SECTION 3: State Regulations

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SECTION 3: State Regulations
2015-07-30 11:29:53

State Regulations
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  1. Three(3) Sources of Regulation of the Insurance Business

    1.State: Primary source

    State Statutes (aka "The Insurance Code") enacted by the Oklahoma State Legislature

    Rules and Regulations are made by the Oklahoma Insurance Department to enforce the provisions of the Oklahoma Insurance Code.

    **Rules and Regulations are created and put in to effect whenever they want**
  2. Three(3) Sources of Regulation of the Insurance Business

    2. Federal: Watchdog Role

    Supervise areas not covered by the state regulation or when state jurisdictions are in conflict
  3. Three(3) Sources of Regulation of the Insurance Business

    3. Self-regulation: Voluntary non-profit organization; promote uniformity by proposing standardized laws

    Make recommendations but have no legal authority

    Act like a support group for state insurance commissioners.
  4. Oklahoma Insurance Commissioner
    Mr. John Doak

    Publicly elected for a 4yr term

    • Must be 25 years old
    • Must have been a resident of Oklahoma for at least 5 years 
    • Must have 5 years experience in the insurance industry 
    • NO financial interest in any insurer agency
    • No Education Requirements but YES continuing education requirements
  5. Commissioner's General Responsibilities (Authority)
    • Adopt rules and regulations
    • Examine Insurance companies 
    • Jurisdiction over complaints 
    • Authority to:
    •       Conduct Hearings, Issue cease and desist         orders, Initiate civil actions, Censure,               suspend, revoke or non renew an                   insurance license
    • Approving (aka affirm) and monitoring company rates 
    • Maintain books
    • Provide an annual report to the Governor for claims paid in the State of Oklahoma 
    • Educate consumers
    • Deliver to successor all furniture, records and property
  6. Hearings & Orders
    Any written request regarding  violations of the Insurance Code shall regarding immediately.


    1. Give Notice of Hearing: at least 5 days not more than 30 days

    • Time (WHEN)
    • Place (Where)
    • Reason for Hearing (Why)

    No court room judge or jury, notice will not include case law.

    2. Conduct for Hearing: The meeting is open to the public and the OID can take depositions and subpoena witnesses or evidence.  Must summarize  in writing within 30 days of the hearing.   

    3. Orders (Punishment): punish the license with a:

    • Slap on the wrist  - cease and desist
    • Institute a civil suit - OID cannot sue you
    • Fine $100 to $1000
    • Suspend, Non-renew or Revoke, a licensee's license

    4. Right to Appeal: 30 days to file for judicial review
  7. Type of Insurers
    Stock Company: shareholders issue "nonparticipating" insurance policies 

    Mutual Company: Policy Owners "participating" insurance policies.  Do participate in the profits in the form of dividends.

    Fraternal (aka Fraternal Benefit Society): society, order, or lodge not for profit for the sole benefit of their members and beneficiaries. 

    Service Organization (non-profit): prepaid dental & medical care benefits.  Pay benefits directly to the provider

    Federal Government Insurers: Medicare Medicaid Social Security
  8. Types of Domicile
    Domestic: Oklahoma 

    Foreign: Another State 

    Alien: Another Country
  9. Certificate of Authority
    Insurer's license to do business in the State of Oklahoma 


    Authorized Insurer (Admitted): Has an Oklahoma Certificate of Authority.  Would include a domestic foreign, or alien

    Unauthorized (Non-Admitted): Does not have an Oklahoma Certificate of Authority

    • Individual gets license 
    • Company gets Certificate of Authority
  10. State Regulations Cont..
    The OID  has a major responsibility to protect against insurance company insolvency (bankruptcy) of insurance companies operating in Oklahoma
  11. Examinations
    Focuses on financial solvency 

    • will consider: 
    • Financial statements 
    • Changes in management and ownership 
    • actuaries and independent financial examiners
  12. Timing of Examinations
    1. May order an examination of an insurer as often as necessary 

    2. Must by law order an examination of all domestic, foreign, and alien insurers every 5 years

    The insurer being examined pays for the cost of examination
  13. Examination Reports
    Following an examination, the chief examiner must file a report within 30 days of completion

    Examined insurer has up to 20 days to make a rebuttal 

    Review "Right to disagree"
  14. Rating Services
    Private Rating Services: NOT OID
  15. Producer (Agent) Licensing Act
    Purpose: Improve efficiency, permit the use of new technology and reduce costs associated with issuing and renewing

    1. Soliciting (prospecting): Attempting to sell

    2. Preliminary Negotiation (quoting): Axt of conferring with the buyer

    3. Selling: Completing the application, issuing a conditional receipt, making policy changes, delivery of policies, and collecting premiums
  16. Persons Exempt from Licensing
    Persons not engaged in the solicitation, negotiation, selling of insurance.  

    They receive NO commissions
  17. Law of Agency
    Where a person is authorized to perform certain acts for another

    3 Parties involved: 

    1.Principal - insurer

    • 2.Producer (Agent) - authorized to act on behalf of the principal 
    • Producer can never bind life or health insurance coverage
    • Producer can be referred to as "Field underwriter" or "Agent Underwriter" 

    3.Third Party: Client or policy owner
  18. Appointment of Producer by Insurer
    • Must have at least 1 appointment
    • Insurer must appoint a producer with in 15 days
    • Can sell only types of insurance licensed and appointed 
    • Can receive a commission from an insurer  only if licensed and appointed by insurer
    • Must notify the OID within 30 days from terminating a producer appointment
    • Appointment is for a 12 month period of time
  19. Producer Fiduciary Respoinsibilities
    A fiduciary is a person HELD IN TRUST and must place the other party's interest above his or her own interest. 

    Conflict of interest: influenced by personal interests.

    Responsibilities Include: 

    1. Contact prospects - Telephone Consurmer Protection Act (aka Do Not Call) - only contact at HOME between 8 am and 9 pm in the time zone of the prospect. 

    2. Risk Management

    3. Selling the coverage most suitable (aka suitability) most appropriate to meet the applicant's financial needs. 

    4. Complete the Application- Fill in ALL blanks

    5. Collecting the initial premium

    • never commingle 
    • never pay the premiums for the insured from personal money

    6. Delivering the policy
  20. Types of Oklahoma Licenses
    Term Period 24 months - Biennial 

    Perpetual as long as fees are paid 

    Insurance Producer- appointed by an insurer

    ** Must pass Exam, Must complete CE**

    Limited Lines Producer- appointed by an insurer

    • **NO Exam, NO CE**
    • Temporary Producer- license issued for 180 days to:

    • Surviving spouse or court appointed representative of a licensed insurance producer 
    • Person entering active service in the Armed Forces
    • Any person who would serve the public interest

    **NO Exam, NO CE**

    Insurance Consultant - offering advice, counsel or opinion with respect to the benefits, advantages, disadvantages of an insurance policy 

    • represents the client
    • Cannot concurrently hold a consult license and a producer license. 
    • Must have a written agreement for services 

    Not required to be a licensed consultant when performing as a producer, attorney, trust officer, or CPA

    **must pass exam and complete CE**
  21. Types of Oklahoma Licensing Cont...
    Resident License - residing in Oklahoma to solicit, negotiate, or sell insurance in the State of Oklahoma 

    • Must be a resident of Oklahoma and legally entitled to work in the USA - be a citizen of the US or possess a valid Visa - citizenship not required to obtain a license 
    • No conviction of a felony
    • Must be 18
    • Pay required fees
    • Have an insurance company appointment
    • Pass Exam with at least a 70%

    Producer in another state who moves to OK and makes an application within 90 days NO EXAM required
  22. Re-Instatement of Expired License
    Reinstate the license withing 12 months without retaking the exam

    Pay a penalty DOUBLE the license renewal fee
  23. Controlled Business
    Insurance written on the interests of the producer, immediate family, and/or employer

    MUST live in your home 

    A producers commission on controlled business cannot exceed 25% of the producer's total commissions within a 12-month period 

    NOT based on sales or policy count.
  24. Oklahoma Non-Non Resident License Qualifications
    Allows a person who is residing in another state to solicit, negotiate, or sell insurance in the State of Oklahoma 

    An applicant must:

    • Be a resident of another state with a license in good standing and legally entitled to work in the US
    • Be competent, trustworthy, and financially responsible, with good business and personal reputation
    • 18 years old
    • Pay OK fees
    • Maintain resident insurance license in his/her home(resident) state
    • Reciprocity between states waives the OK licensing examination
  25. Record (File) Maintenace
    Producers must maintain policy records at /her place of business for a period of 3 years
  26. Notification of Change
    Must notify OID with in 30 days of any:

    • Change of legal name (get married)
    • Change of Address
    • Change of Email Address
    • Conviction of Felony - not accused or arrested ONLY CONVICTED
  27. Failure to Notify of Change
    $50 Administrative Fee if change is made beyond the required 30 days

    After 45days the administrative fee charge will result in a fine between $100 and $1000

    Fine kicks in after 75 total days.