Property and Casualty Exam- Illinois Laws and Regulations

An insurance producer license is required of an individual to:

Solicit- sell or ask person to apply

Negotiate- confer/offer advice, quoting rates

Sell- binding, renewing

Give advice for a fee

Receive commission

Brokering

broker is a producer who arranges policies for insureds through insurance companies for which they do not have agency contract

Disclosure

All insurance producers, limited lines producers, temporary, business entities involved in sale must be identified in policy

Disclosure applies if sale was made by:

1. Insurance producer in person

2. call center phone insurance producer

3. online internet insurance producer

Penalty for not being licensed

1. Class A misdemeanor

2. Class 4 felony

3. Injunction (restraining form selling insurance)

Penalty for not being licensed- Class A misdemeanor

Acting as an insurance agent without license- fine up to $1,000 or 1 year in jail (1 and 1)

Penalty for not being licensed- Class 4 felony

Acting as an insurance agent without a license AND misappropriating premiums- fine up to 5k and/or up to 5 years in jail (5 and 5)

Insurance producer license qualification

1. at least 18

2. not committed acts that would be grounds for suspension, revocation, denial of license

3. Pass state exam

4. Purpose is NOT to sell controlled business

Controlled business

insurance sold to oneself, spouse, employer or persons own business

Pre license requirements

1. 20 hours of pre edu per line- 7.5 class, 12.5 self

2. Motor vehicle insurance- 12.5 hours only- 5 class, 7.5 self

3. State certified course

4. proof of completion

Insurance continuing education

24 hours continuous edu every 2 year license term-

-3 hours ethics (classroom or webinar)

- can be computer based interactive or classroom

- self-study- open book final exam

Business Entity

"Insurance agency"

Business entity license

1.authorized licensed individual

2. Complete Uniform Business Entity Application & pay $150 two year fee

3. If brokering insurance, must own surety bond

Assumed name

Any name other than producer or business entity legal name

Change of address

Insurance producer OR business entity must report change of address within 30 days to state insurance director- no fee

Limited lines producer license

CAN be licensed for more than 1 insurance company:

1. Baggage insurance, limited travel accident, trip cancellation insurance

2. Rental car insurance

3. industrial life insurance

4. industrial accident/health

5. limited health service org plans

6. fire insurance

7. legal expense insurance

8. enroll public aid or medicare recipients in HMO programs

Limited Lines producer license qualifications

1. 18 years

2. competent, trustworthy, good business rep

3. NO EXAM, pre licensing edu, continued edu, bond required

4. company must pay $50

Temporary Insurance producer license

- Issued for 90 day period

- cannot be renewed

- Only ONE temp license per lifetime

- Qualified training program= each 6 month period, 50% of temp producers obtain insurance license prior to expiration of temp

Temporary insurance producer requirements

1. Insur Company must apply- $50

2. Must be in process of fulfilling pre license edu

3. Must be enrolled in qualified training program

Situations where no license required

1. Attorneys offering clients legal advice incidental to insurance

2. bank trust officers

3. Actuaries/ certified public accountants

4. licensed public adjusters

5. executive, administrative

6. sponsor or administer group insurance or employee benefit programs

7. persons who live in & licensed in another state who sell commercial ins. on property located in IL, but property owner's principal place of business is IL

How insurance company is owned

1. Stock- owned by stockholders

2. Mutual- owned by policy holders

3. Fraternal- owned by fraternal society

What does it mean when an insurance company is admitted vs. not admitted?

Admitted- Licensed in state which sale is to be made, non-admitted is they are not licensed or authorized in state which sale is to be made

Surplus Lines Producer Licese

special, additional license required to sell policies non-admitted in state which sale is occurring

Premium finance company license

loaning customers premium money

- if producer allows more than 10% of a/r to go over 90 days from due date, he/she is financing premiums.

- A/r are total premiums due to insurance producer by clients

- Penalty for financing without license= civil penalty up to 1000

The Unfair Claims Practices Act

prohibits insurance companies from delaying unreasonably in settling insurance claims

- specifies time periods which insurance companies must respond to insureds on certain types of claims

Rebating

It is illegal to offer/give something, reduce premium, or accept something:

- of material value and

- to someone not licensed as an insurance producer,

- paid out of a producer's commission

- only if the recipient buys an insurance policy

`

Rebating penalty

$500 or 6 months in jail (1/2 and 1/2)

Prohibited activity penalty

- Civil penalty up to $5000 per offense, not to exceed $20,000

- temp suspension of license

- revocation of license

- application for additional license revoked

Class A Misdemeanor

(1 and 1)- misappropriation of less than $150

Class 4 Felony

(5 and 5)- misappropriation of less than $150- repeat offense

Class 3 Felony

(10 and 10) - misappropriation of $150 or more

Fiduciary Responsibility

Special responsibility to the insurance company to collect, safeguard, and account for all premium monies

Premium fund trust acc

if licensed person holds premium for 15+ days or deposits into local bank acct, then all further premiums must go to seperate bank acct

Penalty- not being properly licensed

1) class A misdemeanor- acting as insurance provider, limited lines, temp __ without license

2) Class 4 felony- acting as licensed person without licensing and misappropriating premium monies

Penalty- financing premiums without premium financing company license

civil penalty of up to $1000

Penalty-Failing to provide documents requested in subpoena or lying under oath

Fine of up to $2,000 and/or jail

Penalty- Violating an order issued by state insurance director as a result of exam or hearing

license may be suspended/revoked,

fine up to $10,000

Held guilty of business offense

Penalty- Cease and Desist or unfair methods of competition

- fine of not less than 100, not more than 5000

- may be ordered to cease and desist

Penalty- Rebating

Class B Misdemeanor (1/2 and 1/2)

Insurance producer license fee

$180 per two year fee

Business entity licence fee

$150 per two year fee

Limited lines insurance producer license fee

$50 per year fee billed to appointing insurance company

license reinstatement fee

$180

Insurance producer administrative fund

all license and exam fees are deposited here-

IL insurance guarantee fund

if your insurance company loses money and can't pay your claim, they guarantee benefits and the assessment of funds- protect policy holders and assure quick settlement of claims

--500,000 max per claim

--10,000 max unearned premium

- FULL amount for workers comp

Property Insurance- Notice of cancellation (by insurance companies)

10 day notice- no matter how long policy has been in effect for cancellation due to nonpayment of premiums

30 days notice- required during first 60 days policy is in effect for reasons other than nonpayment of premiums

60 day notice- required after policy been in effect for 60 days or renewed if the cancellation is for reasons other than nonpayment of premiums. after 60, cancellation can only be nonpayment of premiums or other reasons outlined by law

Notice of cancellation by insurance co- required

- notice must be mailedto insured at last known address

- insured cannot protest a cancellation on basis that they didnt receive notice if insurance co has some type of proof of mailing

- copy of notice cancellation mailed to producer of record

- notice of cancellation contain explanation

What length of time (notice) is requred by insurance companies when changes occur in premium, premium payment plan, deductible, limits of liability

60 days

Reasons a property insurance policy cannot be cancelled

can never be cancelled mid-policy solely due to too many claims

Cancellation due to nonpayment of premium

10 days notice is required no matter how long the policy has been in effect

cancellation during first 60 days of a property policy is in effect

60 days in effect, can be cancelled with a 60 day notice only if:

1. policy obtained by misrepresentation or fraud

2. an act which has measurably increased risk as originally acepted

Reasons a property insurance policy cannot be nonrenewed

- age of property

- location of property

- discrimination as to the occupants

Nonrenewal of property insurance policy during first 5 years

CAN BE nonrenewed within 60 days notice by insurance company for any reason except discrimination

Nonrenewal of fire insurance policy after it has been in effect 5 years

After the first 5 years a property insurance policy is in effect it can be nonrenewed with 60 day notice by insurance co for following reasons

- policy obtained by misrepresentation/fraud

- An act which increased risk as originally accepted

- **After property insurance policy in effect for 5 years, cannot be nonrenewed for any other reason

Pro Rata

When an insurance company cancels policy, unearned premium is returned pro rata

Short Rate

when an INSURED cancels policy, unearned premium can be calculated on short rate basis which will be less than pro rata return

Short rate cancellation recommended by producer

if recommended to insured at any time other than policy anniversary/expiration date, producer must inform insured in writing of additional cost (short rate)

Refusal of coverage due to hate crimes

insurance co cannot refuse to issue/renew or refuse/ cancel insurance policy bc insured made claims for damage caused by hate crime

FAIR plan

Fair Access to Insurance Requirements plan is a state-run program that makes insurance obtainable to those in high risk areas who have been unable to acquire insurance through other channels (3 attempts)

- companies writing fire & extended coverage policies are required to participate in FAIR pool which is administered by industry placement facility

Purpose of FAIR plan

to make property insurance available to urban property owners unable to obtain coverage in normal markets

Mortgage insurance rule

1. lender can require borrower to buy property insurance to cover property that is security for a loan

2. borrower cannot be required to buy prop insurance w/ limits in excess of replacement value of property

Mine Subsidence

Automatically included in all policies sold on structures located in counties designated by state insurance director as being susceptible to mine subsidence

-- premium shown as seperate charge

-- insured has option to waive coverage

-- deductible equal to 2% of face amt but not less than $250 or more than $500

How is mine subsidence insurance covered?

100% reinsured up to $350,000 by state mine subsidence fund (part of FAIR)

What is the minimum auto liability insurance limit?

25/50/20

--Insurance company pay 25,000 for bodily inj. which insured legally liable to one third party

-- Insurance co pay 50,000 for bodily injury which insured legally liable for all third parties

-- Insurance co pays 20,000 for property damage which insured legally liable cause to third parties

Most common liability limit?

(250/500/100)

$250,000/$500,000/$100,000

Uninsured motorist coverage limit

25/50- only covers injuries

- protects insured and any member of household when hit by uninsured or hit and run

___ days is required for cancellation due to nonpayment of premiums (auto)

10 days

__ days is required for cancellation during the first 60 days the policy is in effect for all reasons other than nonpayment of premiums

30 days

__ days is required for cancellation for all reasons other than nonpayment of premium after auto insurance policy has been in effect for 60 ays

60 days

__ days is always required for nonrenewal

60 or 30

Eligibility for automobile insurance plan

- IL registered vehicle

- Valid drivers license

- Rejected for auto insurance from 3 diff companies

- assigns policy to insurance company

A ____ must be submitted by auto insurance company to IL secretary of state if person involved in accident without insurance or is convicted of driving without insurance- must be submitted to avoid license suspension

SR-22 form and certificate of coverage

Penalties for not filing insurance plan or self insurance workers comp plan

employee may sue employer in court (common law)

- employer loses all his/her normal legal defenses

Workers comp act

1. Medical benefits including rehab

2. Temporary total disibility benefits

3. Permanent partial disability relief

4. Survivor benefits

Other states coverage (workerscomp)

provides automatic coverage if employee injured in a state other than the one designated to policy

Common law employer's liability

Covered not to exceed employer's workers com policy

Workers Compensation Commission

State agency separate from dept of insurance

- all plans must be filed with WCC

- Approves all claim settlements

Workers comp assigned risk pool

assure availability of workers comp insurance to all employers including employers that have been rejected by insurance companies

**Rejected by 2 companies

Workers comp assigned risk pool eligibility

- must pay at leas 25% premium down

- comply with all public laws relating to safety of employees

- employer must not have been canceled within 12 months for nonpayment of premium on workers comp policy.

What is is called when an individual appliying for a non resident insurance license is not required to take an exam because their resident state does not require an exam

Reciprocity

Penalties for violating order issued by state insurance director

license suspension

license revocation

Fine up to $10,000

Held guilty of a business offense

Who does Uninsured Motorists and Underinsured Motorists coverage protect?

The insured and all members of their household anywhere

redlining

refusing to write property insurance soley on basis of geographic locations

The director must examine an insurer at least once every __ years

5

Maximum fine for refusal to submit to an examination by director

$2,000

Companies may request hearings within __ days of receiving examination report

10

Producer may request hearing within __ days of receiving examination report

14

Applicants must pass both parts of licensing exam within __ days

90

Change of address must be reported within

30 days

Nonresident producers must file change of address within

30 days

Temporary non producer license for surviving spouse business partner or employee if producer dies/military/disabled

180 days

temporary license may be issued for

90 days

minimum age to obtain producer license

18

Insurance producer license cost

180/2 year

non resident license cost

250

Licenses may be reinstated within __

12 months after due date of renewal

Civil penalties for insurance license violations- each cause

$10,000 max

Civil penalties for insurance license violations- total

$100,000 for all causes max

Producer must report felony charges within

30 days

Max penalty for unfair claims practices

$250,000