Insurance(State LawsCh.8)
Exam and Application Fees
Before receiving an insurance license, an individual must pass an examination, submit an application, and pay the associated fees. The examination must be for the line(s) of authority the individual plans to transact. The examination fee will fall between $20-$100 and is due when the applicant registers for the exam. The applicant has to complete the exam within 90 days from their registration, or this fee will be forfeited. If an individual fails to pass the exam three times, they must wait 30 days before retaking the exam.
Insurance consultant licenses renew every 2 years.
Business entities acting as consultants must submit a renewal application before May 1 biennially.
A business entity acting as an insurance producer must obtain an insurance producer license; before obtaining the license, the business entity must submit the required application and pay the appropriate fees.
Business entities must designate a licensed producer to be responsible for the business entity's compliance with Virginia insurance laws, rules, and regulations.
If a license has been terminated for failure to meet the requirements, or voluntarily surrendered by the licensee who has not provided proof of compliance, the license may be applied for, providing the agent successfully completed the licensing requirements as a new agent.
For continuing education purposes, if an insurance consultant obtains a new license within 12 months of the previous license's expiration, they will be considered to have renewed the original license in a timely manner.
Trust Accounts A separate fiduciary account, also called a trust account, must be maintained and kept separate from any other personal or business account. Commingling client premiums and funds with any of the agent's personal or other business funds is expressly prohibited. Client monies must be kept separate from personal funds.
Funds deposited into the separate fiduciary account may not be commingled or combined with other funds except for the purpose of: Advancing premiums Establishing reserves for the payment of return premiums; or Guaranteeing the account has sufficient funds to make all required payments
At the time of application, the applicant must submit a full set of fingerprints for a background check through the FBI criminal database. Failing to submit the application appropriately will require the applicant to re-satisfy all prelicensing requirements, including examination, before re-applying for a license.
If a nonresident producer becomes a resident of Virginia, they are not required to take an examination so long as they submit their application within 90 days of their previous license being cancelled. The applicant's home state must certify the applicant was in good standing at the time of cancellation. The Commission may also check the NAIC Producer Database records for indication that the producer's license was in good standing for the line of authority requested.
Unfair Trade Practices
In accordance with federal law, Virginia has outlawed certain practices that are considered unfair methods of competition or unfair or deceptive acts of practices.
If a producer willfully commits an unfair trade practice, the maximum penalty for a single violation is:
A $1,000 B $3,000 C $10,000 D $5,000 $5,000
How many years must insurance transaction records be maintained and made available for inspection by the State Corporation Commission?
A 1 B 3 C 2 D 5 3
Within ______ calendar days of any change in name or residence, licensed agents must report the change to the Commission.
A 14 B 60 C 21 D 30 30
When proposing to deny, suspend, or revoke a license, the Virginia Commission must provide at least how many days' notice of a hearing?
A 15 B 30 C 10 D 5 10
After passing the Virginia licensing exam, a producer applicant must submit their application within how many days?
A 180 B 183 C 184 D 182 183
Prior to renewal, an agent in Virginia with just one line of authority must complete how many credit hours of approved continuing education courses?
A 24 B 12 C 32 D 16 16
For an insurance producer in Virginia, how many credit hours of ethics must they complete to meet continuing education requirements?
A 3 B 9 C 12 D 5 3
If an appointment is determined to be invalid, the Bureau has how many days to notify the insurer?
A 30 B 10 C 5 D 20 5
In Virginia, a producer whose license has been suspended may not reapply for another license for at least:
A 6 months B 1 year C 10 years D 5 years 5 years
In Virginia, an agent's appointment with an insurer:
A Can only be terminated if approved by the Commissioner B Must be renewed biennially C Cannot be terminated without a hearing D Is in effect until terminated Is in effect until terminated
Inducing a policyholder to terminate a policy in exchange for a less favorable one is:
A Defamation B Twisting C Coercion D Misrepresentation Twisting
Duration of Appointment
A valid appointment authorizes the agent to act for the insurer as long as the appointing insurer is licensed in this state unless the appointment is otherwise terminated, suspended, or revoked. The insurer has the authority to terminate an agent's authority at any time.
Surplus Lines Broker
A surplus lines broker's license may be issued to any individual or business entity actively licensed as a resident property and casualty insurance agent for procuring insurance from eligible nonadmitted insurers.
In Virginia, in order for a business entity to obtain a producer license, it must comply with which of the following requirements?
A Designate a licensed compliance officer B Provide the names and addresses of all employees C Provide the name and address of the company's clients D Provide the names and addresses of all persons and corporations who own the business entity Provide the names and addresses of all persons and corporations who own the business entity
Insurers in Virginia will be subject to the Commission's examination at least:
A Once every 2 years B Once every 3 years C Once every year D Once every 5 years Once every 5 years
If an individual wants to transact business as an insurance agent in Virginia, they must meet all of the following requirements, except:
A Pay a refundable application fee B Have a reputation for honesty C Satisfy residency requirements D Be at least 18 years old Pay a refundable application fee
Which of the following actions by an insurance agent is an example of defamation?
A Pretending to represent a person they do not represent B Pretending to be someone they are not C Misrepresenting the true purpose of the interview D Making derogatory statements about another insurer Making derogatory statements about another insurer
In Virginia, which of the following actions can an unlicensed individual legally perform?
A Receiving commissions B Underwriting insurance C Negotiating a policy D Selling insurance Underwriting insurance
In Virginia, a consultant must contract all of the following in writing with a client before acting as a consultant, except:
A The services provided B The expiration date of the license C Details about the payment of commission in addition to the consulting fee D The amount of the consulting fee The expiration date of the license
Offering a premium discount, or any other consideration not described in the policy, is called:
A Twisting B Coercion C Rebating D Misrepresentation Rebating
Probation, Suspension, Revocation, or Denial
A license remains in force unless terminated, suspended, or revoked. If the Commission refuses to grant or revokes or suspends a license, any appointments of the licensee will also be revoked or suspended.
Resident Insurance Agent (Producer)
A licensed agent represents an insurer that issued the insurance sold, solicited, or negotiated by the agent. A person may not claim to be a representative, authorized agent, agent, or other term implying an appointed relationship with a particular insurer unless they are appointed by the insurer. A premium payment made by an insured to an agent, where the insurer acknowledged insurance for a specific policy period by the issuance of a policy, is considered payment to the insurer. The insurer will be liable to the insured for any covered losses and the return of any unearned premium amount due to the insured.
Before obtaining a license, the applicant must file an application and certification that they have and will continue to keep a $25,000 bond. Surplus lines licenses are renewable annually upon filing a renewal application and paying the annual nonrefundable fee. If an individuals property and casualty license is terminated, the surplus lines license will also be terminated.
A person licensed in their home state as a surplus lines broker may receive a nonresident surplus lines broker's license if they meet the requirements.
Agent Regulation Acting for an Unlicensed Insurer
A person may not sell, solicit, or negotiate contracts of insurance on behalf of any insurer unless they are licensed to transact insurance business. However, nothing prohibits any person from obtaining insurance on their own life or property from an unlicensed insurer. Any person in violation of this law will be guilty of a misdemeanor and punished for each offense. They will also be held liable on any claim against an unlicensed insurer that arises out of a contract or policy sold, solicited, or negotiated by that person.
Continuing Education In order to maintain and renew an insurance license, life/health/property/and casualty agents, insurance consultants, and title agents must complete continuing education (CE) courses related to their licensed class of insurance on a biennial basis, or every 2 years. The Virginia continuing education program is administered by the VA Continuing Education Board. The Board is responsible for approving CE courses, instructors, and programs of instruction for insurance agents.
Agents holding one license, must complete 16 hours of approved continuing education courses. Agents who hold two or more licenses are required to complete 24 hours of relevant continuing education, with a minimum of 8 hours in each class of insurance. Of the total required credits, 3 hours of continuing education in each biennium must address the topic of ethics, which may include Virginia insurance laws and regulations. Agents are prohibited from receiving more than 75% of their required continuing education credits from courses provided by insurers or insurance agencies.
Record Retention
All insurance licensees are required to retain all records relative to their insurance transactions, including records of applications on issued policies, accounting records of premiums paid, and files of policies cancelled mid-term. Records of premium quotations not accepted by the proposed insured are not required to be kept. Records must be maintained for a minimum of the 3 previous calendar years. The records must be made available promptly to the Commission upon request. The State Corporation Commission has the authority to examine records at any time during normal business hours, without advance notice.
Appointment Procedures
An appointment issued to an agent by an insurer, unless terminated, suspended, or revoked, authorizes the appointee to act as an agent for that insurer and to be compensated by that insurer.
Activities of Unlicensed Individuals A license isn't required of a person whose employment responsibilities include enrolling individuals under a group insurance policy, provided that the person receives no commission or other valuable consideration for such enrollments, and that such compensation is not contingent upon the number of individuals enrolled or the amount of premium generated by such enrollments. In this context, "enrolling individuals" refers to the process of informing individuals of the availability of coverages, calculating the insurance charge, assisting with completion of the enrollment application, preparing and delivering the certificate of insurance, answering questions regarding the coverages, and assisting the individual in making an informed decision whether or not enrollment under the group insurance plan is to be elected.
An unlicensed person may discuss, in general, insurance matters regarding both coverage and rates. An unlicensed person may also list available products and services in response to an inquiry made by an existing policyholder with regard to the existing policy. If such discussion develops into an explanation of the ramifications of options, how choosing one option or another will affect coverage, or similar negotiation discussion, then insurance knowledge is necessary and licensure is required. A licensed agent is not prohibited from using an unlicensed person in a clerical capacity under their direct supervision, nor does the Code of Virginia prohibit the unlicensed person from receiving or passing on to the agent any insurance inquiries or requests of a particular nature, or from taking the necessary steps to implement changes that an existing policyholder has requested be made to an existing policy.
Assumed Names
Any individual or business entity doing business under an assumed or fictitious name must notify the Bureau of Insurance of any such name if planning to conduct insurance business under that name. Notice must be included on the license application or within 30 calendar days from the date the name is adopted. If business is no longer conducted under the assumed or fictitious name, the individual or business entity must notify the Bureau within 30 calendar days from the date use of the name ceases and pay a $10 fee.
Penalties
Any person that knowingly or willfully violates any of Virginia's insurance laws or regulations is subject to a penalty up to $5,000 for each violation. Unintentional violations are subject to a penalty up to $1,000 for each violation with a maximum aggregate of $10,000 for all violations.
Licensing Requirements The primary purpose of licensing insurance agents is to protect the public. To qualify for a producer's license, an applicant must be:
At least 18 years old Of good character and have a reputation for honesty Compliant with residency and other requirements
The Commission may require restitution to be made for any of the following:
Charging a rate in excess of the rate permitted by statute or filed by the insurer Charging a premium that is unfairly discriminatory Failing to pay a claim according to the insurance contract if the insurer did not dispute the claim Improperly withholding, embezzling, or stealing any money or property received in the course of doing business
Each agent subject to these requirements must complete all continuing education courses or waiver requirements and must submit proof of compliance to the Board or its administrator. Proof must be submitted biennially, corresponding with the license renewal. All CE fees specified by the Board are nonrefundable.
Continuing Education Waivers A licensed agent who is unable to comply with the continuing education requirements due to military service or other extenuating circumstances, including long-term illness, may request a continuing education (CE) waiver. The request for a waiver of CE requirements with all documentation, forms, and fees must be made to the Board no later than the last day of the agent's 2-year license period. Agents who failed to complete the CE requirements after the 2-year period may request a waiver within a 12-month reinstatement period. The Board will make a decision regarding the waiver within 30 days of the request. The waiver will only be valid for the biennium for which it was applied.
Unfair Discrimination The following are prohibited acts of unfair discrimination: Permitting individuals of the same class and hazard to be charged different insurance rates for the same coverage—unless the rate difference is based on sound actuarial principles or related to actual experience Refusing to insure or renew insurance for an individual, or charging an individual a different rate for coverage, based solely on blindness or mental or physical impairments—unless the action is based on sound actuarial principles Discriminating between individuals or risks of the same class and hazard by refusing to issue or renew insurance, or cancelling or limiting the amount of insurance, based solely on the geographical location of an individual or a risk—unless the action is based on a legitimate business purpose or required by law
Discriminating between individuals or risks of the same class and hazards by refusing to insure or renew, or cancelling or limiting the amount of insurance, on residential property based solely on the age of the property—unless the action is based on a legitimate business reason or required by law Using the status of a victim of domestic violence as an element in any decision concerning a policy's underwriting, pricing, renewal, extent of coverage, or payment of claims
Address/Name Changes
Each agent must report any change in residence or name to the Commission and every insurer for which they are appointed within 30 calendar days of the change.
Duration and Termination A license is issued to an individual agent or business entity authorizing them to act as an agent until the license is otherwise terminated, suspended, or revoked. The license authority of any licensed resident agent will terminate immediately when the agent has moved their residence from the Commonwealth, whether or not the Commission has been notified of the move. The discontinuance of a partnership, limited liability company, or corporation that formed a business entity will automatically terminate all licenses issued to the business entity within 90 calendar days of notification of the discontinuance.
Each business entity acting as an insurance producer must notify the Commission within 30 days of the removal of the designated licensed producer responsible for the business entity's compliance with insurance laws, rules, and regulations. The business entity must designate a new designated licensed producer within 30 calendar days following the removal of the terminated licensed producer.
Requirement to Report Felony Convictions and Administrative Actions
Each licensed agent convicted of a felony must report the facts and circumstances of the criminal conviction to the Commission within 30 calendar days. If administrative action has been taken against an agent in another jurisdiction or governmental agency within the Commission, the licensed agent must report to the Commission within 30 calendar days of final disposition. The report must include a copy of the order, consent to order, or other relevant legal documents.
Other Powers and Duties The Association may
Employ or retain persons necessary to perform its duties Borrow funds necessary to function in accordance with the plan of operation Sue or be sued Negotiate and become a party to insurance contracts covered by the Association Perform any other necessary and proper acts
Agent's Contract versus Agent's Appointment
Every licensed agent may sell policies and solicit applications for insurance on behalf of the insurer as long as they have a contract and are licensed in that line of authority even if they have not yet been validly appointed, subject to the following:
Gathering information about trade practices to ensure they serve the public interest fairly and adequately Enforcing and imposing penalties if a person fails to provide information to the Commission in a timely manner When necessary to protect the interests of Virginia residents, examining the affairs of any person subject to insurance regulation in Virginia
Examining every insurer licensed in Virginia at least once every 5 years Examining foreign and alien insurers, and any other foreign persons, in cooperation with insurance regulators in other states
Termination of License
Failure to complete the CE course or waiver requirements, furnish proof of compliance, pay any applicable fees, or complete the license renewal requirements will result in administrative termination of each license held by the agent. Neither the Board, its administrator, nor the Commission have the power to grant an agent additional time for completing their CE credits. If a license is terminated by the Commission for failure to comply with continuing education requirements, an agent may appeal the termination within 30 days following the expiration of the license period.
Cease and Desist If the Commission suspects any person has violated any Virginia insurance laws, rules, regulations, or orders, it may serve a notice upon the person that:
Includes a statement of the charges, along with a notice of a hearing that includes the date, time, and place of the hearing; the hearing must be held at least 10 days after the date the order is served Requires the person to show cause why a cease and desist order should not be imposed
The following licensees are exempt from fulfilling the CE requirements:
Insurance consultants (LH/PC) who are also licensed as insurance agents and have satisfied the CE requirements for their agent's license Nonresident agents who furnish evidence of their current good standing in their home state, provided their home state grants a similar exemption to VA resident agents Agents who have received a permanent exemption from the CE course requirements
Payment and Sharing of Commissions
Insurers are not permitted to pay any type of commission or other valuable consideration to any agent or surplus lines broker unless the person is appointed by the insurer and holds a valid insurance license for the class of insurance being written. Commissions may be paid to a trade name, as long as it has been filed by a licensed agent to the Bureau of Insurance. Similarly, only licensed and appointed agents or surplus lines brokers may accept commission or other valuable consideration from an insurer.
Fees and Penalties
Insurers are required to pay a fee for the appointment/renewal of each agent's appointment. Fees are billed quarterly by the Commission to insurers. Each quarterly billing will include charges for appointment notifications submitted to the Commission during the preceding quarter, regardless of the current status of the appointment.
Insurance Consultant An insurance consultant is an individual or business entity licensed to act as an independent contractor for the client in exchange for a fee or other compensation. The fee is not paid by an insurer, an agent, or a surplus lines broker. The consultant offers advice to the client about property and casualty insurance. The following persons are not insurance consultants:
Licensed attorneys acting in their professional capacity Bank trust officers acting in the normal course of their employment Actuaries and certified public accountants (CPAs) who consult during the normal course of their businesses Risk managers who only consult for their employers
In Virginia, a producer may be licensed in the following lines of authority:
Life and annuities insurance agent Health agent Property and casualty insurance agent Personal lines agent Limited lines credit insurance agent Limited lines life and health insurance agent Limited lines property and casualty insurance agent Motor vehicle rental contract insurance agent Restricted nonresident property and casualty insurance agent Restricted nonresident personal lines agent Public adjuster Surplus lines broker Title insurance agent Variable contract agent Viatical settlement broker A resident producer in Virginia may obtain a limited lines license without taking an examination.
Licensing Process Proof of Residency An individual is considered a resident of Virginia, provided that the individual:
Maintains a principal place of residence Declares themselves as a Virginia resident on their federal tax return Pays Virginia income tax and personal property tax
Twisting
No person may engage in twisting, which is using misrepresentation by making an incomplete comparison to encourage or induce an insured to cancel an existing insurance policy and purchase a new policy, known as replacement.
In accordance with federal law, Virginia has outlawed certain practices that are considered unfair methods of competition or unfair or deceptive acts of practices.
No person may enter into any agreement to commit any act of boycott, coercion, or intimidation resulting in or tending to result in unreasonable restraint of, or monopoly in, the business of insurance.
Duties and Powers of the Association
The Association is required to pay covered claims that existed before insolvency. Claims are covered up to 90 days after the determination of insolvency was made.
False Advertising
No person may knowingly make, publish, circulate, or place before the public any advertisement, announcement, or statement that contains an untrue, deceptive, or misleading statement pertaining to the business of insurance or any person conducting the business of insurance. This includes information presented in any way, including in pamphlets, notices, letters, posters, and advertisements made over the radio or on television. Advertising that an agent is licensed in a particular line of authority when that is not the case is considered false advertising.
Misrepresentation
No person may make, issue, or circulate an estimate, illustration, statement, sales presentation, omission, or comparison that misrepresents any element of an insurance policy. Making misleading or false statements about the coverage provided under a policy or projected dividends is considered misrepresentation.
Defamation
No person may publish, circulate, or make any oral or written statement that is false, maliciously critical, or derogatory to any person, including an insurance company, with respect to the business of insurance or to any person in the insurance business if the statement is intended to injure.
The Commissioner may enter into a reciprocal agreement with any other state, territory, or province of Canada if required for Virginia residents to be similarly licensed as a nonresident in that state, territory, or province.
Nonresident licenses will be terminated at any time that the individual's resident license is terminated, suspended, or revoked.
Exceptions to Licensing Insurance employees and officers are not required to be licensed as insurance agents if they do not sell, negotiate, or solicit insurance, and do not receive commissions. For example:
Officers, directors, or employees of an insurer or insurance producer employed in executive, administrative, managerial, and/or clerical capacities Employment related to underwriting, loss control, or claims functions Employees who act as special agents or agency supervisors whose activities are limited to providing technical advice and assistance that does not include the sales, solicitation, or negotiation of insurance Any person who secures and furnishes information for group insurance for the purpose of enrolling individuals in plans, issuing plan certificates, or assisting with the administration of plans Any person who performs administrative services in connection with mass marketed property and casualty insurance An employer or association engaged in the administration of its own employee benefits plan so long as no person connected to the employer or association is compensated by the insurer A nonresident who sells, solicits, or negotiates commercial lines insurance to an insured with risks located in multiple states, so long as that nonresident is licensed to sell, solicit, or negotiate insurance in the state where its principal place of business is located
The Commission may deny, suspend, or revoke a business entity's license after notice and the opportunity for a hearing if any individual licensee acting on behalf of the business, at its direction or with its permission, committed a violation of insurance laws if:
One or more of the business' partners, officers, or managers knew the violation took place The business failed to take corrective action or report the violation to the Commission
Virginia Property and Casualty Insurance Guaranty Association The Virginia Property and Casualty Insurance Guaranty Association is a nonprofit organization that consists of all licensed property and casualty (P&C) insurers in Virginia. Its purpose is to reduce the financial loss to residents in the event an insurance company becomes insolvent. Insurers must become and remain members of the Association as a condition of being able to obtain and maintain their licenses to transact insurance in Virginia.
Operating Accounts The Association uses three separate operating accounts: Workers' Compensation insurance account Automobile insurance account Account for all other insurance
Rebating Unless specifically permitted by law, no person may: Knowingly enter into any insurance agreement that is not stated clearly in the insurance policy or contract Pay, allow, give, or offer any of the following as an inducement for the purchase of a policy if it is not stated in the policy:
Premium rebate Special favor or advantage in the policy's dividends or other benefits Any valuable consideration
Receive or accept any of the following as an inducement for the purchase of a policy if it is not stated in the policy:
Premium rebate Special favor or advantage in the policy's dividends or other benefits Any valuable consideration
If a person is not licensed as an insurance consultant, that person is not permitted to:
Provide planning or consulting services outside the scope of the activities of a licensed insurance agent Charge or receive, in any manner, compensation in exchange for offering insurance advice—other than commissions received as a licensed insurance agent or surplus lines broker in exchange for the sale, solicitation, or negotiation of insurance as permitted by the license
Examination of Books and Records
The Commission has the authority to conduct an examination of insurers and investigate any person licensed to transact insurance business in Virginia to determine if the person is or has engaged in any prohibited unfair method of competition or unfair or deceptive act or practice. This authority includes:
The State Corporation Commission may place on probation, suspend, revoke, refuse, or nonrenew any person's license for one or more of the following reasons:
Providing materially false, misleading, or incomplete information in a license application or any other document filed with the Commission Violating any insurance laws, regulations, subpoenas, or orders Obtaining, or attempting to obtain, an insurance license through fraud or misrepresentation Rebating Twisting Improperly withholding, embezzling, or stealing any money or property received in the course of doing business Misrepresenting intentionally the terms of an existing or proposed insurance application or contract Admitting to, or having been found to have committed, fraud or any insurance unfair trade practice Failure to provide a criminal history record report Being convicted of a felony Using fraudulent, coercive, or dishonest practices Demonstrating incompetence or untrustworthiness in the conduct of business Demonstrating financial irresponsibility when handling funds of any applicant, policyholder, agency, or insurer Having an insurance producer license denied, suspended, or revoked in any jurisdiction Forging an insurance application or any document related to an insurance transaction Using notes or reference materials improperly when completing an insurance license exam Knowingly accepting insurance business from an individual who is not licensed Failing to comply with a court or administrative order imposing a child support obligation Failing to pay state income tax or comply with any order directing its payment
The following activities are not considered rebating
Readjustment of premiums for group insurance based on loss experience Insurers allowing their employees to receive premium discounts on insurance written on their own lives and property and on the lives and property of their spouses and dependent children Paying commissions and compensation to agents and brokers who are licensed appropriately The payment of dividends
Premiums received by an insurance agent in Virginia must be all of the following, except:
Remitted to the party entitled to the payment in the ordinary course of business B Held in a fiduciary capacity C Deposited in the agent's personal account D Accounted for by the agent Deposited in the agent's personal account
Exemptions from Continuing Education Requirements
Resident or nonresident agents who have been issued a license during the last 12 months of the biennium in which the licenses are issued will be exempt from fulfilling CE requirements for that license and only for that biennium.
Types of Licenses No person is permitted to act as an agent of a licensed insurer without first obtaining an insurance license. To act as an agent or transact insurance business means to:
Sell, solicit, or negotiate insurance contracts on behalf of a licensed Virginia insurer Receive or share any commission or other valuable consideration in connection with the sale, solicitation, or negotiation of any insurance contract
Give, sell, purchase, or offer any of the following as an inducement for the purchase of a policy if it is not stated in the policy:
Stocks, bonds, or other securities of any company Dividends or profits accrued on any stocks, bonds, or other securities of any company Anything of value
Insurance Consultant (continued) Applicants for an insurance consultant license must meet the following requirements:
Submit their license applications within 183 calendar days after passing the licensing exam (applicants holding active property and casualty insurance agent licenses are exempt from the exam requirements) If acting as an insurance consultant as an officer, director, principal, or employee of a business entity, hold an individual insurance consultant license
If a member insurer fails to pay an assessment when due, or fails to comply with the plan of operation, the Commission may:
Suspend or revoke the insurer's license to transact insurance in Virginia Levy a fine up to 5% of the unpaid assessment per month, subject to a minimum fine of $100 per month
The Commission may investigate insurance agents to determine if they are violating insurance code.
The Commission has the right to examine all records that pertain to the writing of insurance. Penalties for failure to comply with this examination include the denial, suspension, or revocation of the insurance license.
Probation, Suspension, Revocation, or Denial (continued)
The Commission may refuse to issue an applicant's license if it believes the applicant does not have a reputation for being honest and of good character. When proposing to deny, suspend, or revoke a license, the Commission must provide at least 10 days' notice. If a license is denied, suspended, or revoked, the applicant or licensee is prohibited from applying for another license for at least 5 years from the date of the Commission's order.
Licensed agents are permitted to share commissions only with another agent who holds a similar license. An exception exists for the payment and receipt of renewal or deferred commissions to an unlicensed person who was appropriately appointed and licensed at the time the insurance was sold.
The State Commission may suspend a license if an agent shares commission with an unlicensed person.
State Regulation State Corporation Commission/Commissioner of Insurance General Powers/Rules and Regulations, Orders
The State Corporation Commission (SCC) may also be referred to as the Commission, State Commission, or Bureau of Insurance. The SCC carries out all insurance laws in the Commonwealth of Virginia. The Commission regulates all companies that transact insurance in Virginia and has the authority to issue any rules and regulations required to administer and enforce insurance laws, and to issue certificates of authority to insurers.
Termination Notification
The agent or agency must immediately cease selling or soliciting on behalf of an insurer no later than 10 calendar days after notice of termination, suspension, or revocation of appointment. An insurer that terminates the appointment, employment, contract, or business relationship must notify the Commission within 30 calendar days following the effective date of the termination if the reason for termination is grounds for probation, refusal to renew, suspension, or revocation of license. The insurer must promptly notify the Commission if, upon further review, they discover additional information that would have been reportable to the Commission had they known. The insurer must mail a copy to the agent to their last known address within 15 days of notifying the Commission. An individual will not be held liable for furnishing information, without actual malice, that results in an agent's termination.
If a licensed insurance consultant does not sell, solicit, or negotiate insurance as part of the services provided, the consultant must contract in writing with a client before acting as an insurance consultant and before the client purchases any insurance. The contract must include:
The amount of the consulting fee The specifics of the services provided The duration of the employment Details about the payment of any commissions, bonuses, or form of compensation paid, in addition to the consulting fee, in exchange for the services provided
Nonresident License An individual or business entity who is not a resident of Virginia will receive a nonresident license if:
The applicant presents satisfactory proof that they are currently licensed as a resident and is in good standing in their home state The applicant has submitted the proper request and paid the required fees The applicant has submitted the application for licensure through their home state or a Uniform Application The applicant's home state issues nonresident agent licenses to residents of Virginia on the same basis
Application
The application for a license must be completed within 183 calendar days after passing the state licensing examination. The applicant must submit an application to the Commission in the form containing the information prescribed and pay a nonrefundable application processing fee of $10-$20 for each line of authority.
A penalty of $50 per day will be charged to each insurer for overdue appointment fees.
The appointment fee will not be considered paid until the appropriate fee and all penalties are paid in full.
Assessments
The assessment of each member insurer will be based on the ratio of that insurer's net direct written premiums to the net direct written premiums of all member insurers.
An insurer must, within 30 days of the date of execution of the first insurance application submitted by a contracted but not yet appointed agent, either reject the application or file a notice of appointment with the Commission
The insurer must, within the same 30 days, provide verification to the agent that the notice of appointment has been filed with the Commission Upon receipt of notice of appointment, the Commission will verify that the agent holds a valid license and the appointment was properly submitted
Business Entity A business entity is defined as a partnership, limited partnership, limited liability company, corporation, or other legal entity other than a sole proprietorship. Business entities must be legally established before being licensed and appointed to act as insurance agents. Before obtaining an insurance license, they must submit certification containing:
The name under which business will be conducted or transacted The names of each person, partnership, limited liability company, or corporation owning the business entity, along with their post office and residence addresses The date the business entity was registered to transact business in Virginia (if a foreign entity)
No person is permitted to charge or receive any fee, compensation, or consideration for insurance or for obtaining insurance unless it is stated in the policy. Written disclosure to an applicant regarding administrative fees or charges must be provided prior to services rendered. Written consent of administrative charges is required by a consumer in all instances. Insurance policies in Virginia must state all the fees, premiums, and other amounts charged for the insurance unless one of the following exceptions apply:
The policy is fidelity, surety, title, or group insurance Charges are made lawfully by an insurance consultant Service charges are billed for premiums paid in installments, so long as the service charges are disclosed to the insured in writing
Referrals Any person who refers a customer seeking to purchase any insurance product to a licensed agent and receives compensation for the referral of a customer is exempt from licensing, provided that:
The referral does not include a discussion of specific insurance policy terms and conditions The compensation is in the form of a one-time nominal fee of a fixed dollar amount for each referral The compensation does not depend on whether the referral results in the purchase of insurance by the customer
Limits of Coverage
The requirement to pay is satisfied when the Association pays the full amount of a Workers' Compensation claim, or up to $300,000 per claimant for all other covered claims. The Association is only required to pay unearned premiums in excess of $50. The Association assumes all the rights, duties, and obligations of an insolvent insurer and, in fact, is considered the insurer for those purposes.
If the Commission finds the person has violated insurance laws, it may issue a cease and desist order and any other appropriate order based on the circumstances. If any person violates a cease and desist order, the punishment will be:
The suspension or revocation of the insurance license Up to $5,000 per violation for knowing and willful violations Up to $1,000 per violation for unintentional violations, up to a maximum of $10,000
For notice of claim or suit, the agent of record is deemed to be the agent of the insurer.
Unless authorized by the Commission, no individual whose license was revoked or voluntarily surrendered is permitted to own, operate, or be employed by an insurance agent or agency during the time such person is unlicensed.
Fiduciary Responsibilities A fiduciary is one who is entrusted to care for, or act on behalf of, another. The integrity and fidelity of a fiduciary must be absolute because fiduciary responsibility is the highest standard of care and conduct imposed by ethics and law.
Virginia insurance law requires all premiums, return premiums, and other funds received by an agent or a surplus lines broker be held in a fiduciary capacity and be accounted for by the agent or surplus lines broker. The agent or broker must, in the ordinary course of business, pay the funds to the party entitled to the payment.
Solicitation Prior to Appointment
Within 5 calendar days of receiving the notice of appointment, the Commission must notify the insurer whether the appointment is valid or invalid. If an agent sells or solicits insurance on behalf of the insurer after being notified the appointment is invalid, the agent will be violating insurance law and will be subject to penalties.
An accurate record and itemization of all money deposited into the account must be maintained. The commission portion of any premiums deposited into the separate account may be withdrawn at the discretion of the agent or surplus lines broker. If a licensed business entity maintains a separate fiduciary account, individual agents and surplus lines brokers acting on behalf of that entity may use the business' fiduciary account; they are not required to establish their own separate fiduciary accounts. In addition,
if a duly appointed agent has entered into a written contract with an insurer that contains provisions addressing the remittance of funds, or is contractually authorized, the appointed agent is not required to establish a separate fiduciary account for the funds addressed in the contract. Misappropriating funds held in a fiduciary capacity may result in suspension or revocation of a license
Premiums received by an insurance agent in Virginia must be all of the following, except:
if a duly appointed agent has entered into a written contract with an insurer that contains provisions addressing the remittance of funds, or is contractually authorized, the appointed agent is not required to establish a separate fiduciary account for the funds addressed in the contract. Misappropriating funds held in a fiduciary capacity may result in suspension or revocation of a license
If any person submits insurance business without a required insurance agent's license
the penalty will be a sum that equals the first year commission for the placement of that business, in addition to the penalties stated previously.
The Commissioner may also consider other documentation such as a valid Virginia driver's license or voter registration card as additional proof of residency. An individual who is unable to show proof of residency will not be deemed a resident of Virginia, except for individuals residing outside of Virginia whose principal place of business is in Virginia,
who are able to demonstrate that the laws of their home state prevent them from obtaining a resident agent license in that state, and who affirmatively chooses to qualify as and be treated as a resident of Virginia.