Producer Responsibilities and Restrictions

Change of Address – When a producer’s license is being applied for a correct and current mailing must be given to the Department of Insurance. If this changes, (residential, business or mailing) the producer must notify the Department of Insurance within ten (10) days if in state. If they move to an out of state address, the Department of Insurance must be notified within thirty (30) days. If a producer does not comply with this requirement, he/she will be fined fifty dollar ($50).

A producer’s license will remain in effect as long as he/she complete their continuing education requirements and pay the renewal fee unless the license has been suspended or revoked by the Department of Insurance.

A producer’s license can lapse up to five (5) years can still be reinstated by:

fulfilling continuing education

paying the renewal fee

paying the reinstatement fee

Producers who have allowed their licenses to lapse (expire) for more than five (5) years will be treated as new applicants by the Department of Insurance.

Continuing Education Requirements

Life and Health – Sixteen (16) hours

Property and Casualty – Twenty four (24) hours

Personal Lines – Twenty four (24) hours

Any combination of these – Twelve (12) hours Life and Health and twenty (20) hours for Property and Casualty or Personal Lines

Bail Bonds – Twelve (12) hours

Adjusters – No pre licensing classes are required. Twenty four (24) hours of continuing education will start in 2011.

Note: If newly licensed after March 31 the required continuing education year the producer is not required to take continuing education.

Individuals who are obtaining designations, such as Chartered Property and Casualty Underwriter (CPCU) or Chartered Life Underwriter (CLU) will not have to obtain continuing education credits, when the producer earns a Certificate of Completion.

Producers who teach or instruct continuing education classes will earn the same number of credits as those attending the classes.

There are several ways for a producer to acquire his/her continuing education course hours.

All or half of the required course hours can be acquired in a classroom setting.

Half of the required course hours can be acquired through self-study courses.

Half of the required course hours can be acquired through on line courses.

Note: Producers who are sixty five (65) years old and have at least fifteen (15) years experience are exempt from the continuing education requirements.

Controlled Business – business written on producer, family members, employer or employees.

The Department of Insurance may not grant, renew or continue any license if they find that the license will primarily be used for the purpose of writing controlled business. Controlled business can only represent up to twenty five (25) percent of the commissions earned by the producer in a twelve (12) month period.

Commissions and Fiduciary Responsibilities

A producer must be licensed in the type of insurance that generated commissions to receive these commissions.

People, who are not licensed, may not accept commissions.

Commissions on renewals or other deferred compensation may be paid to an unlicensed person, if that person was licensed in that line of business at the time of the original sale.

A producer may assign their commissions to an insurance agency if that agency is properly licensed.

Violations of the rules on commissions are criminal, punishable by a fine of up to five thousand dollars ($5000.00) and up to two (2) years in prison. Violations would also suspend or revoke the producer’s license.

Producers may not accept compensation unless a valid application is made for an insurance policy.

Producers must account for all moneys and benefits paid. All moneys must be timely remitted to the insurance company. All payments and benefits must be paid to policyholder, beneficiary, or other claimant in a timely manner. Failure to do so may result in criminal charges.

Disciplinary Actions

The following are violations of licensing laws:

Failure to comply with any prerequisite of state or federal law for the issuance or such license

Providing incorrect information or omission of material information in the license or renewal application

Failing to account for any premiums

Fraudulent or dishonest practices

Misrepresenting the terms of the actual insurance application or contract

Committed any insurance unfair trade practice or fraud

Bankruptcy related to insurance premiums or other funds to an insurance company or insured

Forging a client’s name on an application

Not paying state income taxes

Having a license revoked in Louisiana or any other state

Obtaining a license for writing controlled business only

Violating any insurance laws

Being convicted of a felony

Not paying child support

The Department of Insurance may suspend, revoke, or refuse to issue, renew, or reinstate an insurance producer license, and may fine producer up to five hundred ($500.00) dollars for each violation. Producers may be fined up to ten thousand ($10000.00) dollars for all violations in a calendar year.

The Department of Insurance may take action against the license of a business, if it fails to adequately supervise employees or partners of the business, if violations were not reported, and corrective action was not taken.

If the Department of Insurance chooses to discipline a producer, the Department of Insurance must make a written determination of the facts.

The affected person may make a written request for a hearing within thirty days (30) of receiving the Department of Insurance’s decision.

A producer whose license has been revoked, may not reapply for one (1) year from the date of the revocation, or if judicial review was sought five (5) years from the date of the affirmation by the court. A producer’s license may be revoked for up to five (5) years.

The Department of insurance may require that a producer, whose license has been revoked or suspended, to show cause as to why their previous revocation should not be grounds for denial of a license.

If the Department of Insurance terminates or suspends a license, notice will be given to all appointing insurance companies, the National Association of Insurance Commissioners (NAIC), and any jurisdiction that has licensed the producer.

Unfair Trade Practice–the following Unfair Trade Practice laws contain more information affecting practices that at this time prohibited in the state of Louisiana.

Misrepresentations and False Advertising of Insurance Policies

Issuing, circulating, or causing to be made any illustration, statement, circular, sales representation, statement or comparison that does any of the following:

Misrepresenting the benefits of a policy that has been issued

Misrepresenting the dividends or sharing of the moneys to be received on any policy

Making a false, misleading statement about dividends or sharing of moneys previously paid on similar policies

Misrepresenting to policy holders insured by any insurance company of the purpose of enticing the policy holder to lapse, forfeit, or surrender his or her insurance

Using names or titles of any policy misrepresenting the true nature of it

Misrepresentation for the purpose of effecting an assignment or effecting a loan against any policy

Misrepresenting policies as being shares of stock

Misrepresentation in Insurance Applications–it is illegal to make untrue statements on or about policy applications for profit.

False Financial Statements–it is illegal to make false entry, or omit a material fact, in all reports or statement of an insurance company intending to deceive public officials to whom the insurance company is required to report.

Stock Operations and Advisory Board Contracts–no person may give stocks or other instruments to entice a client to purchase insurance.

Unfair Discrimination–insurance companies may not discriminate between persons of the same underwriting class. Insurance companies also may not discriminate between persons of the same class because of:

Geographic location of the risk

Age of the residential property

Bankruptcy filing

Another insurance company refused to insure

Note: Consideration may be given to the nature of the risk, plan of insurance, the expected expense of conducting the business, or any other factor.

Insurance companies may not refuse to insure or limit the amount of coverage to a client solely based on sex, marital status, race, religion, or nationality.

Note: Marital status may be considered when defining persons eligible for dependent benefits, and physical or mental impairments may only be considered when based on actuarial principles and experience.

Defamation – making a false, malicious, or derogatory public statement about another insurance company in order to intentionally injure it. Defamation may be an oral or written statement. It is illegal to defame someone directly or indirectly.

Rebating – offering anything of value to get a client to buy insurance from you. Examples are as follows:

Offering a client LSU football tickets to buy a policy

Offering a client part of your commission to buy a policy

Offering a client their first month’s premium back to buy a policy

Offering a client stock in the company to buy a policy

Producers can buy their clients a meal, give them a calendar, or give them a ball point pen with the company logo but cannot offer the clients anything of value to entice them to purchase insurance.

Coercion–forcing someone to purchase an insurance policy, e.g. a bank cannot force a client to buy an insurance policy because it has approved a person for a home loan.

Discrimination and Rebate Provisions Exceptions–there are certain types of payment and adjustments which are not considered to be illegal rebating or discrimination. Examples are as follows:

Paying bonuses to policy holders from non participating insurance companies

Debit life insurance policyholders who have paid premiums continuously to an insurance company’s office, thereby making an allowance for the savings in collection of premiums.

Changing the rate of a premium for a group policy based on loss or expense experience, retroactive only for that policy year

Agents, excepting on their own responsibility, payment of the first premium

Unfair Claim Settlement Practices – It is illegal to commit any of the following acts with a frequency to indicate it as a general business practice.

Misrepresenting pertinent facts or insurance policy provisions relating to coverage at issuance

Failing to acknowledge and act immediately upon communications with respect to claims arising under insurance polices

Failing to implemen

Refusing to pay claims without conducting an investigation based upon all available information

Failing to affirm or deny coverage of a claim 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 a claim which liability has become clear

Advising insured to file suits to recover amounts due under an insurance policy by offering substantially less than the amounts that were recovered in actions brought by such insured

Attempting to settle a claim for less that a reasonable person would have believed he or she was entitled by reference to printed advertising material accompanying or made part of an application

Making claims payments to insured not accompanied by statement setting forth the coverage under which the payments are being made

Attempting to settle claims on the basis of an application which was altered without notice to or consent of the insured

Making known to the insured a policy of appealing from arbitration awards in favor of insured for the purpose of compelling the insured to accept settlements for less than the amount awarded in arbitration

Delaying the investigation or payment of a claim by requiring the insured 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 contain substantially the same information

Failing to provide a reasonable explanation of the basis in an insurance policy in relation to the facts for denial of a claim

Failure to provide forms necessary to present claims within fifteen (15) days of a request with reasonable explanations regarding their use, if the insurance company maintains forms for that purpose.

Unfair Trade Practice Penalties

Unknowing violations – One thousand dollars ($1000.00) for each violation up to One hundred thousand ($100,000.00) dollars total.

Knowing violations – Twenty five thousand ($25,000) for each violation up to two hundred fifty thousand ($250,000.00) total

License suspension or revocation are possible, if the person knew or could have reasonably known it was in violation.

Cease and Desist – Stop what you are doing

Violating the Cease and Desist order – Twenty five thousand dollars ($25,000) for each violation up to two hundred fifty thousand dollars ($250,000) total, with possible loss of license or Certificate of Authority.

The Insurance Fraud Division –branch of the Department of Insurance that investigates complaints of fraud or fraudulent insurance acts. It conducts background checks on persons applying for licenses and Certificate of Authority.

The division has the authority to investigate the affairs of any person who is believed to have violated the Insurance Code. The division may collect evidence, take sworn statements, and issue subpoenas. If the division finds that a violation of the criminal law has occurred, the case will be turned over to the Louisiana Department of Justice, or other appropriate authority for prosecution.

Insurance Fraud – making untrue statements or withholding material information on applications for insurance coverage and when making claims. This includes supplying false information or making untrue denials, in an attempt to receive coverage that is more favorable. Lower premiums or inflated benefits.

It is insurance fraud to misrepresent the financial condition of an insurance company or solicit coverage for an insolvent insurance company.
It is insurance fraud to conceal records and assets from the Department of Insurance.
It is insurance fraud to prepare false statements either in support of making or denying a claim.
It is insurance fraud to solicit or conspire with others to make such false statements.
It is insurance fraud to cause or participant in a staged accident in an attempt to wrongfully collect insurance benefits from insurance companies.
It is insurance fraud to file multiple claims for the same loss in an attempt to collect from more than one insurance company.

Note: These violations are felonies. They are punishable with fines up to five thousand ($5000.00) dollars and five (5) years incosarated.

Any person involved in the insurance business, including producers, insurance companies and adjusters who become aware of insurance fraud must file a Form Notice with the fraud division within sixty (60) days of the time that fraud is first suspected.

Persons who make statements to the fraud division in the course of an investigation are immune from liability.

Background Checks – Conducted by the fraud division utilize the files of the Federal Bureau of Investigation (FBI) and the National Crime identification Center (NCIC). Applicants may be required to submit proof of identification.

Criminal information held by the fraud division is confidential and wrongful disclosure will result in a fine of five hundred ($500.00) dollars for the first violation and one thousand ($1000.00) dollars for each subsequent violation.

Consumer Financial Information

Federal law designates the DOI as the agency to set up procedures and establish rules to protect the consumer financial information with respect to insurance sales.

The DOI’s regulations requires all of licenses:

That consumer must be given notice about the privacy practices and the policies.

They describe when information may be released.

They provide methods to prevent disclosure of information.

Note: These regulations apply only on personal lines insurance.

Notice

Initial Privacy Policy Notices must be made:

No later than the time at which the customer relationship begins, and before any information is released to a third party.

Annual Notices must be given as long as a customer relationship is maintained.

Notices must contain:

The type of private information collected

The types that the licensee discloses

The parties to which information is disclosed

Whom those parties disclose information to

The consumer’s right to opt out of any disclosure to nonaffiliated third parties

The consumer’s rights under the Fair Credit Act regarding disclosure

The licensees’ policies regarding the security of private information.

Note: If policies and procedures are revised, newly prepared Revised Notices must be sent. All Notices may be made electronically if the consumer agrees. The notice may be sent independently or with a billing or other communication.

Opting Out –When a consumer “opts out” restrictions apply to third parties necessary to service the insurance product or account. The restrictions also do not apply in the normal course of business, such as below:

Credit reports

Responding to subpoenas and other legal process

Complying with anti-insurance fraud measures

Replacement of group life and health plans

Aiding auditors or examiner

Violations – Failure to comply with the statute is a violation of the Unfair Trade Practices Act.

HIV and AIDS Confidentiality

Unless otherwise required by law, HIV related testing could not be ordered without written informed consent. The consent must be signed by the subject or if they are not competent their legal guardian. Before this, the person must be given complete information as to the nature of AIDS and HIV, as well, as to what puts a person at risk for infection. The subject may request that his/her identity by kept secret and that a coded identification system be used.

The Life and Health Insurance Guarantee Association

The purpose of the Life and Health Guarantee Association is to protect policy owners when companies become insolvent. The association’s liability is limited by law. In no case will the Association pay out more that the policy limits. The maximum that they will pay on any one life is:

$300,000 for all coverage on all policies.

$300,000 in death benefits

$100,000 in cash value

$100,000 in health insurance benefits

$100,000 for present value of annuities

All policies delivered in Louisiana must noticeably display, on the face, the following instructions:

The address of the Association and the Department of Insurance
A warning that: The policy may not be covered by the Association, the benefits are limited, it is subject to exclusions and it is dependent on continued Louisiana residency.
A statement that a producer or company may not use the existence of the Association as an inducement to purchase insurance.
A statement that a consumer should not select a company based upon the existence of the Association.
Other information required by the Commissioner of Insurance.

Note: The existence of the Association may not be used in advertising or in sales representations.

Further note: Any policy not covered by the Association must contain an evident warning that the policy is indeed not covered by the Association.

Standard Life Policy Provisions

The incontestable period is two years.

Interest on death benefits begins to accrue twenty days after the insured receives proof of death. The Interest rate is 8%.

Claims must be settled within sixty days of receipt of the proof of death.

Louisiana law limits exclusions in a Life Policy to death occasioned by: war, suicide within two years of the date of issuance, military service including death within six months of leaving active duty, aviation and specified hazardous occupations while living in America or specified foreign countries within two years of the date of issuance.

Group Insurance

Nation Guard units are acceptable units for the purchase of group life. Dependent coverages are permitted if 75% of the group members with dependence elected the said coverages. This does not apply to credit groups.

Delivery Requirements

Manual Delivery: Copies of the delivery receipt must be kept by the producer or the insurance company for a minimum of two years.

Mail: Delivery by mail must be certified with either a return receipt or a certificate of mailing. The produce or insurance company must keep these documents on file for a minimum of three years.

Advertising Regulations

Advertising – any attempt to create interest in purchasing, renewing, or increasing the benefits of life or annuity policies. Advertising includes not only the ads in newspapers, magazines, radio, T.V., but also on billboards, brochures, visual aids for sales presentations and prepared sales presentations.

Communications with policyholders is not advertising unless it is intended to have them continue or increase coverage. General announcements are not advertising nor are internal communications.

Rules for Advertising Life Insurance

Advertising must be clear, concise and complete. It may not be misleading or deceptive. Advertising is deceptive depending upon not just words or pictures, but also the overall impression.

Note: The fact that a policy has a Free Look provision is not a cure for wrongful advertising.

Advertising the Company

The company must be identified in all advertising. Its assets, stability, size and age must not be exaggerated. It can never infer that it is endorsed by the government.

The identity of the insurance company must be clear in all advertising.

It must never be implied that the insurance company is offering its products with any arm of the government.

It may never imply that it does business in areas unless they are authorized to conduct business in that area.

Advertising the Producer

Life insurance producers cannot advertise themselves as financial planners, fiscal advisers, investment advisers or any other term that leads the public to assume that the producer is paid for advice rather than the sale of the product, unless it is true.

Advertising the Policy

Advertisements must identify not only that it is life insurance, but also what type. Producers cannot use terms such as investment plan, profit sharing, character plan, or any other term, which might lead a prospect to believe that something other than insurance is the subject of the sale.

Dividends may never be guaranteed. They must clearly be described as a return of premium. Policies with non-level premiums must clearly disclose the changes in the premiums. Any tax liabilities must be given equal weight when discussing possible tax benefits.00

Note: Producers may never infer that dividends are a share in the profits. Dividends paid by class are not a reflection of the general profitability of the company.

The affect of policy loans on benefits and values in the contract must be clearly disclosed.

Insureds are not to be given the impression that buying a said policy makes them part of a set group, or that an offer is in any way limited to pressuring applicants into making hurried purchases. Direct response sales cannot promise savings by telling the applicant that the insurance company is eliminating the middleman, unless that is the case.

Testimonials, Endorsements, and Statistics in Advertising

If people are making testimonials or endorsements for a company, have interest in the company or are being compensated for their appearance, this fact must be disclosed.

Endorsements may buy groups or associations of any type must be true, and any relationship between the group and company must be disclosed.

Statistics must be current and accurate.

Enforcement

Companies must maintain its complete advertising file. The Department of Insurance may inspect these files at their discretion. The files must be kept for at least four years or until DOI examination is complete.

Companies must file annually for certificate of compliance with the advertising laws, signed by one of the executive officers, along with the company’s annual report.

If the DOI finds that a company has used misleading advertisement, pre-approval may be required for future advertising.

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.

[mtouchquiz id=31]

Life, Medical, Health and Dental: Unit 2