Life and Health Insurance

Transcription

1 Life and Health Insurance Connecticut Effective September 1, 2014 State Law Supplement Important: Check for Updates States sometimes revise their exam content outlines unexpectedly or on short notice. To see whether there is an update for this product because of an exam change, go to and check the Insurance Licensing Blog. If there is an update, it will be clearly noted in the blog entries for this state. CT L&H Law Supplement.indb 1 9/19/ :32:15 AM

2 At press time, this edition contains the most complete and accurate information currently available. Owing to the nature of license examinations, however, information may have been added recently to the actual test that does not appear in this edition. Please contact the publisher to verify that you have the most current edition. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought. CONNECTICUT LIFE AND HEALTH INSURANCE LAW SUPPLEMENT, EFFECTIVE SEPTEMBER 1, Kaplan, Inc. The text of this publication, or any part thereof, may not be reproduced in any manner whatsoever without written permission from the publisher. If you find imperfections or incorrect information in this product, please visit and submit an errata report. Published in September 2014 by Kaplan Financial Education. Printed in the United States of America. ISBN: / PPN: CT L&H Law Supplement.indb 2 9/19/ :32:16 AM

3 Connecticut Law Supplement 1 INTRODUCTION This supplement focuses on statutes regarding Connecticut insurance law. Key aspects of each statute are discussed to help the student pass the state law portion of the licensing examination. In order to understand the content of this supplement, the student should first study the national insurance License Exam Manual. Thorough preparation for the exam requires the complete study of both the national License Exam Manual and the supplement. I. CONNECTICUT LAWS AND REGULATIONS PERTINENT TO LIFE, ACCIDENT, AND HEALTH INSURANCE A. POWERS AND DUTIES OF THE COMMISSIONER OF INSURANCE [SECS. 38A-8; 10] The primary duty of the Insurance Commissioner is to see that insurance laws are properly executed and the public interest is protected by the enforcing of these laws. The Commissioner is appointed by the governor and cannot be a director, officer, or agent of an insurer. He must submit an annual report to the governor. 1. Other powers The Commissioner of Insurance also has the power to: conduct investigations and hearings and issue subpoenas; revoke licenses of insurers, producers, adjusters, and consultants for just cause; regulate insurers for solvency; and regulate most insurance premium rates. 2. Other duties Other general duties include: issuing licenses and collecting the appropriate fees; setting reserves for domestic companies; appointing examiners (such as the division of a department, division chief, hearing officer, or examiner) who are delegated the duty of examining insurers; issuing cease and desist orders to insurers, producers, adjusters, and consultants for just cause; conducting hearings in connection with the wrongdoing of an insurer or licensee; and reporting illegalities in the insurance business to the state attorney general. 3. Hearings [Secs. 38a-16, 817, 818] Due process under the law requires notice and hearing. If a person has been engaging in unfair acts (i.e., sales methods), the Commissioner will issue a notice of hearing that lists the charges against the licensee. The hearing will be at least 30 days after the serving of the notice. The Commissioner may subpoena, examine, and cross-examine witnesses. If any witness ignores a subpoena and does not attend the hearing, the witness will be charged with contempt of court. The Commissioner may assess a monetary penalty of not more than $5,000 for each violation or unfair act, not to exceed an aggregate of $50,000. If the violator knew (or should have known) the law was being violated, the fine will be not more than $25,000 per act, not to exceed an aggregate of $250,000 in any six-month period. CT L&H Law Supplement.indb 1 9/19/ :32:16 AM

4 2 Connecticut Law Supplement 4. Penalties [Sec. 38a-2, 830] Any person or corporation violating any provision of Connecticut insurance law for which no other penalty is provided will be fined no more than $15,000. The penalty for an insurer that makes false statements or advertisements about financial information is a $10,000 fine for a first offense and $20,000 for each subsequent offense. 5. Cease and desist order [Sec. 38a-817(b), (e)] Whenever the Commissioner believes a person has engaged in an unfair method of competition or unfair or deceptive practice, he will issue a statement of charges and a notice of hearing which will occur within 30 days. After the hearing, the Commissioner may issue a cease and desist order if it is determined that the person is guilty; violation of a cease and desist order is punishable with a fine of not more than $50,000 or a suspension or revocation of the person s license. B. LICENSING DEFINITIONS AND INFORMATION [SEC. 38A-769] Licenses are required of all people or businesses who are selling insurance directly to the public and whose compensation is directly linked to their sales. Activities that require a license include selling, soliciting, and effectuating coverages of insurance. A license application must be properly filed and the appropriate fees paid. The Commissioner may examine the qualifications of each applicant, including evidence that the applicant is of good moral character and financially responsible. Each applicant shall take a written examination on the duties and responsibilities of a licensee and the laws of this state applicable to insurance. The Commissioner may require a waiting period not exceeding six months before reexamining any applicant who has failed to pass any such examination. A person shall not sell, solicit, or negotiate insurance in this state for any class or classes of insurance unless the person is licensed for that line of authority. 1. Insurer [Sec. 38a-1] An insurer or insurance company is any person or entity, other than a fraternal benefit society, that transacts insurance business. a. An alien insurer is one that is organized under the laws of a state or country outside the United States. b. A domestic insurer is one that is organized under Connecticut law. c. A foreign insurer is one that is organized under the laws of another US state or territory. d. A mutual insurer is one without capital stock. Its members elect its managing directors or officers. e. A stock insurer is one that is incorporated with capital contributed by stockholders, to whom the earnings are distributed as dividends on their shares. f. An unauthorized entity or nonadmitted insurer is one that has not been granted a certificate of authority by the Commissioner to transact insurance business in Connecticut. CT L&H Law Supplement.indb 2 9/19/ :32:17 AM

5 Connecticut Law Supplement 3 2. Insurance producer [Sec. 38a-702a] An insurance producer is a person required to be licensed under the laws of this state to sell, solicit, or negotiate insurance. 3. Insurance agent [Sec. 38a-702a] An insurance agent is defined by regulation as an insurance producer appointed by an insurer to act on the insurer s behalf. An agent is licensed as a producer and holds a written appointment (or contract) with an insurance company. Agents do not include persons acting as executive officers or traveling salaried employees of an insurance company. 4. License requirements [Secs. 38a-702f(a), 769] Any person, partnership, association, or corporation that is a resident, or has its principal place of business in this state, desiring to act within the state as an insurance producer, public adjuster, casualty adjuster, motor vehicle physical damage appraiser, certified insurance consultant, or surplus lines broker, or desiring to engage in any insurance-related occupation for which a license is deemed necessary by the Commissioner, may make a written application to the Commissioner for a resident license. A nonresident license applicant must hold an equivalent license in the applicant s resident state. An insurance producer may receive qualification for a license in one or more of the following lines of authority: Life insurance (including endowment and annuities) Accident and health or sickness Property Casualty Variable life and variable annuity products Personal lines (property and casualty coverage sold to individuals and families for noncommercial purposes) Credit: limited line credit insurance Any other line of insurance permitted under state law a. The application for a producer s license must be accompanied by a nonrefundable filing fee of $50. b. The producer license and renewal fee is $160 for a two-year period. c. Each applicant for a license in this state will furnish satisfactory evidence to the Commissioner that the applicant is a person of good moral character and financially responsible. d. License examination [Secs. 38a-702d, 702e, 702f(c)] All potential licensees are required to pass a written examination administered by the Commissioner or, at his discretion, designate an independent testing service to prepare and administer such an examination. Each applicant for a license must prove to the satisfaction of the Commissioner that the applicant: has successfully completed a course approved by the Commissioner requiring not less than 40 hours for each line of insurance for which he desires to be licensed or has equivalent experience or training determined by the Commissioner (the Commissioner may require a waiting period not exceeding six months, before reexamining any applicant who has failed to pass any licensing examination); CT L&H Law Supplement.indb 3 9/19/ :32:17 AM

6 4 Connecticut Law Supplement is at least 18 years of age; has not committed any act that is a ground for denial, suspension, or revocation; has paid the appropriate fees; and has passed the examinations for the appropriate lines of authority. 1.) The Commissioner may waive the examination requirement for applicants: for a temporary producer s license; for a nonresident producer s license; and who have held the type of license being applied for any time within 12 months preceding the date of application (a license may be reinstated within 12 months of expiration without having the producer complete new prelicensing and exam requirements). 2.) The Commissioner may waive the prelicensing education and examination requirements for a person who was previously licensed for the same lines of authority in another state if he applies for a Connecticut license within 90 days of cancelling his previous license and the other state certifies that the applicant was in good standing for the line of authority he transacted. 3.) A producer who moves to Connecticut must apply for a new license within 90 days of becoming a resident. e. Expiration and renewal [Secs. 38a-702f(b), (c), 784, 786(b)] A producer s license renews biennially (every two years) on the producer s birthday. Any producer who fails to renew must pay double the $160 renewal fee (a total of $320) to reinstate. Any insurer that cancels or nonrenews an appointment must notify the agent, the agency, and the Insurance Department, in writing, within 30 days. Producers have a one-year grace period in which to reinstate a lapsed license. A certified insurance consultant license renews every two years on September 30 in odd-numbered years. An insurance producer license shall remain in effect unless revoked or suspended provided the fee is paid and the continuing education requirements for resident individual producers are met by the due date. f. Any person impersonating another in taking or attempting to take a state exam for another may be fined not more than $500, imprisoned for not more than six months, or both. g. Salaried officers and employees of an insurance company or producer whose duties are administrative or clerical in nature and do not involve any insurance contract sales or negotiation are exempt from the licensing requirement. 5. Changes in licensee status [Sec. 38a-771(a)(b), 702f(f)] Any person, firm, partnership, association, or corporation holding a license within this CT L&H Law Supplement.indb 4 9/19/ :32:17 AM

7 Connecticut Law Supplement 5 state or holding a license in the name of a trade name shall notify the Insurance Commissioner, in writing, no later than 30 days after any: change of business or residence address; change in employer; change in name; change in licensed members of a firm, partnership, corporation, and so forth; any bankruptcy proceeding; conviction of a felony; or any administrative action taken against the licensee in another state. a. An insurance producer doing business under any name other than the producer s legal name shall notify the Commissioner prior to using the assumed name. [Sec. 38a-702i] b. A producer must report any administrative action taken against that producer in another jurisdiction or by another governmental agency in this state not later than 30 days after it final disposition. Similarly, not later than 30 days after the initial pretrial hearing date, a producer must report any criminal prosecution taken against him/her in any jurisdiction to the Commissioner. [Sec. 38a-702o] c. Violation of this regulation will be subject to the same fines and penalties as described in the following. 6. Suspension and revocation [Secs. 38a-702k, 774] The Commissioner may, after reasonable notice, for cause shown, and after a hearing, revoke or suspend a license. The Commissioner may, in addition to or in lieu of a suspension or revocation, impose a fine not to exceed $5,000. The licensee may appeal the Commissioner s action in court. The Commissioner may place on probation, suspend, revoke, or refuse to issue or renew an insurance producer s license for: providing incorrect, misleading, incomplete, or materially untrue information in the license application; violating any insurance laws or any regulation, subpoena, or order of the Commissioner or of another state s Commissioner; obtaining or attempting to obtain a license through misrepresentation or fraud; improperly withholding, misappropriating, or converting any monies or properties received in the course of doing insurance business; intentionally misrepresenting the terms of an actual or proposed insurance contract or application for insurance; having been convicted of a felony; having admitted or been found to have committed any insurance unfair trade practice or fraud; using fraudulent, coercive, or dishonest practices, or demonstrating incompetence, untrustworthiness, or financial irresponsibility in the conduct of business in this state or elsewhere; having an insurance producer license or its equivalent denied, suspended, or revoked in any other state, province, district, or territory; CT L&H Law Supplement.indb 5 9/19/ :32:17 AM

8 6 Connecticut Law Supplement forging another s name to an application for insurance or to any document related to an insurance transaction; improperly using notes or any other reference material to complete an examination for an insurance license; knowingly accepting insurance business from an individual who is not licensed; failing to comply with an administrative or court order imposing a child support obligation; or failing to pay state income tax or comply with any administrative or court order directing payment of state income tax. 7. Temporary license [Sec. 38a-702j] The Commissioner may issue a temporary insurance producer license for a period not to exceed 180 days without requiring an examination if the Commissioner deems that the temporary license is necessary for the servicing of an insurance business in the following cases: To the surviving spouse or court-appointed personal representative of a licensed insurance producer who dies or becomes mentally or physically disabled to allow adequate time for the sale of the insurance business owned by the producer or for the recovery or return of the producer to the business or to provide for the training and licensing of new personnel to operate the producer s business To a member or employee of a business entity licensed as an insurance producer, upon the death or disability of an individual designated in the business entity application or the license To the designee of a licensed insurance producer entering active service in the armed forces of the United States In any other circumstance in which the Commissioner deems that the public interest will best be served by the issuance of the license a. The Commissioner may limit the authority of any temporary licensee in any way deemed necessary to protect insureds and the public. b. The Commissioner may require the temporary licensee to have a suitable sponsor who is a licensed producer or insurer and who assumes responsibility for all acts of the temporary licensee, and the Commissioner may impose other similar requirements designed to protect insureds and the public. c. The Commissioner may revoke a temporary license if the interests of insureds or the public are endangered. d. A temporary license may not continue after the owner or the personal representative disposes of the business. 8. Nonresident producers [Secs. 38a-702g, 702n] A nonresident person may receive a nonresident producer license if: the person is currently licensed as a resident and in good standing in the person s home state; the person has submitted the proper request for licensure and has paid the required fees; CT L&H Law Supplement.indb 6 9/19/ :32:17 AM

9 Connecticut Law Supplement 7 the person has submitted to the Commissioner the application for licensure that the person submitted to the person s home state or a completed uniform application; and the person s home state awards nonresident producer licenses to residents of Connecticut on the same basis. a. The Commissioner may verify the producer s licensing status through the producer database maintained by the National Association of Insurance Commissioners, its affiliates, or subsidiaries. b. A nonresident producer who moves to this state from another state or a resident producer who moves from this state to another must file a change of address and provide certification from the new resident state not later than 30 days after the change of legal residence. No licensing fee or application may be required from a producer moving to this state pursuant to this section. c. The Commissioner may waive any prelicensing requirements for a nonresident license applicant with a valid license from the applicant s home state if the applicant s home state awards nonresident licenses to residents of Connecticut on the same basis and if the application is received no later than 90 days from the date of cancellation of the previous license. d. A nonresident producer s satisfaction of the producer s home state s continuing education requirements for licensed insurance producers may constitute satisfaction of Connecticut s continuing education requirements if the nonresident producer s home state recognizes the satisfaction of its continuing education requirements imposed upon producers from this state on the same basis. 9. Certified insurance consultants (CIC) [Secs. 38a-731 to 734, 735, 786] No person may, for a fee received or to be received (a consultant may not receive commissions or other compensation from insurers or producers), offer to examine in the policy of insurance for the purpose of giving any advice, counsel, recommendation, or information in respect to the terms, conditions, benefits, coverage, or premium of any policy unless that person holds a license as a certified insurance consultant under Connecticut law. a. No person may advertise in business cards, circulars, letters, pamphlets, or elsewhere and use the title CIC or certified insurance adviser, specialist, counselor, analyst, or any similar title unless that person holds a license as a certified insurance consultant. Any person who acts as a certified insurance consultant without such license or during a suspension of the person s license shall be fined not less than $250 or more than $2,500 or be imprisoned not more than six months, or both. b. The required examination may be waived for property or casualty insurance if the person holds a CPCU designation and for life insurance if the person holds a CLU designation. c. Licenses expire each odd-numbered year on September 30. CT L&H Law Supplement.indb 7 9/19/ :32:17 AM

10 8 Connecticut Law Supplement d. No contract or agreement with a certified insurance consultant may be enforceable by the consultant unless: it is in writing and executed, in duplicate, by the person to be charged (client); it is delivered to, or retained by, the client when it is signed by him; the contract plainly specifies the amount of the fee paid by the client and the services to be rendered by the certified insurance consultant; and it is in a form currently approved by the Commissioner. e. All licensees have a fiduciary responsibility to the public and any insurer they represent. Any person who violates any provision of this section shall be fined not less than $250 or more than $2,500. f. No person, acting in the capacity of a certified insurance consultant, shall directly or indirectly receive any part of any commission or compensation paid by any insurer or producer in connection with the sale or writing of any insurance. C. COMPANY REGULATION One of the Commissioner s duties includes the regulation of insurance companies. 1. Certificate of authority [Sec. 38a-41] All insurance companies who wish to do business within this state must obtain a certificate (license) of authority. It must also file its charter or articles of incorporation with the Commissioner as well as a financial statement. Evidence of timely claim settlement must also be provided. a. Each license will expire on the first day of May succeeding the date of its issuance (and may be renewed annually). b. The Commissioner may suspend or revoke this certificate for cause shown and may impose a fine not to exceed $50, Unfair claim settlement practices [Sec. 38a-816(6)] Committing any of the following acts, if done without just cause and if performed with the frequency indicating a general business practice, will be deemed to be an unfair claim settlement practice: Knowingly misrepresenting to claimants pertinent facts or policy provisions relating to coverage at issue Failing to acknowledge with reasonable promptness pertinent communications with respect to claims arising under insurance policies Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies Not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims submitted in which liability has become reasonably clear Compelling insureds to institute suits to recover amounts due under its policies by offering substantially less than the amounts ultimately recovered in suits brought by them when the insureds have made claims for amounts reasonably similar to the amounts ultimately recovered CT L&H Law Supplement.indb 8 9/19/ :32:17 AM

11 Connecticut Law Supplement 9 Making known to insureds or claimants a policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration Attempting settlement or compromise of claims on the basis of applications that were altered without notice to, or knowledge or consent of, insureds Attempting to settle a claim for less than the amount to which a reasonable person would have believed he was entitled by reference to written or printed advertising material accompanying or made a part of an application Attempting to delay the investigation or payment of claims by requiring an insured and the insured s physician to submit a preliminary claim report and then requiring the subsequent submission of formal proof of loss forms, both of which contain substantially the same information Failing to affirm or deny coverage of claims within a reasonable time after a proof of loss has been completed Refusing payment of claim solely on the basis of the insured s request to do so without making an independent evaluation of the insured s liability based on all available information 3. Capital and surplus requirements [Sec. 38a-72] No insurer may continue to do business in Connecticut unless it maintains the minimum capital and surplus amounts required. a. Minimum capital and surplus for a stock insurance company, that must be maintained: Line Capital Surplus Health $ 500,000 $ 500,000 Life $1,000,000 $2,000,000 Liability (Casualty) $ 500,000 $ 500,000 Fidelity and Surety $ 500,000 $ 500,000 Property $ 500,000 $ 250,000 Workers Comp. $ 500,000 $ 500,000 b. The minimum surplus for a mutual insurance insurance company: Line Surplus Health $1,000,000 Life $3,000,000 Liability (Casualty) $1,000,000 Fidelity and Surety $1,000,000 Property $ 750,000 Workers Comp. $1,000,000 c. Surplus is the excess of qualified assets (such as securities, installment premiums, deferred premiums, cash, or currency) over the sum of paid-in capital and liabilities. CT L&H Law Supplement.indb 9 9/19/ :32:18 AM

12 10 Connecticut Law Supplement D. PRODUCER REGULATION No person in the state of Connecticut may engage in any trade practice defined under Connecticut state law as an unfair method of competition or an unfair or deceptive act or practice in the business of insurance. The purpose of legislation regarding unfair trade practices is to ensure truthful and adequate disclosure of all material and relevant information in the advertisement of insurance. 1. Rebating [Secs. 38a-816(9), 825] No company, officer, or producer may pay or allow, or offer to pay or allow, in connection with placing or negotiating any policy of insurance, any valuable consideration or inducement not specified in the policy or contract. Insurance personnel may not give, sell, or purchase, or offer to give, sell, or purchase anything of value whatsoever not specified in the contract. Any individual offering or accepting a rebate will be deemed guilty of rebating. a. The most common form of rebating involves a producer offering to share commissions with a prospective insured in return for that insured purchasing a policy. An insurer offering securities, stocks, or bonds in return for the purchase of policies is another example of rebating. b. The following are not considered rebating: Paying bonuses to policyholders or abating their premiums out of surplus accumulated from nonparticipated insurance, provided such abatement is fair and equitable For industrial policies, making allowance to policyholders who have continuously made premium payments directly to an office of the insurer in an amount that fairly represents the saving in collection expense Readjusting the premium rate for a group insurance policy based on loss, expense experience, or both at the end of the first or subsequent policy year, which may be done retroactively for the year 2. Misrepresentation, twisting [Secs. 38a-816(1), (8), 826] No company, officer, or producer may make, issue, circulate, or use, or cause to permit to be made, any written or oral statement misrepresenting the terms of any insurance policy or contract. In addition, these parties may not misrepresent the terms of a contract to induce a person to lapse, forfeit, or surrender the policy issued to him (illegal inducement), or to alter or convert it for any other policy or contract (twisting). Anyone engaged in misrepresentation or twisting may be subject to a fine of no more than $5,000, up to 30 days in prison, or both. a. There can be no misrepresentation of policy dividends. [Sec 38a-816(1)(b)] b. Misrepresentation also consists of making false or fraudulent statements or representations on or relative to an application for an insurance policy for the purpose of obtaining a fee, commission, money, or other benefit from any insurer, producer, or individual. CT L&H Law Supplement.indb 10 9/19/ :32:18 AM

13 Connecticut Law Supplement False information in advertising generally [Sec. 38a-816(2)] Making, publishing, disseminating, circulating, or placing before the public in a newspaper, magazine, or other publication, or in the form of a notice, circular, pamphlet, letter, or poster, or over any radio or television station, or in any other way, an advertisement, announcement, or statement containing any assertion or a statement with respect to the business of insurance which is untrue, deceptive, or misleading is known as false information in advertising and is illegal. This includes all types of media presentations, sales talks, and any other material used in soliciting insurance. The identity of the insurer must be provided to the public without any deception. 4. Defamation [Sec. 38a-816(3)] Making, publishing, disseminating, or circulating directly or indirectly or aiding, abetting, or encouraging any oral or written statement or any pamphlet, circular, article, or literature that is false or maliciously critical of or derogatory to the financial condition of any person, which is calculated to injure any person engaged in the business of insurance, is known as defamation and is illegal. 5. Boycott, coercion, and intimidation [Sec. 38a-816(4)] Entering into any agreement to commit or by any concerted action committing any act of boycott, coercion, or intimidation resulting in or tending to result in unreasonable restraint of or monopoly in the business of insurance is illegal. 6. Unfair discrimination [Secs. 38a-816(12), (13)] Making or permitting any unfair discrimination between individuals of the same class and life expectancy and the rates charged for any life insurance contract or a life annuity or in the dividends or other benefits payable thereon, or in any other of the terms or conditions of the contract, is prohibited. Unfair discrimination also includes making or permitting any unfair discrimination between individuals of the same class and of essentially the same hazard in the amount of premium, policy fees, or rates charged for any policy or contract of accident or health insurance or in the benefits payable thereunder, or in any of the terms or conditions of the contract. It is illegal to discriminate on the basis of race, religion, or national origin. 7. False financial statements [Sec. 38a-816(5)] Filing with any supervisory or other public official or making, publishing, disseminating, circulating, or placing before the public any false statement regarding the financial condition of any person or insurer with intent to deceive is illegal. This may also involve making any false entry in any book, report, or statement with the intent to deceive any agent or examiner lawfully appointed to conduct an exam into its condition or into any of its affairs; or willfully omitting to make a true entry of any material fact pertaining to the business of the person in any book, report, or statement. 8. Compensation of licensees [Sec. 38a-734; 702l] An insurance company or insurance producer must not pay a commission, service fee, brokerage, or other valuable consideration to a person for selling, soliciting, or negotiating insurance if the person is required to be licensed and is not. a. A person may not accept a commission, service fee, brokerage, or other valuable consideration for selling, soliciting, or negotiating insurance in this state if the person is required to be licensed and is not. CT L&H Law Supplement.indb 11 9/19/ :32:18 AM

14 12 Connecticut Law Supplement b. Renewal or other deferred commissions may be paid to a person for selling, soliciting, or negotiating insurance in this state if the person was required to be licensed at the time of the sale, solicitation, or negotiation and was at that time. c. A producer may pay or assign commissions, to an insurance agency or to persons who do not sell, solicit or negotiate insurance in this state, unless the payment would violate the state s insurance rebating law. 9. Producer license, controlled business [Sec. 38a-782] The lines of authority granted to a producer by exam qualification are indicated on the producer s license. An applicant for a producer s license may not use the license for the purpose of obtaining commissions on policies or bonds on which the producer, the producer s spouse, the producer s employer, or any corporation controlled by the producer, the producer s spouse, and the producer s employer pays the premiums. To conform with this regulation against writing controlled business, premiums for policies written for the general public must exceed nine times the premiums on policies paid for by the producer, spouse, employer, or corporation controlled by those persons. 10. Examination of books and records [Sec. 38a-769(f)] All licensees in this state are required to maintain adequate and up-to-date records of insurance transactions in which they engaged. The Commissioner has the option of inspecting or examining any books, accounts, or records of any producer at any time. 11. Appointment of producer as agent [Sec. 38a-702m] An insurance producer may not act as an agent of an insurer unless the producer becomes an appointed agent of the insurer. To appoint a producer as its agent, an insurer must file a notice of appointment not later than 15 days after the date the agency contract is executed or the first insurance application is submitted. a. Notice to Commissioner When the Commissioner receives a notice of appointment, the Commissioner must within 30 days verify that the producer is eligible for appointment. If the Commissioner finds that the producer is ineligible for appointment, the Commissioner must notify the insurer not later than five days after making the determination. 12. Acting as a consultant without a license [Sec. 38a-735] A person who acts as a certified insurance consultant without a license or during a suspension of the person s license shall be fined between $250 and $2,500 and/or be imprisoned up to six months. 13. Unauthorized insurance contracts unenforceable, liability of agent [Secs. 38a-275, 714] Any contract entered into by an unauthorized insurer is unenforceable by the insurer. If an unauthorized insurer fails to pay a claim or loss, any person who assisted or aided in the procurement of such insurance contract is liable to the insured for the full amount of claim or loss. Any person making insurance contracts on behalf of an insurer not licensed in Connecticut is personally liable to the insured for the performance of such contract. CT L&H Law Supplement.indb 12 9/19/ :32:18 AM

15 Connecticut Law Supplement Representing an unauthorized insurer [Secs. 38a-703, 777] No person may solicit or procure insurance, except with regard to that person s own property or person, with or by any insurance company that does not hold an active certificate authority from the Commissioner authorizing the insurance company to do business in this state. Any person who aids any corporation, association, or person not authorized to do insurance business in this state in soliciting this type of business from Connecticut residents, by means of any advertisement published in this state or by any other means, may be fined no more than $2,000, imprisoned no more than six months, or both. Any surplus lines broker who negotiates, continues, or renews insurance contracts in an unauthorized company and fails to file the required affidavit, or who willfully makes a false statement, or who negotiates, continues or renews any such contract of insurance after the revocation or during the suspension of the licensee s license, is subject to license revocation and a fine of up to $4,000, imprisonment of no more than six months, or both. 15. Failure to remit premiums [Sec. 38a-712] If, upon investigation of a report from an insurer concerning a failure of a producer to remit premiums, the Commissioner determines that a producer has received premiums directly or indirectly from insureds and has failed to remit them to the proper company, its state agent, or managing general agent, the Commissioner may, following a hearing, suspend or revoke the license of the producer. Upon receipt of a report concerning a dishonored check issued by a producer to the Connecticut Department of Insurance, the Commissioner must notify the producer issuing the check. If an arrangement for payment of funds is not made to the satisfaction of the Commissioner by the producer within 15 days of receipt of the notice, the license of the producer will be automatically suspended. Within 60 days of receipt of the notice, the producer may submit a written demand for a hearing to show cause why the suspension should be terminated. This hearing must be held within 30 days from the date of receipt of the written demand. If, by the end of the 60-day period, no hearing has been demanded, the license of the producer may be revoked. The failure of a producer to remit premiums to the insurer within 30 days may result in license suspension or revocation. 16. Failure to maintain complaint record [Sec. 38a-816 (7)] Failure of an insurer to maintain a complete record of all the complaints received since the date of its last examination is an unfair trade practice. The complaint record must indicate the total number of complaints, their classification by line of insurance, the nature of each complaint, the disposition of the complaint, and the time it took to process each complaint. Complaint means any written communication primarily expressing a grievance. E. CONTINUING EDUCATION [REGS. 38a-782a-2, 10, 13 to 15] Every resident and nonresident producer must complete 24 hours of continuing education each biennium (two year period). 1. A minimum of three of those credit hours must be on Connecticut insurance law and regulations or ethics. 2. Of the total 24 hours, a minimum of six credit hours must be taken through course work applicable to the line of authority held (such as a life insurance license). CT L&H Law Supplement.indb 13 9/19/ :32:18 AM

16 14 Connecticut Law Supplement 3. No credit hours may be carried over from one biennium to the next. 4. Exemptions from the continuing education requirements are as follows. a. Producers who seek reinstatement of their license within one year after the license expiration date shall be required to complete any deficient continuing education credit hours for the previous biennium and successfully complete 24 credit hours of continuing education during the current biennium. b. Producers who become Connecticut residents and are granted a license based on their previous home state licensure shall not be required to complete Connecticut continuing education during the initial biennium. c. Producers who hold a license in states requiring continuing education for their insurance producers, and who furnish evidence of their compliance with the continuing education requirements in such states are exempt from meeting this state s continuing education requirements provided that the insurance supervisory official of the state in which the producer completes the continuing education requirements will grant similar exemptions to Connecticut residents licensed therein who have satisfied Connecticut s continuing education requirements. d. Producers whose only line of authority is credit insurance, which includes credit life, credit accident and health, and mortgage guaranty; or travel accident and travel baggage insurance are exempt from the 24 hours of continuing education credits requirement. e. Producers whose licenses are renewed by the Commissioner for one year according to the transitional process shall be required to complete 12 credit hours of continuing education during the transitional period. 5. Nonresident agents who reside in states requiring continuing education for their resident insurance producers and furnish evidence of their compliance with the continuing education requirements in their state of residence are exempt from meeting Connecticut s continuing education requirements provided that the insurance supervisory official of the nonresident producer s state of residence will grant similar exemptions to Connecticut residents who have satisfied Connecticut s continuing education requirements. 6. Deadlines a. Extensions for cause In general, producers will not be granted extensions of time in which to earn continuing education credits. The only exception is for those whose military service prevents them from completing required continuing education within their compliance period. b. Failure of a producer granted an extension to satisfy the requirement by the last day of the extension period may result in the immediate suspension of his insurance producer license. CT L&H Law Supplement.indb 14 9/19/ :32:18 AM

17 Connecticut Law Supplement 15 c. No resident or nonresident producer whose license has been suspended under the terms of this section may have the suspension removed for a period of at least 90 days from the date of suspension. The Commissioner may provide a reasonable means whereby any person aggrieved by the action of the Commissioner may appeal the suspension, in person or by an authorized representative to review the grievance. F. CONNECTICUT LIFE AND HEALTH INSURANCE GUARANTY ASSOCIATION [SEC. 38A-859] To provide protection for policyowners, insureds, beneficiaries, annuitants, payees, and assignees against failure in the performance of contractual obligations due to the financial impairment of the insurer, the Life and Health Insurance Guaranty Association was created. The association is made up of admitted insurers in this state. Member companies are assessed to provide funds. The association also assists the Commissioner in the detection and prevention of insurer impairments. 1. Prohibited advertising of Life and Health Insurance Guaranty Association [Sec. 38a-871(e)] No company or producer may advertise, as an inducement for an individual to purchase insurance, the fact that the company is a member of the Association. G. CONNECTICUT INSURANCE INFORMATION AND PRIVACY PROTECTION ACT [SECS. 38a-975 to 999a] An insurance company or producer must provide a written notice of information practices to all applicants and policyholders. The insurer must distinguish those questions designed solely to obtain information for marketing or research purposes from an individual in connection with an insurance transaction. 1. The insurer must obtain a disclosure authorization from the applicant or insured. The disclosure authorization form must: be written in plain language; be dated; specify the types of persons authorized to disclose information concerning the individual; specify the nature of the information authorized to be disclosed; identify the insurance institution or agent and the types of representatives of the insurance institution to whom the individual has authorized the information to be disclosed; specify the purposes for which the information is collected; specify the length of time such authorization will remain valid, which may be no longer than 30 months from the date the authorization is signed if the application or request involves life, health, or disability insurance, or one year from the date the authorization is signed if the application or request involves property or casualty insurance; and advise the individual or a person authorized to act on his behalf that he is entitled to receive a copy of the authorization form. CT L&H Law Supplement.indb 15 9/19/ :32:18 AM

18 16 Connecticut Law Supplement 2. No request for information with respect to an employer s employee benefit plan may be made that relates to a period of time more than 24 months before the date the request was made. 3. An insurer must inform the individual if it intends to prepare or request an investigative consumer report. 4. If an individual requests access to personal information obtained by an insurer, it must be provided within 30 days of the request. A reasonable fee for a copy of the information may be charged by the insurer. 5. An individual may request the correction, amendment, or deletion of information; the insurer must act on the written request, within 30 business days, by changing the information or refusing to make the requested changes. Whenever an individual disagrees with the information and the insurer refuses to make the requested changes, the individual may file a concise statement specifying what he believes to be correct information and why he disagrees with the insurer s refusal to change the information. 6. In the event of an adverse underwriting decision, the insurer must either provide the reason in writing or notify the individual that the reason may be obtained upon written request made within 90 business days from the receipt of the notification. The insurer must provide the reason within 21 business days from the date of receipt of the individual s written request. 7. Insurers may not seek information concerning previous adverse underwriting decisions unless the reasons for the decisions are also requested. Insurers are prohibited from considering previous adverse underwriting decisions or past residual market mechanism (assigned risk) coverage. 8. Information obtained by an insurer may not be disclosed unless the disclosure is: authorized by the individual; reasonably necessary to perform a business or professional function in determining an individual s eligibility for a benefit payment or in detecting or preventing a criminal activity; made to a regulatory authority; made to a law enforcement or other government authority; in response to an administrative or judicial order; or made for the purposes of conducting actuarial or research studies. 9. Penalties for the violation of various sections of this act are as follows. a. In any case in which a hearing results in the finding of a negligent violation, the Commissioner may, in addition to the issuance of a cease and desist order, order payment of a penalty of not more than $2,000 for each violation but not to exceed $20,000 in the aggregate for multiple violations. b. In any case in which a hearing results in the finding of an intentional violation, the Commissioner may, in addition to issuing of a cease and desist order, order payment of a penalty of not more than $20,000 for each violation but not to exceed $100,000 in the aggregate for multiple violations. CT L&H Law Supplement.indb 16 9/19/ :32:18 AM

19 Connecticut Law Supplement 17 c. Any person who violates a cease and desist order (issued in connection with this act) of the Commissioner may, after notice and hearing and upon order of the Commissioner, be subject to one or more of the following, at the discretion of the Commissioner: A penalty of not more than $20,000 for each violation A penalty of not more than $100,000 if the Commissioner finds that violations have occurred with such frequency as to indicate a general business practice Suspension or revocation of an insurance institution s or agent s license d. No action under this act may be brought unless it is done within two years from the date the alleged violation is or should have been discovered. e. Any person who knowingly and wilfully obtains information concerning an individual from an insurance institution, agent, or insurance-support organization under false pretenses may be fined not more than $20,000. f. No person may disclose individually identifiable medical record information with the malicious intent to damage an individual s reputation or character. Any person who violates this section may be fined no more than $500, imprisoned no more than three months, or both for the first offense and may be fined no more than $2,000, imprisoned no more than one year, or both for each subsequent offense. II. CONNECTICUT LAWS AND REGULATIONS PERTINENT TO LIFE INSURANCE A. LIFE INSURANCE SOLICITATION [REGS. 38a to 39, APPENDIX] The purpose of life insurance solicitation regulations is to require insurers to deliver to purchasers information that will improve the buyer s ability to select the most appropriate plan and to improve their understanding of the features and benefits of the policy. These regulations do not apply to annuities, credit life, group life, life insurance issued in connection with pension and welfare plans, or variable life. 1. Disclosure requirements The insurer must provide a Buyer s Guide to all prospective purchasers. A Policy Summary must also be provided. Both of these items must be provided before an application or initial premium is accepted unless the policy has a free-look provision of at least 10 days; in this case, the Buyer s Guide and Policy Summary can be provided before policy delivery. [38a (G), Appendix] 2. Policy cost indexes The life insurance surrender cost index must be disclosed by determining the guaranteed cash surrender value, if any, available at the end of the 10th and 20th policy years. [Reg. 38a (F), Appendix] 3. Producers must advise each of their customers that they are an insurance producer (agent) and provide the full name of the insurance company being represented. Producers must not use a title such as financial planner, investment advisor, financial consultant, or financial counselor, which might imply that a fee is charged for their advice. [Reg. 38a ] CT L&H Law Supplement.indb 17 9/19/ :32:19 AM

20 18 Connecticut Law Supplement B. ADVERTISING [REGS. 38a to 31] 1. Purpose of advertising regulations [Reg. 38a ] Minimum standards and guidelines for life insurance advertising are evaluated by the Insurance Department to ensure truthful disclosure of all material and relevant information in the advertising of life insurance and annuity contracts. 2. Definition [Reg 38a , 23] a. Advertising includes any material designed to: create public interest in an insurance product or company; or induce members of the public to purchase, increase, or modify a policy. b. Advertisements may assume the forms of: printed and published material, audiovisual material, and descriptive literature used in direct mail, newspapers, magazines, television scripts, billboards, and similar displays; descriptive literature and sales aids; material used for recruiting, training, and educating an insurer s sales personnel; and prepared sales talks, presentations, and materials for use by sales personnel, agents, solicitors, and brokers. 3. Testimonials [Reg 38a (k)] Testimonials must be genuine. If the person giving the testimonial is compensated in any way or has a financial interest in the insurance company, it must be stated in the advertisement. 4. Dividends [Reg 38a (i)] Advertisements may not describe dividends in a way that is misleading or implies that dividends are in any way guaranteed. Dividend illustrations must be based on the current dividend scale and must include a statement that they are not to be construed as guarantees or estimates of future dividends. 5. Form and content of advertisements [Reg 38a ] a. Advertisements must be truthful and must not mislead. 1.) The form and content of all advertisements must be clear enough to avoid deception. 2.) The Commissioner is responsible for determining whether an advertisement might mislead or deceive a person of average education and intelligence in the segment of the public to which it is directed. b. Advertisements must not use the terms investment, profits, or other similar terms that might mislead a purchaser to believe that he may receive something that is not available to other persons of the same class and life expectancy, unless it is the truth. CT L&H Law Supplement.indb 18 9/19/ :32:19 AM