Exam (elaborations)
19- Michigan Laws and Rules Pertinent to Insurance Exam Questions and Answers
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19- Michigan Laws and Rules Pertinent to Insurance Exam Questions and Answers
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19- Michigan Laws and Rules Pertinentto Insurance Exam Questions and
Answers
Departments of Insurance & Financial Services - Answer -Department of Insurance and
Financial Services is a principal department in the Michigan executive branch with
responsibility for insurance and financial institutions.
headed up by a commissioner appointed to a four year term has the power to revoke a
producer's insurance license
Cease & Desist Order - Answer -The Commissioner may issue a cease-and-desist
order to any person found to have committed an unfair or deceptive act or has violated
a state insurance law
Upon a hearing, a penalty of $500 per violation (not to exceed a total of $5,000) may be
imposed Upon a hearing, a penalty of $2,500 per violation (not to exceed a total of
$25,000) may be imposed if the person reasonably knew he was in violation
Certificate of Authority - Answer -The Commissioner will examine the financial affairs of
all insurers before issuing a certificate of authority to transact business in Michigan
Solvency - Answer -The Commissioner will suspend the certificate of authority of any
insurer that becomes insolvent, is threatened with insolvency, or is delinquent in claims
payment.
Producer - Answer -A producer is any person who sells, solicits, or negotiates insurance
contracts for compensation on behalf of an insurer. This includes submitting
applications to the insurer, collecting premiums, and delivering policies to policyowners.
Each agency that transacts insurance must be licensed by the insurance department.
An insurance producer CANNOT act as an agent of an insurer until the insurance
producer becomes appointed by the insurer.
Counselor - Answer -An insurance counselor is any person who, for a fee, offers to
examine any policy for the purpose of giving advice or recommendations with respect to
the benefits provided by the contract. An counselor must be licensed in the State of
Michigan.
Business Entity - Answer -A business entity that acts as an insurance producer in any
manner (sells, solicits, negotiates, advertises, collects commission) must be licensed in
,Michigan. The types of business entities that can be licensed in Michigan are
corporations, limited liability companies, limited liability partnerships, partnerships, or
sole proprietorships.
Process - Answer -An applicant for a resident producer license in Michigan must
Be at least 18 years of age Meet the prelicensing education requirements required by
Michigan law
Have passed the state exam for the lines of authority in which licensure is sought
Submit the application with fees
Maintenance & Duration - Answer -Producer licenses are renewable biennially (every
two years) with fee, renewal application, and proof of completing continuing education
(CE). Exceptions are made for producers who are in active military service or other
extenuating circumstances by requesting a waiver.
Applicant can apply 90 days prior to license expiration date
nonresident Producer - Answer -A producer who holds a resident license in a different
state may apply for a nonresident license in Michigan, as long as both states have a
reciprocal agreement. To apply, nonresidents must submit an application form, proof of
resident license in good standing, and fees. Nonresident producer applicants do not
have to take the Michigan state licensing exam, but must not have committed any act
for which the license could be denied, suspended, or revoked.
Temporary - Answer -A temporary license may be issued in cases where a producer
has become disabled or dies, requiring a replacement to service the producer's
business. It also can be issued when the producer is actively serving in the military.
A temporary license is valid for a maximum of 180 days.
Continuing Education - Answer -Resident producers must complete 24 hours of
continuing education every 2 years to keep their license active. Of those 24 hours
required, 3 hours must be in ethics. Nonresident producers are not required to complete
Michigan continuing education requirements as long as their home state requirements
are met.
Reinstatement - Answer -A lapsed license may be reinstated within one year of the
suspension date. The requirements include:
reinstatement application renewal fee plus a reinstatement fee proof of completion of
continuation education requirements
Probation, suspension, revocation, refusal to issue or renew of licenses - Answer -The
Commissioner may levy a civil fine, place on probation, suspend, revoke, refuse to
renew, or deny a license to any person who has:
Provided incorrect, misleading, incomplete or untrue information in the license
application
Violating any insurance laws, regulations, subpoena, or orders from the Insurance
Commissioner Obtaining to obtain a license through fraud or misrepresentation
, Intentionally misrepresent the terms of an insurance contract Been convicted of a felony
Committed any insurance unfair trade practice
Using fraudulent, coercive, or dishonest practices or demonstrating incompetence,
untrustworthiness, or financial irresponsibility in this or any other state.
Having an insurance license denied, suspended, or revoked by another state
Forging a name to an insurance document or application Cheating on an insurance
license examination
Knowingly accepting insurance business from an unlicensed individual
Failing to comply with a court order imposing child support Failing to pay state income
tax
Producer appointments - Answer -The agreement between an insurance producer and
insurer under which the insurance producer, for compensation, may sell, solicit, or
negotiate policies issued by the insurer is called an appointment. A producer cannot act
as an agent for an insurer unless he or she is appointed to work for that insurer.
The insurer is required to file a notice of appointment to the Commissioner within 15
days from the date date the first insurance application is submitted or agency contract is
executed
Upon receipt, the Commissioner has 30 days to verify that the producer is eligible for
appointment. If found ineligible, the Commissioner shall notify the insurer within 5 days.
Termination of Producer Appointment - Answer -An insurer that terminates an agent
appointment must notify the Commissioner within 30 days of the date of termination.
Within 15 days of such notice, the insurer must mail a copy of the notice to the
terminated agent, after which the agent will have 30 days to submit written comments to
the Commissioner.
Address/name change - Answer -Producers must report a change in address or name
to the Commissioner within 30 days of the change.
Reporting of actions - Answer -Producers must report any bankruptcy, felony conviction,
or any other administrative action that occurs in Michigan or another jurisdiction to the
Commissioner within 30 days.
Assumed Names - Answer -An insurance producer doing business under any name
other than the producer's legal name shall notify the commissioner prior to using the
assumed name.
Producer Records - Answer -All producers shall maintain full and correct transaction
records of the business done by them for a period of 5 years.
Commissions - Answer -It is illegal for an unlicensed person to receive commissions
from the sale, solicitation, or negotiation of insurance. However, renewal or deferred
commissions are payable to retired producers.
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