Insurance Regulation 5% Flashcards
There is an annual fee to maintain an adjuster license paid to the
director of insurance.
An adjuster must notify the commissioner of a change of name, address, or email address
within 30 days of the change.
Disciplinary Actions - Cease and Desist Order
● Commissioner issues a cease and desist order after finding that a licensee has violated an insurance law
● Licensee must cease his unlawful actions at once
Penalty for violating cease and desist order:
● fine up to $10,000 - $50,000 and/or suspension or revocation of license
Suspension, Revocation, and Refusal to Issue or Renew
●Commissioner can suspend, revoke, or refuse to issue or renew a person’s license if a hearing determines that the licensee is guilty of violating insurance law
● If an adjuster poses a threat to the public, the commissioner can suspend his license immediately, without a hearing
Penalties and Fines - Misrepresenting terms of a policy
● upto$1,000 fine per violation or
imprisonment
Penalties and Fines - Violating an insurance law
● up to $500 fine per violation or $5,000 total
Penalties and Fines - Knowingly violating an insurance law:
● up to $2,500 fine per violation or $25,000
total for multiple violations committed in a 6-month period
Commissioner can hold a hearing if he believes a person has violated
● an insurance law or regulation
● An applicant denied a license can request a hearing within 30 days of being denied
Process for applying for an adjuster license:
- Applicant submits an application to the commissioner
- Commissioner has the applicant take an examination and conducts any
investigations necessary for determining the applicant’s qualifications - After receiving an application, commissioner has 60 days to make a decision
about the applicant - If the applicant is approved, the commissioner issues him a license
Lines of Authority
The following lines of authority are available in Michigan:
● Fire and other hazards
● Workers’ compensation
● Crop(including multi-peril crop insurance
Public adjuster
A licensed adjuster who represents the insured who has suffered losses
Independent adjuster
A licensed adjuster who adjusts losses on behalf of an insurance company
Requirements for being licensed as an adjuster in Michigan:
● Beat least 18 years old
● Apply online
● Pay an application fee and a transaction fee
● Pass the state exam
● Be of good moral character
● Have a reasonable understanding of insurance and the laws governing it in MI
● Intend to act in good faith
● Possess a good business reputation
The following are 14 claim settlement practices that are prohibited by Michigan law:
- Misrepresentation
- Failing to acknowledge communication about claims
- Failing to implement standards for claims investigation
- Denying claims without having conducted a reasonable investigation
- Failing to affirm or deny coverage of a claim within a reasonable time
- Failing to make prompt, fair, and equitable settlements for claims in
which liability has become reasonably clear - Offering substantially lower settlements than is fair, forcing claimants to
take the insurer to court - Attempting to settle claims for less than what a reasonable person would
expect based on advertisements made in applications - Trying to settle a claim using an application that was altered without
insured’s knowledge or consent - Making claims payments without explaining which coverage provided for
them - Attempting to compel a claimant to accept a settlement that is less than
the amount awarded in arbitration, by telling them that the insurer has a
policy of appealing arbitration awards that favor the insured - Delaying the settlement process by demanding both a preliminary claim
report and formal proof of loss forms - Refusing to settle claims promptly under one part of the policy in order to
influence settlement under another - Failing to explain promptly and thoroughly why a claim was denied or a
compromise settlement offered
- Misrepresentation
This refers to when an insurer or adjuster makes a material misrepresentation to the insured (or any other person who has an interest in the results of a settlement) in order to reduce the dollar amount of a claim settlement.
- Failing to acknowledge communication about claims
Insurers may not fail to acknowledge any communication about insurance
claims, and they are required to respond promptly to these communications.
- Failing to implement standards for claims investigation
An insurer must enforce standards so that every claim gets a proper
investigation: the insurer must acknowledge the claim within the required time
frame, investigate it thoroughly, taking all of the policy provisions into account, and then approve or deny it as promptly as possible.
- Denying claims without having conducted a reasonable investigation
The insurer is responsible for completing a thorough investigation before
deciding to deny a claim.
- Failing to affirm or deny coverage of a claim within a reasonable time
After receiving all the information necessary for an investigation, including
proof of loss forms, the insurer must make a decision within a reasonable
amount of time.
- Failing to make prompt, fair, and equitable settlements for claims in
which liability has become reasonably clear
If a claim is legitimate, the settlement amount has become clear, and the
claimant has provided proof of the loss, the insurer must pay that settlement
promptly.
- Offering substantially lower settlements than is fair, forcing claimants to
take the insurer to court
The insurer is not allowed to offer a policyholder substantially less than the
proper amount of damages. Not only is this type of behavior unfair, it also clogs
the legal system with unnecessary lawsuits simply because the insurer is not
willing to indemnify policyholders according to contract
- Attempting to settle claims for less than what a reasonable person would
expect based on advertisements made in applications
An insurer is obliged to honor the terms of any written or printed advertising
material that accompanied or was a part of the policyholder’s application.
- Trying to settle a claim using an application that was altered without
insured’s knowledge or consent
An insurer may not attempt to settle claims on the basis of an application that
was altered without the insured’s knowledge or consent. This includes binders
or any other document that would change the insured’s coverage in any way.
- Making claims payments without explaining which coverage provided for
them
When making a claim payment, the insurer should include a statement that
explains the amounts provided by each coverage, so the policyholder
understands clearly what is being covered under which provision of the policy.
- Attempting to compel a claimant to accept a settlement that is less than
the amount awarded in arbitration, by telling them that the insurer has a
policy of appealing arbitration awards that favor the insured
The insurer must not try to convince the insured to settle for less than the
amount awarded him at the arbitration by threatening to appeal the arbitration
award.
- Delaying the settlement process by demanding both a preliminary claim
report and formal proof of loss forms
If an insurer requires an insured, a claimant, or the physician of either to submit
a preliminary claim report, the insurer may not then delay the settlement
process by demanding formal proof of loss forms. These forms contain
substantially the same information, so requiring both before proceeding is
simply a way of delaying settlement
- Refusing to settle claims promptly under one part of the policy in order to
influence settlement under another
If settlement is undisputed under one policy coverage, the insurer must pay it.
The insurer may not “hold-out” on undisputed coverage in order to get the
claimant to settle for a lower indemnity under another coverage.
- Failing to explain promptly and thoroughly why a claim was denied or a
compromise settlement offered
The insurer must provide the exact reason for the denial or compromise offer,
based on the facts of the claim and the insurance coverage. When offering a
compromise settlement, the insurer must explain how the new amount was
calculated.
Unfair methods of competition in Michigan:
- Failing to make payments to an insured on a timely basis
- Failing to complete a payroll audit annually or within 120 days of either
receiving a request from the insured or terminating the policy - Refusing to offer insurance to a healthcare provider because the provider has
entered into an arbitration agreement with a patient - Issuing a disability policy to someone who is eligible for medicare
- Failing to provide information about a rate upon request
- Failing to keep record of complaints
- Maintaining a business under a false name
the commissioner can place a licensee on probation, fine him, or suspend or revoke his license if he commits any
of the following violations
● Providing incorrect, misleading, incomplete, or materially untrue
information on a license application
● Violating any insurance laws or an order of a commissioner of
insurance
● Obtaining a license through misrepresentation or fraud
● Improperly withholding, misappropriating, or converting any money or
property received in the course of doing insurance business
● Being convicted of a felony
● Using fraudulent, coercive, or dishonest practices or demonstrating
incompetence, untrustworthiness, or financial irresponsibility in the
conduct of business in Michigan or elsewhere
● Having an insurance producer license or its equivalent denied,
suspended, or revoked in any other state, province, district, or
territory
● Forging someone else’s name on an insurance application or any
document related to an insurance transaction
● Improperly using notes or any other reference material to complete
an exam for an insurance license
● Knowingly accepting insurance business from an unlicensed
individual
● Failing to pay child support
● Failing to pay the single business tax or the Michigan business tax or
to comply with any administrative or court order directing payment of
the single business tax or the Michigan business tax
● Making false comparisons of insurance policies
● Misrepresenting the terms of an insurance policy
● Misrepresenting an insurer’s financial condition
● Concealing an insurer’s identity
Is Called…
Misrepresentation
Deception
It is unlawful to:
● Publish false, deceptive, or misleading advertisements
condition
● Makefalse, maliciously critical, or derogatory statements of the financial
● Circulate libelous or slanderous material
Boycott, Coercion, and Intimidation
In Michigan, it is unlawful to commit any act of boycott, coercion, or intimidation in
order to restrain the business of insurance.
Unfair Discrimination
● Refusing or limiting a person’s insurance coverage because of race, color, age,
etc.
Penalty:
○ $500 fine per violation for an insurer
○ $50-$500 fine per violation for adjuster
Insurance Fraud Regulation - Fraudulent insurance act
An act or omission committed with the intent to injure, defraud, or deceive
Penalty: $1,000 fine or up to 3 months imprisonment
Other fraudulent insurance acts in Michigan include:
● Knowingly preparing or presenting false written statements to an insurer regarding an insurance policy application or claim payment
● Soliciting or accepting new insurance risks for an insolvent insurer
● Removing records of assets or transactions from an insurer’s place of business in order to conceal them
● Diverting an insurer’s funds
● Falsely obtaining benefits under an insurance policy
● Knowingly helping someone else commit a fraudulent act
Consumer Privacy Regulation - Consumer Privacy Protection:
ensures that insurers and their agents do not misuse
sensitive personal information
In order to protect consumer privacy, a licensee may not disclose a person’s policy or credit card account numbers to a marketing company, unless:
● The information is encrypted and the licensee doesn’t give the marketing company a way to decode it market his own products or services
● The licensee provides the information to his own service provider in order to
● The licensee gives the information to a participant of a program that the consumer has knowingly entered into
Insurers must have a written information security program to:
- Ensure the safety and confidentiality of nonpublic customer
information - Protect against any threats or hazards to the safety or integrity of that
information - Protect against the unauthorized access to or use of the information
that could harm a customer or cause inconvenience - Establish procedures for the periodic, secure disposal of any
information that is no longer necessary for business operations
Here are the requirements for being licensed as an adjuster in Michigan:
● Beat least 18 years old
● Apply online
● Pay an application fee and a transaction fee
● Pass the state exam
● Be of good moral character
● Have a reasonable understanding of insurance and the laws governing it in MI
● Intend to act in good faith
● Possess a good business reputation
Annual Fee
There is an annual fee to maintain an adjuster license.
