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.