Chapter 8 FL State Laws Flashcards
Financial Services Regulations
The administration of state insurance law is the responsibility of the Chief Financial Officer (CFO), Financial Services Commission and Director, or Commissioner, of the Office of Insurance Regulation.
Chief Financial Officer
The Chief Financial Officer (CFO) is an elected official and is the head of the Department of Financial Services (DFS). The CFO directly oversees the following divisions under the DFS:
Division of Accounting and Auditing
Division of Consumer Services
Division of Insurance Agent and Agency Services
Division of Public Assistance/Insurance Fraud
Office of Consumer Advocate for Insurance
Division of Unclaimed Property
The CFO as the head of the Department, is directly responsible for the regulation of insurance agents.
The CFO is a member of the Financial Services Commission, also known as the Governor's Cabinet. Elected head of DFS Licensing of: Insurance agents adjusters agencies
Financial Services Commission
The Financial Services Commission is composed of the Governor, CFO, Attorney General, and Commissioner of Agriculture.
It appoints the Commissioner of the Office of Insurance Regulation (OIR), which is responsible for:
Regulating the following areas of insurance industry:
Licensing
Rates
Policy forms
Market conduct
Claims
Certificates of Authority
Protecting the public through oversight of insurance company solvency
Maintaining expertise related to life and health, property and casualty, specialty lines, and other insurance entities
The Commission also appoints the Director of the Office of Financial Regulation (OFR), which is responsible for:
Regulating the following:
Banks, credit unions, savings association, international bank agencies
Financial service companies
Securities industry
Includes the Bureau of Financial Investigations:
Functions as a criminal justice agency
Conducts investigations to protect consumers from financial entities that violate state laws and rules
The administration of state insurance law is the responsibility of which of the following?
Chief Financial Officer
The administration of state insurance law is the responsibility of the Chief Financial Officer (CFO), Financial Services Commission and Director of the Office of Insurance Regulation.
Which state entity decides conflicts between insurance companies and policyholders?
State judicial system
The State judicial system also enforces the code by administering criminal penalties and decides if new laws are constitutional.
Which state entity is responsible for approving a Certificate of Authority for an insurance company?
Office of Insurance Regulation
The Commissioner of the Office of Insurance Regulation also regulates insurance licensing, rates, policy forms, market conduct, claims, and company solvency.
Department of Financial Services (DFS)
General Duties and Powers
Agent and Adjuster Licensing and Investigations
The DFS supervises methods of obtaining business, including agent licensing and control of unfair trade practices. The department may interrogate an applicant or agent relating to the applicant’s qualifications, residence, prospective place of business, and any other matter which, in the opinion of the department or office, is deemed necessary or advisable for the protection of the public and to ascertain the applicant’s qualifications.
The department also may make further investigation of the applicant’s character, experience, background, and fitness for the license or appointment, and include the applicant’s fingerprints to be checked by local and federal law enforcement agencies. If the department believes that any person has violated any provision of the code, or upon the written complaint, it will conduct an investigation of the person’s accounts, documents, and transactions pertaining to the subject.
The CFO can impose the following penalties upon an agent for Insurance Code violations:
Failure to answer a subpoena or order – $1,000 fine
Violation of cease and desist order – Up to $50,000 fine
Willful violation of the Insurance Code – Misdemeanor of the 2nd degree (imprisonment up to 60 days)
Fraudulent conduct in committing twisting or churning – 1st degree misdemeanor (imprisonment up to one year)
Non-willful violation – $5,000 fine per violation
Willful violation – $75,000 fine per violation
Willfully submit fraudulent signatures – 3rd degree felony (imprisonment up to 5 years)
Non-willful violation – $5,000 fine per violation
Willful violation – $75,000 fine per violation
Division of Consumer Services
The Division of Consumer Services within the DFS is responsible for assisting consumers, answering general insurance and financial questions from its toll-free helpline, regional service centers, and website. The division provides consumer education and outreach assistance, as well as the following:
Receive and compile inquiries and complaints the DFS deems necessary to assist consumers
Provide direct assistance and advocacy for consumers who request such services
Report alleged violations of law by persons licensed by the DFS, OIR, or OFR to the appropriate regulator
Insurance Fraud
The Bureau of Financial Investigations, which functions as a criminal justice agency within DFS, may conduct investigations within or outside Florida as the bureau deems necessary to aid in the enforcement of a suspected violation. If, during an investigation, the office has reason to believe any criminal law has or may have been violated, the office will refer any records to show such violation to state or federal law enforcement or prosecutorial agencies and provide investigative assistance to those agencies as required.
Receivership
The Division of Rehabilitation and Liquidation of the DFS monitors the financial condition of insurers and rehabilitates or liquidates insurers as needed. It has the responsibility of performing the duties as receiver of any insurer placed into receivership in Florida.
The division plans, coordinates, and directs the conservation, rehabilitation, and liquidation of insolvent insurance companies, unlicensed insurance companies, and unlicensed insurance entities.
The basic responsibilities of the receiver include the collection of assets or debts due to the company, and evaluating all known claims against the company. The goal of the division as the liquidator is to maximize the value of the assets of the liquidated company and distribute the assets equitably.
Unclaimed Property
The Department of Commerce Division of Unclaimed Funds handles unclaimed property. Written notice must be sent to apparent owner of unclaimed property, which refers to property abandoned that remains unclaimed for 3-5 years. All unclaimed property must be turned over to the state. There are filing and reporting requirements if property remains unclaimed.
Other Powers
Oversee the insurance industry based on the Insurance Code
Organize and license insurance companies including establishing the initial financial requirements
Guard against unauthorized insurance activities
Regulate insurance company activities, policy forms, provisions, and rates
An agent willfully violated a requirement in the Insurance Code and his penalty was which of the following?
Imprisonment up to 60 days
A willful violation of the Insurance Code is a misdemeanor of the 2nd degree and imprisonment up to 60 days.
Choose the true statement about the state insurance fraud department.
If a criminal law has been violated, the office will refer it to the appropriate law enforcement agency
The Bureau of Financial Investigations functions as a criminal justice agency within DFS, may conduct investigations within or outside Florida, and will refer records to the appropriate state or federal agency and provide assistance as required.
The Department of Financial Services can impose which of the following penalties?
Fine for violation of a cease and desist order up to $50,000
A willful violation for submitting fraudulent signatures is $75,000 per violation and $5,000 per violation for a non-willful violation.
Which of the following is not a duty of the Department of Financial Services?
Enforces the Insurance Code by administering criminal penalties
The Department of Financial Services also handles unclaimed property, licensing insurance companies, and investigates applicants for an insurance license.
Policy Approval Authority
The Office of Insurance Regulation (OIR) supervises insurers via approval of new rates and forms, which must be approved by the OIR.
Prior approval exists when insurers are not allowed to implement a rate or rate change until it has been approved by the insurance department. Florida requires the insurer submit the filing 30 days prior to use. The Office has 30 days to approve or disapprove or request a change to the filing. If no decision is made within that time period the rate or form is approved.
Every filing must include the effective date and character and extent of the changes.
Rates
Rates for all insurance classes must not be excessive, inadequate, or unfairly discriminatory. Insurers must include rates, rating schedules, rating manuals, premium credits or discount schedules, and surcharge schedules with noted changes.
Forms
The following forms require approval:
Insurance policy or annuity contract form
Printed application
Group policy certificates
Printed rider, endorsement, renewal certificate
Market Conduct Examinations
Market Investigations is a division of the Office of Insurance Regulation that conducts examinations and investigations of insurers (as often as it believes necessary) to ensure compliance with the statutes and rules. All accounts, records, documents, files, etc., must be freely available to the examiners. The cost of an examination will be paid by the person or entity examined.
There are 4 sections with unique duties:
Property and Casualty Section – Conduct exams and investigate business practices of authorized property and casualty insurers.
Life and Health Section – Conduct exams and investigate business practices of authorized life and health insurers.
Investigations – Special Investigation Unit – investigates allegations of unauthorized and illegal insurance activity and in-
depth investigations of authorized insurers.
Market Analysis Section – Identifies trends and analyzes patterns of insurer’s data related to industry or marketplace issues.
Which of the following forms does not require approval from the Office of Insurance Regulation?
Agent report
Other forms that do require approval include the insurance policy, annuity contract form, and printed riders or endorsements.
The Market Investigation division includes 4 sections with unique duties. Which of the following is not one of those 4 sections?
Approval
The Property and Casualty section conducts exams and investigates business practices of authorized P&C insurers; the Special Investigation unit investigates illegal activity; and the Market Analysis section identifies trends and date relating to the insurance industry.
Office of Financial Regulation
General Duties and Powers
Enforcement of the Insurance Code and carrying out those duties
Collect, propose, publish or disseminate information regarding duties
Protecting the public against unauthorized behavior
All carriers must be audited at least once every 3 years. It can be more frequent if warranted
Monitoring marketing activity to avoid unfair trade practices such as twisting, unsupported replacement and illegal rebating
Protecting the public by trying to limit insolvencies via tracking reserves, restricting investments to prudent vehicles and confirm accuracy of financial statements
Taking over insolvent companies and attempting to restore financial integrity. If not successful, these companies will be liquidated. Other carriers in the state will be asked to buy blocks of business
Subjecting all people and companies to audit. Records of business associated with premiums must be kept for 3 years
Restricting carrier investments to avoid high-risk transactions. Accounting procedures must conform to state guidelines. Approved investments include:
Government paper
First mortgages in secured real estate
Policy loans
Small amounts of blue chip stock (allowed by the leeway or basket provision)
Investment quality corporate bonds (“junk bonds” are not allowed)
The two most common types of life insurance investments are bonds and mortgages, which are long-term investments.
Calculate reserves that carriers are required to maintain
Order hearings to discover unfair competition, unethical marketing practices, nonconformity to license requirements, and if the public trust has been violated
Agency Actions
The purpose of the OFR’s actions are to protect insurance consumers from unlawful or harmful business practices. It can bring about administrative actions and penalties when corrective action is required.
Within existing resources, the OFR develops and implements an outreach program for the purpose of encouraging the entry of additional insurers into the Florida market.
Investigation
The OFR can conduct any investigation to determine violations of the Code, obtain information to administer the Code, and secure information useful in the lawful administration of any provision. The cost of investigations are borne by the state.
All insurance carriers authorized in Florida must be audited by the Office of Financial Regulation once every __________.
3 years
The Office of Financial Regulation protects the public against unauthorized behavior by audited insurance companies at least once every 3 years, and more frequently if warranted.
Definitions
Insurance Contract – An agreement enforceable by law in which the insurer agrees to pay a certain amount of money upon the death of the insured, and the policyholder agrees to pay the premium.
Insurance Transaction – “Transact” with respect to insurance includes any of the following, in addition to other applicable provisions of this code:
Solicitation or inducement
Preliminary negotiations
Effectuation of a contract of insurance
Transaction of matters subsequent to effectuation of insurance contract and arising out of it
Insurer – Every person engaged as indemnitor, surety, or contractor in the business of entering into contracts of insurance or of annuity.
Admitted (authorized) – Admitted carriers are those that have been issued a license (certificate of authority) by conforming to Florida standards for transacting business.
Nonadmitted (unauthorized) Carriers – Nonadmitted companies are not state licensed, so they are not regulated by Florida. They are not permitted to sell through the mail, and the Florida Guaranty Association does not extend protection for Floridians who buy from these companies.
Some nonadmitted carriers claim an exemption from state law as a result of ERISA regulations. Florida regulators take the position that ERISA, in most situations, does not allow nonadmitted companies relief from Florida law.
Agents doing business with nonadmitted carriers are subject to a 3rd degree felony, personal liability for unpaid claims and may have their license suspended or revoked. Companies acting without a certificate of authority are subject to a 1st degree felony, liable for unpaid claims and may lose all licenses.
Unlicensed Entities – The following are regulatory concerns with unlicensed (nonadmitted/unauthorized) companies transacting insurance business in Florida:
Potential for criminal activity
Adverse economic impact on authorized insurers
Potential for unpaid claims due to dishonesty and lack of sound actuarial decisions
State or federal guaranty funds do not pay unpaid claims
Future insurability issues for insureds
Lack of oversight by state or federal regulatory agencies
Which of the following is not true of a nonadmitted carrier?
The Florida Guaranty Association protects residents who buy from a nonadmitted carrier
Nonadmitted companies are not state licensed nor regulated by Florida, and the Florida Guaranty Association does not extend protection for Floridians who buy from these companies.
Unlicensed entities is a regulatory concern due to which of the following issues?
Potential for criminal activity
Unlicensed entities also have an adverse economic impact on authorized insurers, potential for unpaid claims due to dishonesty and lack of sound actuarial decisions and the state and federal guaranty funds do not pay for those unpaid claims.
Definitions (continued)
Unauthorized Insurers Process Law – The purpose of the Unauthorized Insurers Process Law is to subject certain insurers, their representatives or those aiding such insurers to the jurisdiction of Florida courts in lawsuits by or on behalf of insureds or beneficiaries under insurance contracts. This law also provides a process for residents of this state to assert their legal rights on policies issued or delivered by insurers not authorized to do business in this state.
The Legislature declares that in so doing it exercises its power to protect its residents and to define what constitutes doing business in this state. It also exercises powers and privileges available to the state by virtue of Public Law No. 15, 79th Congress of the United States, which declares that the business of insurance and every person engaged therein is subject to the laws of the several states.
Certificate of Authority – No person can act as an insurer and no insurer or its agents, attorneys, subscribers, or representatives can directly or indirectly transact insurance in Florida unless authorized by a Certificate of Authority, issued to the insurer by the Office of Insurance Regulation.
No county, city, municipality, district, school district, or political subdivision can require any further authorization, permit or registration of any insurer, agent, or representative regulated under this code for conducting lawful insurance transactions granted by the state under this code.
Any person who acts as an insurer, transacts insurance, or otherwise engages in insurance activities in this state without a Certificate of Authority commits a:
3rd degree felony, punishable by fines up to $5,000 and up to 5 years imprisonment, only if the total premiums collected in the unauthorized transaction(s) are less than $20,000
2nd degree felony, up to 15 years imprisonment, if the total premiums collected are between $20,000 and $100,000
1st degree felony, a term not exceeding 30 years, if the total premiums collected are over $100,000
Certificate of Authority is not required:
When an insurer formerly authorized in this state needs to conduct investigations, settlements or litigations concerning claims on policies written in this state
For transactions pursuant to surplus lines coverages lawfully written by this state’s insurance code
For authorized reinsurance transactions
For continuation and servicing of insurance or annuity policies/contracts remaining in force on residents of this state when the insurer is no longer transacting new insurance business in Florida
For investment by a foreign insurer in Florida real estate if the foreign insurer complies with the Florida laws relating to foreign business corporations
For life insurance policies or annuity contracts issued by an alien insurer which cover only persons who, at the time of issuance, are not residents of the United States and are not illegal nonresidents. However, the alien insurer must meet specific capital requirements.
A person acting as an insurer without a Certificate of Authority and collects $150,000 in premiums is guilty of which of the following?
1st degree felony
A person, while acting as an insurer without a Certificate of Authority, is subject to not more than 30 years imprisonment if the total premium collected is over $100,000.
Licensing
Purpose
An applicant must obtain an insurance license in order to be familiar with the Florida insurance laws.
License Types
Agent – A general lines agent who transacts business related to selling property and casualty insurance to individuals.
Adjuster – A qualified individual may be licensed as a:
Public Adjuster – A person hired for a fee on behalf of an insured or third-party claimant to negotiate and settle a claim.
All-lines Adjuster – A person who is self-employed or employed by an insurer or an independent adjusting firm and determines the amount of a claim and settles the claim.
The same individual cannot concurrently be licensed as a public and all-lines adjuster, nor can an all-lines adjuster may be appointed concurrently as an independent and a company employee adjuster.
Agency – An insurance agency is a business location at which an individual, firm, partnership, corporation, association, or other entity, but not an employee, that engages or employs individuals to engage in any activity which by law may be performed only by a licensed insurance agent.
An agency:
Must complete an application for an agency license, which must be renewed every 3 years
Must have a licensed and appointed full-time agent in charge of each agency location
That fails to file an application for licensure may be levied an administrative penalty of up to $10,000
If an agent works out of his/her own home, the home doesn’t have to be licensed as an agency as long as it is not advertised to be a business location.
Which of the following is true about an insurance agency?
An agency must have a licensed and appointed full-time agent in charge
An insurance agency is a business location at which an individual, firm, partnership, corporation, association, or other entity that employs individuals to engage in any activity which by law may be performed only by a licensed insurance agent.
Which type of adjuster is hired on behalf of a third-party claimant to negotiate and settle a claim?
Public Adjuster
A public adjuster is a person hired for a fee on behalf of an insured or third-party claimant to negotiate and settle a claim. An all-lines adjuster is self-employed or employed by an insurer or an independent adjusting firm and determines the amount of a claim and settles the claim, but cannot concurrently be licensed as a public and all-lines adjuster.
A personal lines agent may not sell which type of insurance?
Limited credit insurance
A personal lines agent is limited to transacting business related to property and casualty insurance sold to individuals and families for noncommercial purposes.
Appointments
An agent:
Must be appointed with a carrier in order to earn a commission or deliver a policy. An agent may use another carrier for excess or rejected business, which is defined as applications that are rejected or amounts requested that exceed what the “home company” will issue or cases that will not be issue at a standard rate. This is done using “a single case agreement” that falls under the state’s “exchange of business” law.
May present a proposal to a company that has not appointed him/her, if the sale is in the business for which he/she is licensed. If the policy is sold, the agent must obtain an appointment which then allows the carrier to issue the policy and pay a commission.
May broker business, which means that it is placed through another agent who operates as a broker. Both broker and agent must be licensed in the line of insurance being sold.
Unless specifically prohibited, the same individual may at any one time hold any and all categories of appointments for which he/she has qualified and been licensed under this code. An agent must have a separate appointment as to each insurer by whom he/she is appointed as an agent.
A customer service representative may be appointed only by the following:
A person holding a Florida general lines agent license
A general lines insurance agency
A surplus lines agent if the surplus lines agent obtained surplus lines licensure based upon licensure as a general lines. If the surplus lines agent obtained such licensure upon grounds of being a managing general agent, that surplus lines agent may not appoint a customer representative.
Which of the following is incorrect about insurance company appointments?
An agent must be appointed for property and casualty insurance separately
The department may issue a single appointment covering both property and casualty insurances to an individual licensed for both kinds of insurance and appointed as agent for both kinds by the same insurer.
License Requirements
Any person seeking a personal lines license in Florida must be:
Trustworthy and competent
A natural person at least 18 years of age
A United States citizen or legal alien who possesses work authorization from the United States Bureau of Citizenship and Immigration Services and a bona fide resident of this state
The applicant’s place of business will be located in Florida and be identifiable and accessible by the public, and the applicant must be actively engaged in the business of insurance
Qualified by knowledge, experience or instruction by completing any of the following:
Successfully completed an insurance course of a minimum of 60 hours approved by the Department covering property, casualty, and inland marine insurance
Completed at least 6 months of responsible insurance duties as a substantially full-time employee in the area of property and casualty insurance sold to individuals and families for noncommercial purposes
Completed at least 6 months of responsible insurance duties as a licensed and appointed customer representative, limited customer representative, or service representative in property and casualty insurance
Application
An applicant must file a written application completed under oath and signed by the applicant. A third party may complete, sign, and submit the application on the applicant’s behalf. If the applicant takes the licensing exam before submitting the application, an exam application must be submitted with the fees. Applications may be submitted online.
The method for completing the prelicensing education must be stated on the application. The application will ask if the applicant has ever been refused an insurance license, voluntarily surrendered, or suspended or revoked in any other state. Details must be provided if any insurer or MGA claims the applicants is indebted to him.
Background Check
Applicants are required to submit a set of fingerprints and pay the fee to the department in order to investigate the applicant’s qualifications. The fingerprints must be taken by a law enforcement agency or the exam center. An applicant’s Social Security number also must be provided on the application in order to verify child support enforcement.
Examination
Applicants must take and pass a written examination. License examinations may not be taken more than 5 times in a 1 year period. A lapsed or suspended licensee may have to retake the exam and pay the fees before the license can be reinstated.
Which of the following is not a qualification to apply for an insurance license in Florida?
Must have a high school diploma or GED
The person must also be trustworthy and competent and a resident of Florida.
Maintaining a License
Continuing Education
Compliance with continuing education requirements must occur prior to the issuance, continuation, reinstatement, or renewal of any appointment.
New agents licensed within the past 5 years must complete a must take a 5-hour law and ethics course specific to the license held every 2 years. In addition, the licensee must complete 19 hours of elective continuing education courses every 2 years. The total amount of CE required is 24 hours every 2 years.
An agent licensed for 6 years or more must complete only 20 hours. However, the 20 hours must be in intermediate or advanced courses.
An agent who has been licensed for at least 25 years, a CLU or CPCU, has a B.S. in risk management or insurance with 18 or more semester hours in upper-level insurance courses, must complete 10 hours of CE every 2 years
A nonresident licensee must complete the required CE hours in the home state as long as the home state is reciprocal with Florida
Failure to comply will result in nonrenewal of the license. However, the department can grant an extension of time (up to 1 year) during which the requirements may be completed.
Communicating with the Department
A new residence address, principal business street address, mailing address, contact telephone numbers, including a business telephone number, or email address must be reported to the Department of Financial Services within 30 days.
Recordkeeping
Every agent transacting any insurance policy must maintain in his/her office, or have readily accessible by electronic or photographic means, for a period of at least 5 years after policy expiration, records of policies he/she transacted. This enables policyholders and department to obtain all necessary information, including daily reports, applications, change endorsements, or documents signed or initialed by the insured concerning such policies.
Criminal and Administrative Actions
Reporting Agent Crimes – If an agent is declared guilty of any crime punishable by imprisonment for 1 year or more, it must be reported to the Insurance Department within 30 days. Where the crime occurred is irrelevant.
Reporting Administrative Actions – Administrative actions include those relating to the:
Business of insurance
Sale of securities
Activities involving fraud, dishonesty, untrustworthiness, or breach of fiduciary duty
Any licensee must report any administrative action, including copies of the orders, reported by any governmental or regulatory agency in Florida or any other state or jurisdiction to the department.
A new agent must complete ______ hours of continuing education every ______ year(s).
24 hours/2 years
New agents must take 24 hours of continuing education every 2 years and agents licensed for 6 years or more must complete 20 hours in intermediate or advanced courses.
A change of address must be reported to the DFS within how many days after moving?
30
A new residence address, principal business street address, mailing address, contact telephone numbers, including a business telephone number, or e-mail address must be reported to the Department of Financial Services within 30 days.
If you are found guilty of any crime punishable by imprisonment one year or more, you must report it to the Insurance Department within how many days?
30
If you are declared guilty of any crime that is punishable by imprisonment for 1 year or more, you must report it to the Insurance Department within 30 days, even if you pleaded “no contest” or it occurred outside of Florida or even the U.S.
Maintaining a License (continued)
Suspension, Termination, Revocation of License – The department may, in its discretion, deny an application for, suspend, revoke, or refuse to renew or continue the license or appointment of any applicant or agent. It may suspend or revoke a person’s eligibility to hold a license or appointment if it finds that any one or more of the following applicable grounds exist:
Any cause for which issuance of the license or appointment could have been refused had it then existed and been known to the department
Violation of any provision of this code or of any other law applicable to the business of insurance in the course of dealing under the license or appointment
Violation of any lawful order or rule of the department, commission, or office
Failure or refusal, upon demand, to pay over to any insurer he/she represents, or has represented, any money coming into his/her hands belonging to the insurer
Violation of the provision against twisting, as defined in the Unfair Methods of Competition
In the conduct of business under the license or appointment, engaging in unfair methods of competition or in unfair or deceptive acts or practices, or having otherwise been a source of injury or loss to the public
Willful over-insurance of any property or health insurance risk
Having been found guilty of or having pleaded guilty or nolo contendere (no contest) to a felony or a crime punishable by imprisonment of 1 year or more under federal or state laws, or under the law of any other country, without regard to whether a judgment of conviction has been entered by the court having jurisdiction of such cases
If a life agent, violation of the code of ethics
Cheating on an examination required for licensure or violating test center or examination procedures. Communication of test center and examination procedures must be clearly established and documented.
Failure to inform the department in writing within 30 days after pleading guilty or nolo contendere (no contest) to, or being convicted or found guilty of, any felony or a crime punishable by imprisonment of 1 year or more under the laws of the United States or of any state, or under the law of any other country without regard to whether a judgment of conviction has been entered by the court having jurisdiction of the case
Knowingly aiding, assisting, procuring, advising, or abetting any person in the violation of a provision of the insurance code or any order or rule of the department, commission, or office
Failure to comply with any civil, criminal, or administrative action taken by the child support enforcement program to determine paternity or to establish, modify, enforce, or collect support
An insurance license may not be suspended for which of the following?
Over-insuring a health insurance risk
An agent’s license will not be suspended for over-insuring a health insurance risk unless the agent willfully over-insured it.
Maintaining a License (continued)
Appointments
Subject to renewal or continuation by the appointing entity, the appointment of an agent will continue in effect until the person’s license is revoked or otherwise terminated, unless written notice of earlier termination of the appointment is filed with the department. If a licensee is not reappointed by another company within 48 months, the license will lapse and a new examination must be taken for re-licensure.
Subject to an appointee’s contract rights, an appointing entity may terminate its appointment of any appointee at any time. The appointing entity must give the agent at least 60 days advance written notice of its intention to terminate the appointment. Exceptions include:
When termination is based upon a ground which would subject the appointee to suspension or revocation of his or her license
The appointing contract allows for less days advance notice
The appointing entity must notify the department within 30 days after terminating an appointment. The written notice must include the reason(s) for the termination. Upon termination of the appointment of an appointee, whether by failure to renew or continue the appointment, the appointing entity must:
File with the department the information required under the regulation
Subject to the exceptions provided under the regulation, continue the outstanding contracts transacted by an agent until the expiration date or anniversary date when the policy is a continuous policy with no expiration date
An appointee may terminate the appointment at any time by giving written or electronic notice to the appointing entity or to the department. The department will immediately terminate the appointment and notify the appointing entity of the termination. The termination is subject to the appointee’s contract rights, if any.
Agent Responsibilities
Fiduciary Capacity
A fiduciary holds a position of special trust and confidence.
Premium Accountability
An agent, as a fiduciary, accepts premiums, return premiums, or other funds on behalf of the insurer and offers advice about financial security. As a fiduciary on behalf of the insurer, the payment of premiums to the agent by the insured is the same as giving the money directly to the insurer. The agent’s fiduciary responsibility is to turn that money over to the insurer immediately.
Separate Account Requirements
An agent/agency must keep funds belonging to each insurer in a separate account so it can be properly audited. An agent must not commingle the insurer’s premium with personal funds, or otherwise use it for personal purposes.
Agent Responsibilities/Commissions and Compensation/Charges for Extra Services
Agents are paid by commissions that are a percentage of the first year premium, and thereafter, a percentage of subsequent renewal premiums. A written contract between the agent and the party paying the negotiated fee must be signed by both parties and include the promise that any commissions paid by the insurer will refund the amount paid by the party within 30 days. The contract must be retained by the agent for 3 years.
Sharing of Commissions – An agent may not share a commission or any valuable consideration with anyone who does not have a license and appointment for the type of insurance sold. Commissions may be shared with a person who is licensed and appointed in the same line of business.
An agent may write excess or rejected business (business that was first rejected by the agent’s company or accepted only on a substandard basis) with another company. One of the typical reasons for business to be rejected is because the risk limits are in excess of what the agent’s company will accept.
A licensed and appointed health insurance agent may broker rejected business to another agent appointed by the issuing insurer. The brokerage must be desired by both parties and in the best interest of the insured.
The agent’s fiduciary responsibility is to turn that money over to the insurer _____________.
Immediately
As a fiduciary on behalf of the insurer, the payment of premiums to the agent by the insured is the same as giving the money directly to the insurer.
A homeowner agent may share a commission or any valuable consideration with anyone who:
Has an appointment and license to sell homeowner insurance
Commissions may be shared with a person who is licensed and appointed in the same line of business.
A contract between the agent and the party paying the negotiated fee must be signed by both parties and retained by the agent for how many years?
3
A written contract between the agent and the party paying the negotiated fee must be signed by both parties and include the promise that any commissions paid by the insurer will refund the amount paid by the party within 30 days. The contract must be retained by the agent for 3 years.
Reply to DFS and/or Office of Insurance Regulation
Civil Immunity
A person, other than a person filing a required report or other required information, may provide the department, commission, or office with information about the financial condition of an insurer. Unless the person acted with knowledge that the information was false or with reckless disregard for the truth or falsity of the information, he or she is immune from civil liability arising out of the provision of the information.
Examination Testimony
A person may ask to be excused from testifying or producing records involving an examination, hearing, or investigation conducted by the DFS or Office of Insurance Regulation, for fear that it might incriminate the person who will then be prosecuted. DFS or the Office will direct the person to testify or produce the evidence, but the person will not be prosecuted or subjected to any penalty or forfeiture.
Ethics
Avoid the commission of acts or the existence of circumstances that would constitute grounds for suspension, revocation, or refusal of licensees. The purpose of an insurance license issued to an agent is to authorize and enable the licensee to actively and in good faith engage in the insurance business as an agent with respect to the general public and to facilitate the public supervision of such activities in the public interest.
Examples of Unfair Trade and Marketing Practices include:
Twisting Rebating Defamation Misrepresentation CPCU: Canons of the Code of Professional Ethics for CPCU
Clearly communicates the minimum standards of conduct expected for CPCUs and for those who are candidates for this designation
Disciplinary process includes investigation of violations of the Code
The 3 requirements of the CPCU designation are education, experience, and ethics
Agent Ethics can be summarized by the principle in the Golden Rule: “Conduct business with a client as you would want business to be conducted with you.”
Which of the following is not considered unethical as described in the Unfair Trade and Marketing Practices?
Representation
Unfair Trade and Marketing Practices provide examples of unethical behavior, such as twisting, rebating, churning, and misrepresentation.
Insurance Guaranty Fund
Florida Insurance Guaranty Association
The Florida Insurance Guaranty Association is a nonprofit legal entity. All insurers authorized to conduct business in Florida must be members of the association. Further, as a condition of such authority, an insurer agrees to reimburse the association for all claim payments the association makes on said insurer’s behalf if such insurer is subsequently rehabilitated. For the purposes of administration and assessment, the association is divided into 2 separate accounts:
Auto liability and auto physical damage account
All other eligible insurance account
The association’s liability for the contractual obligations of the insolvent insurer is in excess of $100 and does not exceed:
$300,000 per policy per claim $200,000 for the portion of a covered homeowner’s insurance claim which relates only to damage to the structure and contents In no event is the association liable for any penalties or interest. To pay covered claims and claim expenses, the association will levy assessments in the proportion that each insurer’s net direct written premiums in Florida in the class protected by the account bears to the net total written premiums received from all respective insurers the previous year, not to exceed 2% of each insurer’s net total written premium.
Emergency assessments will be levied for the direct payment of covered claims of insolvent insurers by the effects of a hurricane. The following types of insurers are not eligible for guarantee payments:
Life, annuity, health, disability Protection against investment risks Fidelity and surety bonds Creditor-debtor transactions Warranty Ambulance service, health care, funeral merchandise or service Optometric, pharmaceutical, or dental service Legal expense Ocean marine or wet marine Self-insurance Title Surplus lines Workers’ Compensation and employer liability Transfer of investment or credit risk Government guaranteed
The Florida Insurance Guaranty Association will assume the contractual obligations of an insolvent insurer up to _________ for any one policy.
$300,000
The Association’s liability for the contractual obligations of the insolvent insurer does not exceed $300,000 for any one policy and an additional $200,000 for the portion of a covered claim for damage to the structure and contents.
