19- MICHIGAN LAWS AND RULES PERTINENT TO
INSURANCE EXAM QUESTIONS AND ANSWERS WITH
COMPLETE SOLUTIONS
Departments of Insurance & Financial Services
Department of Insurance and Financial Services is a principal department in the Michigan executive
branch with responsibility for insurance and financial institutions.
headed up by a commissioner appointed to a four year term has the power to revoke a producer's
insurance license
Cease & Desist Order
The Commissioner may issue a cease-and-desist order to any person found to have committed an unfair
or deceptive act or has violated a state insurance law
Upon a hearing, a penalty of $500 per violation (not to exceed a total of $5,000) may be imposed Upon a
hearing, a penalty of $2,500 per violation (not to exceed a total of $25,000) may be imposed if the
person reasonably knew he was in violation
Certificate of Authority
The Commissioner will examine the financial affairs of all insurers before issuing a certificate of authority
to transact business in Michigan
Solvency
,The Commissioner will suspend the certificate of authority of any insurer that becomes insolvent, is
threatened with insolvency, or is delinquent in claims payment.
Producer
A producer is any person who sells, solicits, or negotiates insurance contracts for compensation on
behalf of an insurer. This includes submitting applications to the insurer, collecting premiums, and
delivering policies to policyowners. Each agency that transacts insurance must be licensed by the
insurance department. An insurance producer CANNOT act as an agent of an insurer until the insurance
producer becomes appointed by the insurer.
Counselor
An insurance counselor is any person who, for a fee, offers to examine any policy for the purpose of
giving advice or recommendations with respect to the benefits provided by the contract. An counselor
must be licensed in the State of Michigan.
Business Entity
A business entity that acts as an insurance producer in any manner (sells, solicits, negotiates, advertises,
collects commission) must be licensed in Michigan. The types of business entities that can be licensed in
Michigan are corporations, limited liability companies, limited liability partnerships, partnerships, or sole
proprietorships.
Process
An applicant for a resident producer license in Michigan must
Be at least 18 years of age Meet the prelicensing education requirements required by Michigan law
Have passed the state exam for the lines of authority in which licensure is sought
Submit the application with fees
,Maintenance & Duration
Producer licenses are renewable biennially (every two years) with fee, renewal application, and proof of
completing continuing education (CE). Exceptions are made for producers who are in active military
service or other extenuating circumstances by requesting a waiver.
Applicant can apply 90 days prior to license expiration date
nonresident Producer
A producer who holds a resident license in a different state may apply for a nonresident license in
Michigan, as long as both states have a reciprocal agreement. To apply, nonresidents must submit an
application form, proof of resident license in good standing, and fees. Nonresident producer applicants
do not have to take the Michigan state licensing exam, but must not have committed any act for which
the license could be denied, suspended, or revoked.
Temporary
A temporary license may be issued in cases where a producer has become disabled or dies, requiring a
replacement to service the producer's business. It also can be issued when the producer is actively
serving in the military.
A temporary license is valid for a maximum of 180 days.
Continuing Education
Resident producers must complete 24 hours of continuing education every 2 years to keep their license
active. Of those 24 hours required, 3 hours must be in ethics. Nonresident producers are not required to
complete Michigan continuing education requirements as long as their home state requirements are
met.
Reinstatement
, A lapsed license may be reinstated within one year of the suspension date. The requirements include:
reinstatement application renewal fee plus a reinstatement fee proof of completion of continuation
education requirements
Probation, suspension, revocation, refusal to issue or renew of licenses
The Commissioner may levy a civil fine, place on probation, suspend, revoke, refuse to renew, or deny a
license to any person who has:
Provided incorrect, misleading, incomplete or untrue information in the license application
Violating any insurance laws, regulations, subpoena, or orders from the Insurance Commissioner
Obtaining to obtain a license through fraud or misrepresentation Intentionally misrepresent the terms of
an insurance contract Been convicted of a felony Committed any insurance unfair trade practice
Using fraudulent, coercive, or dishonest practices or demonstrating incompetence, untrustworthiness, or
financial irresponsibility in this or any other state.
Having an insurance license denied, suspended, or revoked by another state
Forging a name to an insurance document or application Cheating on an insurance license examination
Knowingly accepting insurance business from an unlicensed individual
Failing to comply with a court order imposing child support Failing to pay state income tax
Producer appointments
The agreement between an insurance producer and insurer under which the insurance producer, for
compensation, may sell, solicit, or negotiate policies issued by the insurer is called an appointment. A
producer cannot act as an agent for an insurer unless he or she is appointed to work for that insurer.
The insurer is required to file a notice of appointment to the Commissioner within 15 days from the date
date the first insurance application is submitted or agency contract is executed
INSURANCE EXAM QUESTIONS AND ANSWERS WITH
COMPLETE SOLUTIONS
Departments of Insurance & Financial Services
Department of Insurance and Financial Services is a principal department in the Michigan executive
branch with responsibility for insurance and financial institutions.
headed up by a commissioner appointed to a four year term has the power to revoke a producer's
insurance license
Cease & Desist Order
The Commissioner may issue a cease-and-desist order to any person found to have committed an unfair
or deceptive act or has violated a state insurance law
Upon a hearing, a penalty of $500 per violation (not to exceed a total of $5,000) may be imposed Upon a
hearing, a penalty of $2,500 per violation (not to exceed a total of $25,000) may be imposed if the
person reasonably knew he was in violation
Certificate of Authority
The Commissioner will examine the financial affairs of all insurers before issuing a certificate of authority
to transact business in Michigan
Solvency
,The Commissioner will suspend the certificate of authority of any insurer that becomes insolvent, is
threatened with insolvency, or is delinquent in claims payment.
Producer
A producer is any person who sells, solicits, or negotiates insurance contracts for compensation on
behalf of an insurer. This includes submitting applications to the insurer, collecting premiums, and
delivering policies to policyowners. Each agency that transacts insurance must be licensed by the
insurance department. An insurance producer CANNOT act as an agent of an insurer until the insurance
producer becomes appointed by the insurer.
Counselor
An insurance counselor is any person who, for a fee, offers to examine any policy for the purpose of
giving advice or recommendations with respect to the benefits provided by the contract. An counselor
must be licensed in the State of Michigan.
Business Entity
A business entity that acts as an insurance producer in any manner (sells, solicits, negotiates, advertises,
collects commission) must be licensed in Michigan. The types of business entities that can be licensed in
Michigan are corporations, limited liability companies, limited liability partnerships, partnerships, or sole
proprietorships.
Process
An applicant for a resident producer license in Michigan must
Be at least 18 years of age Meet the prelicensing education requirements required by Michigan law
Have passed the state exam for the lines of authority in which licensure is sought
Submit the application with fees
,Maintenance & Duration
Producer licenses are renewable biennially (every two years) with fee, renewal application, and proof of
completing continuing education (CE). Exceptions are made for producers who are in active military
service or other extenuating circumstances by requesting a waiver.
Applicant can apply 90 days prior to license expiration date
nonresident Producer
A producer who holds a resident license in a different state may apply for a nonresident license in
Michigan, as long as both states have a reciprocal agreement. To apply, nonresidents must submit an
application form, proof of resident license in good standing, and fees. Nonresident producer applicants
do not have to take the Michigan state licensing exam, but must not have committed any act for which
the license could be denied, suspended, or revoked.
Temporary
A temporary license may be issued in cases where a producer has become disabled or dies, requiring a
replacement to service the producer's business. It also can be issued when the producer is actively
serving in the military.
A temporary license is valid for a maximum of 180 days.
Continuing Education
Resident producers must complete 24 hours of continuing education every 2 years to keep their license
active. Of those 24 hours required, 3 hours must be in ethics. Nonresident producers are not required to
complete Michigan continuing education requirements as long as their home state requirements are
met.
Reinstatement
, A lapsed license may be reinstated within one year of the suspension date. The requirements include:
reinstatement application renewal fee plus a reinstatement fee proof of completion of continuation
education requirements
Probation, suspension, revocation, refusal to issue or renew of licenses
The Commissioner may levy a civil fine, place on probation, suspend, revoke, refuse to renew, or deny a
license to any person who has:
Provided incorrect, misleading, incomplete or untrue information in the license application
Violating any insurance laws, regulations, subpoena, or orders from the Insurance Commissioner
Obtaining to obtain a license through fraud or misrepresentation Intentionally misrepresent the terms of
an insurance contract Been convicted of a felony Committed any insurance unfair trade practice
Using fraudulent, coercive, or dishonest practices or demonstrating incompetence, untrustworthiness, or
financial irresponsibility in this or any other state.
Having an insurance license denied, suspended, or revoked by another state
Forging a name to an insurance document or application Cheating on an insurance license examination
Knowingly accepting insurance business from an unlicensed individual
Failing to comply with a court order imposing child support Failing to pay state income tax
Producer appointments
The agreement between an insurance producer and insurer under which the insurance producer, for
compensation, may sell, solicit, or negotiate policies issued by the insurer is called an appointment. A
producer cannot act as an agent for an insurer unless he or she is appointed to work for that insurer.
The insurer is required to file a notice of appointment to the Commissioner within 15 days from the date
date the first insurance application is submitted or agency contract is executed
