Insurance Regulation

Question 1

Terms

Answer 1

Cease and desist - to stop or discontinue
Coercion - forceful act or threat aimed to influence a person to act against his or her will
Commission - payment to the agent by the insurance company for placing insurance, usually a percentage of the policy premium
Exempt - not subject to an obligation
Immunity - exemption from a duty or legal obligation, or protection against a liability
Inducement - an offer that attempts to influence the other party
Insolvent - unable to meet financial obligations
Moral turpitude - conduct that is contrary to community standards of justice, honesty or good morals
Promulgate - to make public, to put into action (e.g. laws, court decrees, and similar)
Statute - a formal written law enacted by legislature; insurance statutes can be found in the state Insurance Code
Superintendent of Financial Services (Superintendent) - the head of the New York State Department of Financial Services

Question 2

A. Licensing

Answer 2

A. Licensing
Insurance professionals must be properly licensed for a specific line of authority in order to transact insurance. The purpose of
licensing is to ensure that a producer meets educational and ethical standards required to fulfill producer’s responsibilities to the
insurer and to the public. Licensing regulations set out the requirements, procedures, and fees relating to the qualification, licensure,
and appointment of insurance producers.

Question 3

Producer

Answer 3

Producer
Insurance producer means an insurance agent, title insurance agent, insurance broker, reinsurance intermediary, excess lines broker,
or any other person required to be licensed under the laws of this state to sell, solicit or negotiate insurance.

Question 4

Home State

Answer 4

Home State
Home state means any state, district, or territory of the United States in which an insurance producer maintains his/her principal place
of residence or principal place of business, and is licensed to act as an insurance producer.

Question 5

Negotiate

Answer 5

Negotiate
Negotiate (or negotiation) means the act of directly conferring with or offering advice to a purchaser or prospective purchaser of a
particular insurance contract concerning any of the substantive benefits, terms or conditions of the contract, provided that the
person engaged in that act either sells insurance or obtains insurance from licensed insurers, fraternal benefit societies or health
maintenance organizations for purchasers.

Question 6

Sell

Answer 6

Sell
Sell (or sale) means to exchange a contract of insurance by any means, for money or its equivalent, on behalf of a licensed insurer,
fraternal benefit society or health maintenance organization.

Question 7

Solicit

Answer 7

Solicit
Solicit (or solicitation) means attempting to sell insurance or asking or urging a person to apply for a particular kind of insurance from
a particular licensed insurer, fraternal benefit society or health maintenance organization.

Question 8

2. Process

Answer 8

2. Process
   To qualify for an insurance license, an applicant must submit an application to the Superintendent and declare that all statements are
   true, accurate and complete to the best of the applicant’s knowledge and belief. Additional requirements for a license applicant
   include
   • Be a resident of the state of New York;
   Be at least 18 years of age;
   • Submit a standard application for licensing on a form approved by the Superintendent;

• Fulfill the prelicensing education requirement of classroom work or equivalent in correspondence work or similar instruction (20
hours a single line of authority agent or broker, such as Life only agent or broker, 40 hours for a Life, Accident and Health agent or
broker, Personal Lines agent or broker and Public Adjuster, and 90 hours for Property/Casualty agent or broker);
• Pay the applicable fees;
• Pass the applicable examination for each line of authority.

Question 9

Licensing Examination Exemptions

Answer 9

A written examination is not required of the following individuals applying for an insurance agent’s license:
• Ticket-selling agent or representative (airline, bus, train or sea) for one-time issuance of baggage or accident insurance;
• Any individual whose license has been revoked or suspended (at the discretion of the Superintendent);
• In connectfon with any certificate of appointment for an additional insurer, as long as it is under the same line of authority already
licensed;
• A nonresident licensee currently licensed in another state;
• An applicant who has passed the written examination for an insurance agent’s license and was licensed, or an applicant who was
licensed as an agent but did not pass the examination, provided the applicant applies within 2 years following the date of license
termination:
• Any individual who was previously licensed for the same line of authority in another state (provided that the applicant’s home
state grants nonresident licenses to residents of New York on the same basis). Such individual will not be required to complete
any prelicensing education. This exemption is only available if the application is received within 90 days of the date of
cancellation of the applicant’s previous license:
• If applying for a life insurance, variable life and variable annuity products, or accident and health insurance license, or any other,
line of authority deemed to be similar by the Superintendent:

An individual seeking to be a representative of a fraternal benefit society as its agent;
o An applicant who is a Chartered Life Underwriter (CLU) or a Chartered Life Underwriter Associate (at the Superintendent’s
discretion);
• If applying for a property, casualty, personal lines or any other similar license:
o An applicant who has been granted the Chartered Property Casualty Underwriter (C.P.C.U.) designation by the American
Institute for Property and Casualty Underwriters.

Question 10

Refuse to Issue a License

Answer 10

Refuse to Issue a License
The Superintendent may refuse to issue any insurance agent’s or insurance broker’s license if the proposed licensee is found to be
not trustworthy and competent, or has not complied with any prerequisites.

Question 11

Exemption from Licensing

Answer 11

Exemption from Licensing
An insurance producer license is not required of any officer, director or employee of an insurer or organizations employed by insurers,
provided they are not directly or indirectly involved with the actual sale of an insurance contract and do not receive any commission.
Furthermore, the following individuals are NOT required to hold an insurance producer license:
• A director or employee of an insurer whose activities are limited to executive, administrative, managerial, or clerical;
• The director or employee of a special agent assisting insurance producers by providing technical advice and assistance to
licensed irSurance producers:
• A person who secures and furnishes information for group insurance or performs administrative services related to mass-
marketed property and casualty insurance;
• An employer or association engaged in the administration or operation of a program of employee benefits for the employer’s or
association’s own employees;
• Employees of insurers or organizations engaging in the inspection, rating or classification of risks, or in the supervision of the
training of insurance producers and who are not individually engaged in the sale of insurance;
• A person whose activities are limited to advertising without the intent to solicit insurance;
• A nonresident who sells, solicits or negotiates a contract of insurance for commercial property and casualty risks to an insured
with risks located in more than one state insured under that contract; or
A salaried full-time employee who counsels or advises his or her employer relative to the insurance interests of the employer or
subsidiaries.

Question 12

Types of Licensees

Answer 12

Types of Licensees
The following are the types of licenses that can be issued in the state of New York:
• Insurance agent;
• Insurance broker;
• Business entity;
• Consultant;
• Adjuster;
• Nonresident:
• Temporary.

Question 13

Agents

Answer 13

Agents
An insurance agent is a person authorized by an insurer, fraternal benefit society or health maintenance organization (HMO) to solicit,
negotiate and obtain insurance, HMO or annuity contracts. The agent represents the insurer, not the insured.
The following are excluded from this definition:
• Any regular salaried officer or employee of an insurer, fraternal benefit society, or HMO who does not solicit or accept
applications and does not receive a commission; and
• Any agentor representative of a fraternal, who devotes less than 50% of their time to the solicitation and procurement of
insurance contracts and receives no commission.

Question 14

Brokers

Answer 14

Brokers
An insurance broker is any person, firm, association or corporation who solicits, negotiates or obtains insurance for an insured (other
than him/herself) in exchange for a commission. A broker represents the insured, not the insurer, and acts in the best interest of the
insured. The following are excluded from this definition:
• Any regular salaried employee of an insured whose duties are to counsel or advise his or her employer regarding insurance, but
who does not receive any commissions or sell or solicit insurance.
• Any regular salaried employee of a licensed insurance broker who does not receive any commissions.

Question 15

Consultants

Answer 15

Consultants
Insurance consultants offer advice to the public about the benefits, advantages and disadvantages of insurance policies for a fee. The
Superintendent may issue an insurance consultant’s license to any person, firm, association or corporation who has complied with the
following requirements:
• Submit a written application and pay a fee of $50 per year;
Pass a written examination;
• Must be trustworthy and competent;
• Must not be an executive or an employee of or own any shares in the insurer he/she represents.

Question 16

Adjusters

Answer 16

Adjusters
An independent adjuster is any person, firm, association or corporation, who, for a commission, acts on behalf of an insurer in the
work of investigating and adjusting claims. An independent adjuster may not include any of the following:
• Officer, director or regular salaried employee of an insurer;
• Adjustment bureau or association owned by the insurers;
• Licensed agent of the insurer; or
• Attorney at law.
A public adjuster is any person, firm, association or corporation, who for a commission, acts on behalf of the insured in negotiating a
settlement of a claim for loss or damage to property. The following are not considered public adjusters:
• Employee, agent, broker or other representative of any insurer who acts as an adjuster; or
Attorney at law.

Question 17

Nonresident

Answer 17

Nonresident
A nonresident insurance agent or nonresident insurance broker is an individual who is a resident of another state, who is licensed or
authorized to act as an agent or broker in the state of New York.
Applicants may qualify for a license as a nonresident only if he/she holds a similar license in another state or foreign country. Licenses
issued to nonresidents by the Superintendent grant the same rights and privileges as resident licenses. This is called reciprocity.
Nonresidents are not required to take a written examination.
If a person licensed in another state moves to New York and wants to become a resident àgent or broker, he/she must apply for a
license within 90 days of the cancellation of the applicant’s previous license. As long as the licensee was in good standing at the time
of cancellation, he or she may not have to fulfill prelicensing or examination requirements for lines of authority held in the previous
state, unless the Superintendent determines otherwise.

Question 18

Business Entities

Answer 18

Business Entities
A business entity is a corporation, association, partnership, limited liability company, limited liability partnership or other legal entity.
Before any original insurance agent’s or broker’s license is issued, the prospective licensee must apply to the Superintendent. The
application must contain information concerning the business entity. The licensee is responsible for the business entity’s compliance
with New York state insurance laws and regulations.

Question 19

Temporary

Answer 19

Temporary
A temporary license may only be used to service existing business, not to solicit, negotiate or procure new business. The
Superintendent may issue a temporary license to an agent or broker or both without requiring an examination, in the following cases:
• To the surviving spouse, next of kin or court appointed personal representative of an agent who dies, or becomes mentally or
physically disabled;
• To a member or employee of a business entity licensed as an insurance agent upon death, disability, or termination of a
designated individual in the business entity; or
• To the designee of an agent entering active military service.
The temporary license may be issued for a term of not more than 90 days unless the Superintendent renews additional 90-day terms
not to exceed an aggregate of 15 months. In the case of military service, the temporary license may continue up to 60 days after th
discharge from service.

Question 20

4. Maintenance and Duration

Renewal

Answer 20

4. Maintenance and Duration
   Renewal
   Producer licenses will remain in effect unless suspended or revoked, as long as they are properly renewed. Insurance agent’s or
   broker’s license must be renewed every 2 years. The licenses of insurance agents or brokers born in odd-numbered years will expire
   on their birthdays in odd-numbered years. The licenses of insurance agents or brokers born in even-numbered years will expire on
   their birthdays in even-numbered years.
   An agent or a broker must file an application for renewal of license with the Superintendent at least 60 days before the license
   expires. If it is submitted late, the applicant will be subject to a late filing fee of $10.
   The current license remains in effect until the Superintendent issues or denies the renewal license. Before a license can be denied,
   the Superintendent must notify the applicant of intentions to deny or nonrenew and give the applicant a hearing. If a renewal license
   is denied, the current license will expire 5 days after the licensee is notified.
   Continuing Education
   Continuing education (CE) rules are established to protect the public by maintaining high standards of professional competence in the
   insurance industry, and to maintain and improve the insurance skills and knowledge of licensed producers.
   To renew a license, any resident or nonresident agent or broker must complete 15 hours of instruction by an approved provider of
   continuing education biennially (every 2 years). This continuing education requirement applies to agents and brokers licensed in life
   insurance and annuity contracts, sickness, accident and health insurance, all lines of property and casualty insurance.
   Excess credit hours accumulated during any biennial licensing period cannot be carried over to the next period for the same class of
   license.
   The course programs of instruction must be approved by the Superintendent. The providers must file for approval biennially. Each
   licensee must pay a fee of $10 per license for continuing education certificate filing and recording charges.
   Assumed Names
   Every licensee must notify the Superintendent upon changing of legal name. Except for an individual licensee’s own legal name,
   licensees may not use any name unless it has been previously approved by the Superintendent.
   Change of Address
   The Department of Financial Services must be notified within 30 days of any change of address: residence, business or email.
   Reporting of Actions

Question 21

Reporting of Actions

Answer 21

Reporting of Actions
A licensee must report any administrative action taken against him or her in another jurisdiction or another state within 30 days of the
final disposition of the matter. The report, filed with the Superintendent, must include a copy of any relevant legal documents.
Within 30 days of the initial pretrial hearing date, a licensee subject to this article must report to the Superintendent any criminal
prosecution of the licensee taken in any jurisdiction. The report must include a copy of the initial complaint filed, the order resulting
from the hearing, and any other relevant legal documents.

Question 22

B. State Regulation

Superintendent’s General Duties and Powers

Answer 22

Superintendent’s General Duties and Powers
The Superintendent of Financial Services (Superintendent) is appointed by the Governor, and continues in office until the end of the
Governor’s term. The Superintendent has very broad powers, both expressed and implied with the business of insurance, that extend
to all financial service providers.
First and foremost, the Superintendent has the power and authority to recommend, withdraw, or amend regulations for the following
purposes:
To regulate the internal affairs of the Department of Financial Services (Department), including governing the procedures used in
the practice of the Department;
To prescribe forms and regulations; and
• To interpret state insurance laws and provisions.
The Superintertlent has the authority to take action deemed appropriate to ensure the following:
• Economic development and financial industry growth in this state;
• Solvency, safety, and prudent conduct of the insurance and financial services providers;
• Fair and timely fulfillment of the financial obligations;
• High standards of honesty, transparency, and fair business practices;
• Elimination of financial fraud, criminal abuse, and unethical conduct in the industry;
• Education of product users to enable them to make informed decisions about financial products and services.
If a person has been charged with 5 separate civil penalties within 5 years, the Superintendent may levy an additional penalty of up to
$50,000. An additional civil penalty of up to $50,000 may be levied if the person is charged for every 5 subsequent violations.
When the Superintendent grants an approval, authorization, permission or any other order that affects an insurer, insurance agent cr
insurance broker, the order will not be effective unless it is in writing and signed by the Superintendent.

Question 23

Examination of Books and Records

Answer 23

Examination of Books and Records
The Superintendent may examine the books and records of any insurer, any pension fund, retirement system or organization
authorized in the state of New York, as often as deemed necessary, for the protection of public interest.
The Superintendent will make an examination of insurers as follows:
• Every domestic fraternal benefit society and domestic property/casualty insurance company, at least once every 3 years. If the
Superintendent determines that every 3 years is not necessary for property and casualty, it can be changed to every 5 years;
• Every domestic life insurer must be examined at least once every 5 years;
• Every other authorized domestic insurer and every rate service organization which makes or files rates at least once in every 5
years.
Unless otherwise required by law or regulation, an insurer must keep the following for 6 years, or until the filing of a review of the
record, whichever is longer:
• A policy record for each insurance contract or policy (the time starts after the contract or policy is no longer in force);
• An application where no policy or contract was issued;
• A claim fill (the time starts after the claim is resolved and the file is closed);
• A licensing record for each licensee with which the insurer establishes a relationship;
• A complaint record (the time starts after the complaint is resolved and the file is closed);
A financial record necessary to verify the financial condition of an insurer.
If any person does not submit the requested information within 15 days, the Superintendent may levy a civil penalty of up to $500 per
day for each day beyond the specified date. Total penalty cannot exceed $10,000.

Question 24

Company Regulation

Certificate of Authority

Answer 24

Company Regulation
Certificate of Authority
No person, firm, association, corporation or joint-stock company may conduct insurance business unless authorized by a Certificate
of Authority, issued by the state. If any business is transacted while not authorized, a penalty of $1,000 will be levied on the first
violation and $2,500 for each subsequent violation.
In order to qualify for a certificate of authority, every person, firm, association, corporation or joint-stock company must meet the
following requirements:
• The entity must fully comply with all applicable provisions of New York’s insurance laws.
• If a stock company, the amount of capital and surplus required by law paid in cash or investments.
• If a mutual company, must provide statements of at least 3 incorporators, proof of the required initial surplus in cash or
investments, and the required number and amount of bona fide (actual) applications for insurance, with premiums paid for in
cash.
Every license must contain the following information:
• The name of the licensee;
Home office address;
• The state or country under whose laws it was organized; and
The kinds of insurance business it will provide and term of license.
After a notice and hearing, the Superintendent may refuse to issue a license to a company if any of its directors or officers has been
convicted of any crime involving fraud, dishonesty, or moral turpitude (corruption, wickedness), or is considered an untrustworthy
person.
The Division of Criminal Justice Services processes electronic fingerprints on a statewide basis for all individuals requiring a criminal
background check. Fingerprinting is required for all adjuster, bail bond/charitable bail, and life settlement provider, intermediary, or
broker licenses. Fingerprinting is also required for any person wishing to be an officer or director of an insurance company.
The Superintendent may also refuse to issue or renew a license if the business name is identical or so similar to an existing insurer
name, that it is likely to deceive or mislead the public.
Solvency
An insurer is considered solvent if it has the assets to meet its financial obligations. If at any time an insurer becomes unable to med
financial obligations, it is considered insolvent.

Question 25

Solvency

Answer 25

Solvency
An insurer is considered solvent if it has the assets to meet its financial obligations. If at any time an insurer becomes unable to meet
financial obligations, it is considered insolvent.
It is the Superintendent’s responsibility to make sure every insurer, fraternal, pension fund, retirement system or state fund remains
solvent. Each entity transacting insurance in this state must file with the office of the Superintendent an annual statement on or
before March 1st of each year showing its financial condition.
An authorized official of the insurer may verify the annual statement of an alien insurer. The statement must provide information on
the business done and the assets held within the United States for the protection of policyholders and creditors, as well as the
liabilities incurred against the assets.
If any authorized entity fails to file an annual statement as required or does not reply to a written inquiry within 30 days, there can be a
penalty of up to $250 per day of delay, not to exceed an aggregate of $25,000 for each failure.
Guaranty Association
Guaranty Associations are formed to protect policyowners, insureds, beneficiaries, and anyone entitled to payment under an
insurance policy from the incompetence and insolvency of insurers. The association will pay covered claims up to certain limits set by
state law. The Association is funded by its members through assessment. All authorized insurers, which are required to be the
members of the Association, contribute to a fund to provide for the payment of claims for insolvent insurers.
It is an unfair trade practice to make any statement that an insurer’s policies are guaranteed by the existence of the Insurance
Guaranty Assotiation.
Know This! Insurers cannot advertise protection by the Insurance Guaranty Association.

Question 26

Unfair Claims Settlement Practices

Answer 26

Unfair Claims Settlement Practices
The following are improper claims practices if committed in conscious disregard for the law or if committed with such frequency as to
indicate a general business practice to engage in that type of conduct:
• Misrepresenting to insureds pertinent facts or policy provisions relating to coverages at issue.
• Failing to acknowledge and act reasonably promptly upon communications with respect to an insurance claim.
• Failing to adopt and implement reasonable standards for prompt investigation and processing of insured’s claims.
Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements are completed and submitted
by insureds.

• Not attempting in good faith to effect prompt, fair and equitable settlements of claims on which liability has become reasonably
clear.
• Compelling insureds to initiate suits to recover amounts due under an insurance policy by offering substantially less than the
amount ultimately recovered in those suits.

Question 27

Agent Appointment

Answer 27

Agent Appointment
Every insurer, fraternal benefit society or HMO doing business in New York must file a certificate of appointment for its agents with
the Superintendent. The certificate states that the appointed agent is trustworthy and competent to transact insurance business.
To appoint an agent, the appointing insurer must file, in a format approved by the Superintendent, a notice of appointment within 15
days from the date the agency contract is executed or the first insurance application is submitted.
Certificates of appointment are valid until
• The license is terminated by the appointing insurer after a termination in accordance with the provisions of the agency contract;
• The license is suspended or revoked by the Superintendent; or
• The license expires and is not renewed.

Question 28

Termination of Agent Appointment

Answer 28

Termination of Agent Appointment
When an insurer or HMO terminates an agent’s certificate of appointment, it must file a statement with the Superintendent within 30
days, explaining the cause of the termination and facts surrounding it. The insurer or HMO must also provide a copy of this notice to
the producer within 15 days of the date of filing with the Superintendent.

Question 29

Licensee Regulation

Controlled Business

Answer 29

Licensee Regulation
Controlled Business
Controlled business is any coverage written on a producer’s own life, health or property, and/or that of the producer’s immediate
family or business associates. A licensee is not allowed to collect commissions on controlled business above the state-specified limit.
Most states will not issue a license to a person if it is determined that the primary purpose of the license is to write controlled
business.

Question 30

3. Licensee Regulation

Controlled Business

Answer 30

Controlled business is any coverage written on a producer’s own life, health or property, and/or that of the producer’s immediate
family or business associates. A licensee is not allowed to collect commissions on controlled business above the state-specified limit.
Most states will not issue a license to a person if it is determined that the primary purpose of the license is to write controlled
business.

The Superintendent may refuse to issue, suspend or revoke a license if an applicant or licensee receives more than 10% of the
aggregate commissions during a 12-month period from controlled business.

Question 31

Sharing Commissions

Answer 31

Sharing Commissions
An insurer or fraternal benefit society may not pay any commission to any person or organization that is not licensed in New York.
Commissions can be split among agents/brokers provided that the agents/brokers are licensed with the same insurer for the
designated lines of authority.

Question 32

Fiduciary Responsibility

Answer 32

Fiduciary Responsibility
Agents, brokers and reinsurance intermediaries have a fiduciary relationship, a position of financial trust, for all funds they receive in
the course of their business. Such funds may not be commingled with personal or other funds without express written consent of
their principals.
Premiums collected by agents and brokers not remitted immediately to insurers must be deposited in an appropriately identified
account in a New York bank. Withdrawals from these accounts are allowed only to transfer premiums to the rightful insurers. Failure
to submit funds appropriately could constitute embezzlement.

Question 33

License Display

Answer 33

License Display
The establishing agent or broker must prominently display the license(s) of the supervising person(s) responsible for that place of
business in a headquarters location and each satellite office.

Question 34

Commissions aid Compensation

Answer 34

Commissions aid Compensation
Insurers and agents cannot pay a commission or provide compensation to a person or organization that is not licensed in New York. In
addition, agents, brokers, consultants, surplus line brokers, reinsurance intermediaries and adjusters cannot pay any commission to or
compensate any person who is not licensed and authorized in the same lines of insurance at the time of the transaction.
No licensed person may charge directly or indirectly any additional fees or compensation not authorized for examining, appraising,
reviewing or evaluating any insurance policy, annuity or retirement plan. This also includes other services in connection with a life
insurance contract. If compensation is authorized, it must be made in writing, including the amount of compensation and signed by
the person to be charged. A copy of this record must be kept for at least 3 years.

Question 35

Termination Responsibilities of Producer

Answer 35

Termination Responsibilities of Producer
After producers receive the notice of termination, they have 30 days to file written comments concerning the content of the notice
with the Superintendent. The producer must send a copy of the comments to the reporting insurer at the same time. These
comments will become part of the Superintendent’s file and will accompany every copy of a report distributed or disclosed about about the
producer.
In the absence of fraud, bad faith or gross negligence as the cause for the producer’s termination, the terminated producer will not be
subject to civil liability.

Question 36

Reporting

Answer 36

Reporting
Any licensee who believes that a fraudulent insurance transaction has taken place or is about to take place has 30 days from the
point of that determination to submit information regarding that transaction to the Superintendent. The Superintendent will review
each report and conduct further investigation as deemed necessary.

Question 37

4. Disciplinary Actions

Hearings

Answer 37

4. Disciplinary Actions
   Hearings
   Because the Superintendent’s role is to enforce insurance laws and to protect the public from unfair trade practices, if the
   Superintendent suspects that an insurer or its agent has committed a violation or is engaged in an unfair trade practice, the
   Superintendent may issue a statement of charges and hold a hearing for any purpose deemed necessary (within the scope of the
   Insurance Code).
   The hearing will be held at least 10 days after notice is served. At the hearing, the aggrieved party has the opportunity to:
   • Appear in person and by counsel;
   • Give evidence why an order should not be made;
   • Inspect all documentary evidence and witnesses;
   Obtain witnesses on the person’s behalf.
   All hearings will be open to the public, unless the Superintendent or the person authorized by the Superintendent to conduct the
   hearing believes that a private hearing would be in the best interest of the public.
   After the hearing, the Superintendent will complete a written report on his/her findings and send a copy to the person charged.
   Once it has been determined that a person is liable for a civil penalty, that determination may be entered 120 days later as a judgment
   and enforced, without court proceedings.

Question 38

Cease and Desist Order

Answer 38

If the Superintendent finds that the licensee is in violation of an unfair method of competition, unfair claim, or unfair act or practice,
the Superintendent will issue a cease and desist order. This means the person must stop doing whatever the Superintendent
suspects is in violation of the insurance laws.
A person who violated a cease and desist order is liable for penalties of up to $5,000 for each violation. The determination of the
amount will take into consideration whether the violation was intentional.
Suspension, Revocation, and Nonrenewal
The Superintendent may refuse to renew, revoke, or suspend a license of any insurance producer, insurance consultant or adjuster, if,
after notice and hearing, the Superintendent determines that the licensee or any sub-licensee has
• Violated any insurance laws or regulation, subpoena or order of the Superintendent or of another state’s Commissioner;
• Provided materially incorrect, misleading, incomplete or untrue information in the license application;
• Obtained or attempted to obtain a license through misrepresentation or fraud;
Used fraudulent, coercive or dishonest practices:
• Demonstrated incompetence, untrustworthiness or financial irresponsibility in the conduct of business in this state or elsewhere;
• Improperly withheld, misappropriated or converted any monies or properties received in the course of business;
• Intentionally misrepresented the terms of an actual or proposed insurance contract or application for insurance;
• Been convicted of a felony;
• Admitted or been found to have committed any insurance unfair trade practice or fraud;
• Had an ins,urance producer license, or its equivalent, denied, suspended or revoked in any other state, province, district or
territory;
• Forged another’s name to an application for insurance or to any document related to an insurance transaction;
• Improperly used notes or any other reference material to complete an examination for an insurance license;
• Knowingly accepted insurance business from an individual who is not licensed;
• Failed to comply with an administrative or court order imposing a child support obligation; or
• Failed to pay state income tax or comply with any administrative or court order directing payment of state income tax.
An individual, corporation, firm or association whose license has been revoked cannot obtain any license for a period of 1 year after
such revocation, or, if such revocation be judicially reviewed, for 1 year after the final judgment.
If a firm loses its license, a member, officer or director of the corporation may be able to obtain a license if the Superintendent
determines, after notice and hearing, that the person was not at fault.
If a nonresident producer’s license is suspended, revoked or nonrenewed in his/her resident state, the license will also be also be suspended,
revoked or nonrenewed in New York. Reinstatement in the producer’s home state means reinstatement in New York.
If an administrative action has been taken against a licensee, the licensee must report it to the Superintendent within 30 days.
The Superintendent will give a written reason of action to the applicant or licensee. The applicant or licensee has 10 days to make a
demand for a hearing.

Question 39

Penalties

Answer 39

Penalties
If the licensee is found in violation of insurance licensing laws, the Superintendent may issue a penalty in lieu of revoking or
suspending the person’s license. The penalty may be up to $500 for each offense, up to $2,500 aggregate for all offenses.
Unless the court orders a stay, the licensee has 20 days after receipt to pay the penalty. If the licensee fails to pay the penalty within
the allotted time, the Superintendent may then revoke or suspend the person’s license.
Any violation of the Insurance Code provisions will be considered a misdemeanor unless specifically categorized as a felony.
If, after a notic and hearing, the Superintendent finds that an authorized insurer, representative, broker or adjuster has willfully
violated the Insurance Code, the Superintendent may order the person to pay a penalty of up to $1,000 for each offense. Failure to
pay the penalty within 30 days of the order will constitute a further violation of the provision of the Code. However, no penalty will be
imposed if a monetary penalty is otherwise provided by the New York Insurance Code.

Question 40

Prohibitions

Answer 40

Prohibitions
In addition to any criminal liability, the Superintendent may levy a civil penalty of up to $5,000 and the amount of the claim for each
violation upon any person who committed a fraudulent insurance act, or knowingly and with intent to defraud, files, makes, or assists,
solicits or conspires with another to file or make an application for a premium reduction containing any materially false information or
that conceals information concerning any material fact.

Question 41

Aiding Unauthorized Insurer

Answer 41

Neither a person nor a corporation may act as an agent or broker for an insurer that is not licensed to solicit, negotiate or effect any
insurance or annuity contract, or aid any such insurer in effecting any insurance transactions. Note that the law allows for some
exceptions for reinsurance brokers.
Any person who violates this regulation may be subject to a $500 penalty for each transaction, in addition to any other penalties
provided by the state law.

Question 42

Unfair and Prohibited Practices

Answer 42

Unfair and Prohibited Practices
Insurers and insurance producers may not engage in any trade practice that is defined as, or determined to be, an unfair method of
competition or an unfair or deceptive act or practice in the business of insurance.
It is considered an unfair trade practice to knowingly commit an unfair method of competition or to engage in such actions with
enough frequency that the commission of unfair marketing practices indicates a general husiness practice If, after a hearing, the Department determines that a producer or an insurer has committed an unfair trade or competition practice,
the Department may issue an order requiring the person to cease and desist from engaging in the method of competition, act, or
practice, and/or impose penalties for violation of insurance laws.

Question 43

Misrepresentation

Answer 43

Misrepresentation
It is illegal to issue, publish or circulate any illustration or sales material that is false, misleading or deceptive as to policy benefits or
terms, benefits, advantages, the payment of dividends, or the financial condition of any insurer. This regulation also applies to oral
statements made by an insurer or its producers and representatives.
It is illegal for an agent or broker to show an incomplete comparison of policies to induce a person to lapse, forfeit or surrender a
policy.
Any agent or broker who willingly commits misrepresentation and knowingly receives any compensation or commission for the sale
induced by a misrepresentation is liable for a civil penalty in the amount received. In addition, the agent/broker is liable for a civil
penalty in the amount of any compensation or commission lost by any agent, representative or broker as a result of making of false or
misleading statements. Any person so offended may also sue the agent/broker for the amount gained and penalty paid during the
misrepresentation.
It is considereckan unfair trade practice in this state to knowingly misrepresent to a claimant the terms, benefits and advantages of
the insurance policy pertinent to the claim. Insurers cannot deny any element of a claim on the grounds of a specific policy provision
or exclusion unless reference to such provision or exclusion is made in writing. Any payment or settlement that does not include all
the amounts reasonably expected from the claim will be deemed to be a communication which misrepresents a pertinent policy
provision (as long as the claim payment is within the policy limits).
While the concept of misrepresentation during policy replacement applies specifically to life insurance and annuities, all agents and
brokers (regardless of their line of authority) must be aware of and in compliance with this regulation. Any replacement of individual
life policies or individual annuity contracts of an insurer by an agent, representative of the same or different insurer must conform to
the following standards implemented by the Superintendent:
• Specify what constitutes the replacement of a life policy or annuity contract and the proper disclosure and notification
procedures to replace a policy or contract;
• Require notification of the proposed replacement to the insurer whose policies or contracts are intended to be replaced;
• Require the timely exchange of illustrative and cost information necessary for completion of a comparison of the of the proposed and
replaced coverage; and
• Provide for a 60-day period following issuance of the replacement policies or contracts during which the policyowner may return
the policies or contracts and reinstate the replaced policies or contracts.

Question 44

False Advertising

Answer 44

False Advertising
Advertising covers a wide scope of communication, from publishing an ad in a newspaper or magazine, to broadcasting a commercial
on television or the Internet. Advertisements cannot include any untrue, deceptive, or misleading statements that apply to the
business of insurance or anyone who conducts it. The violation of this rule is called false advertising.
It is prohibited to advertise or circulate any materials that are untrue, deceptive, or misleading. False or deceptive advertising
specifically includes misrepresenting any of the following:
• Terms, benefits, conditions, or advantages of any insurance policy;
• Any dividends to be received from the policy, or previously paid out;
• Financial condition of any person or the insurance company; or
• The true purpose of an assignment or loan against a policy.
Representing at insurance policy as a share of stock, or using names or titles that may misrepresent the true nature of a policy also
will be considered false advertising. In addition, a person or an entity cannot use a name that deceptively suggests it is an insurer.

Question 45

Rebating

Answer 45

Rebating
Rebating is defined as any inducement offered in the sale of insurance products that is not specified in the policy. It is illegal to offer
an inducement to a person to encourage the purchase of an insurance policy. Rebates include money, sharing of commissions,
promises, inducements and personal services. Both the offer and acceptance of a rebate are illegal.
Articles of merchandise with a conspicuously stamped or printed advertisement of the insurer, agent or broker, are not considered
rebates if they are valued at $25 or less.

Question 46

Defamation of Insurer

Answer 46

Defamation of Insurer
Defamation occurs when an oral or written statement is made that is intended to injure a person engaged in the insurance business
This also applies to statements that are maliciously critical of the financial condition of any person or a company.

Question 47

Unfair Discrimination

Answer 47

Unfair Discrimination
Discrimination in rates, premiums, or policy benefits for persons within the same class or with the same life expectancy is illegal. No
discrimination may be made on the basis of an individual’s marital status, race, national origin, gender identity, sexual orientation,
creed, or ancestry unless the distinction is made for a business purpose or required by law.

Question 48

Insurance Frauds Prevention Act

Answer 48

Insurance Frauds Prevention Act
The Insurance Frauds Prevention Act is intended to permit the Superintendent and the department to utilize their expertise to
investigate and discover insurance frauds, halt fraudulent activities more effectively, and receive assistance from federal and state
law enforcement agencies.

Question 49

Insurance Frauds Bureau

Answer 49

Insurance Frauds Bureau
The Insurance Frauds Bureau in the Department continues its operations under the supervision of the Superintendent, who has the
power to designate one or more units for the purpose of investigating and preventing fraud.

Question 50

Procedures

Answer 50

Procedures
If the insurance frauds bureau has reason to believe that a person is engaged or is about to engage in a fraudulent act, it has 30 days
to make a report on the action, including any information relating to the circumstances and the parties involved.

The Superintendent has the power to make an investigation within this state or outside of the state.

Question 51

Immunity

Answer 51

Immunity
As long as the suspected fraudulent transaction was reported in good faith, no civil liability will be placed against the person who
reported it.
Fraud Prevention Plans and Special Investigations Units
Every insurer writing private or commercial insurance must file a fraud prevention plan for the detection, investigation and prevention
of fraudulent irkurance activities within 120 days. The plan must include the details necessary for the proper implementation of the
plan.
The following rules apply to the implementation of the plan:
• If the Superintendent does not return a fraud detection and prevention plan to the insurer within 120 days from the date of filing,
it is considered approved.
• If the plan is returned, the insurer has up to 45 days to make the necessary revisions and return to the Superintendent.
• If the plan has been returned more than once, the insurer is entitled to a hearing.
• If the insurer fails to submit a final plan within 30 days after the determination of the hearing, the Superintendent may impose a
fine of up to $2,000 per day or impose an appropriate fraud detection and prevention plan.
In lieu of a special investigations unit within the insurance company, an insurer may contract an outside company to provide the
investigative services. This insurer must also file a detailed plan with the Superintendent.

Question 52

7. Consumer Privacy Regulation

Answer 52

7. Consumer Privacy Regulation
   Treatment of nonpublic personal financial information about individuals requires the insurer to
   • Provide notice to individuals about its privacy policies and practices, no later than the time an insurance policy is delivered,
   annually thereafter. If information is collected from a source other than the applicant or public records, notice must be given at
   the time the information is collected.
   • Describe the conditions under which a licensee may disclose nonpublic personal financial information about individuals to
   affiliates and nonaffiliated third parties. If the insured requests or authorizes a transaction in connection with servicing,
   processing or maintaining of an insurance product, the insurer is exempt from the requirements of disclosure.
   • Provide methods for individuals to prevent a licensee from disclosing that information. An opt out notice must be provided, to
   allow the consumer a choice to limit disclosure of personal information.

Question 53

8. Producer Compensation Transparency

Answer 53

8. Producer Compensation Transparency
   The regulation on Producer Compensation Transparency was promulgated to help regulate the acts and practices of insurers and
   their producers, as well as to protect the public by establishing minimum disclosure requirements regarding the role of insurance
   producers and their compensation.
   For the purposes of this regulation, the term compensation means anything of value, which includes, but it not limited to money,
   credits, loans, trips, prizes or gifts, whether paid as commission or otherwise. Advertisement or promotional goods with the insurer’s
   name or logo are not considered compensation, as long as their aggregate value per insurer per year is less than $100.
   This regulation,does not apply to the following:
   Placement of reinsurance;
   • Placement of insurance with a captive insurer;
   • Producers who have no direct sales or solicitation contact with the purchasers;
   • Sale of insurance by a person who is not required to be licensed; or
   • Renewals.

Question 54

Disclosure of Producer Compensation

Answer 54

Disclosure of Producer Compensation
A disclosure of producer compensation must include the following information:
• A description of the producer’s role in the transaction;
• Whether or not the producer will receive compensation from the sales;
• An explanation of factors that affect the amount of producer compensation;

The purchaser’s right to request and obtain information about the producer’s compensation.
Producers are required to keep a copy of all written disclosures provided to the purchasers for at least 3 years.

Question 55

9. Cyber Regulation

Answer 55

9. Cyber Regulation
   In an effort to combat the ever-increasing menace of hackers extracting sensitive data from companies’ databases, the state of New
   York has instituted a new regulation outlining the minimum standards for a required cybersecurity program (23 NYCRR 500).
   All financial services companies must implement and maintain a cybersecurity program designed to prevent cyberattacks and
   recover if one occurs. Senior management must be responsible for the organization’s cybersecurity program and ensure the safety
   and soundness of the institution and protect its customers. Regulated entities must file an annual certification confirming compliance
   with these regulations.

Question 56

Covered Entity:

Answer 56

Covered Entity: any person operating under a license, registration, certificate, or similar authorization under the Banking Law, the
Insurance Law, or the Financial Services Law.

Question 57

Cybersecurity Event:

Answer 57

Cybersecurity Event: any effort to obtain unapproved access to an Information System (or information stored on it), whether
successful or unsuccessful.

Question 58

Information System:

Answer 58

Information System: an organized system that collects, maintains, and transmits electronic Nonpublic Information.

Question 59

Nonpublic Information:

Answer 59

Nonpublic Information: any business-related information that is not publicly available information that if misused could jeopardize a
covered entity’s security and operations; any personally identifiable information (such as social security number or credit card
numbers); and any information (other than age and gender) related to health care.
Multi-Factor Authentication: authentication through verification of at least two factors:
1. Knowledge factor, such as a password;
2. Possession factors, such as a token or text message on a mobile phone; or
3. Inherence factors, such as a biometric characteristic.

Question 60

Penetration Testing

Answer 60

Penetration Testing means a test method where assessors attempt to circumvent or defeat the security features of an information
system by attempting to penetrate databases or controls from outside or inside the information systems.

Question 61

Chief Information Security Officer (CIO):

Answer 61

Chief Information Security Officer (CIO): Each covered entity must designate a qualified individual for overseeing and implementing
its cybersecurity program and enforcing its cybersecurity policy.

Question 62

Cyber Security Program

Answer 62

Cyber Security Program
Each nongovernmental Person operating under the New York Department of Financial Services must design, implement, and
maintain a Cvbersecuritv Plan based on its Risk Assessment that ensures the confidentiality, integrity, and availability of Information
Systems. The 6 critical functions of the Cybersecurity Program are:
1. Identify cybersecurity risks;
2. Use defensive infrastructure and put policies and procedures in place to prevent cybersecurity risks;
3. Monitor and recognize cybersecurity events;
4. Counter any attacks to reduce undesirable outcomes;
5. Recover from such events; and
6. Report the event as obligated.
The Cybersecurity Policy is an approved written document that identifies the policies and procedures in place to keep the Information
System safe, and must encompass the following:
• Information security;
• Data governance and classification;
• Asset inventory and device management;
• Access controls and identity management;
• Business continuity and disaster recovery planning and resources;
• Systems operations and availability concerns;
• Systems and network security and monitoring;
• Systems and application development and quality assurance;
Physical security and environmental controls;
• Customer data privacy;
• Vendor and third-party service provider management;
• Risk assessment; and
Incident response.

Covered Entities must make sure that the nonpublic information and information systems accessible by Third-Party Service
Providers (those who are authorized to access nonpublic information) are kept safe. To do that, the policies and procedures set forth
must include the following:
• Identification and risk assessment of third-parties with access to such information;
• Minimum cybersecurity practices that must be upheld by third-party service providers;
• Processes in place to judge the effectiveness of the third-party’s cybersecurity practices;
• Annual (at minimum) evaluation of third-parties and their cybersecurity practices.

Question 63

Training and Monitoring

Answer 63

Training and Monitoring
As part of its cybersecurity program, each Covered Entity must:
1. Implement risk-based policies, procedures and controls designed to monitor the activity of authorized users and detect
unauthorized access or use of, or tampering with, nonpublic information by such authorized users; and
2. Provide regular cybersecurity awareness training for all personnel that is updated to reflect risks identified by the covered entity
in its risk assessment.
After a cybersecurity event has been discovered, an insurer or its agents must report the event to the Department of Financial
Services within, 72 hours.
C. Federal Regulation

Question 64

1. Fair Credit Reporting Act

Answer 64

1. Fair Credit Reporting Act
   The Fair Credit Reporting Act established procedures that consumer-reporting agencies must follow in order to ensure that records
   are confidential, accurate, relevant, and properly used. The law also protects consumers against the circulation of inaccurate or
   obsolete personal or financial information.
   The acceptability of a risk is determined by checking the individual risk against many factors directly related to the risk’s potential for
   loss. Besides these factors, an underwriter will sometimes request additional information about a particular risk from an outside
   source. These reports generally fall into 2 categories: Consumer Reports and Investigative Consumer Reports. Both reports can only
   be used by someone with a legitimate business purpose, including insurance underwriting, employment screening, and credit
   transactions.

Consumer reports include written and/or oral information regarding a consumer’s credit, character, reputation, or habits collected by
a reporting agency from employment records, credit reports, and other public sources.

Question 65

Investigative Consumer Reports

Answer 65

Investigative Consumer Reports are similar to consumer reports in that they also provide information on the consumer’s character,
reputation, and habits. The primary difference is that the information is obtained through an investigation and interviews with
associates, friends and neighbors of the consumer. Unlike consumer reports, these reports cannot be made unless the consumer is
advised in writing about the report within 3 days of the date the report was requested. The consumers must be advised that they
have a right to request additional information concerning the report, and the insurer or reporting agency has 5 days to provide the
consumer with the additional information.
Know This! Insurance applicants must be notified in writing whenever insurers request investigative consumer reports.

Question 66

Fair Credit

Reporting Act.

Answer 66

The reporting agency and users of the information are subject to civil action for failure to comply with the provisions of the Fair Credit
Reporting Act. A person who knowingly and willfully obtains information on a consumer from a consumer reporting agency under
false pretenses may also be fined and/or imprisoned for up to 2 years.
An individual who unknowingly violates the Fair Credit Reporting Act is liable in the amount equal to the loss to the consumer, as well
as any reasonable attorney fees incurred in the process.
An individual who willfully violates this Act enough to constitute a general pattern or business practice will be subject to a penalty of
up to $2,500.

Question 67

Fair Credit Reporting Act,

Answer 67

Under the Fair Credit Reporting Act, if a policy of insurance is declined or modified because of information contained in either a
consumer or investigative report, the consumer must be advised and provided with the name and address of the reporting agency.
The consumer has the right to know what was in the report. The consumer also has a right to know the identity of anyone who has
received a copy of the report during the past year. If the consumer challenges any of the information in the report, the reporting
agency is required to reinvestigate and amend the report, if warranted. If a report is found to be inaccurate and is corrected, the
agency must send the corrected information to all parties to which they had reported the inaccurate information within the last 2
years.
Consumer reports cannot contain certain types of information if the report is requested in connection with a life insurance policy or
credit transaction of less than $150,000. The prohibited information includes bankruptcies more than 10 years old, civil suits, records
of arrest or convictions of crimes, or any other negative information that is more than 7 years old. As defined by the Act, negative
information includes information regarding a customer’s delinquencies, late payments, insolvency or any other form of default.

Question 68

2. Fraud and False Statements including 1033 Waiver

Answer 68

2. Fraud and False Statements including 1033 Waiver
   It is considered unlawful insurance fraud for any person engaged in the business of insurance to willfully, and with the intent to
   deceive, make any oral or written statement that are either false or omit material facts. This includes information and statements
   made on an application for insurance, renewal of a policy, claims for payment or benefits, premiums paid, and financial condition of an
   insurer.
   Anyone engaged in the business of insurance whose activities affect interstate commerce, and who knowingly makes false material
   statements may be fined, imprisoned for up to 10 years or both. If the activity jeopardized the security of the accompanied insurer,
   the punishment can be up to 15 years.
   Anyone acting as an officer, director, agent or other insurance employee who is convicted of embezzling funds faces the
   aforementioned fines and imprisonment. However, if the embezzlement was in an amount less than $5,000, prison time may be
   reduced to 1 year.
   Federal law makes it illegal for any individual convicted of a crime involving dishonesty, breach of trust or a violation of the Violent
   Crime Control and law Enforcement Act of 1994 to work in the business of insurance affectine interstate commerce without

insurer.
Anyone engaged in the business of insurance whose activities affect interstate commerce, and who knowingly makes false material
statements may be fined, imprisoned for up to 10 years or both. If the activity jeopardized the security of the accompanied insurer,
the punishment can be up to 15 years.
Anyone acting as an officer, director, agent or other insurance employee who is convicted of embezzling funds faces the
aforementioned fines and imprisonment. However, if the embezzlement was in an amount less than $5,000, prison time may be
reduced to 1 year.
Federal law makes it illegal for any individual convicted of a crime involving dishonesty, breach of trust or a violation of the Violent
Crime Control and Law Enforcement Act of 1994 to work in the business of insurance affecting interstate commerce without
receiving a letter of written consent from an insurance regulatory official - a 1033 waiver. The consent of the official must specify
that it is granted for the purpose of 18 U.S.C. 1033. Anyone convicted of a felony involving dishonesty or breach of trust, who also
engages in the business of insurance, will be fined, imprisoned for up to 5 years or both.
Section 1034, Civil Penalties and Injunctions for Violations of Section 1033, states that the Attorney General may bring a civil action in
the appropriate U.S. district court against any person who engages in conduct that is in violation of Section 1033 of not more than
$50,000 for each violation, or the amount of compensation the person received as a result of the prohibited conduct, whichever is
greater.