Illinois State Regulations & NAIC Insurance Law

Licensing

To apply for an Illinois resident producer’s license, you must:

Be at least 18 years old
Be a resident of Illinois before you submit your application

Pre-licensing course and exam

Illinois requires a prelicensing course of 20 hours for each of life, accident and health, fire, casualty and personal lines before the producer examination (215 ILCS 5/500-30).

A candidate who fails the examination, or does not appear for it, must reapply and pay the required fees again before being rescheduled (215 ILCS 5/500-25).

Fingerprints/background check

The Director reviews an applicant’s background before issuing a license, and many states require applicants to submit fingerprints for a state and FBI criminal history check as part of the application.

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.

Illinois will not extend (renew) a producer license if, in either of the two calendar years before the extension date, the premiums on the licensee’s controlled business (insurance on the licensee’s own life, property or risks, or those of a spouse, employer or the licensee’s own business) exceeded the premiums on all the licensee’s other insurance business (215 ILCS 5/500-125).

Non-resident license

A producer licensed in another state can obtain an Illinois nonresident license without taking Illinois’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

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.

Illinois may issue a temporary producer license for up to 180 days, renewable once for another 180 days, without an examination, where one is needed to service an insurance business (215 ILCS 5/500-60).

Military service

A licensed Illinois producer who is unable to comply with license renewal procedures because of military service may request a waiver of those procedures (215 ILCS 5/500-35(e)).

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 Illinois producer license is issued for 2 years (215 ILCS 5/500-35(a)).

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 a license lapse may be issued a license without a new examination within 12 months after the renewal fee’s due date, but a penalty of double the unpaid renewal fee applies (215 ILCS 5/500-35(d)).

Continuing education

All states, including Illinois, have continuing education (CE) 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 Illinois 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 Illinois producer must inform the Director of a change of address within 30 days after the change (215 ILCS 5/500-35(g)).

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 Department of Insurance to conduct business in Illinois. To receive a certificate of authority, the company applies to the Director 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 Illinois 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 Illinois, the Director may, after giving at least 20 days’ notice and an opportunity for a hearing, revoke or suspend the certificate of authority of a foreign or alien company that fails to maintain the required capital or surplus, or may instead order it to pay a penalty of up to $500 (215 ILCS 5/119(1)(b), (2)). When an insurer falls short, state law decides what happens to the certificate: commonly the regulator must or may suspend or revoke it, sometimes after giving the insurer time to make up the shortfall.

Duties of the Director of Insurance

The Illinois Director of Insurance is a state executive position in Illinois state government. The Department of Insurance’s mission is to protect consumers by providing assistance and information, efficiently regulating the insurance industry’s market behavior and financial solvency, and fostering a competitive insurance marketplace. The Director of Insurance is appointed by the Governor.

The Director is responsible for establishing and enforcing regulations in the Illinois insurance market in a manner that protects consumers and encourages economic development.

Those duties include:

Investigate all claims and complaints of legal violations relating to insurance.
If the Director 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.
The Director must examine every insurer licensed in Illinois at least once every 5 years (215 ILCS 5/132.3(a)).
Audit the books and records of any resident producer as frequently as necessary. Under the NAIC’s examination model, the regulator may examine any person subject to its authority, nonresident producers included, as often as it considers appropriate.
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 Director does not have the authority to arrest, issue injunctions, or sentence jail time. The Director can start the process, but it takes a law officer to arrest and a judge or court of law to issue injunctions or sentence jail time.

Suspend, revoke or non-renew

The Director 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.
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 Illinois. 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 Director finds that a producer has violated the state’s insurance laws, the Director 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 Director is entitled to notice and an opportunity for a hearing, within time limits set by Illinois law, and may ask a court to review the final order.

A producer who wants to contest the Director’s denial, suspension or revocation of a license may demand a hearing in writing within 30 days after the notice is mailed (215 ILCS 5/500-70(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.

After a hearing, the Director may impose a civil penalty of up to $10,000 for each cause for denial, suspension or revocation of a license, but no more than $100,000 in total (215 ILCS 5/500-70(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.

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 Director.

The Director must approve, withdraw or disapprove a life, accident or health policy form within 60 days after it is submitted, a period the Director may extend by no more than 30 days (215 ILCS 5/143).

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.

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 Director’s inspection.

For annuity recommendations, Illinois requires insurers and producers to keep the information behind each recommendation for 7 years after the transaction is completed (50 Ill. Adm. Code 3120.80(a)).

Fraudulent producer representation

An insurance producer who represents to the public that they are licensed to conduct insurance business in Illinois, but has not passed the appropriate licensing examination, is in violation of regulation. Any means of public communication - including advertisements, letterheads, circulars, business cards, and other methods of representation - are included in the definition of impersonating a licensed producer.

A producer found guilty of conducting business in Illinois 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 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. In Illinois, the Insurance Code bars any estimate, illustration, circular or statement misrepresenting the terms of a policy or the benefits or advantages it promises (215 ILCS 5/149(1)), and any advertising implying that the State of Illinois, the federal government, the Director or the Department approved, endorsed or guaranteed a company, its financial condition or its policies (215 ILCS 5/149(4)), and makes each an unfair or deceptive act or practice (215 ILCS 5/424(1)).

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. 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.

Illinois prohibits an insurer, agent or broker from giving any rebate of premium or commission, or any other valuable consideration not specified in the policy, as an inducement to insurance, apart from narrow exceptions the statute lists (215 ILCS 5/151).

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. Illinois’s rebating statute has no such allowance: no company, agent or broker may give, directly or indirectly, any valuable consideration or inducement to insurance that is not specified in the policy (215 ILCS 5/151(1)).

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.

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

Illinois 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.

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 Department of Insurance 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. Illinois goes further for government: no advertisement may imply that a company, its financial condition or its policies are approved, endorsed or guaranteed by the State of Illinois, the United States Government, the Director or the Department, whether or not that is so (215 ILCS 5/149(4)).
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 Illinois’s insurance privacy law, an authorization signed with an application, a reinstatement or a request to change benefits is valid for no longer than 30 months for life, health or disability insurance, or one year for property or casualty insurance (215 ILCS 5/1007(G)).

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

Licensing

Resident producer applicant: at least 18 years old, Illinois resident before applying

Pre-licensing course and exam

20 hours required per line (life, A&H, fire, casualty, personal lines) before exam
Failed/no-show candidates must reapply and pay fees again

Fingerprints/background check

Director reviews background before licensing
Fingerprints often required for state/FBI criminal history check

Controlled business

Insurance on producer’s own life/property/family/employer/controlled business
License meant for public sales, not primarily controlled business
Illinois won’t renew license if controlled business premiums exceeded other business premiums in either of prior 2 years

Non-resident license

No Illinois exam needed if licensed elsewhere in good standing
Requires reciprocity, application, and fee payment
Address change: file within 30 days; moving producer applies for new resident license within 90 days (no re-testing for held lines)

Temporary license

Issued without exam to keep business serviced (death/disability of producer, military entry)
Regulator may limit scope and require licensed sponsor
Illinois: up to 180 days, renewable once for another 180 days

Military service

Producers unable to renew due to military service may request waiver

Renewal and reinstatement

Illinois license term: 2 years
Lapsed license may be reinstated without exam within 12 months, but penalty = double unpaid renewal fee

Continuing education

Required for renewal of major lines licenses
Hours set by state law, published by insurance department

Notice of change of name or address

Report address change within 30 days
Report administrative actions/criminal prosecutions within 30 days
Must notify regulator before using a different business name

Company regulations

Insurers need Department of Insurance authorization (certificate of authority)
Must file charter, financial statements, meet capital/surplus rules

Capital and surplus requirement

Certificate of authority requires maintaining minimum capital/surplus

Duties of the Director of Insurance

Appointed by Governor; protects consumers, regulates market/solvency
Investigates violations, refers for prosecution
Examines every insurer at least every 5 years
Audits producer records as needed, collects fees, issues fines/license actions
No arrest/injunction/jail authority (law officer/court needed)

Suspend, revoke or non-renew

Grounds include: false application info, fraud, felony conviction, misappropriation, unfair trade practices, forgery, exam cheating, prior out-of-state revocation

Cease and desist

Orders stopping/limiting violating activity, does not suspend/revoke license itself

Hearing and penalties

Right to notice/hearing; 30 days to demand hearing after denial/suspension notice
Civil penalty up to $10,000 per cause, capped at $100,000 total

Unfair claims settlement practices

Violations include: delaying claims/investigations, failing to explain denials or offers, denying claims without investigation, altering application info, settling for less than the application’s advertising material led the insured to expect

Policy forms

Director must approve/disapprove life/A&H forms within 60 days (extendable 30 days)
Conflicting provisions read as amended to match law
Policy loan interest rates capped by state law

Record maintenance

Producers keep transaction records for Director inspection
Annuity recommendation records kept 7 years

Fraudulent producer representation

Illegal to claim licensure without passing exam
Applies to all public communications (ads, cards, letterhead)
Unlicensed activity can trigger suspension/revocation of other licenses

Misrepresentation

Prohibits false/inaccurate policy info, illustrations, comparisons
Includes inducing lapse/surrender via false info (twisting)

False advertising

NAIC model act: untrue, deceptive or misleading statements about insurance business
Applies across all media; NAIC model: unfair if flagrant and in conscious disregard of the law, or a general business practice
Illinois bars misrepresenting a policy’s terms, benefits or advantages, and advertising implying state or federal approval or guarantee; each is an unfair or deceptive act (215 ILCS 5/149(1), 5/149(4), 5/424(1))

Defamation

False or malicious statements harming insurer’s financial reputation prohibited
Classic example: spreading false rumors of insurer failure

Boycott, coercion and intimidation

Prohibited if resulting in unreasonable restraint/monopoly in insurance business

False financial statements

Prohibits false material statements on insurance applications

Illegal inducements

Offering unlisted value (rebates, gifts) to induce purchase generally prohibited
Illinois bans rebating with narrow exceptions
NAIC model allows reasonable non-cash gifts/donations if not conditioned on purchase

Unfair discrimination

Prohibits differing treatment of same-class/equal-risk individuals
Cannot discriminate based on sex, marital status, race, religion, national origin
Property/casualty: cannot deny solely for geography (unless justified) or physical/mental impairment
Many states also protect blind/partially blind individuals

Errors & omissions

E&O = professional liability insurance for producers
Covers negligence/unintentional mistakes; excludes intentional/criminal acts and fines

Rebating

Illinois prohibits refunds/discounts/credits to induce purchase
Soliciting/negotiating insurance implies licensure

Sharing commission

Allowed between licensed producers in same line
NAIC model also allows payment to agencies or non-selling persons

Twisting

Misrepresentation inducing policy lapse/surrender/exchange
Distinct from defamation (which targets insurer’s reputation, not policyholder action)

Unfair marketing practices

Dept sets standards for disclosure, standardized terms
Ads cannot falsely imply government/independent endorsement
Illinois specifically bans implying state/federal approval
Cannot misstate claims payment timeframes

Gramm-Leach-Bliley Act (GLBA)

Repealed key parts of Glass-Steagall; allows bank/insurance/investment consolidation
Establishes federal/state regulatory framework for merged financial services

McCarran-Ferguson Act

1945 law: insurance regulated at state level
Grants limited antitrust exemption
Since 2021, health insurance excluded from exemption (except historical loss data sharing)

National Association of Insurance Commissioners (NAIC)

Standard-setting body of state insurance regulators (50 states, DC, 5 territories)
Coordinates regulatory oversight, peer review, best practices

Fair Credit Reporting Act

Regulates consumer reporting agencies/reports used in underwriting
Investigative report request: disclose to consumer within 3 days
Adverse action: must notify consumer; consumer has 60 days for free report; may also dispute errors

Privacy Act of 1974

Governs only federal agencies’ handling of personal info, not private insurers
Insurer privacy governed by FCRA, GLBA, state law
Illinois: authorization valid up to 30 months (life/health/disability) or 1 year (property/casualty)

Telemarketing

National Do Not Call Registry protects registered numbers
Calls allowed only 8 a.m.–9 p.m. local time
Must disclose caller’s name, the company the call is made for, and a number or address for it

CAN-SPAM

Commercial emails must be labeled as ads, have accurate headers/subject lines
Must include valid postal address
Opt-out required, honored within 10 business days

Illinois State Regulations & NAIC Insurance Law

Licensing

To apply for an Illinois resident producer’s license, you must:

Be at least 18 years old
Be a resident of Illinois before you submit your application

Pre-licensing course and exam

Illinois requires a prelicensing course of 20 hours for each of life, accident and health, fire, casualty and personal lines before the producer examination (215 ILCS 5/500-30).

A candidate who fails the examination, or does not appear for it, must reapply and pay the required fees again before being rescheduled (215 ILCS 5/500-25).

Fingerprints/background check

Controlled business

Non-resident license

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)

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.

Military service

A licensed Illinois producer who is unable to comply with license renewal procedures because of military service may request a waiver of those procedures (215 ILCS 5/500-35(e)).

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 Illinois producer license is issued for 2 years (215 ILCS 5/500-35(a)).

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

Continuing education

Notice of change of name or address

An Illinois producer must inform the Director of a change of address within 30 days after the change (215 ILCS 5/500-35(g)).

Company regulations

Capital and surplus requirement

Duties of the Director of Insurance

The Director is responsible for establishing and enforcing regulations in the Illinois insurance market in a manner that protects consumers and encourages economic development.

Those duties include:

Investigate all claims and complaints of legal violations relating to insurance.
If the Director 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.
The Director must examine every insurer licensed in Illinois at least once every 5 years (215 ILCS 5/132.3(a)).
Audit the books and records of any resident producer as frequently as necessary. Under the NAIC’s examination model, the regulator may examine any person subject to its authority, nonresident producers included, as often as it considers appropriate.
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...

Suspend, revoke or non-renew

The Director 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.
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 Illinois. 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

Hearing and penalties

A person facing action by the Director is entitled to notice and an opportunity for a hearing, within time limits set by Illinois law, and may ask a court to review the final order.

A producer who wants to contest the Director’s denial, suspension or revocation of a license may demand a hearing in writing within 30 days after the notice is mailed (215 ILCS 5/500-70(b)).

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.

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 Director.

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 Director’s inspection.

Fraudulent producer representation

A producer found guilty of conducting business in Illinois 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

Defamation

Boycott, coercion and intimidation

False financial statements

Illegal inducements

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.

Errors & omissions

Rebating

Illinois 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

Twisting

Unfair marketing practices

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. Illinois goes further for government: no advertisement may imply that a company, its financial condition or its policies are approved, endorsed or guaranteed by the State of Illinois, the United States Government, the Director or the Department, whether or not that is so (215 ILCS 5/149(4)).
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)

McCarran-Ferguson Act

National Association of Insurance Commissioners (NAIC)

Fair Credit Reporting Act

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

Telemarketing

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

Illinois State Regulations & NAIC Insurance Law

Licensing

To apply for an Illinois resident producer’s license, you must:

Be at least 18 years old
Be a resident of Illinois before you submit your application

Pre-licensing course and exam

Illinois requires a prelicensing course of 20 hours for each of life, accident and health, fire, casualty and personal lines before the producer examination (215 ILCS 5/500-30).

A candidate who fails the examination, or does not appear for it, must reapply and pay the required fees again before being rescheduled (215 ILCS 5/500-25).

Fingerprints/background check

Controlled business

Non-resident license

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)

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.

Military service

A licensed Illinois producer who is unable to comply with license renewal procedures because of military service may request a waiver of those procedures (215 ILCS 5/500-35(e)).

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 Illinois producer license is issued for 2 years (215 ILCS 5/500-35(a)).

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

Continuing education

Notice of change of name or address

An Illinois producer must inform the Director of a change of address within 30 days after the change (215 ILCS 5/500-35(g)).

Company regulations

Capital and surplus requirement

Duties of the Director of Insurance

The Director is responsible for establishing and enforcing regulations in the Illinois insurance market in a manner that protects consumers and encourages economic development.

Those duties include:

Investigate all claims and complaints of legal violations relating to insurance.
If the Director 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.
The Director must examine every insurer licensed in Illinois at least once every 5 years (215 ILCS 5/132.3(a)).
Audit the books and records of any resident producer as frequently as necessary. Under the NAIC’s examination model, the regulator may examine any person subject to its authority, nonresident producers included, as often as it considers appropriate.
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...

Suspend, revoke or non-renew

The Director 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.
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 Illinois. 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

Hearing and penalties

A person facing action by the Director is entitled to notice and an opportunity for a hearing, within time limits set by Illinois law, and may ask a court to review the final order.

A producer who wants to contest the Director’s denial, suspension or revocation of a license may demand a hearing in writing within 30 days after the notice is mailed (215 ILCS 5/500-70(b)).

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.

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 Director.

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 Director’s inspection.

Fraudulent producer representation

A producer found guilty of conducting business in Illinois 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

Defamation

Boycott, coercion and intimidation

False financial statements

Illegal inducements

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.

Errors & omissions

Rebating

Illinois 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

Twisting

Unfair marketing practices

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. Illinois goes further for government: no advertisement may imply that a company, its financial condition or its policies are approved, endorsed or guaranteed by the State of Illinois, the United States Government, the Director or the Department, whether or not that is so (215 ILCS 5/149(4)).
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)

McCarran-Ferguson Act

National Association of Insurance Commissioners (NAIC)

Fair Credit Reporting Act

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

Telemarketing

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

Licensing

Resident producer applicant: at least 18 years old, Illinois resident before applying

Pre-licensing course and exam

20 hours required per line (life, A&H, fire, casualty, personal lines) before exam
Failed/no-show candidates must reapply and pay fees again

Fingerprints/background check

Director reviews background before licensing
Fingerprints often required for state/FBI criminal history check

Controlled business

Insurance on producer’s own life/property/family/employer/controlled business
License meant for public sales, not primarily controlled business
Illinois won’t renew license if controlled business premiums exceeded other business premiums in either of prior 2 years

Non-resident license

No Illinois exam needed if licensed elsewhere in good standing
Requires reciprocity, application, and fee payment
Address change: file within 30 days; moving producer applies for new resident license within 90 days (no re-testing for held lines)

Temporary license

Issued without exam to keep business serviced (death/disability of producer, military entry)
Regulator may limit scope and require licensed sponsor
Illinois: up to 180 days, renewable once for another 180 days

Military service

Producers unable to renew due to military service may request waiver

Renewal and reinstatement

Illinois license term: 2 years
Lapsed license may be reinstated without exam within 12 months, but penalty = double unpaid renewal fee

Continuing education

Required for renewal of major lines licenses
Hours set by state law, published by insurance department

Notice of change of name or address

Report address change within 30 days
Report administrative actions/criminal prosecutions within 30 days
Must notify regulator before using a different business name

Company regulations

Insurers need Department of Insurance authorization (certificate of authority)
Must file charter, financial statements, meet capital/surplus rules

Capital and surplus requirement

Certificate of authority requires maintaining minimum capital/surplus

Duties of the Director of Insurance

Appointed by Governor; protects consumers, regulates market/solvency
Investigates violations, refers for prosecution
Examines every insurer at least every 5 years
Audits producer records as needed, collects fees, issues fines/license actions
No arrest/injunction/jail authority (law officer/court needed)

Suspend, revoke or non-renew

Grounds include: false application info, fraud, felony conviction, misappropriation, unfair trade practices, forgery, exam cheating, prior out-of-state revocation

Cease and desist

Orders stopping/limiting violating activity, does not suspend/revoke license itself

Hearing and penalties

Right to notice/hearing; 30 days to demand hearing after denial/suspension notice
Civil penalty up to $10,000 per cause, capped at $100,000 total

Unfair claims settlement practices

Violations include: delaying claims/investigations, failing to explain denials or offers, denying claims without investigation, altering application info, settling for less than the application’s advertising material led the insured to expect

Policy forms

Director must approve/disapprove life/A&H forms within 60 days (extendable 30 days)
Conflicting provisions read as amended to match law
Policy loan interest rates capped by state law

Record maintenance

Producers keep transaction records for Director inspection
Annuity recommendation records kept 7 years

Fraudulent producer representation

Illegal to claim licensure without passing exam
Applies to all public communications (ads, cards, letterhead)
Unlicensed activity can trigger suspension/revocation of other licenses

Misrepresentation

Prohibits false/inaccurate policy info, illustrations, comparisons
Includes inducing lapse/surrender via false info (twisting)

False advertising

NAIC model act: untrue, deceptive or misleading statements about insurance business
Applies across all media; NAIC model: unfair if flagrant and in conscious disregard of the law, or a general business practice
Illinois bars misrepresenting a policy’s terms, benefits or advantages, and advertising implying state or federal approval or guarantee; each is an unfair or deceptive act (215 ILCS 5/149(1), 5/149(4), 5/424(1))

Defamation

False or malicious statements harming insurer’s financial reputation prohibited
Classic example: spreading false rumors of insurer failure

Boycott, coercion and intimidation

Prohibited if resulting in unreasonable restraint/monopoly in insurance business

False financial statements

Prohibits false material statements on insurance applications

Illegal inducements

Offering unlisted value (rebates, gifts) to induce purchase generally prohibited
Illinois bans rebating with narrow exceptions
NAIC model allows reasonable non-cash gifts/donations if not conditioned on purchase

Unfair discrimination

Prohibits differing treatment of same-class/equal-risk individuals
Cannot discriminate based on sex, marital status, race, religion, national origin
Property/casualty: cannot deny solely for geography (unless justified) or physical/mental impairment
Many states also protect blind/partially blind individuals

Errors & omissions

E&O = professional liability insurance for producers
Covers negligence/unintentional mistakes; excludes intentional/criminal acts and fines

Rebating

Illinois prohibits refunds/discounts/credits to induce purchase
Soliciting/negotiating insurance implies licensure

Sharing commission

Allowed between licensed producers in same line
NAIC model also allows payment to agencies or non-selling persons

Twisting

Misrepresentation inducing policy lapse/surrender/exchange
Distinct from defamation (which targets insurer’s reputation, not policyholder action)

Unfair marketing practices

Dept sets standards for disclosure, standardized terms
Ads cannot falsely imply government/independent endorsement
Illinois specifically bans implying state/federal approval
Cannot misstate claims payment timeframes

Gramm-Leach-Bliley Act (GLBA)

Repealed key parts of Glass-Steagall; allows bank/insurance/investment consolidation
Establishes federal/state regulatory framework for merged financial services

McCarran-Ferguson Act

1945 law: insurance regulated at state level
Grants limited antitrust exemption
Since 2021, health insurance excluded from exemption (except historical loss data sharing)

National Association of Insurance Commissioners (NAIC)

Standard-setting body of state insurance regulators (50 states, DC, 5 territories)
Coordinates regulatory oversight, peer review, best practices

Fair Credit Reporting Act

Regulates consumer reporting agencies/reports used in underwriting
Investigative report request: disclose to consumer within 3 days
Adverse action: must notify consumer; consumer has 60 days for free report; may also dispute errors

Privacy Act of 1974

Governs only federal agencies’ handling of personal info, not private insurers
Insurer privacy governed by FCRA, GLBA, state law
Illinois: authorization valid up to 30 months (life/health/disability) or 1 year (property/casualty)

Telemarketing

National Do Not Call Registry protects registered numbers
Calls allowed only 8 a.m.–9 p.m. local time
Must disclose caller’s name, the company the call is made for, and a number or address for it

CAN-SPAM

Commercial emails must be labeled as ads, have accurate headers/subject lines
Must include valid postal address
Opt-out required, honored within 10 business days

Illinois State Regulations & NAIC Insurance Law

Licensing

To apply for an Illinois resident producer’s license, you must:

Be at least 18 years old
Be a resident of Illinois before you submit your application

Pre-licensing course and exam

Illinois requires a prelicensing course of 20 hours for each of life, accident and health, fire, casualty and personal lines before the producer examination (215 ILCS 5/500-30).

A candidate who fails the examination, or does not appear for it, must reapply and pay the required fees again before being rescheduled (215 ILCS 5/500-25).

Fingerprints/background check

Controlled business

Non-resident license

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)

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.

Military service

A licensed Illinois producer who is unable to comply with license renewal procedures because of military service may request a waiver of those procedures (215 ILCS 5/500-35(e)).

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 Illinois producer license is issued for 2 years (215 ILCS 5/500-35(a)).

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

Continuing education

Notice of change of name or address

An Illinois producer must inform the Director of a change of address within 30 days after the change (215 ILCS 5/500-35(g)).

Company regulations

Capital and surplus requirement

Duties of the Director of Insurance

The Director is responsible for establishing and enforcing regulations in the Illinois insurance market in a manner that protects consumers and encourages economic development.

Those duties include:

Investigate all claims and complaints of legal violations relating to insurance.
If the Director 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.
The Director must examine every insurer licensed in Illinois at least once every 5 years (215 ILCS 5/132.3(a)).
Audit the books and records of any resident producer as frequently as necessary. Under the NAIC’s examination model, the regulator may examine any person subject to its authority, nonresident producers included, as often as it considers appropriate.
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...

Suspend, revoke or non-renew

The Director 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.
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 Illinois. 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

Hearing and penalties

A person facing action by the Director is entitled to notice and an opportunity for a hearing, within time limits set by Illinois law, and may ask a court to review the final order.

A producer who wants to contest the Director’s denial, suspension or revocation of a license may demand a hearing in writing within 30 days after the notice is mailed (215 ILCS 5/500-70(b)).

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.

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 Director.

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 Director’s inspection.

Fraudulent producer representation

A producer found guilty of conducting business in Illinois 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

Defamation

Boycott, coercion and intimidation

False financial statements

Illegal inducements

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.

Errors & omissions

Rebating

Illinois 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

Twisting

Unfair marketing practices

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. Illinois goes further for government: no advertisement may imply that a company, its financial condition or its policies are approved, endorsed or guaranteed by the State of Illinois, the United States Government, the Director or the Department, whether or not that is so (215 ILCS 5/149(4)).
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)

McCarran-Ferguson Act

National Association of Insurance Commissioners (NAIC)

Fair Credit Reporting Act

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

Telemarketing

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

Licensing

Resident producer applicant: at least 18 years old, Illinois resident before applying

Pre-licensing course and exam

20 hours required per line (life, A&H, fire, casualty, personal lines) before exam
Failed/no-show candidates must reapply and pay fees again

Fingerprints/background check

Director reviews background before licensing
Fingerprints often required for state/FBI criminal history check

Controlled business

Insurance on producer’s own life/property/family/employer/controlled business
License meant for public sales, not primarily controlled business
Illinois won’t renew license if controlled business premiums exceeded other business premiums in either of prior 2 years

Non-resident license

No Illinois exam needed if licensed elsewhere in good standing
Requires reciprocity, application, and fee payment
Address change: file within 30 days; moving producer applies for new resident license within 90 days (no re-testing for held lines)

Temporary license

Issued without exam to keep business serviced (death/disability of producer, military entry)
Regulator may limit scope and require licensed sponsor
Illinois: up to 180 days, renewable once for another 180 days

Military service

Producers unable to renew due to military service may request waiver

Renewal and reinstatement

Illinois license term: 2 years
Lapsed license may be reinstated without exam within 12 months, but penalty = double unpaid renewal fee

Continuing education

Required for renewal of major lines licenses
Hours set by state law, published by insurance department

Notice of change of name or address

Report address change within 30 days
Report administrative actions/criminal prosecutions within 30 days
Must notify regulator before using a different business name

Company regulations

Insurers need Department of Insurance authorization (certificate of authority)
Must file charter, financial statements, meet capital/surplus rules

Capital and surplus requirement

Certificate of authority requires maintaining minimum capital/surplus

Duties of the Director of Insurance

Appointed by Governor; protects consumers, regulates market/solvency
Investigates violations, refers for prosecution
Examines every insurer at least every 5 years
Audits producer records as needed, collects fees, issues fines/license actions
No arrest/injunction/jail authority (law officer/court needed)

Suspend, revoke or non-renew

Grounds include: false application info, fraud, felony conviction, misappropriation, unfair trade practices, forgery, exam cheating, prior out-of-state revocation

Cease and desist

Orders stopping/limiting violating activity, does not suspend/revoke license itself

Hearing and penalties

Right to notice/hearing; 30 days to demand hearing after denial/suspension notice
Civil penalty up to $10,000 per cause, capped at $100,000 total

Unfair claims settlement practices

Violations include: delaying claims/investigations, failing to explain denials or offers, denying claims without investigation, altering application info, settling for less than the application’s advertising material led the insured to expect

Policy forms

Director must approve/disapprove life/A&H forms within 60 days (extendable 30 days)
Conflicting provisions read as amended to match law
Policy loan interest rates capped by state law

Record maintenance

Producers keep transaction records for Director inspection
Annuity recommendation records kept 7 years

Fraudulent producer representation

Illegal to claim licensure without passing exam
Applies to all public communications (ads, cards, letterhead)
Unlicensed activity can trigger suspension/revocation of other licenses

Misrepresentation

Prohibits false/inaccurate policy info, illustrations, comparisons
Includes inducing lapse/surrender via false info (twisting)

False advertising

NAIC model act: untrue, deceptive or misleading statements about insurance business
Applies across all media; NAIC model: unfair if flagrant and in conscious disregard of the law, or a general business practice
Illinois bars misrepresenting a policy’s terms, benefits or advantages, and advertising implying state or federal approval or guarantee; each is an unfair or deceptive act (215 ILCS 5/149(1), 5/149(4), 5/424(1))

Defamation

False or malicious statements harming insurer’s financial reputation prohibited
Classic example: spreading false rumors of insurer failure

Boycott, coercion and intimidation

Prohibited if resulting in unreasonable restraint/monopoly in insurance business

False financial statements

Prohibits false material statements on insurance applications

Illegal inducements

Offering unlisted value (rebates, gifts) to induce purchase generally prohibited
Illinois bans rebating with narrow exceptions
NAIC model allows reasonable non-cash gifts/donations if not conditioned on purchase

Unfair discrimination

Prohibits differing treatment of same-class/equal-risk individuals
Cannot discriminate based on sex, marital status, race, religion, national origin
Property/casualty: cannot deny solely for geography (unless justified) or physical/mental impairment
Many states also protect blind/partially blind individuals

Errors & omissions

E&O = professional liability insurance for producers
Covers negligence/unintentional mistakes; excludes intentional/criminal acts and fines

Rebating

Illinois prohibits refunds/discounts/credits to induce purchase
Soliciting/negotiating insurance implies licensure

Sharing commission

Allowed between licensed producers in same line
NAIC model also allows payment to agencies or non-selling persons

Twisting

Misrepresentation inducing policy lapse/surrender/exchange
Distinct from defamation (which targets insurer’s reputation, not policyholder action)

Unfair marketing practices

Dept sets standards for disclosure, standardized terms
Ads cannot falsely imply government/independent endorsement
Illinois specifically bans implying state/federal approval
Cannot misstate claims payment timeframes

Gramm-Leach-Bliley Act (GLBA)

Repealed key parts of Glass-Steagall; allows bank/insurance/investment consolidation
Establishes federal/state regulatory framework for merged financial services

McCarran-Ferguson Act

1945 law: insurance regulated at state level
Grants limited antitrust exemption
Since 2021, health insurance excluded from exemption (except historical loss data sharing)

National Association of Insurance Commissioners (NAIC)

Standard-setting body of state insurance regulators (50 states, DC, 5 territories)
Coordinates regulatory oversight, peer review, best practices

Fair Credit Reporting Act

Regulates consumer reporting agencies/reports used in underwriting
Investigative report request: disclose to consumer within 3 days
Adverse action: must notify consumer; consumer has 60 days for free report; may also dispute errors

Privacy Act of 1974

Governs only federal agencies’ handling of personal info, not private insurers
Insurer privacy governed by FCRA, GLBA, state law
Illinois: authorization valid up to 30 months (life/health/disability) or 1 year (property/casualty)

Telemarketing

National Do Not Call Registry protects registered numbers
Calls allowed only 8 a.m.–9 p.m. local time
Must disclose caller’s name, the company the call is made for, and a number or address for it

CAN-SPAM

Commercial emails must be labeled as ads, have accurate headers/subject lines
Must include valid postal address
Opt-out required, honored within 10 business days