Unit 21: NC Statutes and Regulations

Countersignatures Not Needed [Sec. 58-33-60]

- A licensed resident agent or broker does not need to counter sign an application, policy, or other form of insurance contract on behalf of a nonresident agent or broker nor receive a share of the commission earned by the nonresident agent broker for the business in order for the transaction to be valid in NC

Nonresident License [Sec. 58-33-32]

- A nonresident can receive a NC nonresident producer license - An individual who applies for an insurance producer license in NC who was previously licensed for the same insurance in the home state is not required to complete any pre-licensing education or examination. o 90 days o License in home state must be in good standing - Must apply within 90 days of arriving - The Commissioner may not assess a greater fee to nonresidents

Restricted License [Sec.58-33-15]

- A person may be licensed as a foreign military sales agent to represent a life insurer o The commissioner may issue a restricted license valid for representing the insurer in a foreign country and on military base

False Pretense and Cheats [Article 19, Sec. 14-100

- A person who attempts to obtain anything of value from another by false pretenses with the intent to cheat or defraud is guilty of a felony

Limited representative [Sec. 58-33-10]

- A person who authorized by the commissioner to solicit contract for the following limited lines of insurance o Motor vehicle physical damage insurance o Title insurance

Agent [Sec.58-33-10,20]

- A person who is unlicensed but who solicits or negotiates a policy on behalf of insurer also is considered an agent and therefore faces the same liability as a licensed agent - the agent acts on behalf of the insurer

License Terms [Sec. 58-33-26]

- A broker's or limited representative's license must be renewed each April 1, and renewal fees paid - A license issued to an agent authorizes the agent to act until the license is suspended or revoked.

Business Entity [Sec. 58-33-10]

- A corporation, association, partnership, limited liability co, limited liability partnership, or other legal entity excluding a sole proprietorship

Complaint Records [11 NCAC 19.0103]

- All insurers must keep track of complaints - Retained for 5 years

Appointment of Agent [Sec. 58-33-40, 82]

- An insurer cannot accept an insurance application from an individual who is not currently appointed by the insurer

Prohibited Rebates and Inducements [Sec. 58-33-35 (repealed), 85]

- An insurer may not offer anything of value nor change a fee to take an application or perform service - Favored discrimination in pricing by insurers is prohibited in favor of individuals between insurants of the same class and equal expectation of risk

Investigative Consumer Reports [Sec. 58-39-40]

- An insurer may not prepare or request an investigative consumer report about an individual in connection with an application, policy reinstated, or change in benefits unless the insurer informs the individual that he may request to be interviewed and that is entitles to receive a copy of the report.

Agent Liability [Sec. 58-33-95]

- Any person representing an insurer is personally liable on all contracts of insurance unlawfully made for any company not authorized to do business in NC o Class 1 if unintentional o Class H felony if the person knew or should have known the company was unauthorized

Power of Attorney [11 NCAC 4.0122]

- Except for use in premium finance agreements, no producer or limited representative may solicit a power of attorney from a consumer that authorizes the producer or limited representative to sign insurance related forms

Books and Papers [Sec. 58-2-200]

- Whoever controls books and papers must exhibit them to the commissioner 1. Refusal means suspension or revocation 2. Also a class 1 misdemeanor

Penalty for False Statements [Sec. 58-2-180]

- Willfully misstates info in any financial statement, guilty of perjury. - Fine of at least $2,000 but not more than $10,000

An investigative consumer report

- a consumer report or portion thereof in which information about a naturals person's character is obtained through personal interviews with acquaintances who have knowledge of the person

Consumer Report:

- any written, oral, or other communication of information bearing on a persons credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living that is used in connection with an insurance transaction. o A consumer reporting agency is any person who § Regularly engages in the practice of assembling or preparing consumer reports for a monetary fee § Obtains information primarily from sources other than the insurance institutions § Furnishes consumer reports to others

Declination of insurance coverage

- denial, in whole or in part by an insurance institution or agent of requested insurance coverage

Termination of insurance coverage or insurance policy

- either a cancellation or nonrenewal of an insurance policy for any reason other than the failure to pay a premium as required.

Commingling [11 NCAC 4.0429]

Accounting records must be kept separate from any other business records

Ethical Standards [11 NCAC 4.0423]

Every producer or limited representative must, - identify himself and occupation - provide National Producer Number and Departments Website - conduct a manner as fair and honorable dealings

Penalties/restitution [Sec. 58-2-70]

If there is a violation, the commissioner can order payment of monetary penalty 1. Each day of violation is a separate violation 2. Commissioner cannot order less than$100 or more than $1,000 3. Payment of the civil penalty under this section will be in addition to payment for violation of the criminal law 4. The court may order the person who committed the violation to make restitution in amount that would make any person harmed whole

Representative Capacity [Sec. 58-33-20, 58-58-30]

Representative Capacity - Agents: or limited representative who solicits and insurance application is regarded as representing the insurer and not the insured or the insured's beneficiary. o This provision does not affect the agents apparent authority. - Brokers: who solicits an insurance application is regarded as representing the insured or the insured beneficiary and not the insurer; however, an insurer that delivers a policy to an insurance broker on an application submitted by a broker is considered to have authorized the broker to receive on its behalf any premium due when the policy is issued or delivered.

Adjuster [Sec. 58-33-10]

This is any individual who, for salary, fee commission, or other compensation of any nature, investigates claims arising under insurance contract annuity.

Surrender of License [Sec. 58-2-65]

When a licensee is accused of any misconduct, they may surrender their license with the consent and approval of the commissioner. - a person who surrenders the license is not eligible for licensure during the period of surrender.

Examinations and Investigations [Secs.58-2-50, 131, 155, 160] - The Commissioner may conduct hearings and investigations if:

o Sufficient evidence to charge a person with violation, he may arrest o Give 10 days notice of hearings o May visit agencies (once every five years) o Pay charges incurred in the examination o Bring civil action to collect expenses from companies o Not subject to civil liability for libel or slander by virtue of investigation

Fraudulent Claims [Sec. 58-2-161, 162]

- A person who knowingly presents fraud is a felon - Civil action brought against the party suspected of fraud may result in compensatory damages, attorney's fees, cost, and treble damages

Penalty for Violations [Sec. 58-63-50]

- A person who willfully engages in an unfair claim practice or unfair method of competition must pay to the commissioner between $1,000 and $5,000 for each violation

Service Fee [11 NCAC 4.0120]

- A producer or limited representative who intends to charge a policy or service fee to an applicant may not do so unless: o A sign is displayed in a prominent place o A signed policy or service fee consent for from the applicant providing the amount of the fee is obtained each time o A separate receipt or itemization of the policy or service fee is provided

Payment of a Premium by Credit Card [Sec. 58-3-145]

- Accepted if o Complies with the prohibition against unfair discrimination o Pays the fees charged by the credit card company for the payment of premiums by card

Rebating and Credit Insurance [Sec. 58-33-90]

- Agents who write credit insurance my not keep any funds received for the payment of loss

Records [Sec.58-2-185, 195]

- All insurance companies must keep record of all business activities 1. Commissioner may make reasonable rules regarding records 2. Anyone who violates may be suspended 3. Second offense, license revoked for up to one year

Premium Payment Receipts [ 11 NCAC 4.0121

- All premium payment receipts and copies issued by a producer or limited representative must be dated and contain the printed or stamped name and address of the agency, producer, or limited representative and the name of the insurer. - Must be signed by the person accepting the payment

Statements made in applications [Sec. 58-3-10]

- All statements made in application are a representation o Statement that underwriter accepts as true Unless material or fraudulent, will not prevent loss of

Correction of Recorded Personal Information [Sec.58-39-50]

- An Insurer or agent must correct amend or delete and recorded personal info about the individual within 30 business days for the date of requested or notify the individual

Unfair Discrimination [Sec. 58-33-80]

- An agent may not discriminate unfairly in favor of any person

Requirements for a broker's licenses [Sec. 58-33-30]

- An applicant for a broker's license must hold a valid license o Only covers insurance covered by agent's license o If an agent's license is suspended so is the broker's o Must keep in force a bond for not less than $15,000 in favor of NC for the use of aggrieves parties

Assumed Business Names [Sec. 58-.33-83]

- An insurance producer doing business under an assumed name must notify the Commissioner before using the assumed name

Information Disclosure Authorization Forms [Sec. 58-39-35]

- An insurer may not use as its disclosure authorization form on that authorizes the disclosure of personal or privileged information about an individual to the insurer or agent unless the form: o Specifies the types of persons authorized to disclose info o Specifies the nature of the info o Names the insurer and representatives of the insurer o Specifies the purpose o Specifies the length o Specifies the duration o Advises the individual that he is entitled to a copy of the authorization form

Limitations on disclosure of recorded personal information [Sec. 58-39-75, 76]

- An insurer must not disclose o Any personal or privileged information about an individual unless the disclosure is with the dated and signed written authorization o Credit card account numbers to any institution, other than to a consumer reporting agency, for use in telemarketing, direct mail, or electronic marketing programs.

Market Research Questions [Sec. 58-39-30]

- An insurer or agent must clearly specify those questions designed to obtain information solely for marketing or research purposes

Twisting [Secs. 58-3-115, 58-58-40]

- An insurer, agent, or broker may not make any statement misrepresenting or incompletely comparing the terms of any insurance policy to induce a policy holder to drop an existing policy to his detriment

Pretext Interviews [Sec. 58-39-20]

- An interview whereby a person does one or more of the following o Pretends to be someone he is not o Pretends to represent a person he is not o Misrepresents the true purpose of the interview o Refuses to identify himself upon request

Broker [Secs. 58-33-10, 20]

- An unlicensed agent who obtains insurance for third parties through an agent of an insurer for whom the ____ is not authorized to act

Validity of Premium Payment to Agent Falsely Representing Insurer [Sec. 58-33-100]

- Any agent who acts for a person other than himself is the company's agent. It's a misdemeanor

License Surrender [Sec. 58-33-50]

- Any licensee who ceases to maintain residency in North Carolina must deliver the licensee's insurance to the Commissioner within 30 days after terminating residency.

Regulation of Credit Insurance [Sec. 58-57-65]

- Credit life insurance and credit accident and health insurance may not be required of any borrower by any creditor. - When credit property insurance is required for any indebtness, the debtor shall be notified in writing of the option of furnishing the required amount of insurance through existing policies owned or controlled by him or of procuring and furnishing the required coverage through any insurer authorized to transact an insurance business within this state

Sanctions for Noncompliance [Sec. .0811]

- Fee of $75 if licenses laps and needs to be reinstated - No longer than 120 days

Injunctions [Sec. 58-2-65]

- If a company has violated an insurance law, he may apply to the courts for a restraining order and injunction 1. A conviction includes an adjunction of guilt, a plea of guilty, or a plea of nolo contendere 2. The conviction of an insurance licensee for a criminal violation automatically suspends the license of that person

Notice of Conviction [Sec. 58-2-69]

- If a license is convicted in any court for any crime of offense other than a motor vehicle infraction, the commissioner must be notified within 10 days after the date of the conviction

Notice of Cancellation [Sec. 58-33-56]

- If an insurer cancels a licensee's appointment, employment, or contract, the insurer must give written notice of the cancelation and its effective date to the Commissioner within 30 days.

Embezzlement [Sec. 58-2-162]

- If any agent appropriates any money or other considerations received as an agent, he is guilty of embezzlement, a felony

False Representation in insurance applications [Sec. 58-33-105]

- If any agent, applicant, or other person knowingly makes false or fraudulent statement in any application, the person is guilty of class 1 misdemeanor

Individual Access [Sec.58-39-45]

- If any individual submits a written request, the insurer must inform the individual of the nature of the information and permit the individual to see and copy it o 30 days o Must § Disclose to the individual the identity of those persons to whom the information has been disclosed within 2 years § Provide a summary of the procedures to correct, amend, or delete personal information

Penalties for Violations [Sec. 58-33-120]

- If any person acts as a principal without a license or any act of making a contract, guilty of class 1 misdemeanor

Required to be licensed [Secs. 58-33-5, 26]

- In NC, agents must be licensed to sell any carry all their responsibilities

Adverse Underwriting Decisions [Sec.58-39-55, 60, 65]

- In the event of an adverse underwriting decision, the insurer must give written ntice that provides the applicant or policy holder with the reason of the adverse decision o Declined coverage o Terminated coverage o Failure to apply for a requested insurance institution

Unfair and Deceptive Acts or Practices [Sec. 58-63-15]

- Includes: o Misrepresentation an false advertising o Defamation o Actions tending to result in monopoly of the insurance businesses o False financial statements o Issuing securities as an inducement to buy insurance o Unfair discrimination o Rebates o Soliciting unauthorized insurance contracts in other states Unfair claim settlement practices

Unauthorized Insurers [Sec. 58-33-82]

- Licensed agents may not solicit insurance in NC for companies not authorized to do business in the state

Hardships [Sec. .0807]

- Licensees may request in writing an extension of time during or before the last month of the licensee's compliance year.

Safe Driving Plan [11 NCAC v4 .0415]

- Major: at fault accident resulting in BI or death ($3,850 or more) - Intermediate: at fault accident resulting in only property damage for more than $2,300 but less than $3,850 - Minor: at fault accident resulting only in property damage of $2,300 or less

Discrimination Forbidden [Sec. 58-3-25, 120]

- May not discriminate on blindness, partial blindness, deafness, or partial deafness - May not on race, color, or national or ethnic origin by: o Refusing to issue or renew, limit amount, extent, or kind of coverage o Charging an individual a different rate for the same coverage

General Licensing Requirements [Secs. 58-33-26, 31]

- Must be 18+ - not committed any act that is a ground for probation, suspension, nonrenewal, or revocation - Special Education - Passed licensing Exam - Paid applicable fees

Change of Address [Sec. 58-2-69]

- Must give notice within 10 business days to the commissioner - A violation is not ground for revocation , but licensee shall pay $50 to the Commissioner

Reporting Violations [Sec. 58-2-163]

- Must notify the commissioner of any fraud found or face consequences - The Commissioner may suspend, revoke, or refuse to renew the license of any licensee who fails to comply

Examinations [Sec. 58-33-30]

- Must pass a written exam o Policy terms and provisions o Duties and responsibilities o NC Law

Pre-licensing Education [Sec. 58-33-30]

- Must successfully complete 20 hours of instruction for each license - Applicants for Medicare supplement or long-term care licenses must successfully complete 10 additional hours

Illegal Compensation for Recommendations on Repairs [Sec. 58-33-76]

- No agent can accept any commission for recommending a repair - Discounts offered by repair service does not violate this prohibition

Required Insurance [Sec. 58-3-135]

- No lender shall require the purchase of insurance from them or from an affiliate or subsidiary of the lender as a condition to making, renewing, refinancing, or setting the terms of a loan.

Carryover Credit [Sec. .0804]

- Only whole insurance continuing education credits can be carried over from one biennial compliance period to the next biennial compliance period

Commissioner's Duties [Sec. 58-2-40]

- Seeing that all NC insurance laws are executed - Furnishing the necessary reporting form to insurance companies - Reviewing annual statements - Conducting investigations of all domestic insurers at least once every five years - Report any violations of insurance laws to the attorney general

Acting without a License [Sec.58-3-120, 130]

- Shall be deemed guilty of class 1 misdemeanor

Binders as Evidence of Insurance [Sec. 58-3-140]

- Temporary written insurance contract - The Binder o Limited to 60 days o Includes all standard provisions and endorsements o Provision that it may not be cancelled within the terms of the binder without a 10 days' notice to the mortgagor - Does not prohibit lenders from refusing to accept a binder or from disapproving the insurer or agent making the binder, as long as it is reasonable

Penalties [Secs. 58-39-80, 90, 105, 110]

- The Commissioner may o Conduct a hearing to hear the charges and the evidence o Issue a cease and desist order o Obtain an order for a penalty no less than $100 and no more than $1,000 - A person who violates a cease and desist order are subject to o A fine not more than $10,000 each violation o A fine not more than $50,000 if violations constitutes a general business practice o Suspension or revocation of an insurer or agent license

Commissioner's examination powers [Sec. 58-63-20]

- The Commissioner may investigate the affairs of every person who transacts insurance in the state to determine whether that person has been of is practicing any unfair method

Continuing Education [Sec. 58-33-130, 132]

- The Commissioner sets the requirements o Instructors must be approved o No one can teach without a license o The commissioner may suspend if § Inaccurate § Or received a rating of poor

Restricted Licenses [Sec. 58-33-17]

- The commissioner may grant restricted licenses to a rental car company for rented vehicles for less than 30 days o Excess liability coverage o Accident and health o Personal effect insurance

Licenses for Rental Car Companies [Sec. 58-33-17]

- The commissioner may issue a limited license to a rental car company enabling it to sell certain coverages related to the rental of motor vehicles

Notice of License Suspension or Revocation [Sec. 58-33-50]

- The commissioner must notify all appointed insurers, the National Association of Insurance Commissioners (NAIC), and the licensee regarding any license suspension, revocation, or nonrenewal.

Continuing Education Advisory Committee [Sec. 58-33-135]

- The commissioner will appoint one advisory committee for fire and casualty insurance licensees and one advisory committee for life and health insurance licensees o The advisory committee will recommend reasonable rules to the commissioner o The commissioner may adopt, reject, or modify such recommendations

Acts constituting transactions of business [Sec. 58-28-12]

- The following constitute transaction of business o Maintaining an office where insurance business is conducted o Maintaining files or records of contracts of insurance o Receiving payments of premiums for contracts of insurance - The following acts, when conducted by an unauthorized insurer, constitute transaction of business. o Issuing or delivery of contracts of insurance o Soliciting applications for contracts of insurance o Collecting premiums membership fees assessments or other considerations o Transacting any matters arising out of the execution of insurance contracts.

Proof of Loss Forms [Sec. 58-3-40]

- The following must occur with proof of loss o Must furnish a blank form for that purpose o If insurer does not furnish within 15 days after receipt of notice, the claimant is deemed to have complied with the policy requirements regarding proof of loss

Immunity for Reporting Fraud [Sec.58-2-160]

- The person must release all information to the commissioner and is not subject to civil liability for libel or slander for doing so unless malicious.

Insurance Information and Privacy Protection Act Article 39 (SECS. 58-39-5 through 58-39-120)

- The purpose of this act is to establish standards for the collection and use of information gathered by insurers and agents. - This act applies to any property and casualty insurance institution, agent, or insurance support organization that: o Collects, receives, or maintains information or engages in transactions relating to delivered, issued, or renewed policies or certificates, or e o Engages in transactions involving mortgage guarantee insurance

Temporary License [Sec. 58-33-66]

- Up to 180 days - To spouse if the agent can no longer perform (dies) - If it serves public interest - May require a sponsor

Meaning of Accident [Sec. 58-3-30]

- When a policy uses the term accident, accidental injury, and accidental means, it must define the terms to imply result language o Must provide for the payment of benefits when the result of the insured's injurious activity was an accident o It may not require the cause of the injury to be accidental before it will pay benefits

Cease and Desists Orders and Judicial Review [Sec. 58-58-20]

- Whenever the Commissioner has reasonable grounds to believe that any person is violating state law governing unauthorized insurers, he may, after notice and opportunity for a hearing, issue a cease and desist - Any person ordered to cease and desist may seek judicial review of that order

Coinsurance Clause [Sec. 58-3-15]

- no insurance company or agent may issue any policy covering property that contains any provision requiring the insured to take a larger amount of insurance than expressed in the policy

Signing Blank Policies [Sec. 58-33-110]

An agent who signs any lank policy is guilty of a misdemeanor, upon conviction may be punished between $1,000 and $5,000.

Insurance Contract

An agreement that obligates an insurer to pay money as reimbursement for the destruction, loss, or injury of something in which the insured has economic trust.