Key Takeaways
- Michigan producers have duties to act honestly and in good faith with clients
- Producers must disclose compensation arrangements and conflicts of interest when required
- Trust funds and premiums must be handled according to strict requirements
- Producers must maintain accurate records and provide required disclosures
- Continuing education includes mandatory ethics training
Producer Conduct and Fiduciary Duties
Michigan insurance producers have legal and ethical obligations to their clients and the public. Understanding these duties is essential for professional conduct and exam success.
Producer Duties
Michigan producers owe duties to their clients:
Key Duties
| Duty | Description |
|---|---|
| Honesty | Truthful in all communications |
| Disclosure | Reveal material information |
| Competence | Maintain professional knowledge |
| Confidentiality | Protect client information |
| Good Faith | Act honestly in all dealings |
Agent vs. Broker Duties
| Producer Type | Primary Duty To |
|---|---|
| Agent | Insurance company (but still must be fair to client) |
| Broker | Client/Insured |
Exam Tip: While agents represent insurers, they still have ethical obligations to treat clients fairly and honestly.
Disclosure Requirements
Michigan producers must disclose:
Compensation Disclosures
When required:
- Method of compensation (commission, fee, both)
- Material conflicts of interest
- Ownership interests in recommending insurers
- Referral arrangements
Product Disclosures
- All material terms and conditions
- Limitations and exclusions
- Premium and cost information
- Comparison with alternatives when replacing
Handling of Funds
Producers must handle premiums and client funds according to strict rules:
Premium Collection
| Requirement | Rule |
|---|---|
| Deposit | Promptly to insurer or trust account |
| Commingling | Cannot mix with personal funds |
| Trust Account | Required for holding premiums |
| Records | Must maintain detailed records |
Trust Account Requirements
- Separate from personal accounts
- Clearly designated as trust/fiduciary account
- Detailed records of all transactions
- Regular reconciliation
- Available for DIFS examination
Consequences of Mishandling
- License suspension or revocation
- Required restitution
- Civil liability
- Potential criminal charges (theft, embezzlement)
Record Keeping
Michigan requires producers to maintain records:
Required Records
| Record Type | Retention Period |
|---|---|
| Applications | 5 years minimum |
| Policy documents | Duration of relationship + years |
| Client correspondence | 5 years |
| Premium records | 5 years |
| Replacement forms | 5 years |
Access to Records
- DIFS can examine records during investigations
- Must provide records upon request
- Failure to maintain records is a violation
Ethics in Practice
Client Communication
Best practices for ethical client communication:
- Be Truthful - Never exaggerate or mislead
- Be Clear - Use language client understands
- Be Complete - Disclose all material information
- Be Responsive - Address questions and concerns
- Be Professional - Maintain appropriate boundaries
Conflicts of Interest
Common conflicts and how to handle them:
| Conflict | Proper Response |
|---|---|
| Higher commission product | Recommend what's best for client |
| Insurer incentive programs | Don't let incentives drive recommendations |
| Product quotas | Don't let quotas drive recommendations |
| Referral fees | Disclose to client when required |
Continuing Education
Michigan requires ethics training as part of CE:
- 3 hours of ethics every renewal period
- Part of the 24-hour total requirement
- Covers regulatory updates
- Includes case studies and examples
Professional Standards
Beyond legal requirements, professional standards include:
- Treating all clients fairly and equally
- Maintaining professional competence
- Avoiding conflicts of interest
- Protecting client confidentiality
- Being honest in all communications
- Reporting illegal or unethical conduct
- Staying current on products and regulations
Which type of Michigan insurance producer primarily represents the insurer?
What is prohibited regarding the handling of premium funds in Michigan?