WSR 06-08-100

PROPOSED RULES

OFFICE OF THE

INSURANCE COMMISSIONER

[ Insurance Commissioner Matter No. R 2005-06 -- Filed April 5, 2006, 8:13 a.m. ]

     Original Notice.

     Preproposal statement of inquiry was filed as WSR 05-22-115.

     Title of Rule and Other Identifying Information: Establishing requirements for an agent to represent an insurer prior to notifying the commissioner of an appointment.

     Hearing Location(s): Insurance Commissioner's Office, Room TR 120, 5000 Capitol Boulevard, Tumwater, WA 98504-0255, on May 10, 2006, at 10:30 a.m.

     Date of Intended Adoption: May 22, 2006.

     Submit Written Comments to: Kacy Scott, P.O. Box 40255, Olympia, WA 98504-0258, e-mail Kacys@oic.wa.gov, fax (360) 586-3109, by May 9, 2006.

     Assistance for Persons with Disabilities: Contact Lori Villaflores by May 8, 2006, TDD (360) 586-0241.

     Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: The purposes served by the proposed rules are to: (1) Implement the provisions of RCW 48.17.150 (1)(g)(ii) by establishing a procedure to permit agents to represent insurers prior to receipt of notification by the commissioner of the appointment; (2) clarify current procedures by using principles consistent with the governor's executive order regarding "plain talk"; (3) broadening the methods acceptable to the commissioner for communicating information to include transmission by electronic means; (4) encouraging insurers and other appointing authorities to use the National Insurance Producer Registry (NIPR) internet gateway to appoint and terminate the appointments of agents; and (5) promote uniformity of Washington state's producer licensing procedures with those of other states. It is anticipated that, if promulgated, the effects of the proposed rules will be to: (1) Reduce the commissioner's processing time for appointments; (2) permit licensed agents to represent an insurer immediately upon appointment by the insurer; and (3) reduce the amount of time for licensed agents to begin soliciting insurance on behalf of insurers.

     The changes to existing rules are:

• Adding a definition for "business entity" that is based upon language found in section 2A of the National Association of Insurance Commissioners Producer Model Licensing Act (MA).
• Adding definitions for "sending written notice" and "NIPR."
• Providing that the commissioner will confirm an appointment within fifteen days after receipt.
• Prescribing the methods acceptable to the commissioner for making appointments.
• Establishing the method of notification of an insurer where an agent is not eligible for electronic appointment and describing the reasons for ineligibility.
• Providing that the commissioner will notify an insurer where an agent is not eligible for an appointment when the notice is not submitted electronically that is based upon language found in section 14C of the MA.
• Establishing the requirements for renewing an agent's appointment.
• Clarifying the procedure for an insurer to terminate an appointment. See RCW 48.17.160(3).
• Clarifying the procedure for an agent to terminate an appointment.
• Specifying the procedure to be followed and information that must be provided where a licensee's appointment or affiliation is terminated "for cause" that is based upon language found in section 15A of the MA.
• Defining the conduct that constitutes "for cause" that is based upon language found in section 12A of the MA for numbers 1 through 11, and the OIC "Termination of Appointment/Affiliation" form: INS-24(98) for numbers 12 through 15.
• Clarifying that an agent must be licensed for all of the lines of authority possessed by the appointing insurer. See WAC 284-17-121.
• Establishing the requirements to allow an agent to act as a representative of and place insurance with an insurer without first notifying the commissioner of the appointment for a period of time up to thirty days from the date the first insurance application is executed by the agent.
• Clarifying that the authority of a licensee affiliated with a business entity is limited to those lines for which the licensee is qualified and within the business entity's lines of authority.

     Reasons Supporting Proposal: The proposed rules establish a procedure, a "grace-period," to permit agents to represent insurers prior to receipt of notification by the commissioner of an appointment as authorized by RCW 48.17.150 (1)(g)(ii). When the procedure is used, licensed agents will be able to begin soliciting insurance on behalf of an appointing insurer immediately after the appointment is made without delaying until after notice of the appointment is received and accepted by the commissioner. In addition, by limiting eligibility for taking advantage of the "grace-period" to those insurers and other appointing authorities that submit appointments electronically through NIPR, electronic submissions will increase resulting in a reduction of time for processing appointments (those submitted through NIPR are ordinarily completed within twenty-four to forty-eight hours). While the proposed sections for implementation of RCW 48.17.150 (1)(g)(ii) were being drafted (proposed WAC 284-17-457 through 284-17-471), it became clear that redrafting of WAC 284-17-400 through 284-17-420 was necessary to ensure that, after promulgation, the rules would be integrated in a logical manner that would promote clarity. In addition, the current rules were not drafted according to "plain talk" principles. The proposed rules are intended to conform to those principles. Finally, the proposed rules also reflect efforts to further clarify the current rules by including additional pertinent information for the purpose of completeness and to enhance uniformity with procedures followed in other states by incorporating certain related provisions contained in the National Association of Insurance Commissioners Producer Model Licensing Act.

     Statutory Authority for Adoption: RCW 48.02.060 (3)(a) and 48.17.150 (1)(g)(ii).

     Statute Being Implemented: RCW 48.17.150 (1)(g)(ii).

     Rule is not necessitated by federal law, federal or state court decision.

     Name of Proponent: Mike Kreidler, Insurance Commissioner, governmental.

     Name of Agency Personnel Responsible for Drafting and Implementation: John Hamje, P.O. Box 40255, Olympia, WA 98504-0255, (360) 725-7262; Enforcement: Carol Sureau, P.O. Box 40255, Olympia, WA 98504-0255, (360) 725-7050.

     No small business economic impact statement has been prepared under chapter 19.85 RCW. In accordance with RCW 19.85.030 (1)(a) a small business economic impact statement is not required because this rule does not impose more than minor costs on businesses in the industry.

     A cost-benefit analysis is not required under RCW 34.05.328. A cost-benefit analysis is not required because this rule is a procedural rule as defined in RCW 34.05.328 (5)(c)(iii).

April 5, 2006

Mike Kreidler

Insurance Commissioner

OTS-8723.2


NEW SECTION
WAC 284-17-421   What definitions apply to WAC 284-17-421 through 284-17-483?   (1) "Business entity" means a corporation, partnership, limited liability company, or limited liability partnership.

     (2) "Sending written notice" or "sending a copy of the written notice" means transmitting the required information in writing and, where appropriate, on forms designated by the commissioner for that purpose, via mail, commercial parcel delivery company, electronic telefacsimile transmission, or e-mail.

     (3) "NIPR" means the National Insurance Producer Registry or other equivalent organization or entity designated or maintained by the National Association of Insurance Commissioners, its affiliates, or subsidiaries.

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NEW SECTION
WAC 284-17-423   How long are initial and reinstated individual licenses in effect?   Initial and reinstated individual licenses are valid from the date of issuance until the date of the licensee's next birthday anniversary plus one year.

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NEW SECTION
WAC 284-17-425   How long are initial and reinstated business entity licenses in effect?   Initial and reinstated business entity licenses are valid for a period of two years from the date of issuance.

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NEW SECTION
WAC 284-17-427   What is the renewal period for a license?   The renewal period for all licenses is two years.

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NEW SECTION
WAC 284-17-429   How long is an initial appointment valid?   Initial appointments are valid for the period ending with the insurer's first appointment renewal date after the initial issue date of the appointment. The appointment renewal date for the insurer is assigned by the commissioner.

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NEW SECTION
WAC 284-17-431   What is the renewal period for an appointment?   The renewal period for all appointments is two years.

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NEW SECTION
WAC 284-17-433   How long is an appointment effective?   Each appointment is effective until the agent's license expires or is revoked, the appointment has expired, or written notice of termination of the appointment is received by the commissioner, whichever occurs first.

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NEW SECTION
WAC 284-17-435   How will the commissioner notify an insurer that an agent has been appointed?   The commissioner will confirm the agent's appointment by sending written notice to the insurer within fifteen calendar days after receipt of the appointment by the commissioner.

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NEW SECTION
WAC 284-17-437   How may an agent be appointed?   An agent may be appointed by using one of the following methods:

     (1) By submitting the appointment electronically through NIPR (preferred method); or

     (2) By submitting the appointment to the commissioner using the form provided by the commissioner for that purpose. The form may be obtained upon request or may be found at the commissioner's web site.

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NEW SECTION
WAC 284-17-439   How will the commissioner notify an insurer if an agent is not eligible for an electronic appointment?   If an agent is not eligible for an electronic appointment, the insurer will be notified when the electronic appointment is not accepted for transmission through NIPR. An agent is not eligible for an appointment where the agent's license is not valid or the agent is not licensed for all lines of insurance that the appointing insurer is authorized to transact in the state of Washington.

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NEW SECTION
WAC 284-17-441   How will the commissioner notify an insurer if an agent is ineligible for an appointment when the appointment has not been submitted electronically?   The commissioner will notify an insurer that an agent is ineligible for an appointment when the appointment has not been submitted electronically by sending written notice to the insurer.

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NEW SECTION
WAC 284-17-443   How may an insurer renew an agent's appointment?   A renewal appointment list will be sent to the insurer identifying all of the insurer's agents whose appointments are due to expire. An insurer may renew an appointment by:

     (1) Sending written notice to the commissioner that the appointment will be renewed; and

     (2) Paying the renewal fee for each agent appointed by the insurer on the renewal date assigned by the commissioner.

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NEW SECTION
WAC 284-17-445   How may an insurer terminate an appointment?   An insurer may terminate an appointment by sending written notice of termination to the agent and by sending a notice of termination of the appointment to the commissioner:

     (1) Electronically through NIPR (preferred method); or

     (2) Using the form provided by the commissioner for that purpose. The form may be obtained upon request or may be found at the commissioner's web site.

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NEW SECTION
WAC 284-17-447   How may an agent terminate an appointment?   An agent may terminate an appointment by sending advance written notice to the insurer stating:

     (1) The agent will no longer act as a representative of the insurer; and

     (2) The effective date of the termination.

     The agent must also send a copy of the written notice to the commissioner.

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NEW SECTION
WAC 284-17-449   When an agent's appointment is terminated "for cause," what procedure must be followed in notifying the commissioner?   If an insurer or its authorized representative terminates the appointment of an agent "for cause," the insurer must notify the insurance commissioner within thirty days following the effective date of the termination by sending written notice of termination of the appointment "for cause" to the commissioner.

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NEW SECTION
WAC 284-17-451   What information must be provided relating to a "for cause" termination?   Upon the written request of the commissioner, the insurer shall provide additional information, documents, records or other data pertaining to the "for cause" termination or activity of the agent.

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NEW SECTION
WAC 284-17-453   What conduct constitutes "for cause"?   "For cause" includes the following conduct:

     (1) Providing incorrect, misleading, incomplete or materially untrue information in the license application;

     (2) Violating any insurance laws, or violating any regulation, subpoena or order of the commissioner or of another state's insurance commissioner;

     (3) Obtaining or attempting to obtain a license through misrepresentation or fraud;

     (4) Improperly withholding, misappropriating or converting any moneys or properties received in the course of doing insurance business;

     (5) Intentionally misrepresenting the terms of an actual or proposed insurance contract or application for insurance;

     (6) Having been convicted of a felony;

     (7) Having admitted or been found to have committed any insurance unfair trade practice or fraud;

     (8) Using fraudulent, coercive, or dishonest practices, or demonstrating incompetence, untrustworthiness or financial irresponsibility in the conduct of business in this state or elsewhere;

     (9) Having an insurance license, denied, suspended or revoked in any other state, province, district or territory;

     (10) Forging another's name to an application for insurance or to any document related to an insurance transaction;

     (11) Knowingly accepting insurance business from an individual who is not licensed;

     (12) Incompetence;

     (13) Failure to account for premiums;

     (14) Rebating; and

     (15) Abandonment.

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NEW SECTION
WAC 284-17-455   Is an agent required to be licensed for the same lines of authority as the appointing insurer?   An applicant for an agent's license must be licensed for all lines of insurance that the appointing insurer is authorized to transact in the state of Washington with the following exceptions:

     (1) Insurers authorized to write lines of insurance in addition to vehicle insurance or surety insurance may appoint agents to write vehicle insurance or surety insurance only. It is only necessary that these appointees take a qualifying examination for vehicle insurance or surety insurance.

     (2) Where the appointment is for the "limited" licenses of travel, credit life and disability, credit casualty, specialty producers, or rental car agents, it is not necessary for the applicant to be licensed for all lines of insurance that the appointing insurer is authorized to transact in the state of Washington.

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NEW SECTION
WAC 284-17-457   May a licensed agent act as a representative of an insurer and solicit insurance on its behalf before notifying the commissioner of the appointment?   A licensed agent may act as a representative of an insurer and solicit insurance on its behalf before notifying the commissioner of the appointment where:

     (1) The agent is appointed by the insurer; and

     (2) The notice of appointment is submitted electronically through NIPR.

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NEW SECTION
WAC 284-17-459   How long may a licensed agent act as a representative of an insurer and solicit insurance on its behalf before notifying the commissioner of the appointment?   A licensed agent may act as a representative of an insurer and solicit insurance on its behalf before notifying the commissioner of the appointment for up to thirty calendar days after the date the agent has signed the first application for insurance for submission to the insurer.

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NEW SECTION
WAC 284-17-461   May a licensed agent act as a representative of an insurer and solicit insurance on its behalf before notifying the commissioner of the appointment if the notice of appointment is not submitted electronically?   If the notice of appointment is not submitted electronically, the commissioner must receive written notice of the appointment and accept the appointment before the licensed agent may act as a representative of an insurer and solicit insurance on its behalf.

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NEW SECTION
WAC 284-17-463   Who is responsible for ensuring that the agent is eligible for appointment?   The agent and the appointing insurer are responsible for ensuring that the agent is eligible for appointment.

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NEW SECTION
WAC 284-17-467   What are the consequences when an agent has solicited insurance on behalf of an insurer as authorized by WAC 284-17-457 but is later determined not to be eligible for appointment by the insurer?   When an agent has solicited insurance on behalf of an insurer as authorized by WAC 284-17-457 but is later determined not to be eligible for appointment by the insurer:

     (1) The insurance will be effective;

     (2) The agent is not entitled to receive compensation for any insurance or insurance product sold by the agent; and

     (3) The agent and the insurer may be subject to disciplinary action under RCW 48.17.530.

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NEW SECTION
WAC 284-17-469   Is the insurer responsible for the acts of the agent during the period of time the agent is acting as a representative of the insurer or soliciting insurance on its behalf?   The insurer is responsible for the acts of the agent during the period of time the agent is acting as a representative of the insurer or soliciting insurance on its behalf but before the commissioner is notified of the appointment. This is the case whether or not the thirty-calendar-day period after the date the agent has signed the first application for insurance for submission to the insurer has elapsed. Any misconduct or errors that may occur during this time will be the responsibility of the insurer and the agent.

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NEW SECTION
WAC 284-17-471   What are the consequences if the commissioner is not notified of the appointment within thirty calendar days after the date the agent has signed the first application for insurance for submission to the insurer and the agent continues to act as a representative of the insurer or solicit insurance on its behalf?   If the commissioner is not notified of the appointment within thirty calendar days after the date the agent has signed the first application for insurance for submission to the insurer, the agent may no longer act as a representative of the insurer or solicit insurance on its behalf. If the agent continues to do so, the insurance will be effective but the agent and the insurer may be subject to disciplinary action under RCW 48.17.530.

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NEW SECTION
WAC 284-17-473   Is a business entity licensed as an agent, adjuster or broker required to affiliate an individual licensee?   Each business entity licensed as an agent, adjuster or broker must notify the commissioner of all individual licensees that represent the business entity and act on its behalf using the form provided by the commissioner for that purpose. The form may be obtained upon request or may be found at the commissioner's web site. Individual licensees that represent the business entity and act on its behalf are "affiliated" with the licensed business entity. A business entity licensee must have at least one individual licensee who is affiliated.

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NEW SECTION
WAC 284-17-475   Must an individual licensee who is affiliated with a business entity license be individually appointed by insurers if the business entity is appointed by the insurer?   If an individual licensee is affiliated with a business entity licensee, the individual is not required to be directly appointed by the insurer. The licensee's authority to act as an agent is limited to those lines for which the licensee is qualified and within the business entity's lines of authority.

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NEW SECTION
WAC 284-17-477   How long is an affiliation valid?   An affiliation by a business entity which is not revoked will be valid until the first renewal date after the notice of affiliation. Thereafter, each affiliation may be renewed for a period of two years upon payment of the annual affiliation renewal fee for each affiliation at the time of renewal of the business entity license.

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NEW SECTION
WAC 284-17-479   How may a business entity terminate an affiliation?   A business entity may terminate an affiliation of an individual by sending written notice of termination to the agent and a copy to the commissioner.

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NEW SECTION
WAC 284-17-481   How should an insurer notify the commissioner of a termination of an affiliation "for cause"?   If a business entity or its authorized representative terminates the affiliation of a producer "for cause," the business entity must notify the commissioner within thirty days following the effective date of the termination by sending written notice of termination of the affiliation to the commissioner.

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NEW SECTION
WAC 284-17-482   What information must be provided relating to a "for cause" termination?   Upon the written request of the commissioner, the business entity shall provide additional information, documents, records or other data pertaining to the "for cause" termination or conduct of the affiliated person.

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NEW SECTION
WAC 284-17-483   How may an individual agent terminate an affiliation?   An individual agent may terminate the agent's affiliation by sending advance written notice to the business entity stating:

     (1) The agent will no longer act on behalf of the business entity; and

     (2) The effective date of the termination.

     The agent must also send a copy of the written notice to the commissioner.

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REPEALER

     The following sections of the Washington Administrative Code are repealed:
WAC 284-17-400 Renewal dates for agents, brokers, solicitors and adjusters.
WAC 284-17-410 Appointment renewal and termination procedures for insurance agents.
WAC 284-17-420 Appointment, affiliation and renewal procedures for licensed persons empowered to exercise the authority conferred to a corporate or firm licensee.

© Washington State Code Reviser's Office