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.

Required pre-licensing course and exam

Before you can sit for the Illinois pre-licensing exam, you must successfully complete a Department of Insurance-approved pre-licensing course.

Fingerprints/background check

As part of the application process, you must submit fingerprints to the Illinois Department of Insurance.

Timing matters:

• Plan to get fingerprinted after you pass the state exam.
• Get fingerprinted at least one day before you apply for the license.

Controlled business

Controlled business is insurance written primarily for the benefit of the producer or the producer’s family members. Producers may not obtain an Illinois insurance license for the purpose of writing controlled business.

You may sell a policy to yourself or to family members, but you can’t get licensed solely for that purpose.

Non-resident license

To obtain a nonresident license, a licensed producer must meet the following requirements:

• The individual must have an Illinois resident producer license in good standing.

• The individual must complete the appropriate application and submit the required fees to the insurance department/commission in each state they wish to become licensed in.

• The individual’s home state must offer equal reciprocity for the state you are attempting to obtain a non-resident license in. Currently, Illinois has reciprocation agreements with all other states.

Temporary license

A temporary producer license is valid only if the temporary producer is sponsored and appointed by an insurance company.

Key limits:

• It’s a once-in-a-lifetime license per line of authority.
• It’s valid for a maximum of 6 months from the date the license is issued.

Inactive status

An Illinois resident producer who is ordered to active military duty may place their license on inactive status until discharge.

While the license is inactive:

• The producer may continue to receive residual (“trailing”) commissions.
• The producer may not solicit or transact any new business.

Renewal maintenance

Illinois insurance licenses are initially issued for 2 years.

Renewal rules:

• A producer must renew every 2 years.
• Renewal is due by the last day of the licensee’s birth month.

If you miss the deadline:

• There is a 30-day grace period.
• Renewing during the grace period results in a $50 late fee.
• If the license is not renewed during the grace period, the license expires and all company appointments are canceled.

Reissuing an expired license:

• A producer may have their license reissued within 12 months of expiration without retesting.
• If the producer has been without a license for more than 12 months, they must take the pre-licensing course, retest, and get fingerprinted before applying for a new license.

Continuing education

All states, including Illinois, require continuing education (CE) to renew major lines (life, health, property, liability) insurance licenses.

In Illinois, you must complete 24 hours of CE before renewing your license.

Notice of change of name or address

Any change of name or address (residential or business) must be reported by the licensee to the Illinois Department of Insurance within 30 days.

Failure to report changes on time may result in monetary fines and/or suspension of the license.

Company regulations

An insurance company must be authorized by the Department of Insurance to conduct business in Illinois.

To receive authorization, the company must provide:

• Rate tables
• Articles of incorporation (including the nature and purpose of the company’s business intentions)
• Corporate bylaws
• Appropriate fees

Place of business

Every resident insurance producer authorized to conduct business in Illinois must maintain a place of business (with public access) within the state.

Capital and surplus requirement

An insurer authorized to conduct insurance business in Illinois must meet minimum corporate standards.

A certificate of authority allows the insurer to conduct business in the state only if it maintains the minimum capital or permanent surplus required.

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, their findings and supporting documents will be forwarded to the state attorney general to pursue prosecution.

• Monitor transactions of all companies including domestic, foreign, and alien insurance companies.

• Audit the books and records of all Domestic insurers at least every 3 years.

• Audit the books and records of any resident producer as frequently as necessary.

• 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. They can get the process started, 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.

• Being found guilty of a violation or the noncompliance of insurance regulations and laws…

• Committing fraud while attempting to obtain an insurance license.

• Commingling policy owners’, insurers’, and beneficiaries’ money with the producer’s own money.

• Providing false information in reference to the terms and conditions of an insurance contract.

• Having been found guilty of a felony (or misdemeanor involving activities related to the individual’s moral character.)

• Having been convicted of violations in reference to unfair trade practices 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.

• 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 believes that a producer has violated (or is about to violate) an Illinois insurance regulation, the Director may issue a cease and desist order.

A cease and desist order does not automatically mean the producer’s registration has been suspended or revoked. It does require the producer to stop or limit the activity addressed in the order.

Hearing

A cease and desist order must be followed immediately, but the Director’s actions are not “final and binding.” Any Illinois resident producer subject to disciplinary action has the right to request a hearing to discuss the merits of the situation.

The Director may also investigate any producer doing business in Illinois to determine whether a hearing is required. If sufficient evidence is found, the Director will issue a notice with the date and time of the hearing and send it to interested parties at least 20 days before the hearing.

If a hearing results in a finding of a known violation of Illinois insurance law, the Director may (in addition to issuing a cease and desist order) impose a civil penalty of up to$15,000 per violation.

Unfair claims settlement practices

• The intentional obstruction and delay of claims payment or the delay of a claims investigation is a violation of regulation.

• Neglecting to provide a prompt response and written explanation of insurance policy terms, conditions, and laws related to the contract are examples of unfair claims settlement practices.

• Failure to provide claims without launching a thorough investigation is a violation of regulation.

• Making settlement claims based on information contained on an application that has been altered without the insured’s consent is a violation of regulation.

• Denying a claim without conducting a thorough investigation.

• Attempting to settle a claim for less than fair market value.

Policy forms

Illinois is a “file and use” state.

A file and use filing is a submission that must be filed with the Department, but the insurer may begin using it as soon as it is filed. The insurer does not have to wait for Department approval before using it.

File and use does not mean the insurer can submit anything. The submission must still comply with Illinois laws, regulations, and bulletins.

If the wording on a health insurance policy (or other form) conflicts with Illinois state law, the policy will be amended to minimum conformity with state statutes.

Record maintenance

Complete and accurate records must be kept at the producer’s place of business for a minimum of 3 years.

Records must show:

• Every contract placed
• The named insured
• Changes or amendments
• Premiums received with each transaction

Records may be inspected at any time by the Department of Insurance or a representative appointed on its behalf.

Fraudulent producer representation

A 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.

This includes public communication through advertisements, letterheads, circulars, business cards, and other methods of 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.

• Providing inaccurate or incomplete information or comparisons regarding the benefits of a policy is an example of misrepresentation.

• Providing inaccurate or incomplete information with the sole purpose of inducing lapse, exchange, conversion, forfeiture, or surrender is a violation as well (twisting).

False advertising

Communication involving the publication of newspapers, magazines, radio, or television that is intended to deliver false information in reference to insurance is a violation of NAIC regulation.

Defamation

• The intentional and malicious circulation of written or oral information intended for the direct or indirect dissemination of derogatory statements is prohibited.

• Publishing and circulating inaccurate information regarding the financial condition of an insurer, person, or competitor in the insurance industry is a violation of NAIC regulation.

Boycott, coercion and intimidation

Participation in any boycott or activity involving coercion and intimidation for the sole purpose of retaining business, or that results in a monopoly of insurance business, is prohibited.

False financial statements

Any licensed producer who makes false statements containing inaccurate material facts, or makes false statements on an application for insurance, is in violation of NAIC regulation.

Illegal inducements

In Illinois, it is prohibited to induce the purchase of insurance by offering anything with a monetary value in excess of $10.

It is also prohibited to accept anything with a monetary value in excess of $10 from a client.

A producer who participates in this activity is subject to suspension of their license and a monetary fine.

Unfair discrimination

Discriminating on the basis of class, race, marital status, or sexual preference is a violation of regulation.

Any unfair discriminatory practices intended to directly or indirectly favor an applicant or insured are prohibited.

Denying insurance coverage based on the blindness or partial blindness of an individual is considered discrimination and is a violation of NAIC regulation.

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 honest mistakes that result in financial damage to customers or prospects. It does not cover violations of insurance regulation.

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.

Furthermore, producers in Illinois are also prohibited from receiving any payment for the sale, solicitation, or negotiation of insurance outside of commissions and/or salary.

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.

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.

Unfair marketing practices

The Department of Insurance establishes minimum standards for full and fair disclosure of policy content. It also requires standardization and simplification of the terms used to describe insurance coverage.

Advertising may not involve the following:

• Any 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.

• Any statements regarding advertising that are false or untrue in reference to the time frame in which claims are paid.

Gramm-Leach Bliley Act (GLBA)

This law repealed the Glass-Steagall Act of 1933, allowing consolidation of commercial banks, investment institutions, and insurance companies.

GLBA established a framework of responsibilities for federal and state regulators across 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.

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 of 1971

If an applicant is denied insurance, employment, or credit due to information collected, this regulation grants access to the information and the reasons for the denial.

After receiving notice that an adverse underwriting decision has been made (which must be communicated within 3 days), an individual has 90 business days to request a copy of the report.

Privacy Act of 1974

This regulation provides a system for the collection, use, and dissemination of information gathered during the underwriting process.

When an applicant for insurance signs the application (notice regarding insurance information practices), they give the insurer the right to check driving records, MIB, and consumer investigative reports.

A signed application authorizes the insurer to collect information for 30 months. If the insurer has not done so by then, a new authorization must be obtained.

Telemarketing

The DO NOT CALL registry is a list of telephone numbers, intended to prevent calls from telemarketers.

Unsolicited sales calls must be made in accordance with the following provisions:

• No call may be placed outside of the hours of 8 am to 9 pm local time where the call is received.

• The sales nature of the call must be disclosed and the nature of the product/service being offered must be disclosed.

• The caller must identify themselves and the broker/dealer they represent.

• If a prize is being offered, the prize cannot be contingent on purchase.

CAN-Spam

When an unsolicited e-mail is sent the sender must:

• Use the word advertisement or the letters ADV on the subject line.

• Notate the physical location from where the email originated.

• Give the recipient the opportunity to opt out of ever receiving another email from the sender.

Insurance guaranty association

The Illinois Insurance Guaranty Association is made up of authorized insurers and is controlled by a board.

Joining the association is part of the authorization process that admits insurance companies to conduct business in Illinois. This is not unique to Illinois. Insurers must be authorized in every state they transact business in.

Once authorized, any insurer doing business in Illinois must contribute to the Illinois Insurance Guarantee Fund, which is intended to indemnify policy owners of insurance companies that have become insolvent (up to $100,000 cash and $300,000 total benefits).

Auto insurance state minimum

The “state minimum” auto insurance is the minimum amount of car insurance you must carry in Illinois to legally drive a vehicle. It helps ensure you can pay for others’ injuries and damages if you cause a car accident.

Driving without adequate coverage can result in financial repercussions such as fines, license suspensions, vehicle impoundment, and even jail time.

Auto insurance is typically structured as a split limit policy with coverage minimums represented by numbers and slashes.

• The first number is BI coverage per person.
• The second is BI coverage per incident (if multiple people are injured).
• The third is PD per incident.

In Illinois, the state minimum is 25/50/20. This covers up to $25,000 of bodily injury protection per person, up to $50,000 of bodily injuries per incident, and up to $20,000 of property damage per incident.