Massachusetts Producer Discipline, Appointments and Compensation
This chapter covers how Massachusetts disciplines and penalizes producers, how insurers appoint producers and report terminations, and the rules on premiums held by agents, paying the unlicensed, commissions and records. The chapter on Massachusetts State Regulations covers the list of grounds for discipline and the cease and desist procedure under chapter 176D; the chapter on Massachusetts producer licensing covers the licenses themselves.
Disciplinary actions
Probation, suspension, revocation, refusal to issue or renew (Mass. Gen. Laws ch. 175, § 162R; ch. 30A, § 13)
The Commissioner may place on probation, suspend, revoke, or refuse to issue or renew a producer’s license, levy a civil penalty under ch. 176D, § 7, or combine these actions (Mass. Gen. Laws ch. 175, § 162R(a)). The grounds listed in the chapter on Massachusetts State Regulations come from § 162R(a). Note that misrepresenting the terms of a contract or application is a ground when it is intentional, and the list also includes knowingly accepting business from an unlicensed individual, failing to comply with a child support order, and failing to pay state income tax (Mass. Gen. Laws ch. 175, § 162R(a)).
The Commissioner keeps the authority to enforce the licensing law and chapter 176D against a person under investigation or charged even after the license is surrendered or lapses (Mass. Gen. Laws ch. 175, § 162R(e)).
Hearings (Mass. Gen. Laws ch. 175, §§ 162R(b), 174A; ch. 30A, § 13)
- When the Commissioner denies an application or nonrenews a license, the Commissioner gives the reason in writing, and the person may make a written demand within 30 days for a hearing on the reasonableness of the action, held under chapter 30A (Mass. Gen. Laws ch. 175, § 162R(b)).
- A state agency may not revoke or refuse to renew a license without first offering a hearing, and an agency that suspends without one must promptly offer one. The rule has exceptions, including where a statute expressly says no hearing is required, where the law requires the action without discretion on the basis of a court conviction or judgment, and where the action rests solely on a failure to file timely reports or applications, pay required fees, or keep required insurance coverage (Mass. Gen. Laws ch. 30A, § 13).
- A notice of a hearing under § 162R, or of a revocation or suspension, is sufficient when sent postpaid by registered mail to the licensee’s last business or residence address on the Commissioner’s records (Mass. Gen. Laws ch. 175, § 174A).
Penalties and fines (Mass. Gen. Laws ch. 175, §§ 162R, 170, 174–177, 194; ch. 176D, §§ 7, 10)
In addition to, or instead of, action against the license, a person may after a hearing be fined under ch. 176D, § 7 (Mass. Gen. Laws ch. 175, § 162R(d)).
| Violation | Penalty |
|---|---|
| An unfair or deceptive act or practice | Fine of not more than $1,000 for each act or practice (ch. 176D, § 7) |
| Violating a final cease and desist order | Up to $10,000 for each violation, plus possible suspension or revocation (ch. 176D, § 10) |
| Knowingly obtaining a premium by fraudulent representations | $100 to $1,000 or up to one year in prison (ch. 175, § 170) |
| Corporation placing insurance for stockholders in violation of § 174 | Corporation $200 to $1,000; individual $100 to $1,000 or up to 30 days, or both (ch. 175, § 174) |
| Holding out as licensed when not; doing business under a name not in the license | $10 to $100 (ch. 175, § 175) |
| Failing to pay over a premium after written demand | Larceny (ch. 175, § 176) |
| Knowingly paying an unlicensed person for producer work | $50 to $500 (ch. 175, § 177) |
| Any chapter 175 violation with no specific penalty | Up to $500 (ch. 175, § 194) |
The Commissioner may also order an insurer or its agent to make restitution to a claimant who suffered actual economic damage from a chapter 176D violation (Mass. Gen. Laws ch. 176D, § 7). In a suit on a policy, a court may add punitive damages of up to 25 percent of the claim if the claimant was damaged by a violation of § 3 or § 4 that the Commissioner has determined (Mass. Gen. Laws ch. 176D, § 7).
Producer appointments and termination
Producer appointments (Mass. Gen. Laws ch. 175, § 162S)
A producer may not act as an agent of an insurer unless appointed by that insurer. A producer who is not acting as an insurer’s agent need not be appointed (Mass. Gen. Laws ch. 175, § 162S(a)).
- The insurer files a notice of appointment within 15 days from the date the agency contract is executed or the first application is submitted. One request can appoint the producer to some or all insurers in the insurer’s holding company group (Mass. Gen. Laws ch. 175, § 162S(b)).
- The Commissioner verifies the producer’s eligibility within a reasonable time not over 30 days, and notifies the insurer within 5 days of finding the producer ineligible (Mass. Gen. Laws ch. 175, § 162S(c)).
- The insurer pays the appointment fee for each producer it appoints, and a renewal appointment fee (Mass. Gen. Laws ch. 175, § 162S(d)–(e)).
Termination of producer appointment (Mass. Gen. Laws ch. 175, § 162T)
- An insurer that terminates a producer’s appointment, employment or contract notifies the Commissioner within 30 days after the termination takes effect, whatever the reason (Mass. Gen. Laws ch. 175, § 162T(a)–(b)).
- Within 15 days after notifying the Commissioner, the insurer mails a copy to the producer’s last known address. For a termination for cause, it goes by certified mail, return receipt requested, or overnight delivery (Mass. Gen. Laws ch. 175, § 162T(d)(1)).
- Within 30 days after receiving it, the producer may file written comments with the Commissioner, sending a copy to the insurer. The comments become part of the Commissioner’s file (Mass. Gen. Laws ch. 175, § 162T(d)(2)).
In the absence of actual malice, the insurer, the producer and the Commissioner are not civilly liable for a statement this section requires (Mass. Gen. Laws ch. 175, § 162T(e)(1)). An insurer or producer that fails to report, or is found by a court to have reported with actual malice, may after notice and hearing have its license or certificate of authority suspended or revoked and be fined under chapter 176D (Mass. Gen. Laws ch. 175, § 162T(g)).
Producer regulation
Larceny (Mass. Gen. Laws ch. 175, §§ 169, 176)
An agent or broker who negotiates, continues or renews a policy for someone else is the insurer’s agent for receiving the premium, whatever the policy says (Mass. Gen. Laws ch. 175, § 169). The agent or broker holds that premium in trust for the insurer. Failing to pay it over after written demand, less commission and any deductions the insurer consented to in writing, is prima facie evidence of using it for another purpose, and on conviction the agent or broker is guilty of larceny (Mass. Gen. Laws ch. 175, § 176).
Unlicensed persons compensation and commissions (Mass. Gen. Laws ch. 175, §§ 177, 184)
No insurer, officer, agent, employee or licensed producer may pay or offer compensation or anything of value to a person for acting as an insurance producer in Massachusetts who is not licensed as one. Referral fees to unlicensed employees of a licensed producer or business entity producer, for customers they refer, are allowed (Mass. Gen. Laws ch. 175, § 177).
Paying a commission is not a rebate. The anti-rebating sections do not stop an insurer from paying a commission to another company or to a person licensed as its agent or as a broker who carries on business in good faith, or a licensed person from receiving a commission on a policy insuring himself (Mass. Gen. Laws ch. 175, § 184). For the kinds of insurance rated under chapter 175A, such as liability, surety and auto physical damage, nothing in that chapter restricts the freedom of contract between insurers and agents or brokers over commissions (Mass. Gen. Laws ch. 175A, § 5(d)).
Records retention (Mass. Gen. Laws ch. 176D, § 3(10))
Agents, brokers and adjusters keep every written communication they receive that expresses a grievance for two years from receipt, with a record of its disposition, available to the Commissioner at any time (Mass. Gen. Laws ch. 176D, § 3(10)). Reinsurance intermediary brokers keep transaction records for ten years (Mass. Gen. Laws ch. 175, § 177Q(A)).
Lesson summary
- The Commissioner may place a license on probation; a person denied or nonrenewed may demand a hearing within 30 days (§ 162R).
- No agency may revoke or refuse to renew a license without first offering a hearing, with exceptions such as an action resting solely on missing reports, fees or required insurance (ch. 30A, § 13); hearing notices go by registered mail (§ 174A).
- Chapter 176D fines run up to $1,000 per act or practice, and up to $10,000 per violation of a final cease and desist order; a court may add punitive damages of up to 25 percent of a claim (ch. 176D, §§ 7, 10).
- Knowingly paying an unlicensed person for producer work can bring $50 to $500; referral fees to a licensed producer’s unlicensed employees are allowed (§ 177). The general chapter 175 penalty is up to $500 (§ 194).
- Appointments are filed within 15 days; terminations are reported within 30 days, with a copy to the producer within 15 days after that report (§§ 162S, 162T).
- A premium held by an agent is held in trust; keeping it after written demand is larceny (§ 176). Written grievances are kept two years (ch. 176D, § 3(10)).