Chapter 1: Insurance Regulation Flashcards
Purpose of licensing
to assure the public is treated fairly and equitably. Protect the public and help them get the most for their insurance expenditure
Licensing Prerequisites
pass exam, apply for license and pay fee, fingerprints
24 hrs PLE, waivers for CPCU,CLU,CIC
Qualification of an applicant
individual who has passed or is exempt from taking the insurance producer licensing exam
18yrs old, read/write English, no prohibited acts, pass exam, residence or business address in PA, finger prints
Producer (resident)
agent representing company- appointment
broker representing consumer- written agreement (surplus lines)
What is the licensing fee for an individual resident and an individual non-resident?
Resident- $55
Non-Resident- $110
Lines of authority- what is it & how they apply to a producer
Insurance coverages; Types of insurance which the producer can sell, solicit or negotiate.
Lines of Authority
- Life
coverage on human lives, benefits of endowments, annuities, disability income and accidental death/dismemberment
Lines of Authority
- Accident and Health or Sickness
Coverage for sickness, bodily injury or accidental death including disability income
Lines of Authority
- Property
coverage for direct or consequential loss/damage to property of every kind
Lines of Authority
- Casualty
coverage against legal liability, including due to death, injury, disability or damage to real or personal property
Lines of Authority
- Variable Life and Annuity
Coverage provided under variable life and variable annuity contracts that involve investment in securities
Lines of Authority
- Personal Lines
Property & Casualty insurance coverage sold to individuals and families primarily for non-commercial purposes
Other lines of authority
Credit Insurance & Motor Vehicle Rental
who qualifies for a temp license
- Surviving spouse or representative of deceased/disabled individual producer
- Designee of licensee who enters active service in military
- Persons involved which commissioner determines the public interest would be served
How do you maintain an insurance license (renewal fees/education)
- each 2 yr license period
Resident fee- $55
Non Resident- $110
Lapsed fee- $165
Timeframes for reporting criminal convictions, address changes or contact information
Misconduct- 30 days after final disposition
Criminal- within 30 days of being charges with conduct, including legal documents
Address Changes- within 30 days of change
license lapse and reinstatement
Failing to renew the license on timely basis, request reinstatement within 1 yr of the renewal date.
- First 60 days following lapse will be reinstated retroactively back to effective date.
- More than 60 days (w/n 1 yr) after lapse, will be reinstated not retroactively, resulting in gap of licensing
- After 1 yr, you have to reapply
activities that carry disciplinary actions from the Insurance Dept.
Acting as producer w/o license
Doing business with unlicensed persons
Representing/advertising as a producer for an nonadmitted insurer
Soliciting applications or insurance for non-existent entities
Rebating (giving back a portion of premium)
Misrepresentation (false statements)
Larceny (theft)
Redlining
enforcement options for insurance dept.
Notice, hearing, evidence, penalties (loss of license, financial up to $5,000 fine, cease and desist)
penalties for
Did not know- $1,000 to $10,000
Did Know- $5,000 to $50,000
Violation of Cease & Desist- up to $10,000
*max is for 6 month period
Consent agreement
penalty paid but no admission of wrongdoing
3 acts that require someone to have a producer’s license
Negotiate- offer to a purchaser
Sell- exchange money for insurance contract
Solicit- attempt to sell/ask/urge person for insurance
general duties and responsibilities of the Insurance Commissioner
investigate and examine the affairs of persons engaged in unfair competition or deceptive act/prohibited practices
collect fees
report illegalities to the Attorney General
Certificate of Authority- what does it do
Permitted to conduct business in another state other than which formed
3 “rules” in rate making
Adequate- enough money/earnings to pay losses/expenses
Not Excessive- Rates unreasonably high; rate is high for insurance type and company’s losses/expenses are low compared to cost of insurance
Not Unfairly Discriminatory
the process companies must follow in filing rates and forms in PA
Every manual, class rate, rating schedule or rating plan and modification. State proposed effective date and extent of coverage
Producer’s fiduciary responsibility
act honestly & faithfully with premiums
separate account for premiums
no co-mingling
who is allowed to be paid commissions and fees
unlicensed person for referring a prospective client to a producer or renewal commission to person who was licensed when witting license but sense expired
company appointment procedure’s
Notify the department of a producer’s appointment or companies made. Producer remains appointed until insurer terminates or license is revoked, suspended, terminated.
Unfair insurance practice and potential penalties
Failing to act promptly on communication dealing with a claim
Penalties- Fines, revoking license, increased CE hrs
producer’s requirements for maintaining consumer privacy
annual privacy notification given
given the option to opt out of sharing info with others
protect security of financial info
Federal Regulations that affect Insurance
Federal Fair Credit Reporting Act- financial info as part of underwriting process
Fraud and False Statements
Insurance Fraud Regulation
Privacy of Consumer Financial Info
Feral Terrorism Risk Insurance Program (TRIA)
Motor Carrier Act
Non-Resident Insurance Producer
neither lives nor has office in PA; licensed producer, principal residence in home state, principal place of business in home state
4 instances when Commissioner may grant temp license
surviving spouse or rep if death
spouse or rep is disabled
designee if producer enters active service in armed forces
other situation
*no new business
*max of 180 days
Temporary License
issued to individual due to death, disability, or active military service of a licensed producer; issued for 180 days or until business is sold/transferred, producer recovers/returns, new personnel are trained/licensed to operate business
Managers & Exclusive General Agents
Firms (licensed producers) who work for independent contractors on behalf of a domestic insurer
- specified territory
- function on behalf of insurance companies
Manager General Agent (MGA)
negotiates and binds on behalf of insurer
Exclusive General Agent
sole authority as producer for territory/specific portion of Insurers Business
*has binding authority
*Produces & Underwrites more than 25% of surplus
Rebating
a practice whereby something of value is given to sell the policy that is not provided for in the policy itself
Misrepresentations
an illegal act or activity that causes someone to enter into a contract
Twisting
making incomplete comparisons between policies
Illegal Inducement
tricking another person into signing an agreement by offering something (tickets in exchange for policy)
Consent Agreement
requires an insurer to seek an insured’s approval prior to settling a claim for a specific amount.
Solvency
the ability for an insurance company to meet its long term obligations.
pay what you owe/claims
Boycott, Coercion, Intimidation
Boycott- pressure another group to do something by withholding
Coercion- forcing someone to buy insurance
Intimidation- unreasonable restraint of or monopoly in insurance
Misappropriation of Funds
Improperly withhold, steal, or convert money or property received in the course of doing business
