Licensing

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

• Be at least 18 years old.
• Be an Alabama resident before you submit your application.

Under the Beason-Hammon Taxpayer and Citizen Protection Act, Alabama must verify the citizenship of all applicants. There are sixteen acceptable identifiers. One option is your official driver’s license (front and back).

Pre-licensing Course and Exam: Not Required

Alabama does not have specific pre-licensing requirements.

Fingerprints/Background Check

As part of the application process, you must submit fingerprints to the Alabama 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.

Fingerprint results stay in the system for only 30 days. If your application reaches the DOI after that 30-day window, you’ll need to be fingerprinted again and pay the required fee.

The Alabama Department of Insurance can only use fingerprints processed through Fieldprint. It also can’t accept fingerprints taken for any purpose other than pursuing an insurance license through the Alabama Department of Insurance.

Controlled Business

Controlled business is insurance written solely in the interest of the producer or the producer’s family members. Producers can’t secure an Alabama insurance license for the purpose of writing controlled business.

You can sell a policy to yourself or your family members, but you can’t obtain a license for that sole purpose.

Non-Resident License

A licensed producer must meet the following requirements to obtain a nonresident license:

• The individual must have an Alabama 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, Alabama 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. A Temporary Producer license is a once in a lifetime license per line of authority and is valid for a maximum of 6 months from the date the license is issued.

Inactive Status

An Alabama resident producer who is ordered to active military duty may place his/her license on inactive status until he/she is discharged.

While a license is inactive, the producer:

• May continue to receive residual or “trailing” commissions.
• May not solicit or transact any new business.

Renewal Maintenance

Alabama insurance licenses are initially issued for 2 years.

Renewal rules:

• Producer must renew their license every 2 years, by the last day of the birth month of the licensee.
• There is a 30 day grace period for those failing to renew prior to expiration.
• Renewing during this 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.

A producer may have their license reissued within 12 months of expiration without having to test again.

When former producers have been without a license over 12 months, they must take the pre-licensing course, retest, and get fingerprinted before applying for a new license.

Continuing Education

All states, including Alabama, have continuing education requirements that must be met to renew any major lines (life, health, property, liability) insurance license.

Individuals licensed in the state of Alabama must complete 24 hours of CE (3 of which must be on ethics) prior to renewing their 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 Alabama Department of Insurance within 30 days of relocation.

Failure to do so may result in monetary fines and/or the suspension of a license.

Company Regulations

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

To receive authorization, the insurance company must present:

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

Place of Business

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

Capital and Surplus Requirement

A company that has been authorized to conduct insurance business in Alabama 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.

Duties of the Commissioner of Insurance

The Alabama Commissioner of Insurance is a state executive position in the Alabama government. The Commissioner is the chief executive of the Alabama Department of Insurance, which regulates insurance companies operating in Alabama.

The Commissioner of insurance is appointed by the governor and serves a term concurrent with the governor.

The Commissioner is responsible for establishing and enforcing regulations in the Alabama 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 Commissioner 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.

The Commissioner also oversees the state Fire Marshal’s Office, which investigates “suspicious fires and explosions,” and enforces the state’s fire code through building inspections.

Sidenote

Know this...

The Commissioner does not have the authority to arrest, issue injunctions or sentence jail time.

Suspend, Revoke or Non-renew

The DOI 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 Alabama.

• 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 DOI believes that a producer has (or is about to) violate any insurance regulation in Alabama, it may issue a cease and desist order.

A cease and desist order does not suspend or revoke the recipient’s registration. However, it does require the recipient to stop or limit the activity addressed in the order.

Hearing

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

The DOI also has the authority to investigate any producer doing business in Alabama to determine whether a hearing is required. If the DOI finds sufficient evidence, it will issue a notice with the date and time of the hearing. This notice will be sent to interested parties at least 20 days prior to the hearing.

If a hearing results in a finding of a known violation of Alabama insurance law, the Commissioner 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

Alabama is a “file and use” state.

A File and Use filing is a submission that must be filed with the Department, but the insurer can 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 an insurer can submit anything it wants. The submission still must comply with the Law, Regulations and Bulletins.

If the wording on a health insurance policy (or other form) conflicts with Alabama 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.

The 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 DOI or any representative appointed on its behalf.

Fraudulent Producer Representation

An insurance producer who represents to the public that he/she is licensed to conduct insurance business in Alabama, but has not passed the appropriate licensing examination, is in violation of regulation.

Any means of public communication is included, such as advertisements, letterheads, circulars, business cards, and other methods of representation.

A producer found guilty of conducting business in Alabama 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

The participation in any boycott or activity involving coercion and intimidation for the sole purpose of retaining business or that results in the monopoly of insurance business 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 NAIC regulation.

Illegal Inducements

In Alabama 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.

Any producer participating in this activity will be subject to suspension of his/her 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 is 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 only covers honest mistakes resulting in (financial) damage to customers/prospects. There is no coverage for violation of insurance regulation.

Rebating

Alabama 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 Alabama 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 is prohibited.

Unfair Marketing Practices

The DOI is responsible for establishing minimum standards for the full and fair disclosure of policy content. It also requires the 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 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.

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 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 within which to request a copy of the report.

Privacy Act of 1974

This regulation was established to provide 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, and the DO NOT CALL registry is 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 Alabama 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 Alabama. This is not unique to Alabama. Insurers must be authorized in every state they transact business in.

Once authorized, any insurer doing business in Alabama must contribute to the Alabama 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).