1.2 Producer Regulation (state Regulations) Flashcards
Commissions
Insurance companies or producers cannot pay a commission, service fee, brokerage, or any other valuable compensation for selling, soliciting, or negotiating insurance to a person who is not licensed.
Similarly, a person cannot accept any commission, service fee, or brokerage for selling or negotiating insurance in South Carolina if they are not licensed.
Records Maintenance
Producers must keep records of every insurance transaction for at least 5 years from the last date of contact.
The records must include:
Number, date, term, amount insured, premiums, and the person to whom the policy was issued or renewed.
These records must be available for inspection by the Director at any time.
Misappropriation of Funds
This is the #1 reason insurance agents lose their licenses.
Producers have a fiduciary relationship with insurers, meaning they must properly handle money and responsibilities on behalf of the insurer.
It is illegal for a producer to:
Pretend to represent an insurer they are not authorized to represent.
Collect or do business for an insurer without proper authorization.
Obtain or collect cash advances through false statements.
Refuse or fail to turn over money collected on behalf of an insurer.
A producer who misappropriates funds is guilty of a misdemeanor and may face a fine or up to 2 years of imprisonment.
Fiduciary Responsibility
Producers have a fiduciary duty to handle money correctly when collecting payments from insured individuals or applicants.
The funds collected must only be used for insurance premiums as outlined in the agency agreement.
No other charges may be collected except those specified in the policy or application.
Blank Forms
A producer cannot sign a blank application, contract, or insurance policy or encourage an applicant to do so.
This also applies to tickets or insurance covering accidental personal or property injury, loss, or damage.
If a producer violates this rule, they can be fined up to $200 per offense.
Sharing Commissions
An insurer or producer can pay a commission or other consideration only if the person receiving it has a valid insurance license for the same type of insurance.
Unlicensed individuals cannot accept commissions or compensation for selling, soliciting, or negotiating insurance.
A licensed producer can share part of their commission, but only with the insured (exception noted).
Representing an Unauthorized Insurer
If someone unlawfully solicits, sells, collects, or transmits a premium for an unauthorized insurer (i.e., one that does not have a certificate of authority in South Carolina), it is considered a misdemeanor.
Violators can face fines of up to $2,500.
The individual can also be personally liable for any policies they sell on behalf of an unlicensed or unauthorized insurer, meaning they could be responsible for any claims under those policies.
Fraudulent Insurance Application
A licensed producer who intentionally submits or assists in submitting an insurance application containing false or misleading information is guilty of a felony.
This applies if the misinformation is material to the underwriting of the insurance.
Penalties include up to five years in prison, a fine of up to $5,000, or both.
If a producer knows that information in an application is false and still submits it, they can face these felony charges.
f an insurance agent (producer) knowingly submits or helps submit an application with false or misleading information, it is a felony. This is serious because insurers rely on accurate information to decide coverage and pricing.
Penalties:
Up to 5 years in prison
Fines up to $5,000
Or both
If a producer knows an application contains false information but still submits it, they can be charged with a felony.
