Arkansas State Regulations & NAIC Insurance Law
Licensing
Any individual applying for an Arkansas resident producer’s license must be at least 18 years old and be a resident of Arkansas before submitting an application.
Pre-licensing course and exam
Arkansas requires a prelicensing course of at least 20 hours of instruction for each of the life, accident and health, property, casualty and personal lines of authority (23 CAR § 14-103).
A candidate must score at least 70% to pass the Arkansas producer examination (Arkansas Insurance Department PSI Candidate Handbook).
Fingerprints/background check
The Arkansas Insurance Department’s Licensing Division investigates every resident applicant by reviewing Arkansas State Police records (Arkansas Insurance Department, Licensing).
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.
Non-resident license
A producer licensed in another state can obtain an Arkansas nonresident license without taking Arkansas’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.
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
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.
The Arkansas Insurance Commissioner may issue a temporary producer license for up to 180 days, without an examination, when the Commissioner deems one necessary to service an insurance business (Ark. Code Ann. § 23-64-511(a)).
Military service
An Arkansas producer who cannot comply with license renewal procedures because of military service, or another extenuating circumstance such as a long-term medical disability, may request a waiver of those procedures and of any examination requirement, fine or sanction for failing to comply with them (Ark. Code Ann. § 23-64-507(d)). A producer license also remains in effect during active duty in the United States armed forces or the Arkansas National Guard, with the renewal fee and education requirements waived for that period (Ark. Code Ann. § 23-64-507(b)(2)).
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.
An Arkansas producer license remains in effect, unless revoked or suspended, as long as the required fee is paid and, for a resident individual producer, education requirements are met by the due date (Ark. Code Ann. § 23-64-507(b)).
A producer who misses the deadline and lets the license lapse may be able to reinstate it without retaking the examination.
A producer who lets an Arkansas license lapse may reinstate the same license within 12 months after the renewal fee’s due date without passing an examination, but a penalty of double the unpaid renewal fee applies to a renewal fee received after the due date (Ark. Code Ann. § 23-64-507©).
Continuing education
All states, including Arkansas, have continuing education requirements that must be met to renew any major lines (life, health, property, liability) insurance license. Individuals licensed in the state of Arkansas must complete continuing education before 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
An Arkansas licensee must inform the Commissioner of a change of address within 30 days of the change, and failing to do so on time brings a penalty (Ark. Code Ann. § 23-64-507(f)). A resident agent or broker must also maintain a place of business accessible to the public, whose address appears on the license, and must notify the Commissioner in writing of a change in that address within 10 days (Ark. Code Ann. § 23-64-220(a)).
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. 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 Arkansas Insurance Department to conduct business in Arkansas. 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 authorized to conduct insurance business in Arkansas must meet minimum corporate standards. 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 Arkansas, an insurer that no longer meets the requirements for the authority originally granted, on account of deficiency of assets or otherwise, faces suspension or revocation of its certificate of authority (Ark. Code Ann. § 23-63-212(a)(2)); in lieu of either, the Commissioner may impose an administrative penalty of $5,000 or $10,000 (§ 23-63-213©).
Duties of the Insurance Commissioner
The Arkansas Insurance Commissioner is a state executive position in the Arkansas state government. The commissioner oversees the Arkansas Insurance Department, which licenses and regulates insurance providers in the state. The office also administers the state’s workers compensation program, provides insurance counseling for senior citizens on Medicare, and investigates claims of insurance fraud and other consumer complaints.
The Insurance Commissioner is appointed by the Governor with the advice and consent of the Senate, and serves at the pleasure of the Governor (Ark. Code Ann. § 23-61-102).
The Commissioner is responsible for establishing and enforcing regulations in the Arkansas insurance market in a manner that protects consumers and encourages economic development.
Duties of the Commissioner include:
-
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 producers
-
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.
Beyond its direct regulation of the insurance industry, the insurance commissioner’s office provides educational resources for consumers, such as insurance cost comparisons among different companies, brochures, and alerts regarding potential fraudulent activity. The insurance commissioner’s office also manages the state government’s workers’ compensation program.
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.
-
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.
-
Having admitted or been found to have committed any insurance unfair trade practice or fraud.
-
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 Arkansas.
-
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. In Arkansas, the Commissioner may also summarily order a person who has engaged in or is about to engage in a violation of an insurance law, rule or order to cease and desist, and must promptly notify the person of the order and of the right to a hearing (Ark. Code Ann. § 23-61-103(f)(1)). Receiving a cease and desist order does not mean the producer’s registration has been suspended or revoked, but it does require the producer 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 Arkansas law, and may ask a court to review the final order.
A person aggrieved by an act or order of the Commissioner may demand a hearing in writing, and unless both sides agree to postpone it, the hearing is held within 30 days after the Commissioner receives the demand (Ark. Code Ann. § 23-61-303(b)).
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.
Where grounds exist to suspend or revoke a license, the Commissioner may impose an administrative penalty of up to $1,000 per violation, or up to $5,000 per violation for willful misconduct or a willful violation (Ark. Code Ann. § 23-64-216(d)).
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.
-
The intentional obstruction and delay of claims payment or the delay of a claims investigation is a violation of regulation.
-
Neglecting to provide a prompt response and written explanation of insurance policy terms, conditions, and laws related to the contract are examples of unfair claims settlement practices.
-
Failure to provide claims without launching a thorough investigation is a violation of regulation.
-
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 a claim for less than fair market value.
Policy forms
Insurers file their policy forms with the Commissioner.
An Arkansas policy, annuity, application, rider or endorsement form must be filed with and approved by the Commissioner before it is used. A filing is made at least 30 days before the form is delivered, and at the end of those 30 days it is deemed approved unless the Commissioner has acted on it (Ark. Code Ann. § 23-79-109).
If a policy provision conflicts with Arkansas law, the policy is read as amended to conform to the law.
The interest rate an insurer may charge on a life insurance policy loan is also limited by state 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.
An Arkansas agent or broker keeps the usual and customary records of transactions under the license at the place of business for at least 5 years from the date each record was created (Ark. Code Ann. § 23-64-220©).
Fraudulent producer representation
An insurance producer who represents to the public that they are licensed to conduct insurance business in Arkansas, but has not passed the appropriate licensing examination, is in violation of regulation. “Representation” includes any means of public communication, such as advertisements, letterheads, circulars, business cards, and other methods.
A producer found guilty of conducting business in Arkansas 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.
-
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. The model act’s test is whether the statement is untrue, deceptive or misleading, not whether the person meant to deceive.
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 that insurer or any other person engaged in the business of insurance. Arkansas’s definition is broader: it reaches a false or maliciously critical statement about the financial condition of any person that is calculated to injure that person (Ark. Code Ann. § 23-66-206(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 inaccurate material facts, or makes false statements on an application for insurance, is in violation of the state’s unfair trade practices law.
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.
Arkansas prohibits rebating. For property, casualty and surety insurance, no insurer, employee, broker or agent may pay, allow or give, or offer, directly or indirectly, any rebate, discount, abatement, credit or reduction of the premium, or any valuable consideration or inducement not specified in the policy, except as provided in a filing with the Commissioner (Ark. Code Ann. § 23-66-308(a)); the unfair trade practices law prohibits rebating in life, health and annuity contracts as well (Ark. Code Ann. § 23-66-206).
For property, casualty and surety insurance, Arkansas permits token gifts worth $100 or less in wholesale value that are used for advertising, such as pens, calendars and notebooks (Ark. Code Ann. § 23-66-308©). The unfair trade practices law allows the same token gifts in every line, life and health included (Ark. Code Ann. § 23-66-206(9)©).
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 Arkansas, the rule against refusing, terminating or modifying coverage solely because the applicant or insured is mentally or physically impaired applies to any policy or contract of insurance, not only property and casualty (Ark. Code Ann. § 23-66-206(13)(F)). Arkansas also bars refusing to insure solely because of race, color, creed, national origin, citizenship, status as a victim of domestic abuse, or sex (§ 23-66-206(13)(G)), and treats marital status separately (§ 23-66-206(13)(E)).
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 covers negligence and unintentional mistakes that cause financial harm to clients. It does not cover intentional misconduct, criminal acts, or regulatory fines.
Rebating
Arkansas licensed producers are prohibited from directly or indirectly giving any refund, discount, favor, or credit to reduce premiums to induce the purchase of insurance.
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.
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 are 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 commissioner’s office is responsible for establishing minimum standards for the full and fair disclosure of policy content. The office 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 Glass-Steagall Act of 1933, allowing consolidation of commercial banks, investment institutions, and insurance companies. GLBA established a framework of responsibilities for 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©).
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 Arkansas’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 (23 CAR § 30-503(b)).
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 disclose the caller’s identity, the company the caller represents and that the purpose is a sale
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