Oklahoma Producer Responsibilities and Ethics

Oklahoma insurance producers must adhere to strict ethical standards and professional responsibilities under Title 36 of the Oklahoma Statutes and Oklahoma Insurance Department regulations.

Fiduciary Duty

Definition

Fiduciary Duty - A legal obligation to act in the best interest of another party, placing their interests ahead of your own.

Insurance producers owe fiduciary duties to:

• Clients - When representing consumers in placing coverage
• Insurers - When acting as an agent with binding authority
• The Public - General duty to uphold insurance laws and protect consumers

Fiduciary Responsibilities

Breach of Fiduciary Duty

Violations include:

• Placing personal interests ahead of client interests
• Failing to disclose material information
• Mishandling client funds
• Recommending unsuitable coverage for commissions
• Failing to follow client instructions

Producer Duties

Duty to Clients

Oklahoma producers must:

1. Assess Client Needs

   • Conduct thorough needs analysis
   • Recommend appropriate coverage and limits
   • Explain policy terms, conditions, and limitations
   • Identify coverage gaps and exposures

2. Provide Accurate Information

   • Truthfully represent policy features and benefits
   • Disclose all exclusions and limitations
   • Explain coverage options clearly
   • Correct any misunderstandings

3. Act Promptly

   • Submit applications timely
   • Forward premiums to insurers promptly (within required time frames)
   • Report claims without delay
   • Respond to client inquiries within reasonable time
   • Provide certificates of insurance when requested

4. Maintain Coverage

   • Provide renewal notices with adequate time
   • Alert clients to coverage gaps or lapses
   • Assist with policy changes and endorsements
   • Monitor policy expiration dates

5. Handle Funds Properly

   • Maintain separate premium trust account
   • Never commingle premiums with personal funds
   • Remit premiums to insurers timely
   • Account for all funds received

Duty to Insurers

When acting as an agent with binding authority, producers must:

• Follow insurer underwriting guidelines accurately
• Complete applications accurately and completely
• Collect appropriate premiums before binding
• Report all material information disclosed by applicant
• Protect insurer interests within legal and ethical bounds
• Maintain confidentiality of insurer proprietary information

Duty to the Public

All producers have duties to:

• Uphold Oklahoma insurance laws and regulations
• Maintain competence through continuing education
• Report suspected insurance fraud
• Cooperate with OID investigations
• Maintain professional standards

Prohibited Practices

Oklahoma law specifically prohibits unfair and deceptive practices:

Misrepresentation

Prohibited: Making false, misleading, or deceptive statements about:

• Policy terms, benefits, or conditions
• Dividends or policy values
• Insurer financial condition or ratings
• Legal requirements to purchase insurance
• Competitor products or services
• Future premiums or coverage

Examples of Misrepresentation:

• "This policy covers everything"—when exclusions exist
• "You're required by law to buy this coverage"—when not mandatory
• "Rates will never increase"—when insurer can adjust rates
• "This is the cheapest policy available"—without proper comparison

Penalty: License suspension or revocation, fines, restitution

Exam Tip: Misrepresentation includes both false statements AND material omissions. Not disclosing important information can be misrepresentation.

Rebating

Rebating - Offering or giving any valuable consideration not specified in the policy as an inducement to purchase insurance.

Prohibited Rebating:

• Offering cash back to customers
• Giving gifts of significant value
• Sharing commissions with non-licensed persons
• Providing services not specified in policy
• Any inducement not included in filed rates

Permitted Activities:

• Advertising and marketing materials
• Promotional items of nominal value (pens, calendars, coffee mugs)
• Educational materials and services
• Discounts specified in filed rates and policies

Important: Oklahoma strictly prohibits rebating. Even with good intentions, sharing your commission or providing valuable gifts violates the law.

Exam Tip: Oklahoma prohibits rebating. You cannot share commissions with customers or offer inducements beyond what's in the filed policy. Promotional items of minimal value (under $25) are generally permitted.

Unfair Discrimination

Prohibited: Using unfair discrimination in:

• Underwriting decisions
• Premium rates
• Policy terms and conditions
• Claims settlements
• Marketing and advertising

Permitted: Risk-based underwriting using actuarially sound factors

Examples of Unfair Discrimination:

• Denying coverage based on race, religion, national origin, or gender
• Charging different rates based on zip code without actuarial justification
• Refusing coverage due to disability unrelated to risk
• Discriminating based on sexual orientation
• Different treatment based on credit score without proper justification

Examples of Permitted Risk-Based Discrimination:

• Higher auto rates for drivers with DUI convictions
• Different homeowners rates based on claims history
• Commercial property rates based on building construction and protection
• Auto rates based on driving record and experience

Twisting and Churning

Twisting - Inducing a policyholder to replace existing coverage by misrepresenting facts about the existing or proposed policy.

Examples:

• Falsely claiming existing policy is about to be cancelled
• Misrepresenting benefits of new policy vs. existing
• Concealing disadvantages of replacement
• Creating fear to motivate replacement

Churning - Frequently replacing policies primarily to generate commissions without material benefit to the client.

Examples:

• Replacing policies every year to earn new commissions
• Recommending replacements without proper analysis
• Multiple replacements in short time period

Both practices are strictly prohibited in Oklahoma and can result in license revocation.

Other Prohibited Practices

Disclosure Requirements

Producer Capacity Disclosure

Oklahoma producers must disclose their capacity:

Agent

• Represents one or more insurance companies
• Has authority to bind coverage on behalf of insurer
• Must disclose company representation
• Owes duties to both insurer and client

Broker

• Represents the insurance consumer
• Places business with multiple insurers
• Does NOT have binding authority
• Owes primary fiduciary duty to client
• Must disclose broker capacity

Conflict of Interest Disclosure

Producers must disclose:

• Financial interests in recommended products
• Ownership relationships with affiliated companies
• Compensation arrangements and incentives
• Any material conflicts of interest
• Relationships with service providers

Policy Replacement Disclosure

When replacing existing coverage, producers must:

• Provide replacement notice to client
• Compare existing and proposed coverage
• Explain advantages and disadvantages
• Notify existing insurer of replacement
• Complete replacement questionnaire

Privacy and Confidentiality

Under Oklahoma privacy laws and federal regulations:

1. Privacy Notice Requirements

   • Provide privacy notices to consumers at inception
   • Explain information collection, use, and sharing practices
   • Disclose categories of third parties receiving information
   • Update annually or when practices change

2. Information Security

   • Protect customer information from unauthorized access
   • Maintain secure record-keeping systems
   • Use encryption for electronic data
   • Properly dispose of confidential information (shredding)
   • Report data breaches to affected individuals and OID

3. Opt-Out Rights

   • Allow consumers to opt out of information sharing
   • Honor consumer privacy preferences
   • Maintain opt-out lists and preferences
   • Respect do-not-call and do-not-email requests

Disciplinary Actions

OID Enforcement Authority

The Oklahoma Insurance Commissioner can:

• Investigate complaints and potential violations
• Conduct examinations and audits
• Subpoena witnesses and documents
• Issue cease and desist orders
• Impose civil penalties (fines)
• Suspend or revoke licenses
• Order restitution to consumers

License Discipline

Grounds for license suspension, revocation, or denial:

Civil Penalties

The Commissioner may impose fines:

• Up to $25,000 per violation
• Each day may constitute separate violation
• Fines paid to State of Oklahoma
• May be in addition to other penalties

Criminal Penalties

Certain violations are criminal offenses:

• Insurance fraud: Felony, imprisonment and fines
• Unlicensed activity: Misdemeanor, fines
• Embezzlement: Felony, imprisonment and restitution

Appeal Rights

Producers subject to disciplinary action have rights to:

• Written notice of charges and proposed action
• Hearing before administrative law judge
• Legal representation at hearing
• Present evidence and witnesses
• Cross-examine witnesses
• Appeal to Oklahoma courts
• Stay of penalty during appeal (in some cases)

Record-Keeping Requirements

Required Records

Oklahoma producers must maintain records of:

Record Access

Records must be:

• Readily accessible for OID examination
• Maintained in organized and systematic fashion
• Available for inspection during business hours
• Produced promptly upon OID request (typically within 10 days)
• Kept in Oklahoma or electronically accessible

Premium Trust Account

Producers must:

• Maintain separate account for client premiums
• Never commingle with personal or business funds
• Reconcile account monthly
• Maintain records of all deposits and withdrawals
• Make funds available for OID examination

Exam Tip: Oklahoma requires 5 years of record retention for most insurance documents. Premium trust accounts must be separate from personal funds—commingling is grounds for license revocation.

Professional Standards

Competency

Producers must:

• Maintain knowledge of products sold
• Stay current with Oklahoma laws and regulations
• Complete continuing education requirements
• Understand coverage options and limitations
• Know when to seek expert advice

Communication

Professional communication includes:

• Responding to client inquiries promptly
• Providing clear and accurate information
• Using understandable language (not excessive jargon)
• Following up on client concerns
• Documenting important communications

Advertising Standards

Oklahoma requires insurance advertising to:

• Be truthful and not misleading
• Identify the insurer clearly
• Include producer license number
• Not misrepresent policy benefits
• Comply with OID advertising regulations

Prohibited advertising practices:

• False or misleading statements
• Deceptive trade names
• Unfair comparisons
• Misleading illustrations
• Failure to identify as insurance