Licensee Responsibilities Overview
Licensed producers have specific obligations to report information to the Department of Banking and Insurance, follow standards of conduct, and handle funds properly. Failure to meet these responsibilities can result in administrative penalties.
Exam Alert!
This section is full of specific timeframes and numbers. Pay close attention to the days required for each responsibility!
1. Reporting Information to the Department
Change of Address - 30 Days
All licensees must provide the Department with current:
Business mailing address
Residence address
Phone number
Email address
Important: Notify Department within 30 days of any changes. May submit electronically. Keep proof of notification for 5 years or until documentation from Department is received.
Business Names
Resident Producers:
May NOT conduct insurance business under a name other than their legal name unless the name has been filed with and approved by the Department.
Nonresident Producers:
May NOT conduct business under a name other than their legal or business name in their resident state.
Assumed Names:
Must notify the Commissioner PRIOR to using an assumed name.
A Business Name CANNOT:
-
✗
Be misleading or deceptive
Example: "Guaranteed Lowest Rates Insurance" when you can't guarantee that
-
✗
Be identical or confusingly similar to another resident producer's name
Example: If "Smith Insurance Agency" exists, you can't open "Smiths Insurance Agency"
-
✗
Imply affiliation with government or nonprofit organization
Example: "NJ State Insurance Services" or "AARP-Affiliated Insurance Agency"
If the name contains "insurance," it must be used with words like "agency" or "brokerage" to distinguish from an underwriting company.
Branch Offices - 30 Days
A branch office is an office in NJ other than the principal office where a resident licensee conducts insurance business.
To Open:
- • File registration form 30 days BEFORE business begins
- • Must have licensed producer permanently assigned
- • Must be open during reasonable hours
- • Hours must be clearly posted
To Close:
- • Advise Department within 30 days of closing
- • Return branch office certificate
Note: Certificate expires at same time as producer's license. No branch office may conduct business unless a licensed producer is present.
2. Standards of Conduct
Marketing Standards
Disclosure of Information
Producers are PROHIBITED from disclosing personal or privileged information about an individual received in connection with an insurance transaction.
Delivery of Policy
Policies must be delivered or mailed to insured within 10 calendar days of receipt by producer. Can only retain longer if agreed to in writing by insured.
Reply to Commissioner
Producer has 15 calendar days to reply in writing to any inquiry from the Department.
Reporting Claims
Claims must be reported to insurer no later than 5 business days after receipt of notice by producer.
Management of Funds
Commingling of Funds - PROHIBITED!
All premiums collected must be held in a fiduciary capacity and must NOT be:
Misappropriated
Illegally Withheld
Improperly Converted
"I'll deposit this $2,000 premium check into my personal checking account and pay the insurer later..."
ILLEGAL - This is commingling (mixing client money with personal funds)
"Business is slow this month - I'll use the premium money to pay my office rent and replace it next week..."
ILLEGAL - This is misappropriation/conversion of fiduciary funds
Remittance Standards - 5 Business Days
To Insurer:
All premiums must be remitted to the insurer within 5 business days after receipt.
To Insured:
All premiums due the insured must be paid or credited within 5 business days.
When Trust Account is Required:
A producer must establish and maintain a trust account when:
- • Holding premiums for more than 5 business days before remitting
- • Depositing collected premiums into a financial institution account, even if remitted within 5 days
Think of it this way: A trust account is like a holding tank labeled "CLIENT MONEY - NOT MINE." If you touch client premiums at all (even briefly), they must go into this separate account, never your personal or business operating account.
Record Maintenance - 5 Years
- • Issue receipt for each premium payment at time of payment
- • Maintain copy of each receipt issued
- • Completed receipt books retained for minimum 5 years from date of completion
- • All other books and records maintained for 5 years after termination of coverage
3. Commissions and Compensation
Cannot PAY Commission If:
No insurance company or agent may pay a commission, service fee, or other valuable consideration to a person for selling, soliciting, or negotiating insurance if that person is NOT properly licensed.
Example: "My friend referred 5 clients to me, so I'll give her $500." → ILLEGAL if she's not licensed
Cannot ACCEPT Commission If:
No one may accept a commission, service fee, or other valuable consideration for selling, soliciting, or negotiating insurance if that person is required to be licensed and is not so licensed.
Example: "Sure, I'll take that $500 referral fee for sending you those clients!" → ILLEGAL if you're not licensed but acted like an agent
Exception - Renewal/Deferred Commissions:
Renewal or other deferred commissions MAY be paid if the person was properly licensed at the time of the transaction.
Example: Agent retires in 2024. They can still receive renewal commissions in 2025 for policies they sold while licensed.
4. Administrative Procedures and Penalties
If a producer violates NJ law regarding Standards of Conduct, the Department may impose an administrative penalty.
Notice from Department Must Include:
Reference to statute, rule, or order violated
Brief statement of facts constituting violation
Statement of the administrative penalty
Statement of right to hearing and procedure
20 Calendar Days to Request Hearing
The person in violation has 20 calendar days from service of notice to request a hearing in writing.
If Hearing Request Doesn't Include:
Specific admission, denial, or explanation of each fact, the statements in the notice will be deemed ADMITTED.
If No Response:
Failure to respond = admission to ALL allegations. Final order may be issued without further proceeding.
If Payment Not Made:
License may be suspended or revoked.
5. Information Privacy
Protecting Customer Information
Insurers are required to implement and maintain a comprehensive written information security program.
Administrative
Safeguards
Technical
Safeguards
Physical
Safeguards
Compliance: The Department of Insurance must have access to the insurer's records that demonstrate compliance with information security requirements.
Quick Reference: Key Numbers
30 days
Report change of address
30 days
Open/close branch office
10 days
Deliver policy to insured
15 days
Reply to Commissioner
5 business
Report claims / Remit premiums
5 years
Maintain records
20 days
Request hearing after violation notice
Exam Tips
Tip #1: The 5's
5 business days: Remit premiums, report claims. 5 years: Keep records.
Tip #2: The 30's
30 days: Address changes, branch office open/close.
Tip #3: Business vs Calendar Days
5 BUSINESS days for claims/premiums. 10/15/20/30 are CALENDAR days.
Tip #4: Fiduciary Duty
Premiums are held in fiduciary capacity - NEVER commingle with personal funds!