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This chapter focused on state-specific regulations for insurers and producers. Let's first recap some of the important requirements and processes.
State Regulations
Topic
Key Points
Regulations
California Insurance Code: the primary body of laws established by the state legislature that regulates the business of insurance. California Code of Regulations: Administrative Code that identifies the standards for the Insurance Code and how it is to be administered.
Commissioner of Insurance
Elected for 4 years (maximum 2 consecutive terms). Regulates the internal affairs of the Department of Insurance. Does not write laws. Examines all authorized insurers.
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 the insurer's policies are guaranteed by the existence of the Association.
Licensing Requirements
Topic
Key Points
Licensing Process
Pass examination and meet prelicensing education requirements (12 hours of California Insurance Code & Ethics). Submit application and fees. Be a state resident. Be of good character.
Types of Licenses
Insurance agent: represents the insurer. Insurance broker: transacts insurance on behalf of the insured. Life and disability analyst: receives a fee from a source other than an insurance company; advises regarding insurance.
Maintenance and Duration
Must be renewed every 2 years. Continuing education must be completed every reporting period (24 hours, including 3 hours of ethics). Report changes in name and address immediately. Report administrative actions within 30 days. License is not required if a person does not receive commissions. Inactive license: no active appointments. Disciplinary actions: cease and desist order, denial/suspension/revocation or refusal to renew, monetary fines.
Producer Regulation
Must be licensed in the line of authority for which the agent transacts insurance. Must be appointed by insurer to transact on the insurer's behalf. Maintain records of transactions for 5 years. Avoid unfair trade practices.
Types of Insurers
Topic
Key Points
Domicile
Domestic — home office is incorporated or chartered in the same state where policies are being sold. Foreign — home office is located in a different state than the one where policies are being sold. Alien — home office is chartered in any country other than the United States; considered an alien insurer in ALL U.S. states and territories.
Ownership
Stock: owned and controlled by stockholders; nonparticipating policies. Mutual: owned and controlled by its policyowners; sells ONLY participating policies. Fraternal Benefit Society: not an insurer; operates as a corporation, society, or association; is for the benefit of its members and beneficiaries; not for profit; lodge system.
Admitted/Authorized
Licensed and authorized to transact business in this state. Must obtain a Certificate of Authority.