Property & Casualty. Colorado State Laws. A.D.Banker&Company

Transcription

1 Property & Casualty Colorado State Laws A.D.Banker&Company

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3 COLORADO STEPS TO GET YOUR LICENSE Colorado Insurance Department (303) (800) Complete a Prelicensing Course Testing Provider (Pearson VUE) If you would like to sell insurance in Colorado, 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, video lectures, online courses, or self-study. All courses are cross-referenced with the exam content outline. You can view course options for Colorado and register at When you satisfy the requirements for your course, you will receive a Certificate of Completion and A.D. Banker & Company will report your course completion to the state. Pre-licensing education is valid for one year from the date of completion; you will need to take and pass your state exam within this timeframe. The Certification Exam must be monitored by a disinterested third party (someone who is not a friend, family member, or financial connection to you) Line 2. Pass a Licensing Exam Hours Life 50 Accident & Health 50 Property 50 Casualty 50 Property & Casualty 50 Personal Lines 50 Making Exam Reservations Licensing exams are provided by Pearson VUE. An exam fee must be paid at the time of reservation by credit card, debit card, voucher or electronic check. You can make an exam reservation through the following methods: Online: Make an online reservation at at least 24 hours before the desired exam date or 5 days in advance if paying by electronic check Phone: (800) Before you call, you must have the following: Legal name, address, Social Security number, daytime phone number, and date of birth Name of the exam Preferred exam date and test center location The five digit code number of your pre-licensing provider (50007 for A.D. Banker) What to Bring Two forms of current signature identification: 1. A primary ID (photograph and signature, not expired) such as a Driver s License or Passport 2. A secondary ID (signature, not expired) such as a Debit or Credit card You will not be required to supply a copy of your Certificate of Completion at the exam. A.D.Banker&Company

4 COLORADO STEPS TO GET YOUR LICENSE Exam Procedures Report to the test center 30 minutes before the exam to verify identification and be photographed for the score report. No personal items are allowed in the testing room such as cell phones, watches, wallets, or purses. Studying is not allowed in the test center. The test administrator will provide you with materials to make notes or calculations. You may not write on these items before the exam begins or remove these items from the testing room. You will have the opportunity to take a tutorial that will not reduce the exam time. Exam Format Each major line exam is given in a multiple-choice format. The exam consists of two parts: 1. The general section deals with basic insurance product knowledge 2. The state section deals with insurance laws, rules, and regulations, and practices that are unique to Colorado Each exam contains pretest questions that are mixed in with the scored questions and are not identified. Pretest questions may not be covered in your educational materials and do not affect your final score! The passing score required on each exam is 70%. When you complete the exam, they will receive a score report marked pass or fail. Candidates who fail will receive a score report that includes a numeric score, diagnostic and re-testing information. Exam Code Exam Name Colorado Exam Information Exam Time Scoreable Questions Pretest Questions Total Questions 01 Life 2 hrs Accident & Health 2 hrs Property 2 hrs Casualty 2 hrs Personal Lines 2 hrs 15 min Public Insurance Adjuster 1 hr 15 min Apply for a License After passing the exam, apply for your license by completing an application at A.D.Banker&Company

5 TABLE OF CONTENTS Colorado State Laws Property & Casualty Students 15.1 Property and Casualty Laws Property Laws Casualty Laws Retention Question Answer Key Key Word Index This edition is valid starting January

6 Copyright 2018 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 A.D.Banker&Company

7 Colorado State Insurance Laws OVERVIEW This chapter helps students become more familiar with Colorado insurance regulatory and licensing processes. The primary purpose of licensing is to protect the general public. Take Note Information in this chapter modifies or amends information from previous content Property and Casualty Laws Insurance Commissioner The Commissioner is the head of the Division of Insurance and is appointed by the Governor and confirmed by the State Senate. The Commissioner must be well versed in insurance and have no financial interest in any insurance agency or company other than as a policyholder. The Commissioner also can hire employees to help carry out the duties of the office. Retention Question 1 The Insurance Commissioner is: a. Appointed by the President of the NAIC b. Appointed by the Governor and confirmed by the State Senate c. Appointed by the State Senate and confirmed by the Governor d. Elected through public nominations Power and Duties The Commissioner has the power to administer the insurance laws of the state designed to protect the public. The Commissioner may establish and amend reasonable rules as necessary to carry out duties. The Commissioner s duties are: Filing and safeguarding all books and papers required by law Issuing Certificates of Authority to insurance companies that have complied with Colorado s laws: Before receiving a Certificate of Authority, the Commissioner must certify that the insurer is in compliance with Colorado laws and is authorized to transact insurance in this state The Certificate of Authority must be renewed annually as long as the insurer continues to comply with the law Requiring all authorized insurers to keep books, records, accounts, and vouchers to verify annual statements to determine solvency Insurance companies doing business in Colorado must file an annual financial statement Any insurer who fails to file required documents or maintain complaint records may be assessed a penalty of up to $500 for the first violation and up to $5,000 for any subsequent violations A.D.Banker&Company 3

8 Issuing, denying, revoking, or suspending licenses or Certificates of Authority as required by Colorado s law Supervising the business of insurance in a manner that is in the best interest of the general public and to protect policyholders Transmitting all fees, surcharges, costs, taxes, penalties, and fines collected by the Division of Insurance to the Department of the Treasury Enforcing state insurance laws; the Commissioner does not make the laws Conducting investigations and hearings to determine if anyone involved in the insurance business has engaged in any unfair method of competition, unfair or deceptive act or trade practice, or has violated the insurance laws in Colorado If violations justify such action, the Commissioner must present the results of investigations and examinations to the district attorney or proper judicial district for possible criminal investigations Establishing effective procedures for examining the activities, operations, financial conditions and affairs of anyone transacting insurance, as determined by the general assembly Examining the financial condition and affairs of authorized insurers whenever it s necessary, but no less than once every 5 years Managing insolvency procedures Ensuring that rates are adequate, as opposed to being excessive, inadequate, or unfairly discriminatory; the Commissioner does not set the rates Retention Question 2 All of the following are powers and duties of the Commissioner, except: a. Issuing, denying, revoking, or suspending insurance licenses b. Enforcing state insurance laws c. Ensuring that insurance rates are adequate d. Performing all duties in the best interest of independent insurance agents Financial Statements All insurance companies doing business in Colorado must file an annual financial statement with the Commissioner annually by March 1st of each year. This is a detailed statement summarizing the assets and liabilities, amount of business transacted, premiums collected, claims paid, returned premiums, and the amount of reinsurance accepted from admitted and nonadmitted insurers for the previous calendar year. This statement is made under oath and must be provided on what is known as the convention blank form, which is adopted from year to year by the National Association of Insurance Commissioners (NAIC). The Commissioner may require an insurer to file interim financial statements and reports monthly or quarterly as deemed necessary to protect public interest. Authorized insurers are required to file the convention blank form with the NAIC annually along with additional filings as prescribed by the Commissioner. Examinations An examination is a formal or informal financial or market conduct assessment or investigation conducted by the Commissioner to determine compliance with Colorado insurance laws. Market conduct examinations can include routine, targeted, follow-up, multi-state, or desk examinations. Examiners must follow guidelines and procedures set forth in the Colorado insurance examiner s handbook as adopted by the NAIC. 4 A.D.Banker&Company

9 An examination or investigation of any person (individual, association, corporation, partnership, or agency) can be conducted at the sole discretion of the Commissioner as frequently as deemed appropriate; however A formal financial examination of every licensed insurer must be conducted not less frequently than once every 5 years An examination is not limited to the financial condition of a company, and also can include all other activities and affairs of the company. Every person from whom information is requested must provide timely, convenient, and free access during reasonable hours at its offices of all books, records, accounts, papers, tapes, computer records, and other documents relating to the property, assets, business, and affairs of the company being examined. The Commissioner and all examiners have the power to issue subpoenas, administer oaths, and examine under oath any person regarding any matter pertinent to the examination. The refusal to submit to examination or comply with any reasonable written request of the examiners is grounds for suspension, revocation, denial, or nonrenewal of any license or authority. Upon the failure or refusal of any person to obey a subpoena, the Commissioner can petition a court of competent jurisdiction for an order, which is enforceable through: Contempt proceedings Compelling the person to appear and testify; or Produce documentary evidence A person who knowingly testifies falsely to any matter related to an investigation, examination, or inquiry is guilty of a misdemeanor and, upon conviction, will be: Punished by a fine up to $5,000 and/or Imprisoned in the county jail up to 3 months The reasonable expenses and charges for the cost of the examination will be paid by the person being examined (examinee) directly to the examiner(s). The cost of financial examinations outside of the state will be paid by the examinee and will include the expenses of the Commissioner and staff. Retention Question 3 A licensed insurer must be examined by the Commissioner at least every year(s). a. 1 b. 3 c. 5 d. 7 Hearings and Penalties Hearings To protect the public, the Commissioner may examine and investigate the business affairs and conduct of every person applying or holding a license to determine whether a person has been or is engaged in the violation of state insurance laws or an unfair or deceptive act, practice, or method of competition. Based on information regarding the possible violation, the Commissioner may issue a statement of charges and hold a hearing. Such person may be required to appear and show cause as to why the Commissioner should not refuse, suspend, revoke, or continue such person s license. The Commissioner can refuse, suspend, revoke, or non-renew the license of an agency or business entity if, after a hearing, it is found the agency or business knew or should have known of its partner s, officer s, or manager s violation of state law and neither reported it nor took corrective action. A.D.Banker&Company 5

10 Penalties If, after a hearing, the Commissioner finds the person charged has engaged in an unfair method of competition, deceptive act or practice, or has violated any other rules or laws, the Commissioner will: Provide the findings in writing and issue a Cease and Desist Order Impose a civil fine up to $3,000 per unintentional violation and up to a maximum of $30,000 for all unintentional violations. Fines for knowing violations are $30,000 per violation and have a maximum of $750,000. Suspend or revoke a license, if the licensee knew or should have known a violation was being committed. Order payment of a claim not paid because of the violation, unless a civil action concerning the claim is pending Any order issued as a final action by the Commissioner may be appealed and subject to judicial review by the Court of Appeals. Violating a Cease and Desist Order is punishable by a fine of up to $500 per violation of an individual or up to $10,000 per violation of an insurer and/or license suspension or revocation. Retention Question 4 If the Commissioner suspects that a licensee or applicant has violated state law, engaged in an unfair method of competition, or engaged in an unfair or deceptive act or practice, the Commissioner may refuse, suspend, revoke or nonrenew such person s license by: a. Issuing a cease and desist order b. Holding a hearing c. Submitting a request to the Attorney General d. Imposing a penalty Retention Question 5 The Commissioner can impose a penalty for all of the following, except a person who has: a. Surrendered his/her license b. Not surrendered his/her license c. Engaged in an unfair trade practice d. Failed to pass the licensing examination License Suspension and Revocation After conducting a hearing, the Commissioner can refuse, suspend, revoke, or non-renew a license if suitable grounds are found, or if the licensee has violated any provision under state law, or has: Attempted to obtain the license by fraud, misrepresentation, or a material misstatement Been convicted of a felony or crime involving moral turpitude Misappropriated funds Accepted insurance business from an unlicensed individual or entity Had a license suspended or revoked in another state Demonstrated a lack of trustworthiness or competence Cheated on an insurance examination 6 A.D.Banker&Company

11 Committed an unfair trade practice or fraud COLORADO STATE INSURANCE LAWS Forged another s name to an application for insurance or any document related to an insurance transaction Failed to comply with an administrative or court order to pay state income tax or child support Misrepresentated the terms of any actual or proposed insurance contract or application for insurance Failed to meet all licensing requirements Submitted a license application that contains any incorrect, misleading, incomplete, or materially false information In addition to, or in lieu of, termination of a license, a civil penalty can be imposed not to exceed $3,000 per violation. If the person fails to pay a penalty or make restitution, the Commissioner may refer the matter to the Attorney General (or District Attorney) for enforcement of any criminal violations. The Commissioner can enforce these provisions and impose a penalty or remedy against any person who is under investigation or charged with a violation even if the license has already lapsed or been surrendered. The Commissioner must notify the applicant or licensee of the reasons for denial or nonrenewal of a license if such action is being taken. A producer or business entity must report to the Commissioner if it is the subject of: Any administrative action by another jurisdiction within 30 days after the matter has become final or disposed Criminal prosecution in any jurisdiction within 30 days after the initial pretrial hearing date An insurance producer license is at all times considered property of the State of Colorado. If a license is suspended, revoked, terminated, discontinued, or nonrenewed, the Commissioner will require surrender of the license and order it to be returned promptly to the Commissioner by personal delivery or by certified or registered mail within 15 days of such action. If a license is lost, stolen, or destroyed while in possession of the licensee, an affidavit providing the facts of such loss must be provided to the Commissioner. In addition to notifying a resident insurance producer licensee of any penalties, suspension, revocation, or termination, the Commissioner must also notify the central office of the National Association of Insurance Commissioners (NAIC). Retention Question 6 If a producer is the subject of criminal prosecution in any jurisdiction, the producer must report to the Commissioner after the initial pretrial hearing date within: a. 60 days b. 12 months c. 10 days d. 30 days A.D.Banker&Company 7

12 Retention Question 7 The Commissioner can refuse, suspend, revoke, or nonrenew a license if the licensee has committed any of the following, except: a. Failed to pay child support b. Issued insufficient coverage to a customer through apparent authority c. Had a license suspended or revoked in another state d. Cheated on an insurance examination Retention Question 8 Concerning license suspension and revocation, the Commissioner can take all of the following actions, except: a. Notify the producer of any license suspension, revocation, or termination b. Notify the NAIC of any license suspension, revocation, or termination c. Notify the Attorney General or District Attorney of criminal violations of the insurance code d. Impose a civil penalty of $1,500 per violation, up to $10,000 per fine in addition to, or in lieu of, license termination Records and Requests for Information Every entity and person must maintain its books, records, documents, and other business records, including internal and external communications, in a manner so that the following information may be readily understood: Operations and management Policyholder services Claims handling; rating Underwriting; advertising, marketing and sales Complaint/grievance handling Producer licensing; And, for Health insurers: Network adequacy Utilization review Quality assessment and improvement Provider credentialing Records and data for this regulation shall be maintained for the current calendar year plus 2 prior calendar years. Unless another time period is specified by the Division in writing, every individual or business entity must provide a complete and accurate response to an Examination Request/Comment Form or Examination Request/Memo Form within 10 calendar days from the date on the form. Except for responses to an Examination Request/Comment Form or Examination Request/Memo Form, and unless another time period is specified by statute, regulation or by the Division either electronically or in another written form, every individual or business entity must provide a complete and accurate response to any inquiry from the Division within 20 calendar days from the date of the inquiry. 8 A.D.Banker&Company

13 Extension Requests If additional time is required to respond to any Division inquiry, a written request for an extension of time must be submitted to the Division employee or examiner making the inquiry. The request for an extension of time shall: Be made no later than 5:00 PM Mountain Time on the business day prior to the response due date Include a specific period of time for the extension State in detail the reasons necessitating the extension An extension may be granted, at the discretion of the Division, for good cause shown. If an extension is not granted, or the person requesting the extension does not receive written confirmation from the Division that the extension is granted, the original response due date applies. Failure to provide a complete and accurate response to a Division inquiry, failure to request an extension for a specified period, or failure to provide a complete and accurate response to a Division inquiry when an extension is not granted may result in a civil penalty of $500 for an initial violation, and may be increased up to a maximum penalty of $5,000 for each subsequent violation. Licensing and Producers Legal Responsibility Persons Required to Be Licensed Producer A person who solicits, negotiates, effects, procures, delivers, renews, continues, or binds policies of insurance for risks residing, located, or to be performed in this state. A producer cannot transact insurance for any lines of authority for which they are not qualified or properly licensed. An insurance producer does not include the following and is not required to be licensed: An insurer Any officer, director, or employee who: Is salaried and devoted full time to clerical or administrative duties, including the incidental taking of applications and receipt of premiums as long as the person does not negotiate or solicit insurance and is not paid commission or compensation that varies based on the volume of application or premiums taken. Conducts activities that are executive, managerial, administrative, or clerical and not directly related to the sale, solicitation, or negotiation of insurance. Conducts activities related to underwriting, loss control, inspection, or claims handling Is a special agent or supervisor providing technical aid and who neither sells nor negotiates insurance An employer, association, or trustee administering its own employee benefit program that happens to use insurance An employee inspecting, rating, or classifying risks if not selling or negotiating insurance A management association, partnership, or corporation not publicly selling insurance An auto rental company s officers and employees, for rental insurance transactions A person whose activities are limited to advertising A nonresident licensed to sell/negotiate commercial property and casualty policies in another state A.D.Banker&Company 9

14 A salaried full-time employee whose job is to provide insurance advice to an employer, if not selling insurance or receiving commissions A person who gathers/provides information for insurance purposes, if not receiving commissions An agent, representative, or member of a fraternal benefit society who devotes substantially all of his or her time to activities other than solicitation and negotiation and does not receive a commission or compensation directly related to the number or amount of contracts An agent, representative, or member of a fraternal benefit society who procured life insurance contracts in a face amount not exceeding $50,000, or any kind of insurance to not more than 25 individuals per year, and received no commission Note The producer represents the insurance company, not the insured or beneficiary. Retention Question 9 The definition of a Colorado producer includes which of the following? a. A person who solicits or negotiates membership enrollments in a health care plan b. A nonresident licensed to sell or negotiate commercial property and casualty insurance policies in another state c. An insurer d. An employer, association, or trustee administering its own employee benefit program that uses insurance Prelicensing Education Each applicant for a life, health or property and casualty license must provide evidence to the Commissioner of completion of an approved prelicensing educational program. Applicants must complete at least 50 hours of approved education in each line of authority in which they seek licensure. This includes 3 hours pertaining specifically to insurance industry ethics. The training requirements are as follows: 50 hours Life only 50 hours Health only 50 hours Property and Casualty An individual seeking a producer license must pay, in addition to other fees and charges, an established fee for the operation of the prelicensing education program. Retention Question 10 Each applicant for an insurance license must provide evidence to the Commissioner that he or she has completed which of the following? a. At least 50 hours of an approved course and an additional 3 hours of ethics b. At least 24 hours of an approved course and an additional 3 hours of ethics c. At least 50 hours of an approved course including 3 hours of ethics d. At least 24 hours of an approved course including 3 hours of ethics 10 A.D.Banker&Company

15 Exemption from License Examination The following are exempt from the licensing examination requirement: A nonresident applying for a license in this state for the same lines of authority is exempt from the prelicensing education and examination if the person is currently licensed in his or her home state and the license is in good standing A person licensed in another state who moves to this state and applies within 90 days after establishing legal residence to become a resident licensee in the same line of authority An applicant for a license to solicit and deliver travel accident policies An individual applicant who holds a CLU, CPCU, ChFC, or RHU designation is only required to take the examination pertaining to Colorado laws Licensing Requirements An individual applicant for a resident insurance producer license must apply to the Commissioner and meet certain requirements. The Commissioner will issue a producer license to an individual who: Is at least 18 years of age Is competent, trustworthy, and of good moral character and business reputation Is a resident of Colorado, or a state for which Colorado grants nonresident licenses Completes the required prelicensing education requirements Passes the state insurance licensing examination as a resident licensee Pays the required license fee Has not committed an act that is ground for license refusal, suspension, or revocation If a nonresident, submits a Letter of Certification issued within the previous 90 days from his/her home state s insurance regulatory authority with the application of license Variable Contracts Applicants for a variable products license must obtain authority to write life insurance. They must also provide evidence that they have passed the appropriate FINRA registration exam and are currently registered with a FINRA-member broker or dealer firm. Nonresidents must meet the requirements of their resident state and be currently registered with a FINRA-member firm. An insurance agency or business entity must submit an application to act as an insurance producer. The Commissioner will issue a license if the agency or business entity has: Disclosed to the Commissioner all officers, partners, and Directors and whether or not they are licensed as producers and are trustworthy, of good moral character, and of good business reputation Paid the required fees as established by the Commissioner Designated a licensed producer responsible for the agency or entity s compliance with state laws Registered with the Commissioner each natural person who is acting as and is licensed as an insurance producer; at least one licensed individual must hold a valid license for the lines of authority requested in the application The Commissioner may require the filing of any documents necessary to verify information contained or required in the application. Each insurer transacting any form of limited line credit insurance must provide each individual selling, soliciting, or negotiating limited lines credit insurance with a program of instruction approved by the Commissioner. A.D.Banker&Company 11

16 Retention Question 11 Each of the following are requirements for licensure, except: a. Residency in Colorado b. Residency in a state to which Colorado grants nonresident licenses c. Passing the state licensing examination d. Being at least 21 years of age Nonresident License A licensee from another state may apply for a nonresident license in Colorado. The Commissioner will waive any requirements for a qualified nonresident license applicant with a valid license from the applicant s home state as long as the home state is reciprocal and awards nonresident licenses to residents of this state on the same basis. The Commissioner may issue an insurance producer license to a qualified nonresident person based on the following: The person maintains a license in good standing in the home state The agency or business entity has its principal office located in another state The person holds a similar license on the same basis and same lines of authority applied for in this state A proper request was submitted and fees were paid The nonresident filed a current certification of license status with the Commissioner The license status can be verified through the NAIC database A nonresident who moves from one state to another or a resident producer who moves from this state to another must file a change of address and certification from the new home state within 30 days after change of legal residence without paying a fee If a person s home state license is suspended, terminated, or revoked, the nonresident producer must notify the Commissioner and return the Colorado nonresident license Upon the issuance of a nonresident license, the Commissioner will be appointed as the nonresident s agent to receive service of legal process. This lawful process will have the same legal validity as personal service of process to the nonresident licensee. Within 10 working days of receiving 3 copies of the process served, the Commissioner will forward a copy of such process by registered or certified mail to the nonresident s address of record. The Commissioner will keep a record of all processes so served. Lines of Authority An insurance producer may receive qualification for a single license for one or more of the following lines of authority: Life Coverage on human lives that may include benefits of endowment, annuities, accidental death or dismemberment and disability income Accident and Health Coverage for sickness, bodily injury, or accidental death and dismemberment that may include disability income Variable Life and Variable Annuity Products Coverage provided under such contracts Property Coverage for the direct or consequential loss or damage of property of any kind Casualty Coverage against legal liability, including death, injury, disability, or damage to real or personal property Personal Lines Coverage for noncommercial property and casualty losses sold to individuals and families 12 A.D.Banker&Company

17 Limited Lines Credit Insurance Crop hail Title Surplus Lines Travel Insurance Licensing Insurance producer licenses are issued as perpetual to an applicant who has met the requirements. Each producer license remains in effect unless suspended or revoked, as long as the continuation fee is paid, and continuing education requirements are completed on or before the due date. The license must include: Name, address, and personal identification number of the licensee Date of issuance General conditions relative to expiration or cancellation Lines of insurance covered by the license Trade name under which the licensee transacts business Any other information deemed necessary by the Commissioner A licensed producer who fails to meet the license continuation and renewal procedures due to military service, long-term medical disability, or any other condition deemed appropriate, may request a waiver of those procedures. A waiver may also be requested for examination requirements or other fines or sanctions imposed for failure to comply. Licenses must be renewed biennially (every 2 years) by the last day of the producer s birth month. Producers will be notified of the procedures for renewing their license by mail or 90 days before the renewal is due. After the expiration date, licenses may not be renewed by the usual renewal procedure. For up to one year, they may be reinstated by applying for reinstatement and paying an initial application fee. After one year, licenses may only be reinstated by completing a new prelicense education course and again passing the licensing exam. All producer licensees must notify the Commissioner in writing of any change of address within 30 days after the change. Failure to provide notice will result in the assessment of a penalty. Appointments by Insurer A producer must be appointed by at least 1 insurer to transact insurance. A producer can be appointed by more than 1 insurer, but the appointment must be in place at the time the business is placed. The appointment may be terminated by the producer, insurer, or Commissioner. Notification of Termination of Appointment An insurer must notify the Commissioner within 30 days of terminating a producer s appointment for cause. The insurer must provide additional documents, records, or data requested by the Commissioner if they have knowledge of a producer engaging in unlawful activities. The producer must be given a copy of the termination notice within 15 days after the Commissioner is notified. The producer has 30 days to file comments about the termination with the Commissioner. Immunity A producer, insurer, or authorized representative who compiles information and makes available to the Commissioner or law enforcement agency will not be subject to civil liabilities that arise from the result of any information that leads to the termination of a producer. Confidentiality The Commissioner is authorized to use these documents, materials, or other information to aid in the investigation and further any legal action taken against a producer. All information received must be kept confidential and no parties with access to this information can be required to testify in any private civil action concerning the confidential information. A.D.Banker&Company 13

18 Registration of Assumed Names A producer must register any assumed name with the Commissioner PRIOR to its first use and must notify the Commissioner PRIOR to any change and before discontinuing its use. The Commissioner will not accept registration of any name that is misleading to the public or is identical or similar to the name of any producer whose license has been revoked or suspended. Retention Question 12 Each of the following is a component of the legal responsibility of maintaining an insurance license, except: a. A producer must register any assumed name in writing to the Commissioner within 30 days of use b. A producer must inform the Commissioner of any change in address within 30 days c. An insurer must notify the Commissioner within 30 days of terminating a producer s appointment d. The producer must be given a copy of the termination within 15 days of the Commissioner s notification, but has 30 days to file comments about that termination with the Commissioner Surplus Lines In most cases, insurance must be sold through an admitted insurer that holds a Certificate of Authority. Certain types of high-risk insurance may not be available for sale through an admitted insurer and therefore may need to be placed legally through a nonadmitted insurer. A nonadmitted insurer is not required to hold a certificate of authority and does not file rates or forms with the Commissioner. In order to place business through a nonadmitted insurer, a person must first be licensed as an insurance producer before applying for a surplus lines producer license. A resident producer can obtain a surplus lines producer license to represent nonadmitted insurers if the person: Is deemed to be trustworthy and competent by the Commissioner Only transacts surplus lines business according to law Remits taxes on surplus lines insurance transactions promptly Surplus lines producers must prepare documentation demonstrating the required coverage was not procurable after a diligent search was made from among a minimum of 3 admitted insurers. A written record documenting diligent search efforts must be maintained by the producer for at least 3 years from the effective date of coverage. A surplus lines producer cannot place insurance with a nonadmitted insurer solely to get a lower policy premium than that which would be accepted by an admitted carrier unless the premium rate quoted by the admitted carrier is more than 10% higher than that quoted by the nonadmitted carrier. Within 30 days of placing coverage with a nonadmitted insurer, a surplus lines producer must file with the Commissioner an affidavit describing the coverage. A non-admitted insurer must be listed on the Commissioner s Approved List of surplus lines insurers, which is issued each year on July 1st. A foreign or alien non-admitted insurer that wants to be included on the Approved List must apply and pay the required fees on or before March 1st of every year. On or before March 1st of each year, each surplus lines producer must remit to the Division a 3% tax on the net premiums paid for surplus lines business he/she transacted in the previous year. Note During the year, the producer must keep these funds in a separate account at an FDIC insured institution in the state of Colorado. 14 A.D.Banker&Company

19 Surplus lines contracts issued for delivery in this state must include the following required disclosures and statements: This policy is issued by an insurance company that is not regulated by the Colorado Division of Insurance. The insurance company may not provide claims service and may not be subject to service of process in Colorado. If the insurance company becomes insolvent, insureds or claimants will not be eligible for protection under Colorado law. The Colorado Insurance Guaranty Association does not provide protection for such policies issued by nonadmitted insurers. For policies written on a claims-made basis: This policy is a claims-made policy that provides liability coverage only if a claim is made during the policy period or any applicable extended reporting period. If an auto policy does not provide the basic complying policy coverages: This policy does not meet the statutory requirements of this state s financial responsibility laws. It does not provide liability coverage for bodily injury and property damage. The disclosures must be affixed to the declaration page of the contract given to the insured and on a binder, if issued prior to the policy delivery. A copy of the disclosures must be maintained by the broker. A surplus lines producer licensed in another state will be issued a nonresident surplus lines producer license in this state as long as all qualifications are met. Retention Question 13 All of the following are true about surplus lines insurance, except: a. Within 30 days, surplus lines producer must file an affidavit with the Commissioner describing coverage placed with a non-admitted insurer within 30 days b. To write surplus lines insurance in Colorado, a non-admitted insurer must be on the Commissioner s approved list that is issued each year on July 1 c. The written record documenting the search for admitted insurance must be maintained by the producer for at least one year from the effective date of coverage d. Each surplus lines producer must remit a 3% tax on the previous year s surplus lines premiums on or before March 1st of each year Payment and Acceptance of Commissions/Fees No individual or entity can pay commissions or other valuable consideration to any person not licensed as a producer. Only a licensed producer can accept commissions or other payment for services that must be performed by a licensed insurance professional. The individual or entity must be licensed when the service is performed, not necessarily when the consideration is received. Producers are prohibited from charging fees, in addition to commissions, for overhead expenses associated with soliciting, procuring, or servicing policies. However, producers can charge fees for specific services, such as retirement planning, estate planning, risk management, and financial planning, for which the producer does not receive a commission from an insurer. Before service is provided, the client must sign a statement disclosing that he/she is not obligated to buy any insurance product and that any sale relating to the service be contracted will not be sold by the producer rendering the service. The producer must retain a copy of this document for at least 3 years after the services are rendered. A producer can split commissions only with a licensed partnership or corporation of which the producer is an employee, member, or agent, and a corporation of which the producer is an officer. A.D.Banker&Company 15

20 Retention Question 14 Producers can receive the following forms of compensation for soliciting, procuring, or servicing policies: a. Administrative fees, in addition to commissions b. Service fees, in addition to commissions c. Consulting fees, in addition to commissions d. Commissions from an insurer Fiduciary/Commingling A fiduciary duty requires the highest of legal and ethical standards of conduct. Producers must act in a fiduciary capacity when handling premiums. Producers cannot commingle client premiums with their personal funds. Premiums received by the producer must be kept in a separate account. Commingling is a breach of fiduciary duty. Producers who act in an agency capacity must set up a separate trust account where premiums, earned and unearned, must be deposited until remitted to the rightful owner. A producer must: Remit premiums received, less commissions, to the insurer on or before the policy due date or, if there is no due date, within 45 days after receipt Account for any collected premiums within 45 days after the policy due date or within 90 days after receipt Remit unearned premiums received from insurers to the insured, or credit the premiums to the insured s account, as soon as possible, but within 30 days. If coverage is cancelled, premiums must be remitted to the insured within 45 days after the effective date of cancellation Promptly notify the Commissioner in writing if he/she failed to remit premiums as required by law The producer must keep records of the fiduciary funds that are not considered personal assets and cannot be used as collateral for personal or business loans. However, interest earned on the account belongs to the producer. Producers may not use funds received for a specific reason on behalf of a policyholder to satisfy any other amounts the policyholder owes to the producer unless the policyholder has given written authorization to do so. Any insurer that delivers a policy to a producer will be deemed to have authorized that producer to receive premiums on its behalf upon policy delivery. Retention Question 15 With respect to a producer s fiduciary responsibilities and duties, the agent must do all of the following, except: a. Remit premiums received to the insurer on or before the due date, or within 45 days if there is no due date b. Account for any collected premiums within 45 days after the policy due date or within 90 days after receipt c. Remit to the insured any unearned premiums received from the insurer within 30 days, or within 45 days of cancellation d. Maintain separate bank accounts for all insurers represented 16 A.D.Banker&Company

21 Prelicensing and Continuing Education (CE) COLORADO STATE INSURANCE LAWS Continuing Education Producers must complete up to 24 hours of approved continuing education courses within 24 months of their license renewal date. At least 3 of the CE hours must cover ethics, and at least 18 hours must be in the line(s) for which the producer is licensed. Producers licensed to sell property or personal lines insurance must complete 3 hours of continuing education on homeowner s insurance coverage. First-time licensees have until their 2nd continuation to comply, and then must fulfill requirements biennially (every 2 years). A course cannot be repeated within 2 years after completion. Course instructors may earn the same number of credit hours as attendees, but may not count instruction hours for any course more than once in 2 years. A maximum of 12 hours of CE can carry over to the next renewal period; any carryover hours must have been earned in the 120 days prior to the license continuation date. Written certification of completion of the course must be executed by the sponsoring organization. The required number of hours applies regardless of the number of lines of authority for which a producer is licensed. The renewal date for all licenses held by a producer fall every 24 months from the date the first license is renewed. Producers must retain documentation of course completion for 5 years following license continuation. CE requirements apply to any person licensed in Colorado to sell any line of insurance for which the state requires a licensing exam (i.e., life and annuity contracts, property and casualty, etc.). However, CE requirements do not apply to a person holding a limited or restricted license. Note A nonresident shall meet Colorado s continuing education requirements by meeting the CE requirements of his or her home state if that state allows Colorado producers to meet its continuing education requirement(s) on the same basis. The license of any person failing to comply with CE requirements, or who falsifies a Certificate of Completion, will be suspended until CE requirements are met. Noncompliance is subject to any of the sanctions that may be imposed for violating insurance or other laws, including civil penalties, issuance of cease and desist orders, and/or suspensions or revocations of licenses. Prelicensing Any person applying for a resident insurance producer license, other than those exempt, must successfully complete prelicensing education before taking the state producer license examination. The prelicensing education required is satisfied by the successful completion of course(s) with courses totaling 50 hours per line. Course(s) must be approved for prelicensing for the particular line of authority by the Division. Only successful completion of courses approved by the Division will satisfy the requirements of the regulation. A certificate of completion must be issued by the approved Course Provider to each person satisfactorily completing the course. The certificate of completion must contain the student s full name, residential address, name of the approved course, beginning date, date of completion, name of the approved Course Provider, the original or electronic signature of the instructor and any other info the Division deems necessary. The certificate of completion must have been earned prior to sitting for the state license examination. Proof of course completion must be transmitted electronically to the Division or its vendor. Such electronic transmission will satisfy the applicant s responsibility to transmit the certificate to the Division. Prelicensing certificates of completion shall be valid for a period of 1 year from the date of completion. Prelicensing certificates of completion that are more than 1 year old will not be accepted by the Division and students will be required to take an approved prelicensing course. A.D.Banker&Company 17

22 Exemptions An individual who was previously licensed for the same line(s) of authority in a reciprocal state is exempt from prelicensing education. Such an individual is required to certify knowledge of Colorado law applicable to insurance producers on a form approved by the Division. The person must currently be licensed in the other state, or the application must be received within 90 days of the cancellation of the applicant s previous home state license. The prior home state also must issue a certificate stating that at the time of cancellation, the insurance producer is or was licensed in good standing for the line(s) of authority requested. Retention Question 16 How many credit hours of continuing education must a producer complete every license renewal period? a. 12 b. 24 c. 30 d. 18 Unauthorized Entities Acting as an agent or aiding with any insurance transaction in Colorado, including proposing an insurance contract, taking applications, receiving premiums, and delivering contracts, is strictly prohibited unless the entity or individual is authorized with the required certificate of authority. An unauthorized entity engages in the transaction of insurance without specific authorization to do so. It is illegal for any individual or entity to transact insurance, including forwarding insurance contracts, on behalf of an unauthorized insurance entity. Violation of this statute constitutes a Class I misdemeanor with a minimum sentence of 6 months in jail and/or a $500 fine and a maximum sentence of 18 months in jail and/or a $5,000 fine. This section does not apply to the lawful transaction of surplus lines and reinsurance. Through the attorney general, the Commissioner can file an action in court to enjoin unauthorized entities from their activities. A complaint will be filed in the district court for the city of Denver to restrain such company from continuing violations. The Commissioner will issue an emergency Cease and Desist Order if it appears that the alleged conduct is fraudulent, creates an immediate danger to the public safety, or is expected to cause irreparable public injury. The emergency order will be served to the person by certified or registered mail with return receipt at the last known address stating the charges and requiring such person to immediately cease and desist from the practices stated in the order. The subject of the emergency order may request an immediate hearing for an opportunity to show cause why the order should be upheld. If, after a hearing, the Commissioner determines that an emergency cease and desist order has been violated, the Commissioner may impose a civil penalty of $25,000 per violation and order complete restitution to all parties affected. If a person fails to pay a penalty or make complete restitution, the Commissioner may refer the matter to the attorney general for enforcement, or cancel or revoke any permit, license, of certificate of authority. Failure to obtain a certificate of authority will not impair the validity of a contract. An unauthorized insurance entity is still liable for its contractual obligations and if unable to pay its claims, any person who helped the unauthorized insurer procure the contract is liable to an insured for the full value of any loss insured under the contract. All insurance advisers, counselors, or analysts must report every policy issued by an unauthorized insurer to the Commissioner. This requirement also applies to insurance investigators and adjusters. 18 A.D.Banker&Company