Chapter 15.8 (1/3) - AZ Life & Health State Laws

Acts Constituting Insurance Transaction

(Definitions)

(Unfair Claims Settlement Practices)

(See printed list)

Federal rules require the following for commercial email:

-*Identification* - The email must be clearly identified as a solicitation or advertisement for products or services. -*Opt-Out* - The email must provide easily-accessible, legitimate and free ways for you to reject future messages from that sender. -*Return Address* - The email must contain legitimate return email addresses, as well as the sender's postal address.

Rebating

-Life and Disability Insurance -Insurance Other than Life and Disability

Directors Duties and Powers

-The Arizona Director of Insurance is a state executive position and is *appointed* by the Governor with the *consent* of the senate. The Director must be well-versed in insurance matters and have been a resident of the state for at least *3 years* prior to their appointment. The Director is responsible for *enforcing* the insurance code. The state legislature writes and passes all statutes but the Director may issue administrative rules and regulations to help enforce those statutes. -The Director has the authority to examine the affairs, transactions, accounts, records, and assets of authorized insurers as deemed necessary. The Director must examine each domestic insurer at least once every *5 years*. The expense of the examination will be paid by the examiner's revolving fund. -The Director has the power to take depositions, subpoena witnesses or documents, administer oaths, and examine under oath any individual relating to the subject of a hearing or investigation. Any person failing to obey a subpoena will be penalized by the court as if the subpoena were issued by the court. A person who falsely testifies under oath is guilty of perjury.

The following transactions are exempt from licensing:

-The lawful transaction of surplus lines insurance -The lawful transaction of reinsurance -Attorneys acting in the ordinary relation of attorney and client in the adjustment of claims or losses -Transactions involving group annuities to a group organized for purposes other than the procurement of insurance -Transactions involving contracts of insurance that are not readily obtainable from insurers authorized to transact insurance in this state and issued to one or more industrial insureds

Federal Regulations

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Producer Regulation

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Types of Licensees

A *resident licensee* is a person whose home state is Arizona and who does not hold a resident insurance license in another U.S. jurisdiction. An individual must have a principal residence or place of business in this state. A person can only hold 1 resident license, but can request a nonresident license in any other state. A *nonresident licensee* is a person whose home state is not Arizona. A nonresident license will be issued *without examination* to individuals who hold a resident license in a state that is reciprocal (issues a nonresident license to residents in this state on the same basis) with Arizona. To obtain a nonresident license, the license in the applicant's home state must be valid and in good standing. The nonresident must submit an application and pay the required fees.

License Application Requirements: Application for License-3

A business entity is any corporation, association, partnership, Limited Liability Company, Limited Liability Partnership, or other legal entity except an individual or sole proprietorship. Before approving the application of a *business entity*, the Director must find that the business: -Has paid the required nonrefundable fees -Will be acting within the scope of its partnership agreement, articles of incorporation, or other charters when the business entity is transacting business under the license -Has designated an individually licensed producer who will be responsible for the business entity's compliance with insurance law -Has provided the names of all officers and directors of the business entity and ensured that any such individual who acts as an insurance producer obtains a resident insurance producer license A business entity insurance producer must have at least one insurance producer individually licensed for the appropriate lines of authority in each office or place of business in which the *business entity* transacts insurance in this state.

Licensing Eligibility/Lawful Presence

A license cannot be issued to an individual who cannot prove his or her lawful presence in the United States in the form of documentation of citizenship or alien status. If an individual has established United States citizenship or a form of non-expiring work authorization issued by the federal government, documentation is not required for renewal or reinstatement of licensure.

Inactive License During Military Service

A licensee or applicant who is ordered into active military service may request that the license or application be placed on inactive status by sending the Department a written statement that includes all of the following: The licensee's name The licensee's license number or Social Security number The date that the active military service begins A request for inactive status

Inactive License During Military Service-2

A licensee whose license is on inactive status may not sell, solicit, or negotiate insurance, but is allowed to receive renewal or other deferred commissions. The time periods for submission of the license renewal fee and for completion of the applicable renewal and continuing education requirements are extended for a licensee whose license is on inactive status by the number of days that the licensee is in active military service. For the purposes of this section, active military service does not include periodic and routine service as a military reservist.

Insurance Producer-2

A person may not sell, solicit or negotiate insurance in this state for any class or classes of insurance unless the person is licensed for that line of authority. A salaried full-time employee, officer, or director who does *not transact insurance or receive commissions* is exempt from licensing. The license must include the licensee's name, address and identification number, the date of issuance, the lines of authority, the expiration date, and any other information the director deems necessary. The director may make the information prescribed by this section available electronically.

License Required

A person may not sell, solicit, or negotiate insurance unless the person is licensed for that line of authority. An insurer may only pay commissions to a licensed producer. Similarly, no person may accept a commission unless they are licensed.

License Expiration, Surrender, and Renewal-2

A person may renew a license within *12 months of expiration* by filing a renewal application, the appropriate license fee, and a $100 late renewal fee. Any application received during this 12 months period is deemed a renewal application. Any application received more than 12 months after a license has expired is deemed a new application and a new exam is required. If a licensee submits a written request, the Director may accept the voluntary surrender of the licensee's authority to transact one or more lines of insurance, or the entire license. A person who surrenders an authority or a license is not permitted to reapply for the same authority or license for at least *1 year.*

License Application Requirements: Application for License

A person seeking a resident insurance producer license must apply to the Director of insurance by submitting an application and declaring that all statements are true, correct, and complete to the best of the knowledge of the applicant. The application must contain information that includes the applicant's: -Identity and personal history -Business record and experience in insurance -Other pertinent information required by the Director

Sharing Commissions

A producer may only share commission with another producer in the same line of insurance. Renewal or other deferred commissions may be paid if the person was licensed at the time of the transaction.

Report of Actions

A producer must report, within *30 days*, any *administrative action* or *criminal prosecution* that occurs in any jurisdiction or by another governmental agency in this state.

Life Settlement Broker

A producer that is licensed with a life line of authority is deemed to meet the licensing requirements to operate as a life settlement broker. Within the first 30 days of operating as a broker, the licensee must notify the director that he/she is acting as a broker.

Cease and Desist Order

After a hearing, the Director may issue a cease and desist order for: -Transacting insurance without a license -Paying commissions to a person who is not licensed as required or receiving commissions if not appropriately licensed -Acting as any of the following without being appropriately licensed: Managing general agent Adjuster Rental car agent Risk manager Self-service storage agent Bail bond agent Surplus lines broker Any person who has been ordered to cease and desist may file a notice of appeal and may appeal any final order.

Adjuster

An adjuster is any person who, for compensation, adjusts, investigates, or negotiates the settlement of claims on behalf of either the insurer or the insured. "Adjuster" *does not include:* -A licensed attorney who is qualified to practice law in Arizona -A salaried employee of an insurer or of a managing general agent -A licensed insurance producer who adjusts losses arising under policies he/she procures -An employee of a political subdivision who adjusts losses arising under policies covering the political subdivision -An independent contractor retained by a licensed adjuster for the sole purpose of providing assistance in connection with a claim (an independent contractor may include a photographer, estimator, engineer, private detective, or handwriting expert) To be licensed as an adjuster, the individual must be at least 18, be a resident of this state, or another state that allows residents of this state to act as adjusters in the other state, and pass a licensing examination.

Identification of Producer

An authorized insurer cannot issue a policy for in-state risks unless the policy declaration page or endorsement identifies the name of the producer licensed for that line of authority in this state. This section does not apply to: -Reinsurance or life, disability, or title insurance -Insurance of the rolling stock, vessels, or aircraft of any common carrier in interstate or foreign commerce, or of any vehicle principally garaged and used in another state, or covering any liability or other risks incident to the ownership, maintenance, or operation thereof -Insurance of property in the course of transportation interstate or in foreign trade, or any liability or risk incident thereto -Insurance of ocean marine risks -Policies issued through salaried insurance producers or issued by insurers not using insurance producers in the general solicitation of business -Bid bonds issued by any surety insurer in connection with any public or private contracts -Policies issued by a vending machine

Assumed Business Name and Trade Name

An insurance producer doing business under any name other than their legal name is required to notify the Director prior to using the assumed name. The Director may deny the use of an assumed business name, require the use of a different assumed business name, or require the use of an assumed business name if a producer proposes to use a name that is deceiving or misleads the public. An insurance producer must notify the Director in writing within *30 days* after any material change to the information filed with the Director. The Director will not issue any license in a trade name, except to a business entity if the trade name is legally registered.

Types of Licensees (continued) - Insurance Producer

An insurance producer is a person (individual or business entity) required to be licensed to sell, solicit, or negotiate insurance. Producers may be agents or brokers. *Agents* represent the insurer when transacting insurance. *Brokers* represent the insured. A person meeting the requirements of licensure may qualify for an insurance producer's license in one or more of the following lines of authority: Life Accident or health and sickness Property Casualty Variable life and variable annuity products Personal lines Credit

Rates and Rating Systems

An insurer cannot charge rates that are excessive, inadequate, or unfairly discriminatory. As long as a reasonable degree of price competition exists, rates are considered to be fair. Authorized insurers must file all rates, supplementary information, and changes to the rates within *30 days* of becoming effective. Arizona is a *"use and file"* state. The insurer must also file the rating system, including manual classifications and rate plans, 30 days before becoming effective.

Insurance Other than Life and Disability

An insurer may charge only the premium prescribed in its rate filing with the Director. No insurer may pay any rebate, discount, abatement, credit, special favor, or other valuable consideration as an inducement to buy or keep an insurance policy The legal payment and receipt of commissions, compensation, and dividends is not considered rebating.

Fees

An insurer or producer may charge fees for services not customarily provided if they file the fee with the Director and meet the following conditions: - The services are in addition to those normally performed for insureds -The specific services and their related charges are disclosed in writing to the insured -The service charges are reasonable with respect to the cost of the service performed

Notice of Information Practice

An insurer or producer must provide a notice of information practices to all applicants or policyholders upon application, and at the time of policy delivery: -At least *once a year* after a policy renews -Upon reinstatement or change in benefits Notices must contain the following information: -Whether personal information may be collected from any party other than the individuals to be insured -The types of information that may be collected and the sources and investigative methods used -The type of disclosure and the circumstances under which the disclosure of information may be made without prior authorization -A statement that information obtained in a report prepared by an insurance support organization may be retained and disclosed to other persons -A description of the insured's rights (to "opt out" of sharing) and how the rights may be exercised (by providing written notice) Producers are not required to provide this notice of information at policy renewal or reinstatement if the insurer's policy for disclosing personal information has not changed since the customer was last notified.

Payment of Premiums

Any payment of an insurance premium that is mailed on or before the due date is deemed timely payment of the premium using the date shown on the postmark. If the insurer does not retain the envelope or the postmark date on the envelope is illegible, the payment date is presumed to be 5 mail days before the date the insurer receives the payment. If a payment is sent by United States *certified or registered mail*, the date of the registration or certification is deemed the date of payment. If the due date of a payment falls on a Saturday, Sunday, or legal holiday, the payment is considered timely if sent on the next business day.

Managing General Agent (MGA)

Any person, firm, association, or corporation that manages all or part of the insurance business of an insurer, including the management of a separate division, department or underwriting office. An *MGA* is responsible for hiring, training, firing, and general supervision of the business of an insurance company in a particular territory. A surety bond is required as part of the licensing qualifications.

Additional Lines of Producer License Authority

As long as all requirements for licensing have been met, the Director may also issue a license for the following lines of authority: Rental car agent Self-service storage agent Title insurance agent Limited lines license - vendors of portable electronics Limited lines license - travel insurance Qualification to issue variable annuities

Solicit

Attempting to sell insurance or asking or urging a person to apply for a particular kind of insurance from a particular company.

License Application Requirements: Application for License-2

Before approving the application, the Director must find that the individual: -Is at least *18 years of age* -Is a *resident* of this state -Has not committed any act that is grounds for denial, suspension, or revocation of such license -Has paid the required fees, which are *nonrefundable* upon payment -Has passed the licensing exam for all lines of authority for which they are applying -The applicant has *four attempts* to pass the required exam within *12 months* or they must wait 1 year after the fourth attempt to retake the exam -Has applied for a license within *1 year* of passing the licensing exam

Issuance of a License

Before granting a license, the Director may require the applicant to provide: -Documentation necessary to verify information in the application, including prior criminal records -A full set of fingerprints for the purpose of obtaining state and federal (FBI) criminal records

Defamation of Insurer

Defamation is making a verbal or written statement that is false, maliciously critical, and intended to injure another. It is a prohibited practice for any person to make any oral or written statement that is false, maliciously critical of, or derogatory to the financial condition of an insurer, or anyone engaged in the business of insurance if the statement is intended to injure.

Requirements of GLBA

Financial institutions are required to protect an individual's private and personal information from unwarranted intrusions and unauthorized or public dissemination of such information. A financial institution is not permitted to disclose, other than to a consumer reporting agency, any account information to any non-affiliated third party for use in telemarketing, direct mail marketing, or electronic marketing. *Individuals must be permitted to opt out of having their personal information disclosed to third parties*. However, financial institutions may provide personal information to a nonaffiliated third party in order to perform services for or on behalf of the financial institution, but the third party must be required to maintain the confidentiality of such information. Financial institutions must provide a copy of their privacy policies to all customers at least *once a year.*

Continuing Education

For licenses last renewed on or after January 1, 2014, a licensee must complete at least *48 hours* of continuing education, including *6 hours of Ethics*, offered by an approved provider. The Director will not renew a licensee's resident license unless the licensee has provided evidence that the licensee has completed the credit hours during the licensing period. Licensees must maintain their own continuing education records and keep the records until the second renewal date after the licensing period for which the continuing education credits were earned.

Claims Payment

If a first party claim is not paid within *30 days* after the receipt of adequate proof of loss, the insurer must pay *interest* from the date the claim is received. The interest is calculated according to the terms of the insurance contract under which the claim is being submitted.

Effect of Suspension or Revocation of License

If a license is revoked, the licensee must deliver the license to the Director and may not be issued another license to such person for at least *one year*. The person must requalify for licensure when seeking another license.

Fees-2

If the Director determines, after an examination and a hearing, that an insurer or producer violated insurance code pertaining to service fees, he/she may order the guilty party to refund the excessive portion. In addition, the Director may issue civil penalties. The following fees are not prohibited: -Fees charged by a reciprocal or mutual insurer, including membership fees, if included in the insurer's rate filings -Fees associated with the transaction of commercial insurance, meaning insuring risks involving the activities of one or more businesses, including motor vehicle policies insuring 7 or more vehicles

Transact

Includes any of the following: Solicitation and inducement Preliminary negotiations Effectuation of a contract of insurance Transaction of matters subsequent to effectuation of the contract and arising out of it

Place of Business and Records

Insurance producers are required to keep insurance records at the producer's principal place of business for *3 years* following each transaction; they must be available for inspection during business hours throughout the 3-year period. The Director may conduct an examination at any time it is deemed necessary. These records must be kept confidential and the examined party must pay the reasonable cost of the examination. A business entity insurance producer must have at least one individual licensed as a producer at each office or place of business in this state. The individual must be licensed for the appropriate lines of authority transacted at each location.

Annual Audited Financial Statements

Insurers are required to file an *annual financial statement*. Based on adverse findings of the report and audit of the insurer, the Director may determine that continued business of an insurer is hazardous to the public.

Prohibited Inducements

It is a prohibited practice for an insurer, insurance producer, or other person to provide, promise, or offer any of the following to an insured or prospective insured as an inducement to purchase insurance: -Employment -Shares of stock or securities -Advisory board contract or similar contract, agreement, or understanding that provides for or promises special profits -Prizes, goods, merchandise, or tangible property valued in excess of *$100*

Gender Discrimination

It is a prohibited practice for any insurer to: -Deny availability of any insurance on the basis of the applicant's gender or marital status; however, an insurer may use marital status to determine whether a person is eligible for coverage as a dependent -Restrict policy terms, benefits, or conditions on the basis of the gender or marital status of an applicant or an insured

False Financial Statements or Records

It is a prohibited practice for any person to file a false insurance financial statement with the intent to deceive. It is also a prohibited practice to falsify any records, books, reports, or statements of any insurance company or party required to have insurance records, with the intent to deceive any insurance examiner or auditor. Making any willful omission of material fact in any records, books, reports, or statements is also prohibited.

Life and Disability Insurance

It is a prohibited practice for any person to knowingly offer or pay a premium rebate as an incentive to offer or sell any life insurance, annuity, or disability insurance contract. The following are considered rebates if they are *not specifically named in the insurance contract*: -A premium reduction or adjustment -A special favor or advantage in a policy's benefits or dividends -Anything of valuable consideration (i.e., a gift or money) Dividends payable from a participating plan with surplus are not considered rebates.

Change of Personal/Business/Contact Information

Licensees are required to inform the Director in writing of any *change of address*, designated producer, or name. Notification must be submitted within *30 days* of the change. The Director may require a full set of fingerprints for each new member, director, officer, or designated producer to obtain a state and federal criminal records check, as required by law.

False or Deceptive Advertising

Making a misrepresentation about an insurance policy is considered false or deceptive advertising. It is a prohibited practice for any person to publish any advertisement that contains an untrue, deceptive, or misleading assertion concerning the business of insurance or any person conducting the insurance business. It is also considered false or deceptive advertising for any person that is not an insurer to use a name that infers or suggests, deceptively, that they are an insurer.

Misrepresentation

Misrepresentation involves making false or misleading statements during the sale of insurance and is considered a Class-5 felony under Arizona law. Specifically, the unlawful act of misrepresentation includes issuing any statement that: -Misrepresents the terms of a policy, including its benefits, advantages, dividends, or share of surplus received -Falsely portrays a policy's dividends or share of surplus previously paid -Falsely portrays the financial condition of any insurer or its legal reserve system -Uses the name or title of a policy to misrepresent the true nature of the policy -Causes the policyholder to lapse, forfeit, surrender, keep, or convert an insurance policy -Falsely discloses the method or amount of compensation paid in connection with a health benefits plan -Conceals a policy's benefits, coverage, or provisions if they are pertinent to a claim

Boycott, Coercion, and Intimidation

No person may enter into any agreement to commit an act of boycott, coercion, or intimidation resulting in unreasonable restraint of the business of insurance.

Requirements of GLBA-2

Nonpublic personal information may be disclosed: -If necessary to effect, administer, or enforce a transaction requested or authorized by the consumer -With the consumer's consent -To provide information to insurance rate advisory organizations, guaranty funds or agencies, the financial institution's rating agencies, persons assessing the institution's compliance with industry standards, and the institution's attorneys, accountants, and auditors -To a consumer reporting agency in accordance with the Fair Credit Reporting Act -To comply with federal, state, or local laws when honoring a properly authorized civil, criminal, or regulatory investigation, subpoena, or summons by applicable authorities

Civil Penalties

On request by the director, the attorney general may seek an injunction that prohibits a person from engaging in unfair trade practices. The court may enter any order or judgment that is necessary to: _Prevent any act that is unlawful _Return any monies, interest, or real or personal property that was acquired by an act that is unlawful An order of restitution may also include expenses incurred and paid by an insurer in connection with any medical evaluation or treatment services. If the court finds that a person has committed fraud, the attorney general may recover from that person a civil penalty of up to $5,000 per violation.

License Expiration, Surrender, and Renewal

Once issued, any license other than a temporary license continues in force until it expires or the Director suspends, revokes, or terminates the license. A license is subject to renewal per the insurance code. Licenses expire or renew every *4 years* (quadrennially). If the licensee is an individual, the license expires on the last day of the month of the licensee's birthday. Before renewing a license, the Director may require the applicant to verify information contained in the license application, along with any other information, including prior criminal records and submitted fingerprints. The applicant must also complete the insurance continuing education requirements.

Insurance Vending Machines

Only a licensed insurance producer authorized by the Director may solicit applications and issue policies through vending machines. The producer must supervise each machine and issue only those policies of insurers authorized to transact business in Arizona. The insurance producer must display on or near each vending machine evidence of the producer's authority which specifies the name and address of both the insurer and the insurance producer, the kind of insurance and type of policy to be sold, the place where the machine is to be in operation, and the machine's identification number.

Policy Forms

Policy forms must be on file with the Director at least *30 days* before being delivered. If the Director does not disapprove or extend the time period within 30 days, the form is considered approved.

Recordkeeping Requirements

Sellers and telemarketers are required to keep the following records for 24 months from the date the record is produced: -All substantially different advertising, brochures, telemarketing scripts, and promotional material -The name and last known address of each customer, along with the: ~Goods or services purchased ~Dates the goods or services were shipped and/or provided ~Amount paid by the customer

Surplus Lines Brokers

Surplus lines insurance is insurance written by unauthorized insurers when coverage may not be written by authorized insurers. Such insurance may only be written by a resident surplus lines broker. Surplus lines brokers must also be licensed as resident property and casualty insurance producers. Surplus lines broker licenses are renewable on the same basis as other insurance producer licenses. A written surplus lines broker's examination must be passed before a license will be issued. A *Mexican insurance surplus lines broker license* may be issued to a resident or nonresident licensed insurance producer that maintains an office in Arizona.

CAN-SPAM Act of 2003

The CAN-SPAM Act is a federal law that established rules for unsolicited email (known as spam) that often generates unwanted costs to recipients, may contain content that is unwanted or pornographic, and may mislead the recipient about its content or purpose. Penalties for violation of the CAN-SPAM Act include actual damages or fines of up to $250 per violation (each separate email). The fines cannot exceed $2 million.

Certificate of Authority

The Certificate of Authority issued by the director to an insurer is evidence of its authority to transact the kind of insurance specified in the certificate. No person may act as an insurer and no insurer can transact insurance in this state except as authorized by the Director. The Director will examine the accounts, records, and assets of each insurer applying for an initial Certificate of Authority. To receive a Certificate of Authority, an insurer must do both of the following: -Complete an application to receive a Certificate of Authority -Meet minimum capital stock or minimum basic surplus requirements (legal reserves) to prove they have sufficient funds to pay claims All Authorized insurers must file with the Director: Rates Rating system (to determine rates) Policy forms Annual financial statement

Violent Crime Control and Law Enforcement Act

The Department must enforce certain sections (§ 1033 and § 1034) of the Violent Crime Control and Law Enforcement Act that relate to crimes by, or that affect, those who write insurance or reinsurance when those activities affect interstate commerce. -Any such person is prohibited from knowingly, and with the intent to deceive, make any false material statement or report in connection with any financial reports or documents filed with an insurance regulator or its examiner for the purposes of influencing the actions of the regulatory agency or examiner ~This includes any willful and material overvaluation of land, property, or securities ~Violations will be punished by a fine established under law, imprisonment up to 10 years, or both; however, if such illegal conduct jeopardized the safety and soundness of an insurer and contributed to the insurer's financial failure, the violator may be imprisoned up to 15 years -Any such person—including anyone acting as that person's officer, director, agent, or employee—is prohibited from willfully embezzling, abstracting, stealing, or misappropriating money, funds, premiums, credits, or other property of a party engaged in the insurance business ~This includes any person involved in a transaction relating to the insurance business ~Violations will be punished by a fine established under law, imprisonment up to 10 years, or both; however, if such illegal conduct jeopardized the safety and soundness of an insurer and contributed to the insurer's financial failure, the violator may be imprisoned up to 15 years. ~*Exception*:If the amount of illegally obtained funds is no more than $5,000, the term of imprisonment can be no more than 1 year. -Any such person is prohibited from using threats, force, any threatening letter or communication, or corruptly influencing, obstructing, or impeding insurance law with respect to any proceeding that is pending before a regulatory body or official; violations will be punished by a fine established under law, imprisonment up to 10 years, or both -Any person who willfully writes insurance or reinsurance, and whose activities affect interstate commerce, after having been convicted of a felony involving dishonesty or breach of trust, or of any violation of the Violent Crime Control and Law Enforcement Act, will be punished by a fine as provided under law, or imprisoned up to 5 years, or both; this also applies to any person who willfully permits another's participation in filing false reports or statements In addition to the penalties noted, the U.S. Attorney General may file a civil action against any person who violates § 1033. If that person is found guilty, the person will be subject to a civil penalty up to $50,000 for each violation—or the amount the person received or offered for violating the law, whichever is greater. In addition, other criminal, civil, or administrative penalties may also be imposed.

Denial, Suspension, Revocation, or Refusal to Renew; Civil Penalties

The Director may suspend, revoke, or refuse renewal of a producer license for up to *12 months* for: -Providing incorrect, incomplete, or materially untrue information in a license application -Violating any insurance law, or any regulation, subpoena, or order of the Director -Obtaining a license through fraud or misrepresentation -Improperly withholding, misappropriating, or converting any monies or properties received while conducting insurance business -Misrepresenting the terms of an insurance policy, whether issued or proposed -Being convicted of a felony -Any insurance unfair trade practice -Using fraudulent, coercive, or dishonest practices or demonstrating incompetence, untrustworthiness, or financial irresponsibility -Having an insurance producer license denied, suspended, or revoked in any jurisdiction -Using the insurance producer's license *principally* to provide insurance that covers the life, property or insurable interests of the licensee, family members, employer, or employees. This is known as *controlled business.*

Temporary License

The Director of Insurance may issue a temporary insurance producer license for a period not exceeding *180 days*, without requiring an examination if it is necessary to service insurance contracts in the following circumstances: -The surviving spouse or court-appointed personal representative of a licensed insurance producer who dies or becomes mentally or physically disabled to allow adequate time for the: ~Sale of the insurance business owned by the producer ~Recovery of the producer and their return to the business ~Training and licensing of new personnel to operate the producer's business -Any member or employee of a business entity licensed as an insurance producer, upon the death or disability of an individual, designated in the business entity's application or the insurance producer's license -The designee of an individual licensed as an insurance producer who is entering active service in the Armed Forces of the United States A temporary license allows the individual to receive renewal commissions on existing contracts, but does not allow the individual to write or receive commissions on new business.

Number of Exam Attempts

The Director will not allow an individual to take an examination administered for any line of license authority more than 4 times within a 12 month period. If an individual fails an examination for a specific line of authority 4 times, the individual may not take an examination for that line of authority for 1 year. An individual who fails an examination that covers more than 1 line of license authority is considered to have failed the examination for each individual line of license authority.

Fair Credit Reporting Act

The Fair Credit Reporting Act *protects consumer privacy* and protects the public from overly intrusive information collection practices. It ensures data collected is confidential, accurate, relevant, and used for a proper and specific purpose. When an application is taken, the *insurer must inform the applicant in writing* that a credit report (from a consumer reporting agency) may be obtained. The purpose of this is to determine the financial and moral status of an applicant (for a variety of purposes such as employment screening, insurance underwriting, or loan approvals). An applicant has the *right to review* the report from the reporting agency (not the insurer or agent) and *challenge any inaccurate information*.

Telemarketing Sales Rule

The Federal Trade Commission amended the Telemarketing Sales Rule to give consumers a choice about receiving or *stopping unnecessary sales and telemarketing calls*. A consumer can add their phone number to a *Do Not Call List* (only a phone number is required, not a social security number). It is illegal for most telemarketers or sellers to call a number listed on the National Do Not Call Registry. Companies must update their list at least once every *31 days.* Telemarketers and sellers are required to search the registry at least once every 31 days and drop from their call lists the phone numbers of consumers who have registered. Telephone solicitation calls to a customer's home *before 8 a.m. or after 9 p.m.* are prohibited. Anyone making a telephone solicitation call to a customer's home must provide their name, the name of the entity on whose behalf the call is being made, the purpose of the call, the nature of goods being sold, and a telephone number or address where the entity may be contacted.

Gramm-Leach-Bliley Act

The Gramm-Leach-Bliley Act (GLBA), also referred to as the Financial Services Modernization Act of 1999, was established to require financial institutions to protect consumers' personal information from unauthorized or public sharing, in order to: -Insure the security and confidentiality of customer records and information -Protect against anticipated threats and hazards to the security and/or integrity of those records -Protect against unauthorized access to, or use of, customer records that might result in substantial harm or inconvenience to a customer The Department may enforce § 6801 - 6809 of the GLBA, which pertain to the privacy and protection of nonpublic personal information. The Federal Trade Commission has authority over the GLBA and its enforcement; however, state laws may provide broader protections and more stringent requirements with respect to financial privacy and security. So long as state law meets the minimum standards of GLBA, it complies with this federal legislation.

Federal Terrorism Insurance Program

The Terrorism Risk Insurance Act of 2002 (TRIA) was enacted on November 26, 2002 in direct response to the terrorist attacks in New York City and Washington, D.C. on September 11, 2001. Congress decided to provide temporary financial compensation to insured parties for the purpose of stabilizing the U.S. economy during its crisis of recovery from the terrorist attacks. TRIA was intended to respond to the chaos the 9/11 terrorist attacks caused in the insurance industry as well as to assure that commercial property and liability insurance would continue to be able to provide coverage for the peril of terrorism. TRIA is a temporary program that allowed the federal government to share in terrorism losses with private insurers in the event a certified act of terrorism took place. TRIA is a reinsurance program backed by the federal government that requires insurers of certain commercial property and casualty risks to participate in the Terrorism Risk Insurance Program. Personal lines insurance is not covered under TRIA. Primary and excess insurance companies are required to participate, including admitted, nonadmitted, and captive insurers. The Department of the Treasury administers TRIA through the Program. The insurer deductible was originally 1% of an insurer's direct written premiums; subsequent amendments to TRIA increased the insurer deductible to 20% through 2020.

Negotiate

The act of conferring with a purchaser or prospective purchaser of a particular contract of insurance concerning any of the substantive benefits, terms, or conditions of the contract if the person engaged in that act either sells insurance or obtains insurance from insurers for purchasers.

Unfair Practices and Frauds

The following acts are unfair trade practices, unfair methods of competition, or deceptive acts/practices in the business of insurance. As a result, they are prohibited.

Insurance Fraud

The following fraudulent practices are unlawful: -Presenting untrue statements or omissions of material fact pertaining to: ~An application for the issuance or renewal of an insurance policy ~The rating of an insurance policy ~A claim for payment or benefits under an insurance policy ~Premiums paid on an insurance policy ~Payments made under the terms of an insurance policy ~An application for a Certificate of Authority ~The financial condition of an insurer, reinsurer, or purported insurer or reinsurer ~The acquisition of an insurer or reinsurer or the concealing of any information concerning any fact material to the acquisition -Soliciting or accepting insurance risks by or for an insolvent insurer -Concealing records at or removing records from the home office of any insurer -Diverting the monies of an insurer

Unfair Discrimination

The following prohibited acts are considered unfair discrimination: -Permitting individuals of the same class and equal life expectancy to be charged different rates for life insurance or annuities, or in the dividends or other benefits payable -Permitting individuals of the same class and essentially the same hazard to be charged different rates for health/disability insurance -Permitting insureds or subjects of insurance having similar risk and exposure factors to be charged different rates or premiums for property and liability insurance -Rejecting an application based on a genetic condition, developmental delay, or developmental disability when no substantial differences in claims are likely to result -Restricting coverage based on an applicant having been a victim of domestic violence; this prohibition also applies to any entity or individual that provides counseling, shelter, protection, or other services to victims of domestic violence -Denying or limiting coverage based solely because of blindness or partial blindness -Charging an individual a different rate for the same coverage solely because of blindness/partial blindness (If an individual is blind or partially blind when disability insurance is issued, an insurer may exclude disabilities consisting solely of blindness or partial blindness. Otherwise, an insurer may not exclude coverage for loss of eyesight as a disability.)

How Terrorism Losses are Shared

The insurer is responsible for an initial portion of losses resulting from the act of terrorism in the form of a deductible, which is 20% of its direct earned premiums from covered lines of insurance. Once the deductible has been met, the insurer then pays a pro-rata share of the losses in the form of a copayment. This copayment, which was set at 15% in 2015, increases each year until it equals 20% in 2020. Compensation under the Program will not begin until the total insured losses in a calendar year reach the Program Trigger of $100 million, which gradually increases to $200 million by 2020. The federal government then begins making payments subject to insurer deductibles and the insurer's share of losses in excess of the deductible. Once the federal government, or any insurer, has paid $100 billion in insured terrorism losses in a Program year, it will not be liable for additional payments under the Act due to the annual cap being reached.

Insurance Information and Privacy Protection

This protects the rights of the persons who are residents of this state, including natural persons who are the subject of information collected, received, or maintained in connection with insurance transactions, and applicants, individuals, or policyholders who engage in or seek to engage in insurance transactions.

Sell

To exchange a contract of insurance for consideration on behalf of an insurer.

Twisting

Twisting is the act of misrepresenting the terms and conditions or making incomplete comparisons of an insurance policy to induce a policyowner to lapse, forfeit, or surrender an existing policy to purchase a new policy in a replacement transaction.

Insurer Insolvency

Upon determining insolvency, the Director will notify the insurance company and place the insurer under supervision of the Department of Insurance. The insurance company will have *60 days* to comply with the requirements of the Director. Failure to comply will result in a conservator taking charge of all property of the insurer.

Issuance of a License-2

Upon the passing of a licensing examination, the director will issue a license to the applicant pending completion of the background investigation. As part of the agreement to this *conditional license*, the applicant agrees to a revocation of the conditional license if it appears the applicant has misrepresented their background. On completion of the background check and depending on the results, the commissioner may issue a permanent or probationary license. If a nonresident holding an insurance producer license in another state becomes a resident of Arizona, he/she must apply for a resident producer license within *90 days* of canceling the current resident license. The current resident license must be valid and in good standing. As long as all requirements are met, an Arizona examination for licensing is not required.

Denial, Suspension, Revocation, or Refusal to Renew; Civil Penalties-2

When suspending, revoking, or refusing to renew a license, the Director must notify the applicant and provide the applicant with the opportunity for a hearing. Instead of, or in addition to, suspending, revoking, or refusing to renew a producer license, the Director may: -For each unintentional act, impose a civil penalty up to $250 with a maximum penalty of $2,500 -For each intentional act, impose a civil penalty up to $2,500 with a maximum penalty of $15,000 -Order restitution to any party injured by the licensee