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Producer
Frequently Asked Questions |
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APPOINTMENT Q. Can I sell
an insurance product before I am actually appointed with the carrier? A. Yes, but the carrier has to file a
notice of your appointment with the Insurance Department within fifteen (15)
days after the appointment contract is executed or you submit the application
for coverage. Ark. Code Ann. §
23-64-514. There
is no restriction of the payment of commissions during this period. Q. My
appointing carrier is requiring me to pay my own appointment fee. Is this legal? A. No. Under Ark. Code Ann. §23-61-708(d), a carrier cannot collect the appointment fees, directly or indirectly, from the producer licensee. Q. My appointing carrier has cancelled my
appointment! Can the Department make
the carrier reinstate my appointment? A. No. The Department has no jurisdiction to require a carrier to appoint a particular agent. The insurer is required to notify the Department and the agent of the termination. An agent can file a response with the Department and the reporting insurer to the substance of the notification. The agent’s response will become part of his file at the Department and will be provided along with any report disclosed about the agent as allowed by law. REBATING Q. I will be
passing out flyers at businesses regarding term insurance. The flyer tells
the recipient about low term insurance rates and offers a $10 Free Lunch
Coupon to a choice of 15-20 restaurants in the area. If the recipient will
fill out a request for a free no obligation term life quote, I will deliver a
lunch coupon to them for the restaurant of his or her choice when I deliver
the quote. The coupon is delivered regardless of whether the recipient buys a
policy or not. On the flyer in bold print it states that no purchase is
necessary to receive the $10 coupon. Is this an illegal rebate? A. Directive 5-98 allows token gifts valued at less than $25 to be given out without violating the rebate laws. Therefore, since the coupons are worth less than $25, this will not be considered illegal rebating. FEES Q. May
producers charge insureds fees over and above gross premiums charged by
carriers on the policies delivered to the insureds? A. In general, Ark. Code Ann. § 23-66-310
allows a property and casualty producer to charge a fee in excess of the
premiums as long as: a. The fee is separately disclosed on
the insured’s bill; and b. The fee does not exceed 20% of the
premium. Q. Is there
any law that prohibits a retail agent from charging a fee to process an
endorsement? A. All compensation, commission and agent fee combined cannot exceed 20% of the premium under Ark. Code Ann. § 23-66-310. Obviously, multiple charges per policy term changes or endorsements would very quickly exceed and thus violate the cap. Therefore, the Department’s position is that P & C policy fees can be added only once per policy term, unless the insurer itself includes these agent-retained fees in its rate structure.
Q. In order to
process an auto application, my agency has to purchase MVR reports. We want
to recoup this fee from our clients.
Can we do this? A. This is fine. This
will not count toward the 20% compensation cap, since you are merely being
reimbursed for this expense. Q. My agency
receives a bonus from an insurer if our book of business maintains low loss
runs counts. Does this bonus
count toward the 20% cap on producer
compensation? A. It
will not if the bonuses are built into the insurer's rate structure. You can check with the carrier about
this. Otherwise, yes, it does. Q. Does the
20% agent compensation limit include the agent commission and broker fee
combined?? Or can you separate it
out? A. The 20% limit is the total of all commissions to all agents and brokers - the goal of the statute is not to overcharge the consumer, and to allow the agent to charge 20% and the broker to charge 20% would defeat the purpose. Q. An Arkansas
health insurer does not pay agents on accident and health policies sold to
some industries - the producers simply get no compensation when they sell to
some industries. Can a producer charge
a 5% fee to the insured in order to get some compensation? The insurer has no problem with this.
A. No. The agents cannot charge a fee if the fee is not in the insurer's rate structure, per Ark. Code Ann. § 23-66-310(b)(1). PROPERTY & CASUALTY Q. A third party is trying to make a
claim against my customer’s liability policy.
My customer says he is not at fault and has instructed me not to pass
on the claim to his carrier. What
should I do? A. This is a tough issue. The Department’s position on claim reporting is that an agent must report a claim if the agent has some verification that the claim has merit. For example, in the instant case, if your client admits there was an accident, you should turn in the claim and let the carrier determine fault. Sometimes, a customer may want to pay for the damages himself, rather than risk a rate increase. You can give your client a reasonable amount of time to do this, but if the client does not pay the damages, you should turn in the claim. In deciding what a “reasonable” amount of time is, consider Rule and Regulation 43. This regulation concerns claim handling procedures and requires companies to acknowledge receipt of a claim within fifteen (15) working days. Section 7 provides that notice to an agent is deemed notice to the company. Therefore, when a third party notifies you of a claim, the clock began ticking for the carrier to acknowledge the claim and settle it within the timeframe set by the Regulation. An agent’s failure to report a claim could result in a violation of the Regulation. LIFE & HEALTH Q. What is
Arkansas' “Any Willing Provider” law, and when does it go into effect? A. Arkansas' Any Willing Provider Law provides that persons in group or individual health plans or HMOs will be able to go to the doctors or hospitals of their choice, if the doctor or hospital agrees to the "terms and conditions" of that person's health insurer or HMO. This law will go into effect after a Federal Appeals Court makes a ruling on an Arkansas case deciding the validity of Arkansas' 1995 Any Willing Provider Law, and the Department anticipates that, absent further litigation, the "Any Willing Provider" may go into effect before the end of this Summer, or sooner, depending on the date in which the Federal Appeals Court issues its ruling. Q. How long
does a health insurance company have to pay a health insurance claim?
A. Health insurance companies, including HMOs, have 30 days to pay a claim to either you or your medical provider, if the claim is electronically filed with the health insurance company. If the claim is mailed to the health insurance company, the health insurance company has forty-five days to pay the claim. All of these time deadlines assume that the claim is considered a "clean claim," or a claim falling squarely under coverage under the health plan, in which no further information is needed by the health insurer to process the claim. If the claim is however not "clean" or the health insurer needs more information to process the claim, the health insurer is allowed 30 days to collect the information, and after all of the required information is received by the health insurer, the 30 (electronic) and 45 (non-electronic) day payment rules then apply. Q. Is a person still HIPAA eligible if he
comes off a group plan and goes to a short-term major medical policy before
going into another group plan? A. Yes, as long as there is not a 63-day break in coverage between the group coverage and the short-term coverage, or between the short-term coverage and the next group coverage. Q. Are proceeds on life insurance protected from
creditors? A. Yes, life proceeds are exempt as
stated in Ark. Code Ann. § 23-79-131. Q. Are annuity proceeds protected from creditors? A. Yes, annuity proceeds are exempt as
stated in Ark. Code Ann 23-79-134. Q. In what situation is a newborn
automatically covered under an insurance policy? A. Under A.C.A. § 23-79-129 – If an insured has a policy (individual or group), that covers the insured and at least one family member (spouse or child), than a newborn must be covered from birth for at least 90 days. If an insured has an individual policy or certificate with no dependents, in most situations, the newborn will have to go through underwriting unless otherwise stated by contract language. Q. What is
external review? A. An independent review of claims for
benefits (treatment or services) to see if they are medically necessary or
experimental/investigational. The requested benefit must be at least $500 for
external review to apply. Q. I
have been asked to sell a health product that I have never heard of. The rates are really low and it claims to
be an ERISA plan, whatever that is.
Should I sell this? A. No!
Unauthorized health insurance has been a big problem in Arkansas and
has cost consumers and producers thousands of dollars in unpaid claims. Here are the warning signs of an
unauthorized product: - Claims to be set up pursuant to ERISA and exempt from state regulation - Anybody can buy it - You, as an insurance producer, are being asked to sell it - Rates that are too good to be true (really) - Little to no underwriting Q. What should I do if I think I am being
asked to sell an unauthorized health insurance plan? A. Call the Arkansas Insurance Department to see if the carrier is licensed in Arkansas, and - Get copies of all plan documents, applications, etc.; and - Get contact name, address, and phone number - DON’T
SELL IT!! Arkansas law now provides that any producer
involved in the sale of unauthorized insurance must pay for any unpaid
claims. Also, to knowingly sell an
unauthorized product, or to knowingly aid someone else in such sale, is a
Class D felony! MISCELLANEOUS Q. Do the state or federal Do Not Call
laws apply to the business of insurance and insurance agents? A. Yes. The Department is able to provide you some
general information, but please remember that the enforcement authority for the
Do Not Call law (both State and Federal) lies with the Arkansas Attorney
General's Office. Below is the link to their website for further information;
you will need to contact the Consumer Protection Division of the Public
Protection Department: Unlike
the Federal Trade Commission's Do-Not-Call rule, the Federal Communication
Commission's (FCC) Do-Not-Call Rule applies to the insurance industry. Insurance
agents who use the telephone or send faxes will have to follow the FCC's Rule
and check the national do-not-call list even in states that have exempted
insurance agents from their do-not-call rules (like Arkansas!). If an
agent has an "established business relationship" with a client and
that client has placed his or her name on the do-not-call list, the agent is
still allowed to call his or her client at home. An
established business relationship exists where the client has made a purchase
or entered into another transaction within the 18 month period prior to the
call or when an inquiry or application has been made within 3 months before
the call. Nonetheless, "cold" calls to numbers on the
Do-Not-Call list are prohibited unless express written permission
has been given to call. Compliance
with the FCC Do-Not-Call Telemarketing Rule has been required since
10/1/2003. There is also a Do-Not-Fax Rule effective 1/1/2005. Also,
the National Association of Insurance and Financial Advisors has made a joint
filing with the American Council of Life Insurers (ACLI) in 11/2003 asking
the FCC to clarify the definition of "established business
relationship" under the do-not-call rules. The
Department encourages you to contact the FCC directly and inquire about the
applicability of the federal Law to intra-state phone calls, i.e., phone
calls made in-state only from an AR producer to an AR
consumer. It is the Department’s understanding that there is existing
confusion as to the applicability of the former state-exception for insurance
under the new Do Not Call provisions.
The FCC's website and contact information is: http://www.fcc.gov/contacts.html Q. How can I
operate my business in accordance with the law? A. The best way to show compliance with the law is by an agent trust account and carefully maintained records. Ark. Code Ann. § 23-64-220(c) requires producers to keep “the usual and customary records pertaining to transactions under his or her license.” Many times, the only thing standing between a producer and an administrative action is the producer’s documentation! The Department suggests the producers keep records of: - When an application is received and when it is sent to the insurer; and - When a premium payment is received and when it is sent to the insurer; and - When a policy is received and when it is sent to the customer; and - Save those fax confirmations!! This is time-consuming and a pain, but can really save you trouble. Ark. Code Ann. § 23-64-223
requires you to hold all funds and premium monies in a fiduciary capacity and
to account for and pay these monies in the regular course of business to whom
they are owed. “Fiduciary” means you
owe your client a duty of fair dealing,
good faith, honesty, and loyalty.
Agent trust accounts are the best way to show that you have done your
duty to your client. Q. I
am a licensed producer – with whom can I share my commissions? A. Arkansas
Code Ann. § 23-64-513 changes years of Arkansas law on commission
sharing. The simple answer is that a
producer cannot share commissions with someone who should be licensed as an
agent but is not; a producer can share commissions with someone who is not licensed,
and does not have to be, unless doing so would violate some other law (such
as rebating). Q. Under the new
producer compensation disclosure requirements, when does the disclosure have
to be made? A. Disclosure must be made prior to the purchase of insurance. For disclosure to be useful to the customer, it obviously must be made before the customer has committed to purchasing the insurance. Q. Under
the new producer compensation disclosure requirements, do I have to make the
disclosure in writing? A. No, a written disclosure is not required. However, a producer would be well served in documenting that the disclosure was made to the customer, as well the specific date on which the disclosure was made. Q. Does an insurer have to keep a hard
copy of an agent’s license on hand for market conduct reviews? Or can the insurer rely on checking an
agent’s licensing status electronically through the NAIC’s Producer Database
or a state insurance department’s electronic agent search? A. An insurer may electronically confirm an agent’s licensure status. Insurers do not have to keep hard copies of individual licenses. Q. Who needs a
producer’s license? A. With some exceptions, anyone who “sells,” “solicits,” or “negotiates”
insurance must be licensed as a producer.
These terms are defined in Ark. Code Ann. § 23-64-502: -
“Sell”
means to exchange a contract of insurance by any means, for money or its
equivalent, on behalf of an insurance company; -
“Solicit”
means attempting to sell insurance or asking or urging a person to apply for
a particular kind of insurance from a particular company; -
"Negotiate"
means the act of conferring directly with or offering advice directly to a
purchaser or prospective purchaser of a particular contract of insurance
concerning any of the substantive benefits, terms or conditions of the
contract, provided that the person engaged in that act either sells insurance
or obtains insurance from insurers for purchasers. Q. What are producer
activities vs. which are activities that are merely clerical and do not
require a license? A.
This NAIC chart explains the differences in the activities.
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