ExamFX (Insurance Regulation)

Insurance Regulation

Cease and Desist

To stop or discontinue

Coercion

the practice of persuading someone to do something by using force or threats.

Commission

Payment to the agent by the insurance company for placing insurance, usually a percentage of the policy premium

Excempt

not subject to a particular regulation or duty.

Inmunity

a condition that protects an individual or entity from legal responsibility or obligations.

Inducement

An offer that attempts to influence the other party

Insolvent

Unable to meet financial obligations

Moral turpitude

involving conduct that is considered contrary to community standards of justice, honesty, or good morals.

Promulgate

To make known officially or to put into effect a regulation, law, or policy.

Statute

A written law enacted by a legislative body.

Superintendent of Financial Services

The head of New York State department of financial services

Insurance Producer

• Insurance agent

• Title insurance agent

• Insurance Broker

• Reinsurance intermediary

• Excess line broker

• A person or entity licensed to sell, solicit, or negotiate insurance.

Home state

Any state, district or territory of the US in which an insurance producer maintains his principal place of business or is licensed to act as an insurance producer.

Negotiate

To discuss terms and reach an agreement on the sale of insurance.

Solicit

To request or seek insurance applications or policies from potential clients.

Process to qualify for an insurance license

• Be a resident of the State of New York

• Be at least 18 years of age

• Submit a standard application for licensing on a form approved by the superintendent

• Fulfill the prelicensing education requirement of classroom work or equivalent in correspondence work or similar instruction (20 hours a single line of authority agent or broker, such as life only agent or broker, 40 hours for a life, accident and health agent or broker, personal lines agent or broker and public adjuster, and 90 hours for property/casualty agent or broker)

• Pay the application fees

• Pass the applicable examination for each line of authority

Licensing Examination Exemptions

A written examination is not required of the following individuals applying for an insurance agent’s license:

• Ticket-selling agent or representative (airline, bus, train or sea) for one-time issuance of baggage or accident insurance

• Any individual whose license has been revoked or suspended

• In connection with any certificate of appointment for an additional insurer, as long as it is under the same line of authority already licensed

• A nonresident licensee currently licensed in another state

• An applicant who has passed the written examination for an insurance agent’s license and was licensed, or an applicant who was licensed as an agent but did not pass the examination, provided the applicant applies within 2 years following the date of license termination

• Any individual who was previously licensed for the same line of authority in another state. Such individual will not be required to complete any prelicensing education. this exemption is only available if the application is received within 90 days of the date of cancellation of the applicant’s previous license

• If applying for a life insurance, variable life and variable annuity products, or accident and health insurance license, or any other line of authority deemed to be similar by the superintendent:

  • An individual seeking to be a representative of fraternal benefit society as its agent

  • An applicant who is a chartered life underwriter (CLU) or a chartered Life Underwriter Associate (at the superintendent’s discretion)

• If applying for a property, casualty, personal lines or any other similar license:

  • An applicant who has been granted the chartered property casualty underwriter (C.P.C.U.) designated by the American institute for property and Casualty underwriters.

Refuse to issue a license

The Superintendent may refuse to issue any insurance agent’s or insurance broker’s license if the proposed licensee is found to be not trustworthy and competent, or has not complied with any prerequisites.

Exemption from Licensing

Following individuals are NOT required to hold an insurance producer license:

An insurance producer license is not required of any officer, director or employee of an insurer or organizations employed by insurers, provided they are not directly or indirectly involved in the actual sale of an insurance contract and do not receive any commission.

• A director or employee of an insurer whose activities are limited to executive, administrative, managerial, or clerical

• The director or employee of a special agent assisting insurance producers by providing technical advice and assistance to licensed insurance producers.

  A person who secures and furnishes information for group insurance or performs administrative services related to mass marketed property and casualty insurance

• An employer or association engaged in the administration or operation of a program of employee benefits for the employers of association’s own employees.

• Employees of insurers or organizations engaging in the inspection, rating or classification of risks, or in the supervision training of insurance producers and who are not individually engaged in the sale of insurance

• A person whose activities are limited to advertising without the intent to solicit insurance.

• A nonresident who sells, solicits or negotiates a contract of insurance for commercial property and casualty risk to an insured with risks located in more than one state insured under that contract

• A salaried full-time employee who counsels or advises their employer relative to the insurance interests of the employer or subsidiaries.

Types of licensees

• Insurance agent

• Insurance broker

• Business entity

• Consultant

• Adjuster

• Nonresident

• Temporary

Agents

A person authorized by an insurer, fraternal benefit society or health maintenance organization,(HMO) to solicit, negotiate and obtain insurance, HMO or annuity contracts. The agent represents the insurer, not the insured

Exclusions:

• Any regular salaried officer or employee of an insurer, fraternal benefit society, or HMO who does not solicit or accept applications and does not receive a commission

• Any agent or representative of a fraternal, who devotes less than 50% of their time to the solicitation and procurement of an insurance contracts and receives no commission

Brokers

Any person, firm, association or corporation who solicits, negotiates or obtains insurance for an insured (other than him/herself) in exchange for a commission. A broker represents the insured, not the insurer, and acts in the best interest of the insured.

Exclusions:

• Any regular salaried employee of an insured whose duties are to counsel or advise his or her employer regarding insurance, but who does not receive any commissions or sell or solicit insurance

• Any regular salaried employee of a licensed insurance broker who does not receive any commissions

Consultants

Offer advice to the public about the benefits, advantages and disadvantages of insurance policies for a fee. The superintendent may issue an insurance consultant’s license to any person, firm, association, or corporation who has complied with the following requirements:

• Submit a written application and pay a fee of $50 per year

• pass a written examination

• Must be trustworthy and competent

• Must not be an executive or an employee of or own shares in the insurer he/she represents.

Adjusters

Independent Adjuster:

Person, firm, association or corporation, who, for a commission, acts on behalf of an insurer in the work of investigating and adjusting claims. An independent adjuster may not include any of the following:

• Officer, director or regular salaried employee of an insurer

• Adjustment bureau or association owned by the insurers

• Licensed agent of the insurer

• Attorney at law

Public Adjuster:

Person, firm, association or corporation who for a commission, acts on behalf of the insured in negotiating a settlement of a claim for loss or damage to property. The following are not considered public adjusters:

• Employee, agent, broker or another representative of any insurer who acts as an adjuster

• Attorney at law

Public adjusters are required to complete 15 credit hours of continuing education every license renewal period (biennially). All adjusters must file a surety bond of $1,000 with the superintendent before a license may be issued or renewed.

Nonresident

An individual who is a resident of another state, who is licensed or authorized to act as an agent or broker in the state of New York.

If person moves to NY and wants to become an agent or broker in the state, they must apply for a license within 90 days of the cancellation of the applicant’s previous license.

Business Entities

A corporation association, partnership, limited liability company, limited partnership or other legal entity. Before any original insurance agents or broker’s license is issued, the prospective licensee must apply to the superintendent. The application must contain information concerning the business entity. Th e licensee is responsible for the business entity’s compliance with New York state insurance laws and regulations.

Temporary

A temporary license may only be used to service existing business, not to solicit, negotiate or procure new business. The superintendent may issue a temporary license to an agent or broker or both without requiring an examination, in the following cases:

• To the surviving spouse, next of kin or court appointed personal representative of an agent who dies, or becomes mentally or physically disabled

• To a member or employee of a business entity licensed as an insurance agent upon death, disability, or termination of a designated individual in the business entity.

• To the designee of an agent entering active military service.

The temporary license may be issued for a term of not more than 90 days unless the superintendent renews additional 90-day terms, not to exceed an aggregate of 15 months. In the case of military service, the temporary license may continue up to 60 days after the discharge from service.

Renewal

Producer license will remain in effect unless suspended or revoked, as long as they are properly renewed. Insurance agent’s or broker’s license must be renewed every 2 years.

The Licenses of insurance agents or brokers born in odd-numbered years will expire on their bdays in odd-numbered years. even numbers in even years

An agent must file an application for renewal of license with the superintendent at least 60 days before the license expires. If it is submitted late, the applicant will be subject to a late filing fee of $10

The current license remains in effect until the superintendent issues or denies the renewal license. Before a license can be denied, the superintendent must notify the applicant of intentions and give the applicant a hearing. If a renewal license is denied, the current license will expire 5 days after the licensee is notified.

Continuing education

To renew a license, any resident or nonresident agent or broker must complete 15 hours of instruction by an approved provider of continuing education biennially (every 2 years)

The course programs of instruction must be approved by the superintendent. The providers must file for approval biennially. Each licensee must pay a fee of $10 per license for continuing education certificate filing and recording charges.

Assumed names

Every licensee must notify the superintendent upon changing of legal name. Except for an individual licensee’s own legal name, licensees may not use any name unless it has been previously approved by the superintendent.

Change of address

The Department of Financial Services must be notified within 30 days of any change of address: residence, buniness or email.

Reporting Actions

A licensee must report any administrative action taken against him or her in another jurisdiction or another state within 30 days of the final disposition of the matter. The report, filed with the superintendent, must include a copy of any relevant legal documents.

Within 30 days of the initial pretrial hearing date, a licensee subject to this article must report to the superintendent any criminal prosecution of the licensee taken in any jurisdiction. The report must include a copy of the initial complaint filed, the order resulting from the hearing, and any other relevant legal documents.

Superintendent General duties and Powers

Appointed by the governor and continues in office until the end of the governor’s term. The superintendent has very broad powers, both express and implied with the business of insurance, that extend to all financial service providers.

The superintendent has the power and authority to recommend, withdraw, or amend regulations for the following purposes:

• To regulate the internal affairs of the department of financial services, including the procedures used in the practice of the department

• To prescribe forms and regulations

• To interpret sate insurance laws and provisions

The superintendent has the authority to take action deemed appropriate to ensure the following:

• Economic development and financial industry growth in this state

• Solvency, safety, and prudent conduct of the insurance and financial services providers

• Fair and timely fulfillment of the financial obligations

• High standards of honesty, transparency, and fair business practices

• Elimination of financial fraud, criminal abuse, and unethical conduct in the industry

• Education of product users to enable them to make informed decisions about financial products and services.

If a person has been charged with 5 separate civil penalties within 5 years, the superintendent may levy an additional penalty of up to $50,000 an additional civil penalty of up to $50,000 may be levied if the person is charged for every 5 subsequent violations.

The notice will be considered delivered if:

• Is given to the person affected by the order

• Has been placed in the US mail and addressed to the person’s las known place of either business or residence.

Examination of Books and Records

The superintendent may examine books and records of any insurer, any pension fund, retirement system or organization authorized in the state of NY, as often as deemed necessary, for the protection of public interest.

The superintendent will make an examination of insurers as follows

• Every domestic fraternal benafit society and domestic property/casualty insurance company, at least once every 3 years. If the superintendent determines that every 3 years is not necessary for property and casualty, it can be changed to every 5 years

• Every domestic life insurer must be examined at least once every 5 years

• Every other authorized domestic insurer and every rate service organization which makes or files rates at least once in every 5 years

An insurer must keep the following for 6 years, or until the filing of a review of the record, whichever is longer

• A policy for each insurance contract or policy ( the time starts after the contract or policy is no longer in force)

• An application where no policy or contract was issued

• A claim file ( the time starts after the claim is resolved and the file is closed)

• A licensing record ofr each licenseee with which the insurer establishes a relationship

• A complaint record (the time starts after the complaint is resolved and the file is closed)

• A financial record necessary to verify the financial condition of an insurer

Certificate of authority qualifications

• The entity must fully comply with all applicable provisions of NY’s insurance laws.

• If a stock company, the amount of capital and surplus required by law paid in cash or investments

• If mutual company, must provide statements of at least 3 incorporators, proof of the required initial surplus in cash or investments, and the required number and amount of bona fide (actual) applications for insurance, with premiums paid in cash.

License must contain

• The name of the licensee

• Home office address

• The state or county under whose laws it was organized

• The kinds of insurance business it will provide and term of license.

Superintendent may refuse license

After a notice and hearing, the superintendent may refuse to issue a license to a company if any of its directors or officers convicted of any crime involving fraud, dishonesty or moral turpitude (corruption, wickedness) or is considered an untrustworthy person.

The Division of Criminal Justice Services processes electronic fingerprints on a statewide basis for all individuals requiring background check. Fingerprinting is required for all adjuster, bail bond/charitable bail, and life settlement provider, intermediary, or broker licenses. Fingerprinting is also required for any person wishing to be an officer or director of an insurance company

The superintendent may also refuse to issue or renew a license if the business name is identical or so similar to an existing insurer name, that it is likely to deceive or mislead the public.

Solvency

An insurer is considered solvent if it has the assets to meet its financial obligations. If at any time an insurer becomes unable to meet financial obligations, it is considered insolvent.

If any authorized entity fails to file an annual statement as required or does not reply to a witten inquiry within 30 days, there can be a penalty of up to $250 per day of delay , not to exceed an aggregate of $25,000 for each failure

Guarantee Association

Formed to protect policyowners, insured’s, beneficiaries, and anyone entitled to payment under an insurance policy from the incompetence and insolvency of insurers. The association will pay covered claims up to certain limits set by state law. The association is funded by its members through assessment. All authorized insurers must be members of the Association as a condition of their authority to transact insurance in this state.

It is unfair trade practice to make any statement that an insurer’s policies are guaranteed by the existence of the insurance guaranty association.

KNOW THIS

Insurers cannot advertise protection by the insurance Guaranty Association

Unfair Claims Settlement Practices

• Misrepresenting to insureds pertinent facts or policy provisions relating to coverage at issue

• Failing to acknowledge and act reasonable promptly upon communications with respect to an insurance claim

• Failing to adopt and implement reasonable standards for prompt investigation and processing of insured’s claims

• Failing to affirm or deny coverage of claims within reasonable time after proof of loss statements are completed and submitted by insureds

• Not attempting in good faith to effect prompt, fair and equitable settlements of claims on which liability has become reasonably clear.

• Compelling insureds to initiate suits to recover amounts due under an insurance policy by offering substantially less than the amount ultimately recovered in those suits.

Appointment of Agent

Every insurer must file a certificate of appointment for its agents with the superintendent. The certificate states that the appointed agent is trustworthy and competent to transact insurance business.

To appoint an agent, the appointing insurer must file, in a format approved by the superintendent, a notice of appointment within 15 days from the date the agency contract is executed, or the first insurance application is submitted.

Certificate of appointment are valid until

• The license is terminated by the appointing insurer after a termination in accordance with the provisions of the agency contract

• The license is suspended or revoked by the superintendent

• The license expires and is not renewed

Termination of Agent Appointment

When an insurer of HMO terminates an agent’s certificate of appointment, it must file a statement with the superintendent within 30 days, explaining the cause of the termination and facts surrounding it. The insurer or HMO must also provide a copy of this notice to the producer within 15 days of the date of filing with the superintendent.

Licensee Regulation (Controlled Business)

Is any coverage written on a producer’s own life, health or property, and that of the producer’s immediate family or business associates. A licensee is not allowed to collect commissions on controlled business above the state-specified limit. Most states will not issue a license to a person if it is determined that the primary purpose of the license is to write controlled business.

The superintendent may refuse to issue, suspend or revoke a license if an applicant or licensee receives more then 10% of the aggregate commissions during a 12-month period from controlled business

Sharing Commissions

An insurer or fraternal benefit society may not pay any commission to any person or organization that is not licensed in NY. Commissions can be split among agents/brokers provided that the agents/brokers are licensed with the same insurer for the designated lines of authority.

Fiduciary Responsibility

Agents, brokers and reinsurance intermediaries have a fiduciary relationship, a position of financial trust, for all funds they receive in the course of their business. Such funds may not be commingled with personal or other funds without express written consent of their principals.

Premiums collected by agents and brokers not remitted immediately to insurers must be deposited in an appropriately identified account in a NY bank. Withdrawals from these accounts are allowed only to transfer premiums to the rightful insurers. Failure to submit funds appropriately could constitute embezzlement.

License Display

The establishing agent or broker must prominently display the license (s) of the supervising person (s) responsible for the place of business in a headquarters location and each satellite office.

Commission and Compensation

Insurers and agents cannot pay a commission or provide compensation to a person or organization that is not licensed in NY, in addition, agents, brokers, consultants, surplus line brokers, reinsurance intermediaries and adjusters cannot pay any commission to or compensate any person who is not licensed and authorized in the same lines of insurance at the time of the transaction.

No licensed person may charge directly or indirectly any additional fees or compensation not authorized for examining appraising reviewing or evaluating any insurance policy, annuity or retirement plan. This also includes other services in connection with a life insurance contract. If compensation is authorized, it must be made in writing, including the amount of compensation and signed by the person to be charged. A copy of this record must be kept for at least 3 years.

Termination Responsibilities of Producer

After producers receive the notice of termination, they have 30 days to file written comments concerning the content of the notice with the superintendent. The producer must send a copy of the comments to the reporting insurer at the same time. These comments will become part of the superintendents file and will accompany every copy of a report distributed or disclosed about the producer.

In the absence or fraud, bad faith or gross negligence as the cause for the producer’s termination, the terminated producer will not be subject to civil liability.

Reporting

Any licensee who believes that a fraudulent insurance transaction has taken place or is about to take place has 30 days from the pint of that determination to submit information regarding that transaction to the superintendent. The superintendent will review each report and conduct further investigation as deemed necessary.

Disciplinary Actions

• Hearings

• Cease and Desist

• Suspension, Revocation, and Nonrenewal

• Penalties

• Prohibitions

• Aiding Unauthorized Insurer

Hearings

Because the superintendent’s role is to enforce insurance laws and to protect the public from unfair trade practices, if the Superintendent suspects that an insurer or its agents has committed a violation or is engaged in an unfair trade practice, the superintendent may issue a statement of charges and hold a hearing for any purpose deemed necessary (within the scope of the insurance code)

The hearing will be held at least 10 days after notice is served. At the hearing, the aggrieved party has the opportunity to:

• Appear in person and by counsel

• Give evidence why an order should not be made

• Inspect all documentary evidence and witnesses

• Obtain witnesses on the person’s behalf.

All hearings will be open to the public, unless the superintendent or the person authorized by the superintendent can conduct the hearing believes that a private hearing would be in the best interest of the public.

After the hearing, the superintendent will complete a written report on his/her findings and send copy to the person charged

Once it has been determined that a person is liable for a civil penalty, that determination may be entered 120 days later as a judgement and enforced, without court proceedings.

Cease and Desist Order

If the superintendent finds that the licensee is in violation of an unfair method of competition, unfair claim, or unfair act or practices, the superintendent will issue a cease-and-desist order. This means the person must stop doing whatever the superintendent suspects is in violation of the insurance laws.

A person who violated a cease-and-desist order is liable for penalties of up to $5,000 for each violation. The determination of the amount will take into consideration whether the violation was intentional.

Suspension, Revocation, and Nonrenewal

The Superintendent may refuse to renew, revoke, or suspend a license of any insurance producer, insurance consultant or adjuster, it after notice and hearing, the superintendent determines that the licensee or any sub-licensee has:

• violated any insurance laws or regulation, subpoena or order of the superintendent or of another state’s commissioner

• Provided materially incorrect, misleading, incomplete or untrue information in the license application

• Obtained or attempted to obtain a license through misrepresentation or fraud

• Used fraudulent, coercive or dishonest practices

• Demonstrated incompetence, untrustworthiness or financial irresponsibility in the conduct of business in this state or elsewhere

• Improperly withheld, misappropriated or converted any monies or properties received in the course of business

• Intentionally misrepresented the terms of an actual or proposed insurance contract or application for insurance

• Been convicted of a felony

• Admitted or been found to have committed any insurance unfair trade practice or fraud

• Had an insurance producer license, or its equivalent, denied, suspended or revoked in any other state, province, district or territory

• Forged another’s name to an application for insurance or to any document related to an insurance transaction.

• Improperly used notes or any other reference material to complete an examination for an insurance license.

• Knowingly accepted insurance business from and individual who is not licensed.

• Failed to comply with an administrative or court order imposing a child support obligation

• Failed to pay state income tax or comply with any administrative or court order directing payment of state income tax.

An individual, corporation, firm or association wholse license has been revoked cannot obtain any license for a period of `1 year after such revocation or if such revocation be judicially reviewed, for 1 year after the final judgement.

If an administrative action has been taken against a licensee, the licensee must report it to the superintendent within 30 days.

The Superintendent will give a written reason of action to the applicant or licensee. The applicant or licensee has 10 days to make a demand for a hearing.

Penalties

If a licensee is found in violation of insurance licensing laws, the superintendent may issue a penalty in lieu of revoking or suspending the person’s license. The penalty may be up to $500 for each offense, up to $2,500 aggregate for all offenses.

Unless the court orders a stay, the licensee has 20 days after receipt to pay the penalty. If the licensee fails to pay the penalty within the allotted time, the superintendent may then revoke or suspend the person’s license.

Any violation of the insurance Code provisions will be considered a misdemeanor unless specifically categorized as a felony.

If after a notice and hearing, the superintendent finds that an authorized insurer, representative, broker or adjuster has willfully violated the insurance code, the superintendent may order the person to pay a penalty of up to $1,000 for each offense. Failure to pay the penalty within 30 days of the order will constitute a further violation of the provision of the code. However, no penalty will be imposed if a monetary penalty is otherwise provided by the NY insurance code

Prohibitions

In addition to any criminal liability, the superintendent may levy a civil penalty of up to $5,000 and the amount of the claim for each violation upon any person wo committed a fraudulent insurance act, or knowingly and with intent to defraud, files, makes, or assists, solicits or conspires with another to file or make an application for a premium reduction containing any materially false information or that conceals information concerning any material fact.

Aiding Unauthorized insurer

Neither a person nor a corporation may act as an agent or broker for an insurer that is not licensed to solicit, negotiate or affect any insurance or annuity contract, or aid any such insurer in effecting any insurance transactions. Note that the law allows for some exemptions for reinsurance brokers.

Any person who violates this regulation may be subject to a $500 penalty for each transaction, in addition to any other penalties provided by the state law.

Unfair and Prohibited Practices

Insurers and insurance producers may not engage in any trade practice that is defined as, determined to be, an unfair method of competition or an unfair or deceptive act or practice in the business of insurance.

It is considered an unfair trade practice to knowingly engage in an unfair method of competition with enough frequency that the commission of unfair marketing practices indicates a general business practice.

If after a hearing, the Department determines that a producer or an insurer has committed an unfair trade or competition practice, the department may issue an order requiring the person to cease and desist from engaging in the method of competition, act, or practice, and /or impose penalties for violation of insurance laws.

Misrepresentation

It is illegal to issue, publish or circulate any illustration or sales material that is false, misleading, or deceptive as to policy benefits or terms, benefits, advantages, the payment of dividends, or the financial condition of any insurer. This regulation also applies to oral statements made by an insurer or its producers and representatives.

It is illegal for an agent or broker to show an incomplete comparison of policies to induce a person to lapse, forfeit or surrender a policy.

Any agent or broker who willingly commits misrepresentation and knowingly receives any compensation or commission for the sale induced by a misrepresentation is liable for a civil penalty in the amount received. In addition, the agent/broker is liable for a civil penalty in the amount of any compensation or commission lost by any agent, representative or broker as a result of making of false or misleading statements. Any person so offended may also sue the agent/broker for the amount gained and penalty paid during the misrepresentation.

Any replacement of individual life policies or individual annuity contracts of an insurer by an agent, representative of the same or different insurer must conform to the following standards implemented by the Superintendent:

• Specify what constitutes the replacement of a life policy or annuity contract and the proper disclosure and notification procedures to replace a policy or contract.

• Require notification of the proposed replacement to the insurer whose policies or contracts are intended to be replaced

• Require the timely exchange of illustrative and cost information necessary for the completion of a comparison of the proposed and replaced coverage

• Provide for a 60-day period following issuance of the replacement policies or contracts during which the policyowner may return the policies or contracts and reinstate the replaced policies or contracts.

False Advertising

Advertising covers a wide scope of communication, from publishing and ad in a newspaper or magazine, to broadcasting a commercial on television or the internet. Advertisements cannot include any untrue, deceptive, or misleading statements that apply to the business of insurance or anyone who conducts it. The violation of this rule is called false advertising

It is prohibited to advertise or circulate any materials that are untrue, deceptive, or misleading. False or deceptive advertising specifically includes misrepresentation any of the following:

• Terms, benefits, conditions, or advantages of any insurance policy

• Any dividends to be received from the policy, or previously paid out

• Financial condition of any person or the insurance company

• The true purpose of an assignment or loan against a policy.

Rebating

any inducement offered in the sale of insurance products that is not specified in the policy. It is illegal to offer an inducement to a person to encourage the purchase of an insurance policy. Rebates include money, sharing of commission, promises, inducements and personal services. Both the offer and acceptance of rebate are illegal.

Articles of merchandise with a conspicuously stamped or printed advertisement of the insurer, agent or broker, are not considered rebates if they are valued at $25 or less.

Defamation of insurer

Defamation occurs when an oral or written statement is made that is intended to injure a person engaged in the insurance business. This also applies to statements that are malicious critical of the financial condition of any person or a company.

Unfair discrimination

Discrimination in rates, premiums, or policy benefits for persons within the same class or with the same life expectancy is illegal. No discrimination may be made on the basis of an individual’s marital status, race, national origin, gender identity, sexual orientation, creed, or ancestry unless the distinction is made for a business purpose or required by law.

Insurance Frauds Prevention Act

is intended to permit the Superintendent and the department to utilize their expertise to investigate and discover insurance frauds, halt fraudulent activities more effectively, and receive assistance from federal and state law enforcement agencies.

Insurance Frauds Bureau

The Insurance Frauds Bureau in the Department continues its operations under the supervision of the Superintendent, who has the power to designate one or more units for the purpose of investigating and preventing fraud.

Procedures

If the insurance frauds bureau has reason to believe that a person is engaged or is about to engage in a fraudulent act, it has 30 days to make a report on the action, including any information relating to the circumstances and the parties involved.

Immunity

As long as the suspected fraudulent transaction was reported in good faith, no civil liability will be placed against the person who reported it.

Fraud Prevention Plans and Special Investigations Unit

Every insurer writing private or commercial insurance must file a fraud prevention plan for the detection, investigation, and prevention of fraudulent insurance activities within 120 days. The plan must include the details necessary for the proper implementation of the plan.

The following rules apply to the implementation of the plan:

• If the Superintendent does not return a fraud detection and prevention plan to the insurer within 120 days from the date of filling, it is considered approved.

• If the plan is returned, the insure has up to 45 days to make the necessary revisions and return to the superintendent.

• If the plan has been returned more than once, the insurer is entitled to a hearing.

• If the insure fails to submit a final plan within 30 days after determination of the hearing, the Superintendent may impose a fine of up to $2,000 per day or impose an appropriate fraud detection and prevention plan.

In lieu of a special investigation unit within the insurance company, an insurer may contract an outside company to provide the investigative services. This insurer must also file a detailed plan with the Superintendent.

Consumer Privacy Regulation

A set of laws and guidelines designed to protect the privacy rights of consumers in the insurance industry, ensuring that personal information is handled responsibly and securely.

• Provide notice to individuals about its privacy policies and practices, no later than the time an insurance policy is delivered, annually thereafter. If information is collected from a source other than the applicant or public records, notice must be given at the time the information is collected.

• Describe the conditions under which a licensee may disclose nonpublic personal information about individuals to affiliates and nonaffiliated third parties. If the insured requests or authorizes a transaction in connection with servicing, processing or maintaining of an insurance product, the insurer is exempt from the requirements of disclosure.

• Provide methods for individuals to prevent a licensee from disclosing that information. An opt out notice must be provided, to allow the consumer a choice to limit disclosure of personal information.

Producer Compensation Transparency

The regulation on producer Compensation Transparency was promulgated to help regulate the acts and practices of insurers and their producers, as well as to protect the public by establishing minimum disclosure requirements regarding the role of insurance producers and their compensation.

For the purposes of this regulation, the term compensation means anything of value, which includes, but is not limited to money, credits, loans, trips, prizes or gifts, whether paid as commission or otherwise. Advertisement or promotional goods with the insurer’s name or logo are not considered compensation, as long as their aggregate value per insurer per year is less than $100.

This regulation does not apply to the following:

• Placement of reinsurance

• Placement of insurance with a captive insurer

• Producers who have no direct sales or solicitation contact with the purchasers

• Sale of insurance by a person who is not required to be licensed

• Renewals

Disclosure of Producer Compensation

A disclosure of producer compensation must include the following information:

• A description of the producer’s role in the transaction

• Whether or not the producer will receive compensation from the sales

• An explanation of factors that affect the amount of producer compensation

• The purchaser’s right to request and obtain information about the producer’s compensation.

Producers are required to keep a copy of all written disclosures provided to the purchaser for at least 3 years

Cyber Regulation

In an effort to combat the ever-increasing menace of hackers extracting sensitive data from companies databases, the state of NY has instituded a new regulation outlining the minimum standards for a required cybersecurity program (23 NYCRR Part 500)

Regulated entities must file an annual certification confirming compliance with these regulations.

Covered entity

Any person operating under a license, registration, certificate, or similar authorization under the banking law, the insurance law, or the financial services law.

Cybersecurity Event

Any effort to obtain unapproved access to an information system (or information stored on it) whether successful or unsuccessful

Information System

An organized system that collects, maintains, and transmits electronic Nonpublic information

Nonpublic information

Any business-related information that is not publicly available information that if misused could jeopardize a covered entity’s security and operations; any personally identifiable information (such as social security number or credit card numbers); and any information (other than age and gender) related to health care.

Multi-Factor Authentication

authentication through verification of at least two factors:

1. Knowledge factor, such as a password

2. Possession factors, such as a token or text message on a mobile phone

3. inherence factors, such as a biometric characteristic.

Penetration Testing

means a test method where assessors attempt to circumvent or defeat the security features of an information system by attempting to penetrate databases or controls from outside or inside the information systems

Chief information Security Officer (CISO)

Each covered entity must designate a qualified individual for overseeing and implementing its cybersecurity program and enforcing its cybersecurity policy.

Cyber Security Program`

6 critical functions of the cybersecurity program:

1. Identify cybersecurity risks

2. Use defensive infrastructure and put policies and procedures in place to prevent cybersecurity risks

3. Monitor and recognize cybersecurity events

4. Counter any attacks to reduce undesirable outcomes

5. Recover from such events

6. Report the event as obligated

Cybersecurity Policy

is an approved written document that identifies the policies and procedures in place to keep the information system safe, and must encompass the following:

• Information security

• Data governance and classification

• Asset inventory and device management

• Access controls and identity management

• Business continuity and disaster recovery planning and resources

• Systems operations and availability concerns

• Systems and network security and monitoring

• Systems and application development and quality assurance

• Physical security and environmental controls

• Customer data privacy

• Vendor and third-party service provider management

• Risk assessment

• Incident response

Covered entities must make sure that the nonpublic information and information systems accessible by third-party service providers (those who are authorized to access nonpublic information) are kept safe. To do that, the policies and procedures set forth must include the following:

• Identification and risk assessment of third-parties with access to such information

• Minimum cybersecurity practices that must be upheld by third-party service providers

• Processes in place to judge the effectiveness of the third-party’s cybersecurity practices

• Annual (at minimum) evaluation of third-parties and their cybersecurity practices

Training and Monitoring

As part of its cybersecurity program, each covered entity must:

1. Implement risk-based policies, procedures and controls designed to monitor the activity of authorized users and detect unauthorized access or use of, or tampering with, nonpublic information by such authorized users

2. Provide regular cybersecurity awareness training for all personnel that is updated to reflect risks identified by the covered entity in its risk assessment

After a cybersecurity event has been discovered, an insurer or its agents must report the event to the Department of Financial Services within 72 hours.

Fair Credit Reporting Act

The Fair Credit Reporting Act (FCRA) ensures that consumer information is kept confidential and accurate, while allowing underwriters to evaluate risk through consumer and investigative reports for legitimate business reasons.

The acceptability of a risk is determined by checking the individual risk against many factors directly related to the risk’s potential for loss. Besides these factors, an underwriter will sometimes request additional information about a particular risk from an outside source. These reports generally fall into 2 categories: Consumer reports and investigative consumer reports. Both reports can only be used by someone with a legitimate business purpose, including insurance underwriting, employment screening, and credit transactions.

Consumer Reports

Include written and /or oral information regarding a consumer’s credit, character, reputation, or habits collected by a reporting agency from employment records, credit reports, and other public sources.

Investigative Consumer Reports

Are similar to consumer reports in that they also provide information of the consumer’s character, reputation, and habits. The primary difference is that the information is obtained through an investigation and interviews with associates, friends and neighbors of the consumer. Unlike consumer reports, these reports cannot be made unless the consumer is advised in writing about the report within 3 days of the date the report was requested. The consumers must be advised that they have a right to request additional information concerning the report, and the insurer or reporting agency has 5 days to provide the consumer with the additional information.

Insurance applicants must be notified in writing whenever insurers request investigative consumer reports

The reporting agency and users of the information are subject to civil action for failure to comply with the provisions of the Fair Credit Reporting Act. A person who knowingly and willfully obtains information on a consumer from a consumer reporting agency under false pretenses may also be fined and/or imprisoned for up to 2 years.

An individual who unknowingly violates the fair credit reporting act is liable in the amount equal to the loss to the consumer, as well as any reasonable attorney fees incurred in the process

An individual who willfully violates this act enough to constitute a general pattern or business practice will be subject to a penalty of up to $2,500

Under the Fair Credit Reporting Act

if a policy of insurance is declined or modified because of information contained in either a consumer or investigative report, the consumer or investigative report, the consumer must be advised and provided with the name and address of the reporting agency. The consumer has the right to know what was in the report. The consumer also has a right to know the identity of anyone who has received a copy of the report during the past year. If a report if found to be inaccurate and is corrected, the agency must send the corrected information to all parties to which they had reported the inaccurate information within the last 2 years

Consumer reports cannot contain certain types of information if the report is requested in connection with a life insurance policy or credit transaction of less than $150,000. The prohibited information includes bankruptcies more than 10 years old, civil suits, records of arrest of convictions of crimes, or any other negative information that is more than 7 years old. As defined by the act, negative information includes information regarding a customer’s delinquencies, late payments, insolvency or any other form of default.

Fraud and False Statements including 1033 Waiver

It is considered unlawful insurance fraud for any person engaged in the business of insurance to willfully, with the intent to deceive, make any oral or written statement that contains either false statements or omissions of material fact. This includes information and statements made on an application for insurance, renewal of a policy, claims for payment or benefits, premiums paid, and financial condition of an insurer

Anyone engaged in the business of insurance whose activities affect interstate commerce, and who knowingly makes false material statements may be fined, imprisoned for up to 10 years, or both. if the activity jeopardized the security of the accompanied insurer, the sentence may be extended up to 15 years.

Anyone acting as an officer, director, agent or other insurance employee who is caught embezzling funds faces the aforementioned fines and imprisonment. however, if the embezzlement was in an amount that is less than $5,000, prison time may be reduced to 1 year.

Federal law makes it illegal for any individual convicted of a crime involving dishonesty, breach of trust or violation of the violent crime control and law enforcement act of 1994 to work in the business of insurance affecting interstate commerce without receiving written consent from an insurance regulatory official (Director of Insurance, Commissioner of Insurance, etc.) a 1033 waiver. The consent from the official must specify that it is granted for the purpose of 18 U.S.C. 1033. Anyone convicted of a felony involving dishonesty or breach of trust, who also engages in the business of insurance, will be fined, imprisoned for up to 5 years, or both.

Section 1034, Civil Penalties and Injunctions for Violations of Section 1033, states that the attorney General may bring a civil action in the appropriate U.S. district court against any person wo engages in conduct that is in violation of Section 1033 of not more than $50,000 for each violation, or the amount of compensation the person received as a result of the prohibited conduct, whichever is greater.

Reciprocity

is the practice of recognizing and accepting the insurance regulations and licenses of other states, allowing insurers to operate across state lines without needing to obtain separate licenses in each state.

Who regulates insurance in NY?

Superintendent

What are the requirements for maintaining your producer license?

meet continuing education requirements, pay renewal fees, and remain in good standing.

What are some unfair trade practices that you must avoid?

Misrepresentation, rebating, defamation, unfair discrimination

Twisting

misleading comparison of policies to persuade insured to cancel or switch policies that can result in financial loss and is considered an unfair trade practice.

This practice involves misrepresenting or manipulating the details of an existing policy to induce an insured to switch to a different policy, often resulting in financial detriment.

Fraud

intentional misrepresentation of a material fact

False or fraudulent statements

knowingly making untrue statements pertaining to any aspect of insurance or insurers.

A state issued document empowering an insurance company to become an admitted insurer is called what?

Certificate of Authority

Who may share in commission from the sale of an insurance policy?

Only producers properly licensed for the type of insurance transaction

When can the commissioner or director examine insurers?

Whenever deemed necessary, but at least once every few years