36 Long Alley Saratoga Springs NY 12866
518-583-0639
inquiry@3hcs.com

FAQ’S

Frequently Asked Questions

Insurance Compliance

The insurance industry is policed by a number of different state and federal agencies.  These include, but are not necessarily limited to:  the Department of Insurance, the Department of State, the Department of Taxation, the Department of Banking as well as the Department of Financial Services, or their state named equivalent.  There is also federal agency oversight of some insurance related activities as is the case with regard to variable annuity products by the SEC.   Given the breadth of government agency oversight, maintaining compliance across the entire regulatory spectrum requires  consideration of a myriad of different laws as they may be applicable to each individual’s or entity’s specific insurance operations.

~Gary T. Harker, Esq., LL.M.

The position of insurance compliance manager necessitates understanding the applicable regulatory footprint of their organization’s business operations while continuously monitoring for new regulatory developments that may impact their organization, and assessing risks associated therewith.  They are also responsible for developing and executing policies, procedures, and internal controls to keep risk at levels acceptable to senior management with the aim of mitigating exposure to regulatory censure.

~Gary T. Harker, Esq., LL.M.

Compliance with insurance laws and state and federal agency regulations is critical because failure to adhere to the applicable requirements defined therein could result in criminal sanctions (in the most serious cases) as well as loss of charter, license, registration or eligibility to transact insurance and/or significant fines.  Additional repercussions would, in most cases, include increased administrative burden where an individual or entity has a multi-state footprint or intends to expand current footprint, and potentially damage an individual or entity’s reputation.

~Gary T. Harker, Esq., LL.M.

Yes, even if it happened 20 years ago.   As part of a state’s license due diligence process, states do take into account a licensee’s character and fitness to be licensed, and so prior felonies and misdemeanor’s may have a bearing on whether a state ultimately grants an insurance license. Disclosure typically requires submission of a copy of the court record, disposition documentation and a personal explanation relating to the felony and/or misdemeanor.

~Gary T. Harker, Esq., LL.M.

As a general rule, yes.  This is because part of the remit of the state agency overseeing the insurance market is to safeguard those seeking insurance coverage from unscrupulous individuals who would take advantage of their position.  Performing background checks into those serving in a position of authority at an entity licensee or having control over the licensee enables insurance regulators to eliminate prior to the issuance of an insurance license anyone it deems inappropriate, due to prior bad acts, from serving in a position of authority that may seek to take advantage of the unsuspecting insurance consumer.

~Gary T. Harker, Esq., LL.M.

Most states require DBA’s to be approved prior to use by an insurance licensee.  Accordingly, in most states DBA’s may not be used if they have not been approved by the state agency regulating insurance and additionally properly registered in accordance with state registration requirements, such as those enumerated under the state business corporation law or limited liability company law.

~ Darrell Belch, Esq., Vice President of Corporate Compliance

The answer to this question requires consideration of a multitude of different factors but in my experience the answer is most frequently no, a non resident insurance business entity does not need to be qualified to do business with the Department of State and Tax Department in every state it is conducting business if it is  licensed in every state nationally.  Laws speaking to whether a business entity operating in the insurance space needs a Certificate of Authority to do business with the Department of State and needs to register for income tax return and remittance purposes are promulgated under various state statutes.  These include some or all, depending upon the state, the following:  state Insurance Statutes as well as the Business Corporation and Limited Liability Company laws, state Employment laws and state Tax laws.  Other considerations as to whether a Certificate of Authority to do business should be obtained necessarily include such considerations as Intellectual Property as well as other legal considerations.  Needless to say, there is no single right answer for all insurance entities.  Each business entity should seek out guidance from appropriately qualified legal experts for a bespoke guidance.  To not do so, could cost your agency thousands and in some cases tens of thousands of dollars each year in administrative, professional, third party registered agent and state filing fees.  Should you have any questions about your agency, brokerage, producer agency, Adjuster firm, Reinsurance Intermediary, TPA, Premium Finance Company, MGU, MGA or other insurance business entity’s current footprint, or are contemplating forming any one of the foregoing, please don’t hesitate to reach out to our legal compliance experts for a free consultation.

~Gary T. Harker, Esq., LL.M.

Insurance regulatory compliant means conducting business in accordance with the body of laws, codes, rules and regulations which constitute the framework within which all activity associated with the transaction of insurance is governed at the state and federal level, as applicable.  This framework includes, but is by no means limited to, regulation as it relates to: insurance products, forms, rates, services, income (commission, service and referral fees), premium tax, sales and marketing communication, PHI, PII, data integrity,  and individual and entity licensure/registration/charter issuance, operating policies, procedures and, in the case of insurance captives and carriers, capital requirements.

~Gary T. Harker, Esq., LL.M.

The answer to this question requires consideration of a multitude of different factors but in my experience the answer is most frequently no, a non resident insurance business entity does not need to be qualified to do business with the Department of State and Tax Department in every state it is conducting business if it is  licensed in every state nationally.  Laws speaking to whether a business entity operating in the insurance space needs a Certificate of Authority to do business with the Department of State and needs to register for income tax return and remittance purposes are promulgated under various state statutes.  These include some or all, depending upon the state, the following:  state Insurance Statutes as well as the Business Corporation and Limited Liability Company laws, state Employment laws and state Tax laws.  Other considerations as to whether a Certificate of Authority to do business should be obtained necessarily include such considerations as Intellectual Property as well as other legal considerations.  Needless to say, there is no single right answer for all insurance entities.  Each business entity should seek out guidance from appropriately qualified legal experts for a bespoke guidance.  To not do so, could cost your agency thousands and in some cases tens of thousands of dollars each year in administrative, professional, third party registered agent and state filing fees each year.  Should you have any questions about your agency, brokerage, producer agency, Adjuster firm, Reinsurance Intermediary, TPA, Premium Finance Company, MGU, MGA or other insurance business entity’s current footprint, or are contemplating forming any one of the foregoing, please don’t hesitate to reach out to our legal compliance experts for a free consultation.

~Gary T. Harker, Esq., LL.M.

The 3 main reasons for insurance regulation are to: create and maintain a framework for the attainment of an orderly insurance marketplace by balancing the needs of consumers and carriers and regulating the conduct of all market participants; protect consumers; generate revenue for the state through the collection of application processing fees, premium taxes, and regulatory fines.

~Gary T. Harker, Esq., LL.M.