Chapter 4 Overview
This chapter covered state-specific regulations for insurers and producers. The key areas include: types of insurers and producers, state regulatory jurisdiction, licensing requirements, trade practices, fraud prevention, and ethics.
State Regulations Summary
Insurance Company Regulations
Ownership Types
- • Stock - Owned by shareholders
- • Mutual - Owned by policyholders
Domicile
- • Domestic - Incorporated in NJ
- • Foreign - Incorporated in another US state
- • Alien - Incorporated outside the US
Key Requirements: Must obtain Certificate of Authority to transact insurance. Must appoint producers and avoid unfair methods of competition and unfair claim settlement practices.
Producer Regulations
- •Only one license of the same type per agent
- •Must be licensed in the line of authority for transactions
- •Report changes of address, administrative actions, and convictions
- •Avoid unfair trade practices
State Regulatory Jurisdiction
New Jersey Statutes and Administrative Code
The legal framework governing insurance
Court Action
Interpretation of contracts
Commissioner of Insurance
- • Regulates internal affairs of the Department
- • Conducts hearings and issues orders
- • Examines all authorized insurers and producers
- • Does NOT write laws
Insurance Guaranty Association
- •Protects policyowners, insureds, and beneficiaries against insolvent insurers
- •All admitted insurers must be members of the Association
Unfair Trade Practice: Stating that an insurer's policies are guaranteed by the existence of the Association
Licensing Requirements Summary
Licensing Process
Types of Licenses
Individual/Business Entity
Resident and nonresident options
Temporary License
Valid 180 days; maintains existing business
Surplus Lines Agent
For unauthorized insurers; requires P&C license
Maintenance and Duration
- •Must be renewed every 2 years
- •Continuing education must be completed every reporting period
- •License is NOT required if a person does not receive commissions
Disciplinary Actions
License Actions
Denial, suspension, revocation, refusal to renew
Cease and Desist
Order to stop prohibited conduct
Monetary Fines
Financial penalties for violations
Key Numbers to Memorize
18
Min age for license
20
Prelicensing hours/line
24
CE hours every 2 yrs
3
Ethics CE hours
2
Years license period
180
Days temp license
5
Bus days premiums
30
Days report address
5
Yrs revoked to reapply
5
Yrs keep records
Full reference: Part 7 - By the Numbers
Trade Practices Summary
Misrepresentation
Making false statements about policy terms, benefits, or conditions
False Advertising
Misleading promotional materials or statements
Rebating
Offering inducements not stated in the policy (limited exceptions)
Twisting
Inducing replacement through misrepresentation
Penalties
$1,000
Unintentional violation
$5,000
Willful violation
$5,000
Cease and desist violation
Insurance Fraud Summary
11 Types of Fraud Violations
Escalating Penalties
- • 1st violation: $5,000
- • 2nd violation: $10,000
- • Subsequent: $15,000
Surcharges
- • Individual guilty: $1,000
- • Settlement: 5% of total
- • Paid to: State Treasurer
Ethics Summary
Conflict of Interest Law - 5 Areas
Producer's Ethical Responsibilities
To Insurer
Honesty, loyalty, good faith
To Policyowners
Sell to needs, service, disclosure
To Public
Professional integrity
To State
Follow laws, no misrep
Chapter 4 Final Summary
Insurer Types
Stock vs Mutual; Domestic/Foreign/Alien
Commissioner Role
Regulates, examines, conducts hearings (doesn't write laws)
License Period
2 years; 24 CE hours (3 ethics)
Prohibited Practices
Misrepresentation, rebating, twisting, coercion
Fraud Penalties
$5k / $10k / $15k + $1k surcharge
Ethics Core
"Regard for others" - 4 responsibilities