Law & Ethics Update
Disciplinary and Industry Trends
Recent Violations and Enforcement Actions of Licensed Florida Insurance Professionals
Not everyone feels compelled to follow the rules. Whether desperate, hopeless, greedy, or simply believing the rules don’t apply to you … or at least the way you conduct business. Here’s the thing: There are a boatload of people, from our CFO, to dissatisfied customers, to our Strike Force, with which you don’t want to conduct business regarding the enforcement of violations against you. The following are cases from the DFS, Miami and Tallahassee newspapers. Names have been altered and brevity used, but these real cases should discourage you from dancing with the devil.
The following are instances in which licensees or other persons violated the Florida Insurance Code and the administrative action the department has taken against them. Note: All administrative investigations are subject to referral to the Division of Investigative and Forensic Services for criminal investigation.
Case: An investigation was opened on a life, health and variable annuity agent based on an insurer's referral of a consumer complaint. The agent enrolled 23 applicants into products under the Affordable Care Act (ACA) with the intention of making fraudulent claims. Most of the people who signed up for the policies were homeless and did not live in Florida. The agent arranged for fraudulent claims to be submitted from an addiction recovery clinic based in California. The plan unraveled when Investigators discovered the agent used a vacant house as the address for all 23 applicants.
Case: A case was opened on a life, health and variable annuity agent when the Financial Industry Regulatory Authority (FINRA) barred the agent from associating with any FINRA member in any capacity, which includes holding any type of individual registration. FINRA's findings concluded the agent converted $15,250 from elderly customers, forged or falsified the signatures of four customers on nine separate documents, and changed the account address of record for three customers from their home addresses to the agent's business address. The agent paid most of the surrender charges a customer incurred as the result of his recommendation to surrender a variable annuity contract, thereby guaranteeing her against loss, a violation of FINRA rules.
Case: Department investigative staff initiated an investigation of an insurance agency based on a referral from the Florida Office of Insurance Regulation. The referral alleged the agency employed unlicensed individuals to solicit and transact insurance with Florida consumers. Examination of records obtained during the course of the investigation revealed the agency employed approximately 568 individuals who collectively held over 5,500 resident and non-resident licenses. However, the investigation also revealed approximately 330 events in which an employee, not licensed in Florida, conducted transactions requiring a Florida insurance license. While no consumer harm was found in these events, the volume of occurrences demonstrated a business practice on the part of the agency in allowing employees to conduct a high volume of insurance business without the proper licenses and appointments.
Since July 2014, the Division of Insurance Fraud has made 59 arrests of individuals who were licensed by the Department or who were required to be licensed but were operating without one. These arrests represent $4.47 million in fraud and involved insurance agents, bail bond agents and public adjusters. [Florida CFO, Division of Fraud, Insurance Fraud Press Releases]
Customers responding to a TV or radio ad, phone call, piece of mail, email (in this case “spam”), etc., may not have the know-how or inclination to check as to whether the company is authorized to conduct business in Florida. You do. At the very least you have access to the Active Company Search provided by the OIR. (www.FLOIR.com) Keeping ALL your customers aware of the potential for contact by a bogus entity is beneficial to all. Even clients to whom you do not provide health coverage can be educated by the knowledge of the state, OIR, you and your agency.
If you DO solicit or sell for an unauthorized entity you are violating the Representing or Aiding Unauthorized Insurer Prohibited statute, which could cause you to be liable for repayment of any losses suffered by a client when the unauthorized entity fails to pay claims. You may also be charged with a third degree felony for violating the Penalty for Representing Unauthorized Insurer statute, punishable by up to five years in prison and a fine of up to $5000 (first offense).
As our CFO, DFS, OIR, Fraud Strike Force and others work to maintain or improve the integrity of the insurance industry, technology continues to improve with them. As it turns out, fraudulent agents, agencies and products don’t usually lag too far behind. It’s our job to ensure we stay one step ahead of these criminals.
New and Important Terminology Applicable to Licensed Florida Insurance Professionals
Agent In Charge: The licensed and appointed agent who is responsible for the supervision of all individuals within an insurance agency location.
Chief Financial Officer (CFO): An independently elected official and a member of the governor’s cabinet who serves as head of the Department of Financial Services (DFS) and as a member of the Financial Services Commission. The CFO directly oversees the Division of Insurance Agents and Agency Services, Division of Insurance Fraud, Division of Consumer Services, and the Office of the Insurance Consumer Advocate.
Controlled Business: Insurance contracts covering the agent or members of the agent’s family; officers, directors, stockholders, partners, or employees of a business in which the agent or a member of the agent’s family is engaged; or the debtors of a firm, association, or corporation of which the agent is an officer, director, stockholder, partner, or employee.
Department of Financial Services: State agency headed by the chief financial officer and the Commissioner of the Office of Insurance Regulation that oversees the insurance industry in accordance with the provisions of the Insurance Code. The CFO and the Commissioner have broad administrative, quasi-legislative (rule-making) and quasi-judicial powers in order to carry out their responsibilities.
Insurance Agency: Any business location at which an individual, firm, partnership, corporation, association, or other entity (other than an insurer or an adjuster) engages in any activity or employs individuals to engage in any activity that by law may be performed only by a licensed insurance agent.
Insurance Insights: Monthly online newsletter published by the DFS’s Division of Agent and Agency Services that provides valuable information for agents, adjusters, and agencies about what’s happening in Florida’s insurance market and industry trends.
MyProfile: Online portal created by the Florida Department of Financial Services’ Bureau of Licensing that allows licensees to perform various license-related tasks online.
Office of Insurance Regulation: State agency in charge of insurance company regulation, including licensing, rates, policy forms, market conduct, claims, certificates of authority, and solvency.
You may need to use the website to secure terms and codes when you are required to complete a transaction with another state.
AM Best, an insurance rating service, offers a glossary of insurance terms for those looking for anything not already made available in this table, within the Florida Office of Insurance Regulation, or by the compliance representative affiliated with your office.