State Laws Flashcards
If an individual wants to transact business as an insurance producer, they must meet all of the following requirements, except:
Apply for a license within 2 years of passing the licensing exam
Business Entity
A business entity is any corporation, association, partnership, Limited Liability Company, Limited Liability Partnership, or other legal entity, except an individual or sole proprietorship. Before approving the application of a
In order for a business entity to obtain a producer license, it must comply with which of the following requirements?
Ensure that all employees acting as producers are licensed as producers
Issuance of a License
Before granting a license, the Director may require the applicant to provide:
Documentation necessary to verify information in the application, including prior criminal records
A full set of fingerprints for the purpose of obtaining state and federal (FBI) criminal records
If a nonresident holding an insurance producer license in another state becomes a resident of Arizona, they must apply for a resident producer license within 90 days of cancelling the current resident license. The current resident license must be valid and in good standing. As long as all requirements are met, an Arizona examination for licensing is not required.
For an individual called into active military service after passing the examination, the 12-month period to apply for a license may be extended by the number of days the individual was in active military service. However, this extension may not exceed 18 months. The individuals must provide documentation certifying they had been in active military service
Within what time frame must a nonresident producer apply for a resident producer license upon moving to Arizona?
90 days
Before granting a license, the Director may ask for which of the following type of information?
In Arizona, a resident licensee:
Must have a residence or principal place of business in Arizona
All of the following statements about obtaining a nonresident license are correct, except:
The application fees are waived for nonresident licenses
Insurance Producer
An insurance producer is a person (individual or business entity) required to be licensed to sell, solicit, or negotiate insurance. A person meeting the requirements of licensure may qualify for an insurance producer’s license in one or more of the following lines of authority:
Life
Accident and health or sickness
Property
Casualty
Variable life and variable annuity products
Personal lines
Credit
Crop
Adjuster
An adjuster is any person who, for compensation, adjusts, investigates, or negotiates the settlement of claims on behalf of either the insurer or the insured. Adjuster does not include:
A licensed attorney who is qualified to practice law in Arizona
A salaried employee of an insurer or of a managing general agent
A licensed insurance producer who adjusts losses arising under policies they procure
An employee of a political subdivision who adjusts losses arising under policies covering the political subdivision
An independent contractor retained by a licensed adjuster for the sole purpose of providing assistance in connection with a claim. An independent contractor may include a photographer, estimator, engineer, private detective, or handwriting expert.
To be licensed as an adjuster, the individual must apply to the Director, be at least 18 years old, be a resident of Arizona or another reciprocal state, and pass a licensing examination. The examination requirement will be waived if the applicant holds a claims certificate issued by a national or state-based claims association with a program consisting of at least 40 hours of pre-examination course work, a proctored exam, and at least 24 hours of continuing education biennially.
An adjuster who is licensed in their home state is not required to be licensed in Arizona if they are sent to Arizona for the purpose of investigating or adjusting claims resulting from a catastrophic loss.
Life Settlement Broker
A producer that is licensed with a life line of authority is deemed to meet the licensing requirements to operate as a life settlement broker as long as they pay any applicable fee and, within the first 30 days of operating as a broker, they must notify the Director that they are acting as a broker. A broker may renew a license by paying the renewal fee. The expiration date of the broker authority coincides with the expiration of the life line of authority.
Surplus Lines Brokers
Surplus lines insurance is insurance written by unauthorized insurers when coverage may not be written by authorized insurers. Surplus lines insurance may be procured from an unauthorized insurer as long as it is written through a surplus lines broker licensed in Arizona and a diligent effort has been made to obtain coverage through an authorized insurer.
A resident or nonresident property and casualty insurance producer may obtain surplus lines coverage on behalf of a policyholder through a licensed surplus lines broker. The insurance producer may pay a fee or share commission with a surplus lines broker. A surplus lines broker may only receive a fee, commission, brokerage, or other valuable consideration from a licensed property and casualty producer, managing general agent, or another surplus lines broker.
A person may not act as a surplus lines broker in Arizona on behalf of an insured living in Arizona unless they have a current surplus lines broker license issued by the Director.
Mexican insurance surplus lines broker license may be issued to a resident or nonresident licensed insurance producer that maintains an office in Arizona. Mexican insurance surplus lines is a policy of insurance that is to be effective in Mexico and that is issued by an alien insurer not authorized to transact insurance in Arizona. These policies are not protected or regulated by the state of Arizona if the insurer becomes insolvent.
Temporary License
The Director of Insurance may issue a temporary insurance producer license for a period up to 180 days, without requiring an examination, if it is necessary to service insurance contracts in the following circumstances:
The surviving spouse or court-appointed personal representative of a licensed insurance producer who dies or becomes mentally or physically disabled to allow adequate time for the:
Sale of the insurance business owned by the producer
Recovery of the producer and their return to the business
Training and licensing of new personnel to operate the producer’s business
Any member or employee of a business entity licensed as an insurance producer, upon the death or disability of that individual, designated in the business entity’s application or the insurance producer’s license
The designee of an individual licensed as an insurance producer who is entering active service in the Armed Forces of the United States
The Director may impose limitations on the authority of any temporary licensee or revoke the license if deemed necessary to protect insureds and the public. The Director may require the temporary licensee to have a suitable sponsor who assumes responsibilities for all acts of the temporary licensee.
A temporary license may be issued to a designated individual for all of the following reasons, except:
Inactive License During Military Service
A licensee or applicant who is ordered into active military service may request that the license or application be placed on inactive status by sending the Department a written statement that includes all of the following:
The licensee’s name
The licensee’s license number or Social Security number
The date that the active military service begins
A request for inactive status
A licensee whose license is on inactive status may not sell, solicit, or negotiate insurance, but the licensee is allowed to receive renewal or other deferred commissions.
The time periods for submission of the license renewal fee and for completion of the applicable renewal and continuing education requirements are extended for a licensee whose license is on inactive status by the number of days that the licens
Change of Business/Contact Information
Licensees are required to inform the Director in writing of any change of address, designated producer, or name. Notification must be submitted within 30 days of the change. The Director may require a full set of fingerprints for each new member, director, officer, or designated producer to obtain a state and federal criminal records check, as required by law.
Assumed Business Name and Trade Name
An insurance producer must notify the Director in writing within 30 days after any material change to the information filed with the Director. The Director will not issue any license in a trade name, except to a business entity if the trade name is legally registered.
Which of the following statements regarding using an assumed business name is not correct?
An insurance producer must report to the Director within 30 days after the filing date of a criminal conviction in any jurisdiction. The report must include a copy of the initial indictment, information or complaint filed, the final judgment entered, and all other relevant legal documents.
Exceptions to CE Requirements
Licensees who instruct an approved course on behalf of an approved provider may receive 2 times the credit hours assigned to the approved course.
Nonresident licensees may submit proof of completing continuing education requirements in their home state to the Director, provided their home state recognized credits earned by Arizona residents. In the case that the nonresident’s home state is not reciprocal, the nonresident licensee may satisfy the continuing education requirements by earning credits from an approved provider. If their home state does not have continuing education requirements, the nonresident licensee must comply with Arizona’s requirements.
Continuing education requirements do not apply to individuals who have been continuously licensed as an insurance agent, broker, or producer in Arizona since January 1, 1995 and never committed any action that caused:
The suspension, revocation, denial, or nonrenewal of their license
The Director to issue a cease and desist order
The licensee to pay restitution or civil penalty
Disciplinary Actions
The Director may suspend up to 12 months, revoke, or refuse renewal of a producer or business entity license for:
Providing incorrect, incomplete, or materially untrue information in a license application
Violating any insurance law, or any regulation, subpoena, or order of the Director
Obtaining a license through fraud or misrepresentation
Improperly withholding, misappropriating, or converting any monies or properties received while conducting insurance business
Misrepresenting the terms of an insurance policy, whether issued or proposed
Being convicted of a felony
Any insurance unfair trade practice
Using fraudulent, coercive, or dishonest practices
Demonstrating incompetence, untrustworthiness, or financial irresponsibility
Having an insurance producer license denied, suspended, or revoked in any jurisdiction
Forging another’s name to any document related to an insurance transaction
Paying or receiving commissions, directly or indirectly, if not authorized, unlawfully charging interest on a premium finance agreement, or collecting a service charge exceeding $10 for arranging a premium finance agreement
Using the insurance producer’s license principally to provide insurance that covers the life, property or insurable interests of the licensee or the licensee’s family members, employer, or employees. This is known as controlled business.
Denial, Suspension, Revocation, or Refusal to Renew; Civil Penalties (continued)
When denying an application, or suspending, revoking, or refusing to renew a license, the Director must notify the applicant through personal delivery or certified mail and provide the applicant with the opportunity for a hearing. The Director will give at least 10 days’ notice of the time and place of the hearing and the matters to be considered. Any person affected by the hearing may appear in person to inspect all evidence, examine witnesses, present supporting evidence, and have subpoenas issued to compel the attendance of witnesses and the production of evidence.
Instead of, or in addition to, suspending, revoking, or refusing to renew a producer license, the Director may:
For each unintentional act, impose a civil penalty up to $250 with a maximum penalty of $2,500
For each intentional act, impose a civil penalty up to $2,500 with a maximum penalty of $15,000
Order restitution to any party injured by the licensee
Effect of Suspension or Revocation of License
If a license is revoked, the licensee must deliver the license to the Director and may not be issued another license for at least 1 year. The person must requalify for licensure when seeking another license.
The Director may take any of the following disciplinary actions, except:
Suspend a license for up to 2 years if the producer is convicted of a misdemeanor
Cease and Desist Order
If there is reason to believe that any person is violating or about to violate Arizona insurance laws, the Director may order the person to cease and desist and through the attorney general, may file a complaint in the county court to enjoin and restrain the person from continuing the violation, engaging in the violation, or doing any act to violate the law any further.
Specifically, the Director may issue a cease and desist order for:
Committing any action that is grounds for license suspension, revocation, or denial
Transacting insurance without a license
Paying commissions to a person who is not licensed as required or receiving commissions if not appropriately licensed
Acting as any of the following without being appropriately licensed:
Managing general agent
Adjuster
Rental car agent
Risk manager
Self-service storage agent
Bail bond agent
Surplus lines broker
Acts Constituting Insurance Transaction
Insurance transactions include any of the following acts:
Solicitation and inducement
Preliminary negotiations
Execution of a contract of insurance
Transaction of matters subsequent to effectuation of the contract and arising out of it
Solicitation refers to attempting to sell insurance, or asking or urging a person to apply for a particular kind of insurance from a particular company.
Negotiation is the act of conferring with a purchaser or prospective purchaser of a particular contract of insurance concerning any of the substantive benefits, terms, or conditions of the contract, if the person engaged in that act either sells or obtains insurance from insurers for purchasers.
To sell insurance is to exchange a contract of insurance for consideration on behalf of an insurer
Payment of Premiums
Any payment of an insurance premium that is mailed on or before the due date is deemed timely payment of the premium using the date shown on the postmark.
If the insurer does not retain the envelope or the postmark date on the envelope is illegible, the payment date is presumed to be 5 mail days before the date the insurer receives the payment.
Certificate of Authority
Any payment of an insurance premium that is mailed on or before the due date is deemed timely payment of the premium using the date shown on the postmark.
If the insurer does not retain the envelope or the postmark date on the envelope is illegible, the payment date is presumed to be 5 mail days before the date the insurer receives the payment.
If a payment is sent by United States certified or registered mail, the date of the registration or certification is deemed the date of payment. If the due date of a payment falls on a Saturday, Sunday, or legal holiday, the payment is considered timely if sent on the next business day.
Identification of Producer
An authorized insurer cannot issue a policy for in-state risks unless the policy declaration page or endorsement identifies the name of the producer licensed for that line of authority in Arizona. A violation of this law does not invalidate the policy.
This section does not apply to:
Reinsurance or life, disability, or title insurance
Insurance of the rolling stock, vessels, or aircraft of any common carrier in interstate or foreign commerce, or of any vehicle principally garaged and used in another state, or covering any liability or other risks incident to the ownership, maintenance, or operation thereof
Insurance of property in the course of transportation interstate or in foreign trade, or any liability or risk incident related to it
Insurance of ocean marine risks
Policies issued through salaried insurance producers or issued by insurers not using insurance producers in the general solicitation of business
Bid bonds issued by any surety insurer in connection with any public or private contracts
Policies issued by a vending machine
Producer Regulation
Sharing Commissions
An insurer or producer may not pay a commission, service fee, brokerage, or other valuable consideration to a person transacting insurance in Arizona if the person is required to be licensed and is not. A person may not accept a commission, service fee, brokerage, or other valuable consideration for transacting insurance in Arizona if the person is required to be licensed and is not.
An insurer or insurance producer may pay or assign commissions, service fees, brokerages, or other valuable consideration to an insurance agency or persons who do not sell, solicit, or negotiate insurance in Arizona, unless the payment would be seen as an unfair trade practice.
Renewal or other deferred commissions may be paid if the person was licensed at the time of the transaction.
A producer may share commissions with another producer:
Only if they are both licensed in the same line of insurance
Place of Business and Records
Insurance producers are required to keep insurance records at the producer’s principal place of business for 3 years following each transaction. They must be available for inspection during business hours throughout the 3-year period. The Director may conduct an examination at any time it is deemed necessary. These records must be kept confidential and the examined party must pay the reasonable cost of the examination.
A business entity insurance producer must have at least one individual licensed as a producer at each office or place of business in Arizona. The individual must be licensed for the appropriate lines of authority transacted at each location.
Unfair Practices and Fraud
The following acts are unfair trade practices, unfair methods of competition, or deceptive acts/practices in the business of insurance. As a result, they are prohibited.
Misrepresentation
Misrepresentation involves making false or misleading statements during the sale of insurance and is considered a Class-5 felony under Arizona law. Specifically, the unlawful act of misrepresentation includes issuing any statement that:
Misrepresents the terms of a policy, including its benefits, advantages, dividends, or share of surplus received
Falsely portrays a policy’s dividends or share of surplus previously paid
Falsely portrays the financial condition of any insurer or its legal reserve system
Uses the name or title of a policy to misrepresent the true nature of the policy
Causes the policyholder to lapse, forfeit, surrender, keep, or convert an insurance policy
Falsely discloses the method or amount of compensation paid in connection with a health benefits plan
Conceals a policy’s benefits, coverage, or provisions if they are pertinent to a claim
False or Deceptive Advertising
Making a misrepresentation about an insurance policy is considered false or deceptive advertising.
It is a prohibited practice for any person to publish any advertisement that contains an untrue, deceptive, or misleading assertion concerning the business of insurance or any person conducting the insurance business. It is also considered false or deceptive advertising for any person that is not an insurer to use a name that infers or suggests, deceptively, that they are an insurer.
Defamation of Insurer
Defamation is making a verbal or written statement that is false, maliciously critical, and intended to injure another in the insurance business. It is a prohibited practice for any person to make any oral or written statement that is false, maliciously critical of, or derogatory to the financial condition of an insurer or anyone engaged in the business of insurance if the statement is intended to injure.
An insurer or producer may charge fees for services not customarily provided if they file the fee with the Director and meet the following conditions, except:
The services required the producer to spend more time than usual explaining coverages
Unfair Claims Settlement Practices
The following acts are considered unfair claims settlement practices if they are performed with a frequency that indicates they are a general business practice:
Misrepresenting pertinent facts or insurance policy provisions that relate to any coverage at issue
Failing to acknowledge and respond reasonably promptly to communications pertinent to claims
Failing to adopt and use reasonable standards for the prompt investigation of claims
Refusing to pay claims without first conducing a reasonable investigation based upon all available information
Failing to confirm or deny coverage under a claim within a reasonable time after receiving a completed proof of loss
Not attempting in good faith to conduct prompt, equitable, and fair settlement of claims when liability is reasonably clear
The failure of a property and casualty insurer to recognize a valid assignment of claim
Compelling insureds to file lawsuits to receive claim payments by offering substantially less than the amount to which they are entitled based on written or printed advertising material that was part of, or accompanied, an insurance application
Attempting to settle claims based on an application that was altered without the knowledge or consent of the insured
Making claim payments without statements indicating the coverage under which payments are being made
Cancellation and Nonrenewal for Personal Lines
Dwelling, Fire, and Homeowners Insurance
These regulations apply to personal lines property and casualty policies, other than auto policies.
Grounds
After a policy has been in force for 60 days, a policy cannot be cancelled or nonrenewed, except for one of the following reasons:
Premium nonpayment
Fraud or material misrepresentation
The named insured’s being convicted of a crime arising out of acts that increase the hazard insured against
The discovery of grossly negligent acts or omissions by the insured that substantially increases any hazards insured against
Failure of the insured to eliminate conditions that increase the probability of a future loss
A substantial change in risk assumed by the insurer
A determination by the Director that the continuation of the policy would place the insurer in violation of insurance laws
A personal property policy that has been in effect for a minimum of how many days can be cancelled for nonpayment of premium?
60
Provisions Regarding Consumer Report Information
If an insurer uses information from a report provided by an insurance support organization or consumer reporting agency for underwriting purposes, the insurer must obtain that information as soon as practicable on the insurance application, prior to issuing a binder.
Failure to obtain the information in a timely manner will prevent the insurer from declining coverage or terminating a binder based on information in a report. Further, information in a report may not be the basis for coverage declination or binder termination after 30 days from the date of application.
Auto Insurance
These cancellation and nonrenewal requirements apply to personal autos. Personal autos are licensed motor-driven land vehicles, not including the following:
A private passenger vehicle or station wagon used as a public or livery conveyance or rented to others
Any other 4-wheel motor vehicle with a load capacity of 1,500 pounds or less that is used in the business of transporting people or property for hire, including as a public or livery conveyance, or that is rented to others
Any motor vehicle with a load capacity of more than 1,500 pounds
A vehicle used while driving for a transportation network company
Insurers may issue an endorsement to provide coverage for autos used while providing transportation network services, but insurers are not required to do so, and that coverage is not considered basic auto liability coverage.
Grounds for Termination
If a policy has been in force for 60 days or longer, the policy cannot be cancelled except for one of the following reasons:
Premium nonpayment
Fraud or material misrepresentation
The covered auto is regularly used for commercial use
The insurer is placed in rehabilitation or receivership
The Director determines that continuing the policy would violate Arizona law or make the insurer insolvent
The named insured, or someone in the household who regularly operates a covered auto, uses the auto to provide transportation network services, when the policy is not endorsed to provide coverage for the auto’s use during that time and the insured does not have separate auto liability insurance to provide that coverage
For auto insurance, how many days’ written notice of cancellation or nonrenewal must be provided to the insured?
10
In Arizona, the minimum limits of liability are:
25/50/15
The Arizona Automobile Insurance Plan is for which of the following?
A person who has been rejected by 2 insurers
Premium Payments and Administrative Fees
An insurer writing motor vehicle liability policies must make available a monthly premium payment plan on policies that insure 6 or fewer motor vehicles. To accomplish this, an insurer may use a premium finance company.
At the inception of a monthly premium payment plan, the insurer may not require an insured to pay more than 1½ times the monthly premium in addition to the first month’s premium. Premiums for each month of coverage collected after the first month may be due and payable not more than 30 days before the month of coverage related to that premium.
An insurer or insurance producer may charge a fee that is reasonably related to the administrative expenses of the monthly premium payment plan.
Which of the following is correct regarding the Arizona uninsured/underinsured motorist coverage?
Uninsured motorist coverage can be rejected by the insured
