North Dakota State Regulations & NAIC Insurance Law

Licensing

Any individual applying for a North Dakota resident producer’s license must:

• Be at least 18 years old
• Be a resident of North Dakota before submitting an application, or maintain the principal place of business in North Dakota (N.D. Cent. Code § 26.1-26-19)

Pre-licensing course and exam

North Dakota does not have specific pre-licensing requirements, but a resident applicant must pass the examinations for the lines of authority applied for (N.D. Cent. Code § 26.1-26-13.3(1)).

A candidate must score 70% to pass each North Dakota producer examination, and may retest an unlimited number of times (PSI, North Dakota Insurance Licensing Examination Candidate Information Bulletin). A passing score is valid for one year for an applicant who has not completed the application and been licensed; after that, the examination must be retaken (N.D. Admin. Code § 45-02-02-03(4)).

Fingerprints/background check

An applicant for a resident North Dakota producer license must complete a criminal history record check, at the applicant’s own cost, and provide fingerprints for it. The check is not required for a license continuation, or for someone who applies within 12 months after a North Dakota resident license was canceled or expired, unless that license was suspended or revoked (N.D. Cent. Code § 26.1-26-13.3(2); N.D. Cent. Code § 12-60-24).

Controlled business

Controlled business is insurance written on the producer’s own life, property or interests, or on those of the producer’s family, employer or a business the producer controls. A producer may insure themselves and their family, but a license exists to sell insurance to the public, so states generally restrict obtaining or using a license principally to write controlled business.

In North Dakota, the Commissioner may not grant, renew or continue a license that is being or will be used to write controlled business, and a license is deemed used for that purpose if, during any twelve-month period, the commissions earned from controlled business exceeded 35% of the commissions earned on all business the licensee wrote (N.D. Cent. Code § 26.1-26-53(2)).

Non-resident license

A producer licensed in another state can obtain a North Dakota nonresident license without taking North Dakota’s examination. Under the NAIC’s Producer Licensing Model Act, which most states have adopted in some form, a nonresident receives the license if the person:

• Is currently licensed as a resident, and in good standing, in the home state
• Has applied (the home-state application or the Uniform Application) and paid the fees
• Lives in a home state that grants nonresident licenses to residents of this state on the same basis (reciprocity)

Under the same model, a producer who moves to another state files a change of address, with certification from the new home state, within 30 days. A licensed producer who moves into a state applies for a resident license there within 90 days and does not repeat prelicensing education or the examination for lines already held.

In North Dakota, the Commissioner shall issue a nonresident license to a person who meets the conditions listed above, unless the person is denied licensure under the producer licensing chapter (N.D. Cent. Code § 26.1-26-20(1)). North Dakota’s law sets the same deadlines: a producer who moves to another state files the change of address, with certification from the new resident state, within 30 days, and a producer licensed in another state who moves to North Dakota applies for a resident license within 90 days of establishing legal residence (N.D. Cent. Code § 26.1-26-20(3); N.D. Cent. Code § 26.1-26-25(2)).

Temporary license

Most states allow the insurance regulator to issue a temporary license, without an examination, when one is needed to keep an insurance business serviced. Typical cases are:

• The surviving spouse or personal representative of a producer who dies or becomes disabled, to allow time to sell the business or train new people
• A member or employee of a business entity producer, on the death or disability of its designated producer
• The designee of a producer entering active military service

Under the NAIC’s model act, the regulator may also issue one in any other circumstance where it finds that the public interest will best be served.

The regulator may limit what a temporary licensee may do and may require a licensed sponsor who takes responsibility for the temporary licensee’s acts.

North Dakota’s Commissioner may issue a temporary producer license for up to 180 days, without an examination, in the cases above or in any other circumstance where the Commissioner determines the public interest is best served (N.D. Cent. Code § 26.1-26-26). A temporary license is not granted only because the applicant failed the producer examination and wants to be licensed until passing it (N.D. Admin. Code § 45-02-02-02(5)(c)).

Military service

Under the NAIC’s model act, a producer who cannot meet license renewal requirements because of military service, or because of another extenuating circumstance such as a long-term medical disability, may request a waiver of those requirements and of any examination, fine or sanction for missing them.

Renewal and reinstatement

A producer license stays in effect only while the producer renews it on schedule: paying the renewal fee and completing continuing education by the due date.

A North Dakota producer license continues in perpetuity unless, among other reasons, the producer fails to file the biennial continuation and pay the fee (N.D. Cent. Code § 26.1-26-31). The continuation application and its $25 fee are due on or before the last day of the producer’s birth month following the license’s two-year anniversary, and every two years after that (N.D. Admin. Code § 45-02-02-05.1).

A producer who misses the deadline and lets the license lapse may be able to reinstate it without retaking the examination.

North Dakota has no grace period: a license that is not continued by its due date is canceled, and the producer must reapply with an initial application and the $100 license fee (N.D. Admin. Code § 45-02-02-05.2; North Dakota Insurance Department, Renew Producer License). A resident producer who reapplies within 12 months of the cancellation is not required to retake the examination, which stays valid for twelve months after a license is canceled (N.D. Admin. Code § 45-02-04-15; N.D. Admin. Code § 45-02-02-03(5)).

Continuing education

All states, including North Dakota, have continuing education requirements that must be met to renew any major lines (life, health, property, liability) insurance license. Many states also require continuing education of other licensees, such as adjusters or title or bail bond agents, while exempting producers who hold only certain limited lines; each state’s law says which. Individuals licensed in the state of North Dakota must complete continuing education prior to renewing their license. The number of hours required is set by state law and published by the state insurance department.

Notice of change of name or address

A North Dakota licensee must notify the Commissioner of any change in residential or business address, email address or legal name within 30 days of the change, and a licensee who stops residing in North Dakota must notify the Commissioner within 30 days after terminating residency (N.D. Cent. Code § 26.1-26-33).

The model also requires a producer to report to the regulator within 30 days any administrative action taken against the producer in another state or by another government agency, counted from the final disposition, and any criminal prosecution in any jurisdiction, counted from the initial pretrial hearing date. North Dakota’s statute requires a producer to report an administrative action against the producer’s license in another jurisdiction, or by another government agency in the state, within 30 days of the final disposition, and a criminal conviction in any jurisdiction within 30 days after the conviction (N.D. Cent. Code § 26.1-26-45.1). A producer who does business under any name other than their legal name must notify the regulator before using it.

Company regulations

An insurance company must be authorized by the Insurance Department to conduct business in North Dakota. To receive a certificate of authority, the company applies to the Commissioner and files its charter or articles of incorporation, financial statements showing that it meets the state’s capital and surplus requirements, and the other documents and fees the state requires.

Capital and surplus requirement

A company that has been authorized to conduct insurance business in North Dakota must maintain minimum standards as a corporation. The certificate of authority allows the insurer to conduct business in the state only if it maintains the minimum capital or permanent surplus required. In North Dakota, the Commissioner must revoke or suspend a foreign insurance company’s certificates of authority if, in the Commissioner’s opinion, the company is in an unsound condition (N.D. Cent. Code § 26.1-11-08).

Duties of the Insurance Commissioner

The North Dakota Insurance Commissioner is an elected state executive position in the North Dakota state government. The commissioner is the head of the state Insurance Department.

• The Commissioner serves a four-year term and is popularly elected during presidential election years.
• The office oversees the state’s insurance industry and provides consumer protection services.
• The department enforces relevant laws and regulations, ensures competitive marketplaces, and addresses consumer fraud.

Additional duties include, but are not limited to:

• Investigate all claims and complaints of legal violations relating to insurance.

• If the Commissioner finds that laws have been violated, the findings and supporting documents may be referred for criminal prosecution.

• Monitor transactions of all companies including domestic, foreign, and alien insurance companies.

• Audit the books and records of any resident producer as frequently as necessary.

• Examine every insurer licensed in North Dakota at least once every five years (N.D. Cent. Code § 26.1-03-19.2(1)).

• Collect all fees associated with producers and insurers.

• Determine and administer fines associated with violations for insurers and producers.

• Issue reports pertaining to the suspension and revocation of licenses of producers and certificates of authority for insurers.

• Approve documentation used by insurance companies such as forms and rates.

Sidenote

Know this...

The Commissioner does not have the authority to arrest, issue injunctions or sentence jail time. They can get the process started, but it takes a law officer to arrest and a judge or court of law to issue injunctions or sentence jail time.

In North Dakota, the insurance fraud unit is part of the insurance department, and its investigators have a peace officer’s powers when arresting for criminal violations their investigations establish (N.D. Cent. Code §§ 26.1-02.1-08(1), 26.1-02.1-09).

Suspend, revoke or non-renew

The Commissioner has the authority to suspend, revoke, or refuse to renew a license for:

• Providing false information on the application for an insurance license.

• Omitting any relevant information on an application that would have disqualified the individual from being eligible to receive a license. Under the NAIC’s model act, the ground is broader: providing incorrect, misleading, incomplete or materially untrue information in the license application.

• Being found guilty of a violation or the noncompliance of insurance regulations and laws…

• Committing fraud while attempting to obtain an insurance license.

• Improperly withholding, misappropriating or converting any money or property received in the course of doing insurance business.

• Providing false information in reference to the terms and conditions of an insurance contract.

• Having been convicted of a felony. North Dakota’s ground also covers an offense the Commissioner determines has a direct bearing on the person’s ability to serve the public as a producer (N.D. Cent. Code § 26.1-26-42(5)).

• Having been found guilty of an unfair trade practice defined in North Dakota’s insurance code, or of fraud (N.D.C.C. § 26.1-26-42(11)).

• Having engaged in activities of a fraudulent nature which allowed the person to involve themselves in dishonest, coercive, untrustworthy, and financially irresponsible practices.

• Having had a prior insurance license revoked or suspended in a state other than North Dakota. Under the NAIC’s model act, a license denied in another state is also a ground.

• Using another person’s identity and forging their name on an insurance application.

• Being found guilty of using unethical practices or cheating on an examination for an insurance license.

Cease and desist

If the Commissioner finds that a producer has violated the state’s insurance laws, the Commissioner may order the producer to cease and desist. A cease and desist order does not suspend or revoke the recipient’s registration, but it does require the recipient to stop or limit the activity addressed in the order.

Hearing and penalties

A person facing action by the Commissioner is entitled to notice and an opportunity for a hearing, within time limits set by North Dakota law, and may ask a court to review the final order. In North Dakota, the Commissioner may issue a cease and desist order, with notice of an opportunity for a hearing, when it appears a person is engaged in an act or practice that violates or may lead to a violation of the insurance title; a person aggrieved may apply in writing for a hearing within thirty days of the order, the hearing is held within ten days of the application, and the Commissioner then vacates the order or makes it permanent (N.D. Cent. Code § 26.1-01-03.1).

A violation of the insurance laws can bring a civil penalty in addition to action against a license. State law sets the maximum, usually per violation and often with a cap on the total, and a higher tier commonly applies to a violation that was knowing or flagrant. Some violations are also crimes.

A person who violates North Dakota’s producer licensing chapter may, after a hearing, be fined up to $10,000 for each violation, in addition to or instead of action against the license (N.D. Cent. Code § 26.1-26-50). For an unfair trade practice committed willfully, the Commissioner may order a penalty of up to $1,000 per violation, not more than $10,000 in all, or, if the person knew or reasonably should have known of the violation, up to $5,000 per violation and $50,000 in any six months (N.D. Cent. Code § 26.1-04-13(1)(a)).

Unfair claims settlement practices

Under the NAIC’s model act, these practices are violations when committed flagrantly and in conscious disregard of the law, or often enough to indicate a general business practice. North Dakota’s own list of thirteen practices is in N.D. Cent. Code § 26.1-04-03(9), which makes each an unfair claim settlement practice when it is done without just cause and performed with a frequency indicating a general business practice.

• Unreasonably delaying the investigation or payment of claims by requiring both a formal proof of loss form and subsequent verification that would result in duplication of information and verification appearing in the formal proof of loss form.

• Failing, in the case of claims denials or offers of compromise settlement, to promptly provide a reasonable and accurate explanation of the basis for such actions.

• Refusing to pay claims without conducting a reasonable investigation.

• Making settlement claims based on information contained on an application that has been altered without the insured’s consent is a violation of regulation.

• Denying a claim without conducting a thorough investigation.

• Attempting to settle or settling a claim for less than the amount a reasonable person would believe the insured or beneficiary was entitled to by reference to written or printed advertising material accompanying or made part of an application.

Policy forms

Insurers file their policy forms with the Commissioner.

North Dakota requires a policy form to be filed with and approved by the Commissioner before a policy is issued or delivered on it, and a filed form may not be used until 60 days after filing unless the Commissioner gives written approval; the Commissioner may extend that period by up to 15 days (N.D. Cent. Code §§ 26.1-30-19(1), 26.1-30-20). A Commissioner who disapproves a form must give written notice, with the reasons, within the 60 days or the extension (N.D. Cent. Code § 26.1-30-21(1)), and a property or casualty form needs approval to the extent its rates are filed and approved under the state’s property and casualty rating law (N.D. Cent. Code § 26.1-30-19(4)).

Under the usual conformity rule, which many states’ insurance codes write into law, a policy provision that conflicts with state law does not make the policy invalid: the policy is read as amended to conform to the law.

Record maintenance

A producer keeps records of each transaction (the policies placed, the insureds, the premiums received and any changes) and makes them available for the Commissioner’s inspection.

Fraudulent producer representation

An insurance producer who represents to the public that he/she is licensed to conduct insurance business in North Dakota, but has not passed the appropriate licensing examination, is in violation of regulation. This includes any means of public communication, such as advertisements, letterheads, circulars, business cards, and other methods of representation.

A producer found guilty of conducting business in North Dakota in any line of insurance for which they are not properly licensed may have any other insurance license suspended or revoked.

Misrepresentation

• Misrepresentation involving the creation or distribution of policies, quotes, and illustrations designed to provide inaccurate information about the terms and conditions of a policy is prohibited. Under the NAIC’s model act, any estimate, illustration or statement that misrepresents a policy’s benefits, advantages, conditions or terms is an unfair trade practice when committed flagrantly and in conscious disregard of the law, or often enough to indicate a general business practice.

• Providing inaccurate or incomplete information or comparisons regarding the benefits of a policy is an example of misrepresentation.

• Providing inaccurate or incomplete information for the purpose of inducing, or tending to induce, the lapse, exchange, conversion, forfeiture, or surrender of a policy is a violation as well (twisting).

False advertising

Making, publishing or circulating an advertisement, announcement or statement about the business of insurance that is untrue, deceptive or misleading is an unfair trade practice under state law, based on the NAIC’s model act. The medium does not matter: the rule reaches newspapers, magazines, radio and television, and also notices, circulars, pamphlets, letters, posters and any other way of placing the statement before the public. Under the model act, such a statement is an unfair trade practice when committed flagrantly and in conscious disregard of the law, or often enough to indicate a general business practice. Some state laws adopt this condition, and others reach a single such statement.

Defamation

Defamation of an insurer is an unfair trade practice under state law, based on the NAIC’s model act: making, publishing or circulating an oral or written statement that is false, or maliciously critical of or derogatory to the financial condition of an insurer, and that is calculated to injure such insurer. Some states’ laws reach further, to a statement calculated to injure any person engaged in the business of insurance. North Dakota’s statute is broader: it reaches a statement that is false, or maliciously critical of or derogatory to the financial condition of any person, and that is calculated to injure any person engaged in the business of insurance (N.D. Cent. Code § 26.1-04-03(3)). Spreading an untrue rumor that a competing insurer is about to fail is the classic example.

Boycott, coercion and intimidation

Entering into an agreement to commit, or by concerted action committing, any act of boycott, coercion or intimidation that results or tends to result in unreasonable restraint of, or monopoly in, the business of insurance is prohibited.

False financial statements

Any licensed producer who makes false statements containing any information that involves inaccurate material facts or false statements on an application for insurance is in violation of the state’s unfair trade practices law. The rule is not limited to licensed producers: under the NAIC’s model act, it is an unfair trade practice for an insurer or any person engaged in the business of insurance to make false or fraudulent statements or representations on or relative to an application for a policy, for the purpose of obtaining a fee, commission, money or other benefit from any provider or individual person.

Illegal inducements

Offering anything of value not specified in the policy (money, a service, a favor or a gift) as an inducement to buy insurance is prohibited unless state law expressly allows it, and any agreement made as part of the sale must be written into the policy.

North Dakota prohibits a producer from granting, and an insured or applicant from receiving or accepting, any rebate of premium or of the producer’s commission, or any other valuable consideration or inducement not specified in the policy, except as provided in an applicable rate filing in effect or within the $100 gift allowance (N.D. Cent. Code § 26.1-04-06).

States differ on promotional gifts. The NAIC’s model act lets producers and insurers give customers non-cash gifts, meals or charitable donations up to an amount the state considers reasonable, as long as the gift is not conditioned on buying or renewing a policy and is offered without unfair discrimination. Each state sets its own limit. In North Dakota, a producer may give a gift, prize, promotional article, logo merchandise, meal or entertainment activity with an aggregate retail value of up to $100 per person per year (N.D. Cent. Code § 26.1-04-03(8)(c)).

Unfair discrimination

Unfair discrimination is treating people or risks that present the same hazard differently. The NAIC’s model act, on which state unfair trade practices laws are based, prohibits:

• Unfair discrimination between individuals of the same class and equal expectation of life in life insurance and annuity rates, dividends, benefits or terms
• Unfair discrimination between individuals of the same class and essentially the same hazard in health insurance premiums, benefits or terms
• Refusing, limiting or canceling coverage because of a person’s sex, marital status, race, religion or national origin
• In property and casualty insurance, refusing or limiting coverage solely because of a risk’s geographic location, unless sound underwriting and actuarial principles justify it, or solely because the applicant or insured is physically or mentally impaired

Many states also expressly forbid refusing or limiting coverage solely because a person is blind or partially blind. In North Dakota, refusing to insure risks solely because of race, color, creed, sex or national origin is an unfair trade practice, and so is refusing, limiting or charging a different rate for life or accident and sickness insurance solely because of blindness or partial blindness (N.D. Cent. Code § 26.1-04-03(7)(c), (11)).

Errors & Omissions

Errors & Omissions (E&O) insurance is a type of professional liability insurance that protects insurance agents if they are sued for negligent performance of their duties. E&O only covers honest mistakes resulting in (financial) damage to customers/prospects. There is no coverage for intentional misconduct, criminal acts, or regulatory fines.

Rebating

North Dakota licensed producers are prohibited from directly or indirectly giving any refund, discount, favor, or credit to reduce premiums to induce the purchase of insurance.

Sidenote

Know this...

To “solicit” or “negotiate” insurance implies that the person is licensed.

Sharing commission

The splitting or sharing of commissions with a licensed producer is allowed. Both parties must be licensed in the line of business in which the proposed commission is to be split. Under the NAIC’s model act, a commission may also be paid to an insurance agency, or to a person who does not sell, solicit or negotiate insurance. North Dakota’s statute bars an insurer or producer from paying a commission, service fee, brokerage or other valuable consideration to a person for selling, soliciting or negotiating insurance in the state if that person is required to be licensed and is not, and bars that person from accepting it; it permits paying an insurance agency, or persons who do not sell, solicit or negotiate insurance in the state, unless the payment violates the state’s rebating prohibition (N.D. Cent. Code § 26.1-26-04(1), (2), (4)).

Twisting

Providing false information or expressing derogatory ideas about the financial conditions of a competitor company with the intent to lapse or surrender an existing policy is a violation of the law. Any written or oral statements used to induce the lapse, termination, exchange, or surrender of an insurance contract based on inaccurate information is prohibited.

Under the NAIC’s model act, twisting is a misrepresentation made to induce a policyholder to lapse, forfeit, surrender, exchange or convert a policy. A false or maliciously critical statement about a competing insurer’s finances, made to injure it, is defamation.

Unfair marketing practices

The Insurance Department is responsible for establishing minimum standards for the full and fair disclosure of policy content. The department also requires the standardization and simplification of the terms used to describe insurance coverage. Advertising may not involve the following:

• Any statement or implication that policies are approved, or that the financial condition of a company is endorsed, by any government agency or by any independent group, individual, organization or society, unless that is the fact.

• Any statements regarding advertising that are false or untrue in reference to the time frame in which claims are paid.

Gramm-Leach Bliley Act (GLBA)

This law repealed the parts of the Glass-Steagall Act of 1933 that kept commercial banks and securities firms apart, and allowed the consolidation of commercial banks, investment institutions and insurance companies. GLBA established a framework of responsibilities of federal and state regulators for these financial industries. It permits financial services companies to merge and engage in a variety of new business activities, including insurance, while attempting to address the regulatory issues raised by such combinations.

McCarran-Ferguson Act

Federal law signed in 1945 in which Congress declared that the insurance industry would be regulated at the state level. Grants insurers a limited exemption from federal antitrust legislation. Since 2021 the exemption does not cover the business of health insurance, apart from narrow activities such as sharing historical loss data (15 U.S.C. § 1013(c)).

National Association of Insurance Commissioners (NAIC)

The U.S. standard-setting and regulatory support organization is created and governed by the chief insurance regulators from the 50 states, the District of Columbia 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 supports these efforts and represents the collective views of state 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.

Fair Credit Reporting Act

The Fair Credit Reporting Act (FCRA, 15 U.S.C. 1681) regulates consumer reporting agencies and the use of consumer reports, such as credit reports, MIB records and investigative reports, including in insurance underwriting.

• When an insurer requests an investigative consumer report, it must disclose that to the consumer within 3 days of the request
• When an insurer takes adverse action based on a consumer report, it must notify the consumer and identify the reporting agency. The consumer then has 60 days to request a free copy of the report and may dispute inaccurate information

Privacy Act of 1974

The federal Privacy Act of 1974 governs how federal agencies handle personal information. It does not apply to private insurers. An insurer’s use of an applicant’s personal information is governed by the FCRA, the Gramm-Leach-Bliley Act and state insurance privacy law.

Under North Dakota’s insurance privacy rule, an authorization to disclose a consumer’s nonpublic personal health information must state how long it remains valid, which may be no more than 24 months (N.D. Admin. Code § 45-14-01-18(2)).

Under the NAIC’s Insurance Information and Privacy Protection Model Act, a person told of an adverse underwriting decision may ask in writing, within 90 business days of the notice, for the specific reasons for it, which must be given within 21 business days of the request.

Telemarketing

The National Do Not Call Registry is a list of telephone numbers whose owners do not want to receive telemarketing calls. Telemarketers may not call registered numbers without the person’s permission or an established business relationship, and unsolicited sales calls:

• May be made only between 8 a.m. and 9 p.m. in the recipient’s local time
• Must give the caller’s name, the name of the company the call is made for, and a telephone number or address at which that company can be contacted

CAN-SPAM

A commercial email must:

• Be identified clearly as an advertisement
• Carry accurate header information and a subject line that is not deceptive
• Include the sender’s valid physical postal address
• Offer a way to opt out, and the sender must honor an opt-out within 10 business days

Insurance guaranty association

Every state has a property and casualty insurance guaranty association that pays covered claims when a member insurer becomes insolvent. Insurers licensed to write the covered lines in the state must belong to it, and it is funded by assessments on its members.

The North Dakota Insurance Guaranty Association pays up to $300,000 per claim on most covered claims and up to $10,000 per policy for the return of unearned premium (N.D. Cent. Code § 26.1-42.1-05(1)(a)).

Auto insurance state minimum

A state’s financial responsibility law sets the minimum liability an auto policy must carry, written as a split limit: the first number is bodily injury liability per person, the second bodily injury liability per accident, and the third property damage liability per accident, each in thousands of dollars.

North Dakota’s minimum auto liability limits are 25/50/25: $25,000 for bodily injury to or death of one person, $50,000 for bodily injury to or death of two or more people in one accident, and $25,000 for damage to the property of others (N.D. Cent. Code § 39-16.1-11(2)(b)). A motor vehicle may not be driven in the state without a valid liability policy in the amount that chapter requires (N.D. Cent. Code § 39-08-20(1)).