Sources of Law & Commissioner Powers
Two Sources of Law: Statutes and Rules
Wisconsin insurance regulation comes from two places, and both have the force of law. Statutes are laws written and passed by the Wisconsin Legislature. They’re organized into chapters — for example, ch. 601 covers the Commissioner’s office, ch. 628 covers insurance marketing, and chs. 631 and 632 cover insurance contracts. When you see a citation like “s. 628.34,” that’s pointing you to section 34 of chapter 628 of the Wisconsin Statutes. Administrative rules are written by the Commissioner of Insurance to fill in the details that the statutes don’t specify. They’re published in the Wisconsin Administrative Code and cited with “s. Ins” — for example, “s. Ins 6.59” is the rule on intermediary licensing. The Commissioner can’t just make up any rule; rules have to relate to an underlying statute, follow proper rulemaking procedure (with a public hearing and an opportunity for comment), and stay within general legal and constitutional limits. Both statutes and rules are binding Both statutes and rules are binding. Violating either one is grounds for discipline. So when an intermediary asks “where does it say I have to do that?” the answer might be a statute, a rule, or both. They’re both real law.
The Office of the Commissioner of Insurance
OCI exists for one reason: to protect the public. The Commissioner is responsible for administering and enforcing every insurance law in Wisconsin and must act as promptly as possible on every matter brought to the office. That sounds like vague mission-statement language, but in practice it means the Commissioner has an enormous toolkit. The Commissioner can:
- Issue orders — prohibitory, mandatory, declaratory, or any other kind needed to secure compliance with the law.
- Adopt administrative rules through formal rulemaking.
- Conduct examinations of insurers, intermediaries, prelicensing schools, continuing education providers, and applicants.
- Hold hearings — formal or informal, public or investigatory.
- Require any regulated person to submit reports, statements, questionnaires, or explanations of their data systems.
- Impose forfeitures, suspend or revoke licenses, and refer matters for criminal prosecution. In short, the Commissioner is rulemaker, examiner, prosecutor, and judge for Wisconsin insurance regulation, with judicial review available to anyone who disagrees with a decision.
Examination Powers
The Commissioner can examine the affairs and condition of pretty much anyone connected to the insurance business in Wisconsin: licensed insurers and intermediaries, applicants for licensure, organizations forming to transact insurance, advisory organizations, and yes — prelicensing schools, continuing education providers, courses, and instructors. If you’re in this industry in Wisconsin, you’re subject to examination. When the Commissioner examines an insurer or other party, the examinee has to make available, on demand, every account, record, document, and piece of evidence the Commissioner wants to see. Refusing to comply is treated as concealment of records, which is itself grounds for liquidating the examinee’s business. The Commissioner can also examine collateral parties — officers, managers, controlling persons, employees in charge — to follow the trail wherever it leads. Domestic insurers (those organized under Wisconsin law) get examined as a matter of duty; the Commissioner is required to examine each one. Costs of those examinations are apportioned among all domestic insurers based on a premium formula. For other insurers and town mutuals, examination costs are billed to the examinee unless paying would create an unreasonable burden. Prelicensing schools and CE providers can also be billed for examination costs.
Enforcement: Orders, Forfeitures, and Criminal Penalties
When a person or company breaks the rules, the Commissioner has a graduated set of responses.
Orders
The most common response is an order — a written directive requiring the person to do something or stop doing something. If the person ignores the order, the Commissioner can go to court to enforce it.
Forfeitures (civil penalties)
A “forfeiture” in Wisconsin insurance law is a civil money penalty. Several different forfeitures can apply:
- Twice the profit gained. Any person who violates an effective order, statute, or rule may be required to forfeit double any profit they made from the violation, on top of any other forfeiture.
- Up to $1,000 per violation. Anyone who violates an order, statute, or rule can forfeit up to $1,000 per violation. Each day a violation continues is a separate offense. If the duty was to file a periodic report, each week of delay is a new violation.
- Up to $5,000 per violation for vulnerable victims. If the violation involves a consumer who is an “adult at risk” or who is at least 60 years old, or if the violation involves fraud or misrepresentation, the forfeiture can run up to $5,000 per violation.
- Compulsive forfeiture. If a person fails to comply with an order, the Commissioner can give notice of intent to seek a compulsive forfeiture. If the person still doesn’t comply within two weeks of that notice, the Commissioner can sue for a compulsive forfeiture of up to $5,000 per day until the court rules.
- Up to $1,000 against an intermediary firm. If an agent commits a violation in connection with a policy that runs through a particular firm, and the firm regularly uses that agent, the firm itself can be hit with a forfeiture of up to $1,000.
Criminal penalties
A person who intentionally violates an insurance statute, rule, or order — or intentionally permits or aids someone else to do so — can be fined up to $5,000, imprisoned up to three years, or both. For corporations, the fine can run up to $10,000. “Intentionally” means the person meant to do the act or believed it would cause a specific result. That mental state is the key dividing line between civil forfeiture and criminal liability.