The McCarran-Ferguson Act is a Federal law signed in 1945 in which Congress declared that insurance would be regulated at the state level. While insurance regulation is relatively uniform in all 50 states, there are state specific questions on the exam. **THIS SECTION IS SPECIFIC TO THE STATE OF ARIZONA**

Licensing Any applicant for a resident producer license in Arizona must be at least 18 years old and be a resident of the state of Arizona prior to submitting an application. Producer Any individual licensed to conduct insurance business, solicit applications, and negotiate insurance policies on behalf of an insurer is considered a licensed producer. Consultant The only individual authorized to receive a fee for the examination, consultation, or recommendation; or to analyze

the terms and conditions of a policy or contract is a consultant. Any other individual is strictly prohibited from using the word consultant to describe their insurance business. Controlled business is written solely in the interest of the producer or their family members. Producers are prohibited from securing an insurance license to provide this form of business; it is unlawful to conduct a controlled business. Every resident insurance producer authorized to conduct business in the state of Arizona must maintain a place of business (with public access) within the state.

Non-Resident License A producer from another state will need to meet the following requirements to obtain an Arizona nonresident license: • The individual must have a resident producer license in good standing in their home state. • The individual must complete the appropriate application and submit the required fees to the Director of Insurance. • The individual's home state must offer equal reciprocity for the state of Arizona (all States currently offer reciprocity for the producer's license).

Temporary License The Arizona Director of Insurance may issue a temporary producer's license without the requirement of an examination to the surviving spouse or legal representative of a deceased or disabled producer, or a producer who is called to active military duty. A temporary license may be issued once for a maximum of 180 days. A 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 residual or “trailing” commissions may be paid, but solicitation of new business is prohibited.

Renewal Maintenance A producer must renew their license every 4 years, by the end of the birth month of the licensee. Notice of Change of Address Changes of address (residential or business) must be reported by the licensee to the Director of Insurance within 30 days of the move. Failure to do so may result in monetary fines and/or the suspension of a license. Continuing Education Arizona resident producers who maintain a nonresident license must complete 40 hours of continuing education during each 4 year license period.

An insurance company must be authorized by the Arizona Dept. of Insurance to conduct business in Arizona. To receive authorization, the insurance company must present their articles of incorporation which include the nature of the company's business intentions, along with corporate bylaws and appropriate fees. A company that has been authorized to conduct insurance business in Arizona must maintain minimum standards as a corporation. The certificate of authority will allow the insurer to conduct business only if it maintains the minimum capital or permanent surplus required.

Duties of the Director The Director is appointed by the Governor for a term of 6 years. The Director is responsible for enforcing and administering all laws pertaining to insurance in the state of Arizona by: • Investigating all claims and complaints of legal violations relating to insurance. • If the Director finds that laws have been violated, he/she shall report their findings and supporting documents to the attorney general to pursue prosecution. • Monitoring 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. • Collecting all fees associated with producers and insurers. • Determining and administering fines associated with violations for insurers and producers. • Issuing reports pertaining to the suspension and revocation of licenses of producers and certificates of authority for insurers. • Approving documentation used by insurers such as forms and rates.

The Arizona Director of Insurance has the authority to suspend (for a maximum of 12 months), 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 for the state of the Arizona or any other state.

• 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 insurance related misdemeanor). • Having been convicted of violations in reference to the unfair trade practices or fraud act.

Suspend, Revoke or Non-renew (cont.) • 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 from another state. • Using another person's identity and forging their name on an insurance application. • Being guilty of unethical practices or cheating on a licensing exam.

Cease and Desist If the Director believes that a producer has (or is about to) violate any insurance regulation he/she may enter a cease and desist order. The recipient of a cease and desist order has not had his/her registration suspended or revoked, but is required to stop or limit the activity addresses in the order. Hearing The Director has the authority to conduct an investigation to determine if a hearing is required. Upon finding sufficient evidence, the Director may issue a notice to the guilty party of the date and time of the hearing which will be sent out no more than 30 days prior to the hearing.

Penalties and Fines A producer found guilty of conducting business in any line of insurance for which they are not properly licensed may have their license suspended or revoked. Fines The Director has the authority to impose civil penalties of: • $250 for each unintentional violation (not to exceed $2500 aggregate). • $2,500 for each intentional violation (not to exceed $15,000 aggregate).

Policy Forms Arizona is a “File and Use” state. Forms must be filed with the Director before use. After submission, the forms must be filed at least 30 days. Once this time frame has expired, the forms may be considered to be approved, provided no other communication has been received. Record Maintenance Client 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, and premiums received with each transaction. Records may be inspected at any time by the Dept of Insurance.

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 pay 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. • Making a settlement offer less than fair market value to offset the cost of investigating a claim.