Chapter 13 Flashcards
IL Laws
Temporary insurance producer
In Illinois, a temporary insurance producer license can be issued for up to 90 days, without requiring an exam, if the applicant meets the requirements of the Article. The Director may also renew a temporary license for an additional 180 days without requiring an exam.
The Director may issue a temporary license in the following circumstances:
* To the surviving spouse or court-appointed personal representative of a licensed insurance producer who dies or becomes disabled
* To an employee or member of a business entity licensed as an insurance producer, if the designated individual dies or becomes disabled
The Director may limit the authority of a temporary licensee, require a sponsor, or revoke the license if the interest of the public or insureds is endangered
What can be done under temporary insurance license?
The holder of this type of license may only engage in activities related to the continuance of existing business, such as renewing policies or collecting premiums due to the estate or the firm.
**The holder of a temporary license is not permitted to solicit or sell new insurance **
Reinstatement
An individual insurance producer who allows their license to lapse may, within twelve (12) months after the due date of the renewal fee, be issued a license without the necessity of passing a written examination. However, a penalty in the amount of double the unpaid renewal fee shall be required after the due date ($360).
Continuing Education (CE)
This section of Illinois law states that before each license renewal, an insurance producer must satisfactorily complete at least twenty-four (24) credit hours of continuing education. Three (3) of the twenty-four (24) hours of course study must consist of ethics instruction .
Controlled Business
Controlled business is a disproportionate amount of insurance written on a producer’s own life, person, property, or risks, or the life, person, property, or risks of the producer’s spouse, employer, employees, or partners .
For example, if a producer’s commissions during the past two (2) years on sales of controlled business exceed the commissions received from sales on all other business sold to the public, the Director will find that the producer is engaging in controlled business. Controlled business may also be measured by premium amounts as well. Therefore, producers must sell more insurance to others than they write on their own risks.
FIDUCIARY RESPONSIBILITIES
Any premiums handled by an insurance producer, limited lines producer, temporary licensee, business entity, or surplus lines producer must be held in a fiduciary capacity. A fiduciary must act with a high degree of trust since they are handling the monies of the public. It also means that the producer must consider these funds as being held in trust for another party (i.e., the insurer or client).
These funds collected may not be misappropriated, misused, converted (using illegally), or commingled with personal funds . A single instance of misusing, misappropriating, or improperly withholding $150 or less of premium funds is a Class A misdemeanor.
PREMIUM FUND TRUST ACCOUNT
A special account must be established for premium funds if the producer :
- Holds premiums for fifteen (15) days or more before paying them to the insurer; or
- Deposits premiums into any kind of account or otherwise uses the premiums for any length of time.
The account must be maintained in a federally or state-chartered bank or savings and loan institution located in the state of Illinois. The words “Premium Fund Trust Account” must appear on account records, checks, and any other account data.
If a producer must establish a premium fund trust account, all premiums handled by the producer must be deposited in the account. The account may not be used as a general operating account or claims payment account . The only disbursements permitted by the account are:
BOOKS AND RECORDS
Licensees must maintain accurate books and records of account reflecting all insurance and insurance-related operations. All transactions and amounts receivable must be posted to the books and recorded no less than every thirty (30) days. All books and records for a calendar or fiscal year must be maintained for at least seven (7) years thereafter .
COMMISSIONS AND COMPENSATION
Illinois law states that an insurance producer, limited lines producer, or business entity is only permitted to pay commissions, service or brokerage fees, or other considerations to an individual who holds a license at the time the insurance service is provided
MARKETING PRACTICES
State law prohibits:
- Unfair claim practices;
- Falsification of records;
- Deceptive statements by an insurer or producer regarding the financial condition of a competing insurer (i.e., defamation);
- Unfair discrimination in rating based upon race, color, religion, or national origin;
- Rebating or other illegal inducements;
- Engaging in coercion, boycott, or intimidation; or
- Charging a higher rate due to the physical disability of an applicant or insured.
REBATING
Anything of value offered by a producer or insurer to an applicant that is not specified in the policy as an inducement or incentive to purchase insurance is considered rebating . An offer of a rebate or an agreement to accept a rebate is illegal . The most common form of rebating occurs when a producer offers a “kick-back” of their commissions back to the applicant in exchange for purchasing a policy. Offering to buy, sell, give, or option any type of securities, stocks, bonds, mutual funds, season tickets to sporting events, leather jacket or briefcase, any dividends or income from securities or property, or any other item of value is also rebating. Other forms of rebating include:
- A producer pays the premium for coverage on behalf of a client;
- Providing the customer a special advantage regarding the date of the policy or age of issue;
- Providing the customer with any paid employment or contract for services; or
- Offering to provide a favor or anything else of value to the client.
MISREPRESENTATION
Misrepresenting the terms, benefits, or dividends of a policy or circulating or allowing false representations of the same is considered to be misrepresentation .
If an insurer or producer compares policies unfairly in a misleading way in order to induce a policyholder to lapse their existing coverage for a new policy, they have engaged in a form of misrepresentation known as twisting .
DEFAMATION
Defamation
Defamation involves anyone (i.e., producer or insurer) making a false or malicious statement concerning the financial condition of an insurer to intentionally injure any authorized insurer’s business or reputation .
UNFAIR CLAIMS PRACTICES
All insurers are required to maintain detailed records of claims paid and denied. Documentation must include the claim number, line of coverage, date of loss, date of payment or denial, or the date that the claim file is closed without payment. Claim records must be kept for all open and closed claim files during the current year and for the previous two (2) years .
Records kept may be of the paper type or on computer disk as long as all information is accessible
