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insurance regulation

Key Concepts:

Terms in this set (43)

the commissioner has the power to suspend, revoke, or refuse to renew a producer's license. in addition, fines may be imposed upon producers who are found guilty of any of the following:

*failure to comply with any prerequisite of state or federal law or regulations for the issuance of such license

*the act of providing incorrect, misleading, incomplete, or materially false information in the license or renewal application

*failure to account for or remit any premiums, monies, or properties belonging to another which come into the possession of the applicant in the course of doing insurance business, or improperly withholding, misappropriating, converting, or failing to timely remit any premiums, monies, or properties received in the course of doing insurance business

*using fraudulent, coercive, or dishonest practices

*demonstrating incompetence, untrustworthiness, or financial irresponsibility in the conduct of business

*misrepresenting the terms of an actual or proposed insurance contract, binder, rider, plan, or application for insurance, including all forms or documents that are attached to an insurance contract

*having admitted or been found to have committed any insurance unfair trade practice

*the conviction or nolo contendere plea to any felony, participation in a pretrial diversion program pursuant to a felony charge, or conviction of any misdemeanor involving moral turpitude or public corruption

*obtaining or attempting to obtain a license through misrepresentation or fraud, or improperly using notes or any other reference material to complete an examination for an insurance license, or otherwise cheating or attempting to cheat on an examination for an insurance license

*the adjudication of bankruptcy with debts related to the receipt of transmittal of insurance premiums or other funds to an insurer or insured in any fiduciary capacity of the applicant, or issuance to the department of insurance of an insufficient fund or no-
fund check

*forging another's name to an application for insurance or to any document related to an insurance transaction

*knowingly accepting insurance business from a person who is not licensed as a producer

*the procurement of a license for the purpose of writing controlled business

*having an insurance producer license denied, suspended, or revoked in this or any other state

*the violation of any insurance laws of the US

*the refusal to submit physical evidence of identity or the conviction of a felony

*the failure to comply with an administrative or court order imposing a child support obligation

*the failure to pay state income taxes or comply with any administrative or court order directing payment of state income taxes

*the producer has employed or has allowed to associate with his business any person engaged in the business or insurance who has been convicted of a felony in the US or any foreign country

*the conviction of a felony involving dishonesty or breach of trust

if a producer commits any of these violations, the commissioner may impose a fine of no more than $500 for each violation or a total of $10,000 for all violations that occur during a calendar year.

if the commissioner denies any application for a license, the commissioner must notify the applicant and explain the reasons for the denial. within 30 days of receiving notification of denial, the applicant may make written demand to the commissioner for a hearing.

similarly, if the commissioner decides to suspend or revoke a license, the licensee must be notified in writing. the producer can request a hearing on the matter within 30 days of receiving the notice.
all of the following can be classified as unfair claims settlement practices if they are committed frequently enough to indicate a general business practice:

*misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue

*failing to act reasonably promptly when claims are presented

*refusing to pay claims without conducting a reasonable investigation based upon all available information

*failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed

*not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonable clear

*compelling insured to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by the insured's

*attempting to settle a claim for less than the amount to which a reasonable person would have believed that he/she was entitled due to advertising material accompanying an application

*attempting to settle claims on the basis of an application which was altered without notice to, or knowledge or consent of, the insured

*making claims payments to insured's or beneficiaries not accompanied by statement setting forth the coverage under which the payments are being made

*making known to insured's or claimants a policy of appealing from arbitration awards in favor of insured's or claimants for the purpose of compelling them to accept settlements compromises less than the amount awarded in arbitration

*delaying the investigation or payment of claims by requiring an insured, claimant, or the physician of either to submit a preliminary claim report and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information

*failing to promptly settle claims, where liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage

*failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement

*failing to provide forms necessary to present claims within 15 calendar days of a request with reasonable explanations regarding their use, if the insurer maintains the forms for that purpose
the commissioner can conduct investigations and background criminal checks on all applicants for a license or certificate of authority to transact a business of insurance.

if it is determined that there may be a violation of any criminal law, the investigation will be turned over to the LA department of justice, the department of public safety and corrections, public safety services, office of state police, and other appropriate law enforcement agencies for further investigation, enforcement, or prosecution.

the commissioner may deny a license or certificate of authority when the applicant has been convicted of a felony.

fraudulent insurance acts are committed by a person who, with the intention to defraud, does any of the following:

*presents or prepares any statement which he knows to contain materially false information concerning any fact material to the following
-an application for the issuance of any insurance policy
-the rating of any insurance policy
-a claim for payment or benefit pursuant to any insurance policy
-premiums paid on any insurance policy
-payments made in accordance with the terms of any insurance policy
-an application for certificate of authority
-the financial condition of any insurer

*solicits or accepts new or renewal insurance risks by or for an insolvent insurer, reinsurer, or other entity regulated under the insurance laws of this state

*attempts to remove or conceal the assets (or record of assets) and transactions from the place of safekeeping or an insurer and/or attempts to conceal the records from the insurance department

*attempts to illegally divert funds of an insurer

*supplies false or fraudulent material information pertaining to any document or statement required by the department of insurance

nobody who furnishes information to the department concerning suspected fraud (without malice or bad faith) can be taken to court for providing that information

any person who knowingly commits insurance fraud will be guilty of a felony and will be subject to a prison term of up to 5 years or a fine of up to $5,000 for each count. however, if the benefit pursued does not exceed $1,000, the term of imprisonment cannot exceed 6 months or $1,000 for each count.
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 information.

the acceptability of a risk is determined by checking the individual risk against may 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 records, and other public sources.

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.

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 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 for up to $2,500.

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 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.
it is considered unlawful insurance fraud for any person engaged in the business of insurance to willfully, with the intent to deceive, make any oral or written statement that contains either false statements or omissions of material fact. 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 knowingly make 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, that is caught embezzling funds, faces the aforementioned fines and imprisonment. however, if the embezzlement was in an amount that is less that $5,000, prison time may be reduced to 1 year.

federal law makes it illegal for any individual convicted of a crime involving dishonesty, breah 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 written consent from an insurance regulatory official (Director of Insurance, Commissioner of Insurance, etc) - a 1033 waiver. the consent form 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, that also engages in the business of insurance, will be fined, imprisoned for up to 5 years or both.

any person who engages in conduct that is in violation of section 1033 may be subject to civil penalty 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.
in 2013, the federal trade commission (FTC) and the federal communications commission (FCC) worked together to create the national do not call registry, allowing consumers to include their telephone numbers on the list to which solicitation calls cannot be made by telemarketers. insurance companies need to comply with this regulation when making solicitation phone calls.

to comply with the telemarketing sales rules, telemarketers must not do any of the following:

*call any number on the national do not call registry or on that seller's do not call list
*deny someone a right to be placed on the do not call registry
*call outside permissible calling hours (before 8 am and after 9 pm)
*abandon calls
*fail to transmit caller ID information
*threaten or intimidate a consumer or use obscene language
*cause any telephone to ring or engage a person in conversation with the intent to annoy, abuse, or harass the person called.

some exceptions to the do not call registry include the following calls:

*from or on behalf of organizations which have established a business relationship with the consumer (established business relationships last 18 months from the date of a sale or transaction)

*for which the consumer has given prior written permission

*not commercial or that do not include unsolicited advertisements

*by or on behalf of tax-exempt nonprofit organizations

to keep in compliance with the Do Not Call rules, organizations must consult the registry every 31 days. any phone numbers on the registry must be dropped from the organization's call lists.