Illinois insurance law is the Illinois Insurance Code (215 ILCS 5), with the Department of Insurance's rules in Title 50 of the Illinois Administrative Code. Producer licensing is Article XXXI of the Code (Sections 500-5 and following). Auto financial responsibility is in the Illinois Vehicle Code (625 ILCS 5). These notes cover the rules the Illinois state exams draw on.

About the exam

Illinois exams are given by Pearson VUE. Each line has two exams, a General exam and an Illinois State exam, and both must be passed within 90 days of each other (215 ILCS 5/500-25). The passing score is a scaled 70.

Unscored pretest questions are added. Illinois has no combined Life & Health exam and no combined Property & Casualty exam. Property and Casualty are separate lines with separate exams.

After the exam: someone who fails or misses an exam must reapply and pay again (215 ILCS 5/500-25(d)).

Prelicensing education is required (215 ILCS 5/500-30):

• 20 hours each for Life, Accident & Health, Fire (property) and Casualty. Motor Vehicle needs 12.5 hours.
• 7.5 hours of each course must be in a classroom or live webinar (5 hours for Motor Vehicle).
• The Fire and Casualty courses together also satisfy the Personal Lines requirement.
• The course must be completed before the exam and used within one year (50 Ill. Adm. Code 3119.45).
• People holding listed designations, such as CLU, ChFC, CFP, CIC and LUTCF, or a college degree in insurance, are exempt.

Applicants must be at least 18 (215 ILCS 5/500-30(a)(1)).

The regulator

• The Director of Insurance heads the Department of Insurance and is appointed by the Governor (20 ILCS 5/5-20, 5-605).
• Powers:
  • The Director enforces all insurance laws and makes rules to carry them out (215 ILCS 5/401).
  • The Director can subpoena witnesses and records. Refusing a subpoena can bring a penalty of up to $2,000 (215 ILCS 5/403).
• Hearings: written notice at least 10 days before. Hearings are held in Springfield, Chicago or the county of the person's business (215 ILCS 5/402).
• Emergency cease and desist orders are served with notice of a hearing set 20–30 days later (215 ILCS 5/401.1). Violating an order can bring forfeiture of up to $100 a day, with a $5,000 maximum.
• Market conduct: any non-financial review of compliance, from correspondence and interviews to full examinations (215 ILCS 5/132).
• Examining producers: producers under examination must give the Director free access to their records. They may request a hearing within 14 days of receiving the report (215 ILCS 5/500-110).
• Customer service: insurers must run a customer affairs department and answer written complaints within 21 days (215 ILCS 5/143d).

Insurer basics

• An insurer needs a certificate of authority (215 ILCS 5/121-2).
• Domestic = formed in Illinois. Foreign = formed in another state.
• Policy forms:
  • Life, accident and health forms must be filed and approved before use (215 ILCS 5/143(1)).
  • Property and casualty forms are filed but need no prior approval. The Director can stop the use of a noncompliant form (215 ILCS 5/143(2)).
• Withdrawing from a line: an insurer must notify the Director 90 days before policies terminate (215 ILCS 5/143.11a).

Producer licensing (Article XXXI)

Licenses and fees:

• Two-year license. The license renews on the last day of the producer's birth month. The first term is 18 to 29 months (215 ILCS 5/500-35; 50 Ill. Adm. Code 3121.30).
• Fees: $215 resident and $380 nonresident, every two years (215 ILCS 5/500-135).

Lines of authority (215 ILCS 5/500-35(a)):

• life;
• accident and health;
• property (direct or consequential loss to property);
• casualty (legal liability);
• personal lines.

Variable products need a life license plus a separate variable contract license. That license is issued on proof of passing FINRA Series 6 or 7 (50 Ill. Adm. Code 1551.90).

Basic rules:

• License required: selling, soliciting or negotiating without a license is a Class A misdemeanor. If money collected is misappropriated, it becomes a Class 4 felony (215 ILCS 5/500-15).
• Fee-based advice: only attorneys, licensed producers, bank trust officers, actuaries or CPAs acting as consultants, and licensed public adjusters may give insurance advice for a fee (215 ILCS 5/500-15(b)).
• Exemptions: salaried employees doing underwriting, loss control or claims work with no commission, and employers running their own benefit plans without insurer pay, need no license (215 ILCS 5/500-20).
• A license gives no authority to bind an insurer. That authority comes from the insurer (215 ILCS 5/500-10).
• Business entities name a licensed designated responsible licensed producer who is an owner, officer or similar (215 ILCS 5/500-30(c); 50 Ill. Adm. Code 3121.40).

Notices:

• Change of address within 30 days; email changes within 30 days too (215 ILCS 5/500-35(g); 50 Ill. Adm. Code 3121.30).
• Assumed names must be reported before use (215 ILCS 5/500-55).

Moving:

• A producer moving into Illinois applies within 90 days, with no exam for lines already held (215 ILCS 5/500-45).
• A producer leaving Illinois files a change of address and the new state's certification within 30 days (215 ILCS 5/500-40).

Nonresidents are licensed on the strength of a home-state license in good standing (215 ILCS 5/500-40).

Temporary licenses:

• Up to 180 days, renewable once for another 180, without an exam (215 ILCS 5/500-60). They go to a deceased or disabled producer's spouse or representative, a business entity member, or the designee of a producer entering military service.
• A separate 90-day temporary license can be issued while an applicant completes prelicensing education. A person may hold only one in a lifetime (215 ILCS 5/500-65).

Inactive status: available in two-year periods, up to four years in total (215 ILCS 5/500-120).

Lapsed license: may be reinstated within 12 months without an exam by paying double the unpaid renewal fee (215 ILCS 5/500-35(d)).

Continuing education

• 24 hours each two-year period, including 3 hours of ethics taken in a classroom or live webinar (215 ILCS 5/500-35(b)).
• Carryover: up to 12 extra non-ethics hours carry forward. Ethics hours never carry over (50 Ill. Adm. Code 3119.45).
• Association participation: up to 4 hours per period, and it can't count toward ethics.
• Not allowed: credit for courses taken before the license was issued, or for repeating a course in the same period. Producers keep course records for 3 years.
• Failing CE ends the license automatically (215 ILCS 5/500-35(b)(2)).

Commissions, fees and premium funds

• Commissions: none may be paid to an unlicensed person. Renewal commissions may go to someone licensed at the time of sale (215 ILCS 5/500-80).
• Producer fees (215 ILCS 5/500-80(e)):
  • Disclosed in writing before policy delivery, with the disclosure kept 7 years.
  • Fees over 10% of the premium need the consumer's signature.
  • If the policy is cancelled within 90 days, the fee is refunded pro rata within 30 days, unless it was documented as fully earned.
  • No cancellation fee may ever be charged.
• Premium funds:
  • Premiums are held in a fiduciary capacity (215 ILCS 5/500-115).
  • Misappropriating more than $150 is a Class 3 felony.
  • An insured who pays the producer has paid the insurer.
• Premium Fund Trust Account (50 Ill. Adm. Code 3113.40–3113.60):
  • Required if premiums are held 15 days or more, or deposited or used.
  • It must be at an Illinois institution and labeled "Premium Fund Trust Account."
  • It may not be used as an operating account.
  • It is reconciled monthly, and records are kept 7 years.
  • Return premiums are paid within 15 days.
• Producer bond: producers who broker business with insurers they have no agency contract with need a bond. It is the greater of $2,500 or 5% of brokered premium, up to $50,000 (215 ILCS 5/500-130).
• Controlled business: a license may be denied if premiums on business covering the producer, the producer's spouse, employer or own business exceed all other premiums (215 ILCS 5/500-125).

Discipline and reporting

Grounds (215 ILCS 5/500-70) include:

• false application statements;
• forgery;
• using notes on the exam;
• failing to pay state income tax or child support;
• a license denied or revoked in another state.

Applicants with convictions: arrests without a conviction can't be held against an applicant. Rehabilitation factors are weighed, such as 5 years since a conviction (215 ILCS 5/500-76).

Penalties and procedure:

• Civil penalties of up to $10,000 per cause, with $100,000 in total (215 ILCS 5/500-70(d)).
• A hearing may be demanded within 30 days of the notice.
• After a revocation or denial, the person can't reapply for three years.

Felony convictions must be reported within 30 days of the judgment (215 ILCS 5/500-95). The old Section 500-75 reporting rule has been repealed.

Terminations (215 ILCS 5/500-85):

• An insurer reports a termination for a 500-70 reason within 30 days.
• It mails the producer a copy within 15 days. For-cause copies go by certified mail or overnight carrier.
• The producer may comment within 30 days.

Unfair practices

• Misrepresentation and twisting: misrepresentation (215 ILCS 5/149(1)) and twisting through misleading comparisons (149(2)) are prohibited.
• Defamation of an insurer is prohibited (149(3)).
• Implied government approval: suggesting that the State or the Director endorses an insurer is prohibited (149(4)).
• Penalty for Section 149 violations: $200 to $10,000.
• Rebating (215 ILCS 5/151–152):
  • Giving a rebate and accepting one are both banned.
  • A violation is a Class B misdemeanor.
  • The producer loses the commission on that policy.
  • Offering a child passenger restraint system, or a discount on one, is allowed.
• Boycott, coercion and intimidation, and discrimination by race, color, religion or national origin (215 ILCS 5/424).
• Discrimination in rates or coverage is prohibited on these grounds (215 ILCS 5/236):
  • blindness;
  • military or Guard status;
  • lawful travel;
  • a felony conviction, for final expense policies.
• Senior solicitation (215 ILCS 5/424(7)):
  • The seller must advise reviewing current coverage and consulting a family member or advisor.
  • The person then waits 48 hours before making changes.
• Seminars: sales seminars must be labeled "and insurance sales presentation" (50 Ill. Adm. Code 909.85).
• Privacy: an authorization to disclose personal information must be signed and dated, and obtained no more than one year before the disclosure (215 ILCS 5/1014).

Claims

Improper claims practices (215 ILCS 5/154.5–154.6) are listed acts done knowingly or often enough to show a persistent tendency. Examples:

• lowball offers that force insureds to sue;
• failing to provide claim forms within 15 working days.

Fair claims rules (50 Ill. Adm. Code 919):

• Offer payment within 30 days after accepting liability.
• Denials cite the policy provision and include the Department's Notice of Availability.
• Explain any delay on claims unresolved after 45 days.
• Never require a polygraph.

Vexatious delay: an insurer that unreasonably delays can owe attorney fees plus a penalty (215 ILCS 5/155).

Fraud

• Insurance fraud is in the Criminal Code (720 ILCS 5/17-10.5).
  • $300 or less: a Class A misdemeanor.
  • Over $300 up to $10,000: a Class 3 felony.
  • Three or more frauds in 18 months: aggravated insurance fraud.
• Claims Fraud Prevention Act: civil penalties of $5,000–$10,000 plus up to three times each claim. Private parties, including insurers, can sue on the State's behalf (740 ILCS 92).
• Immunity: insurers and people furnishing fraud information without malice are immune (215 ILCS 5/155.23).

Guaranty protection

Surplus lines

Coverage may be placed with an unauthorized insurer only through a licensed surplus line producer, after a diligent effort to place it with authorized insurers (215 ILCS 5/445).

Common exam traps

• Illinois requires prelicensing (20 hours per major line) and two exams per line, passed within 90 days of each other.
• CE is 24 hours with 3 ethics in a classroom or webinar. Up to 12 non-ethics hours carry over. Missing CE ends the license automatically.
• The regulator is the Director, appointed by the Governor.
• After revocation or denial, the wait to reapply is three years.
• Illinois does have a controlled-business rule.
• Rebating is a Class B misdemeanor, and the person who accepts the rebate also violates the law.
• Premium funds held 15 days or more go in a Premium Fund Trust Account at an Illinois institution.