Life & Health. New York State Laws. A.D.Banker&Company

Transcription

1 Life & Health New York State Laws A.D.Banker&Company

2 NEW YORK STEPS TO GET YOUR LICENSE New York State Department of Financial Services (518) (800) Complete a Prelicensing Course Testing Provider (Prometric) insurance/pages/newyork.aspx If you would like to sell insurance in New York, you must complete an approved line of pre-licensing education and pass the state licensing exam. Insurance pre-licensing courses are provided by A.D. Banker & Company in many different formats: classroom, web classes, lecture videos, online courses, or self-study. All courses are cross-referenced with the exam content outline. You can view course options for New York and register at When you satisfy the requirements for your course, you will receive a Certificate of Completion and A.D Banker will report your course completion directly to the state. Pre-licensing education does not expire in the state of New York. New York requires all pre-licensing students to pass a Certification Exam in order to receive a Certificate of Completion for their education. The Certification Exam must be monitored by a state-approved monitor. Students who take an in-classroom course will be able to take this exam at the end of their class; online students will need to contact a state-approved monitor to set up a monitoring session. You can view a list of approved monitors at 2. Pass a Licensing Exam A.D. Banker Provider #: Line Hours Life 20* Accident and Health 20* Life, Accident and Health 40* Property and Casualty 90* Personal Lines 40* Public Adjuster 40* * If applying for a Broker license, you may submit a Statement of Employer form to the Department in lieu of completing a pre-licensing course. Making Exam Reservations Licensing exams are provided by Prometric. You can make an exam reservation online, by phone, fax or mail. Exam fees may be paid with a Master Card, Visa, money order, company check, or cashier s check. Personal checks are not accepted. Online: Phone: (800) Fax: Registration via fax or mail is a two-step process: 1. Submit the registration form along with payment to: Prometric ATTN: NY Insurance Exam Registration 7941 Corporate Drive Nottingham, MD Fax: (800) Call (800) after the registration has been processed to schedule your exam.

3 NEW YORK STEPS TO GET YOUR LICENSE What to Bring A current, signed form of identification. The identification document must: Be government-issued (e.g., driver s license, state-issued or military id card) Contain both a current photo and your signature Have a name that exactly matches the name used to register for the exam Exam Procedures Report to the test center 30 minutes before the exam to verify identification and be photographed. All testing sessions are video and audio recorded. No personal items are allowed in the testing room such as cell phones, watches, wallets, or purses. Exam Format Each major line exam is given in a multiple-choice format. Each exam contains experimental questions that are mixed in with the scored questions and are not identified. Experimental questions may not be covered in the candidates educational materials and do not affect your final score! The passing score required on each exam is 70%. When you complete the exam, your score will be displayed on the screen and you will receive a printed score report. The score report will include whether you passed or failed, the overall percentage score, and percentage correct for each of the major sections of the exam. Prometric notifies the Department of Financial Services your exam results within 2 business days. Exam Code Exam Name New York Exam Information Exam Time Total Questions Life Insurance Agent/Broker 2 hrs Accident and Health Insurance Agent/Broker 2 hrs Life, Accident and Health Insurance Agent/Broker 2 hrs 30 min Life, Accident and Health Insurance Laws and Regulations 1 hr Life Insurance Agent/Broker (Spanish) 2 hrs Accident and Health Insurance Agent (Spanish) 2 hrs Life, Accident and Health Insurance Agent/Broker (Spanish) 2 hrs 30 min Life, Accident and Health Insurance Laws and Regulations (Spanish) 1 hr Property and Casualty Insurance Agent/Broker 2 hrs 30 min Property and Casualty Insurance Laws and Regulations 1 hr Personal Lines Insurance Agent/Broker 2 hrs Public Adjuster 1 hr Independent Accident and Health Insurance Adjuster 1 hr Independent Fire Adjuster 1 hr Independent Casualty Insurance Adjuster 1 hr Independent Automobile Insurance Adjuster 1 hr Independent Aviation Insurance Adjuster 1 hr Independent Fidelity and Surety Adjuster 1 hr Independent Inland Marine Adjuster 1 hr Independent General Adjuster 2 hrs Independent Automobile Damage and Theft Appraisal Adjuster 1 hr Apply for License After passing the exam, apply for your license by completing an application at

4 TABLE OF CONTENTS New York State Laws Life & Health Students Life and Health Laws... 3 Life Laws Health Laws Retention Question Answer Key Key Word Index Life Students (Students studying for the Life Only exam must read pages 3-66) Life and Health Laws... 3 Life Laws Retention Question Answer Key Key Word Index Health Students (Students studying for the Health Only exam must read pages 3-36 and ) Life and Health Laws... 3 Health Laws Retention Question Answer Key Key Word Index This edition is valid starting September

5 Copyright 2017 A.D. Banker & Company, L.L.C. All rights reserved. No part of the material protected by this copyright notice may be reproduced in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission from the copyright owner. Disclaimer: This course, seminar, or publication provides general information regarding the subject matter. It is sold with the understanding that the publisher is not engaged in rendering legal or accounting advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The publisher hereby expressly excludes all warranties. To the extent allowed by law, I release A.D. Banker & Company, L.L.C. from any and all liability for my use of course materials and agree to indemnify and hold them harmless for all losses. I acknowledge that any liability of A.D. Banker & Company, L.L.C. not covered by the above release, is limited to the amount paid for this course. 2

6 Life and Health Laws OVERVIEW The purpose of this chapter is to acquaint the student with those insurance statutes and regulations of the state of New York. Take Note Information in this chapter modifies or amends information from previous content. Licensing Process The primary purpose of licensing insurance professionals is to protect the public. Any person, firm, or corporation requesting an insurance license must comply with all requirements of law before a license may be issued by the Superintendent. Insurance licenses may be issued for the following lines of authority: Life insurance Variable life and annuity products Accident and health insurance, or any similar line of sickness insurance Property, casualty, or personal lines insurance Any other line of authority the Superintendent deems similar If a business entity, association, or corporation is issued an insurance license, it may only authorize as individual agents the people who are named in the license as sublicensees. Sublicensees may only act as an insurance agent in the name of the business, association, or corporate licensee. Applicants for an insurance license or sublicense must: Be at least 18 years old at the time the license is issued File a license application with all required information and related fees Pass a written exam that includes the following applicant information: Full legal name, age, residence address, business address and mailing address Although the following information is required for statistical information and to make certain exams are fair, applicants do not need to provide it: y Gender y Native language y Highest level of education y Race or ethnicity 3

7 NEW YORK STATE INSURANCE LAWS Before applying to take the written exam, an applicant must demonstrate his/her qualifications by having completed a minimum number of hours of classroom work or the equivalent on subjects pertinent to the lines of authority for which a license is being requested: y A minimum of 20 hours must be completed for the following agent and broker licenses: Life only Accident and health only Life settlement broker only y A minimum of 40 hours must be completed for the following licenses: Life, accident, and health agent or broker Personal lines agent or broker Public adjusters y A minimum of 90 hours must be completed for property and casualty agent and broker licenses The requirement for a written exam may be waived by the Superintendent for the following reasons: The applicant is only applying for a baggage or accident and health insurance agent s license as a ticket selling agent of a railroad company, steamship company, airline, bus company, etc. for the sole purpose of selling travel baggage or accident insurance For any individual whose license had been previously suspended or revoked The applicant will only represent a fraternal benefit society as its agent The applicant is seeking to receive an appointment with an additional insurer and is not requesting a license for an additional line of insurance For a sublicensee applicant who is a nonresident insurance agent The applicant received a license that limits the kinds of insurance to those sold by an assessment corporation The applicant was previously licensed and the current application is made within 2 years of the date the previous license terminated At the discretion of the Superintendent, for an individual with the Chartered Life Underwriter (CLU) or Chartered Property Casualty Underwriter (CPCU) designations The applicant is currently licensed as an insurance agent in another state and the applicant s home state issues nonresident insurance agent licenses to individuals on the same basis as New York does; in addition, the following requirements apply: If the applicant is not currently licensed in another state, his/her license in another state terminated within 90 days before applying for a license in this state The other state issues a letter of certification indicating the applicant was a licensee in good standing in that state or in its producer database The applicant is not subject to prelicensing education or examination for any line of authority for which he/she was previously licensed in another state If a nonresident licensee moves to this state, he/she must apply for a resident insurance license within 90 days of establishing legal residence in this state The Superintendent may refuse to issue an insurance agent s license if he/she believes the applicant: Is not trustworthy enough to act as an insurance agent Is not competent to act as an insurance agent Has exhibited conduct that is grounds for the suspension or revocation of an insurance license Has failed to comply with licensing requirements 4

8 LIFE AND HEALTH LAWS In order to identify any potential conflicts of interest, the Superintendent may require licensees and sublicensees before or after receiving a license to provide a statement subject to the penalties of perjury that contains the following information: Details of ownership or interest in any firm, association, or corporation A statement indicating whether the individual has received, or will receive, any benefit or advantage that violates the state s rebating or discrimination laws If an applicant, licensee, or sublicensee has violated the state s rebating or discrimination laws, the Superintendent may deny, suspend, or revoke an insurance license. The Superintendent may also deny, suspend, or revoke an insurance license if an individual obtains a license for the purpose of writing controlled business. A licensee is deemed to have written controlled business if he/she received more than 10% of his/ her aggregate net commissions in the preceding 12-month period from the placement of insurance on the life of, or property owned by: The spouse of the individual applicant/licensee Any corporation of which the individual applicant/licensee and/or his/her spouse own more than 50% of the shares; this also includes shareholders and affiliated and subsidiary corporations Of any firm or association of which the individual applicant/licensees and/or his/her spouse are members Definitions Retention Question 1 Applicants seeking a Life, accident, and health insurance license are required to complete how many hours of prelicensing education? a. 15 b. 20 c. 40 d. 90 Insurance Producer In order to sell, solicit, or negotiate insurance in New York, any person including an insurance agent, insurance broker, reinsurance intermediary, or excess lines broker must be licensed as an insurance producer. However, the following individuals are NOT considered an insurance producer: If not receiving any commission on policies sold or written to insureds that live or perform business activities in this state, the officers, directors, or employees of licensed insurers, fraternal benefit societies, and HMOs and the officers, directors, or employees of a licensed insurance producer; one or more of the following requirements also apply to such officers, directors, and employees: Their primary business activities are executive, administrative, managerial, and/or clerical and are only indirectly related to the sales, solicitation, and negotiation of insurance Their primary function relates to insurance underwriting, loss control, or the following claims-related activities: inspection, processing, loss adjustment, loss settlement, or investigation They act in the capacity of a special agent or supervisor who helps licensed insurance producers by providing technical advice that does not involve the sales, solicitation, or negotiation of insurance 5

9 NEW YORK STATE INSURANCE LAWS Employees of, or organizations employed, by insurers, fraternal benefit societies, HMOs that inspect, rate, or classify risks or that supervise the training of insurance producers and who are not individually involved in the sales, solicitation, or negotiation of insurance Agents or representatives of fraternal benefit societies who, in exchange for commission, spend or plan to spend less than 50% of their time in the sales, solicitation, or negotiation of insurance for fraternal benefit societies Agents and representatives of title insurance companies Administrators, service contract providers, and other persons who market, sell, solicit, or administer service contracts Persons engaged in the securing and furnishing of information, without receiving commission, for the purpose of enrolling individuals in group insurance, including life, property/casualty, annuities, blanket accident and health; this also includes those who issue group certificates or provide administrative services for mass marketed property/ casualty insurance Employers, associations, or their officers, directors, employees, involved in administering an employee benefits plan that uses insurance; this also applies to trustees of such a plan Persons who advertise insurance but who do not have any intention to solicit, sell, or negotiate insurance in this state A nonresident who is licensed in another state to sell, solicit, or negotiate insurance for commercial property/casualty clients that have risks located in multiple states Salaried full-time employees who provide advice or counsel to their employers with respect to the employer s insurance concerns; this exception only applies if the employees do not sell or solicit insurance and do not receive commissions Persons who are certified as navigator entities under the Patient Protection and Affordable Care Act, including their employees who have met all training and certification requirements of the health benefit exchange Home State When a licensee s home state is referred to, the home state is the U.S. location where the person maintains a principal place of residence or business and in which the person is licensed to act as an insurance producer. Home state includes all 50 states, the District of Columbia, and any U.S. territory. Solicit, Negotiate, and Sell The terms solicit and solicitation refer to the attempt to sell insurance or to ask or encourage a person to apply for a particular type of insurance from a particular licensed insurance company, fraternal benefit society, or HMO. The terms negotiate and negotiation refer to the process of one individual discussing with another person a specific insurance contract and its major benefits, terms, and/or conditions so long as the person engaging in the negotiation either sells or obtains insurance from licensed insurers, fraternal benefit societies, or HMOs. The terms sell or sale refer to the exchange of insurance for money or its equivalent on behalf of a licensed insurer, fraternal benefit society, or HMO. 6

10 LIFE AND HEALTH LAWS Example Q is a producer who meets with a man who visits her insurance agency after purchasing a car. When Q begins explaining to the man how auto insurance works, and discusses the auto insurers she represents, she is engaged in the solicitation of insurance. The man asks Q questions about collision coverage and whether he needs to buy rental reimbursement coverage. Q is engaged in the negotiation of insurance when she answers the man s questions. Finally, when Q accepts the man s premium deposit and provides him with an insurance ID card, she is engaged in the sale of insurance. Types of Insurance Licenses Insurance Agent An insurance agent is any person (individual or business entity) authorized or acknowledged by an authorized insurer to act as its agent in the solicitation, negotiation, or sale of insurance. Before obtaining an insurance agent license, an applicant must first pass an exam on the lines of insurance for which the license is being requested. Insurance Broker Unlike insurance agents, insurance brokers act on behalf of the client and not the insurer. An insurance broker is any person (individual or business entity) who, in exchange for commission or any type of compensation, helps another person in any manner to: Solicit, negotiate, or sell insurance Place insurance Purchase insurance This includes engaging in such activities on behalf of any licensed insurance broker; however, persons who are excluded from the definition of insurance broker include: Those who are not required to be licensed as an insurance producer. The following individuals who transact maritime insurance without being compensated for the sale of insurance: Foreign freight forwarder registered with the Federal Maritime Commission Custom house broker licensed by the U.S. Department of the Treasury Those who are licensees or sublicensees of an insurance broker are also included within this definition, as are insurance producers. Insurance broker licenses may be issued to individuals, firms, associations, and corporations. The licensed broker may allow sublicensees to act as insurance brokers on its behalf if they are also licensed as insurance brokers and are named on the license. Age and prelicensing requirements for insurance brokers are the same as those for insurance agents. However, applicants for a resident insurance broker license may substitute one of the following for the prelicensing education requirement: If applying for a property and casualty broker license: During the 3 years preceding the application for a broker license, was regularly employed by an insurance company, insurance agent, or insurance broker for no less than an aggregate total of 1 year Such employment involved duties that related to the underwriting or loss adjustment of fire, marine, liability, Workers Compensation, and fidelity and surety insurance If applying for a life, accident, and health broker license: 7

11 NEW YORK STATE INSURANCE LAWS During the 3 years preceding the application for a broker license, was regularly employed by an insurance company, insurance agent, or insurance broker for no less than an aggregate total of 1 year Such employment involved duties that related to the use of life insurance, accident and health insurance, and annuity contracts for personal reasons and those involving estate planning, employee benefits, or business continuation During the 3 years preceding the applicant s entry into, or discharge from, the U.S. Armed Forces, was regularly employed by an insurance company, insurance agent, or insurance broker for no less than an aggregate total of 1 year. If applying for a property and casualty broker license, such employment involved duties that related to the underwriting or loss adjustment of fire, marine, liability, Workers Compensation, and fidelity and surety insurance If applying for a life, accident and health broker license, such employment involved duties that related to the use of life insurance, accident and health insurance, and annuity contracts for personal reasons and those involving estate planning, employee benefits, or business continuation Insurance Consultant An insurance consultant meets with clients and discusses insurance, providing advice and recommendations in exchange for a consulting fee based upon a written agreement signed by the client. Individuals and business entities may act as insurance consultants if licensed appropriately. Insurance consultant licenses are issued with respect to 2 types of insurance: Life insurance, which includes annuities, accident and health insurance, and variable products General insurance, which includes all other types of insurance If a firm or association is licensed as an insurance consultant, it may only authorize its members and employees to act as individual insurance consultants on its behalf. If a corporation is licensed as an insurance consultant, it may only authorize the sublicensees listed on its license to act as individual insurance consultants on its behalf. Sublicensees who act as individual consultants for a firm, association, or corporation may only act as a consultant for that business entity. Applicants for an insurance consultant license must submit an application and a fee of $50 per year for the license and $50 per year for each sublicensee. The $50 fee also applies for any fraction of a year in which a license will be in force. Licensed insurance consultants may not: Be an executive or employee of any authorized insurer in this state Own shares in an authorized insurer in this state if the shares give the consultant any substantial interest in the insurer Recommend or encourage the purchase of insurance, annuities, or securities from any authorized insurer in which a member of the consultant s immediate family holds an executive position or substantial interest 8

12 LIFE AND HEALTH LAWS Adjuster The term adjuster includes independent adjuster and public adjuster. An independent adjuster is any person or business entity that in exchange for money, commission, or anything of value acts on behalf of an insurer to investigate and adjust insurance claims arising under the insurer s policies. An independent adjuster performs duties as required by the insurer that are incidental to its claims. An employee of an independent adjuster who investigates and adjusts claims is also an independent adjuster. The definition of independent adjuster does NOT include the following: An officer, director, or regular salaried employee of an authorized insurer, an attorney in fact of any reciprocal insurer or Lloyds underwriter, or a maritime underwriting office unless acting as an auto body repair estimator An officer, director, or regular salaried employee of: An authorized health insurer or HMO when the claim to be adjusted is issued or administered by an affiliate insurer or HMO A holding company, including managers and controlled persons within the holding company system, when the claim to be adjusted is submitted for payment under a health benefit plan issued or administered by an insurer or HMO within the holding company system An authorized insurer licensed to write the type of insurance to be adjusted unless acting solely as an auto body repair estimator An authorized life insurer or its manager, agent, general agent, or any of its departments if the claim is submitted under another insurance company s reinsurance contract and relates to a kind of insurance the authorized life insurer is adjusting and licensed to write An adjustment bureau or association owned and operated by insurers to adjust and investigate losses who devotes virtually all of his/her time to the business matters of the adjustment bureau or association unless acting as an auto body repair estimator; this exception also applies to the adjustment bureau or association itself A licensed agent of an authorized insurer who only adjusts losses arising under the insurer s policies that are issued through his/her agency IF the agent does not receive compensation of more than $50 per adjusted loss A licensed New York attorney A person who adjusts maritime or average losses An agent or representative of an authorized life insurer if not receiving compensation for providing adjusting services The definition of independent adjuster does NOT include the following: An employee, agent, or representative of an authorized insurer who adjust claims without receiving compensation for adjusting services IF the individual does not advertise or solicit publicly the adjustment of claims as a public adjuster; this also includes a broker that represents an authorized insurer and adjusts such claims for his/her own clients A licensed New York attorney who acts as an adjuster in connection with his/her law practice, so long as the attorney does not advertise as a public adjuster A licensed insurance broker who acts as an adjuster for any loss that arises out of insurance he/she placed as the broker of record Any licensed insurance broker who is designated to act on behalf of the insured, in writing, before a loss occurs 9

13 NEW YORK STATE INSURANCE LAWS A public adjuster is any person or business entity that in exchange for money, commission, or anything of value acts on behalf of an insured to investigate and adjust insurance claims. This includes any person that advertises or solicits work as a public adjuster or that works for or on behalf of a public adjuster. Adjuster Licensing Requirements An individual can only be licensed as an independent adjuster OR a public adjuster and the Superintendent determines the types of adjuster licenses issued based on the lines of insurance claims for which the adjuster is authorized to investigate and adjust. An adjuster cannot: Act on behalf of an insurer unless licensed as an independent adjuster Act on behalf of an insured unless licensed as a public adjuster No insurer, including its agents and representatives, is permitted to pay any fee or other compensation to any person acting as an independent adjuster unless that person is licensed as an independent adjuster or exempted from the requirement to be licensed. Licensed adjusters are not required to hold any other license issued by the Department. Adjuster licenses may be issued to individuals, firms, associations, and corporations. The licensed adjuster may allow sublicensees to act as adjusters on its behalf if they are also licensed as adjusters and are named on the license. Applicants for an adjuster license or sub-license must: Be at least 18 years old at the time the license is issued File a license application with all required information and related fees, including fingerprinting of both hands Not have been convicted of a felony or a crime or offense that involves fraud or dishonesty nor have employed such a person Provide personal references from 5 reputable members of the community that certify, under the penalties of perjury, the person making the reference: Has known the applicant personally for at least 5 years before the filing of the adjuster license application Has read the application and believes its statements are true Believes the applicant to be honest, competent, and of good character Is not related to the applicant by blood or marriage If applying for a public adjuster license, pass a written exam after showing: They possess at least 1 year of experience in the insurance business that involves sales, underwriting, claims, or other appropriate experience; OR They have completed 40 hours of formal training in an approved course or program of instruction The requirement for an exam may be waived for an individual applicant or sublicensee who previously held a public adjuster license. If applying for an Independent adjuster license, pass a written exam; however, the exam requirement may be waived if: The applicant worked as a licensed independent adjuster in this state for the 5 years immediately before entering the U.S. Armed Forces and applies for a license within 1 year of terminating military service An individual applicant or sublicensee previously held an independent adjuster license and applies for a license within 2 years of the date the previous license was terminated 10

14 LIFE AND HEALTH LAWS At the request of the Superintendent, provide evidence of previous employment by an insurer or adjuster that qualify as satisfactory preliminary training for becoming a licensed adjuster Obtain and maintain a fidelity bond of $1,000 that is made to the state of New York; the bond must specifically authorize recovery by the state if the adjuster or any sublicensee: Is found guilty of fraud or dishonesty in the adjusting of insurance claims; OR Is convicted of any violation of insurance code pertaining to the crime of arson Adjusters are not permitted to misrepresent facts or give legal advice in the transaction of their duties as adjusters. Public adjusters are not permitted to accept compensation from, or on behalf of, any insured unless the compensation is based upon a written contract signed by the person being charged for adjusting services. The contract must clearly state the amount and extent of the compensation in a form prescribed by the Superintendent. Retention Question 2 In New York, applicants for insurance producer and adjuster licenses must be which of the following? a. High school graduates b. College graduates c. At least 18 years old d. At least 21 years old Retention Question 3 Which of the following licensees helps with the investigation and settlement of insurance claims? a. Adjuster b. Consultant c. Agent d. Broker Nonresident Insurance Agents and Brokers A nonresident insurance agent or broker is an individual who is not a resident of New York and who is licensed or authorized to act as an insurance agent or broker in the state where he/ she resides. This definition also includes a nonresident individual who is a member, employee, officer, or director of a firm, association, or corporation that maintains an insurance office in another state. Nonresident applicants are exempt from the requirement to pass an exam for an insurance agent or broker license if they are licensed in their home states and those states are reciprocal with New York. The other state is reciprocal with New York, and honors reciprocity, if all of the following conditions are met: The applicant has a current and valid license in his/her home state and is in good standing in that state The applicant has submitted the required application to New York or his/her home state The applicant has paid all fees required by the state of New York The applicant s home state awards nonresident insurance producer licenses to residents of New York on the same basis required by New York insurance code 11

15 NEW YORK STATE INSURANCE LAWS Business Entity When referring to business entity in insurance code, the term includes a corporation, association, partnership, limited liability company, limited liability partnership, or other legal entity. It should also be noted that the term person refers to an individual or a business entity. Insurance agent license applicants that are business entities must provide to the Superintendent a list of the sublicensee(s) who are designated as responsible for the business entity s compliance with all insurance laws, rules, and regulations in the state of New York. Temporary Licenses If an insurance agent or broker dies, becomes disabled, or begins serving actively in the U.S. Armed Forces, New York law permits certain individuals to obtain temporary insurance licenses without having to pass an exam or meet requirements pertaining to prelicensing education or prior employment in the insurance industry. The original licensee is the licensed agent, broker, or business entity that dies, becomes disabled, or begins serving in the military. A temporary insurance agent or broker license may be issued to the following individuals: If a licensed agent or broker dies, to: The deceased s executor or the administrator of his/her estate If no executor or administrator exists, the deceased s surviving next of kin If the deceased was a member of a firm or association, the surviving member(s) of the firm or association If the deceased was the only officer or director sublicensee of a corporation, an officer or director of the corporation OR the executor or administrator of the deceased s estate If a licensed agent or broker is absent due to serving in any branch of the U.S. Armed Forces, to any person designated by a licensed insurance agent or broker; this also applies to any partnership or corporation if the licensee or all sublicensees are absent and serving in the military. If a person becomes totally disabled while being licensed and unable to pursue any duties of his/her occupation as a licensee, to the person s next of kin. Before a temporary insurance license can be issued, the person(s) requesting the license must submit a written application to the Superintendent, along with a written designation of the person(s) to be licensed and any required information. The application must be submitted on a form prescribed by the Superintendent. No fees are charged for the issuance or renewal of a temporary license, with one exception. The fee for renewal of a temporary license issued to the person designated by an individual serving in the military is half the fee that would normally be charged. Licensees to whom temporary insurance agent or broker licenses are issued are granted the authority to conduct the following activities on behalf of the original licensees: Renew the insurance business on the books that expires during the term of the temporary license Collect insurance premiums due and payable to the original licensee or his/her estate Transact the business of insurance as it relates to the original licensee s book of business continuing in force Individuals holding a temporary insurance agent or broker license are not permitted to sell, solicit, or negotiate insurance. In addition, they may only be licensed as agents of the same carriers the original licensee represented at the time of his/her death, disability, or entrance into the military. 12

16 LIFE AND HEALTH LAWS If a temporary license is issued because the original licensee died or became disabled, it will be issued for a term of 90 days from the original licensee s death or disability. The Superintendent may renew a temporary license for additional terms of 90 days but for no more than a total of 15 months. Two exceptions to this requirement exist: If a temporary license is issued to the deceased s next of kin, it cannot be renewed if the deceased s executor or administrator has applied for, and is qualified for, a temporary license If renewal of a temporary license beyond the 90-day or 15-month terms will best serve the interests of any person serving in the U.S. military, the Superintendent may renew a license for additional periods If a temporary license is issued because the original licensee began serving in the military, it will be issued for a term of 6 months and can be renewed for additional 6-month periods. A temporary license cannot remain in force or be renewed, for any reason, more than 60 days from the date of an absent licensed producer s final discharge from the military. Any temporary license issued due to a producer s military service will expire on the 60th day after the producer s final discharge date. Retention Question 4 A temporary insurance license authorizes the licensee to do which of the following? a. Sell new insurance on behalf of the original licensee b. Solicit new insurance on behalf of the original licensee c. Negotiate new insurance on behalf of the original licensee d. Renew existing insurance on behalf of the original licensee Maintenance and Duration of Licenses License Renewal Insurance licenses are issued for terms of 24 months and may be renewed by filing a renewal application that conforms to insurance code. If a new license is issued to a new applicant, it may be issued for more than 24 months but cannot be issued for more than 30 months. Licenses renew/expire as follows: Business entity licenses: For life and health lines of authority, on June 30th of odd-numbered years For property and casualty lines of authority, on June 30th of even-numbered years Individual licenses: If the licensee was born in an odd-numbered year, on the individual s birthday in each odd-numbered year If the licensee was born in an even-numbered year, on the individual s birthday in each even-numbered year A license is considered to be in good standing during its term unless: It is revoked or suspended by the Superintendent All certificates of appointment have been terminated by insurers (if this occurs, the license becomes inactive) The licensee fails to file a renewal application, if it was in good standing before expiration 13

17 NEW YORK STATE INSURANCE LAWS Before a renewal license can be issued, the licensee must submit a renewal application and fees as prescribed by the Superintendent. If an agent s license is inactive at the time it renews, it will expire. If no certificate of appointment with an insurer is on file during the term of the renewal, the license will expire and cannot be renewed. Any license for which an appointment is not filed will be deemed inactive. However, if a renewal application is submitted and a certificate of appointment is filed, the license can be renewed for the balance of its term. So long as a renewal application has been submitted before the license expires, it will continue in full force and effect until the renewal license is issued or until 5 days after the renewal application is denied and the Superintendent has given notice to the applicant and each of his/ her sublicensees. Before a renewal license can be denied (for any reason other than failure to pass an exam), the Superintendent must provide notice of the pending denial and offer the applicant a hearing. If a licensee or sublicensee is unable to submit a renewal application personally because he/she is actively engaged in the military, a renewal license may be issued upon the submission of an application filed by someone on behalf of the licensee. That person must also submit an affidavit that documents the military service of the licensee or sublicensee and his/her inability to submit an application personally. If a licensee or sublicensee is unable to comply with license renewal procedures because of extenuating circumstances other than military service, such as for disability, he/she may request a waiver of renewal procedures. The request must be submitted in a manner prescribed by the Superintendent and may include a waiver of examination requirements and the imposition of fines or sanctions for failing to comply with the license renewal procedures. License renewal applications must be submitted no fewer than 60 days before the expiration of the license to avoid a $10 late filing fee. The license renewal fee is waived for veterans of the U.S. Armed Forces who were not discharged dishonorably. No license fee applies to any request to make changes to an existing license. Licensees may submit a written application for a replacement license if their license is lost or destroyed; the fee for a replacement license is $15. If an agent is appointed to transact insurance for an authorized insurer, he/she is also authorized to transact insurance for any subsidiaries or affiliates of that insurer that are licensed in New York for the same lines of authority for which the producer is appointed. No additional certificates of appointments are necessary so long as the insurer has filed a certified copy of the required corporate resolution with the Superintendent. Retention Question 5 How often do individual producer licenses expire? a. Every 2 years on December 31st b. Every 2 years on June 30th c. Every 2 years on the licensee s birthday d. Every 5 years on the licensee s birthday Continuing Education Continuing education statutes applies to resident and nonresident licensees with the following lines of authority: Life insurance, annuities, variable annuities, and variable life insurance Sickness, accident, and health insurance All lines of property and casualty insurance Life settlements 14

18 Continuing education statutes do not apply to: Licensees holding licenses that did not require an examination LIFE AND HEALTH LAWS Limited and other licensees that are exempt from continuing education requirements by the Superintendent Life settlements, if the licensee is acting as a life settlement broker with a life line of authority Non-exempt resident and nonresident licensees must complete approved continuing education courses on a biennial basis (every 2 years). During each full 2-year licensing period, licensees must complete 15 hours of instruction by an approved continuing education provider. Courses completed must be on topics related to the lines of authority for which the individual is licensed. Excess hours of approved continuing education cannot be carried over to the next licensing period. The same course cannot be repeated for credit within the same licensing period. Nonresident licensees are exempt if they meet the continuing education requirements of their home states IF a home state s requirements are equivalent to those of this state. Course instructors who are licensed may receive credit for the courses they teach as if they were completing them as a student; however, they cannot receive credit for the same approved course more than once per licensing period. Licensees must furnish to the Superintendent course completion certificates documenting their compliance with requirements of continuing education statutes. If a licensee fails to meet continuing education requirements, his/her license will not be renewed. If a license is nonrenewed for failure to complete continuing education as required, the licensee is not eligible for relicensing until he/she certifies compliance with continuing education requirements for the previous licensing period. Any approved hours of instructions used by such licensee to satisfy the previous licensing period s requirements cannot be used to satisfy the requirements of the current licensing period. If an entity is eligible to provide approved courses of instruction and seminars, it must file a request for approval of each course on a biennial basis (every 2 years). The filing must include a provider organization application and a course submission application for each course, program, or seminar offered. Provider organizations must include in their filings the names of all instructors; instructors may be added by notifying the Superintendent and paying the appropriate fee. Filing fees are non-refundable. $200 per provider organization $50 per course $50 per instructor In addition, each licensee is required to pay a biennial fee of $10 per license for the filing and recording of continuing education course completions. Retention Question 6 Insurance producers are required to complete how many hours of approved continuing education during each 2-year license period? a. 15 b. 20 c. 24 d

19 NEW YORK STATE INSURANCE LAWS Assumed Names If a licensee uses an assumed name (a name other than the licensee s own legal name), the assumed name must be approved by the Superintendent before the licensee may use it to transact insurance in this state. In addition, licensees are required to notify the Superintendent if they change their legal names. Change of Address All licensees are required to notify the Superintendent of a change in address within 30 days of the change. This includes business address, residence address, mailing address, and address. All licensees (both resident and nonresident) are also required to notify the Superintendent of any change in their home state within 30 days of the change. Reporting of Actions Licensees are required to report to the Superintendent the following actions: Within 30 days of the matter s final disposition, any administrative action taken against the licensee in any jurisdiction, including action taken by a government agency; the report must include a copy of the order, consent to order, or other related legal documents Within 30 days of the initial pretrial hearing date, any criminal prosecution of the licensee in any jurisdiction; the report must include a copy of the initial complaint that was filed, the order that resulted from the hearing, and other relevant legal documents Disciplinary Actions Hearings Notice and Process If the Superintendent believes a person has committed, or is committing, a violation of law with respect to unfair methods of competition and unfair and deceptive acts and practices, he/she may serve upon that person a notice of a hearing and a statement of charges against the person. The hearing must be held within 10 days after the notice is served and the notice must contain the location of the hearing. Cease and Desist Order The person may speak personally at the hearing, or he/she may be represented by an attorney, and provide evidence why the Superintendent should not issue a cease and desist order. Others may appear and be heard at the hearing if they present good cause for their appearance. After the hearing, the Superintendent must serve a copy of a written report that contains his/her findings upon the person charged and any other involved party. If the Superintendent finds the person committed a violation defined in insurance code, he/she will issue a cease and desist order ordering the person to refrain from engaging in the prohibited practice. The penalty for violating a cease and desist order is up to $5,000 per violation. Whether the violation was willful will be considered when determining the amount of the penalty. 16

20 LIFE AND HEALTH LAWS Suspension, Revocation, and Renewal The license of an insurance producer, insurance consultant, adjuster, or life settlement broker can be denied, revoked, nonrenewed, or suspended by the Superintendent, after notice and a hearing, if the licensee has: Violated the insurance laws, regulations, subpoenas, or orders in any jurisdiction Provided information in an insurance license application that was materially incorrect, misleading, incomplete, or untrue Obtained a license through misrepresentation or fraud or attempted to do so Used fraudulent, coercive, or dishonest practices Demonstrated incompetence or dishonesty Demonstrated financial irresponsibility when transacting insurance in any jurisdiction Improperly withheld, misappropriated, or converted any money or property received in the course of conducting insurance in any jurisdiction Intentionally misrepresented the terms of any in-force or proposed insurance policy, life settlement contract, or insurance application Been convicted of a felony Committed any insurance unfair trade practice or fraud or admitted to committing such an act Had an insurance producer license, life settlement broker license, or any similar license denied, suspended, or revoked in any other jurisdiction Forged another person s name to an insurance application or life settlement contract or to any document related to an insurance or life settlement transaction Used notes or any other reference material improperly when completing an insurance license examination Knowingly accepted insurance business from an individual who was not licensed Failed to comply with a legally imposed child support obligation Failed to pay state income tax as required or legally ordered While acting as a life settlement broker, failed to maintain the privacy and confidentiality of any person, as required by law Failed to maintain continuing requirements for licensure Before a resident license can be revoked or suspended, the Superintendent must give the licensee and all sublicensees a hearing with 10 days advance notice. Once revoked or suspended, the Superintendent must notify the licensee immediately and all authority granted by the license will be terminated for both the licensee and all sublicensees. Once a license has been revoked, the licensee cannot obtain any type of insurance license in this state for at least 1 year from the date of revocation or from the date of a final determination resulting from any judicial review. If the license of a business entity is revoked, the licensed and sublicensed officers, directors, and members will also have their licenses revoked unless the Superintendent finds, after notice and hearing, they were not personally at fault in the matter that resulted in revocation of the business entity s license. A nonresident producer license or sublicense may be revoked immediately if any type of insurance license in the licensee s home state is suspended, revoked, or nonrenewed. In addition, the nonresident license or sublicense may be suspended, revoked, or nonrenewed if the nonresident licensee has been granted the right to a hearing under statute in the home state for an action that, in this state, is grounds for the revocation of a license. 17

21 NEW YORK STATE INSURANCE LAWS The Superintendent must give a nonresident licensee 10 days written notice before revoking a license. Upon submission of satisfactory proof that a suspension, revocation, or refusal to renew has been withdrawn, set aside, reversed, or voided by the nonresident licensee s home state, the Superintendent will reinstate and restore any and all of the nonresident s licenses that were revoked in this state. If any person files a verified complaint with the Superintendent that shows sufficient grounds for the revocation or suspension of the license of any insurance producer or adjuster, the Superintendent must provide notice and a hearing to determine whether the license should be suspended or revoked. If any person or business entity is under investigation for, or charged with, a violation of insurance code, the Superintendent has the authority to enforce insurance code and impose any penalties or remedy required by law. Any person conducting a hearing has the authority to administer oaths, examine and crossexamine witnesses, and receive documentary evidence. He/she must report his/her findings to the Superintendent, either verbally or in writing. The individual conducting a hearing may make recommendations but is not required to do so. If accepted by the Superintendent, the report may form the basis of the Superintendent s decision in the matter. If the Superintendent determines a licensee is liable for a civil penalty, he/she may enter a judgment against the licensee within 120 days of the determination. The order must be enforced, without court proceedings, in the same fashion money judgments in civil actions are enforced. The hearing must be open to the public unless the Superintendent finds it is in the best interests of the public for the hearing to be private. All persons affected must be permitted to attend the hearing, present testimony, have reasonable opportunity to inspect all documentary evidence, examine and cross-examine witnesses, and present proof in support of their own interests. Penalties Instead of revoking or suspending an insurance license, the Superintendent may: Require a licensee to pay a penalty up to $500 per offense Pay a maximum penalty of $2,500 for all offenses If a licensee fails to pay a penalty within 20 days after the registered mailing of an order by the Superintendent, the Superintendent may revoke or suspend the licensee s license. Retention Question 7 Before revoking a resident insurance producer s license, how many days notice must the Superintendent provide to the licensee before holding a hearing? a. 10 days b. 15 days c. 20 days d. 30 days 18

22 State Regulation General Duties and Powers of the Superintendent LIFE AND HEALTH LAWS The Superintendent of Financial Services is appointed by the governor and heads New York s Insurance Department. The Superintendent generally holds office until the end of the governor s term of office and is responsible for enforcing insurance laws enacted by the New York Assembly. The Superintendent has the power to make and enforce rules and regulations as needed to carry out this state s insurance laws. In addition, the Superintendent is responsible for: Ensuring the solvency of this state s insurers Eliminating insurance fraud, criminal abuse of the insurance industry, and unethical conduct in the transaction of insurance in this state Receiving and mediating consumer complaints and referring them to any appropriate federal, state, or local law enforcement agencies Specifically, the Superintendent may: Examine and investigate any person to determine whether that person has violated, or is violating, this state s insurance laws pertaining to unfair methods of competition and unfair and deceptive acts and practices Request information from a person under investigation, allowing the person no fewer than 15 days to provide a response If the person fails to provide a good faith response within the required time frame, the Superintendent may levy a civil penalty up to $500 per day for each day the response is late; the maximum penalty is $10,000 and the penalty cannot be levied until after the person is provided with notice and a hearing If the Superintendent levies 5 separate penalties against any 1 person for failure to comply within a 5-year period, he/she may levy an additional civil penalty up to $50,000 after notice and a hearing The Superintendent may levy additional civil penalties up to $50,000 for every 5 subsequent violations within a 5-year period that pertain to unfair competition and unfair and deceptive acts and practices A licensee has the option of surrendering his/her insurance license instead of paying any civil penalty imposed. Retention Question 8 The Superintendent has the authority to take all of the following actions, EXCEPT: a. Refer suspected criminal violations to law enforcement officials b. Create rules to implement and enforce insurance laws c. Create insurance laws d. Investigate consumer complaints 19

23 NEW YORK STATE INSURANCE LAWS Regulation of Insurance Companies Certificate of Authority A certificate of authority is a license issued to an insurance company authorizing it to transact insurance in this state. No person, firm, association, corporation, or joint-stock company may transact insurance business in this state unless it is licensed to do so or is otherwise exempt from the licensing requirement. The penalty for transacting insurance without a certificate of authority is $1,000 for the first violation and $2,500 for each subsequent violation. A certificate of authority is issued for all types of insurance for which the insurer is qualified under insurance code and requirements of its legal structure. The certificate of authority must contain the insurer s name, home office address, the certificate s term, the state or country in which the insurer was organized, and the lines of insurance for which the insurer is authorized to transact in this state. Requirements for a certificate of authority include the insurer meeting the capital and surplus requirements of insurance code (capital and surplus is the amount of the insurer s assets after liabilities are subtracted). Fingerprints and a criminal background check may be requested by the Superintendent from any of the insurer s corporate officers or directors as a condition of issuing a certificate of authority. An application for a certificate of authority may be refused if any insurer, or any of its corporate officers or directors, has been convicted of any crime that involves fraud, dishonesty, or moral turpitude. Moral turpitude is an act or behavior that gravely violates the moral sentiment or accepted moral standards of a society. Examples of moral turpitude include murder, rape, sexual molestation, and the illegal sale of drugs and firearms. Solvency Each insurer authorized to transact insurance business in this state must file an annual financial statement with the Superintendent on or before March 1st. The financial statement must show the insurer s financial status at the end of the preceding year and must be verified by at least 2 of the insurer s principal officers. The Superintendent may accept copies of the filings of audited financial statements required by another state if that state s requirements are substantially similar to this state s requirements. The Superintendent has the authority to grant exemptions from filing requirements and extensions of filing dates. Any insurer that willfully fails to file an annual statement may be subjected to a penalty up to $250 per day for each day of delay, subject to a maximum of $25,000. This also applies to any insurer that willfully fails to reply, within 30 days, to a written inquiry from the Superintendent concerning an annual statement. 20

24 LIFE AND HEALTH LAWS Unfair Claim Settlement Practices All insurers transacting insurance in this state are prohibited from engaging in unfair claim settlement practices. An insurer commits an unfair claim settlement practice if it commits any of the following acts without just cause and with such frequency it indicates a general business practice: With respect to a claim, knowingly misrepresenting policy facts or provisions to claimants Failing to respond promptly to claim submissions and communications within 15 business days Each insurer must establish an internal complaint department and provide to the Superintendent the name and title of its corporate officer responsible for the department Each complaint department must maintain an ongoing central claim log to register and monitor all complaint activity Each insurer must furnish the Department with all available information within 10 business days of receiving an inquiry from the Department about a claim Failing to adopt and implement reasonable standards to investigate claims promptly Failing to attempt in good faith to settle claims promptly, fairly, and equitably once liability has become reasonably clear An exception exists if the insurer has a reasonable basis to believe the claimant committed arson After receiving a properly executed proof of loss, the insurer must advise the claimant of acceptance or denial of the claim within 30 working days Compelling policyholders to file lawsuits to receive claim payments by offering substantially less than the amount they ultimately receive as a settlement of the lawsuit Failing to disclose promptly policy limits for bodily injury upon receipt of a written request by a person covered by supplemental uninsured/underinsured motorists insurance Knowingly misrepresenting to a claimant the terms, benefits, or advantages of the insurance policy Denying any element of a claim on the grounds of a specific policy provision, condition, or exclusion unless explaining in writing the specific reason for denial Misrepresenting a policy provision by making a payment, settlement, or settlement offer without an explanation of the reason it does not offer all amounts that should be included If, after notice and the opportunity for a hearing, it is determined an insurer committed an unfair claim settlement practice, each violation may be treated separately when imposing a fine. Such violations are not considered misdemeanors. Appointment of Agent When appointing insurance agents to represent them, insurers, fraternal benefit societies, and HMOs transacting insurance in this state must file a certificate of appointment with the Superintendent. The certificate must be filed in approved format within 15 days from the date of execution of the agency contract or the date the first insurance application is submitted. Certificates of appointment are valid until: Terminated by the carrier according to the agency contract s provisions The agent s license is suspended or revoked The agent s license expires and does not renew 21

25 NEW YORK STATE INSURANCE LAWS Termination of Agent Appointment If an agent appointment is terminated for cause, insurers, fraternal benefit societies, and HMOs transacting insurance in this state must: File with the Superintendent a statement containing the reason for termination within 30 days of the termination The insurer must also mail to the producer, within 15 days of filing with the Superintendent, a copy of the statement filed with the Superintendent The producer must be notified via overnight delivery or certified mail, return receipt requested, at the producer s last known address If the insurer discovers additional information that would have been reportable had it been known, it must provide that information to the Superintendent promptly A copy of the insurer s notice to the Superintendent must be mailed to the producer at his/her last known address within 15 days of notifying the Superintendent The producer must be notified via overnight delivery or certified mail, return receipt requested Within 30 days of receiving notice, a producer may file written comments with the Superintendent and send a copy of those comments to the insurer, fraternal benefit society, or HMO. Forms used by insurers to provide notice to producers may be obtained from the Department. Unfair and Prohibited Practices In the insurance industry, certain trade practices are prohibited because they have been deemed unfair and/or deceptive. If any insurance licensee, or any representative of an authorized insurer, commits any unfair and prohibited practice, he/she has violated New York insurance code and the New York Codes, Rules, and Regulations. Such person may be subject to penalties and/or loss of licensure as prescribed by law. Misrepresentation With respect to any insurance policy issued or delivered in this state, the following conduct constitutes misrepresentation and is prohibited: Issuing or circulating any illustration, statement, or memo that falsely describes (misrepresents) the terms, benefits, or advantages of any type of insurance contract Making any misleading estimation of the future dividends, share of surplus, or additional amounts to be received under any insurance policy Making any misleading estimation of the dividends, share of surplus, or additional amounts that have already been paid under any insurance policy Making any misleading statement about the financial condition of any insurer or the legal reserve system upon which it operates Making any incomplete comparison of insurance policies for the purpose of convincing one or more persons to lapse, forfeit, surrender an insurance policy; failing to comply with requirements of insurance code when making policy comparisons will be deemed an incomplete comparison 22

26 LIFE AND HEALTH LAWS In addition, an insurer commits misrepresentation of insurance policy provisions when it: Knowingly misrepresents to a claimant the benefits or advantages of a policy with respect to a claim Denies any portion of a claim based on a specific policy provision, condition, or exclusion unless it provides in writing a specific explanation of that policy provision, condition or exclusion Makes a claim payment, settlement, or settlement offer that does not include all amounts required to be included, and that are within the policy s limits of insurance unless it provides an explanation False Advertising An insurance corporation including its officers, directors, and agents cannot issue or circulate any illustration or statement indicating the corporation is permitted to transact any business that is not authorized by its certificate of authority. Defamation of Insurer No person may willfully make, issue, or circulate a written, printed, or verbal statement that is untrue and intended to describe in a negative or derogatory fashion the financial condition, standing, or solvency of any insurer authorized to transact insurance in New York. In addition, no person may conspire with or advise another to make such a statement. Unfair Discrimination Unless provided otherwise by law, no individual or business entity may engage in the following conduct on the basis of race, color, creed, national origin, or disability: Make premium or rate distinctions between persons Charge different policy premiums or rates between individuals within the same class of business Issue or require a discount or rebate in connection with any insurance policy Include a policy provision or condition that obligates the insured (or the insured s heirs, executors, and administrators) to accept any claim service or amount that is less than the full amount or value provided by the policy unless the provision or condition is included in all policies issued to persons in similar cases; if such a discriminatory provision is included in a policy, it is deemed void In addition, all individuals and business entities are prohibited from performing the following acts if they are carried out solely because of an applicant s race, color, creed, national origin, or disability: Rejecting an insurance application Refusing to issue, renew, or sell an insurance policy after receiving an appropriate application Adjusting rates or agent/broker fees and commissions for the sale or renewal of an insurance policy No individual or entity may refuse to issue, cancel, or nonrenew an insurance policy based on the gender or marital status of the applicant or policyholder. In addition, no insurance policy can be refused, cancelled, or nonrenewed because the insured was previously treated for a mental disability, as defined in insurance code. However, if a refusal, cancellation, or nonrenewal is based on sound underwriting and actuarial principles related to anticipated loss experience, it will not be prohibited. In such a case, the insurer must notify the insured or his/her physician of the specific reason for refusal, cancellation, or nonrenewal. 23

27 NEW YORK STATE INSURANCE LAWS Individuals and entities are prohibited from performing the following acts based solely because a person is or has been the victim of domestic violence: Refusing to issue, renew, or sell an insurance policy after receiving an appropriate application Charging a greater premium or policy payment Designating domestic violence as a reason for denial or reduction of coverage Adjusting rates or agent/broker fees and commissions for the sale or renewal of an insurance policy Rebating No licensee including employees and other representatives may issue, request, or negotiate any insurance policy other than as it has been filed with the Department. In addition, no licensee is permitted to give or share a commission or to make any type of payment, before or after a policy is issued: As an incentive, or to persuade a person, to buy an insurance policy As a rebate, special favor or advantage not contained in the policy, or valuable consideration as an incentive or inducement to buy an insurance policy Payment of a valuable consideration up to $25, including but not limited to merchandise, does not violate this section of law. Licensed insurance agents and brokers may retain commissions and underwriting fees paid for insurance written on their own property and risks; however, the total amount received cannot exceed 5% of the total net commissions paid to the licensee in the calendar year. Commission sharing in this context includes a licensee who receives commission for the negotiation or solicitation of insurance for a subsidiary or affiliated corporation. These rebating statutes do not prohibit the following: An insurer from distributing fairly any dividends payable from surplus on earned premiums An insurer or agent from paying commissions to a licensed insurance broker for negotiating insurance A licensed insurance broker from sharing commission with one or more other licensed insurance brokers who assisted with the sale or negotiation of insurance These rebating statutes and rules do not apply to: Reinsurance Marine insurance (except auto and protection and indemnity coverage) Insurance written on property located entirely outside New York, including vehicles and aircraft that are principally garaged outside New York Insurance written for operations or activities conducted outside New York If an insurer is authorized to transact multiple lines of insurance in this state, the insurer and its agents and representatives are prohibited from offering or selling one type of insurance as an inducement to purchase another type of insurance or any goods, securities, commodities, housing, services, or subscriptions to magazines unless specifically permitted by law. In addition to any other penalties provided by law, violations of rebating statutes are punishable by a penalty of $500 per violation. 24

28 LIFE AND HEALTH LAWS Licensee Regulation Retention Question 9 What unfair and prohibited practice involves the offer of a special premium or favor as an incentive to purchase insurance? a. Replacement b. Rebating c. Misrepresentation d. False advertising Controlled Business A licensee writes controlled business if he/she receives more than 10% of his/her aggregate net commissions in the preceding 12-month period from the placement of insurance on the life of, or property owned by: The spouse of the individual applicant/licensee Any corporation of which the individual applicant/licensee and/or his/her spouse own more than 50% of the shares; this also includes shareholders and affiliated and subsidiary corporations Of any firm or association of which the individual applicant/licensees and/or his/her spouse are members The Superintendant may deny, revoke, or suspend an insurance producer license if the licensee receives more than 10% of his/her total net commissions during any 12-month period from controlled business. Sharing Commissions If a licensed insurance broker acts on behalf of an insured (other than himself/herself) and submits an insurance application to an insurer, the insurer is considered to have authorized the broker to receive on its behalf payment of any premiums due on the policy both at the time of policy issue and at any later time. This only applies if the broker receives the payment within 90 days of the premium due date or, if additional premiums are due after a policy change, on the date the insurer delivers a statement of the additional premium. An insurer or agent may pay commissions to a licensed broker, in the same line of insurance, for negotiating a policy or contract of insurance. A licensed insurance broker may share commission with another licensed broker (in the same line of insurance) for aiding in the negotiation of the policy or contract. In order for an insurance agent, broker, consultant, adjuster, excess lines broker, or reinsurance intermediary to receive any commissions or fees in connection with the placement of insurance or provision of insurance services to any New York government agency or subdivision, the licensee must have actually placed the insurance, or rendered the insurance services, to the state. Any such licensees are required to file disclosure statements with the Department and the most senior official of the governmental unit involved in the insurance sale or service. 25

29 NEW YORK STATE INSURANCE LAWS Retention Question 10 An insurance producer may have his/her license suspended or revoked by earning commissions for business written on his/her own property and risks if the commissions received are more than what percentage of the licensee s net aggregate commissions during the preceding 12 months? a. 50% b. 25% c. 10% d. 5% Fiduciary Responsibility A fiduciary is one who is entrusted to care for, or act on behalf of, another (i.e., a principal). The integrity and fidelity of a fiduciary must be absolute because fiduciary responsibility is the highest standard of care and conduct imposed by ethics and law. Producers have fiduciary responsibilities to both their insurers and clients under New York insurance statutes, rules, and regulations. Every insurance agent, broker, and reinsurance intermediary must hold all funds received or collected in the course of the insurance business in a fiduciary capacity. Such licensees are prohibited from commingling the funds of their principals (i.e., insurers and clients) with the licensees own funds unless they receive the express, written consent of an insurer or client. In addition, although licensees are not required to keep separate bank accounts for each principal, if they keep the funds of multiple principals in the same account, they must keep books and records in a fashion so the funds held for each principal are reasonably identifiable. When holding funds in a fiduciary capacity, insurance agents and brokers must comply with the following requirements: If not making immediate remittance to insurers and clients of the funds received, licensees must deposit funds into one or more bank accounts designated as premium accounts The only deposits into premium accounts should be premiums received and any voluntary deposits necessary to guarantee adequate funds in the account or to pay premiums due but uncollected; these are defined as voluntary deposits The only withdrawals permitted from premium accounts are those for payment of premiums to insurers, payment of return premium to insureds, transfer of interest to the licensee s operating account if authorized in writing by insurers and clients, payment of commissions, and withdrawals of voluntary deposits If a policy s gross premium is deposited into a premium account, the combination of the net premium and the licensee s commissions in the same account is not considered commingling. If a licensee operates under an account current system of bookkeeping meaning the licensee bills the policyholders, collects the policyholders premium payments, and within the time frame agreed to in a contract with the insurer, remits the premiums less commission to the insurer he/ she must at all times maintain a minimum balance in one or more premium accounts that equals the net balance of premiums received but not remitted to insurers. 26

30 LIFE AND HEALTH LAWS Licensees who are required to maintain a premium account must maintain records in connection with their insurance transactions to record the following information: All money received in trust for insurers and clients All payments made from money held in trust All money received and paid in connection with the licensee s insurance business Maintain, at a minimum: A book or permanent account record that is imprinted with the name of the licensee and that shows all money received and paid in the following separate categories: y For money received: the amount and date received, the name of the insured, the insurer s name and policy or binder number, and a description of the risk (i.e., year/make/model of vehicle, address of property) y For money paid: the amount and check number, the name of the insured, the insurer s name and policy or binder number, and a description of the risk (i.e., year/make/model of vehicle, address of property) y Money received and paid for the general operation of the business, sales, and other insurance-related services All billings, correspondence, premium remittances, return premium refunds, commissions, and fees must be recorded Bank statements and passbooks, cashed checks, and deposit slips must be maintained Records may be kept in any of the following formats: a bound or loose-leaf book or in a mechanical or electronic device. Licensees are required to safeguard all records from physical harm and from falsification of information; they are also required to produce all records for inspection and copying by any person legally entitled to examine them. If required to be maintained, records must be held for at least 3 years from the end of the licensee s most recent fiscal year end. Records must be held at the licensee s principal place of business or stored in a location that permits reasonable access upon request of the Department. Nonresident licensees must make their records available to the Department within 10 days of a request. License Display The licenses of the supervising person(s) responsible for that place of business must be displayed prominently at the location of each headquarters and satellite insurance office. Commissions and Compensation Compensation refers to anything of value, including money, credits, loans, interest on premiums, trips, prizes, and gifts whether paid as commissions or in some other fashion. Compensation does NOT include tangible goods bearing the insurer s name, logo, or advertisement if such goods have an aggregate value less than $100 per year. No person is permitted to accept any commission, service fee, brokerage fee, or other valuable consideration in exchange for selling, soliciting, or negotiating insurance in New York if that person is required to hold an insurance license and does not. Insurers and fraternal benefit societies (including their officers, agents, and representatives), and insurance agents and brokers, are prohibited from paying commissions, money, fees, or any type of compensation to any person unless that person is licensed in the line of authority for which payment is made. 27

31 NEW YORK STATE INSURANCE LAWS If a licensed insurance agent, broker, or consultant engages in any of the following activities in exchange for a fee, the licensee must execute a written contract signed by the person being charged the fee: Examines, appraises, reviews, or evaluates an insurance policy, bond, annuity, pension or profit-sharing plan Gives insurance advice or makes insurance recommendations in connection with an insurance contract examination, appraisal, review, or evaluation The written contract must clearly specify the terms of the services being provided and the amount and extent of the fee being charged. A copy of the written contract must be kept by the licensee for no fewer than 3 years after completion of the services. A licensee may not receive any compensation or commission for the sale of insurance if consultation services were performed by contract within the 12 months before the sale. An exception applies if the compensation or commission is permitted in the written consulting contract. An unlicensed person may receive commissions and fees for insurance transactions that took place while the person was licensed. Termination Responsibilities of Producer So long as the statements are made in the absence of fraud, bad faith, or gross negligence, no person providing information about possible terminations will be subject to civil liability for his/her statements. All statements made to the Superintendent by the insurer will be treated as privileged communications. Examination of Books and Records The Superintendent may examine the records of any insurer or licensee transacting insurance in this state. In addition to other requirements of insurance code, insurers are required to maintain records pertaining to policies, claims, complaints, financial matters, and producer licensing. Records means books, records, files, securities, data collections, and other documents. A durable medium is a method for maintaining a record that provides reasonable methods to prevent tampering with the information contained in or on the record. The method also includes for reproduction of the original so that the reproduction is an exact copy. Durable medium includes paper, fax, photocopy, micrograph, or magnetic, optical, mechanical, or electronic media. Unless another statute specifies otherwise, insurers are required to maintain their records for the latest of 6 calendar years or the filing of an examination report that included review of the record. Specific records that must be retained include: Policy records, from the expiration date of the policy Applications that did not result in the issuance of a policy Any reports filed with the Superintendent, from the date of filing Claim files, from the date the claim is closed Licensing records, from the date the relationship is terminated Complaint records, from the date the complaint is resolved Financial records, from the date of their creation Any other records, from the date of their creation Insurers must require that any person authorized on its behalf to transact insurance comply with record retention requirements. Such requirement may be contractual or in some other format. Despite the requirement, the insurer will still be responsible if the authorized person fails to maintain records as required. If records are maintained in a language other than English, they must be accompanied by accurate translations. 28

32 Insurance Frauds Prevention Act LIFE AND HEALTH LAWS The New York Insurance Frauds Prevention Act was established to eliminate the commission of arson as a form of insurance fraud. A fraudulent insurance act is any act committed by a person who, knowingly and intentionally plans to defraud an insurer, self-insurer, or agent by submitting any written statement in connection with an insurance application, certificate of insurance, or claim that while knowing the statement: Contains materially false information concerning any material fact; or Conceals, for the purpose of misleading, information concerning any material fact A fraudulent insurance act also includes conspiring with someone or having the knowledge of, or belief that, a fraudulent insurance act was committed. The commission of a fraudulent insurance act is a violation of insurance code. In addition to any criminal liability that may arise as the result of a fraudulent insurance act, the Superintendent is authorized to impose a civil penalty up to $5,000, plus the amount of the claim, for each violation. This penalty will be imposed against each person who is found to have: Committed a fraudulent insurance act or violation of the Insurance Frauds Prevention Act Knowingly and with intent to defraud, filed, made, assisted, solicited, or conspired with another to file or make an application for a premium reduction on an auto insurance policy if the application contained any information that was materially false or misleading; this includes any concealment of material facts All insurance applications and claim forms in this state, other than those pertaining to auto insurance, unless exempted, must contain the following statement (or a statement that is substantially the same): Any person who knowingly and with intent to defraud any insurance company or other person files an application for insurance or statement of claim containing any materially false information, or conceals for the purpose of misleading, information concerning any fact material thereto, commits a fraudulent insurance act, which is a crime, and shall also be subject to a civil penalty not to exceed $5,000 and the stated value of the claim for each such violation. All auto insurance applications and claim forms must contain the following statement: Any person who knowingly makes or knowingly assists, abets, solicits or conspires with another to make a false report of the theft, destruction, damage or conversion of any motor vehicle to a law enforcement agency, the department of motor vehicles or an insurance company, commits a fraudulent insurance act, which is a crime, and shall also be subject to a civil penalty not to exceed $5,000 and the value of the subject motor vehicle or stated claim for each violation. If the Superintendent has reason to believe a person has committed, or is committing, the crime of larceny (as defined in the penal code) with respect to insurance transactions, he/she may conduct an investigation either in this state or outside it. Any person engaged in insurance in this state, whether licensed or exempt from licensure, is required to report any actual or suspected fraudulent insurance transaction to the Superintendent within 30 days of discovering or suspecting such transaction. The information is required to be submitted on a form prescribed by the Superintendent and should include the facts of the case along with the names of the parties who are involved in it. The Superintendent will review the report and undertake any necessary investigation. 29

33 NEW YORK STATE INSURANCE LAWS Insurance Frauds Bureau The Insurance Frauds Bureau was created by the New York Assembly as a law enforcement agency of the Insurance Department. It is charged with detecting, investigating, and preventing insurance fraud and referring fraudsters for prosecution. The Superintendent has the power to designate employees of the Bureau as peace officers. So long as a person is acting in good faith and without fraudulent intent, he/she cannot be subject to civil liability or a civil cause of action for: Furnishing information pertaining to actual or suspected insurance fraud to law enforcement officials Furnishing information to persons other than law enforcement officials with respect to actual or suspected insurance fraud Furnishing information contained in reports that are filed with the Insurance Frauds Bureau or its employees Insurers that write auto insurance, Workers Compensation, or individual, group, or blanket accident and health insurance must file a fraud prevention plan with the Superintendent and establish and maintain a full-time Special Investigations Unit (SIU). The SIU must be operated separately from the insurer s claims and underwriting functions and have as its goal the detection, investigation, and prevention of insurance fraud. If an insurer fails to comply in a timely manner, the Superintendent may impose a fine, forcefully impose a plan on the insurer, or both. Insurers required to formulate a fraud prevention plan must annually report the plan s activities and results to the Superintendent. Retention Question 11 What is the maximum penalty that can be imposed under the Insurance Frauds Prevention Act for a single violation? a. $500 b. $5,000 c. $50,000 d. 1 year in prison Aiding Unauthorized Insurer It is illegal for any insurer or HMO to transact insurance in this state without being licensed or authorized to do so. As a result, any person, firm, association, corporation is prohibited from acting as an agent or broker to conduct any of the following activities on behalf of an unlicensed or unauthorized insurer: Solicit insurance Negotiate insurance Effectuate insurance Place risks with such an insurer In any manner, assist or aid such an insurer in effecting any insurance agreement, policy, or contract 30

34 LIFE AND HEALTH LAWS Exceptions exist for insurance brokers, other than those with licenses for life and variable products, who are licensed to place the following types of insurance with unauthorized insurers: Reinsurance Insurance on property permanently located out of this state Ocean marine insurance Legal liability insurance for the ownership, operation, maintenance, or use of motor vehicles or aircraft that are principally garaged and used out of this state Legal liability insurance for activities carried out entirely outside of this state or arising from property located permanently out of this state Fidelity bonds Specifically, no person is permitted to conduct any of the following insurance transactions unless specifically excepted: Guarantee or confirm the validity of any agreement, policy, or contract issued by the unauthorized insurer Bind risks on behalf of an unauthorized insurer On behalf of an unauthorized insurer, countersign or endorse: Binders Memorandums Cover notes Slips Certificates Policies Any other insurance document The provisions of this section of insurance code do NOT: Prohibit an attorney from representing an unauthorized insurer in claims settlement or litigation Apply to excess line brokers In addition, licensed insurers are permitted to provide support services to unauthorized insurers that are affiliates, but only if the unauthorized insurer has satisfied all requirements of law pertaining to the placement of insurance by excess line brokers. A penalty of $500 will be assessed to any person, firm, association, or corporation for each violation of any provision of this section of insurance law. 31

35 NEW YORK STATE INSURANCE LAWS Consumer Privacy Regulation The rules and regulations of the New York Insurance Department authorize the Superintendent to outline the responsibility of licensees with respect to the privacy of the financial and health information they receive from and on behalf of consumers and insureds. Specifically, New York insurance statutes, rules, and regulations address certain sections of the Gramm-Leach-Bliley Act (GLBA), including minimum standards in the form, content, and sale of insurance and unfair methods of competition or unfair or deceptive acts and practices. This regulation governs how an individual s nonpublic personal information may be treated by an insurance licensee of this state by: Requiring licensees to provide individuals with a disclosure about its privacy policies and practices Describing the conditions under which a licensee is permitted to disclose an individual s nonpublic personal information to non-affiliated third parties Providing methods for individuals to prevent licensees from disclosing their nonpublic personal information Providing a method for individuals to prevent licensees from disclosing their nonpublic information by not affirmatively consenting to disclosure This regulation applies to all nonpublic personal health information and nonpublic personal financial information about individuals who purchase or seek to purchase insurance, or who are insurance claimants or beneficiaries, for primarily personal, family, or household purposes. This regulation does not apply to information about business entities or individuals who obtain products or services for business, commercial, or agricultural purposes. Definitions Affiliate A company that controls, is controlled by, or is under common control with another company. Clear and Conspicuous A notice is reasonably understandable and is designed to call attention to the information it contains and the importance of that information. Nonpublic Personal Financial Information Personally identifiable financial information and any customer list, description, or grouping that is derived using personally identifiable personal information that is not publicly available. This includes publicly available information in a customer list, description, or grouping. Nonpublic personal financial information does NOT include health information, publicly available information not contained on a list as previously mentioned, and any list, description, or grouping derived without using personally identifiable personal information other than publicly available information. Nonpublic Personal Health Information Health information that identifies an individual who is the subject of the information or provides a reasonable basis to believe the information could be used to identify a specific individual. Personally Identifiable Financial Information Any information: A consumer provides to a licensee to obtain an insurance policy or insurance services About a consumer that results from an insurance transaction between a licensee and the consumer A licensee obtains about a consumer in connection with the provision of insurance services or products to that consumer 32

36 Examples of personally identifiable financial information include: LIFE AND HEALTH LAWS Information a consumer provides on an insurance application Account balance information and payment history The fact that an individual is or has been one of the licensee s customers Any information about a consumer if it is disclosed in a manner that indicates the individual is or has been the licensee s customer Any information the licensee collects through an Internet cookie to the extent the information constitutes personally identifiable information Information appearing on a consumer report A licensee must provide a clear and conspicuous notice that accurately reflects its privacy policies and practices to: A consumer who becomes the licensee s customer, no later than by the time the licensee establishes a customer relationship with the consumer A consumer, before disclosing any of the consumer s nonpublic personal financial information to any nonaffiliated third party A licensee must give customers, at least annually during term of the customer relationship, a clear and conspicuous notice that accurately reflects its privacy policies and practices. If an existing customer obtains a new insurance product or service from a licensee that is to be used primarily for personal, family, or household purposes, the initial notice requirements are met IF: The licensee will provide a revised privacy policy notice that covers the customer s new insurance product or service and clearly states whether any existing opt-out direction applies to the new product or service; or The initial, revised, or annual notice most recently provided was accurate with respect to the new insurance product or service A licensee cannot, directly or through an affiliate, disclose any nonpublic personal financial information about a consumer to a non-affiliated third party unless: The licensee has provided the consumer with an initial notice, as required The licensee has provided the consumer an opt-out notice, as required The licensee has given the consumer a reasonable opportunity, before disclosing information to a non-affiliated third party, to opt out of the disclosure and the consumer does not opt out A licensee may allow a consumer to select certain nonpublic financial information or certain non-affiliated third parties for which to opt out of disclosing nonpublic personal financial information. A licensee cannot, directly or through an affiliate, disclose a policy number or similar identifier to any non-affiliated third party for use in telemarketing, direct mail marketing, or other marketing through electronic mail to the consumer. An exception exists for information provided to a consumer reporting agency. A licensee is not required to provide an initial notice to a consumer if: The licensee does not disclose any nonpublic personal financial information about the consumer to any non-affiliated third party other than as authorized by law A notice has been provided by an affiliated licensee, so long as the notice clearly identifies all licensees to whom the notice applies and is accurate with respect to the licensee and the other institutions A violation of this regulation constitutes an unfair trade practice in the business of insurance. 33

37 NEW YORK STATE INSURANCE LAWS Retention Question 12 Which of the following statements BEST describes the manner in which a licensee must provide a clear and conspicuous notice to its customers that accurately reflects its privacy policies and practices? a. The notice must be provided once, at the time the insurance application is taken b. The notice must be provided every 12 months after is policy is issued c. The notice must be provided every 24 months after a policy is issued d. The notice must be provided a the time the insurance application is taken, and annually thereafter Producer Compensation Transparency When selling insurance, producers must disclose the following information to the party buying and paying for the insurance either verbally or in writing in a prominent fashion no later than at the time of application for insurance: A description of the producer s roles in the sale of insurance Whether the producer will receive compensation in connection with the sale of the policy either from the insurer or a third party A statement that the compensation paid to the producer may vary based on any of the following factors: the type of contract issued, the amount of insurance business the producer submits to the insurer, and the profitability of the insurance business the producer submits to the insurer If requested from the purchaser, the producer must provide information about the compensation the producer anticipates receiving from the proposed sale and from any alternate proposals presented by the producer Such information must be presented to the purchaser no later than at the time the policy is issued An exception exists if such information cannot be provided due to time constraints related to the issuance of the policy; in such a case, the producer must provide the requested information within 5 business days If the purchase requests additional information about producer compensation within 30 days after the policy is issued, the producer must provide it within 5 business days If the actual amount of compensation is not know by the producer at the time disclosure is required, the producer must provide an explanation about how the amount of compensation will be calculated and a reasonable estimate of the anticipated compensation If the original compensation disclosure is made verbally, the producer must also provide it in writing no later than the date the policy is issued. Producers are not permitted to contradict compensation disclosures or to provide any misleading or knowingly incorrect information about the producer s roles in the sale or its compensation. Producers must keep copies of all written compensation disclosures for no less than 3 years after they are given. Compensation disclosures do not apply to: The placement of reinsurance The placement of insurance with a captive insurer An insurance producer that does not have direct sales or solicitation contact with a purchaser, including wholesale brokers and managing general agents The sale of insurance by a person not required to hold an insurance producer license Renewals, if the purchaser makes a request more than 30 days after the renewal 34

38 LIFE AND HEALTH LAWS Cyber Regulation These regulations are designed to promote the protection of customer information as well as the information technology systems of regulated entities. This regulation requires each company to assess its specific risk profile and design a program that addresses its risks in a robust fashion. Senior management must take this issue seriously and be responsible for the organization s cybersecurity program and file an annual certification confirming compliance with these regulations. A regulated entity s cybersecurity program must ensure the safety and soundness of the institution and protect its customers. Each covered entity must maintain a cybersecurity program designed to protect the confidentiality, integrity and availability of the covered entity s information systems. The program must be based on the covered entity s risk assessment and designed to perform the following core cybersecurity functions: Identify and assess internal and external cybersecurity risks that may threaten the security or integrity of nonpublic information stored on the covered entity s information systems Use defensive infrastructure and the implementation of policies and procedures to protect the covered entity s information systems, and the nonpublic information stored on those information systems, from unauthorized access, use or other malicious acts Detect cybersecurity events Respond to identified or detected cybersecurity events to mitigate any negative effects Recover from cybersecurity events and restore normal operations and services; and Fulfill applicable regulatory reporting obligations All documentation and information relevant to the covered entity s cybersecurity program shall be made available to the superintendent upon request. Each covered entity shall notify the superintendent as promptly as possible but in no event later than 72 hours from a determination that a cybersecurity event has occurred that is either of the following: Cybersecurity events impacting the covered entity of which notice is required to be provided to any government body, self-regulatory agency or any other supervisory body; or Cybersecurity events that have a reasonable likelihood of materially harming any material part of the normal operation(s) of the covered entity Annually, each covered entity must submit to the superintendent a written statement covering the prior calendar year. This statement must be submitted by February 15th, certifying that the covered entity is in compliance with the requirements set forth in this Part. Each covered entity must maintain for examination by the department all records, schedules and data supporting this certificate for a period of 5 years. To the extent a covered entity has identified areas, systems or processes that require material improvement, updating or redesign, the covered entity must document the identification and the remedial efforts planned and underway to address such areas, systems or processes. Such documentation must be available for inspection by the superintendent. 35

39 NEW YORK STATE INSURANCE LAWS General Insurance Legal Concepts and Interpretations Affecting Contracts Representations and Misrepresentations Insurance applications, claim forms, and other insurance documents request information from the applicant and/or insured. Most statements made by the applicant or insured in response to an insurer s request on these documents are considered representations. In New York, a representation is defined as a statement about a fact that is made: By an applicant to an insurer (this includes someone acting on behalf of the applicant with the applicant s authority) At or before the date and time an insurance contract becomes effective For the purpose of obtaining the insurance contract A misrepresentation is defined by New York law as being a false representations. Specifically, the misrepresented facts are those facts that make the representation false. A material fact is one that, if the insurer had known the fact, would have refused to issue insurance. In this state, the only types of misrepresentations that void an insurance contract or permit the insurer to deny a claim are material misrepresentations. This means that made by the applicant to the insurer were false and, if the insurer had known the true facts, it would not have issued insurance. With respect to the following types of insurance, the only type of misrepresentation that can void an insurance contract or permit the insurer to deny a claim are intentional misrepresentations: Life, accident, and health insurance Annuities Non-profit medical and dental indemnity Contracts issued by health and hospital service corporations When determining if a fact is material, if an applicant for life, accident, or health insurance makes a misrepresentation about whether he/she has had previous medical treatment, consultation, observation, or care in a hospital or other institution, it will be deemed a misrepresentation about the specific disease that pertains to the treatment or care that was misrepresented. If an insurer can prove that such a misrepresentation was made during legal action undertaken to rescind a contract or deny a claim, the misrepresentation will be deemed a material misrepresentation. Warranties New York defines warranty to mean any insurance contract provision that conditions the applicability of coverage on any fact that either reduces or increases the likelihood of any loss, damage, or injury including death, disability, injury, physical and moral hazards, and any cause of loss or peril insured against. A breach of warranty cannot void an insurance contract or permit an insurer to deny a claim unless the breach materially increases the risk of loss, damage, or injury covered by the policy. If a breach of warranty is made with respect to one type of coverage, it does not constitute a breach of warranty with respect to other types of coverage provided by the policy. This definition and its requirements do not apply to the express or implied warranties that are made under an ocean marine insurance contract. 36

40 Life Laws 37

41 Life Laws Life Insurance Regulation Insurable Interest Generally speaking, a person may only purchase insurance if he/she/it has an insurable interest in the subject of insurance. In New York, insurable interest is defined: With respect to persons related closely by blood or law, a substantial interest that is created by love and affection With respect to other persons, a legal and substantial financial interest in the continued life, health, or physical safety of the person insured this differs from an interest that is only caused, or increased in value, by the death, disablement, or injury of the insured In New York, it is illegal for any person to obtain a life, accident, or health insurance policy on the life of an individual unless the policy s benefits are payable to: The person insured, including his/her personal representatives; or A person with insurable interest in the person insured An exception to this prohibition exists for Type B charitable and religions organizations. If a policy beneficiary, assignee, or payee violates this prohibition, the person insured (including his/ her executor or administrator) may file legal action to recover the benefits received by the person that violated the law. Unless the insured person obtains coverage on his/her own life, or consents in writing prior to being insured, no insurance can be issued on the life of an individual unless: The policy being issued is: Group life insurance Group or blanket accident and health insurance Family insurance The person obtaining insurance is the spouse of the insured person The person obtaining insurance has an insurable interest in a minor under age 14½ or provides support and maintenance for that minor An employer or an irrevocable trust has an insurable interest in the lives of its employees or retirees, or the employees or retirees of its subsidiaries or affiliates Regulation of Variable Products Fixed vs. Variable Life Contracts A separate account is a financial account or fund that is held by a life insurance company apart from its other funds and assets. Separate accounts were designed at the requirement of federal securities laws for use with variable annuities and are now required for use with all variable contracts. In New York, insurers are required to establish and use one or more separate accounts in conjunction with the following types of insurance: Fixed and variable annuities Variable life insurance Private health insurance Settlement or dividend options Annuities issued in connection with funding agreements 39

42 NEW YORK STATE INSURANCE LAWS The income, gains, and losses of a separate account cannot be credited or charged to any other account held by the insurer and its assets must be valued on regular basis no less than monthly. A separate account must have sufficient net investment income and assets to meet anticipated withdrawals under policies funded by the account. It must meet the reserve requirements and other contract liabilities of the policies supported by the account. Assets allocated to a separate account must be valued at their market value on the date of valuation. No transfer of assets may be made between any of an insurer s separate accounts unless the transfer is made for the purpose of establishing the account or to support the contracts to which the separate account relates. The Superintendent has sole authority with respect to the issuance and sale of Variable Agreements and Separate Accounts. He/she will consider the history, reputation,and financial stability of an insurer, as well as the character, experience, responsibility, competence, and general fitness of the insurers officers and directors of an insurer when determining whether or not to approve a Separate Account management statement. Authorized insurers must file a statement with the Superintendent outlining the operation methods used to manage Separate Accounts. That statement must be approved by the Superintendent. Licensee Responsibilities Solicitations and Sales Presentations Advertising Insurance agents and brokers are prohibited from: Making or issuing an advertisement, sign, brochure, or public announcement containing information about an insurer s financial condition unless the information complies with specific requirements imposed by law Use an advertisement or other public announcement to call attention to an unauthorized insurer In addition, when using an advertisement, sign, brochure, or public announcement that refers to an insurance company, agents and brokers must use the insurer s full name and the name of the city in which it has its principal office. Agents and brokers are also prohibited from using the existence of the Life Insurance Company Guaranty Corporation to sell, solicit, or induce the purchase of insurance. This includes making, publishing, circulating, or placing before the public any: Notice, poster, or letter Circular or pamphlet Radio or television advertisement Retention Question 13 Which of the following statements about the Life Insurance Company Guaranty Corporation is correct? a. Its existence must be noted on every advertisement for covered policies b. Its coverages are only sold through health insurance agents c. Its existence may not be used to solicit or sell insurance d. Its existence may not be revealed to the public under any circumstances 40

43 LIFE LAWS Policy Summary All life insurance applicants must be given, no later than at the policy s effective date, a copy of the most recent buyer s guide and a policy summary. Annuity and life contracts with equity index accounts cannot be issued unless an applicant is provided with a disclosure statement that contains specific statements prescribed by law. If a policyholder requests a policy summary, the insurer must provide one for each in-force premium paying policy if no policy summary was ever furnished. The insurer may charge a reasonable fee to the policyholder, subject to Department guidelines. A policy summary must be issued as a separate document and contain the following: A title, which will be place prominently on the document, that states: STATEMENT OF POLICY COST AND BENEFIT INFORMATION The name and address of the insurance agent or broker; if no agent or broker is involved, a statement about how the applicant/policyholder can make inquiries/receive responses about the policy summary The full name and office address of the insurer that issued the policy The generic name of the basic policy and each rider Tables for the first 5 years of the policy, and every 5th year thereafter until the maturity date, that show the following information separately for the basic policy and each rider: The annual or annual planned premium The death benefit at the beginning of the policy year The policy and cash surrender values at the end of each year The policy s effective annual loan interest rate and an indication about whether it is adjustable or fixed, applied in advance or arrears, and the frequency at which it will be determined The date on which the policy summary is prepared Life insurance cost indexes for the 10 and 20 years, however, not beyond the premiumpaying period; separate indexes are to be displayed for the basic policy and each optional term life insurance rider In the case of participating policies and participating optional term life insurance riders, cost indexes must be accompanied by the equivalent level annual dividend A statement that dividends are based on the company s current dividend scale and are not guaranteed A statement next to the life insurance cost indexes that states: AN EXPLANATION OF THE INTENDED USE OF THESE INDEXES IS PROVIDED IN THE BUYER S GUIDE Insurers are required to keep a file containing a copy of every policy summary they issue. This section of insurance law does not apply to any type of insurance that is specifically exempted under law, including but not limited to credit life insurance, group life insurance, and policies subject to ERISA. Buyer s Guide A life insurance buyer s guide three main goals: Help a consumer find an insurance policy that meets his/her needs and budget Help a consumer decide how much insurance he/she needs Assist a consumer with the process of making an informed decision when buying a policy The state of New York has adopted the use of the buyer s guide prepared by the NAIC, which does not endorse any specific insurance policy or insurance company, and requires it to be provided to all applicants no later than at the policy s effective date. 41

44 NEW YORK STATE INSURANCE LAWS Retention Question 14 The purpose of the life insurance buyer s guide is to do which of the following? a. Provide a STATEMENT OF POLICY COST AND BENEFITS for the policy being bought b. Help clients find policies that meet their needs and budgets c. Help prospective clients determine if they will benefit by a policy replacement d. Explain the details of any accompanying policy illustration Illustrations An illustration is a presentation or description that includes non-guaranteed elements of a life insurance policy over a period of years. It may be one of three types: A basic illustration is a ledger or proposal used during the sale of insurance that shows both guaranteed and non-guaranteed elements of the policy A supplemental illustration is furnished in addition to a basic illustration and may only show a scale of non-guaranteed elements that is permitted in a basic illustration An in-force illustration is furnished at any time after the policy has been in force for at least 1 year In general, a life insurance illustration is a document that explains how a particular policy is expected to function over time: At a specified interest rate or rates Based on planned premium payments Using current and guaranteed elements pertaining to insurance costs and expenses A life insurance illustration is not a guarantee of an insurance policy s terms, conditions, or performance it is simply a tool used to explain the policy. A self-supporting illustration is one that depicts a policy at and after the 15th policy year as having an accumulated cash value (including cash surrender values) that equals or exceeds the total values available to the policyholder. A lapse-supported illustration is one that does not meet the tests of a self-supporting illustration, unless the policy does not develop nonforfeiture values. New York insurance regulations pertaining to life insurance illustrations do NOT apply to: Variable life insurance policies Individual and group annuities Credit life insurance Life insurance policies with no illustrated death benefits on any individual exceeding $10,000 The state of New York requires all insurance companies to notify the Superintendant if it intends to market life insurance policies with our without an illustration. This requirement applies to all life insurance policies other than variable life, individual and group annuities, and credit life. If an insurer indicates it will not market a policy form with an illustration, the insurer is prohibited from using an illustration with the policy before its first anniversary. If an insurer indicates it will market a policy form with an illustration, a basic illustration must be prepared and delivered as prescribed by law. 42

45 LIFE LAWS A life insurance illustration must be labeled clearly Life Insurance Illustration, and must contain the following basic information: Insurer s name Name and business address of any applicable producer Name, age, and sex of the proposed insured Underwriting or rating classification upon which the illustration is based The generic name of the policy (i.e., Term Life Insurance), the insurer s product name (i.e., Preferred 10-Year Term), and the policy form number Initial death benefit Dividend option chosen by the insured or the application of any non-guaranteed elements that apply When using a life insurance illustration during the sales process, insurers and producers are not permitted to: Refer to the policy as anything other than a life insurance policy Use or describe non-guaranteed elements in misleading ways State or imply the payment or amount of non-guaranteed elements is guaranteed Use an illustration that does not comply with state law Use an illustration that projects policy performance to be better than actual performance; this applies to any time during the life of the policy Provide the applicant with an incomplete or partial illustration Indicate in any manner that premium payments will not be required at some time during the policy, and still maintain illustrated death benefits, unless the indication is a fact Use the term vanish or vanishing premium (or any similar term) to imply the policy will become paid up using non-guaranteed elements as a portion of future premiums Use a lapse-supported illustration (except for policies that cannot develop nonforfeiture values) Use an illustration that is not self-supporting Use interest rates that are greater than the company s current earned interest rate in determining illustrated non-guaranteed elements Standards for Basic Illustrations All basic illustrations must conform to the following format: The illustration must show the date it was prepared Each page must be numbered and show its relationship to the total number of pages in the illustration (for example, page 2 of 17) The illustration must identify clearly the assumed dates of payment receipt and benefit payout within a policy year The age of the proposed insured must be shown as the issue age plus the number of years the policy is expected to have been in force if it is shown in the tabular detail on the illustration Assumed payments on which the illustrated benefits and values are based must be identified as premium outlay or contract premium Any non-guaranteed elements may not be based on a scale more favorable to the policyowner than the insurer s illustrated scale Guaranteed death benefits and values must be shown and labeled guaranteed and must appear in the illustration before any corresponding non-guaranteed elements 43

46 NEW YORK STATE INSURANCE LAWS The surrender value must be identified by the name the value is given in the policy Illustrations may show benefits and values in any of the following formats: graphic, chart, or tabular Illustration of non-guaranteed elements must indicate: The benefits and values are not guaranteed The assumptions on which they are based may be changed by the insurer Actual results may be more or less favorable Illustrations showing that policy charges may be paid using non-guaranteed values must disclose that a charge continues to be required and the insured may need to continue or resume premium payments If the applicant plans to use any guaranteed or non-guaranteed dividends or policy values to pay any or all of the policy s premium or other charges, the illustration must show the impact of those payments on the policy s future benefits and values All basic illustrations must conform to the following narrative summary: A brief description of the policy being illustrated and the statement that it is a life insurance policy A brief description of the premium outlay for the policy A brief description of any policy features, riders, or options shown and the impact they may have on the benefits and values of the policy; this applies to guaranteed and nonguaranteed elements Identification and a brief definition of column headings and key terms The following statement: This illustration assumes that the currently illustrated nonguaranteed elements will continue unchanged for all years shown. This is not likely to occur, and actual results may be more or less favorable than those show. After the narrative summary, a basic illustration must include a numeric summary of the policy s: Death benefits Policy values Premium outlay and contract premium Unless otherwise excepted by law, the numeric summary must be shown for least policy years 5, 10, and 20 and also at age 70 and include the following: Policy guarantees The insurer s illustrated scale The insurer s illustrated scale but with reduced non-guaranteed elements as prescribed by law Illustrations provided at policy delivery must include the following statement to be signed and dated by the applicant: I have received a copy of this illustration and understand that any nonguaranteed elements illustrated are subject to change and could be either higher or lower. The producer has told me they are not guaranteed. Illustrations provided at policy delivery must include the following statement to be signed and dated by the insurance producer: I certify that this illustration has been presented to the applicant and that I have explained that any non-guaranteed elements illustrated are subject to change. I have made no statements that are inconsistent with the illustration. 44

47 LIFE LAWS Basic illustrations must also show tabular detail for each policy year through the first 10 years and for every 5th policy year thereafter, ending at age 100: The premium outlay and payment mode the applicant plans to use The corresponding guaranteed death benefit, as provided in the policy The corresponding guaranteed cash value available upon surrender, as provided in the policy Standards for Supplemental Illustrations Supplemental illustrations may be issued but only if they are attached to or accompanied by a basic illustration. In addition: The non-guaranteed elements cannot be more favorable to the policyholder than the corresponding elements shown in the basic illustration It must contain the same statement contained in the basic illustration that non-guaranteed elements are not guaranteed If the policy has a contract premium, the premium underlying the supplemental illustration must be the same as the contract premium shown in the basic illustration It must include a notice referring to the basic illustration for guaranteed elements and other important information Standards for Delivery and Record Retention If an illustration is used in the sale of life insurance, it must be signed by the applicant and producer and submitted to the insurer at the time of application. A copy must also be provided to the applicant. If a policy is issued other than as applied for, a revised basic illustration relating to the policy as issued must be delivered with the policy. The revised illustration must be signed and dated by the applicant and producer no later than at policy delivery. If no illustration is used in the sale of life insurance, or if the policy is applied for other than as illustrated, the producer must certify to that effect in writing on a form provided by the insurer at the time of application. In addition: The applicant must acknowledge on the same form that no illustration was provided and an illustration conforming to the policy will be provided no later than at the time of policy delivery This form will be submitted to the insurer at the time of policy application A basic illustration must be delivered with the policy and signed by the insured and producer no later than the time the policy is delivered. A copy must be provided to the insurer and the policyholder. A copy of the basic illustration and any revised basic illustration, along with any certification, must be retained by the insurer until 6 years after the policy is no longer in force. Insurers must provide policyholders with annual reports if a policy was issued on a form that requires the use of an illustration during its sale. Retention Question 15 Illustrations must provide all of the following information, except: a. Insurer s name and the date the illustration was prepared b. Generic name of policy, the insurer s product name, and the policy form number c. Non-guaranteed elements must project future earnings at various rates of interest d. Guaranteed death benefits and values must be shown and labeled guaranteed 45

48 NEW YORK STATE INSURANCE LAWS Replacement The replacement of life insurance is regulated by New York law and all persons, firms, associations, and corporations are prohibited from making any incomplete policy comparisons to lapse, forfeit, or surrender any insurance policy or HMO contract. In addition, all replacing insurers and producers must: Explain what the replacement of insurance entails and provide the appropriate disclosures and notifications Require notification of the proposed replacement to the insurer whose policies or contracts are intended to be replaced Require the timely exchange of illustration and cost information, as required by law Provide a 60-day free look period The purpose of New York regulations with respect to the replacement of life insurance and annuities is to: Regulate the activities of insurers, brokers, and other licensees Protect the interests of the public by requiring standards of conduct with respect to replacement Assure that purchasers receive enough information to make informed decisions Reduce the opportunity for misrepresentation of policies Prohibit unfair methods of competition and unfair practices Unless exempted by state law, the replacement of a life insurance or annuity contract means that a new life insurance or annuity contract is to be purchased and issued. As part of the transaction, existing policies have been or are likely to be: Lapsed, surrendered, partially surrendered, forfeited, assigned to the replacing insurer, or terminated Changed, modified, or continued under a nonforfeiture benefit or reduced through the use of dividend accumulations or any policy cash values Changed or modified in a manner that reduces the amount of the life insurance or annuity benefit or the period of time the contract and/or its benefits will remain in force Reissued with a reduction in cash value Assigned as collateral for a loan or subjected to borrowing exceeding 50% of the cash value Continued with a reduction in premium amount or termination of premium payments A conservation is any attempt by an existing insurer or producer to keep a policy in force when a replacement is contemplated. Insurers are required to maintain all notices of potential replacements for at least 3 years. Replacement regulations do not apply when: The replacement policy is issued by the same insurer that issued the policy being replaced A policy change customarily granted by the insurer is being exercised, provided such change results in no additional surrender; or Additional surrender or expense charges Suicide or contestable clause restrictions The new coverage is provided under: A group life insurance policy or group annuity contract, except when an agent, broker or insurer directly solicits the certificateholder for the new coverage and a portion of the premium or consideration is paid, directly or indirectly, by the certificateholder 46

49 LIFE LAWS Individual contracts for which the entire premium is paid by the insured s employer or an association or group of which the insured is a member The existing policy is a non-renewable, non-convertible term life insurance policy with 5 or fewer years remaining until its expiration date Agent and Broker Duties When replacing a life insurance or annuity contract, agents and brokers must: Obtain a Definition of Replacement form, completed and signed by the applicant and the producer A copy of this form must be left with the applicant The original must be submitted to the insurance company Obtain a list of all existing life insurance policies or annuity contracts proposed to be replaced Notify the existing and replacing insurers of the proposed replacement Submit to the existing insurer: y A list of all policies to be replaced, along with their policy numbers y An authorization signed by the insured y A request for information needed to complete the Disclosure Statement No later than at the time of application, present to the applicant the IMPORTANT Notice Regarding Replacement or Change of Life Insurance Policies or Annuity Contracts and a completed Disclosure Statement form signed by the agent or broker The applicant must acknowledge that he/she received these forms Copies of the forms must be left with the applicant for his/her records Submit to the replacing insurer, with the application A list of all policies to be replaced A copy of any proposals and sales material used The signed acknowledgements of the replacement and disclosure forms A statement indicating the primary reason(s) for the reason the producer recommended the replacement and why the existing policy does not meet the applicant s needs Provide an Outline of Coverage Provide a completed comparison statement Provide a reminder that new evidence of insurability may be required Submit the application to the replacing insurer and include: A list of all life insurance policies or annuity contracts proposed to be replaced A copy of any proposal, including the sales material used in the sale of the proposed life insurance policy or annuity contract Proof of applicant s receipt of the IMPORTANT Notice Regarding Replacement or Change of Life Insurance Policies or Annuity Contracts ; and the completed Disclosure Statement. The primary reason(s) for recommending the new life insurance policy or annuity contract and why the existing life insurance policy or annuity contract cannot meet the applicant s objectives 47

50 NEW YORK STATE INSURANCE LAWS Insurer Duties Insurers must comply with the following requirements when replacing a life insurance or annuity contract: Inform and train their agents and brokers pertaining to replacement laws Require the submission of a Definition of Replacement form with each application, signed by both the applicant and producer Maintain copies of the signed replacement forms for 6 calendar years, or until after the filing of the applicable insurer examination, whichever occurs later Require a statement from the producer, on each application, stating whether the producer is aware, to the best of his/her knowledge, of policy replacement in connection with the transaction Comply with requirements of law pertaining reporting to the existing insurer, record retention, and other procedures Prohibited Acts Insurers, agents, and brokers are prohibited from engaging in the following acts: Provide any deceptive or misleading information on the Disclosure Statement or in any proposal or sales material Fail to ask the applicant the required replacement questions when completing an application Record an answer incorrectly Advise an applicant to answer a replacement question negatively to avoid requirements of replacement laws Advise an applicant to apply for insurance directly from the insurer in a manner that bypasses identifying the agent or broker associated with a replacement transaction Violations of replacement laws by any insurer (including its representative, officer, or employee), agent, broker, or other insurance licensee are subject to insurance penalties that include monetary restitution, restoration of policies and contracts, removal of a insurer s directors or officers, suspension of an insurance license, and monetary fines. Despite individuals having the right to replace their existing insurance and annuity contracts after saying they hadn t intended to do so, if a pattern emerges whereby a number of a producer s clients report that they had not intended to replace their policies, it will be deemed the producer knew the policies were to be replaced and intentionally violated replacement laws. Retention Question 16 If the sale of a life insurance policy involves a replacement, the producer must provide the applicant with all of the following additional documents, except: a. Definition of Replacement b. Insurer s Underwriting Guide c. Outline of Coverage d. Notice Regarding Replacement 48

51 Use of Senior-Specific and Professional Designations in the Sale of Life Insurance and Annuities LIFE LAWS Because senior citizens are vulnerable to misleading and fraudulent marketing practices, the state of New York has established regulations with respect to the use of senior-specific certifications and professional designations by insurance producers in the solicitation, sale, and purchase of any life insurance or annuity contract. This regulation also pertains to any advice given by an insurance producer in connection with such a solicitation, sale, or purchase. Insurance producers are prohibited from using a senior-specific certification or professional designation that misleads, in any fashion, that the producer has special certification or training with respect to advising, selling, or providing services to seniors with the sales or purchase of life insurance and/or annuities. The prohibited use of senior-specific certifications or professional designations includes the use of: A certification or professional designation by one who has not actually earned or is ineligible to use it A non-existent or self-conferred certification or designation A certification or designation that indicates or implies a level of occupational qualifications obtained through education, training, or experience the producer does not have A certification or designation obtained from an unqualified certifying or designating organization When determining whether a combination of words or an acronym properly describes a certification or designation factors to be considered include: Use of one or more words such as senior, retirement, or elder when combined with one or more words such as certified, registered, chartered, advisor, specialist, consultant, or planner in the name of the certification or designation; and The manner in which the words are combined Field Underwriting Backdating, or antedating, is the process of issuing insurance coverage with an effective date in the past, meaning the effective date of the policy is earlier than the date of the application. Property and casualty insurance generally cannot be backdated, however, In some circumstances, life insurance policies can be issued with an effective date up to 6 months in the past to save the applicant s age; this process permits the policy s issue age to be one year younger and the policy premium to be correspondingly lower. In New York, certain laws exist with respect to the backdating of life insurance: Insurers cannot backdate life insurance for more than 6 months before the date of the application if the premium is reduced below the premium that would be charged for the insured s birthday nearest the date on which the application was completed Agents, brokers, and insurer representatives are NOT permitted to backdate life insurance applications (only the insurer may do so) These prohibitions do not void any contract that is issued in volition of these requirements, nor do they restrict or forbid the exchange, modification, or conversion of a life insurance policy if: The new policy s amount of insurance is no greater than the amount of insurance on the previous policy; or The premium paid on the original policy would have purchased the new policy as it was applied for 49

52 NEW YORK STATE INSURANCE LAWS Retention Question 17 Insurers may only backdate up to months. a. 3 b. 6 c. 9 d. 12 Individual Underwriting by the Insurer Medical Examinations and Lab Tests Including HIV Insurance companies and anyone acting on their behalf are prohibited from requesting or requiring an insurance applicant to take any HIV-related test without first receiving that individual s written informed consent for the test. In addition, insurers must provide general information about AIDS and the transmission of HIV infection before any test is administered. The written informed consent to an HIV related test must consist of a written, dated authorization that must include, at a minimum, the following: A general description of the test A statement of the test s purpose A statement that a positive test result is an indication the individual may develop AIDS and may wish to consider further independent testing A statement that the individual may designate the person to whom the specific test results may be disclosed in the event of an adverse underwriting decision; a designee can be named on the authorization form and he/she may be the individual, a physician, or other party chosen by the applicant The department of health s statewide toll-free telephone number that is made available to consumers to obtain further information about AIDS, the meaning of HIV-related test results, and the availability and location of HIV related counseling services The signature of the applicant or proposed insured; if that individual lacks capacity to consent, the signature of a person authorized to consent for the applicant/proposed insured If an insurer s adverse underwriting decision is based on the result of an HIV-related test, the insurer must notify the applicant. An adverse underwriting decision is the declination of insurance coverage or an insurer s offer to issue insurance at a higher than standard rate. If the applicant has not previously indicated the name of the party to whom test results should be released, the insurer must ask the individual to elect in writing whether to have the specific HIV-related test results disclosed directly to the applicant or a designee. If the applicant elects to receive the HIV related test results directly, the insurer must: Advise the individual he/she may call the department of health s statewide toll-free telephone number for further information about AIDS, the meaning of HIV related test results, and the availability and location of HIV related counseling services Advise the individual to consult with a physician about the meaning of and need for counseling with respect to the HIV related test results These requirements do not increase or restrict the Department s specific authority to allow or prohibit the use of HIV-related tests and results for insurance coverage purposes. Any person who violates this section of insurance law will be subject to the penalties for Unfair Trade Practices, which include: 50

53 LIFE LAWS Up to $500 for each day a violation continues beyond the date required to provide a response to an inquiry; this daily penalty cannot exceed an aggregate amount of $10,000 Up to $50,000 in civil penalties if 5 previous and separate penalties have been imposed within the previous 5 years for failure to comply with these requirements Life Insurance Policies Specialized Policies Life Insurance on Minors The state of New York considers an individual who is age 14½ or older to have legal capacity to enter into a life insurance contract, or to consent to being the insured person in a life insurance policy owned by another person. However, this state only permits a person to purchase life insurance on the life of a minor if: The policyholder/applicant has an insurable interest in the minor; or The minor is dependent upon the policyholder/applicant for support and maintenance The total amount of life insurance in force on the child does not exceed the greater of $50,000 or: 25% of the face amount of life insurance in force on the policyholder/applicant if the minor is under age 4½ 50% of the face amount of life insurance in force on the policyholder/applicant is between the ages of 4½ and 14½ Retention Question 18 In New York, what is the maximum amount of life insurance that may be issued on the life of a child under age 14½? a. $5,000 b. $10,000 c. $25,000 d. $50,000 Group Life Insurance Conversion to Individual Policy All group life insurance policies in this state must include a provision that permits a covered employee or member to convert his/her group coverage to an individual policy, without evidence of insurability, if the employee s or member s group insurance: Terminates because: His/her employment or membership in a class of eligible employees/members ends The policy is cancelled Is reduced The employee must apply for the conversion within 31 days after the group coverage terminates or is reduced and must pay the premium appropriate for his/her attained age and rate class. The converted policy must provide the same amount of coverage the group policy provided and the policy form can be any used by the insurer at the time of conversion except for that of a term life insurance policy. However, the individual policy may be converted to 80% of the amount of group coverage if the group policy itself is terminated. 51

54 NEW YORK STATE INSURANCE LAWS If an insured receives notice from an insurer that his/her cost to continue group life insurance will be more than 133% of the net premiums, the insured is entitled to convert the group coverage to an individual policy under the same terms as if he/she ceased being eligible for coverage. Insurers are permitted to offer a provision in their conversion options that does not permit the insured to purchase an individual policy at the time of conversion that exceeds the amount of group insurance in place less any group coverage the insured may become eligible for within 45 days after the existing group coverage terminates. However, the insured has the option to purchase a 1-year term policy that can be converted at the end of the year to any policy form offered by the insurer; the insured must pay the premiums for this policy. In the same fashion, a group policy may also contain a conversion provision that permits an insured to convert group coverage to an individual policy if the group coverage terminates because the insured s eligibility for coverage terminates due to total and permanent disability. If an insured dies within the 31-day period between the termination of the group coverage and issuance of a converted individual policy, death benefits will be paid in an amount that equals the maximum amount of insurance the insured would have been eligible to purchase. This policy provision may contain a requirement that requires the employer to have paid the premium for coverage during the 31-day period. The individual policy purchased in the conversion transaction may contain a contestable clause that is the equivalent of the contestable clause in the group policy. However, the individual conversion policy cannot exclude or restrict coverage for the insured s suicide after 2 years from the date of conversion. An individual conversion policy must offer the insured the option to purchase coverage for dependents who are of the same class of dependents insured by the group policy. The conversion privilege for dependents must be available: Upon termination or reduction of the group insurance Upon the insured s death, to the surviving spouse and children as are then insured by the group policy To a child upon attaining the limiting age of coverage while insured under the group policy Upon the insured s divorce or annulment, to the spouse or former spouse When a group life insurance policy allows conversion to an individual policy, the insured must be notified of the conversion privilege within 15 days before or after the qualifying event occurs. If notice is given between days after the event occurs, the insured will be allowed 45 days after receiving the notice to exercise the conversion privilege. If notice is given more than 90 days after the event occurs, the conversion privilege will expire at the end of the 90-day period. Converted policies, other than term policies, must contain nonforfeiture provisions, but they are not required to be the same as those for policies sold as individual life policies. Retention Question 19 An insured covered under a group life policy will be allowed to convert to an individual policy, without evidence of insurability, within how many days of the termination or reduction of group coverage? a. 10 days b. 31 days c. 45 days d. 90 days 52

55 LIFE LAWS Life Insurance Policy Provisions, Options and Riders Required Provisions All life insurance policies issued or delivered in New York must contain certain provisions, unless they are subject to exceptions. Provisions must be substantially the same as those required by law; however, they can be more favorable to policyholders. Entire Contract If the application is attached to the life insurance policy when it is issued, the entire contract consists of the application and policy. A policy may contain a provision that says the following will also be considered part of the policy if issued or exercised after the policy s issue date: Death benefits or policy provisions changed by written application of the insured Written notice by the insured that he/she is electing to exercise a policy option Any policy change that occurs automatically and according to the policy s provisions Free Look Period The policyholder has the right to examine the policy after it is delivered and receive a full refund if he/she is not satisfied for any reason. If wishing to return the policy for a refund, the policyholder must comply with the following requirements: Submit a written request to the insurer for surrender of the policy The request cannot be submitted any sooner than 10 days after the policy is delivered or any longer than 30 days after it is delivered Each policy must contain details of the free look period on either the policy or a notice attached to it. Grace Period The grace period for individual life insurance policies is 31 days, or 1 month, after any premium due date. For policies with premiums that vary by amount and frequency, the policyholder is entitled to a 61-day grace period after payment of the first premium. This 61-day period begins on the day the insurer determines the policy s net cash surrender value is not sufficient to keep the policy in force for 1 month. If an insured dies during the grace period, the insurer may deduct from the policy proceeds the amount of any unpaid policy premium through the month in which the insured died. If the policy premium had been paid beyond the last day of the month in which the insured died, the insurer must include a premium refund in its payment of the policy proceeds. However, if the policy was in force under the waiver of premium benefit, no refund of premiums paid will be made. Premium refunds are not required for single-premium or paid-up policies. Reinstatement If the policy lapses (cancels due to non-payment of premium), it can be reinstated at any time within 3 years after the date of premium default if the policyholder submits to the insurer: A reinstatement application Evidence of insurability Payment of all overdue premiums, with interest (interest rate cannot exceed 6% per year, compounded annually) Payment of all policy loans and other indebtedness, with applicable interest 53

56 NEW YORK STATE INSURANCE LAWS Incontestability An insurer may only contest a life insurance policy during the first 2 years after it is issued. However, if a policy change is issued or the death benefits are increased after the insured provides evidence of insurability, a new 2-year period of contestability begins on the date of the change or increase. Exceptions exist (meaning the policy IS contestable) for non-payment of premium and violation of the policy s conditions pertaining to service in the armed forces. Insurers are also permitted to include exceptions for total and permanent disability benefits and accidental death benefits. Misstatement of Age If the insured s age is misstated, the policy s benefits will be adjusted to reflect the amount of benefit that would have been purchased at the correct age by the premiums actually paid. Exclusions Life insurance policies issued or delivered in New York may contain certain exclusionary or limiting provisions if they are substantially the same as those required by law; however, they can be more favorable to policyholders. If the insurer declines to pay a death claim because of a policy exclusion, instead of paying death benefits the insurer must pay: If the policy has been in force for 2 years or more, the policy s cash value, dividends, and paid-up additions (if applicable) less any outstanding policy loans and loan interest If the policy has been in force for less than 2 years, the gross premiums billed less any dividends paid or credited to the policy and any outstanding policy loans and loan interest Life insurance policies may exclude or limit coverage for death that occurs while the insured is a resident of a specific foreign country. This exclusion cannot exclude or restrict the manner of death unless it is the result of: Suicide within 2 years of the policy issue date Aviation as specified in the policy (usually if the insured is flying as anyone OTHER than a fare-paying passenger on a commercial airline) Hazardous occupations specified in the policy Death resulting from war or any act of war is excluded if the insured is serving in the armed forces or an attached civilian unit under terms specified in the policy. If a policy permits the death benefit to be increased, or the policy s provisions to be changed upon written request of the policyholder, and the increase or change requires evidence of insurability, the policy may also impose the 2-year contestable clause and limitations based on specified hazardous occupations to that increase or change. The imposition of the contestable clause and occupational limitations will begin on the effective date of the increase or change. Statements of the Applicant Statements made on an application for insurance cannot be used as evidence in a claim dispute unless a copy of the application was attached to the policy when it was issued. All statements made by the applicant, or with the applicant s authorization, are considered representations and not warranties. A representation is made to the best knowledge and belief of the applicant; a warranty is a promise or guarantee of the statement s accuracy. If a life insurance policy is reinstated, renewed, or changed after it is issued, any application submitted in connection with the transaction is subject to this policy provision. If the insurer fails to deliver or mail a copy of the application to the policyholder within 15 days of receiving it, the insurer is unable to use the application as evidence in a claim dispute. 54

57 LIFE LAWS Retention Question 20 In New York, the period within which one may reinstate a lapsed life insurance policy is: a. 1 year b. 2 years c. 3 years d. 6 years Retention Question 21 The incontestable clause in New York life insurance policies is how long after the policy s issue date? a. 10 years b. 5 years c. 4 years d. 2 years Retention Question 22 Which of the following deaths is NOT excluded under a life insurance policy issued in New York? a. The insured committed suicide nine months after the policy s issue date b. The insured was a passenger in a commercial airplane that crashed c. The insured was killed in action while serving in the military d. The insured was killed on the job, in a hazardous occupation listed in the policy Accelerated (Living) Benefit Provisions and Riders Life insurance policies are typically issued to provide a death benefit when an insured person dies. Under certain conditions specified in the contract (i.e., a terminal or chronic illness), a life insurance policy may accelerate benefits meaning it will make payment of a portion of the death benefit directly to the insured policyholder while he/she is alive. The remainder of the death benefit is paid to the beneficiary when the insured dies. New York insurance law contains specific conditions and requirements for the payment of accelerated benefits under a life insurance policy. These requirements also apply to life insurance policies that include special surrender values and that accelerate benefits for long-term care. If a life insurance policy accelerates benefits, the insurer must include a prominent notice on the policy s application for insurance that reads, Receipt of accelerated death benefits may affect eligibility for public assistance programs and may be taxable. In addition, the notice must include the amount of any separate premium or discount that pertains to the accelerated benefit provision. If an insured requests payment of accelerated death benefits, the insurer must date the application for benefits (i.e., claim form) when it sends it to the policyholder. The application for benefits must contain a statement with the amount of the remaining death benefit after payment of the accelerated benefits. The policyholder must complete and sign the application for benefits within 30 days from the date the insurer transmits the application. 55

58 NEW YORK STATE INSURANCE LAWS The application for benefits must contain a notice that prominently displays the following statements: Receipt of accelerated death benefits may affect eligibility for public assistance programs such as medical assistance (Medicaid), family assistance, and supplemental security income. Receipt of accelerated death benefits in periodic payments may be treated differently than receipt in a lump sum. Prior to applying for accelerated death benefits, policyowners should consult with the appropriate social services agency concerning how receipt will affect the eligibility of the recipient and/or the recipient s spouse or dependents. Receipt of accelerated death benefits may be taxable. Receipt of accelerated death benefits in periodic payments may be treated differently than receipt in a lump sum. Prior to applying for such benefits, policy owners should seek assistance from a qualified tax adviser. In addition, the application for benefits must contain a statement by the policy owner that states the request is made voluntarily and without coercion on the part of any third party. No payment of accelerated benefits or any special surrender values can be made to a policyholder until 14 days have elapsed from the date the insurer provides the policyholder with: An illustration of the effect the accelerated benefits will have on the policy s cash value and loans The amount of the death benefit, in dollars, that would be payable upon the insured s death without payment of the accelerated benefits The amount of the death benefit, in dollars, that would be payable upon the insured s death after payment of the accelerated benefits A notice that methods other than accelerating the policy s benefits may help the insured achieve his/her goals, including a policy loan The insurer must provide the policyholder with the preceding items within 5 days of receiving the policyholder s application to accelerate benefits. The policyholder is entitled to cancel his/her request for accelerated benefits at any time during the application process. If a group life insurance policy provides for accelerated benefits or a special surrender value, it must contain a provision that states the certificate holder (i.e., the insured person) is the only person who has the right to accelerate benefits. This also applies to accelerated benefits for long-term care. If a life insurance policy accelerates benefits or provides for a special surrender value for long-term care, the following requirements apply: A licensed health care practitioner must certify the insured is chronically ill All requirements pertaining to long-term care insurers (covered in the must be complied with Retention Question 23 If a life insurance policy accelerates benefits, it does which of the following? a. Only pays a death benefit to the insured s beneficiary b. Only pays a living benefit to the insured c. Pays a portion of the death benefit to the insured d. Pays half the death benefit to the state of New York 56

59 Annuities Required Provisions LIFE LAWS All annuities and pure endowments issued or delivered in New York must contain certain provisions, unless they are subject to exceptions. Provisions must be substantially the same as those required by law; however, they can be more favorable to policyholders. These requirements do not apply to group annuities. For all payments after the first payment, the contract must provide for a 31-day grace period during which the contract will continue in force. The insurer may deduct the amount of any past due premium from the annuity s death benefit. A 2-year incontestable clause applies to all statements made on the application other than those pertaining to the insured s age, gender, and identity. If the age or gender of the annuitant is misstated on the application, the contract s benefits will be adjusted to reflect benefits that would have been purchased at the correct age or gender with the premiums actually paid. If the insurer makes an overpayment or underpayment of benefits based on any misstatement of age or gender, it may charge or credit the next payment made, including interest at a rate not to exceed 6% per year. The annuity contract and the application, if the application is attached to the contract when it is issued, constitute the entire contract between the policyholder and insurer. Insurers must determine dividends on an annual basis. Payments of any applicable dividends must be made at least annually. If an annuity terminates, standard nonforfeiture options must be offered as prescribed by law. Annuities can be reinstated within 3 years after they lapse unless the cash surrender value has already been paid to the policyholder. Annuities must contain a free look provision similar to that provided for life insurance policies. The policyholder must: Submit a written request to the insurer for surrender of the contract The request cannot be submitted any sooner than 10 days after the policy is delivered or any longer than 30 days after it is delivered In addition, if the contract provides for the determination of cash surrender benefits in accordance with a market-value adjustment formula, special requirements apply and the details of this provision must appear in the contract or in a notice attached to it. Standard Nonforfeiture Law for Annuities All annuities issued or delivered in New York must contain certain nonforfeiture options except for: Group annuities purchased in connection with retirement or deferred compensation plans established by an employer Premium deposit funds Variable annuities Immediate annuities Deferred annuities or group annuity certificates after annuity payments have begun (i.e., the contract has been annuitized) Reversionary annuity (survivorship annuity) 57

60 NEW YORK STATE INSURANCE LAWS Nonforfeiture provisions must be substantially the same as those required by law; however, they can be more favorable to policyholders. If the annuity stops making benefit payments, the insurer must offer a paid-up annuity benefit on a plan specified in the contract If the annuity provides for a lump sum settlement at any time, the insurer will pay a cash surrender benefit The contract must contain the mortality table and interest rates used when calculating any guaranteed minimum paid-up annuity, cash surrender, or death benefits If the contract is a deferred annuity, the insurer may terminate the contract by paying the contract value if no premiums have been paid during a 3-year period and the contract value is less than $5,000, or the paid-up annuity benefit would be less than $20 a month Cash surrender benefits cannot be less than amounts stated in the contract If at any time before annuity payments begin the contract fails to provide cash surrender or death benefits, it must provide a prominent statement to this effect on the policy The insurer must mail to the policyholder a statement, at least annually, that shows any paid-up annuity, cash surrender, or death benefits; this applies to annuities that have not yet been annuitized Suitability in Annuity Transactions The state of New York established rules and regulations requiring insurers to create standards and procedures for making recommendations for the purchase of annuities. These standards are necessary so consumers needs and financial objectives are addressed appropriately by insurers and producers. New York s annuity suitability regulation applies to every recommendation made to a consumer by a producer for the purchase or replacement of an annuity contract. If a producer is not involved in the purchase or replacement of an annuity, the insurer is required to comply with this regulation. Exceptions to the regulation exist for transactions that involve: A direct response solicitation that does not involve a recommendation A contract used to fund: An employee pension or benefit plan subject to ERISA 401(a), 401(k), 403(b), 408(k) plans if they are established or maintained by an employer A government or church plan under Internal Revenue Code 414, or a government, church, or deferred compensation plan under Internal Revenue Code 457 A non-qualified deferred compensation plan established or maintained by an employer or plan sponsor An annuity issued as part of the settlement of a personal injury lawsuit, dispute, or claim resolution process A recommendation is advice provided to a consumer that results in the purchase or replacement of an annuity based on that advice. 58

61 Suitability information is information that is reasonably required to determine whether a recommendation is suitable, and includes: LIFE LAWS Age Annual income Financial situation and needs, including the sources of funds used to pay for the annuity Financial experience and objectives The intended use of the annuity Financial time horizon Existing assets, including investments and life insurance Liquid net worth and liquidity needs Risk tolerance Tax status Duties of Insurers and Producers With respect to the following duties, if no producer is involved in the purchase or replacement of an annuity, the insurer must comply with the regulation. In all cases, a producer must have a reasonable basis to believe the annuity recommendation is suitable for the particular consumer on the basis of information disclosed by the consumer that pertains to his/her investments, other insurance policies, financial situation and needs, and suitability information. In addition, the producer must have a reasonable basis to believe ALL of the following: The consumer was informed, in a manner than can be reasonably understood, about various features of the contract, including: Any potential surrender period and surrender charges Cash value availability Potential tax consequences if the consumer sells, surrenders, or annuitizes the contract Death benefit, mortality, and expense fees Investment advisory fees Potential premium charges for riders Limits on the growth of interest and guaranteed interest rates Insurance and investment components of the contract Market risk The consumer would benefit from certain features of the annuity, such as tax-deferred growth, annuitization (periodic income payments), and/or death or living benefits The annuity as a whole including its underlying subaccounts, riders, and enhancements is suitable for the consumer based on suitability information If the recommendation is for replacement of an annuity, it is suitable based on consideration of the following questions: Will the consumer incur a surrender charge, be subject to a new surrender charge period, lose any existing benefits, be subject to tax consequences if the contract is surrendered or impaired by loans, and be charged any advisory fees or rider premiums? Will the consumer benefit from annuity enhancements and improvements? Has the consumer been involved in another replacement transaction, especially within the preceding 36 months? 59

62 NEW YORK STATE INSURANCE LAWS Before recommending the purchase or replacement of an annuity, a producer must make reasonable efforts to obtain the consumer s suitability information. Insurers are not permitted to issue annuity policies or contracts unless a reasonable basis exists for the insurer to believe the annuity is suitable based on the consumer s suitability information. With respect to annuity replacements, and an insurer s obligation to establish a reasonable basis on suitability information, producers and insurers do NOT have any obligations to consumers if: No recommendation is made to the consumer A recommendation was made but it was learned later that it was based on materially false information provided by the consumer A consumer refuses to provide required suitability information and the annuity transaction is not recommended A consumer decides to purchase or replace an annuity that is NOT based on the producer s or insurer s recommendation At the time of the annuity purchase or replacement transaction, a producer must: Document all recommendations Document a consumer s refusal to provide suitability information Document that a purchase or replacement is NOT recommended if the consumer chooses to purchase or replace an annuity without the recommendation of the producer or insurer Insurers must establish and maintain a system of supervision that is designed to assure that both the insurer and its producers comply with suitability standards. Insurers may contract with a third party for this purpose. However, the insurer is responsible for makings sure that each insurance producer who recommends the purchase or replacement of its annuity contracts is trained adequately to make recommendations. Producers are not permitted to make recommendations if they do not have adequate knowledge to do so. In addition, producers are not permitted to discourage a consumer from: Providing truthful and accurate information n response to the insurer s request for suitability information Filing a complaint with the Superintendent Cooperating with the investigation of a complaint Retention Question 24 Which of the following is NOT among the information required by a producer to determine if the purchase or replacement of an annuity is suitable for the consumer? a. Details of the consumer s investments and other insurance b. The consumer s financial situation and needs c. The consumer s tax status d. The consumer s health status 60

63 Life Settlement Definitions LIFE LAWS Life Settlement Contract The sale (including an assignment or transfer) of an existing life insurance policy by the policyowner to a third party for any portion of: The policy s death benefit The policy s ownership Any beneficial interest in the policy, a trust, or another entity that owns the policy if the primary purpose of the transaction is to purchase the policy The following transactions are NOT life settlement contracts: Assignment of a life insurance policy as loan collateral by a federally insured bank or credit union Assignment of a life insurance policy as collateral for a loan whereby the interest in the life insurance policy is assigned solely for the purpose of repaying the loan The exchange of life insurance policies under Internal Revenue Code 1035 An agreement made by an individual to receive the death benefit or ownership of any portion of a single life insurance policy so long as the individual does not enter into any similar agreement, within the same calendar year, pertaining to another policy An agreement to assign, transfer, or pledge a settled policy An agreement where all the parties have insurable interest An agreement where all the parties are closely related to, or have insurable interest in, the insured person; this includes trusts established for the benefit of the parties A bona fide business succession planning arrangement between: A corporation and its shareholders One or more partners in a partnership One or more members in a limited liability company Legitimate corporate or pension benefit plans Life Settlement Broker A person who, in exchange for compensation, negotiates or offers to negotiate a life settlement contract. The following persons are NOT life settlement brokers if they are retained in their professional capacity, do not advertise as being in the business of life settlements, and are receiving compensation without regard to whether a life settlement contract is issued: Licensed life settlement providers, including their representatives Licensed attorneys Licensed certified public accountants Nationally accredited financial planners Business of Life Settlement Involves the offering, soliciting, negotiating, procuring, effectuating, monitoring, or tracking life settlement contracts. The business of life settlements also includes: Transactions made via mail or from locations outside this state Conducting any business in a manner that is substantially the same as the business of life settlements for the purpose of evading the provisions of the Life Settlements Act Financing Transaction A transaction in which a licensed life settlement provider obtains funds from a financing entity. Owner The owner of a life insurance policy who enters into a life settlement contract, or one who attempts to enter into such a contract. Life Expectancy The number of months an insured person can be expected to live based on mathematical calculations involving medical records and other observed data. 61

64 NEW YORK STATE INSURANCE LAWS Retention Question 25 Which of the following persons solicits, negotiates, or offers a life settlement contract in exchange for compensation? a. Life settlement broker b. Life settlement intermediary c. Life insurance policy owner d. Life insurance policy beneficiary Life Settlement Broker Licensing No person is permitted to act as a life settlement broker in New York without having an active life settlement broker license. A firm or association licensed as a life settlement broker must specify on its license who will act as its sublicensees on the firm or association s behalf. Sublicensees must be members of the firm or association and may only act on behalf of the firm or association. A corporation may allow only its officers and directors to act as sub-licensees. All individual applicants for a life settlement broker license or sublicense must be at least 18 years old and must submit to the Superintendent, along with an application, a set of fingerprints unless the individual is already licensed as an insurance producer with a life line of authority. Licensees are also required to pay a license fee; however, any person who served in the U.S. armed forces at any time is not required to pay the license fee unless he/she was discharged dishonorably. Licensees and sublicensees are required to pass a written examination after completing successfully an approved pre-licensing course. A written exam and pre-licensing education are not required of the following individuals: An insurance producer with a life line of authority who has been licensed in New York for at least 1 year An individual whose license was suspended or revoked, but only at the discretion of the Superintendent An applicant who passed the written examination, was licensed as a life settlement broker, and who makes the application within 2 years after the previous license terminated An applicant with a Chartered Life Underwriter (CLU) or Chartered Life Underwriter Associate designation (CLUA) A nonresident life settlement broker, or a nonresident insurance producer with a life line of authority in the individual s home state for at least 1 year IF the individual s home state grants nonresident licenses to New York residents on the same basis If a regular employee of a life settlement provider, life insurance company, life settlement broker, or insurance producer with a life line of authority applies for a license as a life settlement broker, the prelicensing education requirement is waived if the applicant enters or is discharged from the armed services, and: Was employed for less than 1 year before entering the military or immediately following discharge from the military Employment duties involved settlements of life insurance and annuity contracts The applicant applies for a license within 1 year following the date of discharge from the military and submits a statement, subject to the penalties of perjury, that he/she has complied with all requirements of licensure as a life settlement broker 62

65 The Superintendent has the authority to refuse to issue a life settlement broker license if he/she believes the proposed licensee or any sublicensee: Is not trustworthy and competent enough to act as a life settlement broker Has committed an act that is grounds for license revocation or suspension Has failed to comply with requirements of licensure Licenses are issued for a period of 24 months and expire as follows: For business entities, on June 30th of odd-numbered years For individuals, on the their birthdays in: Even-numbered years for those born in even-numbered years Odd-numbered years for those born in odd-numbered years LIFE LAWS Renewal licenses are also issued for a 24-month period if the licensee has filed a renewal application according to insurance law. In order to be renewed automatically, a licensee must submit his/ her application before the license s expiration date, along with the appropriate renewal fee. If the licensee does not submit the renewal application at least 60 days before it expires, a $10 late fee will be charged. If the Superintendent wishes to non-renew a license he/she must notify the applicant of this intention and offer a hearing. Renewal applications are not required for individual licensees and sublicensees who are: Serving actively in the U.S. military Unable to comply with renewal procedures due to extenuating circumstances (i.e., a longterm medical disability) Life settlement broker licenses must contain the following information: The licensee s name, address, personal identification number The date the license was issued If a license is lost or destroyed, the licensee must submit an written application for a replacement license; the fee for such license is $15. No fee is charged if a licensee requests a change to the information contained on a license. Advertising When advertising in New York, life settlement providers, life settlement intermediaries, and life settlement brokers must comply with advertising and marketing laws, rules, and regulations. All advertisements must be accurate and truthful, and cannot be misleading in fact or by implication. No licensee may: In any manner, market, advertise, solicit, or otherwise promote the purchase of a policy for the primary purpose of settling the policy Use the words free, no cost, or similar words in the marketing, advertisement, solicitation, or promotion of the purchase of a policy The failure to follow advertising provisions is a violation of state law. 63

66 NEW YORK STATE INSURANCE LAWS Privacy Except as permitted or required by law, no person with actual knowledge of the identity of an insured or owner may disclose that individual s identity or any information that could be used to identify the insured or owner (or his/her financial or medical information) unless the disclosure is: Necessary to effect a life settlement contract or the sale or transfer of a life settlement contract or a settled policy and the owner and insured have provided prior written consent to the disclosure Provided in response to an investigation or examination by the Superintendent, any other governmental agency, or a federal self-regulating securities entity (i.e., FINRA) A contractual provision to the transfer of a policy between two life settlement providers Necessary to allow the life settlement provider or broker, to administer the insurance policy or to make contacts for the purpose of determining health status Required to purchase insurance Permitted by insurance regulation Any person who obtains or may obtain a settled policy must protect: The identity and privacy of the insured or owner Against the unlawful release of all information concerning the identity of any insured or owner Non-public personal information obtained in connection with a life settlement contract is subject to the Gramm-Leach-Bliley Act (GLBA), the Health Insurance Portability and Accountability Act (HIPAA), and all other applicable laws relating to confidentiality of non-public personal information. Prohibited Practices The following practices are prohibited by all persons with respect to life settlement contracts: Entering into a life settlement contract knowing the policy was obtained in a false, deceptive, or misleading way Engaging in any transaction, conduct, or business practice with the intention or knowledge of avoiding required disclosures Engaging in any fraudulent act or practice in any transaction Providing premium financing for a new policy and entering into a premium finance loan with an application or life insurance policy owner, and: Receiving proceeds, fees, or other consideration that is not commission earned by a licensed insurance producer on said policy, IF Such proceeds, fees, or consideration are more than the amount needed to pay the principal, interest, and reasonable costs and expenses incurred by the lender or borrower Any amounts paid in addition to the principal, interest, and costs must be sent to the original policyowner (or his/her estate if deceased) if an overpayment is discovered. Knowingly failing to disclose any affiliation or contractual arrangement, as required If a life settlement broker or intermediary, purchasing or obtaining an interest in any policy that is the subject of a life settlement contract where the individual is involved in the contract, unless the affiliation has been disclosed to the owner, and: The broker has provided all offers and counter offers, and has conducted the transaction on a fair and equitable arm-length basis; or The intermediary complies with all regulations 64

67 LIFE LAWS Unless one is licensed as a life settlement broker, providing or receiving compensation for acting as a life settlement broker Paying referral or finder s fees, or any other compensation to any person including an owner s physician, attorney, accountant, insurance producer, or insurance consultant other than a licensed life settlement broker; this prohibition also includes receiving such referral or finder s fees, or other compensation Providing any type of compensation, in any matter, to a life settlement broker for services that are not related to a life settlement contract for which all disclosures have been provided clearly Engaging in any insurance unfair or deceptive act or practice Removing, concealing, altering, destroying, or concealing the assets or records of a life settlement provider, broker, intermediary, or other person engaged in the business of life settlements Misrepresenting or concealing the financial condition of a life settlement provider Filing with the Superintendent a document that contains or conceals materially false information Requesting or requiring an insured to submit to a medical examination after settlement of the policy If a life settlement provider, effecting a life settlement contract if proceeds are to be paid in installments Unlawfully restraining trade or displaying anti-competitive behavior that restricts the ability of an owner or life settlement broker from seeking competitive bids or being offered fair contract terms Attempting to become a monopoly in the business of life settlements in this state or actually doing so Limiting or fixing prices with respect to life settlement contracts Being a party to a life settlement contract that might tend to lessen significantly competition in the business of life settlements Being a party to a life settlement contract if any person, including the life settlement provider, broker or intermediary refuses to conduct business with any person in the business of life settlements No life settlement intermediary is permitted to: Represent, solicit, negotiate, or act on behalf of, an owner, a life settlement provider, or a life settlement broker; or Act as a life settlement provider or life settlement broker Insurers are not permitted to prohibit an insurance agent from disclosing to a client the availability of a life settlement contract. Any violation of insurance laws pertaining to life settlement contracts will be defined as an unfair method of competition and/or an unfair and deceptive act or practice. 65

68 NEW YORK STATE INSURANCE LAWS Stranger-originated Life Insurance Stranger-originated life insurance (STOLI) is any act, practice, or arrangement that involves the purchase of insurance with the purpose of benefitting a person who does not have insurable interest in the life of the person to be insured at the time the policy becomes effective. This includes conduct before or at policy issuance. No person is permitted, in any fashion, to engage in any act, practice, or arrangement that constitutes stranger-originated life insurance. Stranger-originated life insurance includes: Purchasing life insurance with funds or guarantees from a person that, at the time the policy becomes effective, is not legally permitted to purchase the policy An agreement to transfer ownership of a policy or its benefits to another person Using a trust or similar arrangement to purchase, in any manner, one or more life insurance policies for the intended benefit of another person that violates New York s insurable interest laws Stranger-originated life insurance does NOT include legal life settlement contracts. Violations of laws pertaining to stranger-originated life insurance will be defined as an unfair method of competition and/or an unfair and deceptive act or practice. Retention Question 26 Stranger-originated life insurance is best defined as: a. Life insurance purchased to benefit someone without insurable interest in the insured b. Life insurance purchased by someone with insurable interest in the insured c. A form of credit life insurance d. Another name for a life settlement agreement 66

69 Health Laws 67

70 Health Laws Accident and Health Insurance Marketing Requirements Advertising New York law requires the truthful and adequate disclosure of relevant information in accident and health insurance advertisements. Insurers must, at all times, have an established system of controls over the form and advertising of its insurance policies. The insurer is responsible for complying with state law about advertising, regardless of who creates, designs, or presents its advertisements. An advertisement includes: Printed and published material, audio-visual material, and descriptive literature used in direct mail, newspapers, magazines, radio and television scripts, billboards, etc. Descriptive literature and sales aids of all types that are issued by an insurer, agent, or broker to the public Prepared sales presentations, talks, and material for use by producers, agents, and brokers The term policy includes policies, plans, certificates, contracts, agreements, statements of coverage, riders, and endorsements that provide accident and health insurance regardless of whether on an indemnity, reimbursement, service, or prepaid basis. The term insurer includes individuals, corporations, associations, partnerships, reciprocal exchanges, inter-insurers, Lloyd s, fraternal benefit societies, and other legal entities that are engaged in the advertisement of a policy. All information required to be disclosed in advertisements must be displayed conspicuously so it is not minimized, difficult to understand, or mixed with other content in a manner that is confusing or misleading. State law specifically requires advertising content to be complete and clear enough to avoid the tendency to mislead or deceive the public. In addition, the form and content of advertisements must: Be truthful in fact and by implication; this includes not using insurance terminology that only insurance professionals understand Contain a prominent statement about the type of coverage and that it meets minimum standards defined by the New York State Insurance Department If advertising a Medicare supplement, be approved by the Department prior to use Deceptive Words, Phrases, and Illustrations Prohibited All advertisements must avoid deceptive words, phrases, or illustrations. Not contain or use words or phrases such as all, full, complete, comprehensive, unlimited, up to, as high as, or this policy will help pay in a manner that exaggerates the policy s benefits Not contain a description of a limitation, exception, or reduction that implies it is a benefit Not use words or phrases such as tax free, extra cash, extra income, extra pay, etc., if payment of a benefit is conditional upon hospital confinement, or confinement in a similar facility Not advertise the amount of a daily benefit as a weekly or monthly benefit if the daily pro-rata benefit relates to the number of days of hospital confinement 69

71 NEW YORK STATE INSURANCE LAWS Not advertise a direct response insurance product as a low cost plan because agents are not involved and commission is not paid to agents Exceptions, Reductions, and Limitation When an advertisement refers to a dollar amount, a period of time for benefit payment, the policy cost, or a specific policy benefit, it must also disclose applicable exceptions, reductions, and limitations. If a policy contains a waiting, elimination, or probationary period before coverage is effective or benefits are payable, an advertisement must disclose the existence of the time periods. In addition, advertisements are not permitted to use the words only, just, merely, minimum and similar words or phrases to describe whether exceptions and reductions apply. Pre-Existing Conditions Any advertisements using the term pre-existing condition must define the term. In addition, they must disclose the extent to which any loss is not covered due to a pre-existing condition. If a policy does not cover losses resulting from pre-existing conditions, its advertisements cannot state or imply the applicant s health status or condition will not affect the issuance of the policy or the payment of a future claim. This rule prohibits the use of the phrase no medical examination required and similar phrases; however, it does not prohibit explanation of the phrase automatic issue. If an insurer requires the insured to complete a medical exam before issuing a policy, any advertisement of the policy must state this fact. If an advertisement contains an application for completion via direct response to the insurer, the application must be identical to the application form approved by the Department for that policy, except for its size. Disclosing Provisions Related to Renewals, Cancellations, and Termination When an advertisement refers to a dollar amount, a period of time for benefit payment, the policy cost, a specific policy benefit, or the loss for which a benefit is payable, it must also disclose the policy s provisions that relate to renewal, cancellation, and termination. This disclosure requirement also includes the modification of benefits, losses covered or premiums dependent upon age and other reasons. Disclosure cannot minimize or disguise the qualifying conditions. Testimonials If an advertisement contains a testimonial, the testimonial must be genuine, represent the author s current opinion, apply to the advertised policy, and be reproduced accurately. Any testimonials contained in an advertisement are considered the insurer s own statements and the advertisement and its statements are subject to the regulation of advertisements. If the person making a testimonial, an endorsement, or an appraisal has a financial interest in the insurer, this fact must be disclosed in the advertisement, endorsement, or appraisal. Similarly, if a person is compensated for making a testimonial, endorsement, or appraisal, the fact must also be disclosed by the label, Paid Endorsement. An advertisement cannot state or imply that an insurer or policy has been approved or endorsed by any person, group, society, association, or other organization unless the approval or endorsement is a fact and the relationship between the two has been disclose. 70

72 HEALTH LAWS When a testimonial refers to benefits received under a policy, the following must be retained by the insurer for inspection for a period of 4 years, or until the next examination of the insurer is filed, whichever is longer: Specific claim data, including claim number Date of loss Other pertinent information Use of Statistics An advertisement relating to the dollar amounts of claims paid, the number of persons insured, or similar statistical information cannot use irrelevant facts. Further, such statistics cannot be used unless they reflect accurately all relevant facts. An advertisement cannot imply statistics are derived from the policy unless the fact is true. Advertisements cannot represent or imply that claim settlements are liberal or generous or that they are or will be beyond the actual terms of the contract. Advertising an unusual amount paid for a unique claim under the policy is misleading and cannot be used. An advertisement must identify the sources of any statistics used. Identification of Plan or Number of Policies If an advertisement refers to a choice when choosing the amount of benefits, it must disclose that the amount of benefits is dependent upon the plan selected. It must also disclose the premium will vary based on the benefits selected. Similarly, if an advertisement refers to various benefits that are offered by multiple policies, it must disclose that the benefits are only provided through a combination of policies. This particular requirement does not apply to group or blanket policies. Disparaging Comparisons and Statements Advertisements cannot make any type of unfair or incomplete comparisons of policies or their benefits. This includes comparisons of different policies offered by other insurers. In addition, advertisements cannot disparage or criticize competitors and/or their policies, services, business methods including to unfairly diminish a competitor s methods of marketing insurance. Jurisdictional Licensing An advertisement cannot imply the insurer is licensed in a jurisdiction in which it is not licensed. Neither may an advertisements imply the insurer, its financial condition, its payment of claims, or its policy forms and plans of insurance are approved, endorsed, or accredited by any government agency. Identity of Insurer All advertisements must clearly identify the name of the actual insurer and the form number(s) of applicable policies. Advertisements cannot use an insurer s trade name, group designation, parent company name, service mark, slogan, or other symbol without also disclosing the name of the actual insurer. Failure to do so will be construed as tending to mislead and deceive the public about the true identity of the insurer. In a similar fashion, no advertisement may use any combination of words, symbols, or physical materials that are similar enough in their content, phrasing, shape, color, etc. to confuse the public or mislead the public to believe the advertisement is connected in some way with a government agency. 71

73 NEW YORK STATE INSURANCE LAWS Group Implications Advertisements cannot state or imply that prospective insureds become members of a group (including a phony group) to be covered under a group policy in order to enjoy special rates or underwriting privileges unless the statement or implication is a fact. Introductory, Initial, or Special Offers Unless the following statements about individual policies are factual, advertisements cannot contain them: One or more contracts are an introductory, initial, or special offer Applicants will receive substantial advantages not available at a later date The offer is only available to a specified group of individuals An advertisement cannot describe an enrollment period as special, or limited when the insurer uses enrollment periods as the usual method of advertising accident and sickness insurance. At least 6 months must elapse between the end of an existing enrollment period and the beginning of the next enrollment period for policies advertised in the same marketing area. The advertisement must indicate the date by which the applicant must mail the application. This date will be no less than 10 days and no more than 40 days from the date the enrollment period is advertised for the first time. Advertisements cannot state or imply that only a specific number of policies will be sold, or that special advantages of a particular policy will be discontinued by a fixed date unless the statement or implication is factual. An advertisement cannot offer a policy that uses a reduced initial premium in a manner to overemphasize the availability and amount of the initial premium. Special awards, such as a safe driver award cannot be used in connection with the advertisements of accident and health insurance. Statements About an Insurer Advertisements cannot contain false or misleading statements about the assets, corporate structure, financial standing, age, or relative position of the insurer in the insurance business. In addition, an advertisement cannot contain any recommendation by a commercial rating system unless it clearly indicates the purpose and limitations pertaining to the scope and extend of the recommendation. Enforcement Procedures Each insurer will maintain at its home or principal office a complete file containing every advertisement the insurer has used for a period of 4 years, or until the filing of the insurer s next examination, whichever is longer. Each insurer is required to file an annual statement with a certificate of compliance signed by an authorized officer. The certificate must state that the officer, to the best of his/her knowledge, information, and belief, believes the advertisements used during the preceding year complied with this state s insurance advertisement laws. If the Superintendent finds that any advertisement has violated insurance law, he/she may order the insurer responsible for the advertisement to publish a corrective advertisement at the insurer s expense. 72

74 HEALTH LAWS Retention Question 27 Which of the following statements concerning advertising accident and health insurance in New York is NOT true? a. Ads may not make unfair or incomplete policy comparisons b. Ads may not state a contract is an introductory offer unless it is true c. Ads must use words such as all, extra, and comprehensive d. Ads must be clear and avoid misleading or deceiving the public Community Rating Community rating establishes the cost of insurance by using a rating method where the premium for all insureds is the same based on the experience of the entire group--without regard to age, sex, health status, or occupation. Refunds, rebates, credits, or dividends based on age, sex, health status, or occupation are prohibited. The following type of contracts must be community rated if they provide hospital, surgical, and medical benefits: Individual health insurance contracts Small group health insurance contracts, including Medicare Supplements Small group means 2-50 employees or group (association) members, excluding spouses and dependents Any individual or small group employee, including dependents, who applies for individual or small group health insurance must be accepted at all times throughout the year for any hospital and/or medical coverage, including Medicare supplemental insurance. Once accepted for coverage, an individual or small group cannot be terminated by an insurer due to claims experience. Insurers have the ability to establish premium rates that reflect reasonable regional (geographical) variance in actuarial factors, which must be approved by the Superintendent. Health insurance plans may also establish different rates for individuals and families. Insurers may not: Terminate coverage for an individual or small group due to claims experience Act as an administrator or claims-paying agent, or provide stop-loss, catastrophic, or reinsurance coverage on behalf of or to any small group which, if insured, would be subject to small group insurance regulation Act as an administrator or claims-paying agent instead of an insurer for a small group or association group and may not provide stop-loss, catastrophic, or reinsurance coverage for the group Issue different coverage to association members based on whether the member is an individual proprietor or a subgroup Cover a group if it performed its own medical underwriting in any fashion Use actively at work rules, or delaying eligibility under a small group plan until the insured returns to work for a specified period Deny coverage because the applicant is eligible for other coverage, unless the applicant is covered by another plan or is an individual eligible for comparable employer group coverage 73

75 NEW YORK STATE INSURANCE LAWS The following underwriting practices and eligibility rules are prohibited with respect to an insurer s decision whether to offer or accept health individual or small group health insurance applications: Using lists of excluded business industries or occupations Using medical or laboratory tests Using medical exams Asking questions about hobbies and other activities Using attending physician statements, questionnaires, investigations, or reviews pertaining to health status, health history, family health status, or sexual orientation Using medical information obtained from other lines of insurance (i.e., life, disability, or long-term care insurance) Using medical information obtained from other sources (i.e., agents, brokers, consultants, the Medical Information Bureau, etc.) Considering the nonprofit status of a small group Continuation of Health Insurance Benefits Health insurance policies must provide for continuation of benefits as required by law. Within 14 days after receiving notice of an election to continue coverage after any event causing termination of coverage, the applicable employer, policyholder, or agent must notify the insureds of their continuation rights. Only one notice is required per family. If the insured was not notified of his/her continuation rights, the insured must be given 60 days to elect continuation after the date on which the notice is finally sent. The employee or spouse requesting continuation coverage must submit a written election to the employer or policyholder within 60 days of the event that terminated coverage. A former spouse has the right to convert his/her coverage under a family health policy to an individual policy, without providing evidence of insurability, by applying and by paying the first premium within 31 days after his/her coverage under the family policy terminates. Retention Question 28 Which of the following statements about small group major medical policies issued in New York IS true? a. They can only be written for a single person, or a single employee b. They may be cancelled because of poor claims experience c. They must be community rated d. They apply to groups with up to 200 employees Individual Health Insurance Policy General Provisions Required Provisions In New York, each policy of accident and health insurance must contain provisions that are substantially similar to the following. An insurer may use different wording in its provisions but only if they are no less favorable to the insured or a beneficiary: Entire Contract; Changes The policy, a copy of the application, and any endorsements or riders constitute the entire contract. No policy changes are valid until approved by the insurer; agent and brokers do not have authority to make policy changes or waive policy provisions. 74

76 HEALTH LAWS Time Limit on Certain Defenses/Incontestable Clause Once the policy has been in force for 2 years, the insurer cannot void the policy or deny a claim based on the misstatements of the applicant in the application unless they are fraudulent misstatements. Grace Period The insured has a specific period of time after the premium due date to pay the premium before the policy lapses. The grace period cannot be less than: 7 days for weekly premium policies 10 days for monthly premium policies 31 days for all other policies Reinstatement If the insured pays a renewal premium after a policy has lapsed, and the insurer does not require a reinstatement application, the policy will be reinstated automatically upon acceptance of the premium payment by the insurer or its agent or broker. If the insurer requires a reinstatement application and issues a conditional receipt for the premium payment, the policy will be reinstated on the 45th day after the conditional receipt is issued, unless the insurer approves the application or provides a written notice of disapproval before that date. Coverage is provided immediately upon reinstatement for accidents and after 10 days for all other losses. Retention Question 29 In New York, an insurer may void a policy or deny a claim for misstatements under what conditions? a. Never b. Within 1 year c. Within 2 years d. Within 5 years Other Provisions In New York, each policy of accident and health insurance may contain optional provisions that are substantially similar to the following. An insurer may use different wording in its provisions but only if they are no less favorable to the insured or a beneficiary: Insurance with Other Insurers If the insured has valid coverage providing benefits for the same loss with another insurer, and THIS insurer has not been given written notice prior to the time of the loss, this insurer s liability is limited to a proportion of the loss. Benefits are determined by dividing the total benefits of policies known before the loss by total benefits of all policies known after the loss. This is referred to as the coordination of benefits for individual policies. The insurer may include in this provision a definition of other valid coverage. This benefit is limited to coverage provided by organizations subject to regulation by insurance law and any other coverage approved by the Superintendent. Any amount of benefit provided for the insured pursuant to any compulsory benefit statute (including workers compensation and employer s liability statute) whether provided by a governmental agency or otherwise will in all cases be considered other valid coverage and will be considered the primary payor. Third party liability coverage is never primary and not considered other valid coverage. 75

77 NEW YORK STATE INSURANCE LAWS Unpaid Premiums This provision allows an insurer to deduct any unpaid premiums from claim payments. Cancellation The insurer may cancel a policy within the first 90 days after it has been issued by providing 10 days written notice to the insured. Any unearned premium must be refunded on a pro-rata basis if the insurer cancels the policy; however, if the insured requests cancellation, the premium refund may be on a short-rate basis. The insured may cancel the policy at any time by providing written notice to the insurer. Conformity with State Statutes Any provision that, on the policy effective date, conflicts with insured s state of residence will be amended to conform to the minimum requirements of the state statutes. Illegal Occupation The insurer is not liable for any loss if a contributing cause was the insured s engagement in an illegal occupation or commission of, or attempt to commit, a felony. Intoxicants and Narcotics The insurer is not liable for any loss that occurs as a result of the insured being intoxicated or under the influence of any narcotic that was not administered on the advice of a physician. Other General Provisions Renewability Clause Insurers are not permitted to non-renew any policy if one-third or more of the total premium is allocated to hospital, surgical, or major medical benefits unless one or more of the following reasons apply: Non-payment of premiums Fraud or material misrepresentation at the time of applying for insurance or when applying for any policy benefits Discontinuance of a class of policies Discontinuance of all hospital, surgical, and medical expense coverage in the individual market in New York If an insurer offers individual policies through a network plan, an individual no longer resides, lives, or works in the service area of the network if coverage is terminated uniformly without regard to a health-status related factor If an insurer decides to discontinue offering hospital, surgical, or major medical coverage in the individual market, it must: Give at least 90 days advance written notice to the Superintendent Give at least 90 days written notice to each covered individual before coverage is discontinued Offer each covered individual the option to purchase coverage in all other hospital, surgical, and major medical coverage plans currently being offered in the individual market Act uniformly without regard to claims experience or any health status-related factor of insured individuals 76

78 HEALTH LAWS If an insurer decides to discontinue offering all hospital, surgical, and major medical coverage in the individual market in New York, it must: Give at least 180 days advance written notice to the Superintendent Give at least 180 days written notice to each covered individual before coverage is discontinued Discontinue issuing and renewing all hospital, surgical, and major medical coverage in this state in the individual market Provide the Superintendent with a written plan to minimize potential disruption based on its withdrawal from the market Disability Income and Related Insurance Noncancellable The insurer may cancel the policy during the first 90 days after issue: Written notice must be delivered to the insured, or mailed by first class mail, at the last address shown in the insurer s records Notice must provide at least 10 days notice of cancellation The insurer must issue a pro-rata cancellation refund of any premiums paid by the insured Cancellation cannot be issued based on any claims that occurred before the policy s issue date Relations of Earnings to Insurance Loss-of-time benefits cannot exceed the greater of the insured s monthly earnings at the time the disability commenced or the insured s average earnings for the 2 years immediately preceding a disability. The monthly benefit cannot be reduced to less than $200. Medical Plans Many types of medical insurance plans are available to individuals and businesses and offer varying types of coverage and benefit levels. These plans may be issued on an individual, group, or blanket basis and may be provided through a medical expense indemnity corporation, health service corporation or a hospital services corporation. The most common types of medical plans are: Major medical insurance (indemnity plans) Health Maintenance Organizations (HMOs) Preferred Provider Organizations (PPOs) Point of Service Plans Preventive Care Services In New York, a health service corporation or medical expense indemnity corporation offering medical, major medical, or similar comprehensive insurance must provide coverage for preventive and primary care services without the application of deductibles and coinsurance. Preventive and primary care services include the following services provided to a covered child of the insured from birth to age 19: An initial hospital check-up and well-child visits scheduled in accordance with the prevailing clinical standards of a national association of pediatric physicians designated by the commissioner of health; coverage only applies if services are rendered under the supervision of a licensed medical professional and in a hospital or medical professional s office. 77

79 NEW YORK STATE INSURANCE LAWS Services at each visit may include: A medical history A complete physical exam A developmental assessment Pertinent immunizations and lab tests (if ordered during the visit and performed in the practitioner s office or a clinical lab; necessary immunizations include those against diphtheria, pertussis, tetanus, polio, measles, rubella, mumps, influenza type B, and hepatitis type B. Every contract that provides hospital, surgical, or medical care coverage, except grandfathered plans, must provide for the following preventive care and screenings for subscribers and will not be subject to annual deductibles and coinsurance: Recommended evidence-based items or services for preventive care and screenings that have an effective rating of A or B from the United States preventive services task force Recommended immunizations from the Centers for Disease Control and Prevention (CDC) With respect to children, including infants and adolescents, evidence-informed preventive care and screenings provided for in comprehensive guidelines supported by the health resources and services administration With respect to women, additional preventive care and screenings provided for in comprehensive guidelines supported by the health resources and services administration A grandfathered health plan refers to coverage provided by a corporation in which an individual was enrolled on March 23rd, 2010 for as long as coverage maintains grandfathered status in accordance with the Affordable Care Act. Retention Question 30 HMOs are required to provide insurance for which of the following types of services if they offer major medical coverage? a. Long-term care b. Only hospital services c. Preventive and primary care services d. Only outpatient services Cost Containment in Health Care Delivery Utilization Review A utilization review is a review to determine whether health care services are medically necessary. A utilization review can be undertaken for services that have been provided in the past, are being provided currently, or that will be provided in the future; however, it cannot be undertaken for emergency services. Utilization reviews may only be conducted by the following individuals: Administrative personnel trained in the procedure of intake screening and data collection IF they are under the supervision of a licensed health care professional Health care professionals trained in the procedures and standards of a utilization review agent Clinical peer reviewers involved in an adverse determination 78

80 HEALTH LAWS A prospective review is a utilization review conducted before the delivery of requested medical service. Prospective reviews include the initial review conducted before treatment starts, and the initial review for treatment to a different body part. During a prospective review, copies of medical records will be required only when necessary to verify that the health care services being considered are medically necessary. A concurrent review is a utilization review conducted while services are being provided. The insurer monitors the insured s hospital stay to make certain everything is proceeding according to schedule. The length of hospital stay is monitored. A retrospective review is a utilization review of claims for services already received. Retrospective reviews may be used to confirm medical necessity of services, identify coordination of benefits opportunities, and to determine if a non-precertification penalty applies. If an insured receives an adverse determination by a health plan, he/she may request an external appeal of that decision. An adverse determination is a determination by a utilization review agent that an admission, extension of stay, or other health care service is not medically necessary. An insured has 4 months during which to initiate an external appeal of an adverse determination. The appeal must be submitted in writing on a form required by law, in accordance with the form s instructions. New York Dependent Requirements (Individual and/or Group) Dependent Child Age Limit Under individual plans of insurance, dependent children include children under age 19 except the following children who are age 19 and older: Unmarried dependent children who are incapable of self-sustaining employment due to mental illness, developmental disability, or mental retardation according to mental hygiene law if the incapacity occurred prior to age 19 Unmarried students attending an accredited learning institution until age 23; this only applies to policies other than hospital, medical, surgical, or prescription drug plans unless the insurer chooses to permit coverage to age 25 Married and unmarried children will be considered dependent children until reaching age 26 regardless of their financial dependence, place of residence, status as a student, or employment if covered by hospital, medical, surgical, or prescription drug coverage In addition, New York law requires insurers issuing hospital, medical, or surgical expense insurance that provide coverage for dependent children to make available a coverage extension for unmarried children until age 29 if the child is not insured by, or eligible for, employer-sponsored group coverage. This coverage extension must be offered without regard to the child s financial dependence, any self-insurance, place of residency, or the insurer s service area. Insurers must provide written notice of the availability of this coverage extension at least 30 days before the beginning of the policy. Under group plans of accident and health insurance providing hospital, medical, surgical, or prescription drug expense insurance coverage may be offered to an insured s spouse, children, and other dependents under the following conditions: Coverage for unmarried and married children of the insured must be provided until age 26, regardless of their financial dependence, place of residence, status as a student, or employment 79

81 NEW YORK STATE INSURANCE LAWS Coverage must be provided for unmarried dependent children who are incapable of selfsustaining employment due to mental illness, developmental disability, or mental retardation according to mental hygiene law if the incapacity occurred prior to age 19. This requirement applies so long as the child remains incapable of working and dependent upon the insured for support The employee must submit proof the child s incapacity upon attaining age 19 A coverage extension to age 29 must be offered under the same conditions that are required under individual plans of insurance Family coverage must include insurance for newborn infants, including those adopted by the insured if the insured takes physical custody of the infant upon his/her release from the hospital and files an adoption petition with the state within 30 days of the newborn s birth. Coverage will be effective from the moment of birth. Coverage for the initial hospital stay is not required if an adopted child s birth parent has insurance coverage for the newborn. Policy Extension for Handicapped Children In New York, individual accident and health policies cannot terminate coverage for unmarried dependent children who meet the following conditions upon their attainment of a specific age or other requirement: The child is incapable of self-sustaining employment and will continue to remain incapacitated The incapacity is due to mental illness, developmental disability, physical disability, or mental retardation as defined in the mental hygiene law The policyholder must submit proof of the dependent s incapacity within 31 days after the dependent attains the limiting age Newborn Child Coverage Every accident and health policy providing family coverage must provide insure newborn infants from the moment of birth for injury and sickness. Coverage must include the treatment of medically diagnosed congenital defects, birth abnormalities, and premature birth. Coverage must also apply to newly born infants adopted by the insured if the insured takes physical custody of the child upon the child s release from the hospital after birth. In the case of adoption, coverage for the initial hospital stay is not required when the natural parent has insurance coverage available for the infant s care. With respect to policies issued on an individual basis, insurers must allow the person to whom the policy is issued to elect coverage of newborn infants from the moment of birth. Notification of the birth and payment of any additional premium required must be made to the insurer within 30 days of the date of birth to obtain coverage. This election is not required in the case of student insurance. Retention Question 31 If an individual health policy contains a provision that terminates coverage for a dependent child upon the attainment of a certain age, coverage cannot be terminated for which of the following dependent children? a. A boy b. A married child c. A child who is working d. A child incapable of working due to a disability 80

82 Patient Protection and Affordable Care Act HEALTH LAWS The PPACA was enacted with the goals of increasing the quality and affordability of health insurance, lowering the uninsured rate by expanding public and private insurance coverage, and reducing the costs of healthcare for individuals and the government. The ACA does not mandate that employers provide health insurance to their employees. The Act also established the Health Insurance Exchange (Marketplace), which is a resource where individuals, families, and small businesses can learn about their health coverage options; compare health insurance plans based on costs, benefits, and other important features; choose a plan; and enroll in coverage. Changes due to the Act have become effective in stages since The following provisions have been established: Minimum health standards identified as Essential Health Benefits Under the individual mandate, all individuals without minimum essential coverage, either group or individual, will be assessed a penalty called the Shared Responsibility payment Prohibited insurers offering group or individual health insurance coverage from imposing lifetime or annual limits on the dollar value of the mandatory essential health benefits Eliminated copayments, coinsurance, or deductibles for preventive care and medical screenings Extended dependent children s coverage through age 25 (up to age 26) based strictly on the parent child relationship Health insurance exchanges must be available to individuals and small businesses as a resource to learn about healthcare options, compare and choose between those options and enroll in health plans Cost Sharing Reductions must be available on policies purchased through an exchange by consumers with income above 138% of the Federal Poverty Line (FPL) up to 250% of the FPL Employers with more than 50 employees that don t offer an affordable health plan that provides the minimum essential benefits will be required to pay an Employer Shared Responsibility penalty if the government has to subsidize at least one employee s individual plan purchased through an exchange PPACA Terminology Essential Health Benefits All health plans, group and individual, offered through an Exchange must provide, at a minimum, benefits in the following 10 categories of care and services: Ambulatory patient services Mental health and substance use disorders, including behavioral health treatment Emergency services Hospitalization Laboratory services Maternity and newborn care (including prenatal and delivery care) Prescription drugs Pediatric services, including dental and vision care Preventive, wellness, and chronic disease management Rehabilitative and habilitative services and devices 81

83 NEW YORK STATE INSURANCE LAWS Benchmark Plans (State Essential Health Benefits) Benchmark plans are state specific required benefits, or mandates, include specific care, treatment, or services a health plan must cover. Actuarial Value The actuarial value of a health plan equals the percentage of the total average costs that a plan pays for Essential Health Benefits. If a health plan had an average actuarial value of 60%, insured individuals would be responsible for paying 40% of the costs of covered benefits. A plan meets the minimum value requirement if it is designed to pay at least 60% of the total costs for covered benefits. Qualified Health Plan (QHP) A qualified health plan is any plan which provides coverage for the 10 Essential Health Benefits and provides a minimum actuarial value of 60%. Medical Loss Ratios The medical loss ratio is the ratio of an insurer s claims costs and certain taxes and fees versus its total premiums received. By requiring a minimum MLR, an insurance company provides greater value to its policyholders when a higher percentage of premiums is used for healthcare costs versus administrative expenses or profits. The ACA requires the medical loss ratio to be 85% for large group plans and 80% for individual and small group plans. If an insurer fails the MLR test (the loss ratio is lower than the required minimum) in a calendar year for all plans in a given market segment (individual or group), the excess premium is to be refunded to consumers enrolled in plans in that market segment. Metal Tier Benefit Categories An Essential Health Benefits package is required by the PPACA to provide coverage for at least one of four levels of coverage offered through all health exchanges. These coverage levels are known as Metal Tiers and are defined as Bronze, Silver, Gold, or Platinum. The main difference between the plans is the actuarial value, or percentage the plan pays of the average overall cost of providing essential health benefits to members. The plan category chosen affects the total amount an individual will spend for essential health benefits during the year. Plan Level Bronze Plan Silver Plan Gold Plan Platinum Plan Characteristics Covers 60% of the benefit cost of the plan Covers 70% of the benefit cost of the plan Covers 80% of the benefit cost of the plan Covers 90% of the benefit cost of the plan In addition to the Metal Tiers, Catastrophic Plans are available in the individual market for those who are under age 30 OR eligible for a hardship exemption because they cannot afford health insurance offered by an Exchange. The premiums are lower than a QHP, but the out-of-pocket costs are higher. Guaranteed Issue The guaranteed-issue provision is designed to eliminate discrimination based on health status by insurers. Insurers must provide health insurance to any person, regardless of medical history or current state of health. Insurers may no longer rate and charge higher premiums for substandard risks. Rates are strictly based on regional costs and the age of the insured. 82

84 HEALTH LAWS Pre-existing Conditions Insurers are required to cover children under 19 with preexisting conditions and are prevented from dropping policyholders if they get sick. All health plans are prohibited from discriminating against or charging higher rates to any individual on the basis of preexisting conditions. Lifetime and Annual Limits Health insurance issuers offering group or individual coverage are prohibited from imposing lifetime or annual limits on the dollar value of Essential Health Benefits. Open Enrollment Period An open enrollment period is the length of time during which any eligible person may enroll in a Qualified Health Plan offered through an Exchange. Open enrollment begins on November 15 before the Benefit Year and ends on February 15 of the Benefit Year. Advance Premium Tax Credit Premium Tax Credits are available from the federal government to help lower the cost of health coverage for individuals and small employers who meet certain income requirements and do not have affordable health insurance that meets the minimum essential coverage requirements. New York Required Benefits and Mandated Offers (Individual, Group, or Blanket) Coverages If coverages or reimbursement is provided by an individual, group, or blanket accident and health policy issued in this state, including a contract issued by a hospital service corporation or health service corporation, the following must apply for these services: Optometric Services The insured must be covered for such service whether performed by a physician or licensed optometrist. Unless otherwise specified, there is no reimbursement for ophthalmic materials, lenses, or eyeglasses. Podiatric Services The insured must be covered for such service whether it is provided by a physician or licensed podiatrist. Dental Services The insured must be covered for such service whether it is performed by a physician or licensed dentist. Psychiatric or Psychological Services The insured must be covered for the diagnosis and treatment of mental, nervous or emotional disorders whether performed by a physician, psychiatrist, or psychologist. Required Benefits The following benefits may be required for contracts issued by group, blanket or individual commercial insurers, or by a medical expense indemnity corporation, hospital services corporation or health service corporation providing hospital, surgical or medical expense coverage. 83

85 NEW YORK STATE INSURANCE LAWS Benefit Specialist Visit (Specialist) Outpatient Hospital Services Hospice Care Infertility Treatment Medical Conditions Leading to Infertility Home Health Care Emergency Medical Services Emergency Transportation Inpatient Hospital Services Physician Services Pre-admission Testing Second Surgical Opinion Characteristics Second medical opinion must be covered for cancer diagnosis A policy that provides for inpatient hospital care must provide for ambulatory care in hospital out-patient facilities Certified as having a life expectancy of 6 months or less; coverage must be provided for at least 210 days Must cover diagnostic tests and surgical procedures used to determine infertility for members between the ages of Coverage for FDA approved prescription drugs used to treat infertility must be covered. Coverage must be provided for treatment of medical conditions leading to infertility Home care is the care and treatment of a covered person under the care of a physician who would otherwise be confined to a hospital or nursing home if home care was not provided. The home health service plan must be established and approved in writing by a physician and provided by a certified or licensed agency. Home care coverage may be subjected to an annual deductible not to exceed $50 per person and a coinsurance provision of not less than 75% of the reasonable charges. Each visit by a member of a home care team (up to 4 hours) will be considered one visit and the contract cannot be limited to less than 40 visits in any calendar year or continuous 12 months per person covered under the contract For policies providing inpatient hospital care, the insured must be covered for services to treat an emergency condition provided in hospital facilities without the need for any prior authorization determination regardless of whether the health care provider furnishing such services is a participating provider. If provided by a non-participating provider, coverage limitations and cost-sharing requirements must be the same as if provided by a participating provider. An emergency condition means a medical or behavioral condition that manifests itself by acute symptoms including severe pain that a layperson could expect the absence of immediate medical attention to result in placing one s health (or others if behavioral) in serious jeopardy or to cause serious impairment, dysfunction, or disfigurement to one s body. Emergency services include a medical screening or ancillary services routinely available to the emergency department to evaluate an emergency medical condition. To stabilize means to provide medical treatment to assure that no material deterioration will during the transfer of an insured from a facility or to a delivery room. Ambulance and pre-hospital emergency medical services Coverage for a hospital stay Inpatient physician and surgical services Coverage must be provided for preadmission tests prior to the scheduled surgery. If the patient has the tests performed on an outpatient basis through a hospital facility, the tests must be necessary and consistent with the diagnosis and treatment of the condition for which surgery is to be performed; the surgery must take place within 7 days of the tests; and the patient is physically present at the hospital for the tests. For policies providing inpatient surgical care, the insured must be covered for a second surgical opinion by a qualified physician on the need for surgery. 84

86 HEALTH LAWS Benefit Skilled Nursing Facility Care Maternity Care Outpatient Mental Health Mental, Nervous, or Emotional Disorders/ Ailments Inpatient Mental Health Care Inpatient and Outpatient Alcoholism & Substance Abuse Outpatient Rehabilitation Services Chiropractic Care Diagnostic Laboratory Services and X-Rays Preventive Care and Screening Autism Spectrum Mastectomy Care Diabetic Supplies, Equipment, and Self-management Education (Diabetic treatment) Chemotherapy Services Eating Disorders Characteristics Continued care and treatment of a person under the care of a physician if they have been in a hospital at least 3 days immediately preceding admittance to the facility Coverage must be provided for maternity care to the same extent coverage is provided for any other illness or disease. Maternity care coverage, other than perinatal complications, must include inpatient hospital coverage for mother and newborn for at least 48 hours after childbirth for a delivery other than caesarean section, and at least 96 hours after a caesarean section. The mother will have the option to be discharged earlier and in this case coverage must include at least one home care visit. Coverage must include the services of a licensed midwife, but will not pay for duplicate routine services actually provided by both a licensed midwife and a physician. Coverage for 30 visits per year including office and outpatient visits. Biologically based services count toward the limit If coverage is provided by physicians, psychologists and psychiatrists, it must also include coverage for a licensed clinical social worker Coverage for 30 days per year including biologically based services Coverage for the diagnosis and treatment of substance use disorder, including detoxification and rehabilitation is limited to facilities certified by the State of New York Outpatient physical therapy in connection with an illness or surgical procedure must be provided within 6 months of discharge or surgical procedure and for no longer than 365 days after discharge or surgical procedure Coverage can be no more restrictive than services provided by other health professionals The insured must be covered at the same percentage of reimbursement whether the tests are provided to the insured as an inpatient or outpatient. The following must be provided: Cervical cytological screening, mammography screening, prostate cancer screening, contraceptive drugs and devices, bone density measurements (testing, drugs and devices) Coverage must be included for the screening, diagnosis and treatment of autism spectrum disorder. Coverage cannot be excluded for the treatment of medical conditions otherwise covered because an individual is diagnosed with this disorder. Coverage may be limited to 680 hours of treatment per person per calendar year. Coverage providing hospital care must include coverage for a lumpectomy or mastectomy for the treatment of breast cancer For policies providing medical coverage including physician services, coverage must be included for equipment and supplies for the treatment of diabetes if prescribed by a physician or other licensed health care provider. Coverage must also be provided for diabetes self-management education. This provides coverage for the drug infusion administration Must be provided by a comprehensive care center for eating disorders 85

87 NEW YORK STATE INSURANCE LAWS Benefit Experimental or Investigational Services Recommended by an External Appeal Agent Enteral Formulas Dialysis Services Cancer Drugs Prescription Drugs Coverages Post-Mastectomy Reconstruction Characteristics Coverage cannot be excluded for a service because it is experimental or investigational as long as it has been recommended by an external appeal agent which is binding by all parties Coverage for Inherited Metabolic Disorder (PKU) Coverage for dialysis by an out-of-network provided cannot be denied as long as the service is provided by a licensed provider, is located outside the service area, and an in-network provider issues a written order Contracts that provide coverage for prescription drugs and chemotherapy treatment must provide coverage for prescribed orally administered anticancer medications If a contract provides coverage for prescription drugs in which cost-sharing, deductibles or coinsurance obligations are determined by category cannot exceed the dollar amount of those obligations for non-preferred drugs Coverage must be provided for all stages of the breast on which a mastectomy or partial mastectomy has been performed Availability of Coverages Written notice of the availability of such coverages must be delivered to the policyholder prior to inception of any group policy and annually thereafter, except where a policy covers two hundred or more employees or where the benefit structure was the subject of collective bargaining affecting persons who are employed in more than one state. These coverages must be made available where applicable at the inception of all new policies and, with respect to all other policies, at any subsequent annual anniversary date of the policy subject to evidence of insurability. Coverage provided may be subject to copayments, annual deductibles and/or coinsurance as deemed appropriate by the superintendent and that are consistent with those imposed on other benefits within a given policy. Long-term Care Insurance Optional Benefits Inflation Protection (COLA) New York insurers must offer inflation protection as either a policy provision or rider when offering LTC insurance. Offers of inflation protection to provide for the increase of benefit levels and maximums can be no less favorable to the insured than the following: Increase benefit levels on an annual basis of at least 5% compounded annually (based on the Consumer Price Index) Guarantee the insured the right to periodically increase benefit levels without medical underwriting if the option for such increases wasn t declined by the insured (the minimum amount of any increase must be the difference between the current benefit limit and the current limit compounded annually at a rate of no less than 5%) The benefit level does not include a maximum specified indemnity amount or limit and, instead, covers a specified percentage of actual or reasonable charges 86

88 HEALTH LAWS Nonforfeiture Benefits New York insurers must include the offer of nonforfeiture benefits when offering LTC insurance. The benefits must provide some type of nonforfeiture value, such as reduced paid-up insurance. The reduced paid-up percentages may apply to the nursing home benefits only or to all benefits in the policy or certificate. These percentages must appear in the policy and may change based on experience, provided the policy or certificate states that such change will only be made in conjunction with an increase in premium. Exclusions LTC insurance in New York cannot exclude coverage by type of illness, treatment, medical condition, or accident unless for the following: A pre-existing condition or disease for which medical advice or treatment was given, received, or recommended by a licensed health care provider within 6 months before the effective date of coverage Mental or nervous disorders other than Alzheimer s disease or organic brain disease Alcoholism and drug addiction Illness, treatment, or medical condition arising out of: War or any act of war, declared or undeclared Participation in a felony, riot, or insurrection Service in the armed forces or one of its auxiliary units Suicide, attempted suicide, or intentionally self-inflicted injury Aviation (only for non-fare paying passengers) Treatment provided in a government facility (unless required by law) or covered by: y Medicare or any other government program except Medicaid y Any Workers Compensation, employer s liability, or occupational disease law y Any mandatory motor vehicle no-fault law y Services provided by members of the covered person s immediate family y Services for which no charge is normally made in the absence of insurance New York Regulations and Required Provisions Renewability All long-term care insurance policies in New York must be guaranteed renewable. Guaranteed renewable means the insured has the right to continue coverage by paying premiums on time. The only reason for which the insurer may cancel the policy is non-payment of premium and the only change the insurer can make to the policy (without the insured s consent) is to adjust the premiums. If premiums are adjusted, they may only be adjusted if the insurer also revised premiums for all insured who were issued policies in the same rate class. Required Disclosure Provisions All LTC insurance policies must include the following disclosures: The state or jurisdiction in which the contract was issued That the disclosure statement is not part of the policy and is a separate document that describes briefly the important policy features; the insured should refer to the policy for details and specifics of coverage The terms under which the contract can be surrendered and returned to the insurer for a refund (free look period) A statement that long-term care insurance is NOT Medicare supplement insurance 87

89 NEW YORK STATE INSURANCE LAWS A statement that the long-term care insurance policy is designed to provide insurance for no less than 24 consecutive months for each covered person: On an expense incurred, indemnity, prepaid, or other basis For all levels of care in a nursing home and for home care benefits In the form of a fixed dollar indemnity benefit for covered long-term care expenses Subject to the following specific conditions that must be specified in the disclosure: y Limitations y Waiting periods y Coinsurance requirements Replacement All LTC insurance applications must include a question designed to obtain information about whether an LTC policy is intended to replace any other accident and health insurance policy currently in force. The application form must require a list of all existing accident and health insurance, including the policy numbers of any policies being replaced. The application must contain a statement signed by the agent that states: The amount and type of replacement insurance applied for is appropriate for the applicant s needs A Notice to Applicant Regarding Replacement must be attached to the applicant and signed by both the applicant and agent A copy of the Notice must be provided to the applicant and the insurer. New York State Partnership for Long Term Care New York offers residents the opportunity to participate in the New York Partnership for Long-Term Care Program. The purpose of a long-term care partnership program is to encourage consumers to use LTC insurance to fund the costs of long-term care (instead of using Medicaid funds) and to qualify for Medicaid without depleting assets. State LTC partnership programs are collaborations between the states and private insurance companies to provide incentives for consumers to purchase LTC insurance, if suitable. When an LTC partnership policy is purchased, policy benefits pay for the costs of LTC services first, before other payment are made by any other source. If the policy s benefits are exhausted and a policyholder is otherwise eligible for Medicaid benefits, some or all of the policyholder s assets are protected from spend down requirements when they apply for Medicaid. Under a qualified partnership policy, personal assets in the amount of the total benefits paid are disregarded when Medicaid asset eligibility is calculated. For each dollar of benefits paid, one dollar of assets is not counted toward the eligibility limit. However, they are not exempted from Medicaid s income requirements. The term used for the protection of assets in a partnership policy is asset disregard. Asset Categories New York has two asset categories: Total Assets and Dollar-for-Dollar. The Total Assets option protects all assets, while the Dollar-for-Dollar option only provides asset disregard that is equal to the amount of the benefits actually received under the long-term care partnership qualified policy. LTC insurance policies in New York are assigned a 3-number identity: 1.5/3/5; 3/6/50; 2/2/100 or 4/4/100. All plans offer the same services and provisions, but differ in the amounts of some requirements. 88

90 HEALTH LAWS The first number refers to the minimum number of years the policy must pay for institutional care, such as a care in a skilled nursing facility (SNF) or and assisted living facility (ALF). A 1.5 plan must provide at least 1.5 years (18 months) of benefits for institutional care and a 3 plan must provide at least 3 years (36 months) of such care. The second number refers to the number of years the policy must pay for home care or home health care. The third number refers to a percentage that represents the daily required minimum a policy must pay for home health care as opposed to institutional care. If this number is 50, the policy pays for home care 50% of the required daily minimum for institutional care. Medicaid Estate Recovery Act (OBRA 93) This Act requires states to pursue recovering costs for medical assistance consisting of: Nursing home or other long-term institutional services Home and Community based services Hospital and prescription drug services while receiving nursing facility, home and community-based services Any other items covered by the Medicaid State Plan at the state s option At a minimum,states must recover from assets that pass through probate and at a maximum states may recover any assets of the deceased recipient. Partnership program provisions protect policyholders who apply for Medicaid after exhausting their insurance coverage since certain assets are disregarded during their Medicaid eligibility determination. These assets are also exempt from Medicaid claims against their estates after death. New York Tax Credit The State will provide a 20% tax credit toward LTC Partnership premiums. This credit is available to anyone paying long-term care insurance premiums, including children who pay for coverage on behalf of their parents, when they file a New York State tax return. Retention Question 32 The purpose of the New York Long-Term Care Partnership is to do which of the following? a. Create a public-private partnership for profitably underwriting long-term care risks b. Enforce the terms of the Medicaid Estate Recovery Act c. Extend Medicare benefits beyond 6 months d. Offer residents the chance to qualify for Medicaid regardless of source depletion 89

91 NEW YORK STATE INSURANCE LAWS Group Health and Blanket Insurance Blanket accident and health insurance insures a group of persons against death or injury arising from accident. Blanket insurance is issued to: Any railroad, steamship, bus, or airplane carrier of passengers An employer covering a group of employees against exceptional hazards of employment A college, school, or institution of learning A county, city, town, village, or fire district including a fire department, company, or corporation An association of persons with a common interest or calling so long as the association has at least 50 members A group substantially similar to the preceding groups, or any group with the following characteristics: The members of the group share a common business industry or financial or social affinity or relationship Premiums for coverage are reasonable based on the benefits provided The issuance of insurance is actuarially sound and is not contrary to public interest Any policy that insures more than one person against death of injury from accident is considered group accident insurance, EXCEPT: Blanket accident insurance Any individual policy A policy that provides indemnity benefits Family insurance Workers Compensation disability benefits Eligible Groups An individual employer group (including a trust of a fund established by an employer) consisting of the employer s employees. Coverage may be provided: y Either with or without evidence of insurability. y To all employees or all employees of one or more classes of employees, as determined by the employer with respect to conditions of employment or family status but not on a basis that is individually discriminatory Premiums may be paid by the employer, employees, or both: y If the employees pay any portion of the premium, the policy must insure no less than 50% of eligible employees, OR y If group hospital, medical, major medical or similar insurance is being provided, if less than 50% of the eligible employees are insured, then 50 or more employees must be insured y For all other types of coverage being provided, the plan must insure the lesser of 50% of eligible employees or 5 eligible employees 90

92 A labor union insuring its members Coverage may be provided: y Either with or without evidence of insurability HEALTH LAWS y To all members or all members of one or more classes of members, as determined by conditions relating to their employment, membership in the union, or both but not on a basis that is individually discriminatory y A limited number of plan options may be offered so long as they offer consistent plans of coverage to all individual group members y No less than 50% of all eligible members or at least 50 members must be insured A professional, trade, or other association insuring the all eligible members who share the same profession, trade, or occupation for the sole benefit of the members; coverage may only be issued if: At least 100 persons must insured on the date of issue The association has been in existence for at least 2 years and was formed for a primary purpose other than obtaining insurance Eligible persons are members or members employees, or all of any specific class or classes of membership determined by conditions pertaining to employment, membership, or both Premiums can be paid by the members, individual insured persons, or both y If any portion of the premium is paid by the individual insured persons, the plan must insure the lesser of at least 200 persons or 50% of eligible individuals (excluding those who cannot furnish satisfactory evidence of insurability) y If no portion of the premium is paid by the individual insured persons, the plan must insure all eligible individuals (excluding those who cannot furnish satisfactory evidence of insurability) A customer group (i.e., creditors and vendors and including parent holding companies, trusts, and trustees) so long as the amount of indemnity payable to each covered person does not, at any time, exceed: The lesser of $30,000 and the unpaid amount due of the purchase price For student loans, the lesser of $30,000 and the total of the unpaid balance of outstanding payments (whether due or forgiven) and the amount of any outstanding loan commitment For real estate mortgages, the lesser of $75,000 and the amount of the secured loan Any other type of group IF: It is formed by those with a common business industry or economic or social affinity or relationship Premiums for coverage are reasonable based on the benefits provided The issuance of insurance is actuarially sound and is not contrary to public interest 91

93 NEW YORK STATE INSURANCE LAWS Regulation of Employer Group Plans Family Medical Leave Act (FMLA) The federal Family Medical Leave Act entitles an eligible employee of a covered employer to a family and medical leave insurance benefit for a total of 12 work weeks during any 12-month period for one or more of the following reasons: The birth of the employee s child and to care for such son or daughter. The placement of a child with the employee for adoption or foster care To care for the employee s child, parent, spouse, domestic partner, grandchild, grandparent, or sibling if such person has a serious health condition A serious health condition that makes the employee unable to perform the functions of his/her position Any qualifying exigency (i.e., a sudden unforeseen crisis) arising out of the fact that the spouse, or a son, daughter, or parent of the employee is on active duty (or has been notified of an impending call or order to active duty) in the Armed Forces of the United States in support of a contingency operation To care for the employees child, parent, spouse, domestic partner, grandchild, grandparent, sibling, or next of kin of the employee who is a covered service member An eligible employee is an employee: Who earned wages with a covered employer for a minimum of 6 months before filing an application for leave benefits Who was been employed by the employer for at least 625 hours of service during the previous 6 months Of a small employer that has elected to participate in the Program Who is not an employee of the federal government Who is a self-employed individual A covered employer is a person that: Is an employer Is a small employer that has elected to participate in the Program Is a self-employed individual who has elected to participate in the Program Is not a voluntary plan employer In carrying out the Federal Program, the Secretary of the Department of Labor may enter into a contract with a state under which the state agrees to establish or expand a state program in effect at the date of the enactment of this Act for the purpose of including a State Family and Medical Insurance Program that provides the benefits described under the federal program. Employer Group Health Insurance Coordination of Benefits Provision Rules pertaining to coordination of benefits were established to provide for uniformity in the permissive use of over-insurance provisions and to avoid claim delays and misunderstandings that might arise from the use of inconsistent or incompatible provisions among various plans. A coordination of benefits provision is one designed to avoid claim payment delays and duplication of benefits when a person is insured by two or more plans that provide similar coverage. It establishes guidelines for the order in which each of the plans will make payment and provides authority for the exchange of information to expedite claim payments. It also avoids the duplication of benefits by allowing plans to reduce their payments when, according to established rules, it is not required to benefits first. 92

94 HEALTH LAWS Insurance regulations permit, but do not require, insurers to include coordination of benefits provisions in their policies. However, if a plan does include a coordination of benefits provision, the provision must comply with insurance rules and regulations. If a plan does not include a coordination of benefits provision, it is not permitted to taken another plan s benefits into consideration when making payments. Two exceptions to this rule exist: Coverage that is supplementary to a basic package of benefits will be excess over any other parts of the plan Noncontributory group or blanket coverage that provides excess major medical benefits that supplement basic benefits may continue to be excess to the basic benefits A plan is a form of coverage written on an expense-incurred basis that allows coordination of benefits. A primary plan is one whose benefits must be determined without taking into consideration the existence of any other plan. There may be more than one primary plan. A secondary plan is a plan that is not a primary plan. The benefits of each secondary plan may take into consideration the benefits of the primary plan(s) and any other plan that has its benefits determined before those of the secondary plan. An allowable expense is the necessary, reasonable, and customary item of cost for health care when the service is covered under a plan. The order of benefit determination rules is as follows: Primary plans pays benefits as if secondary plans do not exist A secondary plan takes the benefits of another plan into account only when it is secondary to that other plan; When a plan is secondary, it must reduce its benefits so the total benefits paid by all plans during a claim determination period are not more than 100% of total allowable expenses The plan that covers the person as an employee or member (other than as a dependent) before the plan that covers the person as a dependent With respect to coverage for a child as a dependent of different parents: The plan of the parent whose birthday falls earlier in the calendar year pays before the plan of the parent with the later birthday If both parents have the same birthday, the plan that covered the parent longer pays before the other parent s plan If the other plan does not follow the rules based on birthday and uses a rule based on the gender of the parent, and the plans do not agree on the order of benefits, the rule based on the gender of the parent determines the order of benefits A plan that covers a person as an employee who is neither laid-off nor retired pays before a plan that covers the person as a laid-off or retired employee Conversion Privilege If a group policy that provides coverage other than for specific diseases or accident-only must provide all insured persons with an option to convert the group coverage to an individual policy of coverage terminates. The conversion option is offered under the following conditions: Termination must meet certain requirements: The employment or membership in classes of eligible coverage terminates The policy terminates The policyholder has not replaced group coverage with other, similar and continuous group coverage The insured person was covered by the group policy for at least 3 months 93

95 NEW YORK STATE INSURANCE LAWS Each member of the group must be notified within 15 days of termination If notice is provided more than 15 days but less than 90 days after termination, the conversion privilege must be extended to 45 days The conversion policy will be available without evidence of insurability The insured person must submit an application to the insurer within 45 days after coverage terminates and pay a quarterly premium (unless a less frequent mode of payment is permitted for that type of insurance) The insurer may choose to provide coverage under a group policy rather than an individual policy The converted policy must provide for identical coverage for dependents, unless the insured person chooses differently; other conditions pertaining to the converted policy include: The converted policy is not required to provide benefits in excess of those of the group coverage that was terminated The converted policy may contain any exclusion or limitation that was contained in the group coverage or that is customarily included in an individual policy The effective date of the converted policy must be the same date the group coverage terminates The converted policy cannot contain any pre-existing condition exclusion not contained in the group policy; however: y It may reduce benefits by any amounts due under the group policy y During its first year, the converted policy s benefits may be reduced so they don t duplicate benefits provided by the group coverage if it had not terminated y It may terminate coverage for any person eligible for coverage under Medicare Family members who lose group coverage because they no longer meet the policy s definition of family member may apply for conversion to an individual policy without evidence of insurability The family member must submit an application and premium payment for a converted policy within 31 days after group coverage terminates This same option is available to a former spouse upon divorce or annulment from the insured person or to a dependent upon reaching the attainment of a specified age The insured person or dependent must be provided with a notice between 15 and 60 days before the dependent reaches the specified age The notice must explain the dependent s rights pertaining to: Enrollment in an accredited education institution The inability to work at self-sustaining employment due to mental illness, developmental disability, or any physical or mental handicap Premiums charged for any converted policy will be at the individual s age and applicable rate class Insurers are not permitted to non-renew a converted policy due to the insured s physical or mental condition. In addition, insurers are not permitted to require as a condition of renewal that the policy will limit the nature or extent of the policy s benefits. 94

96 Small Employer Medical Plans HEALTH LAWS A small group health insurance policy is a group policy written to cover 2-50 employees or association members, not including their dependents and spouses. An insurer may only include a sole-proprietor in the small group category if it applies that classification consistently to all soleproprietors. Availability of Coverage A small group health insurance policy does NOT include a policy that only provides: Long-term care benefits Nursing home benefits Home care benefits Dental or vision services Hospital or surgical indemnity benefits with specific dollar amounts (unless those dollar amounts exceed the amounts required to be defined as basic hospital and medical insurance) Accident-only indemnity benefits Accidental death and dismemberment benefits Prescription drug benefits Disability income benefits Specified disease benefits Renewability Open enrollment is a period of time during which any individual (including his/her dependents) and any small group (including all employees and members) applying for small group coverage must be accepted at all times during the year. This applies to any hospital and/or medical coverage offered by the insurer, including Medicare supplement insurance, in this state. Once coverage has been provided during an open enrollment period, coverage cannot be terminated by the insurer due to claims experience. Government Health Insurance Plans New York State Disability Benefits Law This law, which is administered by the Workers Compensation Board, only provides loss of income disability benefits for eligible employees who are prevented from earning an income because of nonoccupational injuries or illness. This law does not provide medical benefits and does not provide benefits for occupational injury or illness covered by Workers Compensation insurance. An employer is a person, partnership, corporation, deceased employer s legal representative, receiver, assignee, or trustee who employ persons. This term does not include the state, municipal corporations, local government agencies, or political subdivisions unless they choose to be classified as covered employers. An employee is an individual performing services for compensation or other valuable consideration for a covered employer but only if a legal employer-employee relationship exists. Managers, superintendents, and other administrative personnel are considered employees. Disability (during employment) is an employee s inability, as a result of injury or sickness not arising out of employment, to perform his/her regular employment duties or the duties of any other employment the employer may offer at the person s regular wages--and that the injury or sickness does not prevent the employee from performing. 95

97 NEW YORK STATE INSURANCE LAWS Disability (during unemployment) is an employee s inability, as a result of injury or sickness not arising from employment, to perform the duties of any employment for which he/she is reasonably qualified by training and experience. This term includes disability caused by or in connection with pregnancy. Employment Covered Employees, as defined above, are covered by this law. Unemployed workers may also be eligible for benefits if they become disabled while unemployed. Types of employment that are NOT covered include: Persons in casual employment for fewer than 45 days per calendar year Services performed as a real estate broker or associate Maritime employment Service subject to the Federal Railroad and Unemployment Insurance Act Domestic workers in private homes who are employed for fewer than 40 hours per week by any one employer Professionals or teachers working for religious, charitable, or educational institutions Independent contractors Licensed ministers, priests, rabbis, and other religious personnel Farm laborers Executive officers of an incorporated religious, charitable, or educational institutions Benefits The law provides an eligible person with benefits up to 50% of his/her average weekly wages during the 8 weeks before the onset of disability, subject to a maximum specified dollar amount per week. Benefits begin on the 8th consecutive day of disability and may not extend beyond 26 weeks in any 52-week period. Retention Question 33 Under the New York State Disability Benefits Law, what is the maximum number of weeks one may receive a benefit? a. 52 weeks in any 52-week benefit period b. 26 weeks in any 26-week benefit period c. 13 weeks in any 26-week benefit period d. 26 weeks in any 52-week benefit period Retention Question 34 Which of the following statements regarding the New York State Disability Law is correct? a. Persons in casual employment for fewer than 45 days per calendar year are eligible b. The maximum weekly benefit equals 50% one s pre-disability wages up to the state maximum c. Individuals collecting unemployment are not eligible for benefits d. The New York State Disability Law is another name for worker s compensation 96

98 HEALTH LAWS Medicaid Child Health Plus To be eligible for either Children s Medicaid or Child Health Plus, children must be under age 19 and residents of New York. Whether a child qualifies for Children s Medicaid or Child Health Plus depends upon the family s gross income. Children who are not eligible for Medicaid can enroll in Child Health Plus if they do not already have health insurance and are not eligible for coverage under the public employees state health benefits plan. Some children who were covered by employer-based health insurance within the previous 6 months may be subject to a waiting period before they can enroll in Child Health Plus. Healthy New York Healthy New York is state program established for the purpose of making standardized health insurance available to eligible individuals, sole-proprietors, and small employers. It was designed to encourage small employers to offer health insurance to their employees and to make coverage available to uninsured employees who do not have employer-sponsored coverage available to them. Effective January 1, 2014, Healthy New York stopped offering coverage to individuals and soleproprietors and only offers coverage to small employers. Covered services provided by the plans issued under Healthy New York can only include: Inpatient hospital services: Daily room and board General nursing care Special diets Miscellaneous hospital services and supplies Outpatient hospital diagnostic and treatment services Physician services: Diagnostic and treatment services Consultant and referral services Surgical services (including breast reconstruction after a mastectomy) Anesthesia services Second surgical opinion Second opinion for cancer treatment Outpatient surgical facility charges Preadmission testing Maternity care Adult preventive health services: Mammography screening Cervical cytology screening Periodic physical examinations every 3 years Adult immunizations Preventive and primary health care services for dependent children, including routine wellchild visits and necessary immunizations Diabetes equipment, supplies, and self-management education Diagnostic x-ray and lab services Emergency services Radiologic, chemotherapy, and hemodialysis services Blood and blood products pertaining to surgery and inpatient hospital services 97

99 NEW YORK STATE INSURANCE LAWS Prescription drugs obtained at a participating pharmacy (HMOs may utilize mail order programs) Applications for coverage must be accepted from eligible applicants throughout the year. Insurers are not permitted to impose any pre-existing conditions exclusions or limitations on any plan that is not a grandfathered plan under the Patient Protection and Affordable Care Act. Small group employers must pay at least 50% of the employees premiums and must offer coverage to all employees receiving annual wages of $30,000 or less. At least 1 employee must accept coverage. All contracts must be community rated and include specified rate tiers. Private Insurance for Senior Citizens and Special Needs Individuals Medicare Supplements Medicare supplements are private plans of insurance designed to supplement Medicare benefits and are subject to Medicare guidelines. These plans pay all or some of the Medicare deductible and coinsurance. Applicants must be enrolled in Medicare by reason of age or disability to be eligible for a Medicare supplement. Open Enrollment Applicants must be accepted at all times throughout the year for any Medicare supplement insurance plan available from an issuer. An issuer cannot deny the issuance or discriminate based on pricing due to the health status, claims experience, receipt of health care, or medical condition of an applicant. The free look period for Medicare Supplements is 30 days and every Medicare supplement must issued on at least a guaranteed renewable basis. The policy must not exclude coverage for any pre-existing conditions more than 6 months prior to the effective date of coverage. Standards for Marketing Each insurer marketing Medicare supplement insurance must: Establish marketing procedures to ensure that any comparison of policies by its agents will be fair and accurate Establish marketing procedures to ensure excessive insurance is not sold or issued Inquire and make every reasonable effort to identify whether a prospective applicant for Medicare supplement insurance already has disability or other health coverage, and the types and amounts of coverage Establish auditable procedures for verifying compliance with these requirements Display prominently on the first page of the policy the following statement: Notice to buyer: This policy may not cover all of your medical expenses. The following acts and practices are prohibited: Twisting Knowingly making any misleading representation or incomplete or fraudulent comparisons for the purpose of inducing a person to lapse, forfeit, surrender, terminate or convert a policy and take out a policy from another insurer. High-pressure Tactics Employing a method of marketing having the effect of or tending to induce the purchase of insurance through force, fright, threat or undue pressure to purchase insurance. Cold-lead Advertising Employing a method of marketing which fails to disclose that the purpose of the marketing is solicitation of insurance and that contact will be made by an insurance agent or company. 98

100 Permitted Compensation Arrangements HEALTH LAWS The first year commission or compensation cannot be more than 200% of renewal commissions or compensation in year two and thereafter. All renewal commissions or compensation must be of the same value as the 2nd year and must be paid for at least 5 renewal years. When a policy replaces one issued under the Social Security Act, the commissions or compensation cannot be greater than what the insurer pays for other policy renewals. Appropriateness of Recommended Purchase or Replacement Producers must make reasonable efforts to determine the appropriateness of a recommended purchase or replacement of a Medicare supplement policy. Any sale of a Medicare supplement policy that will provide an individual with more than one Medicare supplement policy is prohibited. The application for Medicare supplement insurance taken by an agent must include, or have attached thereto, a statement signed by the agent that states: I have reviewed the current health insurance coverage of the applicant and find that additional coverage of the type and amount applied for is appropriate for the applicant s needs. Replacement Requirements Upon determining that the sale of a Medicare supplement insurance policy will involve replacement of an existing accident and health insurance policy (including Medicare supplement insurance, Medicare Select, or Medicare Advantage coverage), the issuer must furnish the applicant with a notice regarding replacement of coverage. This notice must be provided prior to the policy delivery. It must be signed by the applicant and the agent, with one copy provided to the applicant and an additional retained by the issuer. When replacing a Medicare Supplement policy the agent must: Be sure the replacement does not result in decreased benefits at an increase in premium Use an application containing questions that elicit information to determine if the applicant has or has had a Medicare supplement in effect or if the application is for replacement of an existing Medicare supplement Provide a notice of replacement to the applicant prior to issuance or delivery of the new Medicare supplement policy When recommending the purchase or replacement of a Medicare supplement policy, make reasonable efforts to determine the appropriateness of the purchase or replacement Medicare supplement policy applications must include the following statements: You do not need more than one Medicare supplement policy or certificate If you purchase this policy, you may want to evaluate your existing health coverage and decide if you need multiple coverages You may be eligible for benefits under Medicaid and may not need a medicare supplement policy If a Medicare supplement policy replaces another Medicare supplement policy that has been in force for 6 months or more, the replacing insurer cannot impose an exclusion or limitation based on a pre-existing condition. If the original policy has been in force for less than 6 months, the replacing insurer must waive any time periods that apply to pre-existing conditions to the extent they have already been satisfied under the original policy. 99

101 NEW YORK STATE INSURANCE LAWS Required Disclosure and Disclosure Statement A disclosure statement is required by insurers issuing Medicare supplements in this state. The disclosure statement must include 4 parts: a cover page showing all benefit plans offered, premium information for all plans offered, disclosure pages, and charts displaying the features of each benefit offered. The disclosure statement must be written in not less than 12-point type and provided at the time of application with written acknowledgment of receipt. Insurers must disclose to the applicant: A description of policy provisions relating to renewability, cancellation, or continuation of coverage, including any reservation of rights to change premium The premiums for the policy separately from the premiums for any optional or supplemental riders Renewability Every Medicare supplement insurance policy must be guaranteed renewable. The term guaranteed renewable as used in this section means that the insured has the right to continue the Medicare supplement insurance in force by paying the premiums on time and the issuer has no unilateral right to make any change in any provision of the policy while the insurance is in force, except to: Change the benefits designed to cover cost-sharing to coincide with any changes in the Medicare deductibles and copayments Amend the policy to meet minimum standards Revise premium rates on a class basis Retention Question 35 What is the purpose of a Medicare supplement policy? a. To replace Medicare benefits b. To supplement Medicare benefits c. To duplicate Medicare benefits d. To cancel Medicare benefits 100