IL Insurance Law (General) Flashcards
McCarran-Ferguson Act
Federal law that allows most insurance regulation to be done at state level
IL Department of Insurance
Overseen by governor-appointed director
Director has the power to make reasonable rules and…
Regulations to enforce insurance laws
Director has the power to conduct reasonable investigations to determine…
Violations of state insurance requirements
Director has the power to issue immediate cease-and-desist orders to…
Halt illegal insurance practices
Director has the power to issue subpoenas in order to obtain…
Insurance documents
Director has the power to require individuals to…
Testify under oath about insurance matters
Director has the power to issue, deny, suspend, or revoke insurance licenses for…
Individuals and businesses
Failure to comply with director orders can result in…
$2000-$20000 in additional fines
Guilty party can be forced to…
Pay for independent investigations
Cease-and-desist orders generally include…
Right to a hearing within 30 days
Investigated parties must receive…
Copies of disciplinary reports before the public
Producer license generally required when doing the following for compensation…
Selling insurance; encouraging someone to buy insurance; negotiating terms of insurance; giving insurance advice; providing insurance quotes
Penalty of acting without a license
Class A misdemeanor, $2500 fine and 1 year in jail
An insurer.producer cannot compensate an unlicensed person for…
Selling or negotiating insurance
Possible exception for a formerly licensed person who is receiving…
Deferred compensation and was licensed at time of transaction
License Qualifications
18+, pre-license education, state exam, licensing fee, good moral character
Someone might not be eligible for a license if…
Committed a felony, fail to pay child support, have license revoked in another state
Each line of authority generally requires…
20 hours of pre-license education and a state exam
Lines of Authority
Life, accident and health, property (fire), casualty
Other lines of authority may have slightly different requirements
Personal lines, motor vehicle, variable contracts, limited lines
Limited Lines Producer
Allows someone to sell a limited set of insurance products that represent a narrow portion of the market
Pre-License exemptions required state exam but no pre-license education for…
College grads with a degree in insurance
No state exam and no pre-license education for…
Limited line producers; producers moving to IL who already licensed in same line of authority; non-residents of IL who are already licensed in the same line of authority in their home state
Producers moving to IL who area already licensed in same line of authority must…
Be in good standing and complete paperwork within 90 days of residency
Non-residents of IL who are already licensed in their home state must…
Be in good standing and obtain non-resident IL license before insuring to anyone in IL
Temp License: Upon Death and Disability
Allows for limited time to settle disabled or deceased producer’s business affairs
Temp License: Upon Death and Disability requires state exam?
No
Temp License: Upon Death and Disability issued for…
180 days and can get one extension for another 180 day period
Temp License: Upon Death and Disability can require supervision from…
Licensed producer
Temp License: Upon Death and Disability license terminates if…
Business is sold or dissolved
Temp License: Not Death or Disability
Allows licensing candidates to begin work while completing the licensing process
Temp License: Not Death or Disability is valid for…
90 days with no extension
Temp License: Not Death or Disability must be affiliated with…
Insurer
Temp License: Not Death or Disability insurers whose candidates don’t complete the licensing process can no longer…
Sponsor temporary licenses
Fees: Resident Producer License
$215 every 2 years
Fees: Non-Resident Producer License
$380 every 2 years
Fees: Temporary Producer License
$50
Fees: Insurance Business License
$150 every 2 years
Fees: Limited Lines Producer License
$50 every year
Fees: Licensing Exam
$50, plus other fees charged by the testing vendor
Fees: Operating as a pre-license or continuing education provider
$1,000 every year
Fees: Approval of a pre-license or continuing education course
$50 initial fee, then $20 every year
Brokers must have a surety bond equal to at least…
$2500 or 5% of brokered premiums from previous year, whichever is more
Broker Surety Bond max
$50,000
Producer license is generally valid for…
2 years
License renewal requires…
Fees and continuing education
License renewal possible exemption
Actively serving in military
License Reinstatement
1 year to reinstate by paying double the licensing fee and completing remaining CE hours
Continuing Education Requirements
24 hours every 2 years before license renewal date; at least 3 hours must be ethics
CE hours must be reported…
Prior to renewal deadline
CE generally not applicable to…
Non-resident producers who complete CE in their home state
Changes to physical and email addresses must be reported within…
30 days
Assumed Names
Need to report to DOI if doing business under another name
Insurance agencies and brokerages must be licensed as…
Producers
Agencies and brokerages must have one…
Designated producer in charge of compliance
There are separate producer licenses for…
Partnership, LLC, or corporation
Felony convictions must be reported within…
30 days to the DOI
Actions that can result in license suspension, revocation, or refusal and fines of $10,000 per occurrence (up to $100k max), Part 1
Felony conviction; Demonstrating incompetence or untrustworthiness in business; Having insurance license disciplined in another state; Forging an insurance document
Actions that can result in license suspension, revocation, or refusal and fines of $10,000 per occurrence (up to $100k max), Part 2
Cheating on insurance exam; Knowingly doing business with an unlicensed producer; Failing to play child support; Failing to pay state income taxes; Making false statements on a licensing application; Violating laws, rules, or orders from DOI
Actions that can result in license suspension, revocation, or refusal and fines of $10,000 per occurrence (up to $100k max), Part 3
Improper handling of funds obtained as part of an insurance transaction; Misrepresenting facts about insurance product; Committing fraud
Suspensions might be…
Temporary
Revocations are expected to be…
Permanent
Producers who’ve been denied or revoked can reapply after…
3 years but can still be refused
Disciplinary action requires written notice and right to request a hearing within…
30 days
If an insurer or insurance business terminates a relationship with a producer because of legal violation…
Must inform DOI within 30 days
Failure to report to the DOI or take preventative action after learning of a producer’s violations can lead to…
Business license revocation/suspension
Can’t misrepresent…
Type or benefits of an insurance product
Can’t disparage…
Competition to make a sale
Can’t act as if…
Products are affiliated with the state or federal government
Can’t engage in…
Boycott or intimidation to force a sale
Misrepresentation can result in…
Fines of $200-$10,000 per occurrence
Fees are not…
Commission
Fees must be disclosed…
Before coverage is obtained, with records kept for 7 years
No fee for…
Cancelling someone’s insurance
Rebating
Sharing commission in order to induce a sale
Things of value must be disclosed in…
Insurance Contract
Rebating is a…
Class B misdemeanor, $1,500 fine and 6 months in jail
Dividends are not…
Rebates
Controlled Business
No more than half of business can be from insurance for yourself, your spouse your business, or your employer
Money provided by consumer is generally held in…
Fiduciary capacity by producers
Fiduciary money cannot be…
Commingled, misappropriated, or used for other purposes
Insurers must continue to cover people when a producer misappropriates their funds but…
Producer can face legal consequences
Premium Fund Trust Accounts (PFTA)
Can’t put principal dollars at risk
Generally cannot withdraw from PFTA unless…
Transfer of premium to an insurer or transfer of earned commissions to producers
PFTA: Must be from…
Federal or state bank or savings and loan
Bank records and checks must indicate…
PFTA
PFTA records must be maintained for…
7 years
PFTA can be interest-bearing but…
Can only be kept if authorized by carrier
PFTA Penalties: Misappropriating less than $150 in first offense
Class A misdemeanor, 1 year in prison and $2,500 fine
PFTA Penalties: Misappropriating less than $150 in multiple offenses
Class 4 felony, 3 years in prison and $25,000 fine
PFTA Penalties: Misappropriating more than $150
Class 3 felony, 5 years in prison and $25,000 fine
IL Insurance Privacy Rules
Information obtained as part of an insurance transaction generally cannot be disclosed without written consent
State privacy law applies to…
Nearly all types of insurance
No discrimination based on…
Race, religion, color, national origin
Can’t refuse to offer or renew insurance based on…
Gender, marital status, sexual orientation
Price differences must be based on…
Sound actuarial data
Unfair Claims Practice: Insurers can be fined for not responding to communication from a claimant within…
Reasonable amount of time
Unfair Claims Practice: Insurers can be fined for not offering fair and prompt settlements when…
Insurer’s liability is reasonably clear
Unfair Claims Practice: Insurers can be fined for frequently prompting claimants to sue in order to…
Receive the full amount owed to them
Unfair Claims Practice: Insurers can be fined for being named in…
Disproportionately high number of consumer complaints
Unfair Claims Practice: Insurers can be fined for denying claims without…
Conducting a reasonable investigation
Unfair Claims Practice: Insurers can be fined for refusing to make a decision about…
Claim within a reasonable time
Unfair Claims Practice: Insurers can be fined for requiring additional proof of a loss in order to…
Delay payment
Unfair Claims Practice: Insurers can be fined for failing to explain why…
Claim was denied
