Insurable interest in life insurance signifies a legitimate relationship between the policy owner and the insured, such that the policy owner would suffer a financial or emotional loss if the insured were to die. North Dakota law dictates that insurable interest must exist at the time the policy is purchased. Generally, individuals have an insurable interest in their own lives, the lives of their spouses, children, and key employees. Business partners may also have an insurable interest in each other. If insurable interest does not exist at the policy’s inception, the policy is considered a wagering contract and is unenforceable. This means the insurer would likely not be obligated to pay out the death benefit. Furthermore, the policy could be deemed illegal, potentially leading to legal repercussions for those involved in procuring it. North Dakota Century Code 26.1-32.1-04 addresses insurable interest.

North Dakota Administrative Code 45-06-05 outlines the requirements for policy replacement. When a new policy is purchased to replace an existing one, the replacing insurer must notify the existing insurer of the proposed replacement. The replacing insurer must also provide the applicant with a “Notice Regarding Replacement of Life Insurance” which details the potential disadvantages of replacing existing coverage. The existing insurer, upon notification, must provide the policyholder with information about their existing policy, including any surrender charges or other penalties that may apply. Failure to comply with these regulations can result in disciplinary action by the North Dakota Insurance Department, including fines, suspension, or revocation of the producer’s license. The purpose of these regulations is to protect consumers from being misled into replacing policies that are beneficial to them.

The North Dakota Life and Health Insurance Guaranty Association Act (North Dakota Century Code Chapter 26.1-36) provides a safety net for policyholders in the event that their insurance company becomes insolvent. The Association covers direct life insurance policies, health insurance policies, annuity contracts, and supplemental contracts to these policies. However, it does not cover certain types of policies, such as self-funded employee benefit plans, or policies issued by fraternal benefit societies. The Act places limitations on the amount of coverage provided. For life insurance death benefits, the limit is generally $500,000 per life, regardless of the number of policies. For health insurance benefits, the limit is typically $500,000 for major medical coverage. In the event of an insurer’s insolvency, the Association will step in to pay covered claims up to these limits, ensuring that policyholders receive at least some of the benefits they were promised.

Twisting is an illegal and unethical practice in insurance sales where a producer induces a policyholder to drop an existing policy and purchase a new one, typically from the same producer, to the detriment of the policyholder. This often involves misrepresentation or incomplete comparisons of the two policies. For example, a producer might convince a client to surrender a whole life policy with accumulated cash value to purchase a new, more expensive universal life policy, without adequately explaining the surrender charges, loss of guaranteed interest rates, or the potential for the new policy to lapse if premiums are not consistently paid. North Dakota Century Code 26.1-26-17 prohibits misrepresentation and false advertising of insurance policies. Engaging in twisting can result in severe penalties, including fines, suspension or revocation of the producer’s license, and potential civil lawsuits from the harmed policyholder. Ethically, twisting violates the producer’s fiduciary duty to act in the best interests of their client.

North Dakota requires licensed insurance producers to complete continuing education (CE) to maintain their licenses. Producers must complete 24 hours of CE every two years, prior to their license renewal date. Three of those hours must be in ethics. The remaining hours can cover various insurance-related topics, such as insurance law, product knowledge, and sales practices. North Dakota Administrative Code 45-02-03 outlines the specific requirements for CE. Failure to complete the required CE hours by the deadline will result in the suspension of the producer’s license. The producer will then need to complete the CE requirements and pay a reinstatement fee to have their license reinstated. Repeated failures to comply with CE requirements can lead to more severe disciplinary actions, including revocation of the license.

Unfair discrimination in insurance underwriting refers to the practice of treating individuals or groups differently based on factors that are not directly related to the risk being insured. North Dakota Century Code 26.1-26-16 prohibits unfair discrimination. Examples of unfairly discriminatory practices include: charging different premiums or denying coverage based solely on an individual’s race, religion, national origin, or sexual orientation. It is also generally considered unfairly discriminatory to deny coverage based solely on an individual’s geographic location within the state, unless there is a demonstrable and actuarially sound reason for doing so. Underwriting decisions must be based on objective, verifiable risk factors, such as age, health status, driving record, and claims history. Any deviation from this principle could be considered unfair discrimination and subject to regulatory action.

North Dakota law regulates the use of credit information in insurance underwriting to protect consumers from unfair or discriminatory practices. Insurers are permitted to use credit information as one factor among many in assessing risk and determining premiums for personal lines of insurance, such as auto and homeowners insurance. However, they cannot base an adverse action (e.g., denial of coverage, cancellation, or premium increase) solely on credit information. North Dakota Century Code 26.1-26.4 outlines these regulations. Insurers must disclose to consumers that they may use credit information in their underwriting process. If an adverse action is taken based in whole or in part on credit information, the insurer must provide the consumer with a notice of the adverse action, including the specific reasons for the action and information about how to obtain a free copy of their credit report. Insurers are also prohibited from using certain types of credit information, such as inquiries not initiated by the consumer, or accounts designated as being in dispute.

Twisting, in the realm of insurance, refers to the unethical practice of inducing a policyholder to drop an existing insurance policy and purchase a new one from a different insurer, primarily for the agent’s personal gain, without demonstrating a tangible benefit to the policyholder. This often involves misrepresentation, incomplete comparisons, or outright deception regarding the terms and benefits of the existing and proposed policies. North Dakota Century Code § 26.1-26-16 outlines unfair methods of competition and unfair or deceptive acts or practices in the business of insurance. While “twisting” is not explicitly named, it falls under the broader prohibition of misrepresentation and unfair comparisons. Specifically, making any statement that misrepresents the benefits, advantages, conditions, or terms of any insurance policy, or making any unfair or incomplete comparison of any insurance policy to induce a policyholder to lapse, forfeit, surrender, retain, or convert any insurance policy, is a violation. Penalties for engaging in twisting can be severe. The North Dakota Insurance Commissioner has the authority to issue cease and desist orders, impose civil penalties, and suspend or revoke an agent’s license. Civil penalties can range up to \$5,000 per violation, and in cases of willful violation, up to \$50,000 per violation. Furthermore, the agent may be liable for restitution to the policyholder for any financial losses incurred as a result of the twisting. The Commissioner also has the power to pursue criminal charges in cases of egregious or repeated violations.

North Dakota requires licensed insurance producers to complete continuing education (CE) to maintain their licenses. As per North Dakota Administrative Code Article 45-02-03, producers must complete a specified number of CE credit hours every license term, which is typically two years. The specific number of required hours varies depending on the lines of authority held by the producer, but it generally falls around 24 credit hours, with a certain number of those hours dedicated to ethics training. Qualifying CE courses must be approved by the North Dakota Insurance Department and cover topics relevant to the producer’s licensed lines of authority. These topics can include insurance law, policy provisions, ethical conduct, and industry updates. Some courses may be specific to certain product lines, such as life, health, property, or casualty insurance. Producers are responsible for ensuring that the courses they take are approved and relevant to their licenses. Failure to meet the CE requirements can result in disciplinary action by the North Dakota Insurance Department. This may include suspension of the producer’s license until the deficiency is corrected, imposition of fines, or even revocation of the license in cases of repeated non-compliance. Producers are typically given a grace period to complete any missing CE hours, but they may be subject to penalties during this period. It is crucial for producers to track their CE credits and ensure timely completion to avoid any disruptions to their licensing status.

The North Dakota Insurance Guaranty Association (NDIGA) serves as a safety net for policyholders in the event that an insurance company becomes insolvent and is unable to fulfill its obligations. Established under North Dakota Century Code Chapter 26.1-43, the NDIGA provides a mechanism for paying covered claims of insolvent insurers, thereby protecting policyholders from financial losses. The NDIGA is activated when an insurance company licensed to do business in North Dakota is declared insolvent by a court and ordered into liquidation. Upon activation, the NDIGA steps in to pay covered claims up to certain limits. These claims typically include unpaid policy benefits, unearned premiums, and other obligations of the insolvent insurer. However, the NDIGA’s coverage is subject to several limitations. First, it only covers policies issued by licensed insurers; it does not cover policies issued by unauthorized or unlicensed entities. Second, there are maximum limits on the amount of coverage provided. As of current regulations, the NDIGA typically covers claims up to \$500,000 per claim, although specific limits may vary depending on the type of policy and the nature of the claim. Third, certain types of policies are excluded from coverage, such as life and health insurance policies (which are covered by separate guaranty associations), as well as surety bonds, credit insurance, and other specialized lines of insurance. It’s important to note that the NDIGA is not intended to provide complete reimbursement for all losses, but rather to offer a degree of protection to policyholders who would otherwise be left with unpaid claims.

The process for handling complaints against insurance companies or producers in North Dakota is overseen by the North Dakota Insurance Department. Individuals who believe they have been wronged by an insurer or producer can file a formal complaint with the Department. The complaint should be submitted in writing and include detailed information about the alleged violation, supporting documentation, and the complainant’s contact information. Upon receiving a complaint, the North Dakota Insurance Department reviews the allegations to determine if they fall within its jurisdiction and if there is sufficient evidence to warrant an investigation. If the Department decides to proceed, it will notify the insurance company or producer of the complaint and request a response. The Department may also conduct its own investigation, which could involve interviewing witnesses, reviewing policy documents, and examining company records. The potential outcomes of a complaint investigation vary depending on the nature and severity of the violation. If the Department finds that the insurance company or producer has violated insurance laws or regulations, it may take disciplinary action, such as issuing a cease and desist order, imposing fines, suspending or revoking the producer’s license, or requiring the insurer to pay restitution to the complainant. In some cases, the Department may also refer the matter to law enforcement for criminal prosecution. If the Department finds no violation, the complaint will be closed, and the complainant will be notified of the decision. The North Dakota Insurance Department’s primary goal is to protect consumers and ensure that insurance companies and producers comply with all applicable laws and regulations.

In North Dakota, “controlled business” refers to insurance written on the producer’s own life, health, or property, or on the lives, health, or property of the producer’s immediate family or business associates. This includes employees, employers, and firms in which the producer or their immediate family has an interest. The concern with controlled business is that a producer might obtain a license primarily to insure themselves and their close connections, rather than serving the general public. North Dakota insurance regulations place restrictions on producers who primarily write controlled business to prevent abuse of the licensing system. While specific percentage thresholds may vary, a common rule is that a producer cannot derive more than a certain percentage (e.g., 50%) of their total insurance premiums from controlled business. If a producer exceeds this limit, their license may be subject to suspension or revocation. The purpose of these restrictions is to ensure that producers are genuinely engaged in the business of insurance and are serving the broader insurance needs of the public. Producers are expected to actively solicit and write insurance for individuals and businesses outside of their immediate circle of controlled business. The North Dakota Insurance Department monitors producer activity to identify those who may be violating these restrictions and takes appropriate action to enforce compliance.

To obtain a nonresident insurance producer license in North Dakota, an individual must already hold a valid resident insurance producer license in their home state. The process generally involves submitting an application to the North Dakota Insurance Department, providing proof of licensure in the home state, and paying the required application fee. North Dakota participates in the National Association of Insurance Commissioners (NAIC) Producer Database (PDB), which facilitates the verification of producer licensing information across state lines. As a result, the application process for nonresident licenses is often streamlined. North Dakota has reciprocity agreements with many other states, meaning that it recognizes the licensing requirements of those states as substantially similar to its own. This allows producers from reciprocal states to obtain a nonresident license in North Dakota without having to complete additional prelicensing education or examination requirements. However, producers may still be required to complete continuing education requirements to maintain their nonresident license. The North Dakota Insurance Department may require nonresident applicants to submit fingerprints for a criminal background check. Additionally, applicants must disclose any past disciplinary actions or criminal convictions on their application. The Department reviews each application to ensure that the applicant meets all licensing requirements and is of good moral character. If the application is approved, the nonresident license is typically valid for a specified period, such as two years, and must be renewed periodically.

North Dakota insurance regulations place specific requirements on advertising by insurance producers to ensure transparency and prevent misleading or deceptive practices. According to North Dakota Administrative Code and relevant sections of the North Dakota Century Code, all insurance advertisements must be truthful and accurate, and they cannot misrepresent the terms, benefits, or conditions of any insurance policy. Specifically, advertisements must clearly and conspicuously disclose the producer’s name and license number. This information allows consumers to verify the producer’s credentials and ensure that they are properly licensed to sell insurance in North Dakota. Additionally, advertisements must identify the insurer that the producer represents. This disclosure is important because it informs consumers about the financial strength and stability of the insurance company that will be providing coverage. Advertisements cannot use any language or illustrations that are false, misleading, or deceptive. They must accurately describe the policy being advertised and cannot exaggerate the benefits or minimize the limitations. Any comparisons to other insurance policies must be fair and accurate, and they cannot unfairly disparage competitors. The North Dakota Insurance Department has the authority to review and approve insurance advertisements to ensure compliance with these regulations. Producers who violate these advertising rules may be subject to disciplinary action, including fines, suspension of their license, or other penalties.