Producer Responsibilities & Duties

Kansas law imposes significant responsibilities on P&C producers to protect consumers, maintain industry integrity, and ensure proper business practices.

Fiduciary Responsibilities

Handling of Funds

Producers have a fiduciary duty when handling client funds:

Fiduciary Obligations:

• Premiums: Hold in trust for insurers and insureds
• Trust Accounting: Maintain separate accounts if holding premiums
• Prompt Remittance: Forward premiums to insurers per agreement terms
• Return Premiums: Promptly return unearned premiums to policyholders
• Claims Payments: Immediately deliver claim proceeds to insureds
• No Commingling: Never mix insurance funds with personal funds

Prohibited Actions:

• Using premium funds for personal purposes (conversion/misappropriation)
• Delaying premium payment to insurers to earn personal interest
• Retaining claim payments intended for insureds
• Mixing insurance funds with operating or personal accounts
• Borrowing from premium trust accounts

Exam Tip: Misappropriation or conversion of premiums—using client funds for personal purposes—is one of the most serious violations. It can result in license revocation, restitution orders, fines, and criminal prosecution.

Premium Payment Handling

Proper Premium Handling Steps:

1. Receipt of Premium:

   • Provide receipt if requested by client
   • Document payment method, amount, and date
   • Note effective date of coverage
   • Record in agency management system

2. Premium Trust Account (if maintaining one):

   • Deposit premiums in clearly identified trust account
   • Account must be separate from personal and business operating funds
   • Maintain accurate records of deposits and disbursements
   • Reconcile account regularly

3. Remittance to Insurer:

   • Forward premiums per agency agreement (typically within 30 days)
   • Maintain documentation of remittances
   • Track outstanding premium balances
   • Never use premiums for other purposes before remittance

4. Return of Premiums:

   • Promptly return unearned premiums to insureds
   • Typically within 30 days of cancellation or policy change
   • Include any refunds or overcharges due
   • Document all refunds

Disclosure Requirements

Required Disclosures

Kansas producers must disclose certain information to consumers:

Misrepresentation Prohibitions

Prohibited Misrepresentations:

About Policies:

• ✗ Falsely describing policy benefits or coverage
• ✗ Omitting material exclusions or limitations
• ✗ Misrepresenting policy terms or conditions
• ✗ Exaggerating benefits beyond actual provisions
• ✗ Understating premiums or fees

About Companies:

• ✗ Falsely representing insurer's financial condition
• ✗ Misrepresenting insurer's licensing or authorization status
• ✗ Making false comparisons with other insurers
• ✗ Implying state or government endorsement
• ✗ Falsely claiming company awards or ratings

About Dividends and Refunds:

• ✗ Falsely promising future dividends or premium refunds
• ✗ Misrepresenting dividend history
• ✗ Guaranteeing non-guaranteed elements
• ✗ Overstating investment returns

Exam Tip: Misrepresentation—knowingly making false statements or omitting material facts to induce someone to buy insurance—is one of the most serious producer violations and grounds for license revocation.

Unfair Trade Practices

Kansas law specifically prohibits certain unfair practices:

Rebating

Definition: Offering premium rebates or valuable inducements not specified in the policy

Prohibited Actions:

• Offering to rebate part of premium to induce purchase
• Giving special favors or advantages not available to all insureds in same class
• Offering cash, gift cards, or valuable inducements not in policy
• Providing special services not offered to all customers

Exception: Promotional items of nominal value (typically under $25) such as:

• Pens, calendars, notepads with agency name
• Educational materials
• Non-cash items of minimal value

Exam Tip: Rebating is offering valuable consideration not specified in the policy to induce purchase. Small promotional items under $25 are typically allowed. Large inducements (cash back, expensive gifts, special services) are prohibited.

Twisting

Definition: Using misrepresentation to induce an insured to lapse, forfeit, or replace an existing policy

Prohibited Actions:

• Making false comparisons between existing and proposed coverage
• Misrepresenting benefits of proposed policy
• Omitting material facts about existing coverage
• Convincing client to replace coverage solely to earn new commission
• Understating value of existing policy

Distinguishing Legitimate Replacement:

• ✓ Legitimate: Honest assessment that new policy better meets needs
• ✗ Twisting: Using misrepresentation to induce replacement

Churning

Definition: Excessive replacement of policies for producer's benefit (commission generation)

Characteristics:

• Replacing policies frequently without valid insurance reason
• Pattern of unnecessary policy changes
• Replacements primarily benefiting producer, not client
• Short holding periods before replacement

Unfair Discrimination

Prohibited:

• Unfairly discriminating between individuals of same class and essentially same risk
• Charging different rates without actuarial justification
• Denying coverage based on prohibited factors (race, religion, national origin, etc.)
• Treating similarly situated insureds differently

Permitted Discrimination:

• Rate differences based on legitimate risk factors (driving record, claims history, etc.)
• Actuarially justified classifications
• Underwriting based on objective risk assessment

Defamation

Prohibited:

• Making false or malicious statements about competitors
• Injuring reputation of other insurers or producers
• Spreading false rumors about financial condition
• Publishing false statements about business practices

Record Keeping Requirements

Required Records

Producers must maintain adequate business records:

Required Documentation:

• Applications and policy documents
• Correspondence with insureds and insurers
• Premium payment records
• Commission statements
• Client disclosure forms and receipts
• Complaint records and resolution
• Continuing education certificates
• Appointment documents

Retention Period:

• Minimum: 5 years for most insurance records
• Longer for Claims: Until final disposition plus 5 years
• CE Records: Through next renewal cycle
• Electronic Storage: Acceptable if readily accessible and secure

Department Access to Records

Commissioner Authority:

• Kansas Insurance Department may examine producer records at any time
• Producers must make records available upon request
• Failure to produce records can result in license suspension
• Records must be maintained in Kansas or readily accessible
• Electronic records must be readily producible

Exam Tip: Kansas requires maintaining records for 5 years. This is a commonly tested retention period. Records must be readily available for Department examination.

Reporting Requirements

Change of Information

Must Report Within 30 Days:

Criminal Convictions and Regulatory Actions

Immediate Reporting Required:

• Criminal conviction of any felony
• Criminal conviction of misdemeanor involving dishonesty or breach of trust
• Administrative action by any insurance regulatory authority
• License suspension, revocation, or discipline in another state
• Formal regulatory complaints or investigations

Failure to Report Consequences:

• License suspension or revocation
• Separate violation (failure to report)
• Increased penalties for underlying violation
• Loss of settlement opportunities

Exam Tip: Criminal convictions and regulatory actions must be reported IMMEDIATELY (not within 30 days like address changes). This immediate reporting requirement is commonly tested.

License Discipline and Penalties

Grounds for Discipline

The Kansas Insurance Commissioner may suspend, revoke, or refuse to renew a license for:

Application Violations:

• Providing false information on license application
• Misrepresenting facts or credentials
• Concealing criminal history or regulatory actions
• Using fraudulent documents

Financial Violations:

• Misappropriation or conversion of premiums or other funds
• Commingling insurance funds with personal funds
• Failing to remit premiums to insurers
• Failing to return unearned premiums

Business Practice Violations:

• Misrepresenting terms of insurance policies
• Rebating or offering improper inducements
• Twisting or churning policies
• Unfair discrimination in underwriting or rates
• Defaming competitors

Regulatory Violations:

• Failing to complete continuing education requirements
• Failing to report address changes within 30 days
• Failing to report criminal convictions immediately
• Allowing license to be used by unlicensed persons
• Refusing to cooperate with Department examinations

Criminal Issues:

• Conviction of felony
• Conviction of crime involving dishonesty or breach of trust
• Pleading guilty or nolo contendere to serious crime

Out-of-State Issues:

• License suspended or revoked in another state
• Disciplinary action by another insurance regulator
• Pattern of consumer complaints across states

Penalties and Disciplinary Actions

Available Penalties:

Aggravating Factors Increasing Penalties:

• Prior violations or disciplinary history
• Harm to multiple consumers
• Pattern of intentional misconduct
• Failure to cooperate with investigation
• Attempting to conceal violations
• Large financial harm to consumers

Exam Tip: The Commissioner can fine up to $10,000 PER VIOLATION. Multiple violations can result in substantial cumulative fines (e.g., 5 violations = up to $50,000). This per-violation amount is commonly tested.

Administrative Hearing Process

Producers subject to discipline have due process rights:

Hearing Rights:

• Written notice of charges
• Opportunity for hearing before final decision
• Right to legal representation
• Right to present evidence and witnesses
• Right to cross-examine Department witnesses
• Written decision with findings of fact
• Right to appeal to Kansas courts

Hearing Timeline:

1. Notice of charges or proposed action
2. Request for hearing (within specified days)
3. Pre-hearing discovery and preparation
4. Hearing before hearing officer or Commissioner
5. Post-hearing briefs (if allowed)
6. Written decision issued
7. Appeal period (typically 30 days to appeal to district court)

Professional Standards

Best Practices

Client Service Standards:

• Return client calls and emails promptly (within 24-48 hours)
• Provide clear, understandable explanations
• Document all client interactions
• Review coverages at renewal
• Proactively identify coverage gaps
• Serve client's best interests above commission considerations

Risk Management:

• Maintain errors & omissions (E&O) insurance (if required by appointing company)
• Document coverage recommendations and client decisions
• Use written coverage proposals
• Obtain signed declination forms for rejected coverages
• Maintain complete client files
• Follow agency procedures and protocols

Ethical Obligations

Core Ethical Principles:

• Honesty: Be truthful in all communications
• Integrity: Do what's right even when no one is watching
• Competence: Maintain knowledge and skills
• Loyalty: Put client interests first
• Fairness: Treat all clients equitably
• Confidentiality: Protect client information

Exam Tip: When answering ethics questions on the exam, always choose the answer that puts client interests first, provides full disclosure, and complies with regulations—even if it means lower commissions for the producer.