Louisiana Laws, Rules and Regulations

The regulation of the insurance industry rest primarily with each state. In Louisiana, the agency that governs this responsibility is the Department of Insurance also known as the DOI. The DOI is responsible for licensing of producers and all persons involved in the business of insurance for the state of Louisiana.

The Commissioner of Insurance

The officer that presides over this department is the Commissioner. The Commissioner is elected for a four-year term. He is in charge of appointing personnel, including a deputy who acts in the Commissioner’s absence.

Company Classification – Insurance companies issue policies and endorsements that provide insurance coverage.

Insurance companies that are domiciled in this state are known as Domestic, if domiciled in other states they are known as Foreign, or actually located or domiciled in other countries are known as Alien companies.

There are three types of Insurance companies:

Stock

Mutual

Fraternal

A stock company is operated for the benefit of the stockholders. When money is earned, dividends are paid to the stockholders.

A mutual company is operated for the benefit of the policy owners. It is a not for profit organization in structure and any money is returned to the policyholder in the form of a policy dividend.

A fraternal company is organized for members of a fraternal organization and benefits those members only if something should happen.

Authority Classification granted by the state – Insurance companies would be either Admitted or Non Admitted.

Admitted Insurance Company – Allowed to conduct business in the state of Louisiana. When a company becomes Admitted the Department of Insurance issues a Certificate of Authority.

Certificate of Authority – In order to be issued a Certificate of Authority a company must meet certain financial and other requirements that are set by the Louisiana Insurance Code. A company must file with the Department of Insurance a copy of its Charter of Incorporation; give reports of its financial standing, surplus and deposits. The president and secretary of the company must sign these statements under oath. Information on all Officers, Directors and/or Owners with a controlling interest must be filed. The company must appoint at least one state agent.

After application is filed, the Department of Insurance will conduct an examination of the company and if everything is in order the Certificate of Authority will be issued. The company must hire an Independent Auditor, and Actuary to prepare annual financial statements for the next three years.

Non-Admitted Insurance Company – A company that is not licensed to conduct business in this state. This does not mean the company is being run incorrectly or in financial difficulty. After completing the steps required by the Department of Insurance to acquire a Certificate of Authority, these companies simply pay taxes to the State to conduct business in Louisiana.

How is the Industry Regulated – The Commissioner of Insurance is entrusted with powers from all branches of Government.

Executive: The power to conduct examinations and investigations and to act as a law enforcement officer. The Commissioner also administers the Department of Insurance.

Legislative: The power to draft and disseminate rules and regulations that are necessary to enforce the statutes passed by the State Legislature. The Commissioner enforces the laws and establishes the rules and regulations of the law.

Judicial – The power to conduct hearings and issue orders concerning violations of insurance laws, rules and regulations. The Commissioner or Department of Insurance can issue orders, revoke your license or impose fines however they cannot send you to jail.

Why does the Department of Insurance enforce the law, conducts examinations and investigations?

With any insurance policy, what the client gets from the company is a promise to act in the future. Therefore, it is extremely important that insurance companies be financially able to carry out there promises. To protect the citizens of this state the Department of Insurance monitors the financial stability of Insurance Companies during business in Louisiana by conducting fiscal examinations of these companies randomly.

What does an examination entail?

The Department of Insurance will appoint state examiners to conduct these investigations. This includes examining any or all of its books, records or documents. If the Department finds it necessary, they may examine under oath any or all Officers or producers of said companies. All admitted companies (domestic, foreign or alien) can are subject to this type of investigation. The Department of Insurance must examine all admitted insurance companies every five years or as often as they feel necessary.

Hearings – The Department of Insurance may hold hearings for any purpose within the extent of the Insurance Code.

Companies or producers that are affected by this action may also demand hearings. The demand must be made within thirty (30) days of receipt of notice. All participants may expand this date, but the hearing must be held within sixty (60) days of the date of demand.

Demand for a hearing may postpone any proposed action taken by the Department of Insurance except an order to correct impairment of the companies capital funds. Should the Department of Insurance refuse to grant a postponement the company may seek the postponement at the Division of Administrative Law.

In Hearings, the Department of Insurance states what action is to take place and the responding party(s) must “show cause” as to why it should not be done.

Hearings can be adjourned and/or reconvened without further notice.

Affected parties have the right to a Judicial review in Court. The may apply to the Court for a postponement. If case involves suspension, revocation or refusal to issue a license a bond may be required.

If the affected party is not satisfied with the judgment an appeal may be taken to the Appellate Court.

The Department of Insurance may also seek enforcement of a Judicial review in court.

The Hearing process does not preclude a person or company from seeking a Writ of Mandamus directly from a court to compel with the Department t of Insurance to comply the Insurance Code.

Licensing

Purpose of Licensing –

To protect the public by assuring that licensees have a minimum level of knowledge and competence in their licensed area.

To assure that clients meet the standards for honesty and business qualifications determined by the Legislature as necessary to serve the public.

Definitions

Producer – An individual or business entity required to be licensed under the law of Louisiana to negotiate, sell or solicit insurance.

License – Document issued by the Department of Insurance authorizing an individual or business entity to act as an insurance producer for the lines of authority specified in the document.

Negotiate – Act of conferring directly with or offering advice directly to the client or prospective client of a particular contract of insurance concerning any of the benefits, terms, or conditions of the contract, provided that the person engaged in that act either sells insurance or obtains insurance from the insurance companies for its clients.

Sell – Exchange a contract of insurance by any means, for money or its equivalent, on behalf of a company.

Solicit – Attempting to sell insurance or asking a potential client to apply for a particular kind of insurance from a particular company.

Terminate – Cancellation of a producer’s authority to transact business by a carrier.

To solicit applications, deliver insurance policies, bind coverage, or in any other way act as a producer, you must first obtain a producer’s license in that line of authority.

Exceptions to the license requirements

No license is required for clerical employees of a producer who are not involved in sales, solicitations or negotiations.

No license is required to collect premiums.

No license is required of employees of insurance companies who deal only with licensed producers.

No license is required of employees of insurance companies who have the authority to sign policies, but do not solicit or sell insurance.

Lines of Authority

Annuities – Fixed and Variable contracts

Health and Accident – Medical expense, Accidental Death & Dismemberment and Disability income benefits.

Life – Life, Accidental Death and Dismemberment and Disability income benefits.

Casualty – Legal liability from injury to a third party or damage to their property.

Automobile Club – Services and Membership

Baggage

Bail Bonds

Credit Accidental and Health

Credit Life

Fidelity and Surety

HMO Subscribers

Home Service Life

Industrial Accident and Health

Industrial Fire

Industrial Life

Title

Surplus Lines – Producers with the authority to represent Non-Admitted Insurance Companies.

Termination of a Producer License – The company shall file with the Department of Insurance a Notice of Termination within thirty (30) days if…

the company finds that the producers violated the licensing law or

the company becomes aware of a finding issued by a court, or administrative agency, that the producer violated the licensing law;

The company should make the Department of Insurance aware of the nature of the violation and shall promptly notify the Department of Insurance after termination if any violation of the law is discovered.

Upon the request of the Department of Insurance, the company will furnish all documents and records pertaining to the termination.

The producer should be sent a copy of the filing at their last known address.

If the termination is for alleged violation of the licensing law, the Company’s notice to the Producer shall be sent by certified mail with return receipt or by overnight delivery service.

The producer will then have thirty (30) days to file a written response with the Department of Insurance. The producer’s response should be made part of the file. All responses filed by the producer with the Department of Insurance must also be sent to the company.

All reports are confidential. Insurance companies or producers who fail to meet the reporting requirements may be fined per violation.

Absent true malice, all parties involved are immune from civil liability arising out of any statements made or filed during the termination process. If a court finds actual malice, the person making the report may have their license or Certificate of Authority suspended or revoked and be fined for each violation.

Resident Producer License

Every applicant for a Producer’s license must be 18 years or older.

They must be a Louisiana resident or have their principle place of business here.

Applicants must complete an approved pre-licensing course.

Applicants must pass a test.

In order to obtain a license applicant must fill out the registration and applicant signing it that all information is correct and truthful.

Applicant must pay a testing fee.

Applicant must pay a fee for the license.

Business Entities – a corporation, partnership, association, limited liability company, or limited liability partnership.

Business Entities licensed, as Producers must:

Pay required fees.

Designate one or more individuals who hold a Producer’s license to be responsible for compliance with the insurance laws.

If an entity is a Corporation or Limited Liability Company the application should be accompanied by:

A letter of good standing from the Secretary of State

Verification from the entity’s secretary that the officers have properly selected

A statement from the President listing the names of all officers.

Directors and owners of more than 10% of the entity

If the entity is a partnership or limited liablitiy partnership, the application should be accompanied by:

The current letter of registration from the Secretary of the State

Verification by the partners has been properly named

A statement, under oath, of the percentage of interest and amount of contribution of each partner

If the entity is a bank the application should by accompanied by:

A current letter of good standing from the chartering authority

Verification by the secretary or cashier that the directors and officers were properly elected

A statement from the President listing the names of all the shareholders owning more than 10% of the entity

If the entity is an association, the application should be accompanied by whatever the Department of Insurance deems necessary.

Note: The background information should contain all material information on any legal action, e.g. lawsuits or similar proceedings, involving the entities or named individuals for the past 5 years.

As a Resident Producer:

The person has to live in Louisiana or have a primary place of business in Louisiana.

The person has to complete prelicensing education requirements.

The person has to pass the licensing exam.

The person has to complete continuing education every two years (even years for Life and Health, odd years for Property and Casualty).
The person has to pay a renewal fee

If the producer does not the renewal fee on time, there will also be a late fee to renew the license.

As a Non – Resident Producer:

The producer has to be licensed as a resident producer and in good standing in their home state.

The producer has to complete and file with the Department of Insurance, the National Association of Insurance Commissioner’s Uniform Application, or a copy of their home state’s application.

The producer has to pay the required licensing fees.

The producer has to appoint the Department of Insurance as an agent to accept service of legal process.

The producer has to pay a renewal fee.

If the producer does not pay the renewal fee on time, there will also be a late fee to renew the license.

Note: This applies only if the Non Resident Producer home state has reciprocity with Louisiana. A producer, whether Resident or Non Resident, who moves to another state may shift their status by filing a change of address with the Department of Insurance within 30 days along with providing certification from the new state. No application or fees are required.

Temporary Producer’s License

Temporary Producer’s licenses are available in Louisiana when it is for the public’s interest. If the Department of Insurance determines that the issuance of a temporary license is necessary for servicing business in certain specified circumstances, they may issue a temporary license to an individual or corporation for a period of 180 days or less.

The circumstances in which the Department of Insurance may issue a temporary license are as follows:

To a surviving spouse, or court appointed representative, in the event of the death or disability of a licensed producer.

To an individual designated by a producer in the event that producer enters active duty in the Armed Forces.

To an employee of a licensed Business Entity Producer, upon the death or disability of the licensed producer who was chosen as the compliance officer for the company.

The Department of Insurance may issue a temporary license if it feels it is in the interest for the public in other circumstances.

Temporary licensed may be revoked by the Department of Insurance if they feel that the insureds or the public are endangered.

Temporary Licenses cease after the sale of the business.

Home Service (Debit) Life Producer

The Department of Insurance may grant authority to Home Service (Debit) Life Insurance Producers. The authority extends from the date of the mailing (certified) until revoked, or the person qualifies for a full Life license. Home service life products are guaranteed life insurance; they have guaranteed premiums, death benefits and no forfeiture value.

A Home Service Marketing Distribution System is one which:

Fifty (50)% or more of the premium is derived from in home sales.

Premiums are paid no less frequently than monthly.

The producer is responsible for, and debited with, the collection of premium.

This is an optional quiz you may take to review the content of this unit.

Your answers are not submitted for credit. Only the final test of this course is submitted for credit.

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Life, Medical, Health and Dental: Unit 1