According to Florida law, an insurance agent cannot write controlled business unless he or she also writes other similar business that is at least equal to the restricted business.
Taking out life insurance or annuity contracts that cover the agent or family members; officers, directors, stockholders, partners, or employees of a business in which he or a family member is engaged; or debtors of a firm, association, or corporation of which he or she is an officer, director, stockholder, partner, or employee are all examples of controlled business.
A business over which an agent can exercise personal control.
influence. The agent’s company, for example, is usually included in this type of business.
employees and members of their immediate families The majority of states impose restrictions on the amount of alcohol that can be consumed.
A controlled business that an agent may write. The constraint
bans people from obtaining a license only for that purpose
of writing business for less money (for example, by avoiding commissions)
costs) for employees, employers, and family.
“An unfair trading practice that happens when someone in the insurance business uses physical or mental coercion or the fear of force to compel another to transact insurance,” according to the definition. However, coercion does not always have to be forceful. Coercion occurs when an agent interferes with or harms a client’s reputation or business unless a policy is acquired. Coercion is defined as any behavior that has the goal of removing the client’s free will.
It can be considered unfair discrimination if an agent creates a “difference in sales, underwriting, pricing, claims management, or any other insurance application function between two individuals of practically the same underwriting classification and expectancy of life or health.” Agents should never discriminate; they must provide all products and services to their clients on an equal basis, regardless of color, gender, age, ethnicity, or other factors. The Florida code specifically prohibits discrimination against victims of domestic violence or abuse (Sec. 626.9541, F.S.).
Twisting is the act of persuading or attempting to persuade a policy owner to cancel an existing life insurance policy and replace it with a nearly similar policy by utilizing misrepresentations or incomplete comparisons of the two policies’ benefits and drawbacks.
Selling insurance to one’s self, spouse, employer, and/or own business is considered controlled business. A violation occurs when controlled business accounts for more than half of the total premiums collected by the producer.
Defamation is defined as any inaccurate and unfavorable written or oral expression about a person or entity. Defamation lawsuits are often covered by media liability and general liability policies (although general liability policies exclude such coverage for insureds engaged in media businesses).
When it comes to insurance sector unfair trading practices, we don’t need the law to figure out a handful of them. Unfair commercial practices include misrepresenting benefits, overcharging for coverage, and underpaying claims, which are also characterized as lying, cheating, and stealing. Yes, brokers and agents may attempt to rationalize the half-truth, and insurance companies may engage in promotional puffery, but the limits for all three sins are clearly drawn.
The unethical behavior of an insurance business does not end there. There are several less well-known acts that are prohibited by Florida law. Even if they don’t rate among the seven deadly sins, who’s to say the eighth or ninth aren’t just as dangerous?
The practice that has just come to our attention is “Slide.” An announcement was made by the Florida Office of Insurance Regulation “In February, the Department of Transportation released a “informational memorandum” on travel insurance policies and sliding premiums. The OIR apparently received complaints or concerns that consumers were being exploited. The OIR used the opportunity to remind insurers that under the state’s Unfair Insurance Trade Practices Act, sliding is expressly forbidden.
Sliding occurs when a consumer is misled by an insurance agent or firm regarding the breadth or cost of coverage. For example, the insurer may inform a customer that state law mandates that everyone buying a homeowners policy also buys auto insurance. Alternatively, the insurer may claim that auto insurance is included in the homeowners policy at no extra cost when, in fact, there is an additional cost that the consumer is unaware of.
The law also prohibits an insurer from charging a customer for coverage that he or she has not consented to buy. Without the consumer’s informed consent, an insurer cannot charge for coverage.
This was the issue that the OIR was made aware of, the lesser mortal sin that spurred the investigation “Last month, we received a “informational memorandum” (we used to call them bulletins).
The Florida Office of Insurance Regulation (OIR) is a state agency that regulates insurance “Automatically charging consumers for ancillary travel insurance without their informed agreement is illegal, according to OIR-15-01M, which was published on February 3, 2015.
Instead of acquiring insurance and trusting an insurance company to repay you, self-insurance is saving away your own funds to cover a potential loss.
You could come across a sales tactic every now and then that makes you think; something about it doesn’t feel right. You’re less likely to believe there’s a true conspiracy going on. Rebating and churning are two examples of sales activities that should be avoided.
Rebating is similar to a “kickback,” in that it involves offering or giving something of value as an incentive to buy insurance that isn’t explicitly stated in a life insurance policy. Although it is allowed in some jurisdictions, insurers may find it to be disadvantageous. The following are examples of rebates:
Rebating activity patterns can be evident in many early lapse scenarios, particularly when the agent commission is larger than 100% of the first year premium and commissions are not recaptured after the policy’s first anniversary or other predetermined commission period. Because first-year fees can be as high as 135 percent of the first-year premium, an agent who collects premiums on behalf of policyholders might potentially gain 35 percent on each policy purchased.
Numerous MIB activity codes and Insurance Activity Index (IAI) hits, with no indication of the application of considerable or any amount of current in-force coverage, could be an indicator of such behavior. A basic example is a situation in which the literary agent switches his or her own coverage with a new carrier each year. In the first year, the new agent commission offsets the first-year premium. In effect, insurance companies subsidize the agent’s insurance program on a continuous basis, with several carriers losing money in the process. Carriers with commission arrangements similar to those described above should have reporting in place to examine 13-month persistency, particularly for freshly engaged agents.
Churning is a sales technique in which a current life insurance policy is replaced with a new one in order to earn more first-year commissions. This practice, commonly known as “twisting,” is prohibited in most jurisdictions and is also prohibited by most insurance policies. When the product being churned is a permanent plan of coverage with a total commission payout of more than 100% of the first-year premium, the activity is very prevalent.
Churning, by definition, has a direct impact on insurance lapse rates. Because of the labor cost of underwriting and new business employees, underwriting requirement costs, and agent commissions, new business acquisition costs are often higher than first-year premiums, especially in the first policy year. While some lapse behavior is unavoidable and priced for, intentionally planned scenarios, such as when the policy was never intended to last longer than 12 to 15 months, are not.
The use of analytics to assess agent activity is crucial in this case. To discover frequent replacements and persistency issues at the agent level, companies need to send information to Marketing, Compliance, and Legal associates on a regular basis.
On December 6, 2006, the Office of General Counsel, representing the New York State Insurance Department, issued the following opinion.
Is it permissible for a validly appointed and licensed life insurance agent to split commissions on the sale of a life insurance policy with a relative of the insured who is a licensed insurance agent but has not been designated as an agent for the insurer that offers the policy?
No, a validly appointed and licensed life insurance agent may not share commissions with another insurance agent unless the latter was a licensed representative of the insurer that wrote the policy at the time of the solicitation, negotiation, and/or sale of the policy. An insurance agent who shares a commission with a non-appointed agent would be in violation of New York Insurance Law 2114. (McKinney 2006). Furthermore, even if both insurance agents were licensed agents of the insurer, the commission sharing would appear to be an enticement that is banned by New York Insurance Law 4224(c) under the conditions described below (McKinney Supp. 2006).
An insurer duly appointed a licensed life insurance agent. A prospective customer expressed anxiety about acquiring a life insurance policy from the agent because the client has a relative who is a life insurance agent but has not been appointed by the insurer. The agent indicated that they agreed to split the insurance commissions with the relative in order to alleviate the prospective client’s fears, and that they had already made one payment as stipulated in the agreement.
Here on our website, we offer you free tips, tricks, hacks and knowledge for getting your health, wealth and belongings insured.