Unit Seventeen - Florida Statutes and Rules
A general lines agent must complete ____ hours in continuing education every two years.
24
Once requested a Proof of Loss form must be filed within __ days.
60
Errors and Omission Claims
Errors and Omissions Claims occur when an insured sues the insurance company because of either inaccurate information (an error) of lack of information (an omission) from an agent, service representative or claims adjuster. Error and Omission claims are sometimes a symptom of unethical behavior and sometimes the result of just being human and making mistakes. The best defense against errors and omissions claims is knowledge. Know and understand the information you need to counsel the customer correctly, take the time to advise customers accurately and document well.
If an individual has sought medical or psychological treatment for a____, an insurance company may not discriminate against them.
abuse
Which term is closely related to agent ethics?
altruism
Wind mitigation discounts are mostly impacted by the r____.
roof
Packaging an ancillary product with an insurance policy and indicating the entire package is required by law is known as ____.
sliding
The claim that the insuring entity and the health plan are not subject to insurance regulation is known as: ____
"Pre-emption"
Problems with unauthorized entities resulted in which legislation?
"The Employee Retirement Income Security Act"
An insured can offer a free gift with an insurance policy if the cost of the gift does not exceed ____.
25.00
A licensee has ____ days to notify the DFS of a change of address.
30
When an insurance licensee ends his appointment with an authorized company, he has ____ months to secure another appointment.
48
Unfair Trade Practices statute results in a penalty of $____ for each non-willful violation and $____ for each willful violation
5,000, 40,000
Certificate of Insurance
A certificate of authority should not be confused with a certificate of insurance. A certificate of insurance is a document used to provide information on specific insurance coverage. The certificate of insurance provides verification of the insurance and usually contains information on types and limits of coverage, insurance company, policy number, named insured, and the policies' effective periods. A Certificate of Insurance is used to verify the existence of insurance coverage under specific conditions granted to listed individuals
Change of Address
A licensee must notify the Department of Financial Services within 30 days of an address change. Expiration of License and Appointment To represent the insurance company as a licensed agent, the company must appoint the agent. If an appointment is terminated, a licensee has 48 months to secure another appointment. A customer representative may be appointed only by the following: (a) A person holding a Florida resident general lines agent license (b) A general lines insurance agency (c) A surplus lines agent, if the surplus lines agent obtained surplus lines licensure based upon licensure as a general lines 2-20 agent. Under special conditions a temporary license may be issued. An example of this is during hurricane season when additional adjusters are needed. Also, agent may die and the DFS will issue a temporary license to a family member to transact the business activities necessary to close the office. A temporary license is good for six (6) months.
Stock and Mutual Companies
A mutual company is a company owned by its policyholders that returns part of its profits to the policyholders as dividends. The insurer uses the rest as a surplus cushion in case of large and unexpected losses. A mutual company is an incorporated insurer without capital stock or shares. A stock company is an insurance company owned by its stockholders who share in profits through earnings distributions and increases in stock value. Fraternal Insurance Fraternal insurance is issued by a not-for-profit fraternal orders or associations. Members usually have other financial benefits beyond purchasing insurance, i.e. access to scholarship funds, discounted products, etc. This type of insurance is not common today, but sometime life insurance is available through non-profit associations.
Limits of insurance, insurance company, named insured and effectives dates are listed on a ____ of ____.
Certificate of Insurance
The Florida Department of Financial Services is managed by the C____ F____ O____.
Chief Financial Officer
Unfair methods of competition and unfair or deceptive acts prohibited
Florida Statute 626.9521 states that no person shall engage in this state in any trade practice, which is defined or determined to be an unfair method of competition or an unfair or deceptive act or practice involving the business of insurance. Any person who violates of this statute is subject to a fine in an amount not greater than $5000 for each non-willful violation and not greater than $40,000 for each willful violation. Many Unfair Trade Practices also result in license suspension or revocation. The following activities are considered Unfair Methods of Competition and Unfair or deceptive acts: Misrepresentations and False Advertising of Insurance Policies Defamation Boycott, Coercion and Intimidation Knowingly making false statement and entries Promising returns or profits as an inducement to insurance Unfair discrimination Unlawful rebates Unfair claim settlement practices Failure to maintain complaint handling procedures Complete definitions of all Unfair Trade Practices are listed in the Florida Statutes. The statutes are available online at the FLDFS web site or in Florida insurance study manuals.
There are two sections of questions on the state exam. The first set of questions are taken from units 2-16. The second set of questions focus on the Unit 17 topics which include state laws which are known as F____ S____.
Florida Statutes
This unit covers Selected Florida Statutes.
Florida Statutes are state laws as they apply to the insurance industry. It is the responsibility of licensed agents to know and uphold these laws. Students will learn the duties and functions of the Department of Financial Services and the Chief Financial Officer, as well as the Division of Agents and Agencies and the Office of Insurance Regulation. Insurance definitions and agent licensing and appointment is also covered in this chapter. This unit concludes with a unit examination. A passing grade of 70% is required to proceed to the next unit. An overall grade of 70% is required to pass the pre-licensing course. This unit makes up 15% of the state licensing exam. It is a separate section on the state licensing exam.
What is the name of the association that helps insurance buyers deal with unauthorized insurance companies?
Florida Surplus Lines Service Office
The next step to building sound ethics is understanding the difference between morals and ethics.
Morality is defined as obedience to something that is enforceable - right or wrong? Determining what is moral is based on: Legality - is it violation of the law Truth - what is not true is typically wrong and therefore immoral Moral standards - what is accepted by society as morally right On the other hand, ethics is defined as obedience to something that is unenforceable. Ethics takes the insurance agent to a higher standard. It involves doing what is right because you want to - not because you have to. Attributes of ethics include: loyalty, honesty and commitment.
MEWA is an abbreviation for ____-____ ____ ____.
Multiple-Employer Welfare Arrangement
Roof Features
Roof shapes are important to wind mitigation. There are two primary roof shapes - gable and hip. Gable roofs do not receive a discount and hip roofs do receive a discount. This is because hip roofs deflect the wind better and offer more resistance to wind damage.
Unfair Claim Settlement Practices
Settling a claim based on an altered application Material misrepresentation Failure to adopt and implement a proper investigation Misrepresenting pertinent facts and/or provisions relating to insurance coverage Failure to acknowledge and act promptly on communications Failure to provide a written statement when requested Failure to provide a reasonable explanation for denial of a claim Failure to notify the insured of additional information needed for the processing of a claim Failure to clearly explain the nature of requested information
ERISA "Pre-emption" and State Insurance Regulation
Some of the legal issues with ERISA regulations involve the concept of "pre-emption". Pre-emption is the claim that the insuring entity and the health plan are not subject to state insurance regulation. The concept of pre-emption refers to ERISA Section 514(a). This section states: ERISA supersedes any and all state laws insofar as they...relate to any employee benefit plan.
As a result of the terrorist act of 9-11-2001, Congress passed the ____ ____ ____ Act.
Terrorism Risk Insurance
Fair Credit Reporting Act (FCRA)
The Fair Credit Reporting Act (FCRA) is a federal law that governs how a credit reporting agency (CRA) handles your credit information. It is designed to protect the integrity and privacy of your credit information. The FCRA requires credit reporting agencies to ensure that your information is fair and accurate, and kept private. The FCRA protects your right to access and correct any inaccuracies in your credit report and provides you with remedies if a credit reporting agency or information furnisher violates your rights.
License Revocation or Suspension
The following activities may also result in an insurance license being suspended or revoked: Transacting business outside the scope of a license Misrepresentation or fraud Using discriminatory practices Making false entries on an application Defaming another agency or company Demonstrating a lack of reasonable knowledge or technical competence Misappropriation of funds Failure to inform the DFS in writing within 30 days after pleading guilty or no contest to a felony Specific examples of Unfair Trade Practices Sliding is selling an ancillary product with an insurance policy and indicating the entire package is required by law. An example of this is packaging a motor club membership with PIP/PD and indicating the entire package is required by law. Churning is the practice where existing policy values are used to purchase another policy with the same insurer for the purpose of earning additional profits or premium. Twisting is knowingly making misleading representations or fraudulent comparisons or material omissions with respect to insurance or insurance companies for the purpose of getting a customer to switch companies.
Examination of Books and Records
The office of the Chief Financial Officer conducts regular audits on insurance companies. During these audits the FLDFS may request an examination of an insurance company's books and records. Audits are conducted for various reasons, including: rates checks proper settlement of claims adjustments license compliance financial stability
Agent Responsibilities
The relationship between the agent and the insurance company is known as a fiduciary relationship. This establishes the agent's duty to act in the best interests of the insurer. This duty extends through all actions the agent takes in which the insurer's interest is at stake, especially proper handling of premiums, solicitation of business, full disclosure of pertinent facts related to applicants, following insurer directives and exercising due care in their dealings. The most obvious fiduciary duty -- one with which agents are generally familiar -- is the duty to account for premiums. Premiums must not be converted for personal use. Agents who do so are guilty of "embezzlement" -- a criminal offense ranging from a misdemeanor if the amount is $300 or less, to a felony, if the amount is more. If the agent deposits the applicant's premiums in a bank account, the agent should be sure to maintain a separate bank account for that purpose to avoid the appearance of impropriety. Florida law requires that agents maintain records of premium payments for at least three years. Also, premiums accepted by the agent must be submitted to the insurer on a timely basis.
Ethics - What is it?
The word "ethics" comes from the Greek word "ethos" which means "custom". When used in Greek society, it generally referred to "proper modes of conduct". Ethical behavior is more than just not breaking the law. It is the product of ingrained attitudes, personal respect, and ideals of service to others in an unselfish manner. Altruism is a term that is closely related to agent ethics. Altruism is defined as "consciously seeking and serving the welfare of others". The opposite of Altruistic would be "selfish" or putting your own interests above the interests of others.
Ethics is obedience to something that is u____.
unenforceable.
What are the three exceptions to the MEWA definition?
Union Plans, Association Plans, Professional Employer Organization (PEO)
Error and Omission claims are a result of two things. Those can be: u____ b____ and h____ e____.
unethical behavior, human error
An insurance adjuster settles a claim without notifying the insurer of additional information they need to process the claim. This is known as an u____ c____ s____ p____.
unfair claim settlement practice
Lesson 1
When we consider our ethical practices in dealing with insurance customers, several conflicts come to mind. One of the forces driving agent behavior is cost to the company. This often conflicts with satisfying the needs of the customer. Agents and service representatives have to deal with pressure from the company, volume commitments/goals, trips and contests and contingent commissions, based on total premium volume and loss ratios. These all add to decision-making that ultimately affects ethical decisions. Just as the insurance agent is aware of decisions that impacts cost, consumers are increasingly more demanding. This sometimes provides temptation for unethical behavior. Agents may be tempted to counsel insurance coverage or offer legal advice. The impact of unethical behavior affects the entire company. Rates may ultimately go up for everyone causing the company to be uncompetitive in preferred markets, and error and omissions claims may increase.
Personal Ethics
Where do we get our values? Parents Friends Religion Community School Media Other role models Examples of the values you received from these sources may include the Golden Rule, truthfulness, respect, treating people with dignity, etc.
The two areas of insurance most affected by unauthorized entities are w____ c____ and h____ insurance.
Workers compensation, health
Fraud is defined as
a false statement intended to deceive the insurer and to encourage the insurer to part with something of value or to surrender a legal right. Fraud is intentional and it can only be determined by a court of law in the appropriate jurisdiction. Controlled Business An agent may not seek a license for the purpose of writing controlled business. This term refers to the amount of insurance countersigned, issued or sold by an agent to members of the agent's immediate family, the agent's employer or employees, or any organization with which the agent is associated. Florida limits the amount of controlled business that may be written to 50%. If the premium or commissions on controlled business exceed this percentage, the agent's license may be suspended, revoked, or not renewed. **Do not confuse controlled business with controlled lines which is covered under PAF in unit four.
Unfair Discrimination involves many areas of insurance, so there are several definitions. An insurance company and/or an agent cannot discriminate:
between individuals of the same actuarially supported class against individuals who have sought medical or psychological treatment for abuse. Abuse is defined as: attempting or committing assault, battery, sexual assault or sexual battery False imprisonment Physically or sexually abusing a minor child An act of domestic violence
In order to transact business within the state of Florida, the insurance company must hold a ____ of ____.
certificate, authority
Knowingly making false written or oral statements about another person is ____.
defamation
The Chief Financial Officer is an ____ official and a member of the Florida ____.
elected, cabinet
A relationship that takes into account the best interest of others is known as a ____ relationship.
fiduciary
What is the name of the association that protects policyholders against insolvent insurance companies?
florida insurance guaranty association
A company that has its home office in another state, but transacts insurance business within the state of Florida is known as a ____ company.
foreign
The Office of Insurance Regulation protects the public against ____.
fraud
A G____ L____ Agent license is required to sell P&C, surety or health insurance.
general lines
ERISA covers only ____ insurance plans.
health
Which of the roof shape receives a discount?
hip
The owner of an insurance company commits fraud causing the company to fail financially. This type of insurance fraud is known as i____.
insolvency
The Florida Insurance Guaranty Association handles claims for i____ P&C insurance companies.
insolvent
A company owned by policyholders is known as a ____ company.
mutual
A plywood roofing desk can qualify for a discount if it is attached with the right n_____s at the right i_______s.
nails, intervals
For a covering to receive an impact resistant, it must pass the n____ - p____ m____ test.
nine-pound missile
A company that has not been approved by the Department of Financial Services is a ___-____ company.
non-admitted
Another name for Surplus Lines insurance is n__ - a____ insurance.
non-admitted
Knowingly making fraudulent statements about an insurance competitor is known as ____.
twisting
A General Lines Agent license is also known as a _-__ license.
2-20
Certificate of Insurance
A certificate of insurance is a used to provide information on specific insurance coverage. The certificate provides verification of the insurance and usually contains information on types and limits of coverage, insurance company, policy number, named insured, and the policies' effective periods.
Name one consequence for aiding and abetting an unauthorized insurer
Any of these 3 answers are correct: Conviction of a 3rd degree felony; liability for unpaid claims; suspension or revocation of insurance licenses
Hearings & Penalties
Frequently the Department of Financial Services subpoenas a person to testify at hearings. These hearings may involve insurance fraud, license compliance, claim settlements, etc. If a person is subpoenaed and they are non-compliant with the subpoena, the individual who was subpoenaed is liable for the costs of the legal proceedings. Penalties for non-compliance include monetary fines, and/or refusal, suspension, or revocation of insurance licenses and/or appointments.
Private information of individuals is protected by the ____ ____ ____ Act.
Gramm Leach Bliley
Proof of Loss
If you have filed an insurance claim, you need to understand what a Proof of Loss form is. The requirements of what needs to be included in a proof of loss will most likely be stipulated within your insurance policy. Simply put, a proof of loss is a form provided by the policyholder to the insurance company in support of their claim, it will typically include basic facts about the loss that occurred and set the amount of the loss. Most companies only require this form upon their request and once requested you will have 60 days to provide it to them. However, there are some companies that state in their policy that you are to submit a sworn Proof of Loss within 60 days of your loss. As you can see this is similar wording with very different meanings. Regardless of the wording, do not discount this very important form. If it is your requirement to file it within 60 days, file it regardless of whether they ask for it or not. This is a policy condition and you do not want to fail to comply with it as it can be detrimental to your claim. The truth is that the insurance company is going to send out an adjuster that is paid and trained by the insurance company to represent them through the claim process, you too need representation
Terrorism Risk Insurance Act
In addition to the risk of natural disasters, the insurance industry faces the threat of terrorist attacks. Losses stemming from the destruction of the World Trade Center and other buildings by terrorists on September 11, 2001, totaled about $31.6 billion in 2001 dollars. About two thirds of these losses were paid for by reinsurers, companies that provide insurance for insurers. Concerned about the limited availability of terrorism coverage in high-risk areas and its impact on the economy, Congress passed the Terrorism Risk Insurance Act (TRIA). The Act provides a temporary program that, in the event of major terrorist attack, allows the insurance industry and federal government to share losses according to a specific formula. TRIA was renewed again for six years in January 2015. The new law is known as the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) of 2015.
Which division is responsible for enforcing Florida Statutes (Insurance laws)?
The Bureau of Investigation
Who may require hearings when there is the appearance of a violation or wrongdoing?
The Chief Financial Officer
The Duties of the Chief Financial Officer
The Chief Financial Officer (Insurance Commissioner) administers insurance laws. It is the job of the CFO to: investigate the practices of anyone involved in the insurance industry hold hearings issue cease and desist orders approve policies and rates revoke or suspend an insurance company's license to do business collect fine and penalties when a company fails to comply with insurance rules and regulations The Chief Financial Officer issues Certificates of Authority, which allow companies to sell insurance in the state of Florida.
Gramm Leach Bliley Act
The Gramm-Leach-Bliley Act (GLB Act or GLBA) is a federal law enacted in the United States to control the ways that financial institutions deal with the private information of individuals. The Gramm-Leach-Bliley Act is a very robust federal information privacy and security law. GLB contains rules regarding the privacy of "nonpublic personal information" collected by financial institutions. As for insurance companies, the GLBA is enforced under state insurance law - by state insurance authorities. The Act consists of three sections: The Financial Privacy Rule, which regulates the collection and disclosure of private financial information. The Safeguards Rule which stipulates that financial institutions must implement security programs to protect such information. The Pretexting provisions, which prohibit the practice of accessing private information using false pretenses. The Act also requires financial institutions to give customers written privacy notices that explain their information-sharing practices.
Code of Ethics
The Independent Insurance Agents and Brokers of America, Inc. has developed a Code of Ethics for insurance companies and agents. Since the Personal Lines Agent acts for the insurance company this code is especially appropriate. It is important that the insurance agent honor the integrity of their designation and assist in maintaining professional standards in the insurance industry.
What limits the scope ERISA Section 514(a)?
The Savings Clause Congress never intended that ERISA would relieve any person from any law of any state that regulates insurance. This is stated within the ERISA law. This paragraph is referred to the "savings clause".
17.5 Selected Florida Statutes
The following statutes are a summary of selected Florida Statutes that have a greatest impact on studying for the state exam. The Florida State Study Manual has more detail on each of these statutes. The online course overview is designed to assist you in studying this important unit. The Chief Financial Officer As a statewide elected officer of the Florida Cabinet, the Chief Financial Officer oversees the Florida Department of Financial Services. The CFO is elected every four years and is a member of the Florida Cabinet. The FLDFS is a multi-division state agency responsible for management of state funds and unclaimed property, assisting consumers who request information and help related to financial services, and investigating financial fraud. The FLDFS is also the state organization responsible for monitoring the Florida insurance markets.
Summary
There is a great deal of material covered in Unit 17 relating to Florida Statutes. Florida Statues is another way of saying Florida law. This is an important unit for a couple of reasons. First, it is important that you understand insurance laws so you are careful not to break the law as a new agent. Failure to comply with these laws is cause for suspension or revocation of your insurance license. Second, the material in this unit is one of the most heavily tested areas on the state exam. The state exam is divided into two sections. The first section is made up of 150 questions that are taken from content in units 1-16. The second section has 25 questions on Florida Statutes. Many test questions on the state exam seem to be taken from the topics emphasized in this unit. Selected Florida Statutes (17.) in the state study manual seems intimidating. It is lengthy and the wording sometimes makes it hard to understand. The following is a list of what you need to focus on for the state exam from the Florida Statutes section of the state manual. This does not mean that this is the only information covered on the exam, but these are the areas of focus. Finally, you are not required to know specific Florida Statutes by number. Topic Duties of the Florida Department of Financial Services Insurance and Self-Insurance Domestic, foreign and alien companies Authorized and unauthorized insurers Certificate of Authority Continuing education requirements Notice of change of address Definitions for Rebating, Twisting, Churning, Sliding and Misrepresentation Grounds for suspension or revocation of license Purpose of license Qualifications for general lines agent's license Have a general understanding of unfair methods and deceptive acts or practices Stock and mutual insurers You also need to have a basic understanding of the following: Fair Credit Reporting Act (FCRA) Terrorism Risk Insurance Act Graham Leach Bliley Act
What government agency is responsible for enforcing ERISA?
U.S Department of Labor
An agent may not obtain an insurance license for the purpose of selling only to family members or friends. This is known as ____ ____.
controlled business
The Fair Credit Reporting Act protects the privacy of your ____ information.
credit
Rebating is
giving any valuable consideration, usually all or part of the commission, to the insured as an inducement to buy or renew. Rebating is allowed in accordance with a rebating schedule which is uniformly applied to all insureds who purchase the same policy. Advertising gifts is permitted if the cost of the merchandise does not exceed $25.00. Free insurance is prohibited. This also includes reducing the regular cost of insurance. Coercion is exerting intimidation or unreasonable restraint in the business of insurance.
Misrepresentation
is knowingly making false or fraudulent written or oral statements involving: applications negotiations fees and commissions any other benefit of insurance material omissions, including failure to advise the insured of a pre-existing condition clause in a replacement policy
Defamation is
knowingly making, publishing or circulating, directly or indirectly, any statement about another person which is: false maliciously critical derogatory intended to injury
Making false entries on an insurance application may result in your insurance license being suspended, terminated or r____.
revoked
MEWA provides one or more insurance benefits to employees of ____ or more employers.
two
The wind mitigation discount applies only to the ____ portion of the premium.
wind
Certain areas of Florida are more susceptible from wind-borne debris. These areas are known as w___-b____ d____ regions.
wind-borne debris
Certificate of Authority
A Certificate of Authority is issued by the Department of Financial Services and it allows an insurance company to transact (write) business in the state of Florida. Authorized, Unauthorized and Eligible Companies Insurance companies are also either authorized or unauthorized. Authorized companies hold a certificate of authority that allows them to transact business in Florida Unauthorized companies do not have a certificate of authority so they are not allowed to transact business in Florida. The penalty for representing an unauthorized insurer is a 3rd degree felony and personal liability for all unpaid claims
Building Sound Ethics
Although it seems that ethical issues are not always clear-cut, they are often not us unclear as we might think. The Florida General Lines Study Manual gives the following example: Florida Statute 626. 730 Purpose of License - The purpose of a license issued under this code to a general lines agent, personal lines agent, or customer service representative is to authorize and enable the licensee actively and in good faith to engage in the insurance business as an agent or customer representative with respect to the public and to facilitate the public supervision of such activities in the public interest, and not for the purpose of enabling the licensee to receive a rebate of premium in the form of commission or other compensation as an agent or customer representative or enabling the licensee to receive commissions or other compensation based upon insurance solicited or procured by or through him or her upon his or her own interests or those of other persons with whom he or she is closely associated in capacities other than that of insurance agent or customer representative. This statute states that the main objective of an agent is always the public interest. Although the statue does not give a specific definition of ethical behavior, it does give clear direction for the insurance agent. The agent should act in the best interest of the public and not in the interest of commission or compensation.
Admitted and Non-Admitted Companies
An insurance company that is "admitted" has been approved by a state's insurance department. This means that an insurance company is "admitted by the state insurance department." This status means that... The insurance company must comply with all state regulations regarding insurance In the event that the insurance company fails financially, the state will step in to make payments on claims as necessary. An insurance company that is "non-admitted" has not been approved by the state's insurance department. This means that... The insurance company does not necessarily comply with state insurance regulations. If the insurance company becomes insolvent, there is no guarantee that your claims will be paid, even if your case is active at the time of the bankruptcy or financial failure. If a policyholder thinks his or her case was handled improperly, he or she cannot appeal to the state insurance department.
The Florida Department of Financial Services performs the following insurance-related duties:
Approves the issuance of licenses to qualified agents, customer service representatives and adjusters Supervises claims activity to assure fair treatment and prompt settlement to policyholders Investigates and takes action on charges of unethical conduct The Florida Department of Financial Services does not: Set rates Make underwriting rules
Association Plans
Association Plans are not exempt from state regulations for two reasons: There is no employer-employee relationship They must be fully insured Professional Employer Organization (PEO) are not exempt from state regulations because there is not an employer/employee relationship and the original employer controls the common law incidents of employment, such as: hiring and firing employee performance evaluations employee discipline compensation hours, location, nature and method of the work performed Possible Consequences for Aiding and Abetting an Unauthorized Insurer and for Acting as an Insurer without Proper License Conviction of a 3rd degree felony Liability for all unpaid claims Suspension or revocation of all insurance licenses
17.3 Insurance Discounts for Wind Mitigation
Background In 2007 a special session of the legislature established a requirement for insurance companies to give wind mitigation discounts. These discounts apply to the wind portion of the homeowner insurance premium. The discounts are for certain construction and protection features that reduce the risk of windstorm damage. Customers who upgrade their homes or construct new homes that withstand hurricane wind damage are eligible for these discounts. The Florida Comprehensive Hurricane Damage Mitigation Program was established within the Florida Department of Financial Services to provide assistance to Floridians on how they can reinforce their homes. Eligible homeowners may receive free inspections. Every licensed agent and service representative in Florida is now required to complete one hour of continuing education on Wind Mitigation and premium discounts every two years. The discounts are mostly impacted by the roof. The list of specific features that affect discount eligibility are: Roof shape Roof covering Roof decking Roof to deck attachment Roof to wall connection Opening protection Miscellaneous credits
Opening Protection
Certain areas of Florida, such as along the coast, are designated as wind-borne debris regions. This means these areas are more susceptible to damage from debris that is blown around by high winds. If openings in the home, i.e. windows, doors, skylights, sliding doors and garage doors are either manufactured to withstand the debris, or covered by storm shutters that are manufactured to withstand wind-borne debris, they may receive a discount. For a covering to receive an impact resistant rating, it must pass the nine-pound missile test. This test involves shooting a nine-pound 2X4 wood stud out of a cannon at 35 miles/hour to see if the window or shutter can withstand the impact.
Codes of Ethics
Codes of ethics are designed to help individuals reach a higher level of responsibility. They provide a standard or measurement for applying values to the workplace. Some examples of core values include: Honesty and truth Responsibility and accountability Respect and tolerance Fairness and justice Compassion and caring Codes of ethics are: expressed in general terms rather than being detailed brief and easily memorized express shared, basic values set standards at a higher level than basic compliance laws
The Savings and Deemer Clauses
Congress never intended that ERISA would relieve any person from any law of any state that regulates insurance. This is stated within the ERISA law. This paragraph is referred to the "savings clause". Another clause within the law is known as the "deemer clause". This means that a legitimate ERISA plan providing health benefits cannot be "deemed" to be an insurance company or to be engaged in the business of insurance. Also ERISA plans may not take profits or be marketed to others. This is the business of insurance companies - not ERISA plans. What types of employers use ERISA? 1. Large companies with sufficient assets to handle the costs if contributions to the plan are insufficient to cover expenses of the plan 2. Corporations with many employees among which to spread the risk 3. Companies with the financial expertise to handle the risk planning ERISA Pre-emption and State Regulation
Miscellaneous Mitigation Credits
Discounts can also be given for Gable End Wall Bracing. This involves bracing the joint between the wall and the gable end. This substantially reduces wind damage to a gable roof. Secondary Water Resistance This discount is given for homes that are equipped with panels that act as barriers to water penetrating the roof. "Peel and seal" strips, flashing tape or other adhesive materials that applied to the underside of the roof may also apply for a discount. Insurance Company Requirements It is important to remember that the Wind Mitigation Discount applies only to the wind portion of the homeowner premium - not to the total premium. Qualifying for the Discount - Although you can make some assumptions with homes that were built after 2001 (according to the Florida Building Code), insurers usually require inspection reports to substantiate the credit. Consumers may pay a qualified contractor to provide the report or they can obtain a free inspection through the Florida Comprehensive Hurricane Damage Mitigation Program by visiting www.mysafefloridahome.com The Uniform Mitigation Verification Inspection Form (OIR-B1-1802) should be used when reporting wind mitigation features.
17.2 Agent Pre-Licensing Training: Ethics
Ethics and the Insurance Industry In many businesses, the code of ethics is focused on corporate compliance - let's not break the law. Ethical behavior is more than striving to not do wrong. Instead it is determining to do right. Business ethics aims at creating a culture in which the company's employees conduct business responsibly. Sometimes agreement on what is meant by "conducting business responsibly" does not translate well and it's difficult to establish a common understanding. Some organizations choose to use terms like integrity, honesty, or fairness. Ethics is closely related to altruism because it requires unselfish behavior. Recent business scandals, particularly related to government contracts brought about a focus on corporate compliance. Many large companies have Corporate Compliance Offices and programs. Some have been criticized for focusing more on the letter of the law than the spirit of the law. The following area will attempt to define ethical behavior. Ethical behavior is so important to the insurance industry that agents are required to complete five hours in ethics continuing education every two years.
Lesson 1
If you're a stock car fan you may have heard of Pete Orr. Pete was a racing legend in Florida amassing over 300 victories during his career. At the age of 46 Pete lost his battle with cancer. What makes his death even more tragic is that he left over $250,000 in unpaid medical bills because he was a victim of an insurance scam. He, and 7,200 other Floridians, bought insurance from TRG Marketing LLC of Indianapolis - an unlicensed entity. Pete's situation inspired some influential people to take a serious look at unauthorized entities selling insurance in our state. Senate Bill 1680 (called the Pete Orr Bill) was passed allowing felony charges to be brought against these types of entities and the agents who represent them. The bill also allows for insureds to sue these operators and unlicensed entities in civil court. Around 1974 problems with unauthorized health insurance entities increased. This resulted in the Employee Retirement Income Security Act (ERISA). ERISA gives the U.S. Department of Labor responsibility for enforcing the law involving unauthorized entities. More specifically the Pension & Welfare Benefits Administration (under the U.S. Department of Labor) has direct involvement.
Unit Overview
In unit seventeen the student will learn about unauthorized insurance entities, insurance ethics, wind mitigation and the Insurance Guaranty Association (FIGA). Participants will be able to discover how the Florida Insurance Guaranty Association protects consumers against outstanding claims when an insurance is insolvent (no longer in business). Students will also learn about the Surplus Lines Insurance and the role the Florida Surplus Lines Office (FSLSO) plays in regulating non-admitted insurance. Participants will be able to discuss how ethical behavior relates to the insurance industry from the perspective of the insurance agent and the company. Students will learn the business value of ethical behavior and learn how unauthorized entities threaten ethical insurance behavior. Since Florida is a hurricane state, this unit focuses on the wind discounts available to consumers in the state. Wind mitigation is an issue important to homeowners in a state that faces the risk of hurricanes each year. Insurance discounts are provided to insured to take extra measures to protect their homes against the risk of high winds caused by hurricanes and other tropical storms.
Insurance Guaranty Associations
Insurance guaranty associations provide protection to insurance policyholders and beneficiaries of policies issued by an insurance company that has become insolvent and is no longer able to meet its obligations. Most states have two types of guaranty associations: a life and health guaranty association and a property and casualty insurance guaranty association. If an insurance company has insufficient assets to pay policyholder claims, a guaranty association will obtain funds by assessing member insurers that write the same kind of business as the insolvent insurer. These assessments (together with the assets of the insurer) are then used to pay, up to statutory limits, the covered claims of policyholders of the insolvent company.
Summary
Insureds who take precautions to protect their homes from the high winds that accompany Florida storms and hurricanes are eligible for property discounts. Customers who upgrade their homes or construct new homes that withstand hurricane wind damage are eligible for these discounts. These discounts are for certain construction and protection features that reduce the risk of windstorm damage and they apply only to the wind portion of the homeowner insurance premium. There are seven features that qualify for discounts: Roof shapes Roof covering Roof decking Roof and deck attachment Roof to wall connection Openings protections Secondary water resistance Every licensed agent and customer service representative is required to complete one hour of continuing education every two years on the subject of premium discounts on property for wind mitigation. See Florida Statute 626.2815. The Uniform Mitigation Verification Inspection Form must be used by a licensed inspector to verify the existence of the discount. The Florida Surplus Lines Service Office (FSLSO) oversees the surplus lines industry. Surplus lines insurance applies to situations where the state's licensed insurers are unable to meet the needs of the buyer. Surplus Lines deals with non-admitted or unauthorized insurance companies through specially licensed brokers. Sometimes an insurance company goes out of business. This is known as insolvency. The Florida Insurance Guaranty Association (FIGA) was created to protect consumers against insolvent insurance companies. The Florida Insurance Guaranty Association is funded by assessing all insurance companies. This assessment is capped at 2% of a company's net direct premium and an additional 2% for emergency assessments for hurricanes. The maximum amount the FIGA will cover for a claim is $300,000. If there is damage to both the structure and personal property, the FIGA will pay an additional $200,000. All claims have a $100 deductible.
The MEWA Issue
MEWA is an abbreviation for Multiple-Employer Welfare Arrangement. These are risk-bearing entities defined as employee welfare benefits plans that are established to provide one or more insurance benefits (including health insurance) to employees of two or more employers. In other words, a MEWA cannot be a single-employer plan to exempt it from state insurance regulation. MEWAs are not exempt from state insurance regulation. ERISA recognizes MEWAs so there is a coexisting state and federal regulatory authority over most MEWA employee welfare benefit plans. Special Rules of Pre-emption apply to MEWAs that meet the ERISA definition and that are also employee welfare benefit plans: If fully insured the MEWA is subject to state insurance laws If not fully insured, the MEWA is subject to all state insurance laws not inconsistent with ERISA - unless exempt because of other U.S. Department of Labor regulations. If MEWA is exempted, it is subject to state insurance regulations in the same manner as a fully insured MEWA. If MEWA is not an employee benefit plan, there is no pre-emption and it is subject to full state insurance regulation.
The agency that enforces the law for the Department of Financial Services is the O_______ of I_________ R________.
Office of Insurance Regulation
There are two divisions in the FLDFS that are directly related to the insurance industry. They are the Division of Agents and Agency Services and the Office of Insurance Regulation.
The Division of Agents and Agency Services The Division of Agents and Agency Services is comprised of the Bureau of Licensing and the Bureau of Investigation. The Bureau of Licensing is responsible for the licensure and appointment of all life, health and variable annuity agents, property and casualty insurance agents, bail bond agents, title agents, customer representatives, adjusters and insurance-related entities and firms authorized to transact insurance in Florida. Annually, the bureau receives and reviews close to 70,000 applications for insurance licenses. The bureau oversees the qualification, examination, licensing and continuing education of more than 235,000 licensees. Through execution of its programs, the bureau ensures that licensed insurance representatives are trustworthy, qualified and competent to engage in the business of insurance.
Code of Ethics Summary
Summary Unfortunately for the insurance industry, unauthorized entities exist to make money and Florida is no exception. The McCarran-Ferguson Act was passed that allows states to regulate insurance. ERISA stands for Employee Retirement Income Security Act. The ERISA Law was passed by Congress and gave the United States Department of Labor responsibility for enforcement of this law. ERISA deals with employee health and welfare benefit plans. The only health benefits that preempt the Florida Insurance Code are single employer plans that are 100% self-insured and no sales commissions or profits are generated. This is an important distinction. The term "pre-emption" means that ERISA health plans and sponsoring entities are not subject to state insurance regulation. ERISA plans have a "savings" clause and a "deemer" clause. Also ERISA plans are not intended to be marketed to several employers or multiple self-employed individuals. Once the plan goes in that direction, it is no longer ERISA, but a MEWA plan. MEWA stands for Multiple Employer Welfare Arrangement. MEWAs are not single employer plans and they are regulated by the Florida Insurance Code. Pre-emption rules for MEWAs are: Fully insured - Subject to state insurance laws Not fully insured - subject to state insurance laws Not employee benefit plans - no pre-emption and subject to state insurance laws MEWA plans include: Union Plans, Association Plans and Professional Employer Organizations (PEO) The penalties for an unauthorized insurer are: Conviction of a 3rd degree felony Liability for all unpaid claims Suspension or revocation of all insurance licenses A study of unauthorized entities helps us to better understand the importance of ethical behavior in the insurance industry. Ethics are not always black and white, but if you remember the purpose of receiving an insurance license, it helps to keep a focus on ethical behavior. This unit emphasizes that the purpose of an insurance license is for public interest and not for the agent to receive a commission. Once again read the "Purpose of License--" Florida Statute 626. 730 and think about your personal code of ethics are you look forward to receiving an insurance license.
The following topics are not part of the Florida State Study Manual, but these topics are listed in the "What to Study" area at the beginning of the manual.
Surplus Lines Insurance Surplus Line insurance is a form of insurance in which insurance buyers can deal with non-admitted or unauthorized insurance companies through specially licensed brokers. This is applicable in a situation where the state's licensed insurers are unable to fulfill the buyer's insurance needs. Surplus lines insurance is also known as non-admitted insurance. Florida Surplus Lines Service Office (FSLSO) In 1997, the Florida Legislature created the Florida Surplus Lines Service Office (FSLSO), a self-regulating, nonprofit association. A condition of holding a surplus lines agent's license in Florida is that all surplus lines agents are recognized as members of this association. The FSLSO was created to oversee and provide order to the surplus lines industry in the state. It helps agents maintain compliance with the rules governing the sale of surplus lines insurance. The FSLSO mission is to facilitate agent compliance. The Surplus Lines Law provides orderly access for the insurance buying public to insurers not authorized to transact insurance in Florida unless conducted through licensed and supervised resident and nonresident surplus lines agents in the state of Florida. Oversight of FSLSO is provided by a Board of Governors and the Florida Department of Financial Services.
17.4 Florida Insurance Guaranty Association
The Florida Insurance Guaranty Association The guaranty association in Florida was created by legislation and handles the claims of insolvent property and casualty insurance companies. According to the Florida Insurance Guaranty Association Act, the FIGA have a duty to settle claims in accordance with the Act, the policy and Florida insurance laws, in a timely manner. The Florida Insurance Guaranty Association follows the requirements of Florida insurance law in its handling of covered claims from insolvent property and casualty insurance companies.
Florida Insurance Guaranty Association
The Florida Insurance Guaranty Association establishes and maintains a service-oriented operation for processing covered claims of insolvent members. FIGA is a nonprofit corporation created by the Florida Legislature in 1970. FIGA services pending claims by or against Florida policyholders of member insurance companies which become insolvent and are ordered liquidated. FIGA's membership is composed of all Florida licensed direct writers of property or casualty insurance. The maximum amount the Florida Insurance Guaranty Association will cover for a claim is $300,000. If the damage on a homeowner claim also includes contents as well as the structure, then FIGA will pay an additional $200,000. All claims are subject to a $100 deductible.
Continuing Education
The continuing education requirement to maintain a license is: Customer Service Representative (4-40) - 10 hours every two years Limited Customer Service Representative (4-42) - 10 hours every two years in personal lines auto General Lines Agent (2-20) - 24 hours every two years Personal Lines Agent (20-44) - 24 every two years General Lines Adjuster (6-20) - 24 hours every two years A newly licensed agent/adjuster/service rep is not required to complete continuing education hours during their first compliance period (two years).
Suspension, Termination or Revocation of a License
The following activities may result in an insurance license being suspended or revoked: Failure to meet licensing qualifications (see unit 1) Material misrepresentation or fraud Failure to pass qualifying examinations Transacting business outside the scope of a license Using discriminatory practices Making false entries on an application Defaming another agency or company Demonstrating a lack of reasonable knowledge or technical competence Demonstrating a lack of fitness or trustworthiness Misappropriation of funds Failure to inform the DFS in writing within 30 days after pleading guilty or no contest to a felony Unlawful acts
Agent Licensing Insurance Licenses
There are several Florida insurance licenses. A General Lines Agent license (2-20) is necessary to write property & casualty, surety or health insurance A Personal Lines Agent license (20-44) is necessary to write personal lines of property and casualty insurance A Customer Service Representative (4-40) must be appointed by a general lines agent. They may transact insurance business within an agency office A Limited Customer Service Representative license (4-42) must also be appointed by a general lines agent. They may transact personal auto business with in an agency office A General Lines Claims Adjuster license (6-20) is necessary to investigate, evaluate, and negotiate claims. The claims adjuster license may be either: A 6-20 license is a company employee adjuster's license A 5-20 license is an independent adjuster's license A 3-20 license is a public adjuster's license
Particular Situations
There are three exceptions to the MEWA definition. They are: 1. Union Plans 2. Association Plans 3. Professional Employer Organization (PEO) Union Plans Most Union Plans are subject to insurance law. The only exception are the plans the U.S. Department of Labor has approved after reviewing the bargaining agreements between the union and their employers. Union Plans: can be an exception to MEWA must have an "express finding" made by the U.S. Department of Labor without an express finding are subject to state regulations
Roof Deck Attachment
This refers to how the roof is attached to the trusses. Although a plywood roof decking does not apply for a discount, if it is attached using 8d common nails at six-inch intervals along the edges and 12-inch intervals in the field, it qualifies for a discount. The method of attachment must be in accordance with the 2001 Florida Building Code. Roof to Wall Connection This refers to how the roof trusses are attached to the wall framework. The use of straps and clips in accordance with the building code may qualify for the wind mitigation discount.
Definitions
Transacting insurance means: Soliciting insurance Negotiation of insurance Effecting insurance (placing coverage in effect) Handling insurance matters after insurance has been placed in effect Domestic, Foreign and Alien Companies Insurance companies doing business in Florida are classified as domestic, foreign or alien. Domestic companies have their home office in Florida. They do business in Florida, and they may also coverage in other states as well. Foreign companies have their home office in another state, but they sell coverage in Florida Alien companies are classified as other than domestic or foreign. An example of an alien company is Lloyds of London.
17.1 Agent Pre-Licensing Training:
Unauthorized Insurance Entities Major Regulatory Premise Since insurance is provided for the interest of the public, the state regulates the insurance business. The McCarran-Ferguson Act was passed in 1945 and gives states the authority to regulate the business of insurance without interference from federal regulation, unless federal law specifically provides otherwise. Unauthorized Entities: Basic History, Overview and Rationale Unauthorized entities are insurance companies operating within the state who are not authorized by the state to sell insurance. Health insurance and workers compensation are the major areas of insurance affected by unauthorized companies. The insurance market goes through hard and soft cycles and unauthorized entities are usually more active during hard cycles of insurance. In recent years the people responsible for selling unauthorized insurance have become more sophisticated and they have created more complex schemes.
Lesson 1
When Congress passed the ERISA law they intended that only single-employer health benefit plans would preempt the Florida Insurance Code. One of the goals of ERISA was encourage individual employers to establish employee health plans. This allows an employer to self-insure its employees. Only the employees and their dependents of that specific employer can get the benefits of that specific health care plan. The plan is funded by contributions from the employer and/or employees and no sales commissions or profit is generated. This is an important distinction because ERISA scams involve entities making a profit and agents making high commissions.
One of the duties of the Chief Financial Officer is to examine books and records of insurance companies. This is done by conducting regular a____.
audits
When you submit your application for an insurance license, it will be reviewed by the B____ of L____.
bureau licensing
A Certificate of Authority is issued by the C____ F____ O____.
chief financial officer
Unethical practices do not affect just one or two people. Unethical behavior affects the entire ____.
company
A Certificate of Insurance is used to verify the existence of insurance ____.
coverage
It is important to understand wind mitigation discounts in Florida because Florida is unique to the risk of h____.
hurricanes
Ethics is more than "not breaking the law." It refers to the ____ mode of conduct.
proper
The agent must act in the best interest of the p____ and not in the interest of their c____.
public, commission
The FLDFS does not set ____ or make ____ rules.
rates, underwriting
A Code of Ethics is designed to help individuals be more r____.
responsible
Ethical behavior is more than trying not to do wrong. It is determining to do r____.
right
The Bureau of Investigation is responsible for
the regulation, compliance and enforcement of the Florida Statutes, including the insurance rules and regulations. They are also responsible for the investigation of alleged violations of the Florida Insurance Code by licensed agents, customer representatives, adjusters, bail bond agents, and insurance agencies.
