Massachusetts insurance law is in the Massachusetts General Laws (M.G.L.), mainly chapter 175. Other key chapters include:

• 176D (unfair practices)
• 175A and 175E (rates)
• 175C (the FAIR Plan)
• 175D (the Insurers Insolvency Fund)
• 175I (information privacy)

Regulations are in Title 211 of the Code of Massachusetts Regulations (211 CMR). This guide covers the Massachusetts rules on the regulator, licensing, appointments, CE, unfair practices, fraud, surplus lines and the guaranty funds, with citations. General regulatory concepts are in the national Insurance Regulation guide.

About the exam

Massachusetts sells resident producer exams for all seven lines, including the combined Life & Health and Property & Casualty exams.

• The exam tests knowledge of the lines of authority applied for, the duties and responsibilities of a producer, and the insurance laws and regulations of the commonwealth (M.G.L. c.175 s.162K(a)).
• A candidate who fails or doesn't appear must reapply and pay all fees again before being rescheduled (s.162K(d)).
• The exam and prelicensing education are waived for these applicants (s.162O):
  • someone licensed for the same lines in another state who is currently licensed there, or who applies within 90 days after that license was cancelled
  • a producer moving to Massachusetts who applies within 90 days of establishing residence

The regulator

• The Division of Insurance is one of two divisions of the Department of Banking and Insurance, which sits in the Office of Consumer Affairs and Business Regulation (M.G.L. c.26 s.1; c.24A s.1).
• The Commissioner of Insurance is appointed by the Governor, for a term coterminous with the Governor's, and serves at the Governor's pleasure (c.26 s.6).
• The Commissioner examines each domestic insurer at least once every five years (c.175 s.4). The Commissioner may examine and investigate the affairs of anyone in the insurance business (c.176D s.5).
• An applicant denied a license may demand a hearing in writing within 30 days (c.175 s.162R(b)).

Producer licensing (c.175 ss.162G to 162X)

When a license is needed. A license is required to sell, solicit or negotiate insurance for compensation (s.162I). Anyone who advertises as an agent, broker or adjuster without a license violates s.175.

Not required to be licensed (s.162J):

• insurer employees who earn no commission and work in underwriting, loss control, inspection or claims
• a salaried employee who only advises their own employer about its insurance
• a nonresident selling commercial P&C to a multistate insured headquartered in the producer's home state

Lines of authority (s.162M(a)):

• life, which includes annuities and may include AD&D and disability income
• accident and health or sickness, which may include disability income
• property
• casualty
• variable life and variable annuity, a separate line
• personal lines (P&C for individuals and families for noncommercial purposes)

Applicants (s.162L):

• An individual must be at least 18.
• A business entity designates a licensed producer responsible for its compliance.
• A producer notifies the Commissioner before using an assumed name (s.162P).

Nonresidents (s.162N):

• A nonresident is licensed by reciprocity if in good standing in the home state.
• A resident who moves away reports the move, with certification from the new state, within 30 days.

Temporary licenses (s.162Q):

• last up to 180 days, without an exam
• available to the surviving spouse or representative of a producer who dies or becomes disabled, and to the designee of a producer entering military service
• the Commissioner may require a sponsor

Keeping the license (s.162M):

• A license stays in effect, unless revoked or suspended, as long as the fee is paid and CE is met by the due date.
• A lapsed license may be reinstated within 12 months of the renewal fee due date without an exam. The penalty is double the unpaid fee.
• A producer who can't renew because of military service or another extenuating circumstance may request a waiver.

Reporting:

• Address changes are reported within 30 days (s.162M(f)).
• Administrative actions in another jurisdiction are reported within 30 days of final disposition (s.162V(a)).
• Criminal prosecutions are reported within 30 days of the initial pretrial hearing date (s.162V(b)).

Other license types:

• Public insurance adjusters represent insureds for pay on property losses (s.162, s.172). The license requires:
  • age 21, a written exam and two years of experience adjusting property losses
  • a three-year license term, renewable with 15 hours of CE
  • written contracts on a form filed with the Commissioner
• Life settlement brokers (c.175 s.213). A life producer licensed at least one year may act as one by notifying the Commissioner within 30 days and paying the fee. The broker represents only the owner and owes a fiduciary duty. The owner may rescind within 15 days after all parties sign.

Continuing education (c.175 s.177E; 211 CMR 50.00)

• Each period includes 3 hours of Massachusetts Approved Ethics (MAE).
• Hours may be in any line the producer holds. Excess hours carry forward to the next period.
• Instructors earn the same hours as students. Course sponsors keep attendance records for six years.
• Exempt: nonresidents who meet a reciprocal home state's CE.
• Shortfalls may lead to nonrenewal or suspension. After a hearing, the fine is $20 to $100 per missing hour.

Appointments and terminations (s.162S, s.162T)

Appointments:

• A producer acting as an insurer's agent must be appointed by it. A producer not acting as an insurer's agent doesn't need an appointment.
• The insurer files the appointment within 15 days of the agency contract or first application, whichever is first.
• The Commissioner verifies eligibility within 30 days. If the producer is ineligible, the Commissioner tells the insurer within 5 days of that finding.

Terminations:

• The insurer notifies the Commissioner within 30 days after any termination, whether for cause or not.
• For a for-cause termination, the producer gets a copy within 15 days, by certified mail or overnight carrier.
• The producer may file comments within 30 days.
• Insurers are immune from liability for the report absent actual malice.

Commissions, premiums and records

• Commissions may not go to unlicensed persons. A referral fee may be paid only to the producer's or agency's own unlicensed employees (s.177).
• An agent negotiating a policy is the company's agent for receiving premium (s.169).
• Premiums are held in trust for the insurer. Failing to pay them over after a written demand is prima facie evidence of misuse, and a conviction is larceny (s.176).
• Agents and brokers keep written grievances, and how each was resolved, for two years (c.176D s.3(10)).
• P&C binders and policies are signed by a licensed person or someone with a power of attorney.
• Off-premises solicitation is done by licensed agents or brokers. Unlicensed employees may solicit only on agency premises, under a licensed agent's supervision (s.162).

Discipline (s.162R)

Grounds include:

• fraud, misrepresentation, or violating the insurance laws
• misappropriating money received in the business
• forging a name on an application
• using notes on the license exam
• knowingly accepting business from an unlicensed person
• failing to pay state income tax

Penalties. After a hearing, the Commissioner may impose a civil fine under c.176D s.7, instead of or in addition to license action. A surrendered or lapsed license doesn't end the Commissioner's authority.

Unfair practices (M.G.L. c.176D)

Prohibited practices (s.3):

• Misrepresentation of policy terms (3(1)), and twisting to induce a lapse or surrender (3(1)(f))
• False advertising (3(2))
• Defamation (3(3))
• Boycott, coercion and intimidation (3(4))
• False statements and entries (3(5))
• Stock operations and advisory board contracts (3(6))
• Unfair discrimination (3(7))
• Rebating (3(8))
• Unfair claim settlement practices (3(9))
• False statements on an application to earn a commission (3(11))

Rebating (c.175 ss.182 to 184):

• Both the giver and the receiver of a rebate violate the law.
• Not rebates: a return premium on cancellation, and advice to the insured on reducing the risk of loss.
• A producer may not sell auto liability or workers' comp at a rate other than the one fixed or approved (s.182).

Lenders (c.176D s.4; c.175 s.193E):

• A lender may not require a borrower to buy insurance through a particular insurer or agent, or charge a fee to substitute another insurer's policy.
• A lender may still approve or disapprove the insurer chosen, on reasonable standards.

Underwriting limits:

• Insurers may not refuse coverage or charge more solely because of blindness or physical impairment, unless based on sound actuarial principles (c.175 s.193T).
• Insurers may not ask whether an applicant was a victim of abuse (s.120D).
• For HIV testing, the applicant gives written informed consent, valid for no more than 90 days. A positive result is reported within 45 days. Insurers may not ask about sexual orientation (211 CMR 36).

Privacy (c.175I):

• The notice of information practices is given at application.
• Disclosure authorizations last no more than 30 months.
• Pretext interviews are allowed only to investigate a suspected-fraud claim.
• Reasons for an adverse underwriting decision are given within 21 business days of a timely request.

Waivers. An application clause waiving a provision of chapter 175 is void (s.22B).

Enforcement (c.176D ss.6, 7, 10):

• A hearing is set at least 21 days after the charges are served.
• After the hearing, the Commissioner may issue a cease and desist order, fine up to $1,000 per act, order restitution, and suspend or revoke licenses.
• Violating a final cease and desist order costs up to $10,000 per violation.
• A court may add punitive damages of up to 25% of a claim when the Commissioner found a violation.

Fraud

• Knowingly presenting a false statement in support of a claim is punishable by up to five years in state prison, a fine of $500 to $10,000, or both (c.266 s.111A).
• Auto insurance fraud (c.266 s.111B) carries up to five years and a fine of $1,000 to $10,000, plus restitution. An appraiser or repair shop convicted under it can lose its license or registration for up to two years.
• An agent or examining physician who knowingly falsifies a life application faces a fine of $100 to $500, imprisonment of one month to one year, or both (c.175 s.127).
• The Insurance Fraud Bureau of Massachusetts was created by the insurance industry and authorized by statute in 1990. It investigates fraud in all lines.

Surplus lines (c.175 s.168)

• A special insurance broker may place P&C coverage with an unauthorized insurer when, after a diligent effort, it can't be obtained from admitted companies. Only the excess over what admitted insurers will write may be placed.
• The broker files an affidavit of diligent effort within 20 days.
• Excluded from surplus lines: accident and health, workers' comp, life, and compulsory auto liability. Transportation network vehicles are an exception to the auto exclusion.
• The policy must state that a loss won't be paid by the Massachusetts Insurers Insolvency Fund.
• The broker pays 4% of net premium to the commonwealth. The special broker license lasts one year.

Guaranty funds

Massachusetts Life and Health Insurance Guaranty Association (c.175 s.146B):

• life death benefit: $300,000
• cash value: $100,000
• annuity present value: $250,000
• major medical: $500,000
• disability income and LTC: $300,000 each
• one owner of several individual life policies: $5,000,000 total
• the association may not be used in advertising or sales

Massachusetts Insurers Insolvency Fund (c.175D) pays covered P&C claims of insolvent insurers. It doesn't pay first-party claims of high net worth insureds (s.12).

Common exam traps

• The Commissioner is appointed by the Governor and serves at the Governor's pleasure.
• CE is 60 hours before the first renewal, then 45 hours every 36 months, including 3 hours of MAE.
• A lapsed license can be reinstated within 12 months without an exam, at double the fee.
• Appointments are filed within 15 days. Terminations are reported within 30.
• Criminal prosecutions are reported within 30 days of the initial pretrial hearing.
• Rebating is a violation by both the giver and the receiver.
• Workers' comp can't be placed in surplus lines. The surplus lines fee is 4%.