QUICK NOTES Insurance Schools, Inc. Supplemental Study Guide. For NEW YORK

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1 QUICK NOTES Insurance Schools, Inc. Supplemental Study Guide For NEW YORK LIFE, ACCIDENT & HEALTH INSURANCE AGENT / BROKER EXAMINATION SERIES (April 2015 Edition) Click here to purchase the New York Life, Accident & Health online practice exam simulator which contains nearly 3,000 questions including state specific insurance law questions for New York. What is Insurance Schools Quick Notes Study Guide? Insurance Schools Quick Notes Study Guide is a comprehensive study guide that follows the Prometric state exam content outline and covers every topic listed on the New York Life, Accident & Health Insurance Agent/Broker Examination (Series 17-55). This supplemental study guide is designed to be used as an adjunct learning tool along with our online practice exam simulator and is not a substitute for the required New York prelicensing education course. Insurance Schools Quick Notes Study Guide does not meet the New York prelicensing education course requirement and no course completion certificate will be issued based upon the purchase of this product. Excerpts of New York laws and regulations cited in this study guide have been condensed to emphasize important, testable topics you will see on your state exam. This study guide should not be used as a substitute for competent legal advice.

2 1.0 Insurance Regulation 9% of State Exam 1.1 Licensing Process (2103(d i) The Superintendent may issue a license to any person, firm or corporation who has complied with the requirements of the Insurance Code, authorizing the licensee to act as agent of any authorized insurer. Every individual applicant for a license under this section and every proposed sub-licensee must be 18 years of age or older at the time of issuance of such license. The person must submit to and pass a written examination required by the Superintendent. Definitions Producer Definition (2101(k)) - An insurance producer means an insurance agent, insurance broker, reinsurance intermediary, excess lines broker, or any other person required to be licensed under the insurance laws of this state to sell, solicit or negotiate insurance. Who Should be Licensed (2101(k)(1)) - The term insurance producer does not include: An officer, director or employee of a licensed insurer, fraternal benefit society or health maintenance organization or of a licensed insurance producer, provided that the officer, director or employee does not receive any commission on policies written or sold to insure risks residing, located or to be performed in this state and: (a) the officer, director or employee's activities are executive, administrative, managerial, clerical or a combination of these, and are only indirectly related to the sale, solicitation or negotiation of insurance; (b) the officer, director or employee's function relates to underwriting, loss control, Inspection or the processing, adjusting, investigating or settling of a claim on a contract of Insurance; or (c) the officer, director or employee is acting in the capacity of a special agent or agency supervisor assisting licensed insurance producers where the person s activities are limited to providing technical advice and assistance to licensed insurance producers and do not include the sale, solicitation or negotiation of insurance. Home State (2101(l)) - Home state means the District of Columbia or any state or territory of the United States in which an insurance producer maintains his, her or its principal place of residence or principal place of business and is licensed to act as an insurance producer. Quick Notes - New York Life, Accident & Health Insurance Agent/Broker - 1

3 Negotiate (2101(m)) - Negotiate or negotiation means the act of conferring directly with or offering advice directly to a purchaser or prospective purchaser of a particular contract of insurance concerning any of the substantive benefits, terms or conditions of the contract, provided that the person engaged in that act either sells insurance or obtains insurance from licensed insurers, fraternal benefit societies or health maintenance organizations for purchasers. Sell (2101(n)) - Sell or sale means to exchange a contract of insurance by any means, for money or its equivalent, on behalf of a licensed insurer, fraternal benefit society or health maintenance organization. Solicit (2101(o)) - Solicit or solicitation means attempting to sell insurance or asking or urging a person to apply for a particular kind of insurance from a particular licensed insurer, fraternal benefit society or health maintenance organization. Types of Licensees Agents (2101(a, k)); 2103; Reg. 6, Part 22.2; Reg. 7, Part 23.2) 2101(a) In this section, insurance agent means any authorized or acknowledged agent of an insurer, fraternal benefit society or health maintenance organization issued a certificate of authority pursuant to the public health law, and any sub-agent or other representative of such an agent, who acts as such in the solicitation of, negotiation for, or sale of, an insurance, health maintenance organization or annuity contract, other than as a licensed insurance broker. 2101(k) In this section, insurance producer means an insurance agent, insurance broker, reinsurance intermediary, excess lines broker, or any other person required to be licensed under the insurance laws of this state to sell, solicit or negotiate insurance. The applicant must be at least 18 years of age at the time of license issuance. An examination is required for each applicant, except where noted for applicants with a change in residency moving to New York (see code 2103 below). Holders of certain professional designations such as CLU or CPCU may also be exempt. Brokers (2101(c, h, k); 2104)) A broker refers to: 2101(c) a licensed insurance representative who does not represent a specific insurance company, but places business among various companies. Legally, the broker is usually regarded as a representative of the insured rather than the insuring company. 2101(h) any licensed attorney at law of this state. Quick Notes - New York Life, Accident & Health Insurance Agent/Broker - 2

4 Consultants (2107) - The Superintendent may issue an insurance consultant s license to any person, firm, association or corporation who or which has complied with the requirements of this chapter with respect to either: life insurance, meaning all of those kinds of insurance authorized. Any such license issued to a firm or association shall authorize only the members of such firm or association named in such license as sub-licensees to act individually as consultants there under, and any such license issued to a corporation shall authorize only the officers and directors thereof named in such license as sub-licensees to act individually as consultants there under. Adjusters (2101(g), 2108) 2101(g) The Superintendent may, in his discretion require an applicant for a license under this section to present evidence, in such form as he prescribes, that such applicant has been employed, for a period which he deems reasonable, by an insurer, an independent adjuster or a public adjuster, in the performance of duties which in his opinion would provide the applicant with a satisfactory preliminary training for the duties and responsibilities which would evolve upon him as a licensee under this section. The term independent adjuster means any person, firm, association or corporation who for money, commission or any other thing of value, acts in this state on behalf of an insurer in the work of investigating and adjusting claims arising under insurance contracts issued by such insurer and who performs such duties required by such insurer as are incidental to such claims and also includes any person who for compensation or anything of value investigates and adjusts claims on behalf of any independent adjuster Adjusters will be licensed as either independent adjusters, or as public adjusters. The Superintendent may prescribe the types of independent adjusters' licenses according to the kind or kinds of insurance claims which the licensee is to be authorized to investigate and adjust. No adjuster may act on behalf of an insurer unless licensed as an independent adjuster, and no adjuster may act on behalf of an insured unless licensed as a public adjuster. A public adjuster works on behalf of the insured for a fee. Nonresident (2101(d, e); 2103(g)(5, 11); 2136) 2101(d) In this section, non-resident insurance agent means an individual who is a non-resident of this state and who is licensed or authorized to act as an insurance agent in the state in which he resides, or in which he or the firm or association of which he is a member or employee, or the corporation, of which he is an officer, director, or employee maintains an office as an insurance agent. 2101(e) In this section, non-resident insurance broker", means an individual who is a non-resident of this state and who is licensed or authorized to act as an insurance broker in the state in which he resides, or in which he, or the firm or association of which he is a member or employee, or the corporation, of which he is an officer, director or employee maintains an office as an insurance broker. Quick Notes - New York Life, Accident & Health Insurance Agent/Broker - 3

5 2103(g)(5) In the discretion of the Superintendent, no written insurance examination will be required of any individual seeking to be named as a licensee or sub-licensee who is a non-resident insurance agent. 2103(g)(11) No written insurance examination will be required of any individual who applies for an insurance agent license in this state who was previously licensed for the same line or lines of authority in another state, provided, however, that the applicant's home state grants non-resident licenses to residents of this state on the same basis. Such individual shall also not be required to complete any prelicensing education. This exemption is only available if the person is currently licensed in that state or if the application is received within 90 days of the date of cancellation of the applicant's previous license and if the prior state issues a certification that, at the time of cancellation, the applicant was in good standing in that state or the state's producer database records, maintained by the National Association of Insurance Commissioners, its affiliates or subsidiaries indicate that the producer is or was licensed in good standing for the line of authority requested. An individual or entity licensed in another state that moves to this state must make an application within 90 days of establishing legal residence to become a resident licensee. No prelicensing education or examination will be required of that person to obtain any line of authority previously held in the prior state except where the Superintendent determines otherwise by regulation Reciprocity - The Superintendent shall waive any requirements for a nonresident license applicant otherwise applicable under this chapter if: (a) the applicant has a current and valid license in his or her home state and is in good standing in his or her home state; (b) the applicant has submitted a completed application in the form prescribed by the Superintendent or submitted the application for licensure submitted to his or her home state; (c) the applicant has paid the fees required by this chapter; and (d) the applicant's home state awards nonresident insurance producer licenses to residents of this state on the same basis as provided in this subsection. Business Entities (2101(p); 2103(e)) 2101(p) A business entity means a corporation, association, partnership, limited liability company, limited liability partnership or other legal entity. 2103(e) Before any original insurance agent s license is issued to a business entity, there must be on file in the office of the Superintendent an application by the prospective licensee in such form or forms and supplements, and containing information the Superintendent prescribes and for each business entity, the sub-licensee or sub-licensees named in the application must be designated responsible for the business entity s compliance with the insurance laws, rules and regulations of this state. Quick Notes - New York Life, Accident & Health Insurance Agent/Broker - 4

6 Temporary License (2109; Regs. 9, 18, 29, Part 20.1) A temporary license may be issued in the case of death, service in armed forces or disability. The Superintendent may issue a temporary insurance agent's or insurance broker's license, or both, without requiring the applicant to pass a written insurance examination or to satisfy certain requirements except as to age in the following cases: (1) In the event of the death of a person who at the time of his death was a licensed accident and health insurance agent; (a) to the executor or administrator of the estate of such deceased agent or broker; (b) to a surviving next of kin of such deceased agent or broker, where no administrator of his estate has been appointed and no executor has qualified under his duly probated will; (c) to the surviving member or members of a firm or association, which at the time of the death of a member was such a licensed insurance agent or licensed insurance broker; or (d) to an officer or director of a corporation upon the death of the only officer or director who was qualified as a sub-licensee or to the executor or administrator of the estate of such deceased officer or director; (2) to any person who may be designated by a person licensed pursuant to this chapter as an insurance agent, or an insurance broker, or both, and who is absent because of service in any branch of the armed forces of the United States. (3) to the next of kin of a person who has become totally disabled and prevented from pursuing any of the duties of his or her occupation, and who at the commencement of his or her disability the license or licenses may be issued for a term not exceeding 90 days from the death of such additional term or terms of 90 days each, not exceeding in the aggregate 15 months. The Superintendent may issue renewal licenses for an additional term or terms of 90 days each exceeding the aggregate period of 15 months when in his judgment it will best serve the interests of any person serving in the armed forces of the United States. No person holding a temporary license is permitted to solicit new business under the temporary license. Maintenance and Duration Renewal (2103(j); Reg. 5, Part 21.2) All individual insurance agent licenses must be renewed every two years. Individual licenses are issued with an expiration date determined by the date of birth: The license of an agent born in an even numbered year will expire on the agent s birthday in an even numbered year. The license of an agent born in an odd numbered year will expire on the agent s birthday in an odd numbered year. Quick Notes - New York Life, Accident & Health Insurance Agent/Broker - 5

7 Adjuster licenses are not determined on a birth date renewal. Adjuster licenses expire on December 31 st of even-numbered years. Continuing Education (2108, 2132) Resident Licensees - All licensed agents, brokers, consultants and public adjusters must complete continuing education (CE) requirements as a condition of renewing these licenses. Licensees must complete 15 credits of approved continuing education during each biennial licensing period. After your license has been renewed the first time, continuing education (CE) will always be required upon subsequent renewal or relicensing applications. Credits must be accumulated during the renewal period, which begins with the effective date of the license and ends with the expiration date. CE must be completed before processing the renewal or relicensing application. Assumed Names (2102(f)) Licensees must notify the Superintendent upon changing his, her or its legal name. Except for an individual licensee s own legal name, no licensee may use any name, in conducting a business regulated by this article that has not been previously approved by the Superintendent. Change of Address (All Addresses, including ) - (2134; Reg. 5, Part 21.4; Reg. 6, Part 22.3; Reg. 7, Part 23.4) Licensees must inform the Superintendent by a means acceptable to the Superintendent of a change of business or residence address within 30 days of the change. This also includes addresses. Reporting of Actions (2110(i) Licensees must report to the Superintendent any administrative action taken against the licensee in another jurisdiction or by another governmental agency in this state within 30 days of the final disposition of the matter. This report must include a copy of the order, consent to order or other relevant legal documents. Disciplinary Actions Cease and Desist Order (2405) - Whenever the Superintendent has reason to believe that a person has committed or is committing a defined violation or has been engaged in or is engaging in any method of competition, or any act or practice, which could become a determined violation and that a proceeding thereon would be in the interest of the public, he shall serve upon that person a statement of the charges and notice of a hearing to be held at a time not less than 10 days after the date of service of the notice and at the place fixed in the notice. The person will be given an opportunity at the hearing to be heard personally or by counsel. Anyone violating a cease and desist order may be subjected to a fine of up to $5,000 for each violation. Quick Notes - New York Life, Accident & Health Insurance Agent/Broker - 6

8 Hearings - Notice and Process (2405, Financial Services 305) - A statement of the charges and notice of a hearing to be held at a time not less than 10 days after the date of service of the notice and at the place fixed in the notice. Suspension, Revocation, and Nonrenewal (2110) - The Superintendent may refuse to renew, revoke, or may suspend, for a period the Superintendent determines, the license of any insurance producer, insurance consultant or adjuster, if, after notice and hearing, the Superintendent determines that the licensee or any sub-licensee has: 1. violated any insurance laws, regulation, subpoena or order of the Superintendent of Insurance or of another state's Insurance Commissioner, or has violated any law in the course of his dealings in such capacity; 2. provided materially incorrect, materially misleading, materially incomplete or materially untrue information in the license application; 3. obtained or attempted to obtain a license through misrepresentation or fraud; 4. has used fraudulent, coercive or dishonest practices, demonstrated incompetence, demonstrated untrustworthiness, or demonstrated financial irresponsibility in the conduct of business in this state or elsewhere; 5. improperly withheld, misappropriated or converted any monies or properties received in the course of business in this state or elsewhere; 6. intentionally misrepresented the terms of an actual or proposed insurance contract or application for insurance; 7. has been convicted of a felony; 8. admitted or been found to have committed any insurance unfair trade practice or fraud; 9. had an insurance producer license, or its equivalent, denied, suspended or revoked in any other state, province, district or territory; 10. forged another s name to an application for insurance or to any document related to an insurance transaction; 11. improperly used notes or any other reference material to complete an examination for an insurance license; 12. knowingly accepted insurance business from an individual who is not licensed; 13. failed to comply with an administrative or court order imposing a child support obligation; or 14. failing to pay state income tax or comply with any administrative or court order directing payment of state income tax. Before revoking or suspending the license of any insurance producer or other licensee pursuant to the provisions of this article, the Superintendent will give notice to the licensee and to every sublicensee and will hold, or cause to be held, a hearing not less than 10 days after giving notice. If an insurance producer s license or other licensee's license pursuant to the provisions of this article is revoked or suspended by the Superintendent, the Superintendent will give notice to the licensee. Quick Notes - New York Life, Accident & Health Insurance Agent/Broker - 7

9 No individual, corporation, firm or association whose license as an insurance producer or other licensee has been revoked, and no firm or association of which such individual is a member, will be entitled to obtain any license under the provisions of this chapter for a period of one year after such revocation, or, if such revocation be judicially reviewed, for one year after the final determination affirming the action of the Superintendent in revoking such license. Before revoking the license of any non-resident insurance producer the Superintendent will give 10 days' notice in writing to the licensee of the action proposed to be taken. The Superintendent retains the authority to enforce the provisions of and impose any penalty or remedy. All licensees must report to the Superintendent any administrative action taken against the licensee in another jurisdiction or by another governmental agency in this state within 30 days of the final disposition of the matter. Within 30 days of the initial pretrial hearing date, a licensee must report to the Superintendent any criminal prosecution of the licensee taken in any jurisdiction. Penalties (2127): The Superintendent, in lieu of revoking or suspending the license of a licensee, may in any one proceeding by order, require the licensee to pay a penalty in a sum not exceeding $500 for each offense, and a penalty in a sum not exceeding $2,500 in the aggregate for all offenses. Upon the failure of such a licensee to pay such penalty ordered within 20 days after the mailing of such order, postage prepaid, registered, and addressed to the last known place of business of such licensee, unless such order is stayed by an order of a court of competent jurisdiction, the Superintendent may revoke the license of such licensee or suspend the same for such period as he determines. 1.2 State Regulation Superintendent's General Duties and Powers (2404, Financial Services 201, 202, 301) The Superintendent is empowered to: Examine and investigate into the affairs of any person in order to determine whether the person has violated or is violating the insurance and regulations of this state. Responses to requests for information by the Superintendent should be made not less than 15 business days. The Superintendent is authorized, after notice and hearing, to levy a civil penalty against such person in an amount not to exceed $500 per day for each day beyond the date specified by the Superintendent for response, but in no event will such penalty exceed $10,000. Quick Notes - New York Life, Accident & Health Insurance Agent/Broker - 8

10 In the event the Superintendent levies five separate civil penalties against any one person within five years for failure to comply with this section, the Superintendent is authorized, after notice and hearing, to levy an additional civil penalty against not to exceed $50,000. The Superintendent is also authorized to levy additional civil penalties not to exceed $50,000, after notice and hearing, against such person for every five subsequent violations of this section within a five year period. Any licensee may surrender his or her license in lieu of payment of any civil penalty imposed by the Superintendent. Company Regulation Certificate of Authority (1102) The certificate of authority is an insurer s license to transact insurance in this state as an authorized insurer. Solvency (307) It is required that each insurer file annual financial statements for review by the Superintendent to determine the continued solvency of the insurer. Unfair Claim Settlement Practices (2601; Reg. 64, Part ) - Unfair settlement practices include: Knowingly misrepresenting to a claimant pertinent facts or policy provisions related to the coverages at issue. Failing to acknowledge within reasonable time, communications with respect to claims arising out of its policies. Failing to adopt and implement reasonable standards of prompt investigation of claims arising out of an insurer s policies. Claims must be promptly investigated to determine liability. Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims submitted in which liability has become reasonable clear. Compelling policyholders to institute suit to recover amounts due under its policies by offering less than the amounts ultimately recovered in suit brought by them. Appointment of Agent (2112(a c) In order to sell insurance, as a producing agent for an insurer, the producing agent must be appointed by the insurer as its agent. 1. The appointment must be made 15 days from the date an agency contract is executed, or the first application is submitted 2. Notice of the appointment must be filed with the Superintendent. 3. An agents license may be issued by the Superintendent without an agents appointment. Termination of Agent Appointment (2112(d); Regs. 9, 18, 29, Part 20.2) - Every insurer, fraternal benefit society or health maintenance organization or insurance producer or the authorized representative of the insurer, fraternal benefit society, health maintenance organization or insurance producer doing business in this state must, upon termination of a certificate of appointment, file with the Superintendent within 30 days a statement, in such form as the Superintendent may prescribe, the facts relative to such termination for cause. Quick Notes - New York Life, Accident & Health Insurance Agent/Broker - 9

11 Unfair and Prohibited Practices Misrepresentation (2123; Reg. 64, Part 216.3) It is a violation for an agent to make false or misleading statements or unfair coverage comparisons. False Advertising (2603) It is a violation to make false or misleading statements regarding the advertising of insurance products. A producing agent may not issue any illustration or statement used to advertise his/her business unless the agent is authorized to transact those lines of authority. Defamation of Insurer (2604) It is any false or malicious communication, written or oral, that injures another's reputation, fame or character. Individuals and companies both can be defamed. Unethical agents practice defamation by spreading rumors or falsehoods about the character of a competing agent or the financial condition of another insurance company. Both of these actions are considered illegal. Unfair Discrimination ( , 2612) - Neither agents nor insurance companies are permitted to discriminate against perspective insureds. This means that a person cannot be given a different rate for coverage than another person in identical circumstances. They may not discriminate against a person solely because of an applicants race, religion, occupation, where they live or their financial status. Rebating (2324, 4224) Rebating occurs if the buyer of an insurance policy receives any part of the agent's commission or anything of significant value as an inducement to purchase a policy. State regulations are very strict in this respect and are designed to prohibit discrimination in favor of, or against, policyowners. In this state, the practice of rebating is illegal and the following are defined as illegal inducements: Offering, paying or allowing any rebate or other inducement not specified in the policy or any special favor or advantage concerning the dividends or other benefits that will accrue, in order to place, negotiate or renew the policy. Offering, selling or purchasing anything of value not specified in the policy. Offering, paying or allowing any rebate of any premium on any insurance policy or annuity contract. Licensee Regulation Controlled Business (2103(i)) The Superintendent may refuse to issue, suspend, or revoke a license if an applicant receives more than 10% of the aggregate net commissions during a 12- month period from insurance sold to a licensee s spouse or other family members or business associates or their immediate family. Sharing Commissions (2121, 2128) The sharing of commissions with an unlicensed person or entity is prohibited. Quick Notes - New York Life, Accident & Health Insurance Agent/Broker - 10