OREGON SAMPLE INSURANCE Chapter - 1 Insurance Regulation Before you can begin to learn about general insurance concepts or move on to more specific health insurance concepts, provisions and laws, it is important for you to learn some of the key regulations and statutes in Oregon that apply to insurance and producer licensing and how insurance companies are regulated. It is also vital that you learn how you will be regulated and the laws you are expected to abide by as a licensed health insurance producer in Oregon. This chapter goes into specific detail about Oregon laws and Federal laws that will directly affect and impact your role as a licensed health insurance producer. The first section will discuss the various types of licenses that are available, how long they last, and what you must do to earn them and keep them including how you might be disciplined if you violate any state or federal insurance laws. Next, you will learn about key state statutes including the role of the Department of Insurance in Oregon, the requirements for an insurance company to operate in Oregon and practices that are considered to be unfair trade practices. The information in this chapter will account for 10% of the information you will be tested on in your health insurance producer s licensing examination. By the end of this chapter, you should be able to explain what all of the various terms mean, especially any numbers associated with them, such as time limits and dollar amounts. You should also be able to understand, discuss and apply to real life situations the following terms and concepts: 1. How long an insurance license lasts. 2. The continuing education requirements for producers in Oregon. 3. What you need to do to keep the state aware of where you live and work. 4. The meaning of a fiduciary. 5. What controlled business is and how much you are allowed to legally write. 6. The term that refers to publishing false information that benefits an agency. 7. The meaning of defamation. 8. The legal ramifications of rebating. 9. How long insurance companies must keep records of insurance transactions. 10.The purpose of the Fair Credit Reporting Act. 11.The difference between a consumer report and an investigative report. 1.1 Licensing 1.1.1 Purpose In order to protect people who purchase insurance from harm, the State of Oregon has set up licensing procedures for individuals and companies that wish to conduct insurance business in Oregon. Every person or entity that wishes to conduct Oregon Health Insurance Chapter 1 1 2009 Superior training Systems, Inc.
insurance business must obtain the proper license. All licensed people will be supervised by The Director of Consumer and Business Services (the Director). Whether or not they are incorporated in Oregon, insurance companies must obtain a license, known as a Certificate of Authority. Individuals, firms and corporations that are not insurers and wish to conduct insurance business as producers (agents), consultants, or adjusters, must also be licensed. The license must specify the kinds of insurance business that the licensee will transact. An individual who intends to transact insurance business under a firm, corporation, or other entity must also hold an individual license. The types of acts that are considered to be insurance transactions in Oregon, whether transacted in person or not, are acts such as: 1. Proposing to make an insurance contract; 2. Receiving insurance applications; 3. Receiving or collecting premiums, commissions, or any other payments related to an insurance contract or policy; 4. Issuing or delivering insurance contacts; 5. Acting as a producer by investigating or adjusting claims, forwarding applications, delivering policies, fixing rates, inspecting risks, adjusting claims or losses, advertising policies, or selling insurance; 6. Advertising locally in order to solicit insurance business; and 7. Transacting any business defined in the Oregon Insurance Code as insurance. 1.1.2 Licensing Process Any individual person who wishes to apply for a resident insurance producer license in Oregon must pass a written examination unless that person is considered to be exempt from the pre-licensing education and examination requirements. Exemptions include: 1. If you are or were previously licensed as an insurance producer for the same lines of insurance in another state you are not required to complete the prelicensing education or pass the written examination. You are only exempt if you are currently licensed or if the application for your Oregon license is submitted within 90 days after your license is terminated in another state and if the state that you were previously licensed in issues a statement that your license was in good standing at the time it was terminated (either in that state of with the state s Producer Database maintained by the NAIC). 2. If you move to this state and were licensed as a producer in another state in good standing, you will be exempt if you submit your application and pay the applicable fees within 90 days of relocating to Oregon. 3. You are considered to be exempt of you hold an industry designation such as: a. C.P.C.U. by the American Institute for Chartered Property and Casualty Underwriters. b. C.L.U. by the American College. Oregon Health Insurance Chapter 1 2 2009 Superior training Systems, Inc.
4. You will be exempt if you are applying for the following licenses: a. To transact certain types of limited class insurance. b. To transact title insurance. The examination must test your knowledge specifically pertaining to the class or classes of insurance that you are applying for. In other words, if you are applying for Health Insurance Producer, you are required to pass the Health Insurance Producer s Examination. If you are applying for Life and Health, then you must pass the Life and Health examination. If you are applying for Property and Casualty, then you must pass the Property and Casualty examination and so forth. The examination will test your knowledge pertaining to each class you are applying for, as well as your duties and responsibilities as a producer and specific insurance statutes and rules in the State of Oregon. The examination will be developed and conducted by the Director of the Department of Consumer and Business Services. You may only apply for a resident insurance producer license only if you have established Oregon residence or have an established place of business in Oregon for acting in the capacity of an insurance producer. In addition to passing the written examination, you are also required to complete the pre-licensing education for the number of hours required for the lines you are applying for and pay the applicable application and examination fees. Once you have satisfied your pre-licensing education requirements, you may apply to sit for the examination. You will be assigned an examination date. If you fail to appear for your examination as scheduled, or if you do not pass the examination, you may reapply to take the examination. 1.1.2.1 Uniform Application In order to apply for a producer license you must submit a Uniform Application to the Director. This application includes your personal sworn declaration that the statements you make on your application are true, correct and complete to the best of your knowledge and belief. Before your application is approved, the Director will verify the following requirements: 1. You are at least 18 years old. 2. You have not committed any of the acts as discussed in Section (?) that would be cause for your license to be revoked, suspended, or not renewed. 3. You have completed your pre-licensing education requirements for the lines you are applying for. 4. You have paid all applicable fees. 5. You have successfully passed the written examination for the lines you are applying for. If you are applying as a business entity, you are also required to obtain a producer s license. In this case, you will use the Uniform Business Entity Application. Before the application is approved, the Director will verify the following: Oregon Health Insurance Chapter 1 3 2009 Superior training Systems, Inc.
1. The business entity has paid all applicable fees. 2. The business entity has designated a licensed insurance producer who will be responsible for the business entity s compliance with the insurance laws and rules in the State of Oregon. 3. You have submitted all documentation necessary to verify the information on the application. 1.1.2.2 Rules Regarding Issuing a Producer License Unless the Director has grounds to refuse to issue the license or to refuse to renew a license, any person or business entity that has met the above requirements will be issued a producer license. You may apply and receive qualification for the following classes of insurance (or lines): 1. Life Insurance 2. Health Insurance 3. Property and Casualty Insurance 4. Personal Insurance (for noncommercial use) 5. Variable Life Insurance and Variable Annuities 6. Limited class credit insurance. 7. Title Insurance (for resident producers only). The Director may participate with the National Association of Insurance Commissioners, or any of its affiliates that oversees centralized producer licensing requirements for the purpose of centrally and simultaneously adopting rules and uniform standards and procedures for multiple states including the centralized collection of licensing and appointment fees. You may amend your license to add or delete a class of insurance by meeting the requirements, submitting an application and passing the appropriate written examination. Insurers are exempt from agent licensing requirements, including their officers, directors, employees, subsidiaries, and affiliates unless their compensation is tied to sales or based on commissions. Also, people who transact insurance business but are not directly involved in the sale, solicitation or negotiation of insurance are not required to maintain a license. 1.1.2.3 Pre-examination Education Requirements Anyone who wishes to apply for a resident producer license must the following minimum educational requirements before they can take the licensing examination: 1. 20 hours of training in life insurance principles for life insurance applicants; 2. 20 hours of training in health insurance principles for health insurance applicants; 3. 40 hours of training in basic principles of property and casualty insurance for property licensing applicants; 4. 20 hours of personal lines training for personal lines applicants. (Personal lines is not required if you have taken the property and casualty course and exam.) Oregon Health Insurance Chapter 1 4 2009 Superior training Systems, Inc.
1.1.2.4 Background Check and Fingerprint Requirements As of December, 2008 the Department of Consumer and Business Services will require each applicant to submit fingerprints for the purpose of conducting a criminal history check. As of January 1, 2009, all applicants must agree to submit to a criminal history check by the Department and any applications submitted on or after September 1, 2009 will be required to be submitted with fingerprints. The Department will conduct an Oregon LEDS (Law Enforcement Data System) based criminal history, a fingerprint-based Oregon criminal history and a nationwide criminal history check. The results will be reviewed and used to determine the fitness of each applicant. Any questionable applicants may be required to meet with a designated representative from the Department and to provide additional documentation in order to fully determine their fitness as a licensed producer. 1.1.2.5 Resident Agent Licenses Only residents of the State of Oregon and people who maintain their place of business in Oregon who pass the required written examination may apply for a resident agent license. 1.1.2.6 Variable Annuity Contract and Policy Sales Anyone who wishes to sell variable annuities and variable insurance contracts in Oregon must become a licensed securities dealer in Oregon and successfully pass the NASD Series 6 or 7 examinations. 1.1.3 Types of Licenses 1.1.3.1 Producers Producers are licensed to sell, solicit and negotiate insurance in Oregon in the segment for which they are licensed. All insurance producers must also be licensed by the Director and also must be appointed to act as an agent by at least one insurer. Producers are only allowed to transact business through insurers that have appointed them. A producer must be licensed for the specific classes of insurance he/she wishes to transact. It is illegal for a producer to sell, solicit, or negotiate insurance in Oregon that he/she is not licensed for. This means you may only conduct the type of insurance business for the type of license you hold. Oregon Health Insurance Chapter 1 5 2009 Superior training Systems, Inc.
1.1.3.2 Consultants In most cases, insurance consultants must be licensed in order to charge consulting fees for insurance advice and guidance. However, the following people do not have to be licensed in order to charge consulting fees for their advice and their services: 1. Licensed attorneys and Certified Public Accountants who are acting in their professional capacity; 2. Anyone who performs consultant duties while conducting an educational seminar; 3. Banks, savings and loan associations, credit unions, or consumer finance licensees; 4. Most actuaries; and 5. Anyone who provides consultant services to insurance producers or authorized insurers only. Resident Consultants Anyone who wishes to apply for a resident consultant license must have at least five years of experience in the insurance business, or the educational equivalent (which must be approved by the Director), and must have a current and valid resident producer license. They also must file a current certificate of Errors and Omissions Insurance with the Director in an amount that is established by the Director. Nonresident Consultants Anyone who holds a consultant license in another state and also resides in that state and is registered under a regulatory program governing the requirements for insurance consultants, can be licensed to act as a nonresident consultant in Oregon only if their home state provides the same privilege to resident consultants in Oregon (called a reciprocal licensing agreement). Anyone who wishes to apply for a nonresident consultant license must have at least five years of experience in the insurance business, or the educational equivalent, and pass a consultant s examination if the applicant s home state also requires Oregon residents applying for a nonresident consultant license to pass the same type of exam. Disclosure Insurance consultants are required to provide their clients and their prospective clients with a written disclosure statement that includes the following: 1. The consultant s occupational and educational background as it applies to insurance; 2. A description of the scope of work the consultant intends to perform; 3. The consultant s particular area of expertise; Oregon Health Insurance Chapter 1 6 2009 Superior training Systems, Inc.
4. A fee schedule and any other expenses the consultant may charge; 5. The names of all of the people or businesses that the consultant represents; and 6. A disclosure about whether or not the consultant plans to receive any type of commission or other compensation, monetary or otherwise, in addition to the fees paid by the client for the services provided. While providing consulting services, and before making any insurance recommendations to the client, consultants must also disclose any other activities they are currently involved in related to insurance or financial planning, the method of investment analysis and comparison they plan to use, and any assumptions that might contribute to insurance recommendations they might make to the client. Rebates Rebates are prohibited for consultants. This means that when you are acting in the capacity of an insurance consultant you may not give, receive, or offer the client rebates for fees or other expenses you charge the client for, any commission you may receive, and/or any earning, profit, dividends, or other benefits you may receive while acting in the capacity of a consultant. 1.1.3.3 Adjusters A person who is issued a license by the Director to adjust losses is called an adjuster. An adjuster may adjust in the following insurance classes: 1. Property and casualty insurance. Under this class, in addition to property and casualty insurance, an adjuster may also adjust losses with respect to marine and transportation and surety insurance. 2. Health insurance. The adjuster may adjust claims provided by an insurance company or health care services contractor. 3. Any class of insurance selected by the Director. 1.1.3.4 Nonresidents A resident producer s license may be issued by the Director only to a person who is an Oregon resident. A license can be issued to a nonresident if: 1. The person is currently licensed as a resident insurance producer and is in good standing in their home state. 2. The person has submitted the proper request and paid the applicable fees. 3. The person has submitted their resident license to the Director. 4. The person s home state grants nonresident producer licenses to residents of Oregon on the same basis (called reciprocity). Oregon Health Insurance Chapter 1 7 2009 Superior training Systems, Inc.
1.1.3.5 Temporary A temporary insurance producer license can be issued for a maximum period of 180 days to any of the following people: 1. The surviving spouse or representative of a licensed insurance producer who dies or becomes mentally or physically disabled. This is to allow adequate time for the sale of insurance business owned by the producer or for the producer to recover from the disability or to provide for the training and licensing of new personnel to operate the insurance producer s book of business. 2. A member or employee of a business entity licensed as an insurance producer, upon the death or disability of the person designated in the business entity application or the license. 3. The designee of a licensed insurance producer who is entering active service in the military. 4. In any other circumstances the Director determines that will serve the interests of the public. The Director may require the person with a temporary license to have a licensed producer as a sponsor to oversee and monitor the activities for which the temporary license was granted. 1.1.3.6 Discount Medical Plan Organizations Although discount medical plans are not considered to be insurance in the traditional sense, they are perceived by the public to supplement or even replace existing health insurance and for that reasons individuals and businesses that wish to transact any type of business that is considered to be a discount medical plan must be appropriately licensed in Oregon as of April 2008. Any person or business that wishes to operate as a discount medical plan organization in Oregon is required to apply for a license to transact this type of business by completing and submitting the appropriate application to the Director. The Director will use the application and the supporting documentation that is required to be submitted with the application to determine if the applicant is financially responsible and fit to operate in this capacity. In order to make such a determination, the applicant shall file with or indicate on the application the following: 1. If the applicant has ever filed for bankruptcy. 2. An audited annual financial statement for the most recent year or and unaudited financial statement accompanies by a signed federal tax form for the most recent year that proves the applicant is solvent and has a continuing income stream. 3. If the applicant is a newly formed entity or corporation that has been formed for the purpose of transacting business as a discount medical plan organization, the applicant must submit a business plan including three years of projections of net worth, revenue, expenses and net income. Oregon Health Insurance Chapter 1 8 2009 Superior training Systems, Inc.
Further, in order for the Director to determine if the applicant has the necessary experience and expertise to operate as a discount medical plan organization, the applicant is required to indicate in the application all of the states and Canadian provinces in which they are currently licensed to transact similar business. This includes any licenses that were held within a 10 year period prior to applying in Oregon. In order for the Director to determine that the applicant is of good character and quality, they must also divulge any licenses that have been refused, revoked, suspended or otherwise not renewed or if they have been the subject of any action taken in any state or Canadian province by any licensing or regulatory agency. The applicant must also submit, with the application, a copy of the NAIC biographical affidavit, completed by each member of the board of directors, executive committee or other governing board. These licensing requirements are in addition to and not in lieu of any other requirements established by law for the purpose of conducting or transacting business in Oregon. This means that if you are a licensed insurance producer who also wishes to transact this type of business, you must apply for and maintain a separate license to do so. Your insurance producer s license alone does not permit you to transact discount medical plan business in Oregon. 1.1.4 Maintenance and Duration 1.1.4.1 Renewal and nonrenewal Licenses must be renewed every two years. In order to renew your license, you must submit the appropriate renewal fee, satisfy all of the applicable continuing education requirements, and satisfy any other requirements that may be established by the Director. Anyone who holds a nonresident license must also submit proof that they continue to hold a valid license in their state of residence for each class of business they are licensed to transact in Oregon. If your license has expired in the past 12 months, you may renew it without having to fulfill the initial education and examination requirements again if you pay twice the amount of the renewal fee that was in place at the time the license expired. You must also complete any continuing education requirements, including those for the period in which the license lapsed. If you do not renew an expired license within 12 months of the expiration date, you will be required to satisfy all of the initial education and examination requirements for a new license. 1.1.4.2 Continuing Education Requirements In order to renew their licenses, resident insurance producers must complete the following hours of approved continuing education courses: Oregon Health Insurance Chapter 1 9 2009 Superior training Systems, Inc.
1. For each two year renewal period occurring after issuance of an insurance producer license that an insurance producer holds an insurance producer license, the insurance producer must complete 12 hours of continuing education annually or 24 hours in each two-year renewal period; and 2. For each two year renewal period occurring after issuance of an insurance producer license, the renewing insurance producer must include in the applicable required hours of completed continuing education: a. At least three credit hours of continuing education on the subject of Oregon statutes and administrative rules, including recent changes; and b. At least three credit hours of continuing education of the subject of professional ethics for insurance producers. Exemptions The following producers are exempt from the continuing education requirement: 1. Producers who are licensed without an examination; 2. Retired producers who are authorized to transact life insurance only if they are at least 58 years old, have been licensed as a producer agent for at least 10 years, who will be servicing existing policies only, or who request exemption from the requirement; and 3. Any person licensed as a reinsurance intermediary broker, reinsurance intermediary manager, or both. Credit Limitations Producers cannot earn more than eight credit hours in one day and cannot receive credit for courses repeated during any two year period. Credit will only be granted for courses completed before the licensing renewal date. Licensees who teach continuing education classes receive the same continuing education credit as licensees who attend the class, but receive no additional credit for class preparation. Producers can receive credit for independent study courses that are registered with the Director. The course provider must certify that the producer has completed the course work and passed a final examination. Approved Subjects Continuing education courses must be based on any of the following insurance related subjects: 1. Insurance rating 2. Insurance fundamentals 3. Tax laws related to the license class 4. Policy contents 5. Proper uses of insurance products Oregon Health Insurance Chapter 1 10 2009 Superior training Systems, Inc.
6. Oregon Insurance Code and Regulations 7. Technical information related to general lines, life, or health insurance 8. Insurance or contract law 9. Insurance policies and coverage 10.Insurance needs 11.Insurance risk management 12. Ethics 13.Estate planning 14.Pension plans 15.Financial planning 16. Accounting 17. Finance 18.General underwriting principles 19. Agency management 20.Prevention of errors and omissions Subjects that are not Approved Producers cannot receive credit for any general business courses covering: 1. Sales 2. Motivation 3. Office skills 4. Computer training 5. Securities other than variable annuities 6. Required for pre-licensing training 7. Any subject that relates to a class of insurance for which the applicant does not hold a license 1.1.4.3 Reinstatement The Director has the authority to reinstate a revoked license, revoked category of insurance business or class of insurance. A producer whose license has lapsed may apply to the Director to reinstate the same license within 12 months from the due date for renewal without having to take and pass a written examination. The producer is obligated to pay a reinstatement fee equal to double the unpaid renewal fee and complete any education requirements. 1.1.4.4 Assumed Business Name A producer must notify the Director prior to transacting business under any name other than his or her legal name within 30 days. The Director must also be notified prior to changing, deleting, or adding an assumed business name in connection with the producer s business under the license. Oregon Health Insurance Chapter 1 11 2009 Superior training Systems, Inc.
1.1.4.5 Change of Address and Telephone Number All licensed producers, adjusters and consultants must notify the Director within 30 days of any of the following: 1. A change of business or residence address or telephone number; 2. The opening or closing of a location where a producer transacts business in Oregon; or 3. The commencement or termination of any individual s authority to act on behalf of a business entity. 1.1.4.6 Reporting of Actions Producers must report any administrative action or any criminal prosecution taken against themselves to the Director within 30 days of the final disposition. This report must include a copy of the order, consent to order, or other relevant legal documents. Within 30 days of a pretrial hearing date, a producer must report any criminal prosecution of the producer taken in any jurisdiction to the Director. The report must include a copy of the initial complaint filed, the order resulting from the hearing, and any other relevant documents. 1.1.5 Disciplinary Actions 1.1.5.1 Cease and desist orders Whenever the Director believes that a person has been engaged in or is engaging in or is going to engage in any violation of the Insurance Code, the Director may issue an order to discontinue such actions. The notification to cease and desist will be sent to the person containing the specific charges and will inform the person that a request for a hearing must me done within 20 days of the mailing date. When a hearing is requested, the Director must set a date within 30 days of the receipt of the request. The person must be notified of the hearing in writing at least 7 days in advance. 1.1.5.2 License probation, suspension, revocation or refusal to renew The Director can place anyone on probation, or suspend, revoke, or refuse to renew or issue a license anyone who: 1. Provides incorrect, misleading, incomplete, or materially untrue information in the license application; 2. Violates any insurance law, rule, or subpoena of the Director or of the insurance commissioner of another state, Mexico, or Canada; 3. Obtains or attempts to obtain a license through misrepresentation or fraud; 4. Improperly withholds, misappropriates, or converts and monies or properties received in the course of conducting insurance business; 5. Intentionally misrepresents the terms of an actual or proposed insurance contract or application; Oregon Health Insurance Chapter 1 12 2009 Superior training Systems, Inc.
6. Is convicted of a felony or a misdemeanor involving dishonesty or a breach of trust, or an offense punishable by death or imprisonment under United States law; 7. Admits to or is found to have committed unfair trade practice or fraud related to insurance; 8. Uses fraudulent, coercive, or dishonest practices, or demonstrates incompetence, untrustworthiness, or financial irresponsibility in conducting business in Oregon or elsewhere; 9. Has his or her license cancelled, revoked, suspended, or not renewed in any other state; 10.Has his authority to practice law or to practice under any other regulatory authority cancelled, revoked, suspended, or not renewed by any state or federal agency, Canadian province, or by the government of Mexico, provided that the cancellation, revocation, suspension or refusal to renew was related to the business of an adjuster, insurance producer, or consultant, or if dishonesty, fraud or deception was involved; 11.Forges another person s name to an insurance application or to any document related to an insurance transaction; 12.Improperly uses notes or any other reference material to complete an examination for an insurance license; 13.Knowingly accepts insurance business from an individual who is not licensed; 14.The Director mistakenly issues or renews a license to; 15.Fails to pay any fee or charge to the Director; 16.Fails to pay a civil penalty assessed by the Director that has become final by operation of law or upon appeal; or 17.Fails to comply with the continuing education requirements applicable to the license or any class of insurance authorized under the license, unless the Director has waived the requirements. A business entity may have their license suspended, revoked, or refused if the Director finds that an individual licensee s violation was known or should have been known by any of the partners, officers or managers, and the violation was not reported to the Director and corrective action was not taken. In the event the Director does not renew or denies a license application, he must inform the applicant or licensee in writing what the reason are and of the licensee s right to request a hearing. The Director shall hold a hearing upon written demand by anyone who is aggrieved by any act, threatened act, or failure of the Director to act. The demand must state the grounds for requesting such a hearing. 1.1.5.3 Civil penalty Any company that violates any condition of the Insurance Code or final order of the Director will be required to pay a civil penalty to the General Fund of the State Treasury in an amount not to exceed $10,000 for each offense. For individual producers, adjusters and consultants, this penalty is limited to $1,000 for each offense. Oregon Health Insurance Chapter 1 13 2009 Superior training Systems, Inc.
1.1.5.4 Criminal penalty People convicted of violating Oregon Statutes may be subject to a criminal penalty of one year in jail and a maximum fine of $1,000 for an individual and $10,000 for a corporation. 1.2 State Regulation 1.2.1 Director s General Duties and Powers The Director of the Department of Consumer and Business Services (the Director) is in charge of making sure that the Insurance Code is properly adhered to. In order to facilitate this compliance, the Director conducts examinations and investigations of insurance companies and producers to make sure that they have conducted business according to the law. The Director is also the person who will conduct any hearings and issue any necessary type of cease and desist order. 1.2.2 Company Regulation 1.2.2.1 Solvency The Director may require an insurance company to possess and maintain capital or surplus in excess of the amount that is generally required. For the protection of the public and consumers, the Director requires insurance companies to maintain their solvency. For the purpose of determining the reasonableness and adequacy of an insurance company s capital and surplus, the Director will consider the size of the insurance company in terms of its assets, capital and surplus, reserves, and book of business premiums. The Director will weigh the extent to which the business of the insurance company is diversified among its various lines of insurance using the following criteria: 1. The number and size of risks insured in each line of business. 2. The extent of the geographical dispersion of these risks. 3. The extent of any reinsurance program. 4. The insurance company s investment portfolio. 5. The capital and surplus maintained by other comparable insurance companies. 6. The adequacy of the reserves of the insurance company. 7. The quality and liquidity of investments in affiliates. 8. The quality of the insurance company s earnings. 1.2.2.2 Producer Appointment As a producer, you cannot act as the agent of an insurer unless you are appointed by that insurer to act in the capacity of an agent. The only exception to this is if you are transacting the business on behalf of another producer who is an appointed agent of that insurer. Producers can hold as many appointments as they wish. Oregon Health Insurance Chapter 1 14 2009 Superior training Systems, Inc.
Insurers are required to maintain a current list of insurance producers who are authorized to accept applications and transact business on their behalf and must make the list available to the Director when it is requested. As an insurance producer appointed by an insurer, you represent the insurer and have a fiduciary responsibility to the insurer. If there is any controversy between the insured or the beneficiary and the insurer, the producer is considered to be representing the insurer, not the insured. Immunities Unless there is actual malice, an insurer, an authorized representative of the insurer, a producer, or the Director, will not be subject to civil liability as a result of any statement or information that was reported to the Director during the course of an investigation. Anyone who makes a statement or divulges information with actual malice may be held civilly liable. Confidentiality Any information, documents, records, or other data that the Director may obtain during an investigation will be considered confidential and privileged. This means that the information will not be subject to a subpoena or legal discovery, nor will it be admissible as evidence in any private civil action. The Director is authorized to use the information, documents, records, and other information in any regulatory or legal action brought as a part of the Director s duties. 1.2.2.3 Termination of Appointments In most cases, an insurer must give 90 days notice before they are allowed to terminate a producer s appointment unless: 1. The producer s license has been denied, restricted, revoked, suspended, or cancelled; 2. The producer s business has been sold or has merged, and the insurer has not appointed the successor; 3. The producer is insolvent or fails to pay money that is owed to the insurer; 4. The producer commits fraud or engages in intentional misconduct; 5. The insurer discontinues the line of insurance that the producer transacts; 6. The insurer discontinues conducting insurance business in Oregon; or 7. The insurer and producer mutually agree to terminate the appointment. Other Company Requirements When an insurer terminates a producer s appointment, employment, contract, or other business relationship with a producer, they must notify the Director within 30 days of the termination. Oregon Health Insurance Chapter 1 15 2009 Superior training Systems, Inc.
The insurer must promptly notify the Director if, upon further review and investigation, the insurer discovers additional information that should have been reported to the director had the insurer known if its existence. Within 15 days of notifying the Director, the insurer must mail a copy of the notification to the producer. Within 30 days of receiving the notice, the producer has the right to file comments in writing concerning the notification with the Commissioner. The producer will simultaneously send a copy of the comments to the reporting insurer, and the comments will become part of the Director s permanent file. 1.2.2.4 Unfair Claim Settlement Practices Unfair claim practices are those that are committed in conscious disregard for the law or with such frequency as to indicate a general business practice. These practices are prohibited by law. The following is a summary of what constitutes an unfair claims practice: 1. Misrepresenting facts or policy provisions in settling claims. 2. Failing to acknowledge and act reasonably and promptly when communicating about an insurance claim. 3. Failing to adopt and implement reasonable standards for prompt investigation and processing of claims. 4. Refusing to pay claims without conducting a proper investigation. 5. Failing to affirm or deny coverage of claims within a reasonable period of time after proof of loss statements are submitted by an insured. 6. Not attempting in good faith to effect prompt, fair and equitable settlements of claims on which liability has become reasonably clear. 7. Compelling insureds to initiate lawsuits to recover amounts due under an insurance policy by offering substantially less than the amount ultimately recovered in those suits. Oregon Insurance Code outlines specific regulations regarding the insurance company s responsibilities for investigation and payment of claims: 1. The insurance company has 30 days after the receipt of notification of claim to either acknowledge the notification or pay the claim. 2. Upon an inquiry about a claim from the Director, the insurance company an adequate response within 21 days. 3. All claim investigations must be completed in 45 days after the receipt of notification of claim. If an insurance company needs more time to make a determination, it must notify the claimant within 30 days after the receipt of proof of los, explaining the need for more time. From then on if the investigation remains incomplete, the insurance company must notify the claimant every 45 days. Oregon Health Insurance Chapter 1 16 2009 Superior training Systems, Inc.
1.2.3 Producer Regulation 1.2.3.1 Fiduciary Responsibility All premium funds received by a resident insurance producer must be accounted for and maintained in a trust account separate from all other business and personal funds. A resident insurance producer may not comingle or otherwise combine premium funds in the trust account with any other money. However, a resident agent may comingle with premium funds in the trust account any additional funds for the purpose of advancing premiums, establishing reserves for paying or returning premiums, or for any contingencies that might arise in the course of receiving and transmitting premium or returning premium funds. The trust account provision does not include any financial institution, trust company or any class of insurance producers that the Director has designated by rule or exempts. 1.2.3.2 Place of Business and Records Maintenance A resident insurance producer must keep records of insurance that he or she has transacted for three years following the expiration date of the policy. The records must be kept at the producer s principal place of business to be made available to the Director on request. All insurance producers in Oregon are required to notify the Director of the Department of Consumer and Business Services prior to transacting insurance business using the license that is in his or her name under any name that is different than the producer s legal name. This includes name changes due to marriage and divorce, as well as changing, deleting or adding an assumed business name in connection with the producer s business under the license that has been issued in the producer s name. Resident producers are required to keep usual and customary records that pertain to any business conducted under his or her license at their principal place of business. These records must be kept in such a way that they are readily available and open to inspection by the Director during business hours. These records are required to be maintained and readily available for three years following the expiration of the policy. Nonresident producers are also required to keep the same types of usual and customary records at their primary place of business for any business that is transacted under the nonresident producer license. These records must also be readily available for inspection for three years after the expiration date of the policy. If an nonresident maintains a place of business in Oregon (for transacting insurance business under the nonresident license), that place is automatically considered to be the principal place of business and the place at which the records must be kept and made available for inspection. In other words, if a nonresident maintains an Oregon office, the records for Oregon business must be kept at this location and not at the home office. Oregon Health Insurance Chapter 1 17 2009 Superior training Systems, Inc.
If you change your address or telephone number, or the address or telephone number of your principal place of business you are required to notify the Director within 30 days of the date the change is made. This includes any changes to, additions, or closings of any location where a producer is transacting insurance business under their license in Oregon. Resident insurance producers must notify the Director within 30 days of any change of their residence address in addition to changes in their place or places of business. Additionally within 30 days after an insurance producers authority to act for a producer that is a business entity begins or is terminated, the producer is required to notify the Director either that he or she is authorized to represent the entity or no longer represents the entity. 1.2.3.3 Controlled Business When producers write insurance on themselves, their family, or their coworkers it is called controlled business. If the premiums in any calendar year on controlled business exceed the premiums on other types of business (twice the amount for life and health insurance) then the amount of controlled insurance is considered to have exceeded the legal amount and is referred to as an unlawful rebate. 1.2.3.4 Sharing Commissions An insurance company or producer may not pay a commission to a person for selling, soliciting or negotiating insurance in Oregon if that person does not have an insurance license. 1.2.4 Unfair Trade Practices 1.2.4.1 Misrepresentation It is illegal to issue, publish or circulate any sales material that is false, misleading or deceptive as to policy benefits and terms, the payment of dividends, etc. This also refers to statements made orally. This is called misrepresentation and is illegal in Oregon. 1.2.4.2 False Advertising Advertising covers a wide scope of communication from publishing an ad in a magazine to broadcasting a commercial on the radio, to placing an ad on a billboard or even distributing fliers. It is illegal in Oregon to produce or publish any advertisements that include any untrue, deceptive, or misleading statements that apply to the business of insurance, anyone who conducts it, or the policies that are marketed. False advertising is against the law in Oregon. For more specific information on your responsibilities and the guidelines regarding advertising insurance, please refer to Chapter 6. Oregon Health Insurance Chapter 1 18 2009 Superior training Systems, Inc.
1.2.4.3 Rebating Rebating is defined as any inducement offered in the sale of insurance products that is not specified in the policy. Rebates can include money, reductions in commissions, promises and personal services. Both the offer of a rebate and the acceptance of a rebate are against the law in Oregon. 1.2.4.4 Unfair Discrimination Discrimination in rates, premiums or policy benefits for people who fall within the same class or who have the same life expectancy is illegal. No discrimination may be made on the basis of a person s marital status, race, color, national origin, creed or disability. Further, it is also illegal for an insurance company to discriminate against a victim of domestic violence. The insurance company cannot refuse to issue, renew, deny or cancel a policy solely based on a case of domestic violence nor can they demand a higher premium. 1.2.4.5 Illegal Inducement It is illegal in Oregon to pay or offer to pay any of the following as an inducement to purchase insurance: 1. Any special favor or advantage in dividends or benefits. 2. Any stocks, bonds, securities, or accrued dividends or profits. 3. Anything of value not specified in the insurance contract. 1.2.4.6 Suitability and Replacement The purpose of the rules regarding suitability is to protect consumers from unfair trade practices who are considering replacing or who are being advised to replace existing insurance policies and annuities by regulating the activities of insurance companies and producers with respect to the suitability of replacement policies and policy replacement practices in general. The rules are also designed to protect people who purchase life insurance and annuities by establishing minimum standards of conduct that producers must adhere to and observe in replacement or financed purchase transactions. These guidelines have been established to make sure that the buyer receives accurate information so that they can make a decision that is in their best interest and to also reduce the opportunity for misrepresentation and incomplete disclosure. These rules also establish specific penalties for failing to comply with the suitability laws and replacement guidelines. These rules apply to insurance policies and annuity contracts and do not apply to: 1. Credit life insurance. Oregon Health Insurance Chapter 1 19 2009 Superior training Systems, Inc.
2. Group life insurance or group annuity contracts where there is no direct solicitation of individuals by an insurance producer. However, group life insurance and group annuities that are marketed and sold through direct response solicitation are subject to the suitability laws. 3. An application to the existing insurance company that issued the existing policy or contract when a contractual change or a conversion privilege is being exercised. 4. When the existing policy or contract is being replaced by the same insurance company or to proposed life insurance that is going to replace life insurance under a binding or conditional receipt issued by the same insurance company. 5. Policies or contracts used to fund: a. An employee pension or welfare benefit plan that is covered by ERISA b. A 401 (a),(k) or 403 (b) plan as described in the Internal Revenue Code c. A governmental or church plan as defined by the Internal revenue code including governmental or church welfare benefit plans or deferred compensation plans d. A nonqualified deferred compensation arrangement that is established or maintained by an employer or plan sponsor. (The suitability laws do apply to contracts that are used to fund any plan or arrangement that is funded solely by contributions an employee elects to make, whether on a pre-tax or after tax basis, when the insurance company has been notified that plan participants may choose from two or more insurance companies and there is a direct solicitation of an individual employee by an insurance producer.) e. When new coverage is provided and the employer or sponsoring association pays the entire premium cost. f. Existing life insurance that is a non-convertible term life insurance policy that will expire in five years or less and cannot be renewed. g. Immediate annuities that are purchased with proceeds from an existing contract. (However, immediate annuities that are purchased with proceeds from an existing life insurance policy are not exempt). h. Structured settlements. An insurance producer who initiates an application for a policy must submit with the application a statement that is signed by both the applicant and the insurance producer to the insurance company that identifies whether the applicant has any existing policies or annuity contracts and whether the applicant is replacing any of the existing policies or annuity contracts (this part of the question is optional for the insurance company). If the applicant does not have any existing insurance, or if they are not replacing any of their existing policies or contracts, then the producer has fulfilled his or her duties with respect to replacement. If the applicant does have existing insurance and is replacing an existing policy, or if the applicant has other insurance and the second part of the question was not asked and answered (meaning the insurance company does not know if the policy is intended to replace these existing policies), then the producer is required to present and read out loud to the applicant either before taking the application or at the time the application is taken a notice regarding replacements in a form required by the State of Oregon. The notice must Oregon Health Insurance Chapter 1 20 2009 Superior training Systems, Inc.