State Licensing MARKET REGULATION Handbook 2018 State Licensing Handbook 2018 The NAIC is the authoritative source for insurance industry information. Our expert solutions support the efforts of regulators, insurers and researchers by providing detailed and comprehensive insurance information. The NAIC offers a wide range of publications in the following categories: Accounting & Reporting Special Studies Information about statutory accounting principles Studies, reports, handbooks and regulatory and the procedures necessary for fi ling financial research conducted by NAIC members on a variety annual statements and conducting risk-based of insurance related topics. capital calculations. 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NAIC Executive Office NAIC Central Office NAIC Capital Markets 444 North Capitol Street, NW 1100 Walnut Street & Investment Analysis Office Suite 700 Suite 1500 One New York Plaza, Suite 4210 Washington, DC 20001 Kansas City, MO 64106 New York, NY 10004 202.471.3990 816.842.3600 212.398.9000 State Licensing Handbook ______________________________________________________________________________________________________ Table of Contents Introduction Part I Insurance Producer Licensing Section A Governing Principles Chapter 1 Modern Producer Licensing ............................................................................................... 5 Uniformity Provisions of GLBA ........................................................................................ 5 Countersignature Requirements ......................................................................................... 5 National Insurance Producer Registry ................................................................................ 6 Chapter 2 The Producer Licensing Model Act ................................................................................... 7 Other Key Provisions of the PLMA ................................................................................... 7 Commissioner Discretion ................................................................................................... 8 Section-by-Section of the PLMA ....................................................................................... 8 Frequently Asked Questions ............................................................................................ 11 Producer Licensing Model Act Implementation, Frequently Asked Questions ............... 11 Chapter 3 Uniform Licensing Standards ........................................................................................... 15 Initial and Renewal Producer License Applications ......................................................... 15 Chapter 4 Nonresident Licensing...................................................................................................... 17 Reciprocity Examples ...................................................................................................... 18 Section B Licensing Processes Chapter 5 Activities Requiring Licensure ......................................................................................... 23 License Required to Sell, Solicit and Negotiate ............................................................... 23 Commissions .................................................................................................................... 23 Exceptions to Licensing ................................................................................................... 24 Chapter 6 Prelicensing Education ..................................................................................................... 25 Chapter 7 Application Review for Initial Licenses ........................................................................... 27 Individual Application Forms .......................................................................................... 27 Business Entity Application ............................................................................................. 27 Background Checks ......................................................................................................... 27 Fingerprints ...................................................................................................................... 28 1033 Consent Waivers ..................................................................................................... 28 NAIC Databases Relevant to Initial Application Review ................................................ 28 Review of Applications When Criminal History Is Disclosed ......................................... 28 Statutory Obligations and Discretion ............................................................................... 29 Chapter 8 Testing Programs ............................................................................................................. 31 Introduction ...................................................................................................................... 31 PLMA Guidelines on Examinations ................................................................................. 31 Test Development and Review ......................................................................................... 32 Developing the Questions ................................................................................................ 33 Passing Score vs. Pass Rate .............................................................................................. 33 Test Development Deliverables ....................................................................................... 35 Candidate Information Bulletin (CIB).............................................................................. 35 Technology Issues ............................................................................................................ 35 Legal Defensibility ........................................................................................................... 36 Vendor Responsibilities ................................................................................................... 36 Test Administration .......................................................................................................... 36 Reporting Examination Results ........................................................................................ 37 Retesting/Notice of Failure .............................................................................................. 37 Chapter 9 Lines of Insurance ............................................................................................................ 39 The Major Lines ............................................................................................................... 39 © 2009-18 National Association of Insurance Commissioners State Licensing Handbook ______________________________________________________________________________________________________ The Limited Lines ............................................................................................................ 40 Limited Line of Car Rental Insurance .............................................................................. 41 Limited Line of Credit Insurance ..................................................................................... 41 Limited Line of Crop Insurance ....................................................................................... 42 Limited Line of Surety Insurance ..................................................................................... 43 Limited Line of Travel Insurance ..................................................................................... 43 Non-Core Limited Line ...................................................................................................