Oregon Producer Licensing and Trade Practice Rules

The chapter Oregon State Regulations & NAIC Insurance Law covers the qualifications for a producer license, renewal and continuing education, the Director’s enforcement powers and the main unfair trade practices. This chapter goes deeper: how the license is examined for and issued, what it means to sell, solicit or negotiate insurance, what happens when a license lapses or is not renewed, and the rules on advertising, competition and discrimination.

Licensing

Process (ORS 744.058, 744.059, 744.062)

An individual becomes a resident producer through these steps. The first two must be complete before the application is submitted:

1. Establish a base in Oregon. An individual may apply for a resident license only after establishing a residence or a place of business in Oregon for acting as a producer
2. Complete the pre-examination requirements, submit fingerprints, pass the written examination and complete the criminal history check (OAR 836-071-0118)
3. Apply to the Director on the Uniform Application, declaring that the statements in it are true, correct and complete to the best of the applicant’s knowledge and belief
4. Receive the license, issued for the classes of insurance the applicant qualified in

The written examination (ORS 744.058). An individual applying for a resident producer license must pass a written examination, unless exempt under ORS 744.067 (for example, an individual currently licensed for the same lines in another state). The examination tests the applicant’s knowledge of:

• The class or classes of insurance applied for
• The duties and responsibilities of an insurance producer
• Oregon’s insurance statutes and rules

The Director develops and conducts the examination, and may contract with a private testing service to develop and administer it and to collect the fees. Each applicant pays the fee the Director sets. An applicant who fails, or who does not appear as scheduled, may reapply under the Director’s rules.

Issuance and classes of insurance (ORS 744.062). Unless the Director refuses the license on a ground listed in ORS 744.074, a person who has met the examination and qualification requirements is issued a producer license. A producer qualifies in one or more classes of insurance, and may sell, solicit or negotiate only in those classes:

• Life insurance
• Health insurance
• Property insurance
• Casualty insurance
• Variable life insurance, including variable annuities
• Personal lines: property and casualty coverage sold to individuals and families for primarily noncommercial purposes
• Limited class credit insurance, and any other form the Director designates as limited class insurance
• Title insurance, a class issued only to a resident producer
• Any other class the Insurance Code or the Director’s rules permit

Property insurance is insurance on real or personal property of every kind against loss or damage from any hazard or cause, and against consequential loss from that loss or damage. It does not include noncontractual legal liability for the loss or damage, or title insurance (ORS 731.182).

Amending a license. A producer who wants to add or drop a class applies to amend the license, in the manner prescribed for a license application or as the Director otherwise prescribes (ORS 744.062(3)). A producer licensed only for property insurance who wants to sell liability insurance must first add a class that includes it: the casualty class, or the personal lines class for coverage sold to individuals and families.

Types of licensees

• Producers sell, solicit or negotiate insurance (next section)
• Consultants advise about insurance for compensation other than a commission from selling it (ORS 744.605), and adjusters are paid to investigate, negotiate or settle losses that arise as claims under insurance contracts (ORS 744.502). Both are covered in the chapter Oregon Consultants, Adjusters and Producer Appointments
• Nonresidents receive an Oregon producer license on the strength of a resident license in their home state (ORS 744.063), and temporary licenses keep an insurance business serviced after a producer’s death, disability or entry into military service (ORS 744.073). Both are covered in the chapter Oregon State Regulations & NAIC Insurance Law

Producers (ORS 744.052, 744.053, 731.104)

An insurance producer is a person required to be licensed under Oregon law to sell, solicit or negotiate insurance (ORS 731.104). A person may not do any of these in Oregon for a class of insurance without a producer license for that class (ORS 744.053). Each word has a defined meaning:

Term	Meaning (ORS 731.104)
Sell	To exchange a policy of insurance by any means, for money or its equivalent, on behalf of an insurer
Solicit	To attempt to sell a policy of insurance, or to ask or urge a person to apply for a particular kind of insurance from a particular insurer
Negotiate	To confer directly with, or offer advice directly to, a purchaser or prospective purchaser of a particular policy about any of its substantive benefits, terms or conditions, when the person doing so sells insurance or obtains insurance from insurers for purchasers

Sidenote

Know this...

A license can be required without a sale. Urging a homeowner to apply for a homeowners policy from a particular insurer is soliciting, even if no policy is ever issued. Explaining to a prospective buyer what a particular policy covers is negotiating when it is done by someone who sells insurance.

A “person” is an individual or a business entity (ORS 731.116), so a producer may be either:

• An individual, who applies for a resident license on the Uniform Application
• A business entity: a corporation, association, partnership, limited liability company, limited liability partnership or other legal entity. A business entity that acts as a producer must hold its own producer license. It applies on the Uniform Business Entity Application, pays the fees, and designates a licensed producer responsible for the entity’s compliance with Oregon’s insurance laws and rules (ORS 744.059(2))

A producer’s home state is the state, district or territory of the United States in which the producer maintains a principal place of residence or principal place of business and is licensed to act as a producer (ORS 744.052).

Maintenance and duration

Nonrenewal (ORS 744.072, 744.074). The Director may refuse to renew a producer license for any of the causes listed in ORS 744.074. The Director must then tell the licensee in writing the reason for the refusal and the licensee’s rights under ORS chapter 183. The Director may also require a producer, as a condition of renewal, to meet any or all of the requirements that then apply to the original issuance of the license (ORS 744.072(3)).

Reinstatement (ORS 744.072(6))

An individual producer who lets the license lapse may apply to the Director to reinstate the same license within 12 months of the renewal due date without retaking the examination, by paying double the unpaid renewal fee and completing any continuing education still owed.

The continuing education owed includes the period during which the license was lapsed, and a reinstated license takes effect on the date the Director grants the reinstatement.

For example, a producer whose renewal was due at the end of June applies to reinstate in October. The producer pays twice the unpaid renewal fee and makes up the continuing education owed through October, but does not retake the examination.

Assumed business name (ORS 744.068(1))

A producer must notify the Director before doing business under the license under any name other than the producer’s legal name. The same advance notice is required before changing, deleting or adding an assumed business name used in the producer’s business under the license.

Sidenote

Know this...

The timing is the reverse of the address rule. A change of address or telephone number is reported not later than 30 days after it happens. A business name is reported before it is used, and again before it is changed or dropped.

Place of business/records maintenance (ORS 744.068)

A nonresident producer has the same record-keeping duty as a resident. It keeps the usual and customary records of the business done under the nonresident license at the producer’s principal place of business, open to the Director’s inspection during business hours, for three years following expiration of the policy unless the Director designates another period (ORS 744.068(3)). If the nonresident producer has a place of transacting insurance in Oregon, that place is its principal place of business for this purpose.

The Director’s examination of these records is covered in the chapter Oregon Producer Trust Accounts, Commissions, Fees and Records.

State regulation

Director’s inquiries (ORS 731.296)

The Director may address any proper inquiry to an insurer, a licensee or its officers about its activities or condition, or any other matter connected with its transactions, and the person addressed must reply promptly and truthfully. The reply is made in the form of communication the Director requests and, if the Director requires it, is verified by an officer of the insurer or licensee.

Unfair trade practices

False advertising (ORS 746.110; OAR 836-080-0155)

No person may publish or circulate an advertisement, announcement or statement about the business of insurance, or about any person in it, that is untrue, deceptive or misleading (ORS 746.110).

A separate rule covers one kind of advertising in commercial lines of property and casualty insurance: statements about dividends on a participating policy, a policy that gives the policyholder a right to share in the distribution of the insurer’s profits or other assets. Under OAR 836-080-0105 to 836-080-0155:

• Before a dividend is declared, an insurer may not represent that it will pay a dividend of a specified amount, or agree to a formula that fixes one
• A policyholder’s right to a dividend arises only when the insurer’s board of directors or other governing body determines that the insurer has a surplus from which the dividend may lawfully be paid, and declares the dividend by a resolution adopted after the policy period has expired

Under OAR 836-080-0155, an insurer may not knowingly adopt, issue, circulate or use any representation, plan, schedule, letter or advertising material that states or implies the insurer has acted, or will act, at variance with them. A brochure assuring a business owner of a guaranteed dividend on next year’s policy is an example.

Practices injurious to free competition (ORS 746.160)

Unless a law expressly provides otherwise, no person, inside or outside Oregon, may enter into a contract, understanding or combination with an insurer or its manager, agent or representative, or do any act or engage in any practice, for the purpose of:

• Controlling the rates charged, or the commissions or other compensation paid, for insuring any risk or class of risks in Oregon
• Discriminating against an insurer, manager or agent because of its plan or method of doing business, or because it does or does not belong to a board or association of insurers, managers, agents or representatives
• Doing anything detrimental to free competition in the business or injurious to the insuring public

Agencies that agree to hold commissions at a set level, or agents who agree to shut out an insurer because of the way it sells, would be acting for a prohibited purpose.

Sidenote

Know this...

Do not confuse this statute with controlled business, which is ORS 746.065, a different rule that limits the commission a producer may keep on personal or controlled insurance.

Unfair discrimination (ORS 746.015; OAR 836-081-0005, 0010, 0020, 0030)

ORS 746.015 prohibits unfair discrimination between risks of essentially the same degree of hazard in the availability of insurance, in the application of rates and in policy terms. The Director’s rules name particular practices that violate it.

Availability of insurance (OAR 836-081-0005, 836-081-0010). For insurance other than life or health insurance, an insurer’s decision on the availability of insurance for an individual is unfair discrimination if it is based on any of these characteristics:

• Age
• Sex
• Marital status (single, married, separated or divorced)
• Race or color
• Creed
• National origin
• Ancestry
• A lawful occupation, unless the occupation significantly increases the degree of hazard. This item does not apply to an insurer that limits its market to one occupation or several related occupations
• A change of occupation, unless the frequency of change is significant
• A change of domicile, unless the frequency of change is significant, or the change significantly increases the degree of hazard or the expense of administering policy benefits
• Previous rejection, cancellation or nonrenewal of insurance by another insurer
• A change of insurer
• Lack of previous insurance, unless the lack violates the law

An insurer may rely on a combination of the occupation, change of occupation and change of domicile characteristics only if the combination significantly increases the degree of hazard. “Availability of insurance” includes all terms, conditions and types of coverage under a policy.

OAR 836-081-0005 also says what these two rules do not do:

• They do not concern the making and use of rates. Unfairly discriminatory rates are prohibited by ORS 737.310 for most lines of property and casualty insurance, and unfair discrimination in applying rates by ORS 746.015
• They do not prohibit other risk selection criteria reasonably related to the insurer’s rates and policy forms
• They do not limit the Director’s authority to find other availability practices unfairly discriminatory

Blindness (OAR 836-081-0020, 836-081-0030). These rules apply to all insurance transactions. An insurer unfairly discriminates if, solely because of an individual’s blindness or partial blindness, it:

• Refuses to insure, or to continue to insure, the individual
• Limits the amount, extent or kind of coverage available to the individual
• Charges the individual a different rate for the same coverage

On every other condition, including the underlying cause of the blindness, a blind or partially blind person is held to the same actuarial and experience standards as a sighted person. An insurer may still exclude from coverage a disability that consists solely of blindness or partial blindness and existed when the policy was issued.

Lesson summary

• An individual applying for a resident license needs a residence or place of business in Oregon, passes a written examination unless exempt, and applies on the Uniform Application.
• A license is issued by class of insurance, and a producer may act only in the classes on it. Adding a class means amending the license.
• A producer is a person required to be licensed to sell, solicit or negotiate insurance (ORS 731.104), and may be an individual or a business entity with a designated responsible producer.
• The Director may refuse to renew a license for the causes in ORS 744.074, giving the reason in writing. An individual producer may apply to reinstate a lapsed license within 12 months of the renewal due date without re-examination, by paying double the unpaid renewal fee and making up the continuing education owed.
• A producer notifies the Director before using, changing or dropping an assumed business name. A nonresident producer keeps records on the same terms as a resident.
• Agreements to control rates or commissions, or to discriminate against an insurer or agent, are practices injurious to free competition (ORS 746.160). Controlled business is a different rule (ORS 746.065).
• For insurance other than life or health, an availability decision may not rest on characteristics such as age, sex, marital status, race or a prior cancellation by another insurer (OAR 836-081-0010). An insurer may not refuse, limit or charge a different rate for coverage solely because of blindness.