Chapter 8, Michigan Specific

Question 1

Exemption from Education and Examination

Answer 1

Previously licensed in another state
——To qualify, currently licensed in another state or apply for MI license within 90 days of the cancellation of previous license, established legal residency in MI and maintain good standing with prior state

Question 2

Business Entity

Answer 2

corporation, association, partnership, limited liability company, limited liability partnership or other legal entity
To apply
pay fees
designate individual licensed producer to comply with MI laws
Not commit any acts that would revoke a license

Question 3

Insurance Counselor

Answer 3

person who provides advice, counsel, or opinion with respect to benefits promised, coverage afforded or terms of a policy of insurance
Have to be licensed as insurance counselor
possess reasonable understanding of MI laws, have good reputation and good moral character
not commit any acts to revoke license
complete prelicensing course for lines applied for
Pay fees
pass exam

Question 4

Counselor and Client written agreement

Answer 4

BEFORE services rendered, written agreement between counselor and client must be obtained, outlining the work to be done and the fee
must clearly state fee cannot be waived and disclose commission from insurer or any insurance placed by counselor acting as agent
Must retain copy for 2 years after completion

Question 5

License Duration

Answer 5

will remain in effect (unless suspended or revoked) as long as continuing education is met
If lapse of license-must reapply within 12 months of lapse date to not take the test again
Must have name, address, PIN, date of issuance, license qualification, expiration date and any other info the Director deems important

Question 6

Name or Address change

Answer 6

Must report to Director within 30 days of the change

Question 7

Report of Actions

Answer 7

Within 30 days of occurrence, must report any disciplinary action by insurance regulatory agency of any other state or territory of the US; each disciplinary action on occupational license; each judgement or injunction entered against licensee (fraud, deceit, misrepresentation, or violation of insurance law)
Must include copy of order, consent to order or other relevant legal documents
Failure to report after notice of hearing with result in suspension/revocation of license or civil fines

Question 8

CE requirements

Answer 8

24 credit hours (3 hours must be ethics) every 2 years
If completed more than 24 they will carry over no more than 12 hours for the next 2 year review (no ethics requirement if doing this)
If nonresident-Director may enter into reciprocal CE agreements with directors from other states, if satisfied in home state, it satisfies Michigan
EXCEPTIONS-may waive if: Military service, causes severe hardship, licensed to write ONLY travel/baggage insurance policies and whose employment is only to sell those policies AND ONLY write limited line of credit insurance
Grace period–90 days from expiration date of license and cannot work until CE requirements are met (if lapsed passed grace period, can reinstate within 12 Months)
If long-term insurance–must complete one-time 8 hour long-term training course before acting as agent and to continue must complete 4 hours of ongoing training every 2 years

Question 9

Producer appointment/Notice of appointment

Answer 9

Cannot transact business for an insurer unless appointed by that insurer
Must submit notice of appointment to the Director(contains qualifications)
Must file within 15 days after contract is executed, Director then has 30 days to determine eligibility, and if not Director notifies insurer within 5 days of determination
Insurer pays appointment and renewal fees for EACH appointed producer
Notification of appointment or termination of the appointment must be submitted within 30 days after entering into a contract or of termination

Question 10

Termination of Appointment/Authority of Terminated Producer

Answer 10

Insurer MUST notify Director within 30 days
Within 15 days of notification to the DIRECTOR, insurer must notify producer
AUTHORITY–can only work with existing policies (CANNOT write new lines of business-unless insurer says ok)
Insurer cannot cancel/refuse to renew policy due to producer termination
Only reasons to termination (MI) (1 or more)
-Malfeasance
-Breach of duty/trust
-Violation of insurance code
-Failure to meet terms of contract
-Submission of less than 25 applications for auto/home insurance in 12 month period

Question 11

Termination of Appointment/Authority of Terminated Producer

Answer 11

Insurer MUST notify Director within 30 days
Within 15 days of notification to the DIRECTOR, insurer must notify producer
AUTHORITY–can only work with existing policies (CANNOT write new lines of business-unless insurer says ok)
Insurer cannot cancel/refuse to renew policy due to producer termination
Only reasons to termination (MI) (1 or more)
-Malfeasance
-Breach of duty/trust
-Violation of insurance code
-Failure to meet terms of contract
-Submission of less than 25 applications for auto/home insurance in 12 month period

Question 12

Commissions

Answer 12

-Insurers or producers cannot pay commission, service fee or other valuable consideration to someone selling, soliciting or negotiating insurance who is required to be licensed and is not
-If commission was deferred, can be paid if licensed at the time of commission
-Can assign commissions to agency or person who DOES NOT reside in MI IF it doesn’t break law
DISABILITY policies: may not receive commission for Medicare eligible person UNLESS amount paid in 1st year of policy does not exceed amount agent receives in each of the 2 subsequent renewal periods
——UNFAIR METHOD—–insurer issuing disability policy or rider to an eligible Medicare person that provides a NEW preexisting condition limitation waiting period CANNOT accept commission–basically no commission if extending waiting period to get new amount for commission

Question 13

Disciplinary Actions

Answer 13

DIRECTOR may suspend, revoke, refuse to issue/renew license IF any of the following occur:
providing incomplete, materially untrue info on license application
violating ANY law
fraud/misrepresentation when obtaining license
improperly withholding/misappropriating or converting any money or property in course of business
INTENTIONALLY misrepresenting terms of insurance contract
Convicted of felony within 10 years of application
ANY felony involving violence(domestic too), criminal sexual conduct, or fiduciary fraud, embezzlement bribery or extortion
Admitted to or committing any unfair trade practice or fraud
Using fraudulent, coercive or dishonest practice (OR sucking at your job)
License denied, suspended, revoked in another state
Forging someone else’s name in application
improperly using notes or any other reference material to complete exam
Know3ingly accepting business from producer that is not licensed
Failing to comply with child support administrative order
Failing to pay single business tax of MI tax and fails to comply with court ordered requests

Question 14

Notice of Denial/Notice of Hearing

Answer 14

Director must notify applicant or licensee of denial in writing including reason, APPLICANT must reply for hearing within 30 days of this notice
HEARING–Director determines interest of hearing with the public, gives notice in writing to person involved
if unfair or deceptive practice is not specified in insurance code, 15 days for notice of hearing
Director may issue subpoenas to require attendance ( may be enforced by circuit court)

Question 15

Summary Suspension

Answer 15

If Director feels protection of the public requires emergency action, may order summary of suspension
suspension becomes effective date specified in the order or upon service of certified copy to the licensee (whichever is later)
Hearing on suspension conducted no later than 20 days after suspension
Director determines suspension status at hearing, have 30 days to announce their decision, suspension will remain in affect until Director makes decision

Question 16

Summary Suspension

Answer 16

If Director feels protection of the public requires emergency action, may order summary of suspension
suspension becomes effective date specified in the order or upon service of certified copy to the licensee (whichever is later)
Hearing on suspension conducted no later than 20 days after suspension
Director determines suspension status at hearing, have 30 days to announce their decision, suspension will remain in affect until Director makes decision

Question 17

Insurer Violation/Penalties

Answer 17

If violation of insurance law appears to be committed, Director chooses (after giving proper notice and hearing) to revoke or refuse to renew insurer’s license to do business in MI
PENALTIES
$1,000 per violation (not to exceed $10,000 for same violation)
$5,000 per violation and not to exceed $50,000 for violations committed within 6-month period of if the person knew or reasonably should have known the violation
Suspension or revocation of license
Refund of any overcharges
Restitution to the insured cover incurred losses, damages or other harm due to deceitful acts
—violation regulating, rebating, and misrepresenting is misdemeanor-$100 per violation up to $2,000. Subject to jail time and the amount of insurance will be reduced in proportion to the value of any rebate

Question 18

Cease and Desist Order

Answer 18

If determined to be engaging in unlawful acts, Director will issue an order to stop engaging in further acts or practices
Person accused can file a notice of appeal and may appeal any final order
If the person violates the cease and desist order, civil fine up to $20,000 for each violation, a suspension or revocation of the person’s license or both.
Fines cannot exceed $100,000

Question 19

Unfair and Prohibited Insurance Trade Practices

Answer 19

Misrepresentation ($2,000 or jail)
False information and Advertising (misdemeanor, $1,000 fine or imprisonment up to 6 months or both)–any person
—-If insurer falsely represents its financial standing–ANY of its directors and officers $100 fine and 3 months jail or both
Inducement
False Statements
Deception (defamation included)
Boycott/Coercion/Intimidation

Question 20

Rebating

Answer 20

offer of any rebate of premiums due, any special favor in dividends or other benefits or any valuable consideration or inducement not specified in the policy

Question 21

Fiduciary Responsibility

Answer 21

failure to turn over money in a timely manner that a producer holds in fiduciary capacity to the persons in which is is owed is violation of fiduciary responsibility
must use reasonable accounting methods
If unable to get full coverage amount from insurer, producers can obtain part of the coverage from another licensed producer or risk-sharing plan
Cannot use threats or intimidation
may not be party to a contract that the producer assumes any responsibility or obligation for payment, from their commission or any allocation of premium to them by the insurer, of any losses on insurance policies sold by the producer UNLESS claim adjusting is done my insurance company adjusters or licensed independent adjusters

Question 22

Insurance Fraud Regulation

Answer 22

Fraud committed by person who KNOWINGLY and with intent to injure, defraud or deceive does anything bad in business
Release of Information—is fraud suspected, written request by authorized agency to insurer can release any pertinent information, agency can tell insurer who is committing the fraud if they have that knowledge
Penalties–4 years imprisonment, fine up to $50,000 or both-for fraud- and must pay restitution
Person who enters into agreement, combo, or conspiracy to commit fraud—prison 10 years, fine $50,000 or both
Defraud health care provider—Felony, prison 10 years and fine up to $50,000 or both
False report of death/sickness—Misdemeanor $1000 jail time 3 months

Question 23

Consumer

Answer 23

Individuals who seek to obtain or have obtained products or services for personal, family, household purposes from licensees
Also includes individuals who provides nonpublic personal information to a licensee seeking to obtain financial, investment, or economic advisory services relating to an insurance product or service

Question 24

Personally Identifiable Financial Information

Answer 24

Any info that a consumer provides to a licensee to obtain an insurance product or service, about a consumer resulting from a transaction involving an insurance product or service between a licensee and a consumer, or the licensee otherwise obtains about a consumer with providing an insurance product or service to that consumer

Question 25

Nonpublic Personal Financial Information

Answer 25

Personal Identifiable financial information that includes any list, description, or other grouping of consumers and is derived using any personally identifiable financial information that is not publicly available (getting info from account numbers for example)
DOES NOT INCLUDE–Health information, publicly available information or any list, description or other group of consumers that is derived using info that is publicly available

Question 26

Privacy notice to Consumers

Answer 26

MUST PROVIDE initial notice that reflects its privacy policies and practices to an individual that becomes a customer of licensee, a consumer before the licensee discloses any nonpublic personal financial information about the consumer to any nonaffiliated 3rd party
HAVE to give notice at least once within 12 months during the continuation of consumer relationship
OPT OUT option—consumer can request to opt out of licensee giving any information to 3rd parties that are nonaffiliated, and these do not apply when licensee gives info to 3rd party and tells them to not disclose it

Question 27

Essential Insurance Act

Answer 27

Applicability—Makes personal home/auto coverage available to all MI citizens, All MI auto/home policies must conform with Act provisions
Ratemaking Standards-Rates cannot be excessive, inadequate, unfairly discriminatory
Premium Discount Plan-Must reflect reasonably anticipated loss/expense reduction
Automobile Repair Rights-Insurer must disclose any agreement with repair facility, Insured is not obligated to use a certain facility

Question 28

Loss Payment Provision

Answer 28

Dwelling and home—-losses are payable 30 days after insurers request of proof of loss
IF we dont see 30 go with 60 on the test

Question 29

Cancellation Provision

Answer 29

States if a policy has been in effect for less than 55 days, AND is not a renewal, the insurer can cancel a policy by letting the insured know at least 30 days before the date of cancellation

Question 30

Required Limits of Liability (MI)

Answer 30

Minimum 50/100/10

Default (unique to MI)–250/500/10

Question 31

No fault Automobile Coverage (Liability outside of MI would be used)

Answer 31

Personal Injury Protection (PIP)—medical and funeral expense, loss of income, ordinary services (household services) (pays individual person in no-fault accident)–Unlimited Coverage per person/per accident, Up to $500,000 per person/per accident, Up to $250,000 per person/per accident, up tp $250000 and can exclude some or all drivers, Up to $50,000 per person/per accident, must be enrolled in Medicaid and meet other eligibility requirements, reject PIP but must have Medicare Part A and B as well as meet other eligibility requirements

Property Protection–$1 million limit, coverage for property damaged, includes loss of use

Residual Liability–Provides BI and PD for auto accidents outside of MI

Rent or lease for a period of 30 days or more is considered an ‘owner’ and must provide no-fault auto insurance on the vehicle—MI specific

Question 32

MI Automobile Insurance Placement Facility

Answer 32

(MI’s FAIR plan)

AKA- Assigned Risk Plan
guarantees insurance to anyone unable to obtain it through normal channels
Every Insurance company that writes auto insurance in MI MUST participate in this program

Question 33

MCAA

Answer 33

Michigan Catastrophic Claims Association-nonprofit that reimburses each no fault insurer for PIP related medical claims that exceeds $580,000
Every authorized insurer is required to fund through annual premium assessments

Question 34

Mini-tort coverages

Answer 34

will pay out $3,000 in the event insured is at fault and the other party’s collision insurance does not cover their damages in full

Question 35

Elimination of NON-driving factors

Answer 35

state that insurers are no longer able to use factors such as gender, marital status, home ownership, credit score, education level, occupation, or zip code when setting coverage rates

Question 36

Fraud Investigation Unit

Answer 36

investigate and prevent fraudulent activity in the insurance industry, works in coordination with the MI Dept of Attorney General

Question 37

Penalty Interest

Answer 37

an additional 12% interest per annum is applied if a PIP claim is not paid out to the insured within 30 days of a loss. IF failure to pay exceeds 60 days, the claim is considered overdue