State Licensing MR Handbook

MARKET REGULATION

State Licensing Handbook

2018

State Licensing Handbook

2018

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? 2009, 2011, 2013, 2018 National Association of Insurance Commissioners. All rights reserved.

ISBN: 978-1-59917-967-4

Printed in the United States of America

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State Licensing Handbook ______________________________________________________________________________________________________

All of the references to the Producer Licensing Working Group and Task Force will show that both have changed parent committees since the creation of the State Licensing Handbook. The change in parent committees has not changed the role for the Working Group and the Task Force.

Table of Contents Introduction

Part I Section A

Insurance Producer Licensing Governing Principles

Chapter 1 Chapter 2

Chapter 3 Chapter 4

Modern Producer Licensing ............................................................................................... 5 Uniformity Provisions of GLBA ........................................................................................ 5 Countersignature Requirements ......................................................................................... 5 National Insurance Producer Registry................................................................................ 6 The Producer Licensing Model Act ................................................................................... 7 Other Key Provisions of the PLMA ................................................................................... 7 Commissioner Discretion ................................................................................................... 8 Section-by-Section of the PLMA ....................................................................................... 8 Frequently Asked Questions ............................................................................................ 11 Producer Licensing Model Act Implementation, Frequently Asked Questions ............... 11 Uniform Licensing Standards........................................................................................... 15 Initial and Renewal Producer License Applications......................................................... 15 Nonresident Licensing...................................................................................................... 17 Reciprocity Examples ...................................................................................................... 18

Section B Chapter 5 Chapter 6 Chapter 7

Chapter 8

Chapter 9

Licensing Processes

Activities Requiring Licensure......................................................................................... 23 License Required to Sell, Solicit and Negotiate ............................................................... 23 Commissions .................................................................................................................... 23 Exceptions to Licensing ................................................................................................... 24 Prelicensing Education ..................................................................................................... 25 Application Review for Initial Licenses........................................................................... 27 Individual Application Forms .......................................................................................... 27 Business Entity Application ............................................................................................. 27 Background Checks ......................................................................................................... 27 Fingerprints ...................................................................................................................... 28 1033 Consent Waivers ..................................................................................................... 28 NAIC Databases Relevant to Initial Application Review ................................................ 28 Review of Applications When Criminal History Is Disclosed ......................................... 28 Statutory Obligations and Discretion ............................................................................... 29 Testing Programs ............................................................................................................. 31 Introduction ...................................................................................................................... 31 PLMA Guidelines on Examinations................................................................................. 31 Test Development and Review......................................................................................... 32 Developing the Questions ................................................................................................ 33 Passing Score vs. Pass Rate.............................................................................................. 33 Test Development Deliverables ....................................................................................... 35 Candidate Information Bulletin (CIB).............................................................................. 35 Technology Issues ............................................................................................................ 35 Legal Defensibility........................................................................................................... 36 Vendor Responsibilities ................................................................................................... 36 Test Administration.......................................................................................................... 36 Reporting Examination Results........................................................................................ 37 Retesting/Notice of Failure .............................................................................................. 37 Lines of Insurance ............................................................................................................ 39 The Major Lines ............................................................................................................... 39

? 2009-18 National Association of Insurance Commissioners

State Licensing Handbook ______________________________________________________________________________________________________

Chapter 10

Chapter 11 Chapter 12 Chapter 13

The Limited Lines ............................................................................................................ 40 Limited Line of Car Rental Insurance .............................................................................. 41 Limited Line of Credit Insurance ..................................................................................... 41 Limited Line of Crop Insurance ....................................................................................... 42 Limited Line of Surety Insurance..................................................................................... 43 Limited Line of Travel Insurance..................................................................................... 43 Non-Core Limited Line .................................................................................................... 43 Surplus Lines Producer Licenses ..................................................................................... 45 The Non-admitted and Reinsurance Reform Act ............................................................. 45 Surplus Lines Distribution Systems ................................................................................. 45 Diligent Search requirements ........................................................................................... 46 Premium Taxes................................................................................................................. 48 Guaranty Fund Warning................................................................................................... 48 Stamping Offices.............................................................................................................. 49 Zero Reports..................................................................................................................... 49 Appointments ................................................................................................................... 51 Appointment Terminations .............................................................................................. 51 Business Entities .............................................................................................................. 53 Temporary Licenses ......................................................................................................... 55

Section C Chapter 14 Chapter 15 Chapter 16 Chapter 17

License Continuation

Continuing Education....................................................................................................... 59 Course Approvals ............................................................................................................. 59 CE Providers .................................................................................................................... 60 Reporting of Actions and Compensation Disclosure ....................................................... 61 Reporting of Actions ........................................................................................................ 61 Compensation Disclosure................................................................................................. 61 License Renewal and Reinstatement ................................................................................ 63 License Renewal .............................................................................................................. 63 Reinstatement................................................................................................................... 63 Post Licensing Producer Conduct Reviews...................................................................... 65 License Reinstatement or Reissuance after Disciplinary Action...................................... 65 Collaboration and Referrals Among Regulators .............................................................. 66

Part II Chapter 18

Chapter 19

Chapter 20 Chapter 21 Chapter 22 Chapter 23 Chapter 24

Miscellaneous Licenses

Adjusters .......................................................................................................................... 69 Qualifications of an Adjuster ........................................................................................... 70 Fitness and Character Considerations .............................................................................. 70 Reciprocity ....................................................................................................................... 70 Continuing Education....................................................................................................... 71 Emergency/Catastrophic Adjusters .................................................................................. 71 Non-U.S. Adjusters for Limited Lines Portable Electronics Insurance Products ............. 72 Recommended Best Practices for Regulators................................................................... 72 Bail Bond Agents ............................................................................................................. 73 Bond Forfeiture ................................................................................................................ 73 Prohibited Activities......................................................................................................... 73 Immigration Bonds........................................................................................................... 74 Charitable Gift Annuities ................................................................................................. 75 Fraternal and Small Mutuals ............................................................................................ 77 Fraternal Benefits Societies.............................................................................................. 77 Small Mutual Insurers ...................................................................................................... 77 Insurance Consultants ...................................................................................................... 79 Managed Care Providers .................................................................................................. 81 Health Maintenance Organizations .................................................................................. 81 Preferred Provider Organizations (PPO) .......................................................................... 81 Managing General Agents................................................................................................ 83

? 2009-18 National Association of Insurance Commissioners

State Licensing Handbook ______________________________________________________________________________________________________

Chapter 25 Chapter 26 Chapter 27

Chapter 28 Chapter 29 Chapter 30

Multiple Employer Welfare Arrangements (MEWAS).................................................... 85 Reinsurance Intermediaries .............................................................................................. 87 Risk Retention Groups & Risk Purchasing Groups.......................................................... 89 Risk Retention Groups ..................................................................................................... 89 Risk Purchasing Groups ................................................................................................... 89 Third-party Administrators .............................................................................................. 91 Title Insurance Agents ..................................................................................................... 93 Viatical Settlement Providers and Brokers....................................................................... 95

Part III

Appendices

Section One ? Documents Adopted by the Producer Licensing Working Group and the NAIC

A. Broker Compensation Frequently Asked Questions....................................................................... 99 B. Commercial Lines Multi-State Exemption and Commission Sharing Recommendations ........... 103 C. Continuing Education Reciprocity ............................................................................................... 107 D. Continuing Education Standardized Terms and Definitions......................................................... 109 E. Prelicensing Education Standardized Terms and Definitions........................................................111 F. Continuing Education Recommended Guidelines for Online Courses..........................................113 G. Continuing Education Recommended Guidelines for Classroom Course .....................................115 H. Continuing Education Reciprocity Uniform Course Filing Form................................................. 117 I. Course Guidelines for Classroom Webinar/Webcast Delivery..................................................... 119 J. Emergency Adjuster Licensing Best Practices Guidelines ........................................................... 121 K. Independent Adjuster Reciprocity Best Practices and Guidelines ................................................ 123 L. Independent Adjuster Licensing Guideline ....................................................................................127 M. Limited Line Term Life Resolution.............................................................................................. 139 N. Low Compliance Licensing Standards Recommendations ............................................................141 O. Progress Report to Membership on Producer Licensing State Assessments ? March 2009......... 147

P. Progress Report to Membership on Producer Licensing State Assessments ? March 2010......... 163 Q. Model Bulletin on Flood Insurance ...............................................................................................175 R. Model Bulletin on Long-term Care Continuing Education .......................................................... 177 S. Producer Licensing Model Act..................................................................................................... 179 T. Professional Licensing Standards Recommendations ...................................................................191 U. Public Adjuster Model Act ........................................................................................................... 193 V. Report of the NARAB Working Group: Recommendation of States Continuing to Meet

Reciprocity Requirements of the Gramm-Leach-Bliley Act .........................................................209 W. Uniform Criminal History & Regulatory Action Background Review Guidelines ...................... 237 X. Uniform Appointment Process...................................................................................................... 243 Y. Uniform Licensing Standards. ...................................................................................................... 245 Z. Chart on Licensable and Non-Licensable Acts..............................................................................255

Section Two ? General Reference Materials

A. Sample Continuing Education Program Instructions to Course Providers ....................................259 B. Sample Frequently Asked Questions by Producers Regarding Continuing

Education Requirements ............................................................................................................... 263 C. Sample State Licensing Department Internal Training Manual.....................................................265

Section Three ? Glossary

? 2009-18 National Association of Insurance Commissioners

State Licensing Handbook ______________________________________________________________________________________________________

? 2009-18 National Association of Insurance Commissioners

State Licensing Handbook ______________________________________________________________________________________________________

Introduction

The National Association of Insurance Commissioners (NAIC) is the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight. NAIC staff support these efforts and represent the collective views of state insurance regulators domestically and internationally. NAIC members, together with the central resources of the NAIC, form the national system of state-based insurance regulation in the U.S.

The NAIC has organized its work into various task forces and committees. The Executive (EX) Committee has working groups and task forces that focus on specific issues. In 2009, the NAIC formed the Producer Licensing (EX) Task Force to coordinate and oversee all NAIC groups addressing producer issues. One of the working groups that formerly reported to the Market Regulation and Consumer Affairs (D) Committee and now reports to the Producer Licensing Task (EX)Force is the Producer Licensing (EX) Working Group.

As its name suggests, the Producer Licensing (EX) Working Group focuses its efforts on the licensing process for individuals who sell insurance products. The Producer Licensing (EX) Working Group has worked toward the goal of streamlining and achieving uniformity in the insurance producer licensing process. The purpose of the State Licensing Handbook (Handbook) is to document current guidelines and recommended best practices.

The Producer Licensing (EX) Working Group strongly encourages all states, districts and territories to adopt, without deviation, all provisions of the NAIC's Producer Licensing Model Act PLMA), because true uniformity cannot be achieved until that happens.

Part I of this Handbook contains background information on these efforts and current information on the implementation of the PLMA, reciprocity efforts, the Uniform Licensing Standards (ULS) and related topics.

Part II of this Handbook includes information on other types of licenses that some states issue and that a state licensing director may encounter.

Part III contains Appendices to this Handbook.

The NAIC and the Producer Licensing (EX) Working Group worked to achieve reciprocity, as required by the initial provisions of the federal Gramm-Leach-Bliley Act (GLBA), 15 U.S.C. ? 6751 et seq., adopted in 1999, and to create and implement the ULS and procedures in all states. In 2015, the provisions of the GLBA that prohibited the creation of the National Association of Registered Agents and Brokers (NARAB) were repealed, and NARAB was established. This Handbook contains the current recommendations and guidelines from the NAIC's Executive (EX) Committee, the Producer Licensing (EX) Task Force and the Producer Licensing (EX) Working Group.

? 2009-18 National Association of Insurance Commissioners

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