Unit 21: IL State Laws- Common to both Property and Casualty Insurance

Who appoints the insurance director?

The governor.

*What are the general powers of the insurance director?

-Request criminal hx records.

-Investigate

-Make rules/regulations

-Conduct hearings

-Request Attorney General to proceed w/ court action

*Note: Do NOT write laws!

How does a Cease and Desist order work?

-Issued by the Director.

-Hearing is 20-30 days from the hearing notice.

-Violation of a cease and desist order= fine of

• $100/day.

• Up to $5,000.

*What is the process of the examination of the insured by the Director?

-Director can examine the insured at any time, min. once every 5 years.

-Insured pays for examination.

-Hearing= 10 days notice.

• Failure to submit = $2,000.

- After hearing, Director issues order based on examination within 90 days of filing report/hearing.

*What is the examination process of producers by the Director?

-Based on:

• Facts from records, documents, etc.

• Sworn testimonies.

• Written affidavits.

-Producers examined for violation must request a hearing = 14 days.

-After hearing, Director issues order based on examination within 90 days of filing report/hearing.

-A person who violates a written order is guilty of a business offense = $20,000.

Failure to become licensed and register results in what?

A class 4 felony.

*What are the qualifications and how does one get a Resident Insurance Producer License?

-Must be honest on application and pay application fee to the state and the testing service used.

• *$215 renewal every 2 years.

-*Must be at least 18 y/o.

-Pass the written exam (both parts) in 90 days.

-Meet the pre-licensing study requirements.

• *7.5 class hours and 20 self-study hours.

-License is good for 2 years.

*Non-resident Producer License is obtained by:

-If producer is licensed in their home state, they may submit a request, pay the fees, and submit an application or uniform application.

-Director verifies licensure in home state is valid with National Associate of Insurance Commisioners.

How do Business entities become licensed?

-Submit a uniform business entity application.

-Pay fees: $50 every 2 years.

-Must designate a licensed producer of the business.

*How do I gain a Temporary Insurance Producer license and what are the stipulations?

Purpose=finish business for the o.g. producer:

-Issued: 180 days

• May be renewed an additional 180 days.

- File application and pay fee ($50).

-May require a sponsorship of someone who is licensed.

OR Purpose= to finish permeant licensure studies:

-Issued for 90 days.

-File application and pay fee.

-Limit: 1 per lifetime per person.

-Note: may be denied if during a 6-month period, 50% of temp. holders in a company have failed to obtain permanent licensure.

*Who is exempt from needing to obtain licensure?

-Officer

-Director

-Employee

• U.W.

• Admin

• Managerial

• Clerical

What are the lines of authority?

-Life

-Accident & Health

-Variable life & variable annuity products

-Property

-Casualty

-Personal Lines

License Fee for Producer and Resident Car Rental Limited

$215 every 2 years.

License Fee for Producer and Resident Car Rental Limited Non-resident

$380 every 2 years.

License Fee for annual limited line producer

$50 every year.

Application fee for the written license exam

$50

Annual registration fee for education provider

$1,000.

Fee for each continuing education or certified prelicensing

$50

Annual fee for renewing each course’s certification

$20 a year.

License Fee for limited lines license

$200 every 2 years.

Self-service storage facility limited lines fee

$50 every 2 years.

What are the terms of the licensure?

-Bond is required.

-Annual fee.

-Continuing education required.

*Note: if lapse in 12 months or greater = double renewal fee

What are the bond requirements?

-*Greater than $2,500 or 5% of premiums brokered in the previous year (not exceeding $50,000 total aggregate).

-Surety may cxl bond and be released from liability with 30 days written notice.

-*Producer license is terminated w/o bond.

*What are the continuing education requirements for licensure?

*-24 credit hours every 2 years

-3 credit hours of ethics in class

Note: must keep records of education for 3 years.

What is the Insurance Producer Administration Fund?

-Where all fees are collected.

-Must be used for execution, admin, and enforcement of insurance laws.

What is controlled business?

-Insurance for self, family, own business, own employer.

-Director will NOT grant/extend producer license if controlled business is greater than premiums from others.

*What are the reasons in which a producers license may be suspended/revoked by the Director?

-felony

-violating laws

-stealing money

-not paying child support

-fraud/dishonesty

-cheating on the licensure exam

-forgery

-knowingly accepting business from an unlicensed individual.

How is the producer notified and charged fine-wise for suspension/revocation of their license?

-Director notifies within 30 days.

-hearing upon request: happens 20-30 days from the request.

-After hearing, a civil penalty of $10,000 for each cause, $100,000 for all causes.

-**A person who loses their license becomes ineligible for 3 years!

What are the fines for Fiduciaries if misappropriation occurs?

-$150 or less= Class A misdemeanor

-$150 or more Class 3 Felony

-Repeated offenses= Class 4 Felony

*An address change must be reported to the Director within how many days?

30 days.

A felony conviction must be reported to the Director within how many days?

30 days.

*What is the Premium Fund Trust Account (PFIA)?

-Where premiums are held for, longer than 15 days, by the producer.

-Must NOT be used as a general operations account or claim payment account!

What are the insurer’s responsibilities?

-Reasonable promptness = settle claims in 15 working days.

-Must confirm/deny claims = 30 days.

-Claim unresolved for 45 days = written explanation to the insured.

What does a company’s failure to obey a cease and desist order result in?

-6 months renovation of certificate of authority.

-&/or a $250,000 fine.

What is rebating considered and who may recover it if its paid?

-Class B Misdemeanor

-If paid, may be recovered ONLY by the insurance company.

Misrepresentation or false advertising (twisting) is subject to___?

a fine between $200 and $10,000.

What is defamation?

It is prohibited in IL.

-Statements intended to hurt the financial condition of an insurer.

-Penalty for violation is a fine between $200 and $10,000.

*Define coercion

The lying to customers to get them to buy something.

What is the unfair marketing practice penalty?

The Director may issue a cease and desist order for someone engaging in unfair trade practices.

-Refusal to obey these orders= $1,000 fine for each violation.

What is the purpose of the IL. Insurance Guaranty Association Law?

It protects policy owners, insureds, beneficiaries, annuitants, and assignees from insurer insolvency.

-Assessment may not exceed 2% of the insurer’s net direct premiums.

-Limited to $500,000 & $10,000 unearned premium for any one policy

• Worker’s comp=paid in full.

Excludes:

• accident & health insurance

• reinsured by other

• suretyship

• bonds

• marine insurance

• warranty/contract

• retrospective rating/adjustment policies

Can an insured’s policy be terminated because the agent quit/was fired?

-Termination can NOT be done because the agent who got the insured the policy quit/fired the job.

Can a contract between an independent insurance agent and a company be terminated?

-Only after at least one year of effect:

• insurance company must provide written notice = 180 days to the independent insurance agent.

• Non-renewal notice = 60 days to the independent insurance agent.

What must an agent/broker/company representative notify an insured of upon cancelation?

The short-rate cancellation!

• Return due (-)administrative fee

True or false: short-rate cancellation agents or producers must not recommend that an insured cancel a policy without informing them of any related costs.

True!

Define Adverse Action

Applicants who would typically be denied/cxl will have a higher premium. This change of policy is due to U.W.

Define consumer

Insured/applicant whose credit score is used.D

Define credit information

Information derived from a report.

Define Credit Report

Written/oral information from the consumer reporting agency.

Define insurance score

Predicts insurance loss exposure of an individual.

• Based on credit info.

Define cancel

Done by insurer before policy expiration date.

How many days must the insurer give the insured of cancellation due to non-payment of premium?

10 days notice.

True or false: the insurer can deny renewals without cause after 1 year or 1 policy term (which ever is less)?

False- an Insured can NOT deny renewal without cause after 1 year.

How many days prior to the effective cancelation/nonrenewal must the insured call a hearing (if they want to)?

20 days before the policy terminates.

How many days does the Director have before they must call the requested hearing?

10 days.

How many days does the director have to make their decision after the hearing?

20 days.

How many day does after the decision does the policy terminate if the insured is found to be in the wrong?

30 days!

How much is the cost of the hearing and who pays it?

$100 paid by the loser.

How many days must an Auto Insurance policy be in effect for the insurer to require a reason to cancel the insured’s policy?

60 days WITH reason.

If an insurer cancels the insured’s policy, how are premiums refunded?

On a pro-rata basis, within 30 days of cancelation notice.

How many days, on what basis, and how is the unearned premium returned to the insured for a commercial fire or marine coverage cancellation by the insurer?

-10 days written notice

-pro-rata basis

Must be due to one of the following:

• No repairs after 60 days from loss

• Unoccupied for 60 days

• No utilities for 30 days

How many days and on what basis can an insurer cancel an insured’s residential fire or extended coverage policy?

-After 60 days.

Must be due to one of the following:

• Non-payment of premium

• Misrepresentation/fraud

• Increase of original accepted risk

Note: the insurer must tell the insured about the FAIR act (unless cxl due to non-payment).

Note: the opportunity to rehabilitate must be given to the insured for 90 days.

How many days’ notice must an insurer give an insured for non-renewal of a policy due to non-payment?

10 days for all lines.

How many days’ notice must an insurer give an insured for non-renewal of a policy for any other reason?

30 days (personal lines).

How many days’ notice must be given to an insured by the insurer for any policy changes?

60 days notice.

An insurer cannot cancel or non-renew a fire or extended coverage policy after ___years unless ____?

An insurer cannot cancel or non-renew a fire or extended coverage policy after 5 years unless:

• 60 days notice to non-renew

• misrepresentation/fraud

• Increased risk than o.g. plan described

True or false: an insurer can not refuse renewal of a policy due to an insured’s space heater usage.

TRUE: an insurer can NOT refuse policy renewal due to a space heater.

If a claim has been in relation to a hate crime, an insurer cannot cancel, refuse, or non renew a policy for how long?

60 months.

What is a Certificate of Insurance?

A document prepared by an insurer or insurance producer as evidence of property or casualty insurance coverage.

-Does NOT include: policy, binder, endorsement, of ID/info card.

True or false: an insurer can take adverse action based on credit info.

True: ONLY when the credit report or insurance score was issued/calculated within 90 days of writing the initial policy or renewal.

False: if it is outside of the 90 day window.

In regard to U.W., an auto note or a mortgage can only negatively impact an applicant’s insurance score when the two are made within how many days of one another?

30 days. Otherwise, the two cannot separately be used to negatively impact the applicant’s insurance score.

What does it mean if an agent or broker finances insurance premiums?

They accept payment of a premium from a policyholder more than 90 days later

-Agents or brokers accept 10% or greater of their total accounts receivable installments this way = premium finance company.

What is the service charge requirement for financing insurance premiums?

Max: $10 per $100/year.

What is the civil penalty for NOT having a premium financing company license?

$2,000 for each offense.

-Excludes:

• insurance company

• bank

• credit union

• savings and loans