Producers (Section I)

Marketing Systems

Captive (Exclusive) Agent - agent represents only one insurer.

Independent Agent (Broker) – represents one or more insurers.

Direct Response – marketing/distribution system in which insurer uses advertising to encourage prospective customers to contact the insurer directly to buy insurance. Advertising examples include direct mail, internet advertisements, television commercials, and print marketing (e.g. magazines, newspapers).

3 Types of

Agent Authority

> Express (Actual) Authority

> Implied Authority

> Apparent Authority

Express Authority

Type of authority specifically given to an agent by a principal (insurer), usually in writing, but can also be expressed orally.

Implied Authority

Authority that is NOT express or written, but which the agent is assumed to have in order to transact the business of insurance for the principal.

Apparent Authority

Type of authority that refers to a situation where a reasonable person would believe that an agent had authority to act. This means a principal is bound by the agent's actions, even though the agent had no express (actual) authority.

Insurance Agent

&

Insurance Broker

Insurance Agent - a person who transacts insurance, other than life, disability, or health insurance, on behalf of an admitted insurer.

Insurance Broker - a person who, for compensation and on behalf of another person, transacts insurance other than life, disability, or health insurance with, but NOT on behalf of, an admitted insurer.

Property & Casualty

Broker-Agent

Property – property licensees can transact insurance coverage on the direct or consequential loss or damage to property of every kind.

Casualty – casualty licensees can transact insurance coverage against legal liability, including that for death, injury, disability, or damage to real or personal property.

Personal Lines

Broker-Agent

A personal lines licensee is a person authorized to transact:

Automobile insurance / RV insurance /

Personal watercraft insurance /

Residential property insurance, including earthquake and flood insurance /

Inland marine insurance on personal property /

Umbrella or Excess liability insurance when written over one or more underlying automobile or residential property insurance policies

Limited Lines Automobile

Insurance Agent

A Limited Lines Automobile Insurance Agent is a person authorized to transact automobile insurance

Life Broker

&

Health Broker

Know that there is NO such thing as a Life Broker or a Health Broker!

Field Underwriter

The Agent/Broker acts as a “field underwriter” and is the “eyes and ears” of the Insurer.

Life-Only Agent

Life-Only Agents can transact coverage on:

- human lives (life insurance)

- benefits of endowment and annuities

- benefits in the event of death or dismemberment by accident

- benefits for disability income

Accident & Health Agent

Can transact insurance coverage for sickness, bodily injury, or accidental death and may include benefits for disability income.

(Needed for health, disability income, long-term care, Medicare Supplements, 24-hour coverage, etc.)

Life & Disability Analyst

Provides advice on life and disability policies for a fee.

- Must have a good business and general reputation

- Licensed as both Life-Only AND A&H Agent for at least 5 years

- Must be a 'fit and proper' person

- Must pass a qualification exam

- Must be at least 18 years old

Life & Disability Analyst -

Fee Rules

Written agreements with clients that contain:

- Disclosure that services to be performed might be available for free from insurer.

- Outline of services to be performed along with fee associated with each of those services.

- Disclose that sales commission would be earned in the capacity of Agent if a sale of any life or disability insurance is made.

- Copy of agreement must be retained for at least 3 years.

"Transact"

“Transact” includes any of the following:

(a) Solicitation

(b) Negotiations preliminary to execution

(c) Execution of a contract of insurance

(d) Transaction of matters subsequent to execution of the contract and arising out of it

Penalties for transacting insurance

without a license

Transacting insurance without a valid license is a misdemeanor and can result in a fine of:

- up to $50,000

and/or

- up to 1 year of imprisonment

Title 18 U.S.C. § 1033 -

Prohibited Conduct #1

1) Making any false material statement or report to any insurance regulatory official or agency to influence their actions.

2) Embezzling or misappropriating money, funds, premiums, or other property of any person engaged in the business of insurance.

3) Knowingly making any false entry of material fact in any book, report or statement with the intent to deceive any person about the financial condition or solvency of an insurer.

Title 18 U.S.C. § 1033 -

Prohibited Conduct #2

4) By threats or force, corruptly influencing, obstructing, or impeding the proper administration of the law under which any proceeding is pending.

5) Willfully engaging in the business of interstate insurance if the individual has been convicted of a felony involving dishonesty or breach of trust or has been convicted of an offense under 18 U.S.C. § 1033 and does NOT have written permission from the Commissioner. (“Prohibited Person”)

"Prohibited Person"

“Prohibited Person” means any person who has been convicted of felony crimes of dishonesty, breach of trust in a state or federal jurisdiction OR who has been convicted of ANY violation of Title 18 U.S.C. §1033.

> Prohibited Person must file an Application for Written Consent with the CDI to get permission to transact insurance in the state.

Title 18 U.S.C. § 1033 -

Criminal & Civil Penalties

> 10 or 15 years in prison

(Up to 15 years if activity was significant cause of insurer being placed into conservation, receivership or liquidation)

> Civil fine for greater of:

$50,000 OR amount received or offered

Life Settlement Broker

Life Settlement Broker - licensed to act on behalf of an Owner of a life insurance policy to negotiate a life settlement contract between the Owner and a Life Settlement Provider.

> Life Settlement – contract in which Life policyowner (Owner) assigns ownership to Provider in exchange for a sum of money that is less than policy’s death benefit, but more than its cash surrender value.

Insurance Solicitor

A natural person employed to aid a Property and/or Casualty Broker-Agent in transacting insurance coverage on the direct or consequential loss or damage to property of every kind. (No life, disability or health)

> Holds a Property and/or Casualty Broker-Agent license

> Must be appointed by an Agent or Broker who holds a permanent Property and/or Casualty Broker-Agent license

Life Solicitor

&

Health Solicitor

There is NO such license as a Life Solicitor OR Accident & Health Solicitor!

There’s only an Insurance Solicitor license used in Property & Casualty insurance.

There’s no comparable license in Life & Disability insurance.

Surplus Lines Broker

A P&C Broker-Agent with a specialty license to place insurance with NON-ADMITTED insurers for risks other than aircraft and certain marine and transportation risks.

Special Lines

Surplus Lines Broker

A P&C Broker-Agent with a specialty license to place the following types of insurance with

NON-ADMITTED insurers:

1) Aircraft insurance

2) Insurance on property or operations of railroads engaged in interstate commerce

3) Various types of transportation risks, including insurance against perils of navigation, transit or transportation upon hulls, freights or disbursements

Regulation of

Admitted Insurers

(Standard Market Insurers)

- Must be approved (“admitted”) by state

- Must file forms and rates for approval

- Pays into state’s Guarantee Association (CIGA)

- CIGA may pay out in case of insolvency

Non-Admitted Insurers

(Excess & Surplus Lines Insurers)

- Not approved (“admitted”) by state

- Forms and rates NOT filed for approval

- Does NOT pay into state’s Guarantee Association (CIGA)

- CIGA will NOT pay out in case of insolvency

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)