Bulletin IC-19
| TO: | ALL INSURANCE PRODUCERS, INSURERS AND HEALTH CARE CENTERS LICENSED IN THE STATE OF CONNECTICUT |
| RE: | INCREASE IN FINES LEVIED BY THE INSURANCE DEPARTMENT |
September 17, 2008
The purpose of this Bulletin is to bring to the attention of all persons licensed by the Insurance Department of the enactment of Public Act 08-178, which will take effect on October 1, 2008. Public Act 08-178 generally increases fines the insurance commissioner may assess against insurers, related companies, entities and individuals for violating Connecticut's insurance laws, including those related to unauthorized insurers, producer and company licensing, unfair and prohibited practices, utilization review, and fraud. Most of the fines enacted since 1996 are not affected by this public act, including those related to privacy, preferred provider networks, and self-insured workers' compensation laws.
The act also requires insurers to pay claims from Department of Public Health-licensed emergency medical service personnel and organizations in accordance with the law's prompt claim payment requirements. An insurer's failure to pay claims as specified by law is classified as an unfair and deceptive insurance act, for which the commissioner may assess fines as shown in the table attached herein.
In addition, the Commissioner reminds all licensees that any insurance producer who sells, solicits, negotiates or effects a contract of insurance offered by a specific company or companies is required to be duly appointed to act on behalf of such company or companies. It is a violation of Connecticut General Statutes § 38a-702m for a producer to act as an agent of an insurer without having first, or within fifteen days after the first insurance application has been submitted, procured an appointment from such insurer. Any insurer that allows or permits a producer to act on its behalf without an appointment is also in violation of Connecticut law. Consequently, a violation of appointment requirements can potentially subject both the insurer and the producer to administrative action and subsequent penalties. Moreover, because of the lack of an express statutory penalty for failure to procure an appointment, or allowing a producer to sell solicit and negotiate insurance on behalf of the insurer without the proper appointment, the general penalty provision contained in section 38a-2 of the Connecticut General Statutes will apply. Under Public Act 08-178 a violation of any provision of Title 38a where no other penalty is specified carries a maximum penalty of $15,000.00.
The guidelines provided by Bulletin L-11, which sets out the kind of activities that the Insurance Department takes into account in making a determination about whether an insurance producer is acting as an agent of an insurer, and consequently needs to be appointed, remain unchanged. As a general proposition, L-11 advises that when a producer is marketing or negotiating a specific insurer’s product, or urges or asks clients to buy a specific insurance product from a specific insurer, such producer needs to be duly appointed by the insurer. Therefore, all insurers and insurance producers are urged to review such guidelines to ensure that all appointment requirements are complied with.
A table listing the statutory fines affected by Public Act 08-178 is attached herein.
Thomas R. Sullivan, Insurance Commissioner