Key Takeaways
- Producers must act with honesty, integrity, and in clients' best interests
- Prohibited practices include misrepresentation, rebating, twisting, and unfair discrimination
- Fiduciary duty requires proper handling of premiums and client funds
- West Virginia enforces strict ethical standards through investigation and discipline
- License violations can result in suspension, revocation, fines up to $10,000 per violation
West Virginia Producer Responsibilities and Prohibited Practices
Fiduciary Duties
Core Responsibilities
West Virginia producers have fiduciary duties to both clients and insurers:
| Duty | Description |
|---|---|
| Good Faith | Act honestly and in good faith in all dealings |
| Loyalty | Put client interests ahead of personal interests |
| Care | Exercise reasonable skill and diligence |
| Disclosure | Reveal all material information |
| Confidentiality | Protect client information |
| Accounting | Properly handle all funds |
Duties to Clients
Producers must:
-
Assess Needs Accurately
- Ask comprehensive questions about coverage needs
- Understand client's financial situation
- Identify all insurable exposures
-
Recommend Appropriate Coverage
- Match coverage to actual needs
- Recommend adequate limits
- Explain coverage options clearly
-
Provide Full Disclosure
- Explain policy terms in plain language
- Highlight important exclusions
- Disclose all material facts about coverage
-
Handle Transactions Properly
- Process applications accurately
- Forward premiums promptly
- Deliver policies timely
Duties to Insurers
Producers also owe duties to the insurance companies they represent:
| Duty | Application |
|---|---|
| Accurate Information | Submit correct application information |
| Prompt Remittance | Forward premiums according to agreement |
| Follow Guidelines | Adhere to underwriting guidelines |
| Report Changes | Notify of material changes in risk |
| Avoid Fraud | Never submit false or misleading information |
Premium Handling
Trust Account Requirements
West Virginia requires proper handling of premium funds:
| Requirement | Details |
|---|---|
| Segregation | Premiums held in trust for insurers |
| Separate Account | Cannot commingle with personal funds |
| Prompt Remittance | Forward to insurer according to contract |
| Record Keeping | Maintain accurate premium records |
| Audit Trail | Be able to account for all funds |
Premium Accounting
| Practice | Requirement |
|---|---|
| Collection | Issue receipts for all premiums collected |
| Recording | Post all transactions promptly |
| Reconciliation | Regular reconciliation of accounts |
| Reporting | Accurate reports to insurers |
| Documentation | Retain records for required period |
Prohibited Practices
Misrepresentation
Making false or misleading statements about:
| Subject | Examples |
|---|---|
| Policy Terms | Claiming coverage that doesn't exist |
| Benefits | Overstating what policy pays |
| Premiums | Misquoting costs |
| Company | False statements about insurer |
| Competitor | Defaming other companies |
Penalties: License suspension or revocation, fines up to $10,000 per violation
Rebating
Offering valuable consideration not specified in the policy as an inducement to purchase:
| Prohibited | Allowed |
|---|---|
| Cash back to customer | Premium discounts in policy |
| Gifts of substantial value | Nominal promotional items |
| Sharing commission with customer | Commission to licensed producer |
| Free services of significant value | Normal customer service |
Exam Tip: Rebating is strictly prohibited in West Virginia. Producers cannot share commissions or offer valuable inducements beyond what's specified in filed policies.
Twisting
Misrepresenting policy terms to induce policyholder to switch coverage:
| Element | Description |
|---|---|
| False Statements | Lying about existing policy |
| Inducement | Getting policyholder to cancel |
| Replacement | Replacing with new policy |
| Producer Benefit | Earning commission on new sale |
Example: Telling a client their current policy doesn't cover something when it actually does, to get them to buy a new policy.
Churning
Excessive replacing of policies primarily to generate commissions:
| Indicator | Description |
|---|---|
| Frequency | Multiple replacements in short period |
| Benefit | Little or no benefit to client |
| Motive | Producer earns new commissions |
| Harm | Client may lose benefits, pay surrender charges |
Unfair Discrimination
Making decisions based on factors unrelated to risk:
| Prohibited Factors | Allowed Factors |
|---|---|
| Race | Driving record |
| Religion | Claims history |
| National origin | Age (as risk factor) |
| Gender (unless actuarially justified) | Location |
| Sexual orientation | Credit (where permitted) |
Defamation
Making false statements that damage another's reputation:
| Target | Examples |
|---|---|
| Competing Producer | False statements about competitor's honesty |
| Other Insurer | False claims about company's financial strength |
| Other Policy | Misrepresenting competitor's coverage |
Coercion
Using pressure or threats to influence insurance decisions:
| Type | Example |
|---|---|
| Tying | Requiring insurance purchase for other service |
| Threats | Threatening harm for not purchasing |
| Intimidation | Pressuring elderly or vulnerable clients |
Record Keeping Requirements
Required Records
Producers must maintain records for 5 years in West Virginia:
| Record Type | Details |
|---|---|
| Applications | All submitted applications |
| Policies | Copies of policies sold |
| Correspondence | Client communications |
| Claims Files | Records of claims assisted |
| Premium Records | All premium transactions |
| CE Certificates | Continuing education documentation |
Record Format
| Format | Acceptable |
|---|---|
| Paper | Original documents |
| Electronic | Scanned copies, digital records |
| Microfilm | Acceptable for older records |
| Cloud Storage | If properly secured |
Access Requirements
- Records must be available for OIC inspection
- Must produce records within reasonable time upon request
- Cannot destroy records subject to investigation
Disciplinary Actions
Investigation Process
- Complaint Received - From consumer, insurer, or OIC-initiated
- Initial Review - Determine if investigation warranted
- Investigation - Gather evidence, interview parties
- Determination - Finding of violation or no violation
- Action - Appropriate sanction if warranted
Grounds for Discipline
| Violation | Examples |
|---|---|
| Material Misrepresentation | False statements on application |
| Fraudulent Acts | Insurance fraud, theft |
| Incompetence | Gross negligence, lack of knowledge |
| Untrustworthiness | Dishonest conduct |
| Unfair Practices | Violations of trade practice laws |
| Criminal Conviction | Felony or crime of moral turpitude |
Available Sanctions
| Sanction | Application |
|---|---|
| Warning Letter | Minor, first-time violations |
| Probation | Moderate violations with conditions |
| Fine | Up to $10,000 per violation |
| Suspension | Temporary loss of license |
| Revocation | Permanent loss of license |
| Restitution | Repayment to harmed parties |
Factors Considered
| Factor | Impact |
|---|---|
| Severity | More serious = harsher sanction |
| History | Prior violations increase penalties |
| Harm | Greater consumer harm = more serious |
| Cooperation | Cooperation may mitigate |
| Self-Reporting | May result in reduced penalty |
Consumer Protection Requirements
Required Disclosures
| Disclosure | When Required |
|---|---|
| Producer Status | Whether agent or broker |
| Company Representation | Which insurers represented |
| Commission | Upon request |
| Policy Terms | Before purchase |
| Exclusions | Material exclusions explained |
Privacy Requirements
West Virginia follows federal privacy laws:
| Requirement | Details |
|---|---|
| Privacy Notice | Provide notice of information practices |
| Opt-Out Rights | Allow opt-out of information sharing |
| Security | Protect customer information |
| Breach Notification | Notify of data breaches |
Exam Tip: West Virginia can impose fines up to $10,000 per violation for prohibited practices. Serious violations may result in license revocation and criminal prosecution.
What is rebating in West Virginia insurance law?
How long must West Virginia producers retain business records?
What is the maximum fine per violation for prohibited practices in West Virginia?