THE

INTERCOM VOL5, N0.2 PUBLICATION FOR AGENTS AM0 ADJUSTERS FROM E W l ~ JUL - OCT 1995 THE STATE OF FLORIDA DEPARTMENT OF INSURANCE Treasurer/lnsuranee Commissioner/Fire Marshal

GUN I INUINU EUULAI IUN (CE) COMPLIANCE 1

December 1, 1995, the

information should call

(904) 922-3 134, Ext. 1 If0 Please remain on the line;

order in which it h x l In the Rule,

SLIDIIYG/MISREPRESENTAfION- ment entered into a Seltkmnt Stipulation for Conswit Older with ti^ agent. The settlrrmmt rendered a $1,000 fine, a one-year A Property and Casualty agent wes served wkh a n i ~ n t and won in of $528 to inswed. Administrative Complaint alleging that the agent engaged in sliding

motor club memberships, required consumerstopurchase motor dubs DECEPTlVE ACTS- In order to obtain premium financing, and allowed unlbmed employ- An agent under imrsstigalion by the h p t m m l of Insurance fw ees to transact Insurance. The agent's request for afwmat hearing was -lble ,,,lsapproprialion of m ~ u m funds - found to granted and the case concluded with m t l o n d the agenfs Iloensas. arm -. humem frwn lllhil mte hlb DECEPTIVE PRACTICES-- thtd that the name, Social Sear* number and date of birth being

used by the w n t wewe those of a deceased person. An Emergency A licensed Health agent communicated falsa hformath to other - isrwed immedhbb amow -- agents wncerning-the screening of small employer groups for health Ing this - pu- an mnlstrative writ on me -mpria- problems before offering to write the coverage. Benefit plans must be Issued to small employer groups on a guarantee-hue basls. Screen- tlon charge. Ing for pm-exkt!ng conditions or elalms hismy h not allowed by taw. FAILURE TO DISCLOSE- Such a c t h s by the agent demo~trated a lack of Mess or trustwoMl- An a m falsified his appllmtion for Insumnee license by ness. A fine Of and a one-ycrar p-- was I- On the stating that he had not %een arrested or Indicted by any state or agent. . - federal authorities anywhere in the United States in the last 12 MISAPPROPRIATION OF FUNDS-%-~!-~+~- m t h a . m The llwnsinp p m n s rmqulru m FBllFDLE repod on

The Depdmnt of Insumme issued an Administmth Complaint each appllmnt, but issuance of the Ilaanae Isr not delayed while waltlng Por the report. Accordindy. the applhnt was llcensed

agaimt an agent that he mlaa~roprlatedmd~fundrrend bawd lrpon Imrmat)on contalmd [n m m made matterla1 misstatamenti3 for the purpose of ilcduclng meurnem lo th. bklwy report was receld by it e-te l ~ ~ a ~ ~ l ~ ~ ~ l r Ilfelnsumnw A f t e r w n g a m far aggmmtd ba~ary and m s l a l n ~ an -r want the scent aurmndered Ibnse for t h m ~ a w ~ h t vio~mce. TII~ m r t r n e n t entarad lntoa~ettlment ~ t ipu- Settlement St ipukth for mwnl Order. latlon lor Consent Order which r m u M In a Ilne olW and n FALSE AND MATERIAL MISREPRESENTATION% one-year probation for a materlal mimrspmsenhtlon on an applC

life and Health agent wasE3leged to haw made fa h a n d material 'Or license'

mlsreprewntatlons to a consumer eoncerntng the replacement of a life Insurance policy and execdon of a ,Sectlan 1085 Exchange Form. + 9 9 4 + 9 These misrepresentations and faHm to execute the proper forms resulted In four poncles lapslng and being amelled, which a t tmd the If you en nol sure about the intent of ths law or have q#stha consumer to lose the cash surrender velum of the polldes. Afbr an about Um FlaWa Insurams Code, plea- mU (a) 922-9138 for

. Investigation, an Admlnletrath Complaint wae I#wd and the Depart- hfamWa~

. . -. . . -- -- . - -- - - -. . - - -

.--- UNLICENSED - ENTITIES .. .

donorable William Gary, Judge of the leon County Circult Court, has entered rmanent injunction a@m Insurance Company of Great Britain, Professional Indemnity Corporation, American Institute of Chiropractic, Jean Busch, Dr. Richard Busch, and Chiropmcth Association for Research and Education, permanently and forever enjoining them from transacting Insurance in Florida or relative to rhks or insureds locsted in Florida, unless and until they o h i n a Certificate of Authority from the Department of Inwrance. The court also entered a final judgment w ins t the defendants ordering them to pay a substantial fine and delinquent premium taxes. The defendants had organized an unauthorized purchasing group and were soliciting insurance through a magazine maled to Chiropracton. The group was purportedly insured by two unauthorized &horn compani* lnsuranoe Company of Great Britain and Profes-

::. -.:s-*. \ slonal Indemnity Corporation. .: , .,LA- - : . . - I"

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, ; ., ?: , - ... .. - CHANGE IN UNAUTHORIZED ENTITIES COORDINATOR

The Division of Insurance Fraud, Unauthorized Entities Section, recently announced the appointment of Denise Prather to the position of Unauthorized Entities Coordinator. Denise replaces Gail Connell who hers transferred to the I

Ortando Fraud Field Office as a Crime lntelllgenca Analyst. Persons suspecting any unauthorized insurance activity are urged to contact Me. Prather Immediately by calling

(904) 41 3-4036 or addressing your correspondence to 200 East Gaines SL, Tallahassee, FL 32399-0324; Fax eomrnunk cations should be directed to (904) 488-2632. Unauthorized aethrlty may invohre unlicensed dome& entities, unlicensed oflrhordforeign companies, unapprove(l union plans, unapprwd employee leasing plans, unapproved insurance benefit plans and lndlviduats !hat are marketing andlor solkltlng unauthorized insurance plans within the State of Rorlda.

To determine whether or not an insurer is authorized in Florlda, please call the Departmenfs Consumer Sewices Hotline at 1-800-342-2762 in Florida or (904) 922-31 31 outside of ~lorida.

- rn WARNING: RESIDENT AND NON-RESIDENT AGENTS RISK LOSING THEIR LICENSE

WHENEVER THEY SOLICIT FOR AN UNAUTHORIZED INSURER

....... ourr murrw rrLrwnaiwa art: r t m r r g r y esrrvuurugw r u u u r r r p ~ y W I L rr II re: UUIR w r r u ~ u r r r ; r r u r r u r r laws and regulations and to ensure the proper discipline of violators by filing formal written comdain ts wlth the De~artmen t of Insurance ..,....

ILLEGAL BAlL BOND SOLICITATION The Department has stepped up its efforts statewide to

curtail illegal bail bond solicitation activities. Section 648.44(1) (b), Florida Statutes, provides that bail bonds- men and runners may not directly or indirectly solicit busi- ness in or on the property or grounds of a jail, prison, or other place where prisoners are confined or in or on the property or grounds of any court. Section 4-221 -095, Florida Administrative Code, further specifies that prohibited solici- tation includes displaying, wearing, or distributing any item which directly or indirectly advertises bail bond services, or approaching anyone or urging, enticing, luring, or inviting anyone to approach a bandsmen to use his senrices, and parking a motor vehicle, which displays the name of a bondsman, a bail bond agency, or any other information advertising bail bond senrices, when not conducting bail bond business or for a longer perid of time than necessary when conducting bail bond business. The property or grounds of a court, jail, prison, or other place where prisoners are confined includes all parking lots and

p r k i n g spaces adjacent to such places or adjacent to -9blic walkways adjacent to such places.

The Department recognizes that, while the solicitation of bail bond business is constrained at designated locations, the approach of licensees whlle at these locations by

otherwise unsolicited clientele. does not necessarily con- stitute a violation of the law; therefore, it is necessary to distinguish between direct and indirect solicitation. It is the Departrnenfs position that a bail bond licensee's presence in asolicitatian prohibited area, when said licensee is not on court or bail bond related business, may constitute indirect solicitation. Licensees should exercise caution to ensure that neither they nor their agents violate these provisions of the law.The Department further cautions that it is improper to monitor first appearance court hearings for the purpose of prequalification of candidates for follow-up solicitation, make unrequested jail visitations with detainees to solicit aeir business, or take any other unrequested actions at prohibited Imtions which facilitate bringing together bail bondsmen and potential clients.

Prohibited solicitation is a crime punishable as a misde m n o r of the first degree, as well as a regulatory violation punishable by administrative sanctions against an agent's limnsure status. Clear distinctions between legal and ille- gal bail bond solicitation balances the recognized legiti mate activity of attracting business clientele while prohibit- ing activity which would foster unfair methods of competi- tion within the bail bond industry.

BAlL BOND AGENTS MAY NOT EMPLOY PERSONS WITH A FELONY HISTORY

The Department is presently inves- background wiew before &ending 1 tigating several cases where lt h r s that llcensed bait bond agents have employed persons who have pleaded gull@ or no contest to a felony or crime punishable by impdsonrnent of one (1) year or more. AH bail bond licensees are reminded that pursuant to Chapter 648.44(7)(&), ES., persons witha felony background may not m i p a t e as a director, offlwr, manager, or employem of any bail bond agency or office, m gardtemof whether or not adjudication of gulh was withheld. Such mstrlctians apply even if the felony case is under appeal. W u s e of the dose relation-

ip between the ball bond business

epartment v i m thls as a very seri- ous matter and urges all ticensees to conduct a thorough, due-diligence

an &r of employment to any p e m i Bail bond agents ate subject to licen- sure suspension, revocation, or other administrative penatdes for violating this statutory prohibition. Further, any person who knowingly permits a per- son who has been convicted of or who has pleaded guilty or no oontesl to a felony to engage in the bail bond bui- ness commits a felony of the third de- gree. A felony charge of thls nature against a llcensed bail bondsman will muR In the immediate emergency sw- pension of the bondsman's license; and, depenciing upon the autcome of the case, could mutt in the permanent revacation of the Ilcense. Bail bond agents are strongly encouraged to closely adhere to this law.

BAlL BONDSMEN CHARGED

WORKERS' COMPENSATION ADVERTISING INSURANCE PURCHASING ALLIANCE GIFTS ASSISTS SMALL EMPLOYERS PERMITTED 0

The 1993 Special Session of the Legislature passed the Workers' Com- pensation Insurance Purchasing Alli- an# (WCIPA) bill. The prwisions of this law assist small employers (50 or fewer employees) in obtaining work- ers' compensation coverage in the voluntary market. The Alliance was created within the,Department of In- surance, yet its seven-member Board of Directors is comprised of repre- sentatives from insurance companies and small employers.

The WClPA r CHPA Although the WClPA may sound

simllar to a Community Health Care Purchasing Alliance, it is not. The CHPAs (pronounced %hippas") en- able small businesses to group to- gether to purchase health insurance for their employees in greatervolume at reduced rates. With worken' com- pensation insurance, this 'grouping" of small businesses is not possible for small employers given the wide variety of classlfications involved.

for this service, and contacts only those insurers who have expressed a willingness to review Alliance risks.

Free Sewlce, but no Guaranteed Results

While thk senrice is free to the small employer, the WClPA staff does not guarantee that it can find every riska willing voluntary market insurer. However, in its first few months of operation, the WClPA staff has been successful in finding voluntary cover- age for over 50 percent of those re- questing assistance. Small employ- ers who cannot find coverage in the voluntary market either go bare or usually have to settle for paying higher pollcy premiums in the Workers' Corn- pensatlon Joint Undennriting Awe- ciatian (WCJUA).

In an effort to attract more inwr- ers, the Purchasing Alliance encour- ages employers to lrnpkment drug- free workplace programs, workplace safety standards, and managed care arranaements for their employees. - . -

Conseque't'~~ the WClPA merely if a limnsee encounters amall em- assists individual r isb in obtaining eyers for whom worksmi mmpen- workem' camp co''eraW in the volun- -tion ins" ranee in the wluntary tary mark* by contading interested market cannot be found, please en- insurem. The Alliance staff neither counge to **& the WCIPA underwrites nor earns a commission staff at , -800-342-2782,

New Phone Process Aids Callers In the midst of this technological age, Commissioner Bill

Nelson has called for a little more human touch to the handling of telephone calls .rec-merit's main tele-

calls received by th Ize the system b c

Section 626.9541(l)(m), Florida Statutes, provides a limited excep- tion to the statutory prohibition against rebating. This exception permits the giving of sadvertising gifts* limited to a

'articles of merchandise having a 0

value of not more than $25.' Under this provision, insurers and agent3 .; may give clients advertising gifts such as pens, pencils, calendars, etc., with the company or agency name and telephone number or clocks with com- pany trademarks. Merchandisa is defined as anything movable and cus- tomarily bought and sold for prom.

The Department of Insurance pre- viously has Issued opinions which specifically provide that cash and gif! certificates are not articles of mer- chandise. Further, no court has con- noted merchandise as a plan or ser-

such things as auto club

Reminder Each penon operating an insurance agency

or adjusting firm and each location of a multiplm agency or firm must complete a Primary Agent/ Primary Adjuster Form (014-WM) on or Wore January 1 of each year. No Insurance agency location or adjusting firm lacation shall conduct th business of insurance u n h a pdmmy W n t or primary adjuster is designated at aH times. Failure to designate a primary ~ n t or primary adjuster as muired undar W o r t s $28.592 and 626.8895, F.S., shall oonstktle gmunds far rt+ qulfing that the agency or Please refer to pati4 1 ~ 8 ~ 8 8 copy of the form. If you have questions w

posslble to those needlng the services of the Department of Guest the form, &tact me Bureau of I n W - ] Insurance. I 1 4 EEma

I NEW COMPANIES Statewide of Florida Ins. Co. was

uthorized on 8/11/95, Lines of siness: Fire, Allled Lines.

omeowners Multi Peril, Inland 4: Marine, Private Passenger Auto Clablfity, PPA Physical Damage, Mobile Home Multl Peril, Mobile Home Physlcal Damage; Re-Insurance on all lines listed. Address: 2500 N.W. 79th Avenue, Miami, FL 33122;

, , telephone (305) 71 5-0000. Paramount Dental Plan, Inc., was

authorized on 7120195. Lines of burlness: Dental Service Plan (Prepaid). Address: 10627 Rivercrest Drive, Rlvervlew, FL 33569; telephone (81 3) 667-4955.

Frontier Pacific lnsurance Go. was authorized on 4/6/95. Address: 6404 WHshire Boulevard #850, Los Angeles, CA 90048; telephone (2 I 3) 653-4058.

HIP lnsurance Company d Florida was authorized on 4/6/85, Lbrs of business: Re-insurance-Life, Ra- insurance-Accldent and Health, Life, Accldent and Health. Address: 200 S Park Road, Suite f 00, Hollywood, FL 1 k 1

021 ; telephone (305) 962-3008.

Leadw Spedrslty I n s w a m Go. was authorized on 511 1/95. Llnea of business: Re-insurance on Private Passenger Auto Liability, Commercial Auto Llablllty, PPA Physlcal Damage, Commerclal Auto Physical Damage; Prlvater Passenger Auto Liability, Commerclal Auto Liability, PPA Physlcal Damage. Address: 4807 Ftockslde Road, Independence, OH 441 31 ; telephone (21 8) 447-1 660.

Plnnacle Assurance Corp. - an Assessable Mutual - was authorized on 4/7/05 to convert Irom a WC Self Insurance Fund under the name of Self lnsurance Fund. Address: P. 0. Box 14846, North Palm Beach, FL 33408; telephone (407) 840-71 71.

Voyager lndemnlty Insurance was authorized on 4/6/95. Address: P. 0. Box 901045, Ft. Wofih, TX 76101; telephone (404) 41 1-2389.

PHL Varlablcr Insurance Co. was purchased by Phoenix Home Life and re-admitted to Florida on 7/20/05. Former company names were:

rtford Llfe and Annuity, Dreyfus nsumer Life. Address: 100 Brlght adow Boulevard, Enfield, CT

Sunrise Healthcare Plan, Inc., was authorized on 7/13/95. tines of business: Health Maintenance Organizations. Address: 500 West Cypress Creek Road. Suite 640, Ft. Lauderdale, FL 33309; telephone (305) 492-4243.

Crum and Forster Indemnity Co. was

authorized on 5/11/95. Lines of business: Fire, Allied Lines, Commercial Multi Peril, Inland Marine, Workers' Comp. Other Llabibity, Commercial Auto Liability, Commercial Auto Physical Damage. Address: 6 Sylvan Way. Parsippany, NJ 07054; telephone (2f 2) 41 6-51 00.

Federal Emergency Management Agency Washington, D.C. 20472

National Flood Imurance Program (NRP)

Subject: Rebating of Agents' Commissions Background: The Federal Insurance Administmtlon (FIA) has reoehfed

inquiries from producers and Write Your Own Companies concerning the tmbatlng of q#mtsL mrnmjSSjOne wlth respect to the Nation J Flood tnswam Program (NNP). The three committees that advise the FIA regarding the MNP have provided input on this hue: the Flood Insurance Producers National Commitlee, the Insurance Institute for Property Loss Reduction flood Insur- ance Committee and the Write Your Own Marketing Committee. The Insurance Institute for Propetty Loss Reduction Flood Insurance Committee did not comment as a committee because of concerns about potential anti-trust issues. Howewer, two member companies of that committee responded as lndlvldual companies.

The comments pointed out the need for the NFIP, as a Federal program operating on a natlonal scale, to have a uniform pricing system countrywide, so that insureds would always pay the mme price for the same risk, regardless of geographic location. This Is the only insurance program for the general public that is nationally available with Federal programmatic oversight.

After reviewing all the comments received, the FIA has concluded that the purposes of the NFlP are better served by maintaining the uniform pricing system countrywide.

Polley Statement: In order to preserve the uniform pricing system of thls national program, producen writing policies directly with the Federal Govern- ment as well as with Write b u r Own Companies shall not engage in rebatinq agents' mmlssion8 on NFlP policies.

B+f/9r Date Eldne A. McReynolds

Federal Insurance Administretor

FRPCJUA House Bill 2619 (Chapter 95-276 Laws of Florida). Relates to property insurance; became law on June 14, 1995.

Included in this bH1 were increased coverage limits for the Florida Windstorm Undenvriting Association, the re- definition of residentla1 coverage to include both personal lines residential coverage and commercial Lines residen- tial coverage, and a depopulation mechanism for the Florida Residential Properly and Casualty Joint Under- writing Association (FRPCJUA). The depopulation plan affects insureds, Insurers and agents.

The new law provides for a take-out bonus which requires the JUA to pay up to $1 00 to insurers for each risk the Insurer removes from the FRPCJUA, if the insurer takes out a minimum of 25,000 policies. The bill also allows an exemption from a deficit assessment if the insurer removes at least 50,000 policies, subject to a three-year decreasing percentage.

House Sill 261 9 also addresses the affect the take-out plan has on the FRPCJUA agent of record. When a policy is removed from the JUA, either by buance of a policy upon exptratlon of the JUA pollcy or by assumption, the agent of record is entitled to retain any unearned commis- sion on the policy. In addition, the insurer must either pay this agent an amount equal to the JUA commission tha agent would have earned If the policy had been renewed, or the insurer shall offer to retain the agent to continue servicing the policy for at least one yea<~he agent shall receive the insurer's usual commission according to the policy type. The agent has the option to accept or reject this offer. If the offer is rejected by the agent, the insurer is under no further obligation to the agent.

The Department of Insurance is committed to the stabilization of the insurance market in the State of Florida. This tegislatlon takes the first step toward that goal. The Department encourages anyone who may be affected by this bHI to read it thoroughly, as thb article deals with only a very smell part. If you have questions concerning these matters, you may call the Oivisbn of insurer Services at (904) 822-31 42 or the Depanment Hotline at 1 -800-342-2762.

, Fraud 6 Ill CSIHB 1 745 (Chapter95-340 Laws of Florida).

W o n 624.438, F.S., G e m l Eligibility for Multiple Employer Welfare Arrangements (MEWA's) -

MEWA's were designed to afford businesses the oppor- tunity to join together in insurance purchasing pools for thr --

beneM of themselves and their employees. The nee revisions provide that MEWA's licensed by the Depad ment of Insurance are required to be employers who are of the same profession, trade or industry as recognized by the appropriate licendng agency. The new requirement does not apply to an arrangement licensed prior to 4/1/95 regardless of the nature of its business.

Section 628.561, F.S., Reporting and Accounting for Funds -

This section was amended to provide that any agent, solicitor or adjuster who either temporarily or perma- nently diverts or approptiates premiums, return premiums, or other funds, or any portion thereof, 4 h belonging to insurers or others, to his own use or deprives the other person of such a benefit therefrom commits an offense. The offense can be deemed a misdemeanor of the first degree, a felony of the third degree, a felony of the second degree, or a felony of the first degree, depending upon the amount of funds diverted.

Sectlon 626.902, F.S.. Pen- alty tor ~ e ~ r e k o n t l n ~ ~nauthorlzed Insurers -

This section was amended to make it a third degree felony for an unlicensed person to represent or aid an unauthorized insurer.

Saclion 626.989, F.S., Dlvlslon of Inuuranw Fraud; Dellnition; Invertlgallve, Subpottna Powers; Proteo- tton from Clvl Llablllty; Reports to Dlvlslon; Oivislon - Inveutigator's Power to Exacute Warrants and Make Armst8 -

This section was amended to provide immunity to members of insurers' Speclal Investigative Units (SIU's) and like entities which share information &out fraudu- lent insurance acts with other SlUP and like entities.

Effective July 1, 1995. Sectlon 826.9091, F.S., Insurer Antl-Fraud lmerti- This bill makes it easier for the Division of Insurance Unitm -

Fraud within the Department of Insurance and insurers to pursue and prosecute cases of insurance fraud.

Following are summaries of the eight amended or newly e

This newly created section requires insurers which have

created statutory sections included In this bill: $10 million or more in written premiums to establish an

internal SIU or contract with others for investigative ser- vices. An insurer subject to this suClsection shall file a detailed description of their unit with the Division of Insur- ance Fraud on or before July 1, 1996. Insurers with less han $1 0 million written premiums must adopt and submit

anti-fraud plan tothe Division of Insurance Fraud by July *l996, or they may, in lieu of adopting and filing an anti-

fraud plan, comply with the same provisions as the larger insurers.

Section 772.102, F.S., Civll Remedies for Criminal Practices. Definltlons. -

Under this section of the statutes, new language pro- vides that acting as or representing an unauthorized insurer, acting as an unauthorized MEWA, or transacting insurance without a CertZficate of Authority is subject to civil liability.

Sectlon 817.234, F.S., Falser and Fnrudulmnt Insurance Clalms -

A new provision was added to this section stipulating that any person who knowingly presents a false, incom- plete, or misleading insurance application to an insurer

can be charged with s third degree felony. A statement _I - will be added to applications clearly defin-

L ing this obj&h.The dead- - --- tian line for changes applica- is

e . -

- March I, 1996.

Section 895.02, F.S., Offenses Concerning R a c b t w - Ing and I lkgal Pebts. Deftnltlons. -

A new dsfinltion was added to this section whlch states that transacting insurance without a Certifkate of Author- ity, operating an illegal MEWA, or representing an unau- thorized Insurer, are prosecutable acts under the Rack- eteer Influenced and Corrupt Organization Act (RICO).

Public Adjusters CS/SBs 2030 and 21 44 (Chapter 95-238 Laws of Florida). Amends Section 626.854, F. S. Effective June 9, 1995.

The new language states that *the Legislature finds it Is necessary for the protection of the publk to regulate Public Insurance Adjusten and to prevent the unautho- rlred practice of law." A Publc Adjuster is defined as any person, except a duly licensed attorney, who for money, commission, or any other thing of value, prepares, com- pletes, or files an insurance claim form for an insured or third-party clalmant or who, for money, wmmisslon, or any other thlng of value, acts or aids in any manner on behalf of an Insured or third-party claimant in negotiating for or effecting the settlement of a daim or daims for loss or -a amage covered by an insurance contract, or who adver- ses for employment as an adjuster of such claims. The exemption from licensure end appointment for

a licensed health care provider or employee thereof

who prepares or files a health insurance claim on behalf of a patient was unchanged by the amendments. The new measures exempt persons who file a health insurance claim on behalf of another and does so without compensation.

The revisions to the law specifically prohibit a Public Adjuster from giving legal actvie and from acting on behalf of or aiding any person in negotiating or settling a claim relating to bodily injury, death, or noneconomic damages. For the purposes of this section, the Legislature has M n e d the term 'insured" to indude only the policyhddr and any beneficiaries named or similarly identmed in the PQl~cy.

Section 626.8698, F.S., relating to disciplinary guide lines for PuMic Adjusters was created by the new legisla- tion. These disciplinary guidelines are supplementary to those found in Chapters 626.561,828.011,626.621, and elsewhere in the Florida Insurance Code. The new guide llnes specify that the Department may dsny, suspend, or revoke the license of a Public Adjuster, and administer a fine not to exceed $5,000 per act for any of the following: violating any provision of this Chapter or a Ruk or Order of the Department; receiving payment or anything of value as a result of an unfair or deceptive practice; receiving or accepting any fee, kickback, or other thing of value pursu- ant to any agreement or understan-, ml or otherwise; entering into a spllt-fee arrangement with another person who is not a PuMlc Adjuster; or being otherwise paid or accepting payment for senrims that have not been per- formed; violating s. 81 7.234, or s. 31 6.006, F.S.; soliciting or othemise taking advantage d a prson who is vulner- able, emotional, or othemise upsel as the mutt of trauma, accident, or other similar occurrence; or violattry any ethical Rule of the Department.

The Deparhnent supported the implementation of t- new disciplinary provisions since Publlc Adjusters are independent practitioners and are solely responsible for their conduct when transacting the business of insurance.

Churning Senate Bill 906 (Chapter 95-219 Laws of Florida). Amends Section 626.9541, F. S. Effec- tive July 1, 1995.

Section 626.9541, F.S., relating to unfair methods of competition and unfair or deceptive acts or practices was amended to prohibit the practke of churning. Churning is the practke whereby policy values in an existing life insurance policy or annuity contract, including, but not limited to cash, loan values, or dividend values, and in any riders to that policy or contract, are utilized to purcha8e another insurance pdicy or annulty contract with the same insurer for the purpose of earning additional premiums, fees, commissions, or other compensation.

The new language requires insuren to a&pt wrttten procedures whlch will provide notice of Intended replace- ment of life insurance policies or annutty t y c o n t r a e t s . Chum- ing d-n from the unfair method of competition known as

CONTINUED ON PAGE 8

CONTiNUED FROM PAGE 7

twisting only in that twisting involves the replacement of a policy by another insurer. Problems created by these sales practices became more obvious to the Department during the past year when consumers filed complaints alleging that they had been ha& as a result of such replacements.

The replacement of policies, per se, is not a violation of the Florida Insurance Code; the violation mcurs when misrepresentation or deceptive practices are used to convince the policyowner to surrender one policy in favor of another.

The written procedures for contract replaoement de- fined in the new statute requires insurers to provide notice to the policyowner which compares the benefits of the existing policy wlth what is being offered in the replace- ment policy. Advantages of the replacement policy must be clearly described so that the pollcyowner can deter- mine if the surrender or use of cash values in existing contracts to purchase a different contract is in their best interest. The statute also requires that this notice be provided to all named parties who may have an interest in the continuation of the policy. Additlonatly, the new law mandates an unconditional refund period of 60 days which begins the date the policy is delivered.

Most churning and twisting complaints received by the

Section 1. Paragraph (aa) is added to subsection I (1) of Section 626.9541. F.S., to read: 628.941 Unfair mahi is of competition and unfair

or deceptive acts or practices defined.- (I) UNFAIR METHODS OF COMPETITION AND

UNFAIR OR DECEPTIVE ACTS.-The following are defined as unfair methods of competition and unfair or deceptive acts or practices:

(aa) Churning.- 1. Churning is the practice whereby policy val- i ues in an existing life insurance poiicy or annuity

I contract, including, but not limited to cash, loan values, or divldend values, and In any riders to that policy or contract, are utilized to purchase another insurance policy or annuity contract with that same insurer tor the purpose of earning additional premiums, fees, com- missions, or other compensation:

a. Without an objectively reasonable basis for believing that the replacement or extraction wilt result in an actual and demonstrable benefit to the policyholder;

b. In n fashion that is fraudulent, deceptive, or otherwise mlsleadlng or that involves a deceptive omission;

c. Effective October I, 1995, when the applicant is not informed that the policy values including cash values, dividends, and other assets of the existing polcy or contract will be reduced, forfeited, or utilized

Department have been as a result of consumers being convinced to ustrip' cash value out of existing policies to provide substantial roll-in funds or replace policies with higher death benefits. Projections made by agents re-' -

garding future values of the replacement polides we* apparently bawd upon the interest rates andlor dividends effective at he time of replacement. Many consumers were notmadeawareofhrturev~luesbaseduponthemrstcase scenario or what is known as the muarantees.' Further, some consumers were advised that no future premiums would ever be due over the Me of the new p d i when, in fact, prendums may very possibly become due later in life when the policyholder may be less able to afford it

Consumers have a right to information which will en- able them to make an informed decision when contern- plating the replacement of an existing insurance contract. It is the responslbitity of agents in the insurance profes- sion to provide as much pertinent information as is avail- able, even if it means losing the sale.

Following is a re-print of the text of the new statute, which ml8tes to the replacement of life insurance policies or annuity contracts. The Department hopes this new Act will assist the Industry in providing crucial information to consumers who are contemplating a replacement policy.

in the purchase of the replacing or additional policy or contract, if this is the case; or

d. Effgctive Octaber 1,1995, without informing the applicant that the replacing or additional policy or contract will not be a paid-up policy or that additional premiums will be due, if this is the case.

Churning by an insurer or an agent is an unfair methad of mnptkion and an unfair or deoeptive act or practice.

2. Effective October 1, 1995, each insurer shall comply with sub-subparagraph 1 .c. and sub- subparagraph 1 .d. by disclosing to the applicant at the time of the offer on a form designed and adopted by rule by the department if, how, and the extent to which the policy or contract values (including cash value, dividends, and other assets) of a previously issued policy or contract will be used to purchase a replacing or additional policy or contract with the same insurer. The form shall include disclosure of the premium, the death benefit of the proposed replacing or additional policy, and the date when the policy values of the existing policy or contract will be insufficient to pay the premiums of the replacing or additional polby or contract.

3. Effective October I , 1995, each insurer sh dl adopt written procedures to reasonably avoid churning of policies or contracts that it has issued, and failure to adopt written procedures sufficient to reasonably avoid churning shall be an unfair method of competition and an unfar or deceptive act or practice.

PREMIUM FINANCING DISCLOSURE FORM - REQUIRED

Effective August 16, 1995, when motor ve- hicle insurance premiums are financed, agents are required to disclose certain types of cover- ages financed with personal injury protection. The disclosure is to be made at the time of sale using e completed disclosure form (see page l o ) , signed by the insured, with copies pro- vided to the insured and the premlum finance company. A copy must also be retained by the agent.

If insurance coverages other than property damage liability, bodily injury, collision, unin- sured motorist, or comprehensive coverage for damage of or loss to the vehicle are not fi- nanced with personal injury protection, then no disclosure form is required.

The form is adopted by reference in Rule 4-1 96.02 1 , Florida Administrative Code. (A re- print of the Rule is shown in the column to the right.) The Rule, along with a slightly different format of the form, was initially effective on February 1, 1995.

Licensees should ensure that the disclosure L l requirements are followed and that copies of

completed disclosure statements are included in the file maintained by the agency.

Failure to comply wlth the disclosure require- ments constitutes grounds for disciplinary ac- tion under Ssctlon 628.621 (12), Florida Stat- utes. Depending upon the circumstances, a three- month suspension may result from a single transaction where the disclosure requirements are not followed.

A photocopy of the new form 'Insurance Premium Financing Disclosure Formm-DI4-1 182 (3/95), may be used as long as there are no alterations in text and type size and the copies are clearly legible.

Rule 4-1 96.021 Disclosure Requirements for

Insurance Coverages Financed With Personal Injury

Protection

(1) Whenever motor vehicle insurance is financed, the agent shall disclose at the time of sale any cwemges financed with per- sonal injury protection other than property damage liabiti, bodily injury, collision, un- insured motorist, or comprehensive cover- age for damage of or loss to the vehicle.

(2) The disclosure shall be on Form 014-1 182 (3195), which is incorporated herein by reference. A blank form can be obtalW from the Bureau of Specially Insur- ers, 200 East Qaines Street, Tallahasree, Florida 32399-0331, fm which you may make as many copies as needed. Photo- copies of Form Dl41 1 62 (3/95) are accept- able, provided that the copits are dearly legible and contain no alterations in text and type she.

(3) The disclosure shall be signed by the insured.

(4) Copies of the signed d~lorunr shall be given to the agent, insured, and fhe premium finance company.

Specfflc Authority 627.8405 FS.

Law Implemented 828.9541 (I)@), 627.734,627.8405 FS.

History-New 3-1 -95, Amended 8-1 6-95.

F Y I Consumers in Florida may call the Department's HelpLine for assistance with insurance-related questions.

The Toll-Free number is 1-800-342-2762

INSURANCE PREMf UM FINANCING DISCLOSURE FORM

Florida law requires the owner of a motor vehicle to maintain personal injury protection and property damage liability insurance. Under certain circumstances as provided in Chapter 324, Florida Statutes, additional liability insurance may be required for bodily injury liability. Also,

i additional insurance is usually required by a lienholder of a financed vehicle. Florida law does not require other insurance. The direct or indirect premium financing of auto club

I memberships and other non-insurance products is prohibited by state law.

Insurance you are REQUIRED by law to have: Personal Injury Protection {PIP) ..................................................................... $ Property Damage Uability (PD) ....................... ... .......................................

Other insurance which you MAY be required by law to have: Bodily Injury (If an SR-22 has been issued) ..................................................

OPTIONAL insurance coverage: Bodily Injury (If an sR-22 has NOT been issued) ............................... 1 .....

............................................................................................ Uninsured Motorist .................................................................................................. Comprehensive

Collision ............................................................................................................ @ ........................................................ ........................................................

........................................................................................... Policy Fee, i f applicable I TOTAL INSURANCE PREMIUMS .......................................................................... $ ! I

Less Down Payment Applied .................................................................................. ( 1 I t

AMOUNT FINANCED (LOANED TO YOU) .......................................................... $ 1 t i !

1, , have read the above and understand the coverages I am buying and {Pdm Namm ol tnrursd)

I ?

how much they cost.

Department of Insurance

Division of Agent and Agency Services

200 East Gaines Street

Tallahassee, Florida 32399-0318

!

BULK RAT€ i U.S. Poetage

I

TaikhamM, R t Permit No. 101

'

The Intercom is pulz

partment of Insur- - ance, Division of ~ ~ & t and Agency Services, 200 East 1

Gaines Street, Tallahassee, FL 32399-0318. i -i

Lucy Walker I Editor /Publisher - ! :

NAMEIADI)RESS CHANGE?

If your name, residence ad- dms, principal business street address, or mailing address changes, you mud notify h e De- partment within 30 days of the change. Lkensees who fall to comply are In vlolatlon of Chspter 826.551, ES., and are subject to investlgatlon and possible disci- pllnary action.

Please mall your notice of change to:

Contributors: GerrySmith ShirleyKerrIs

Bill Nelson -r- DIYEBUmOPAGRNTlAGBNCYSXVlCW

john H,h, Dklllon mv ~ l k , wmw, AWWM OMM D-

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--B#Hon- (804)922.8187 Ext. 1101

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Phil Fountain Dale Gliare Joan C a b g e Vinw Mount Sally Burt DonPowem Eugenia Tyua Barry Lanier Da~Flummer DickKealw K e n y Edgil Tom Zutell

Denisr Prather

Wewthmmemgeest lomsand~eolreamlag The bt*rrom. Written suggestions rbould k mailed to Lucy Walker, Florida Department of

Bureau of Wnslng m2sz!lx Department ol In8umm Ball-

M m - A Q m m

Inrurance, 2M1 E. Gain- Street, ~nllahmsaa, Plodda 32399-0318 t

8

200 East Gaines Street T a l h h ~ @ e , FL 32308-0919

A name change necessitates the re-iss~ance of your insur- ance license. Please remem- ber to enclose the $5 fee and a copy of your marrlage certifl- cate, divorce decree, or other documentation at the time you request re-lrsuance.

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