)
Credit hour assigned to a course by the Commissioner after review and approval of course information.
The Safe Driver Incentive Plan distinguishes safe drivers from drivers with driving records containing each of the following, EXCEPT: A Minor moving traffic violations B At fault accidents C Major moving traffic violations D Excessive collision claims
D Excessive collision claims
Insurance Continuing Education Credit
If an approved course is taken in a classroom setting, each instruction period must be at least 50 minutes in order to count for one hour of CE credit.
General Regulations
No insurance company may conduct transactions in the business of insurance in North Carolina unless the insurer is certified and admitted by the Commissioner, or unless the insurance: Covers a nuclear electric generating plant Is reinsurance or marine, aircraft, or liability insurance Is obtained through a surplus lines insurer Is otherwise legal and happens to cover a group, in another state, with insured members who are North Carolina residents
Policy Forms
No policy form for insurance transactions may be used unless it has been filed with the Commissioner by the Bureau and it has either been approved or 90 days have elapsed and the form has not been disapproved.
License Surrenders
When a licensee is accused of any act, omission, or misconduct that would subject the license to suspension or revocation of the license, the licensee may surrender the license for a period of time established by the Commissioner.
Continuing Education Course
A course that is directly related to insurance principles and practices or a course designed and approved specifically for licensees. This does not include a business course of a general nature or an insurance marketing or sales course. Courses must be for instructional purposes only and not for promoting the interests of, or recruiting employees for, any particular insurance agency or company.
Disinterested Third Party
A person not concerned with the result of a pending course final examination, meaning the producer's exam results will not cause the disinterested third party to profit or take a loss.
Records Maintenance/Inspection
All companies, agents, or brokers doing any kind of insurance business in North Carolina must make and keep a full and correct record of the business done by them. This includes: The policy/certificate of renewal number, date, term, amount insured, premiums The person(s) to whom it was issued
Payment of Premium to Agent
An agent, broker, or limited representative who acts for a person other than themselves when negotiating a contract of insurance is considered the company's agent for the purpose of receiving the premium. Any producer receiving premiums through fraudulent representations is guilty of a Class 1 misdemeanor.
Report to the Commissioner
Any insurance company, employee, representative, or licensee who has reason to believe that any other person has violated the law or that any entity licensed by the Commissioner is financially impaired must inform the Commissioner and provide a complete statement of all relevant facts. The Commissioner may suspend, revoke, or refuse to renew the license of any licensee who fails to comply.
Representing an Unlicensed Insurer
Any person who solicits, negotiates, or sells insurance for an unauthorized insurer is strictly liable for any losses or unpaid claims if an unauthorized insurer fails to pay any claim in part or in full. The person making the sale will be guilty of a Class 1 misdemeanor if they do not know the insurer is unauthorized and a Class H felony if they knew or should have known the insurer was not authorized.
Which of the following is NOT true about unauthorized insurers? A The insurer does not have a Certificate of Authority B The insurer might be licensed in a foreign jurisdiction C Business is considered to be contrary to public welfare D The insurer is subject to North Carolina insurance laws
D The insurer is subject to North Carolina insurance laws
Notifications to the Commissioner
Every applicant for a license must provide the Commissioner with a residential address and email address. A licensee must notify the Commissioner in writing within 10 days of a change in residential address or email address. Violation of this requirement is subject to a $50 administrative fee. Notice may be given in writing or by using an online service approved by the Commissioner.
Defamation
It is prohibited to make any false statement that is maliciously critical or derogatory of any insurer's financial condition with the intent to injure someone in the insurance business.
A chose in action
the right to sue a person to recover property, money, goods, or debts.
A violation of the Privacy Protection Act is punishable by all of the following, except: A $100,000 fine B License suspension C License revocation D Up to $10,000 per violation
A $100,000 fine
A temporary license may be issued to an individual for up to how long? A 180 days B 365 days C 30 days D 90 days
A 180 days
Twisting
A licensee may not willfully misrepresent or make an incomplete comparison of the terms, conditions, or benefits contained in any policy for the purpose of inducing a policyholder in any way to terminate or surrender, exchange, or convert any insurance policy.
Limited Representative
A limited representative is authorized by the Commissioner to solicit or negotiate contracts of insurance that are restricted in the scope of coverage they afford.
Insurance Producer
A producer is a person required to be licensed to sell, solicit, or negotiate insurance. An insurance producer includes an agent, broker, and limited representative.
Supervised Examination
A timed, closed book examination that is monitored and graded by a disinterested third party.
Examinations, Hearings, and Investigations
All examinations, hearings, and investigations may be conducted by the Commissioner personally or by one or more deputies, investigators, actuaries, examiners, or employees designated for the purpose. If the Commissioner or designee is of the opinion that there is evidence to charge any person or persons with a criminal violation, the Commissioner may arrest them with warrant or cause. The hearing will be at a time and place designated in a written notice given by the Commissioner to the person cited to appear. The notice must state the subject and specific charges, if any. The Commissioner must notify all interested parties of a hearing's time, place, and subject.
Statements in the Application
All statements or descriptions in any application for a policy of insurance, or in the policy itself, are deemed representations and not warranties. A representation, unless material or fraudulent, will not prevent a recovery on the policy.
Unfair Discrimination
Allowing individuals of the same class and equal life expectancy, of the same class and hazard, or of the same class and risk to be charged different rates for the same insurance coverage. It is not unfair discrimination if the rate differential is based on sound actuarial principles or is related to actual experience. An agent or representative may not discriminate in favor of any person.
Blank Policies
An agent or limited representative who signs a blank contract or insurance policy is guilty of a Class 3 misdemeanor and upon conviction will be punished by a fine of $1,000 - $5,000.
Proof of Loss Forms
An insurer must provide claim forms to a claimant within 15 days of receiving notice of loss. If the insurer fails to do so, the claimant will be deemed to have satisfied the proof of loss requirements as long as the claimant provides the supporting documentation within the policy's time frame.
Each property agent licensee must obtain how many insurance continuing education credits during each biennial compliance period? A 12 B 20 C 24 D 15
C 24
An insurance professional who represents the insured is which of the following? A Agent B Limited Representative C Broker D Insurance Producer
C broker
No privacy information notice needs to be provided to the insured if one was provided within the previous ______ months. A 12 B 36 C 6 D 24
D 24
Embezzlement
Embezzlement in the amount of $100,000 or more is a Class C felony; less than $100,000 is a Class H felony.
Ethical Standards
Every insurance professional, when dealing with the public, must identify themselves and their occupation, carry their license for display upon request, and deal fairly and honorably.
Penalty
If the value of the money, goods, property, services, chose in action, or other thing of value is $100,000 or more, a violation is a Class C felony
Excess Premiums -
Knowingly charge, demand or receive a premium for any policy of insurance except in accordance with the applicable filing approved by the Commissioner.
False Pretenses and Cheats
Obtaining property by false pretenses is an action or event in which a person obtains or attempts to obtain from any other person money, goods, property, services, chose in action, or other thing of value. The person trying to obtain the property using false pretenses must have an intent to cheat or defraud the other person.
Rebating
Offering any rebate, discount of premium, advantage, or valuable consideration not specified in the policy. This does not include: Bonuses paid to insureds or abatement of premiums in place of that bonus Reduction in premium for regularly mailing or bringing the premium to an office, saving the expense of agent 'house-calling' (this applies to industrial policies) Readjustment of group rates based on claims experience
Rebates
Pay, allow, or give directly or indirectly as an inducement to buy insurance. This includes any rebate, discount, abatement, credit, or reduction of the premium named in a policy of insurance after the insurance has been effected. Also included is any special favor or advantage in the dividends or other benefits that accrue, or any valuable consideration or inducement that is not specified in the policy of insurance.
Biennial Compliance Period
The 24-month period during which an agent or adjuster must comply with continuing education requirements.
Coverage for Damage to Rental Vehicles Authorized
The Bureau is authorized to provide rates and policy forms for insurance against property damage to rented private passenger motor vehicles. Property damage includes damage or loss to the rented vehicle of at least $250. This includes loss of use and any costs or expenses related to the damage or loss that the renter is legally obligated to pay. The vehicle must be rented on a daily-rate basis for no more than 21 consecutive days.
Compliance Year
The second year of the biennial compliance period.
Penalties for general regulations/ Unauthorized insurers
Violation of the placement of business by unauthorized insurers may result in the following fines: For the first offense, a fine not more than $5,000 For the second and subsequent offenses, $10,000 for each violation Each day during which a violation occurs constitutes a separate violation
Restraining Orders
Whenever it appears that any person has violated, is violating, or threatens to violate any provision of state insurance law, the Commissioner may apply to the superior court of the county where the violation is occurring or suspected, for a restraining order and injunction to restrain the violation. If the court finds any provision of North Carolina insurance statutes has been violated, is being violated, or is threatened, it shall issue a restraining order prohibiting the violations. This order may be issued regardless of whether criminal prosecution is instituted.
The Association is obligated to pay covered claims
those existing before, and arising within 30 days after, an insurer's insolvency—of more than $50 and less than $300,000, subject to the following exceptions: The Association will not pay any amount exceeding the insolvent insurer's obligation Workers' Compensation claims will be paid in full Unearned premiums will be remitted, up to $10,000 per request If occurring before the 30 days after insurer insolvency, the Association's obligation ends when the policy expires or the insured replaces their policy
Broker
A broker is a person who is licensed as an agent and obtains insurance for the insured through a duly authorized agent of an insurer licensed to do business in this state, but for which the broker is not authorized to act as an agent. A person not duly licensed who procures insurance for the insured is a broker within the intent of the law and becomes personally liable for all the duties, requirements, liabilities, and penalties to which a broker is subject.
Investigations of Complaints
A citizen of this state may file a complaint that a company authorized to do business in this state has violated any provisions of these laws. The Commissioner must investigate the citizen's complaint against an insurer and may examine the insurer's books, records, and documents. The Commissioner may request information for an investigation from any person. Any person, employee, or agent acting without malice, is not subject to civil liability for libel or slander by providing to the Commissioner reports or other information relating to any known or suspected fraudulent insurance claims or transactions.
Ethics Course
A continuing education course that deals with usage and customs among members of the insurance profession involving their moral and professional duties toward one another, toward clients, toward insureds, and toward insurers.
Broker Licensing
An applicant for a broker's license must already possesses an agent's license and maintain an agent's license throughout licensure as a broker. A broker's license will be issued only for the same lines of insurance authorized under the agent license. Suspension or revocation of the agent license will immediately suspend or revoke the broker's license as well. A broker's license must be renewed annually on April 1st.
Twisting
An insurer may not willfully misrepresent, or incompletely compare, the terms, conditions, or benefits of any insurance policy in order to induce a policyholder to replace an existing policy.
False Statements in Applications
Any agent, physician, applicant, or person who knowingly makes any false or fraudulent statements or representations on an insurance application for the purpose of obtaining any fees or commissions from a company engaged in the business of insurance will be guilty of a Class 1 misdemeanor.
Judicial Review
Any order or decision made, issued, or executed by the Commissioner will be subject to a judicial review in the Superior Court if a petition is filed within 30 days from the date of delivery of the order or decision. The judicial review does not apply to an order regarding financial impairment or a decision that the premium rates charged or filed on any class of risk are excessive, inadequate, or unfairly discriminatory.
Appeal of Commissioner's Order
Any order or decision of the Commissioner is subject to judicial review. Whenever a Bureau rate is held to be unfairly discriminatory or excessive and no longer effective by order of the Commissioner, the members of the Bureau may continue to use that rate for the interim period pending judicial review. However, each member places in escrow the amount that is potentially unfairly discriminatory or the excessive portion of the premium collected during the interim period.
False Statements to Procure or Deny Benefits
Any person who presents a written or oral statement that contains false or misleading information material to a claim to procure or deny benefits is guilty of a Class H felony. The person must have the intent to injure, defraud, or deceive an insurer or insurance claimant.
Choose the statement that is INCORRECT regarding North Carolina insurance statutes: A An agreement that obligates an insurer to pay the insured for the loss of something the insured has an interest in is called a contract of insurance B The Commissioner of Insurance in North Carolina is appointed by the Governor C During a hearing all parties can examine and cross-examine witnesses D A licensee must notify the Commissioner in writing within 10 days of a change of residential address
B The Commissioner of Insurance in North Carolina is appointed by the Governor
An insurer must give the insured at least ________ advance written notice whenever the insurer changes the premium rate. A 7 days B 30 days C 15 days D 72 hours
C 15 days
The Insurance Guaranty Association provides coverage under which of the following circumstances? A Insurance company guarantees renewal of property and casualty policies B Applicant has been rejected by at least 2 property insurers C Applicant for insurance is ineligible due to claim history D Insurance company is insolvent
D Insurance company is insolvent
Charges for Related Services
Knowingly charge or receive from an applicant for insurance any money or other consideration, such as money, in addition to the premium in return for the processing of applications or other forms or for the rendering of services associated with a contract of insurance, unless the applicant consents in writing before any services are rendered.
False Information and Advertising
Presenting any information or advertisement that is false or misleading about the insurance business, or about any person in the conduct of their insurance business.
Boycott, Coercion, or Intimidation
Producers are not allowed to be involved in an action that results in an unreasonable restraint of, or monopoly in, the insurance business.
Misrepresentation
Producers are prohibited from making misleading or untrue representations or fraudulent comparisons of policies, misrepresenting a policy's terms or benefits, or making misleading representations about an insurer's financial condition.
Stock Options and Insurance Company Advisory Board Contracts
Producers may not give capital stock, benefit certificates or shares in a corporation, securities, special or advisory board contracts, or contracts promising returns and profits as inducements to purchase insurance.
Special Cases
The Commissioner will prepare courses to address and remedy deficiencies in licensee professional performance or conduct detected by the Commissioner through analyses of consumer complaints or from Departmental audits or examinations of insurance companies, licensees, or insurance agencies or brokerages. The Commissioner will require an individual licensee to take and complete remedial or rehabilitative courses if the licensee has committed any of the acts or omissions causing suspension, probation, revocation, or nonrenewal of licenses.
Countersignature
There may not be requirement that a licensed resident agent or broker must countersign, solicit, transact, deliver, or process an application, policy, or contract on behalf of a nonresident agent, broker, or an authorized insurer. A licensed resident agent or broker is not required to share in the payment of commissions, if any, related to such business.
Nonresident License
To qualify for a nonresident license, a person must be currently licensed and in good standing as a resident agent in their home state. If the license in the home state is no longer in good standing, the nonresident licensee's license issued by the Commissioner will automatically lapse 30 days after the loss of the nonresident's home state license. A nonresident license may be reinstated within 30 days after lapse upon proof that the nonresident's home state license has been reinstated.
Civil Penalties or Restitution for Violations
Violation of any provisions of the general statutes subjects the licensee to suspension or revocation, after notice and opportunity for a hearing. After a hearing, the Commissioner may, in addition to or instead of suspending or revoking a license, order payment of a monetary penalty. The penalty cannot be less than $100 or more than $1,000 and will be in addition to payment of any other penalty for a violation of the criminal laws of this state.
Functional replacement
to replace the property with property that performs the same function when replacement with materials of like size, kind, and quality is not possible, necessary, or less costly than obsolete, antique, or custom construction materials and methods. Forms and rating plans may also provide for credits when functional replacement cost coverage is provided.
Choose the true statement regarding general business regulations for property insurance. A A premium overpaid for a sum in excess of a building's actual cash value must be reimbursed at 6% annual interest from the date of issue B A policy covering fire damage will cover a loss for actual cash value if ACV has been added to the policy by an endorsement C Policy credits are not available for policy forms providing functional replacement cost coverage D A property policy may not be insured for a term exceeding 8 years
A A premium overpaid for a sum in excess of a building's actual cash value must be reimbursed at 6% annual interest from the date of issue
Agent
An agent is a person licensed to solicit applications for or to negotiate a policy of insurance on behalf of an insurer. A person not duly licensed who solicits or negotiates a policy on behalf of an insurer is an agent within the intent of the law and becomes personally liable for all the duties, requirements, liabilities, and penalties to which an agent is subject. A company that compensates a person for soliciting insurance policies accepts and acknowledges the person as its agent in the transaction.
Resident License
An individual residing in this state will qualify for a resident license. A resident license will be void if the licensee applies for a license in and claims to be a resident of another state. Any licensee who ceases to maintain residency in this state must personally deliver or mail their insurance license to the Commissioner within 30 days after terminating residency.
Appointment
An individual who holds a valid insurance agent's license may not solicit, negotiate, or otherwise act as an agent for an insurer without an insurer appointment. An insurer authorized to do insurance business in this state must appoint an individual as its agent. An agent may have only one appointment for each kind of insurance they are licensed for in North Carolina.
Coinsurance Clause
An insurance company or agent licensed in this state may not issue any property insurance policy that contains a clause requiring the insured to maintain a larger amount of insurance than what is expressed in the policy. A coinsurance clause or provision may be written in or attached to a policy when the words "Coinsurance Contract" are stamped on the declaration page. If there is a difference in rate for the insurance with or without the coinsurance clause, the rates must be provided upon request.
Which of the following statements is NOT true regarding the Consumer Division? A An agent charging a service fee must display that fee in their office B An agent may not buy salvage from a claimant C A receipt for an insurance premium must be dated and signed by the agent D Commingling is prohibited
C A receipt for an insurance premium must be dated and signed by the agent
Choose the INCORRECT statement regarding SDIP plan surcharges. A A subclassification plan surcharge must be applied to a policy for 3 policy years B SDIP points must be equal to the severity of the claimant's injury C A major accident is an at-fault accident resulting in BI, death, or PD of at least $3,000 D A person with less than 3 years driving experience may not be surcharged
D A person with less than 3 years driving experience may not be surcharged
Representation
Every agent or limited representative who solicits or negotiates an application for insurance of any kind, in any controversy between the insured or beneficiary and the insurer, is regarded as representing the insurer and not the insured or beneficiary.
License Denial
If the Commissioner finds that the applicant has not fully met the requirements for licensing, the Commissioner will refuse to issue the license and send written notification to the applicant and the appointing insurer of the denial, stating the grounds for the denial. A license applicant may request a review by the Commissioner within 30 days after receiving notice that the license application has been denied. An applicant who disagrees with the outcome of the review may request a hearing within 30 days.
Disapproval, Hearing, Order, and Adjustment of Premium
If the Commissioner finds that the filing does not comply with requirements, they must give notice to the Bureau within 50 days after the date of the filing. The notice to the Bureau must include how the filing fails to meet the requirements, and the Commissioner must set a hearing date within 30 days of the hearing notice being mailed to the Bureau. The Bureau must prove that their proposed rates are not excessive, inadequate, or unfairly discriminatory.
Licensee Exemptions
Licensed insurance producers who are unable to complete continuing education requirements due to military service or long-term medical disabilities may request a waiver for continuing education requirements. The Commissioner will grant an exemption from ICEC requirements for up to one year if the individual provides a deployment notice from the Department of Defense or a notarized statement from a licensed physician stating that the producer is unable to do the work they are licensed to do and needs a long-term medical disability waiver.
Punishment for Misstatements
Making willful misstatements of information in financial or other required statements is a Class I felony, punishable by a fine of not less than $2,000 and not more than $10,000.
Disclosure Limitations and Conditions
Insurers, agents, agency support personnel, or corporations may not disclose any personal information about an individual in connection with an insurance transaction without having the individual's written authorization before the disclosure occurs. This information may also be used in making legitimate business decisions, determining eligibility for benefits, or preventing criminal activity (such as fraud, misrepresentation, or concealment).
Notice of Coverage or Rate Change
Whenever an insurer changes the coverage, other than at the request of the insured, or changes the premium rate, the insurer must give the insured at least 15 days' advance written notice of the coverage or premium rate change. A copy of the notice must also be sent to the agent. This regulation applies to all policies and coverages except Workers' Compensation insurance and Employers' Liability insurance.
Which of the following is NOT a duty required of the Commissioner of Insurance? A Approve or disapprove insurance rates, forms, and safe driver incentive plans B Compiling a list of rates charged by insurers for residential property C Conducting examinations and investigations D Establish laws, rules, and regulations regarding North Carolina insurance
D Establish laws, rules, and regulations regarding North Carolina insurance
Choose the passive unfair claims settlement practice. A Refusing to pay claims without conducting an investigation B Telling an insured the policy of appealing arbitration awards C Misrepresenting pertinent facts or insurance policy provisions relating to the coverage D Failing to promptly explain, based on applicable provisions or laws, a claim's denial
D Failing to promptly explain, based on applicable provisions or laws, a claim's denial
Producer of Record
Every insurance agency transacting insurance business in North Carolina shall appoint a producer of record. This person shall have the responsibility of seeing that all records are maintained as required and provided to the Commissioner as requested.
Complaint Records
Every insurer or its agents must maintain a record of all written complaints for at least 5 years after the complaint's final disposition. For domestic companies, the complaint must be kept until the Commissioner has adopted a final report of a general examination that contains a review of those records for that calendar year, or for 5 years, whichever is later. These records may be subject to inspection and should contain at a minimum the: Insured's name Nature of the complaint Policy/claim number of the insured Final disposition of the complaint
Individual Biennial Compliance Period
Every person with an even-numbered birth year must meet continuing education requirements in an even-numbered compliance year. Every person with an odd-numbered birth year must meet continuing education requirements in an odd-numbered compliance year. Every licensee must complete the 24 ICECs by the last day of their birth month in the compliance year.
Deviations
Except for Workers' Compensation loss costs filings, no insurer or its representative may knowingly issue, deliver, or permit the issuance or delivery of any policy that does not conform to the rates, rating plans, classifications, schedules, rules, and standards made and filed by the Bureau.
Hearings and Penalties
If there is reason to believe a person has violated any part of the Act, the Commissioner will issue and serve a statement of charges and notice of hearing to be held not less than 10 days after the date of service at a fixed time and place. A violation of privacy regulation is punishable by one or more of the following penalties: License suspension or revocation A monetary fine up to $10,000 per violation A monetary fine up to $50,000 if the violations occur with a frequency that constitutes a general business practice
Failure to Complete
The license of a person failing to meet continuing education requirements will lapse. The license will be reinstated when the person has completed the continuing education requirements and paid an administrative fee of $75. This must be done within 4 months after the end of the person's previous compliance year.
