Montana State Regulations & NAIC Insurance Law
Licensing
Any individual applying for a Montana resident producer’s license must:
- Be at least 18 years old
- Be a resident of Montana before submitting an application
Pre-licensing course and exam
Montana does not have specific pre-licensing requirements, but an applicant must pass the examinations for each kind of insurance applied for within 12 months of applying (Mont. Code Ann. § 33-17-211(1)).
Fingerprints/background check
The Commissioner 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.
Non-resident license
A producer licensed in another state can obtain a Montana nonresident license without taking Montana’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.
The NAIC’s model act limits a temporary license to 180 days.
Military service
Under the NAIC’s model act, a producer who cannot meet license renewal requirements because of military service, or because of another extenuating circumstance such as a long-term medical disability, may request a waiver of those requirements and of any examination, fine or sanction for missing them.
Renewal and reinstatement
A producer license stays in effect only while the producer renews it on schedule: paying the renewal fee and completing continuing education by the due date. In Montana, a license remains in effect unless it is suspended, revoked or terminated or it lapses; a producer must complete at least 24 credit hours of approved continuing education, including at least 3 hours of ethics, in each 24-month period, and the license lapses if the producer does not (Mont. Code Ann. §§ 33-17-214(5), 33-17-1203(1)(a), 33-17-1205(2)).
Each state sets its own renewal cycle.
A producer who misses the deadline and lets the license lapse may be able to reinstate it without retaking the examination.
Under the NAIC’s model act, a lapsed license may be reinstated within 12 months of the renewal due date, for a penalty of double the unpaid renewal fee. Each state sets its own window and fee, and after the window closes the person must qualify for a new license. In Montana, the Commissioner may reissue a lapsed license if the licensee pays the lapsed-license reinstatement fee and files certification of completed continuing education for the preceding biennium within 1 year of the lapse (Mont. Code Ann. § 33-17-1002(2)).
Continuing education
In Montana, continuing education is required, unless exempt, of every licensed insurance producer, adjuster, public adjuster and consultant, not only of those holding major lines (life, health, property, liability) licenses; a producer licensed only for surety bail bonds, prepaid legal insurance or limited lines credit insurance completes 5 credit hours each biennium (Mont. Code Ann. § 33-17-1203(1)). 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 Montana must complete continuing education prior to renewing their license. The number of hours required is set by state law (Mont. Code Ann. § 33-17-1203(1)), and the Commissioner approves continuing education courses and determines the credit hours each approved course earns (Mont. Code Ann. § 33-17-1204(1)).
Notice of change of name or address
Under the NAIC’s model act, the licensee reports a change of address to the regulator within 30 days of the change.
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 Commissioner of Securities and Insurance to conduct business in Montana. To receive a certificate of authority, the company applies to the Commissioner and files its charter or articles of incorporation, financial statements showing that it meets the state’s capital and surplus requirements, and the other documents and fees the state requires.
Capital and surplus requirement
A company that has been authorized to conduct insurance business in Montana must maintain minimum standards as a corporation. The certificate of authority allows the insurer to conduct business in the state only if it maintains the minimum capital or permanent surplus required. In Montana, the Commissioner must suspend or revoke the certificate of an insurer that no longer meets its requirements because of a deficiency of assets or otherwise (Mont. Code Ann. § 33-2-118(1)(b)). For a Montana domestic insurer, if a stock insurer’s capital becomes impaired or a mutual insurer’s assets are less than its liabilities and the minimum surplus it must maintain, the Commissioner “shall at once determine the amount of deficiency and serve notice upon the insurer to make good the deficiency within 60 days after service of such notice”; if the deficiency is not made good and proof filed within that period, “the insurer is insolvent and the commissioner shall institute delinquency proceedings against it” (Mont. Code Ann. §§ 33-3-101, 33-3-432).
Duties of the Commissioner of Insurance
The Commissioner of Insurance is an elected state executive position in the Montana state government. Article VI of the Montana State Constitution stipulates that the auditor is a publicly elected official who serves a term of four years. Terms begin the first Monday of January following the election. Under the Montana Constitution, a candidate for state auditor may not be certified if, at the end of the current term, the candidate will have served 8 or more years in any 16-year period, so an auditor may serve no more than eight years, two terms, in any 16 (Mont. Const. art. IV, § 8(1)(a)).
A 2006 ballot measure sought to rename the office of state auditor to Insurance Commissioner. The measure’s legislative sponsors argued that renaming the office would prevent confusion, saying the Commissioner of Insurance does not audit in the traditional sense. The auditor’s primary responsibility is to regulate the state’s insurance industry. The measure was defeated by a margin of 64.1 percent to 35.9 percent.
So, Commissioner of Insurance it is.
The Commissioner of Insurance is responsible for establishing and enforcing regulations in the Montana insurance market in a manner that protects consumers and encourages economic development.
Those duties include:
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Investigate all claims and complaints of legal violations relating to insurance.
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If the Commissioner of Insurance finds that laws have been violated, the findings and supporting documents may be referred for criminal prosecution.
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Monitor transactions of all companies including domestic, foreign, and alien insurance companies.
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Examine the financial condition of insurers; the NAIC’s model examination law calls for every insurer to be examined at least once every five years. Montana examines each authorized insurer at least every 5 years (Mont. Code Ann. § 33-1-401(1)).
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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.
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Collect all fees associated with producers and insurers.
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Determine and administer fines associated with violations for insurers and producers.
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Issue reports pertaining to the suspension and revocation of licenses of producers and certificates of authority for insurers.
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Approve documentation used by insurance companies such as forms and rates.
Suspend, revoke or non-renew
The Commissioner of Insurance has the authority to suspend, revoke, or refuse to renew a license for:
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Providing false information on the application for an insurance license.
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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.
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Being found guilty of a violation or the noncompliance of insurance regulations and laws…
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Committing fraud while attempting to obtain an insurance license.
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Improperly withholding, misappropriating or converting any money or property received in the course of doing insurance business.
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Providing false information in reference to the terms and conditions of an insurance contract.
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Having been convicted of a felony.
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Having been found guilty of an unfair trade practice or fraud prohibited by Montana’s unfair trade practices law (MCA 33-17-1001(1)(h)).
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Having engaged in activities of a fraudulent nature which allowed the person to involve themselves in dishonest, coercive, untrustworthy, and financially irresponsible practices.
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Having had a prior insurance license revoked or suspended in a state other than Montana. Under the NAIC’s model act, a license denied in another state is also a ground.
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Using another person’s identity and forging their name on an insurance application.
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Being found guilty of using unethical practices or cheating on an examination for an insurance license.
Cease and desist
If the Commissioner of Insurance finds that a producer has violated the state’s insurance laws, the Commissioner of Insurance may order the producer to cease and desist. The recipient of a cease and desist order has not had his/her registration suspended or revoked, but is required to stop or limit the activity addressed in the order.
Hearing and penalties
A person facing action by the Commissioner is entitled to notice and an opportunity for a hearing, within time limits set by Montana law, and may ask a court to review the final order. In Montana, the Commissioner may order a person who has engaged in or is about to engage in a violation to cease and desist after reasonable notice and an opportunity for a hearing, or may issue a temporary cease and desist order that remains in effect until 10 days after the hearing; the respondent has 15 days to request a hearing, which is held within 20 days of the request (Mont. Code Ann. § 33-1-318(1)). Under the unfair trade practices law, the desist order follows a hearing (Mont. Code Ann. § 33-18-1004(1)).
A violation of the insurance laws can bring a civil penalty in addition to action against a license. State law sets the maximum, usually per violation and often with a cap on the total, and a higher tier commonly applies to a violation that was knowing or flagrant. Some violations are also crimes. In Montana, the Commissioner may, after a hearing, fine a person up to $25,000, but a fine on a producer or adjuster may not exceed $5,000 per violation (Mont. Code Ann. § 33-1-317).
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. Montana’s statute reaches these practices when committed with such frequency as to indicate a general business practice (Mont. Code Ann. § 33-18-201).
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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.
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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.
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Refusing to pay claims without conducting a reasonable investigation.
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Making settlement claims based on information contained on an application that has been altered without the insured’s consent is a violation of regulation.
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Denying a claim without conducting a thorough investigation.
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Attempting to settle or settling a claim for less than the amount a reasonable person would believe the insured or beneficiary was entitled to by reference to written or printed advertising material accompanying or made part of an application.
Policy forms
Insurers file their policy forms with the Commissioner.
Depending on the line of insurance and the form, a state may require approval before a form is used, often with a period after which a filing that has not been acted on is deemed approved, or may allow the form to be used as soon as it is filed (“file and use”). Montana requires a policy form to be filed with and approved by the Commissioner before it is delivered or issued for delivery in Montana (Mont. Code Ann. § 33-1-501(1)(a)). The form is filed at least 60 days before delivery; if the Commissioner has neither approved nor disapproved it 60 days after receiving it, it is considered approved, and the insurer must notify the Commissioner by separate letter at least 10 days before using a form it believes has been or will be considered approved (Mont. Code Ann. § 33-1-501(2)).
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 Commissioner’s inspection.
Montana requires a producer to keep complete records of transactions at a place of business for at least 3 years after the transaction is completed (Mont. Code Ann. § 33-17-1101(4)).
Fraudulent producer representation
An insurance producer who represents to the public that he/she is licensed to conduct insurance business in Montana, but has not passed the appropriate licensing examination, is in violation of regulation. Any means of public communication using 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 Montana in any line of insurance for which they are not properly licensed may have any other insurance license suspended or revoked.
Misrepresentation
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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.
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Providing inaccurate or incomplete information or comparisons regarding the benefits of a policy is an example of misrepresentation.
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Providing inaccurate or incomplete information for the purpose of inducing, or tending to induce, the lapse, exchange, conversion, forfeiture, or surrender of a policy is a violation as well (twisting).
False advertising
Making, publishing or circulating an advertisement, announcement or statement about the business of insurance that is untrue, deceptive or misleading is an unfair trade practice under state law, based on the NAIC’s model act. The medium does not matter: the rule reaches newspapers, magazines, radio and television, and also notices, circulars, pamphlets, letters, posters and any other way of placing the statement before the public. Under the model act, such a statement is an unfair trade practice when committed flagrantly and in conscious disregard of the law, or often enough to indicate a general business practice. Some state laws adopt this condition, and others reach a single such statement.
Defamation
Defamation of an insurer is an unfair trade practice under state law, based on the NAIC’s model act: making, publishing or circulating an oral or written statement that is false, or maliciously critical of or derogatory to the financial condition of an insurer, and that is calculated to injure such insurer. Some states’ laws reach further, to a statement calculated to injure any person engaged in the business of insurance. 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
In Montana, filing with a public official, or publishing or circulating, a false statement of an insurer’s financial condition with intent to deceive is prohibited (Mont. Code Ann. § 33-18-205(1)), and misrepresenting the terms of an application for insurance is a ground for action against a producer’s license (Mont. Code Ann. § 33-17-1001(1)(g)).
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.
States differ on promotional gifts. The NAIC’s model act lets producers and insurers give customers non-cash gifts, meals or charitable donations up to an amount the state considers reasonable, as long as the gift is not conditioned on buying or renewing a policy and is offered without unfair discrimination. Each state sets its own limit.
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. Montana does: refusing or limiting coverage, or charging a different rate, solely because of blindness or partial blindness is unfair discrimination, unless it rests on sound actuarial principles or actual or reasonably anticipated experience (Admin. R. Mont. 6.6.2106(1)).
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
Montana licensed producers are prohibited from directly or indirectly giving any refund, discount, favor, or credit to reduce premiums to induce the purchase of insurance.
Sharing commission
The splitting or sharing of commissions with a licensed producer is allowed. Both parties must be licensed in the line of business in which the proposed commission is to be split. Under the NAIC’s model act, a commission may also be paid to an insurance agency, or to a person who does not sell, solicit or negotiate insurance. Montana’s rule is narrower: a producer may not share commissions with anyone not also licensed for the same kind of insurance, apart from employees’ regular salaries and distributions among the members or stockholders of a licensed business entity (Mont. Code Ann. § 33-17-1103(2)).
Twisting
Misrepresenting a policy’s terms, conditions or benefits, or comparing policies incompletely, to induce a policyholder to lapse or surrender an existing policy is a violation of the law. Any written or oral statements used to induce the lapse, termination, exchange, or surrender of an insurance contract based on inaccurate information is prohibited.
Under the NAIC’s model act, twisting is a misrepresentation made to induce a policyholder to lapse, forfeit, surrender, exchange or convert a policy. A false or maliciously critical statement about a competing insurer’s finances, made to injure it, is defamation. Montana’s twisting statute reaches a statement misrepresenting or incompletely comparing a policy’s terms, conditions or benefits (Mont. Code Ann. § 33-18-204).
Unfair marketing practices
The Commissioner of Securities and Insurance is responsible for establishing minimum standards for the full and fair disclosure of policy content. They also require the standardization and simplification of the terms used to describe insurance coverage. Advertising may not involve the following:
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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.
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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.
The NAIC’s Insurance Information and Privacy Protection Model Act limits an authorization to collect personal information signed with an application to no more than 30 months for life, health or disability insurance and one year for property or casualty insurance. Montana’s Insurance Information and Privacy Protection Act does not set those two limits. It limits a different authorization: an authorization for a licensee to disclose an individual’s personal information remains valid for a period stated in it that does not exceed 24 contiguous months, and the individual may revoke it at any time (Mont. Code Ann. §§ 33-19-206(2)-(3), 33-19-306(2)).
Under the same 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