General State Law
The Department of Insurance and Financial Services
The Chief Executive Officer of DIFS is the Director
Director of Insurance
Directs the department
Promulgates rules and regulations to execute and enforces provisions of the insurance laws of the state
Can investigate anyone in the insurance business
Powers and Duties of the Director
Hold hearings
Levy fines
Suspension of licenses
May issue cease and desist orders
May issue subpoenas, but not enforce them
Transacting insurance
Soliciting, negotiating, or selling an insurance product
In order to receive commission, a producer must be licensed at the time of the sale
Acting without a license
-Anyone that negotiates, solicits, receives commission, or sells any insurance product must be licensed in the State of Michigan. If they act in these ways and do not have a license, they are in violation of the Michigan Insurance Code.
Exceptions ~those who do not need a license
Persons who work for an insurance company or agency who DO NOT receive commission and perform only administrative functions
Persons who enroll people in Group Plans
Persons engaged in the administration of mass marketing
So an unlicensed individual can
Set up appointments
Take information necessary to complete the application
Take claims information
Commissions
In insurance, a certain percentage of premium produced that is retained as compensation by insurance agents and brokers.
Who can get a license?
Individuals
Business Entities
Corporations, partnerships, LLC, and other legal entities
Resident Producer
A resident producer must
Be at least 18 years of age
Complete pre-licensing education within one year of applying for license
Apply for a license through the National Insurance Producer’s Registry
Pay the application fee
Pass the exam
Not have committed any act that is grounds for denial, suspension, or revocation
Reside in Michigan—do not need to be a US citizen
License Types
Business entity
Entity that acts as an insurance producer must have a license
Must have
- Completed the application
- Paid the fee
- Designated a licensed producer to be responsible for the entity’s compliance with state insurance laws, rules, and regulations
Individual licensed in another state moves to Michigan
Show they are licensed in good standing in their home state
Apply for a Michigan license within 90 days of revoking Resident status of their current license
NOT necessary to complete the pre-licensing program of study or take the Michigan producer’s exam
Counselor
Anyone who provides counsel for a fee regarding insurance policies, values, terms, or provisions must be licensed as an counselor. Does not apply to agents who give advice or lawyers
To obtain a license:
Complete application, pay fee, pass exam
Must have an agreement signed by both counselor and client
Agreement must
Outline the work to be performed and fee
Disclose if commission is to be received
Keep on file for two years
Producer Appointment Requirements
Licensed person may not engage in insurance business until an authorized insurer appoints the licensee to act as a producer
Insurer must notify state within 15 days of
First app or signing agency contract
Must file an approved Notice of Appointment
Can represent more than one insurer
No limit
Appointment in force until terminated by insurer or withdrawn by producer
Director has 30 days to approve or disapprove any Notice of Appointment
If the Director finds the producer not eligible for appointment he must notice the insurer within 5 days
Any appointment fees shall be paid by the insurance company
Producer Appointment Termination
Insurers are required to notify the Director of termination
The termination notice will take effect within 30 days of being filed
The termination of appointment should state the reason why
Insurer must inform the producer within 15 days of informing the Director
The producer has 30 days to send a response to the claims
The action only cancels the appointment; does not cancel license with state
Resident Producer info
Change name
Notify Commissioner within 30 days
Change residential or business address
Notify Commissioner within 30 days
Assumed Name
An assumed name is one that is different than the official name of the licensee as maintained in our database at the Department of Insurance and Financial Services (DIFS).
Continuing Education
Must complete 24 hours every two years
Classroom or self-study programs
Must be approved by the Director
Three of the 24 hours must be in ethics
Director can waive if hardship
Reciprocal agreements with other states
Fail to comply
90-day grace period
May not sell or act as producer except to service existing policies
If, at the end of the grace period, producer still has not meet requirements, license is cancelled
Unfair Claim Practices
An insurer must pay claims within 30 days of receipt of the loss or inform the insured what constitutes a valid proof of loss
If a proof is submitted, claim must be paid with in 60 days of receipt
If not paid, benefits must bear a simple interest from the date 60 days after satisfactory proof of loss was received by the insurer at a rate of 12% per annum
Insurers must play fair
Act in Good Faith and not compel insureds to initiate litigation to receive a rightful payment.
Violations
Misrepresent the pertinent facts of the coverage in question
Fail to acknowledge a claim in a timely manner
Fail to conduct a reasonable and prompt investigation
Fail to pay claims without conducting a reasonable investigation
Fail to affirm or deny a claim within a reasonable time
Fail to act in GOOD FAITH
Compel insured to initiate litigation to receive payment
Producer Regulations
Breach of fiduciary duty
Selling under intimidation or threat
Incorrect material on license application
Obtaining a license through misrepresentation or fraud
Forging a name to insurance document
Misrepresenting the terms of contract
Conviction of a felony
Violating the unfair trade practice act
Engaging in fraudulent transaction
Unfair and Prohibited Trade Practices
Misrepresentations
Leading someone to believe that certain benefits, conditions, or advantages exist in a policy when they do not. In short, it is a lie.
Twisting
Using a misrepresentation to induce a person to drop existing insurance and purchase new insurance with a new producer or company
False information and advertising
Cannot use any untrue, deceptive, or misleading statements
Anything that is written or is said to client is considered advertisement
Defamation
Making any oral or written statements that is false or derogatory as to the financial condition of any insurer and that is circulated to injure any person or company
Boycott
A group that avoids a certain company or producer to steer business to another company or producer
False Financial Statements
It is prohibited to file any financial statement with any public official that contains any false information
False Statements on an Application
It is a violation of the Uniform Trade Practices Act for a produce to make a material representation on any application in order to receive any benefits including commissions.
Failure to Provide Rates to an Insured Upon Request
Producers and insurance companies must provide insurance quotes in a timely fashion from when it was requested. They will be in violation of the Uniform Trade Practices Act if they do not provide the quote in a timely manner
Rebating
Rebating is an illegal inducement to purchase insurance. Rebates can include payments from a portion of the agent’s commission, gifts, shares of stock, or anything of value when the purpose is to convince a prospect to purchase insurance. Agents are also not permitted to offer a rebate of the premium payable on any policy as an inducement unless it is specified in the contract. Agents are allowed to give applicants token gifts, but these must be merchandise valued at less than $5.
Illegal inducement
Including an insured into a drawing or contest in exchange for the purchase of an insurance policy
Discrimination
Making or permitting any unfair discrimination between individuals of the same class and essentially the same hazard in the rate charged for a policy or in dividends, benefits, or other contract terms
Refusing to insure or charging a different rate based on
Sex, color, creed, race, or national origin
False Statements
If a producer makes a misrepresentation on an application to receive any benefit including commission, a violation has occurred.
Uniform Trade Practices Act
Fraud- lying for financial gain
False report of death
Filing an application with material misrepresentations
Making material misrepresentations involving the filing of a claim
Financial loss: loss of earnings, out of pocket, repair or replacement costs, investigative cost, and claim payments. Additional premium would not be considered a financial loss.
Fraud
Immunity: Absent of true malice anyone reporting suspects is immune from civil liability
Anyone found guilty of committing fraud will be convicted of a Felony
4 years in jail and a $50,000 fine
Privacy
We need to give the applicant a notice telling them:
Types of financial information we’re collecting
Other types of private information
To whom the producer discloses this information
The applicant must be notified of their right to privacy during the initial transaction
If the consumer says NO then the producer may not share the information with any non-affiliated 3rd party
We can show the underwriter or investigator looking into insurance fraud
Due Process and Disciplinary Action
Hearing
If found in violation the Director could:
Issue a cease and desist
Suspend the producer’s license
Put the producer on probation
Revoke the producer’s license
Order the producer to pay restitution
Fine the producer
Fines
Licensing Law
Unknowing $ 500 per occurrence$25,000 aggregate
Knowing$2,500 per occurrence$25,000 aggregate
Violation of Cease and Desist Order
$10,000 per occurrence$50,000 aggregate
