Life and Health Laws Flashcards
Insurance director is
appointed by the Governor and has the power and duty to enforce and execute the insurance laws of Illinois
The director has the power to
Make reasonable rules and regulations as necessary
Conduct investigations to determine if any person has violated any insurance law
Conduct examinations, investigations, and hearings as necessary to administer insurance law
Subpoena and examine witnesses under oath during examinations, investigations, and hearings
Institute any action or legal proceeding to enforce insurance laws f the Director’s actions
Issue licenses for insurance producers, and Certificates of Authority for insurance companies, permitting them to transact business in Illinois
Issue and serve a Ceases and Desist order on any person or company whose actions are illegal, threaten solvency, or that endanger its policyholders, or make any state law
Hearings must be within_______ for cease and desist
The director must issue notice that a hearing is to be held within 20-30 days of notification date.
The director does not have the power to
adjust claims, act as a judge in a lawsuit involving claims, advise any insured or any legal action to be taken against an insurer, or make any state law
If after a hearing, any statements in the notice are found to be true
The director may make orders to correct, eliminate, or remedy the illegal or improver conduct, conditions, or grounds.
A person violating a Cease and Desist order or Circuit Court order must
pay a $100 a day fine up to a total of $5,000.
The license or certificate of authority
of a producer or insurer may also be revoked
Any person violating a Cease and Desist Order pertaining to an unfair trade practice may be
fined up to 1,000 per violation
Examinations are used
to determine the financial business practices, performances, and operations of any company, applicant for, or licensee
The Director may examine
The insurance business transacted in Illinois by any authorized company
Anyone forming, promoting, soliciting shares of, or making capital contributions to a company
Anyone under contract to manage or control a company as a general agent, managing agent, or attorney in fact
A registered or licenses individual firm, or administrator or an applicant for such registration or license.
Anyone adjusting losses or financing premiums
The director may
appoint other examiners to investigate on his behalf
Examinees must provide
free access to all books, record, documents, and papers relating to the company’s business and operations.
The examinee must pay
all expenses incurred to help with an examination
Anyone refusing to cooperate may be fined up to
2,000
Reporting and hearing: The director must disclose an examination report
to the examinee before making the report public
The examinee must be given
10 days to request a hearing from the Director
If a hearing is granted, the director must give
the examinee at least 10 days notice
Within
90 days after the report on the hearing is filled, the Director must issue a written order based upon the report
Anyone violating a written report
may be fined up to $5,000. If the order is issued as a result of an examination, the violator may be fined up to $10,000.
If a licensed producer, the violator may be fined up to $20,000 and subjected to license revocation or suspension
Anyone acting as an insurance producer must
be licensed in the class of insurance for which he/she claims to be licensed
Classes include
life health/accident fire and inland marine(property) Casualty motor vehicle personal lines
A person may not offer paid advice about a policy’s benefits unless the person is one of the following
a licensed producer, limited representative, or temporary producer
an attorney
A bank trust officer, actuary, or CPA performing professional duties incidental to his or her position
a licensed public adjuster
any person acting as a producer w/o a licenses is guilty of
class A misdemeanor
misappropriation of collected funds is
class 4 felony
Limited lines producer license requirements
18 years or older, competent, trustworthy, and of good business reputation
Limited lines producer license are for the following classes
Baggage, trip cancellation, or limited travel accident and health sold in connection with transportation on a common carrier
Industrial life or industrial accident health insurance
Legal expense insurance
Mutual farm
HMO enrollments of public aid or Medicare recipients
Limited health care plans issued by an organization with a Certificate of Authority under the Limited Health service Organization act
Credit life or credit accident and health
Limited lines producers are exempt from bonding and pre-licensing requirements
Limited lines producers must be appointed by the companies they represent, but may represent more than one company
Limited line licenses remain
in effect perpetually as long as fees are paid.
A person who is not a legal resident of Illinois may be
licensed to act as a nonresident producer without taking a written exam if he/she meets all other licensing requirements and if his/her home state:
Allows reciprocal licensing of Illinois residents on the same basis
Certifies that he/she holds a current, valid license in good standing in that state
Certifies that he/she has passed a similar exam or that it does not require an exam
Business entities must obtain
a producer license in order to transact any insurance business in Illinois.
It must also appoint at lest 1 licensed producer responsible for its compliance with Illinois insurance law
In order to permit the continuation of business following the death or disability of a licensed producer,
The director may issue a temporary producer license to:
The surviving spouse or court-appointed representative of a deceased or disabled producer
A member of employee of a business entity licensed as a producer, when the entity’s designated producer dies or becomes disabled
The designee of a producer entering active duty in the U.S. armed forces
A temporary licenses is issued for
180 days and can be extended an additional 180 days by the director
A sponsoring insurer must forward a prospective producer’s temporary licenses application to the
director, who may refuse the app if less than half the insurer’s temporary licensees in a 6 month period obtain a permanent license
The director may grant a temporary insurance producer license for
90 days without requiring an exam, renewal is not allowed. An applicant must be enrolled in a training course conducted by the appointing insurer, and must fulfill the pre licensing requirements
An individual applicant may not
hold more than one temporary license in his/her lifetime.
The following individuals are exempt from state licensing requirements
A regular salaried employee or officer of an insurer engaged in technical advice, loss control, claims processing, adjusting, or settling
A salaried employee devoted full time to clerical or administrative duties and not receiving commissions
Any person securing and furnishing information for group life and health insurance who does not receive commission.
A trustee of an employee trust plan, including an employer or officer who administers the program for the plan’s own employees
Any person or organization employed by an insurer only to train licensees or to inspect, rate, or classify risks
Any person who advertises insurance without the intent to solicit
Any salaried employee who only counsels or advises an employer about its insurance interests
To obtain a producers license an applicant must
Be at least 18
Have not committed any act that is ground for denial, suspension, or revocation
Complete a pre licensing course
Unless exempt, file a bond for the greater of 2,500 or 5% of the premiums brokered in the previous year, up to 50,000
Unless exempt, pass a written exam (both sections of the exam must be completed within 90 days of each other)
An individual producer license applicant currently licensed in another state (or licensed within the past 90 days) for the same lines of authority is
exempt from pre licensing education and exam requirements if that state issues a Letter of Clearance stating that the individual’s license is-or, when cancelled, was in good standing.
A producer’s license remains in effect so long as
the biennial fee is paid, the required bond is filed (if applicable), and education requirements for resident producers are met by the due date.
The department charges the following licensing fees
An insurance producer license: $180 ($250 for nonresidents) payable every 2 years
A temporary producer license: $50
A business entity license: $150 payable every 2 years
A limited line producer license: $50 annually
Processing fee for an insurance producer exam application $50
pre-licensing education requirements
An applicant must complete 20 credit of pre-licensing education (including 7.5 hours in a classroom setting) before taking the licensing exam for life, accident/health, property, casualty, of personal lines insurance. 12.5 hours credit hours ( 5 hours in a classroom setting) are needed for motor vehicle insurance.
A producer must maintain a bond to
place insurance with an insurer with which the producer does not have an agent contract. An appointed producer does not need to maintain a bond to transact insurance for the appointing insurer.
Unless a licensee completes continuing education
biennially (every 2 years), his/her license will be terminated. 2 4 hours of approved CE courses are required, 3 of which must consist of classroom instruction on ethics. Up to 12 excess credit hours of continuing education may be carried over to the next biennial reporting period.
A licensee unable to comply to due
to military service may request a waiver
Controlled business is insurance written to
cover the risks of the producer or his/her spouse, employer, or business. Controlled business may not comprise more than 50% of any producer’s premiums
a producer’s license will be denied or non renewed if the producer
has written more controlled than regular business in either of the last 2 years before the license renewal date
Will write more controlled than regular business (based on premium amount) in the 12 month period after his/her license is issued or renewed
An individual producer who allows his/her license to lapse may be issued a license
without exam, by paying twice the renewal fee within 12 months after the original renewal fee’s due date
Licensees must inform the Director of a change of address
within 30 days after the change
The director may revoke, suspend, refuse to issue, or nonrenew a license for any of the following reasons
Any reason that would have resulted in the license not being issued
Violation of state law
attempting to obtain a license by fraud, misrepresentation, or material misstatement
felony conviction
misappropriation of funds
acting as an agency through persons not licensed as agents or brokers
having a license suspended or revoked in another state
intentionally misrepresenting a contracts terms
Demonstrating a lack of trustworthiness or competence
Committing fraud in connection with any insurance transaction
Failing to respond to a subpoena issued by the Director, without reasonable cause
Improperly using notes or other reference materials to complete a license exam
Committing an unfair trade practice
Failing to pay state income tax, penalty, or interest, to repay the Illinois student assistance commission for a delinquent student loan, or to pay court-ordered child support
Failing to comply with any provision of the Viatical Settlements act of 2009
A licensee may demand a hearing
within 30 days after being notified that the director is sanctioning his/her license. The hearing must be held within 20-30 days after the date that the notice of hearing is mailed.
Any of these violations are subject to a fine up to
$10,000 up to a total of $100,000, in additional to denial, suspension, or revocation of the producer’s license.
An individual whose license is denied or revoked may not reapply for a license for
3 years
A producer must hold premiums in a
fiduciary capacity. Any insurer issuing a policy is deemed to have received the premium if the insured pays any producer for the coverage. The insurer is responsible to the insured for any return of premium.
A producer may add a late payment charge up to
1.5% per month to overdue balances on open accounts
A producer knowingly misappropriating funds held in a fiduciary capacity is guilty of
A class A misdemeanor for the 1st offense, and a felony for the subsequent offense, if 150 or less per offense. A class 3 felony if its over 150
A producer must maintain a premium fund trust account if he/she holds
any premium for 15 or more days before remitting it, deposits any premiums into a financial institution account or uses the premiums.
The producer must keep records showing
transaction dates and amounts, and identifying fund sources and destinations by name, type, and policy number.
Producers maintaining a premium fund trust account must pay or credit
any return premiums to the insured within 15 days after receipt and must post the accounts journal entries at least once very 30 days.
The premium fund trust account must be:
With a financial institutions in Illinois
Subject to the jurisdiction of the courts of Illinois
Designated “premium Fund Trust Account” and those words must be displayed on the face of all checks of the account
maintained for 7 years.
Money may be taken from the account only to pay
Net premium to the insurer
Commissions, and any authorized interest to the producer
Returns of premiums du to an insured
Non-Premium monies (service fees, late charges, inspection fees,) that have been matches and identified with prior non-premium deposits.
An insurer or producer may pay a
commission, service fee, or other consideration for services as a producer only if that person is licensed in the class of insurance for which the service was rendered.
A person who is required to be licensed may
accept a commission, service fee, or other consideration only if properly licensed.
Commissions may be paid to a person who
was properly licensed during the sale, solicitation, or negotiation, for which the commissions are being paid, even if that person is no longer licensed.
An insurer or producer may pay or assign
commissions to a person who does not sell, solicit, or negotiate insurance in Illinois.
A producer or business entity must disclose
in writing and before policy delivery, any fee or compensation charged, other than commissions derived from premiums
A licensee must report being
convicted of a felony and give a copy of the judgment, probation or commitment order, and any other relevant documents, to the Director within 30 days after the judgement’s entry date.
A policy solicited by an insurance producer
must identify the name of the producer, representative, or firm.
The soliciting licensee’s
name and signature must be on an application for individual or group life or health coverage.
Offering a rebate, premium discount, or anything of value not specified in the policy
is a class B misdemeanor
An insurer may be sue a producer
for the return of commissions paid for a sale involving rebating
The term rebating does not include
A bonus a nonparticipating insurer pays to policy owners from accumulated surplus
A return of savings to industrial life policyholders that represents the amount the insurer saved by having premiums paid directly to the insurer
Violation may not
receive commissions for any sales for which a rebate was given. Violators who provide evidence or testimony in court are immune from all prosecution except for prejury
These violations by insurers or producers are punishable by a fine of $100-5,000
Misrepresenting a policy’s terms, benefits, or dividends
Misrepresenting companies or policies to induce a policy owner to change existing insurance
Creating the impression that a governmental agents guarantees or approves a company’s policies, financial condition, or claims payment procedures
Referring to a security deposit with the Director
An insured misrepresentation will
void a policy only if the misrepresentation was intended to deceive the insurer or materially affect the risk’s acceptance.
Defamation
Fare or maliciously critical statements made with the intent injure any company doing business in Illinois is punishable by a fine of 100-5000
Twisting
encouraging a client to lapse a policy to his/her detriment and replace it with another.
Give all info to the client
Boycott, coercion, or intimidation
Agreeing to any action unreasonably restraining, or creating a monopoly in, the insurance business. Making an insurance purchase from one source for another type of business transaction
Other unfair trade practices
falsifying insurance company records
false advertising of a company’s financial condition.
Discriminating between persons of the same class or hazard by charging a different rate
Discriminating against handicapped, disabled, blind, or partially blind persons without sound actuarial data.
Discrimination based upon lawful travel
Refusing to provide life insurance solely because an individual is a member of the armed forces
it is not an unfair practice to refuse to issue a policy due to
an applicants occupation.
The following acts are considered unfair or improper claim settlement practices in Illinois
Knowingly misrepresenting relevant facts or provisions relating to coverage at issue
Compelling insureds to sue to recover amounts due by offering substantially less than the amounts recovered in actions bought by legal process
Attempting to settle a claim for less than the amount a reasonable person would believe he/she is entitled to according to advertising materials
Attempting to settle claims on the basis of an altered application
Informing insureds or claimants of a policy of appealing arbitration awards
Delaying a claim’s investigation or payment by requiring that a preliminary claim report be submitted that duplicates the info provided in a proof of loss
Engaging in activity that results in a disproportionate number of complaints against the insurer, or lawsuits filed b claimants against the insurer or its insureds.
Refusing to pay claims without conducting a reasonable investigation based on all available information
The following omissions are considered unfair or improper claim settlement practices in Illinois.
Failing to:
Adopt and implement standards for promptly investigating and settling claims
Attempt in good faith, to promptly, fairly and equitably settle a claim in which liability has become reasonably clear.
State, when paying a claim, the coverage under which payment is being made
Promptly settle a claim where liability has become reasonably clear under one portion of the policy, in order to influence settlements under other portions of the policy.
Promptly and reasonably explain the basis for claim’s denial
Affirm or deny coverage within a reasonable time after proof of loss has been completed
Promptly acknowledge pertinent communications about claims
An insurer must acknowledge receipt of a first-party claim, provide any necessary claim forms, and reply to all other pertinent communications within
15 days
An insurer must pay a claim within
30 days after determining that the loss is covered
An insurer denying a first-party claim, or settling it for an amount less than claimed, must give the claimant a reasonable written explanation of the settlement or denial within
30 days after determining liability
An insurer denying a third-party claim must give the claimant a reasonable written explanation for the denials basis within
30 days after initially determining that it is not liable
an insurer must maintain
detailed claim files and make them available for examination by the Director.
An insurer is not required to notify an insured that
he/she needs to make a claim or how to make it
Illinois life and health insurance guaranty association protects
policyowners, insureds, and beneficiaries against insurer insolvency. All insurers authorized to transact life and health insurance in Illinois must be members of the association. If a member becomes insolvent, the other members are assessed the necessary funds to cover the insolvent insurer’s claims.
The association may not be held liable for more than
the insolvent insurer’s contractual obligations up to
300,000 in life insurance death benefits
100,000 in life insurance net cash surrender and withdrawal values
250,000 in annuity benefits
100,000 in health insurance benefits
300,000 for disability insurance and LTC insurance benefits
500,000 for basic hospital, medical or surgical insurance benefits, and major medical expenses
The association does not cover
non-guarantee benefits under a variable life policy or variable annuity
any hmo, even fi owned by a member insurer
Any health services plan corporation
Any unallocated annuity contract issued to a federally protected employee benefit plan
