North Dakota Producer Responsibilities

Fiduciary Duties

As a licensed producer, you have fiduciary duties to your clients. A fiduciary relationship is one of trust and confidence where you must put your clients' interests ahead of your own.

Core Fiduciary Obligations

Premium Handling

Producers who collect premiums must:

• Maintain Separate Accounts - Premium funds separate from personal funds
• Prompt Remittance - Forward premiums to insurer within required timeframe
• Accurate Records - Keep detailed records of all premium transactions
• Trust Account - Use designated premium trust account if required

Important: Mishandling premium funds is one of the most serious violations a producer can commit. It can result in immediate license revocation and criminal charges.

Disclosure Requirements

Required Disclosures to Clients

Producers must disclose:

1. Producer Status

   • Licensed producer in North Dakota
   • Companies represented
   • Compensation arrangements (if requested)

2. Coverage Information

   • Policy terms and conditions
   • Coverage limits and deductibles
   • Exclusions and limitations
   • Premium amounts and payment terms

3. Material Facts

   • Any information that would affect client's decision
   • Known coverage gaps
   • Policy changes or cancellations

Written Disclosure Requirements

Certain disclosures must be in writing:

• Policy replacement information
• Coverage reduction acknowledgments
• Declination of coverage forms (UM/UIM)
• Surplus lines disclosures

Prohibited Practices

Misrepresentation

Misrepresentation is making false, misleading, or incomplete statements about:

Rebating

Rebating is offering anything of value not specified in the policy as an inducement to purchase:

Prohibited Rebates:

• Cash payments or refunds
• Gift cards or merchandise
• Free services
• Favorable financing terms
• Sharing commission with insured

Permitted Practices:

• Company-approved dividends
• Published promotional items
• Legitimate discounts filed with state
• Educational materials

Twisting

Twisting is misrepresenting facts to induce a policyholder to replace existing insurance:

• Making false statements about existing policy
• Exaggerating defects in current coverage
• Concealing benefits of existing policy
• Using scare tactics to force replacement

Exam Tip: Twisting involves misrepresentation in the context of policy replacement. Legitimate replacement with proper disclosure is allowed; deceptive replacement is twisting.

Churning

Churning is excessive replacement of policies primarily to generate commissions:

• Repeated unnecessary replacements
• Same or similar coverage at higher cost
• Focus on commission over client benefit
• Pattern of frequent policy turnover

Unfair Discrimination

Unfair discrimination is treating similarly situated persons differently based on non-risk factors:

Controlled Business

What is Controlled Business?

Controlled business is insurance written primarily on:

• The producer's own life, property, or risks
• The producer's immediate family
• The producer's business partners or employers

North Dakota Controlled Business Rule

• Producers may not obtain a license solely for personal insurance
• License may be denied or revoked if business is predominantly controlled
• Must demonstrate legitimate insurance business beyond personal needs

Record Keeping Requirements

Required Records

Producers must maintain for at least 5 years:

Department Access

The Insurance Department may:

• Examine records during market conduct exams
• Request records during investigations
• Require production of specific documents

Disciplinary Actions

Grounds for Discipline

License suspension, revocation, or denial may result from:

• Providing false information on license application
• Violating insurance laws or regulations
• Committing fraud or dishonest acts
• Misappropriating premiums or funds
• Failing to maintain CE requirements
• Having license revoked in another state
• Conviction of insurance-related crime
• Demonstrating incompetence or untrustworthiness

Penalties

Hearing Process

1. Notice - Department provides written notice of charges
2. Response - Producer may respond in writing
3. Hearing - Administrative hearing if requested
4. Decision - Commissioner issues final order
5. Appeal - May appeal to state court

Maintaining Good Standing

Best Practices

To maintain your license in good standing:

1. Complete CE on Time - Don't wait until deadline
2. Renew Before Expiration - Avoid lapse and reinstatement fees
3. Update Information - Report address/name changes within 30 days
4. Act Ethically - Follow all rules and put clients first
5. Document Everything - Maintain complete records
6. Stay Informed - Keep current on law changes

Address Changes

Report to Department within 30 days:

• Change of business address
• Change of residence address
• Change of email address
• Change of name

Exam Tip: Know the prohibited practices (rebating, twisting, misrepresentation) and their definitions. These are frequently tested on both national and state exams.