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Laws, Regulations
and Cautions
by Lin Stone
Errors and Omissions: (better known as E&O) Boiled up short, tell 'em wrong, or forget to tell them at all, and you as a professional agent could be headed for a lawsuit. You need an E&O policy for yourself.
This type policy only covers losses due to negligence, error, or omission. It usually has a high deductible, kind of a hint to invite the agent to follow strict procedures while working with a client. The coverage may include both a limit per claim, and a limit for all claims during the policy period. Other than that (and unfair trade practices) the E&O policy has few other exclusions.
| What are the 3 types of regulating the insurance business? | 1: Federal Regulation 2: State Regulation 3: Self-Regulation |
| The body of laws at the state level is known as _____ | the INSURANCE CODE |
| Paul versus Virginia established that the transaction of insurance across state lines was NOT interstate commerce and therefore should be regulated by ______ | Local law or individual state authority. |
| In 1944 the Supreme Court overturned the 75 year old decision and paved the way to more _______ | Federal Regulation of the Insurance Industry. |
| Further clarification came when Congress enacted the McCarran-Ferguson Act in 1945. This act stated that ___ | The Federal Government had the right to regulate the business of insurance, but only to the extent that such business is not regulated by state law. |
| The MAIN INTENT of the law was to ___ | Exempt the insurance industry from most of the provisions of the federal anti-trust laws. |
| What are 2 insurance products regulated by BOTH the federal and state government? | 1: Variable annuities 2: Variable life insurance Both are regulated by the SEC |
| Name the 2 laws having the greatest impact on the insurance industry. | a: the Fair Credit Reporting Act b: the Privacy Act of 1974 |
In regulating insurers, many states have rushed to enact privacy laws under the Unfair Trade Practices Law. Their purpose is to 1: minimize intrusiveness. 2: be fair and impartial in collecting, analyzing and presenting information and reports. And, 3: to make it known to the public that they can expect personal information to be handled in confidence.
Consequently, one of the most important documents an agent may be handling besides the policy itself is the (DISCLOSURE AUTHORIZATION) which are those forms asking applicants for personal information. Your clients MUST be given advance notice of the insurer's practices in this regard:
Furthermore, if a third party is interviewed the applicant must be given notice when the collection of information has begun.
If only the applicant is interviewed, s/he must be given notice when the policy is delivered.
If a policy is being renewed the insured must be given notice of the renewal date.
If a policy is being reinstated the insured must be given notice at the time the request is made.
If an insured party is requesting a change in benefits, the insured must receive notice at the time the request is made.
| Consumer Reports include | 1: written 2: oral 3: and other forms of communication |
| Consumer Reports focus on the consumer's | 1: credit 2: character 3: reputation 4: habits |
| Consumer Reports are used to determine consumer eligibility for | 1: credit 2: insurance 3: employment 4: other purposes authorized under the act. |
| Consumer Reports may provide persons with a legitimate business need for the information and government agencies with: | 1: name of the applicant 2: present and former addresses 3: present and past places of employment |
Oklahoma's Insurance Commissioner will only issue licenses to duly qualified residents or nonresidents of this state. To be qualified the licensee must demonstrate to the Commissioner that s/he is competent, trustworthy, financially responsible, and of good personal and business reputation.
A NONRESIDENT of Oklahoma may be licensed without taking a written examination only if proof is furnished that the applicant has passed a similar written examination, or has been a continuous holder since prior to the time when a written examination was required in that other state for a similar license.
| What 5 applicants might be exempt from the need for an examination? | 1: Those duly licensed in another state 2: Someone applying for a temporary license, pending completion of the examination. 3: a surplus lines insurance broker 4: Any limited insurance representative 5: An applicant for a nonresident license |
| Change of agent addresses reports must be made to the Commissioner within ____ days. | 10 |
| Insurance companies who discriminate between or among their agents might be guilty of a ______ and punished with ____? | a: misdemeanor b: fine of up to $500 and imprisonment in the county jail for not less than 6 months or more than one year, or both. |
| All Insurance Consultants require a license UNLESS they are _____ | a: An actuary or a certified public accountant providing information, recommendations, advice, or services in their professional capacity. b: A trust officer of a bank c: Attorneys licensed to practice law in Oklahoma d: a duly licensed insurance agent e: a duly licensed surplus lines insurance broker. |
There are STRICT PENALTIES for acting without a license after losing it. Doing so can make you guilty of a felony, and subject you to a fine of up to $5,000 or, being committed to the custody of the Department of Corrections for a period of not less than one year, nor more than 5 years, or, BOTH THE FINE AND TIME.
Doing so and never having had a license can make you guilty of a misdemeanor and subject to a fine of up to $500 or being imprisoned in the county jail for a period of not less than 6 months nor more than one year, or both the fine and the time.
Examinations for a license are designed to test the knowledge of the applicant as to the lines of insurance, policies, and transactions to be handled under the license applied for, the duties, and the responsibilities the licensee shall be assuming, and knowledge of the pertinent insurance laws of Oklahoma.
The applicant MUST PASS THE EXAMINATION before a license can be issued. The commissioner will tell the applicant if s/he passed or not within 10 days.
An applicant who has failed to pass the first examination may take a second examination within 30 days following the examination.
However, any applicant who fails to pass the second examination shall not be permitted to take a subsequent examination for at least another 6 months. A word to the wise, Prioritize your study time.
| Each insurance agent must complete at least 14 clock hours of continuing insurance education every ____ | 2 years |
| Each agent must also complete ___ of ethics course work in this same period. | 2 hours |
| If an Insurer terminates an agent written notice must be sent to both the Commissioner and the agent within ___ IF the termination is for any of the reasons a license might be suspended, revoked, or refused | 10 days |
| If terminated for any other reason written notice must be given to both the commissioner and the agent within ____ | 30 days |
Agent licenses can be suspended for:
A: making untrue statements in the license application
B: Violations or noncompliances with any insurance laws of Oklahoma, or of any lawful rule or order made by the Commissioner
C: using misrepresentation or fraud to get a license
D: Improperly withholding, misappropriating or using any monies belonging to insurers, policyholders, beneficiaries or others related to the insurance industry.
E: Misrepresenting the terms of any actual or proposed insurance contract
F: Cheating on an examination for a license
G: Using coercive, fraudulent, or dishonest practices
H: Showing s/he is incompetent, financially irresponsible, or untrustworthy
I: Forging the name of another person to an application for insurance, and Yes, that means dead people too, as one agent in Kansas found out.
J: Being found guilty of any unfair trade practice or fraud
K: Being convicted of, pleaing guilty to, or pleading nolo contendere to any felony -- or to a misdemeanor -- involving dishonesty, or moral turpitude.
The threat gets bigger: When a license is suspended, revoked, or surrendered, the Commissioner shall "promptly notify all appointing insurers and the Central Office of the National Association of Insurance Commissioners." If the licensee holds nonresident licenses the Commissioner will also notify the Insurance Commissioner of each state where another license is held, AND notify the Central Office of the National Association of Insurance Commissioners.
Unfair Trade Practices
insurance agents must avoid
include the use of:
Boycott, Coercion, Intimidation
Defamation
False Information and Advertising
assuming or using any name which deceptively infers or suggests that the person or company is an insurer.
No person shall make, issue, circulate, or cause to be made, issued or circulated, any estimate, illustration, circular or statement which:
1: misrepresents the terms, benefits or advantages of any inusrance policy
2: misrepresents the dividends or shares of surplus to be received from any policy or previously paid on similar policies
3: makes any misrepresentation to any insured policyholder for the purpose of inducing or tending to induce the policyholder to lapse, forfeit, or surrender any insurance
4: uses any name or title of any insurance policy or class of policies rmisrepresenting the true nature of the policy
5: makes a misleading representation or misrepresentation of the financial condition of any insurer or as to the legal reserve system upon which any life insurer operates.
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