Producers (Section II)

Free Insurance

No insurer shall participate in any plan to offer any kind of insurance or annuities as an inducement to the purchase or rental by the public of any property or services, without a separate charge to insured for such insurance (i.e. not for free).

Exceptions: Newspaper subscriptions / Credit union members / Offered as guarantee of performance of goods / Title, life or disability ins. to pay balance of loan

> Agency Name

> Use of Name

> Fictitious Names

Licensee must file with the DOI: True name (individual or organization) & Fictitious names (DBAs) to be used

Reasons for Disapproval: Too similar to name being used / Use of name may mislead public / Name states or implies licensee is an underwriter / States or implies activities not allowed by license / Licensee has already filed and NOT discontinued use of more than 2 names

Names that CANNOT be disapproved by Commissioner

> Bona Fide Natural Name (e.g. Robert Smith)

> Life Agents: Chartered Life Underwriter (CLU) designation (e.g. Robert Smith, CLU)

> P&C Broker-Agents: Chartered P&C Underwriter (CPCU) designation (e.g. Robert Smith, CPCU)

Acceptable Choices for using Corporation name by Agent who has contract to provide service for that Corporation

Agent with contract to provide service for a licensed corporation may use the name of the corporation in stationery or advertisements as follows:

> Placing business through X

> Using services of X

> A stockholder of X (if appropriate)

> Representing X

Change of Address

Every licensee and every applicant for a license shall IMMEDIATELY notify the commissioner using an electronic service approved by the commissioner of any change in his or her e-mail, residence, principal business, or mailing address.

Errors & Omissions

(E&O)

Professional liability insurance designed to cover financial losses for which a professional (e.g. insurance agent or accountant) is responsible because of errors, negligence or omissions.

Prohibited Acts with regard to

Non-Admitted Insurers

> Acting as agent for a non-admitted insurer

> Advertising a non-admitted insurer in any way

> Aiding a non-admitted insurer to transact insurance

(Exception: Surplus Line Brokers ARE allowed to work with non-admitted insurers)

[Penalty: Penalty for misdemeanor + $500 + $100/mo agent continues the violation]

Insurance License Renewal

If new renewal license not received by renewal date, agent can continue to operate under the existing license for up to 60 days as long as the following have been submitted on or before the expiration date:

- Renewal app

- Renewal fee

- Required CE hours satisfied

License Number

License number must appear on Print advertisements, Business cards, and Price quotations

> Must be AT LEAST AS LARGE as any telephone numbers, address or fax numbers OR in 12-point type (8-point type for business cards), whichever is LARGER

> Penalties: 1st offense - $200 / 2nd offense - $500 / 3rd + offense - $1,000

The word

"Insurance"

The word “Insurance” must appear on Print advertisements, Business cards, and Written Price quotations

> Must be AT LEAST AS LARGE as any telephone numbers, address or fax numbers OR in 12-point type (8-point type for business cards), whichever is LARGER

> Penalties: 1st offense - $200 / 2nd offense - $500 / 3rd + offense - $1,000

Records Insurer Must Maintain

- Original application for each insurance policy sold

- Record of premiums received for each policy

- All policies/contracts sold in last 5 years

- Commissions paid for each policy

- Copies of all correspondence between policyowner and insurer or agent

- Copies of any Outline of Coverage or Disclosure required by law

Exception: Printed material in general use which has been distributed by insurer (e.g. sales brochure) is NOT required to be part of those records.

Availability of Records

> Records shall be maintained for minimum of 5 years following policy delivery.

> Original or certified copies of records shall be delivered to commissioner within 30 DAYS following receipt of written demand therefor.

> Records shall be made available for inspection or examination by the Commissioner AT ALL TIMES.

Reasons forLicense to be Denied,

Suspended or Revoked

(With a Hearing)

1 of 2

- Convicted (not just charged) of ANY felony

- Convicted of a misdemeanor involving insurance

- Unqualified to perform duties

- Lacks integrity / good business reputation

- Lied on license app or about a policy

- Exposed public to loss due to incompetence

- Violated or allowed employee to violate CIC

- Acted as agent before had insurance license

- Submitted fraudulent educational certificate

- Refused a professional, occupational or vocational license or had such a license suspended or revoked by any licensing authority

Reasons forLicense to be Denied,

Suspended or Revoked

(With a Hearing)

2 of 2

The licensee has induced a client, whether directly or indirectly, to:

1) cosign or make a loan

2) make the licensee a beneficiary under any intervivos or testamentary trust or the owner or beneficiary of a life insurance policy or an annuity policy

3) make the licensee a trustee under an intervivos or testamentary trust

Reasons forLicense to be Denied,

Suspended or Revoked

(Without a Hearing)

- Convicted (not just charged) of ANY felony- Convicted (not just charged) of a misdemeanor involving insurance law

- Professional, occupational or vocational licensing app denied within last 5 years

- Professional, occupational or vocational license revoked or suspended within last 5 years

Nolo Contendere

For licensing purposes . . .

- a judgment,

- a plea or verdict of guilty, OR

- a conviction following a plea of NOLO CONTENDERE (NO CONTEST) is deemed to be a CONVICTION.

CIC 1729.2

Reporting of

Administrative Actions

&

Criminal Convictions

Per CIC 1729.2, an applicant or licensee must notify the Commissioner in writing within 30 days of learning of a change in background information*.

*Next flashcard defines“background information”

CIC 1729.2

“Background Information”

- Any admission, or judicial finding or determination, of fraud, misappropriation or conversion of funds, misrepresentation, or breach of fiduciary duty.

- Misdemeanor or felony conviction

- Filing of felony criminal charges

- Admin action regarding professional or occupational license

- A bankruptcy, only if it discharges any insurance premiums or fiduciary funds owed to any company

CIC 1729.2

Q&A #1

Q: Do I have to report when criminal charges are filed against me?

A: Yes, you must report any FELONY charges filed against you by a County or State District Attorney or United States Attorney in writing within 30 days of the felony charges being filed.

(Misdemeanor charges only have to be reported if they result in a conviction.)

CIC 1729.2

Q&A #2

Q: What defines a "conviction"?

A: "Conviction" includes, but is not limited to:

- having been found guilty by judge or jury verdict

- having entered a plea of nolo contendere

- having had any charge expunged, dismissed or plea withdrawn

- having been given probation, a suspended sentence, or a fine

CIC 1729.2

Q&A #3

(Driving convictions)

Note: Disclose any crimes resulting in convictions relating to:

- reckless driving,

- driving under the influence,

- driving with a suspended license,

whether or not you spent any time in jail, and whether or not you believe the conviction has been removed from your records.

Action Notice of Appointment

(Notice of Appointment)

(Appointment)

Form filed by an insurer that provides notice to the CDI that a licensee has been appointed to act as an AGENT of that insurer for a particular line or lines of insurance.

> Effective date = date signed by Insurer

> An incomplete or deficient Action Notice filed with the CDI, shall require the filing of an amended, complete Action Notice, together with the necessary filing fee.

Notice of Appointment - Termination

A Notice of Appointment is terminated when any of the following occurs:

> License canceled or expires

> License becomes inactive

> Agent quits working for insurer

> Termination of Appointment filed w/ CDI

Implied Declarations

When an insurer files a Notice of Appointment on behalf of an applicant for an original license, it shall be deemed by that act to have declared that the applicant is:

- Of good reputation, AND

- Worthy of license sought

Life-Only Agent acting as agent for insurer for which agent is NOT specifically appointed

- A Life-Only Agent may present a proposal for insurance and submit an application on behalf of a life insurer for which he is NOT specifically appointed.

- If insurer issues a policy, insurer is considered to have authorized the agent to act on its behalf and is responsible for all actions of the agent that relate to the application and policy as if the agent had been duly appointed for the insurer.

- Not more than 14 days after life agent submits an application (and policy issued), insurer shall submit a Notice of Appointment for the agent.

Inactive License

A valid and current license for which all appointments (NOAs) have been terminated (and, if acting as a broker, the bond required to be posted by brokers has been canceled)

> Inactive license does NOT mean canceled license

Cancellation of a license by the Licensee

A licensee may at any time surrender for cancellation any license under which he or she is permitted to act in any of the capacities specified by the license.

The licensee may make that surrender by written notice thereof delivered to the commissioner.

Termination of license

(individual)

All licenses issued to a natural person terminate upon death of such person.

Termination of license

(organization)

An organization ceases to exist as an entity eligible to hold a license (i.e. license terminates) upon:

> Dissolution of a Corporation

> Dissolution of or Change in Membership of a Copartnership (aka Partnership)

> Termination of an Association

Exception: May continue to transact under license if certain conditions met, application filed and fees paid within 30 days.

Change in membership of a Copartnership

The same license may be used after a membership change in a copartnership (partnership) IF the following requirements are met:

1) App for Registration of Change in Membership filed within 30 days of change

2) Above application is signed by a General Partner

3) Someone who exercised agency powers in old copartnership must remain in new copartnership

Fiduciary

A person in a special position of trust and confidence, especially when handling a client's money or advising them on financial matters.

An agent is a fiduciary, and therefore, has a duty to act in the best interest of his client.

Fiduciary Duties

If fiduciary funds received by licensee, he shall:

1) Remit premiums, less commissions, and return premiums received to the insurer.

2) Maintain funds in a trust account in a bank or S&L insured by the FDIC, SEPARATE from other accounts (i.e. no commingling).

3) Maintain funds in: U.S. Gov’t Bonds, U.S. Treasury Certificates, CDs, Repurchase Agreements, Bonds, or Revenue Bonds.

Bad Fiduciary!

A fiduciary who diverts or appropriates (steals) fiduciary funds (e.g. premiums) for his own use is guilty of THEFTand punishable for theft as provided by law.

Continuing Education (CE)

Requirements

A licensee who holds a:

- Life-only license, OR

- Accident & Health license, OR

- Property Broker-Agent license, OR

- Casualty Broker-Agent license, OR

- Personal Lines Broker-Agent license, OR

- any combination of the above,must complete 24 HOURS of CE for ANY of the above license types every 2-year license renewal period

Ethics

CE Requirements

Three (3) hours of the 24 hours of continuing education that a licensed agent must complete every 2-year license period must be on the topic of ETHICS.

LTC Insurance

CE Requirements

Years 1 – 4: 8 hrs / year

Years 5 & After: 8 hrs / 2-yr license period

(Hours part of total 24 hours needed)

> Initial 8-hr LTC course must be completed PRIOR to soliciting LTC insurance

> Training must include topics related to LTC, including: CA regulations and requirements / Available LTC services and facilities / Changes or improvements in services or facilities / Alternatives to purchase of private LTC insurance

CA Partnership

LTC Insurance

CE Requirements

Agents who market CA Partnership LTC insurance policies must complete:

INITIAL TRAINING (16 hours total)

> 8-hr LTC course (same as regular LTC CE)

> 8-hr LIVE CLASSROOM training on CA Partnership LTC

ONGOING TRAINING

> 8-hr LIVE CLASSROOM training every 2-year license term

Ethics -

CIC & CCR

The CIC (CA Insurance Code) & CCR (CA Code of Regulations) identify many unethical and/or illegal practices, but they are NOT a complete guide to ethical behavior.

Pretext Interviews

In a Pretext Interview the party gathering info does any of the following in an attempt to obtain information about a natural person:

> Pretends to be someone he is not

> Pretends to represent someone he is not

> Misrepresents true purpose of interview

> Refuses to identify himself upon request

Insurers NOT allowed to use pretext interviews

Rules regarding

Internet Advertisements

Agent or Broker who advertises on the Internet AND transacts insurance in CA must include ALL of the following in advertisement:

- Name (as appears on license, and any fictitious name(s))

- State of domicile (i.e. residence) & principal place of business

- License Number

(Note: The AGENT is responsible for info on his website)

Personal Lines

requirement for providing

EFFECTIVE DATE

of coverage

A life agent, a property broker-agent, and a casualty broker-agent shall provide to all insureds or applicants at the time of application or receipt of premium moneys the effective date of coverage, if known, OR the circumstances under which coverage will be effective if there exists conditions precedent to coverage.

> Applies only to coverage for personal lines (e.g. private passenger automobile, homeowners and renters insurance, personal liability, and individual disability and health insurance)