Michigan's insurance law is the Insurance Code of 1956 (1956 PA 218), MCL chapter 500. It is administered by the Department of Insurance and Financial Services (DIFS). The Michigan questions on every exam draw from the same core: DIFS and its Director, producer licensing and appointments, continuing education, fiduciary money, unfair trade and claims practices, fraud, privacy and data security, and the guaranty associations. This guide covers those rules with citations. General concepts (agency law, what rebating or twisting means) are in the national Insurance Regulation guide.

About the exam

Michigan's licensing exams are delivered by PSI. Michigan's passing scores differ by exam.

Before the exam (MCL 500.1204, 1204a)

• You must finish a registered prelicensing program of study first. The course must have been completed no more than 12 months before your exam application.

• Every course must include ethics in marketing and selling.
• Waivers of the course and exam are available for holders of listed designations (for example CLU, ChFC, CFP, CPCU, RHU) and for anyone licensed as a producer within the past 12 months.
• A candidate who fails or doesn't show up must reapply and pay the exam fee again (1204(6)).

The regulator

• DIFS administers the Code. Wherever the Code says "commissioner," it means the Director of DIFS (MCL 500.102).
• The Director may summarily suspend a license to protect the public. A requested hearing must then be held within 20 days (1242).

Producer licensing

Lines of authority (1206): life (including annuities), accident and health or sickness (may include disability income), property, casualty, variable life and variable annuity (a separate line, which also needs securities registration), personal lines (P&C for individuals and families for noncommercial purposes), and others.

Who needs a license

• No one may sell, solicit or negotiate insurance without a license for that line (1201a).
• The license doesn't by itself give authority to represent or bind an insurer. That takes an appointment (1201(h)).
• A producer who places business with an insurer that hasn't appointed the producer is an agent of the insured for that placement (1201(b)).
• Exempt (1202):
  • salaried insurer employees in clerical or administrative roles who receive no commission
  • rental counter staff selling coverage incidental to a vehicle rental of 90 days or less
• Solicitors work under a licensed agent through a written contract. They hold money as fiduciaries. The agent must notify the Director immediately when a solicitor's authority ends (1211, 1216, 1218).
• Insurance counselors give paid advice about coverage. They need a separate license and a signed fee agreement stating the fee can't be waived. They keep a copy at least 2 years (1232, 1236).

Getting licensed

• A resident applicant must be at least 18, finish prelicensing, pass the exam and pay fees (1205).
• The Director issues the license on finding good moral character (1239(3)).
• A business entity designates a licensed producer responsible for compliance (1205(2)).
• Nonresidents in good standing at home are licensed on a reciprocal basis (1206a). A nonresident who moves to another state files the change and a certification from the new home state within 30 days.
• Moving to Michigan: apply within 90 days of becoming a resident. No course or exam is needed for lines already held (1206b). An applicant previously licensed elsewhere is exempt if currently licensed there, or if applying within 90 days of the old license being canceled.
• Temporary license: up to 180 days, no exam. It can go to a surviving spouse or representative of a producer who dies or becomes disabled, or to the designee of a producer entering military service (1211b).
• Assumed names: notify the Director before using one (1211a).

Keeping the license

• A Michigan license stays in effect as long as CE is met. There's no fixed renewal date. CE is reviewed every 2 years (1206(2), 1204c). The old renewal section (1204b) was repealed in 2017.
• Report a change of legal name, mailing address or e-mail address within 30 days (1206(5), 1238).
• Report administrative actions in another jurisdiction within 30 days of final disposition. Report criminal prosecutions within 30 days of the initial pretrial hearing (1247).
• A license that lapsed for a reason other than CE can be reinstated without an exam within 12 months (1206(3)).

Continuing education (MCL 500.1204c)

Long-term care sellers need a life or health license, a one-time 8-hour LTC course, and 4 hours of LTC training every 2-year period (1204f).

Discipline (1239, 1244)

• Mandatory denial:
  • any felony conviction within the last 10 years
  • at any time, a felony involving violence, criminal sexual conduct or financial crimes such as embezzlement or fraud
• Other grounds:
  • false application information
  • misappropriating money
  • forging a name
  • knowingly accepting business from an unlicensed person
  • using notes on the exam
  • ignoring a child support order
• A denied applicant may demand a hearing within 30 days.
• Surrendering a license doesn't stop the Director from imposing penalties.
• Licensing chapter fines: up to $1,000 per violation, or $5,000 if the person knew or should have known. Violating a cease and desist order: up to $20,000 per violation (capped at $100,000 per order). The Director may also order restitution.

Appointments and terminations

• A producer must be appointed before acting as an insurer's agent or binding coverage for it (1208a).
• The insurer files the appointment within 15 days of the agency contract or the first application. DIFS verifies eligibility within 30 days.
• Termination: the insurer notifies the Director within 30 days, for cause or not (1208b).
  • The insurer mails the producer a copy within 15 days. A for-cause copy goes by certified mail or overnight carrier.
  • The producer may comment within 30 days.
• After termination (1209):
  • An insurer can't cancel or nonrenew an insured's policy because the producer's contract ended.
  • A producer who owns renewal rights may keep servicing existing policies but can't bind new risks.
  • A home and auto insurer may end a producer's authority for listed reasons, such as fewer than 25 home and auto applications in 12 months.
• Controlled business: premium an agent writes on his or her own risks and those of employers, employees and business associates can't exceed 15% of the agent's total premium in any 12 months (1208).

Fiduciary money (MCL 500.1207)

• Premiums are fiduciary funds. They're kept in a separate account at a federally insured financial institution, and the account may earn interest.
  • The agent may put in personal money only to open the account or to cover bank charges.
• Returned premium may be held for future premiums only with the insured's written authorization.
• Failing to turn over fiduciary money on time is prima facie evidence of a fiduciary breach. Records are open to the Director.
• An agent may not pay anyone for leads or prospects unless that person is licensed.
• Medicare supplement premiums can't be accepted by check payable to the agent. A written receipt is required.
• Coercion: an agent may not tie a purchase to a promise to lend money, sell goods or provide services, or to a threat to refuse them.

Commissions

• No commission may be paid to a person who must be licensed and isn't (1240). Renewal commissions may go to someone who was licensed at the time of sale.

Unfair trade practices (chapter 20)

Gifts allowed:

• P&C insurers and producers may give merchandise costing $50 or less per calendar year (2024b).
• Life applicants may receive merchandise worth $5 (2024a).

Rebating penalties:

• A license revoked for rebating can't be reissued for 1 year (2066).
• An insured who knowingly accepts a rebate has coverage reduced in proportion to the rebate and commits a misdemeanor (2070).

Unfair trade practice penalties (2038, 2040):

• Up to $1,000 per violation ($10,000 aggregate). If the person knew or should have known: $5,000 per violation ($50,000 aggregate).
• Violating a cease and desist order: up to $20,000 per violation.

Claims

• Unfair claims practices (2026) are acts done as a course of conduct showing a persistent tendency, not isolated incidents. Examples include refusing claims without a reasonable investigation and lowballing to force a lawsuit.
• An agent who receives a complaint must forward it to the insurer unless the agent resolves it.
• Prompt pay (2006):
  • The insurer specifies what proof of loss it needs within 30 days.
  • Payment within 60 days of proof is timely. Late payments bear 12% simple interest.
  • For health plans, a clean claim is paid within 45 days. Defects are identified within 30 days. A claim is clean only if billed within 1 year of service.

Fraud (chapter 45)

• Fraudulent insurance acts include false claim statements and selling for an insurer known to be insolvent. Acting as a runner, capper or steerer is also one (4503).
• Penalties: a felony with up to 4 years and/or $50,000, plus restitution. Conspiracy: up to 10 years (4511).
• Good-faith reports to an authorized agency (State Police, local police, prosecutors, DIFS) are immune from civil liability (4509).

Privacy and data security

• Privacy notices go out at least once every 12 months during the customer relationship (513). Consumers may opt out of sharing with nonaffiliated third parties.
• Policy and account numbers can't be shared with nonaffiliated parties for telemarketing or direct mail (533).
• Data security (555–565):
  • Notify the Director of a cybersecurity event within 10 business days.
  • Keep event records 5 years.
  • Licensees with fewer than 25 employees are exempt from the written security program requirement.

Annuities and life sales

• Best interest (MCL 500.4155): a producer recommending an annuity must act in the consumer's best interest. Details are in the Michigan Annuities guide.
• Life free look: individual life policies allow 10 days after receipt for a full refund (4015).

Guaranty associations

Common exam traps

• The regulator is DIFS, headed by the Director.
• Licenses are continuous while CE is met: 24 hours with 3 ethics every 2 years, a 12-hour carryover cap and no ethics carryover.
• CE grace period: 90 days. You may service existing business but not sell.
• Appointment: 15 days. Termination notice: 30 days. Copy to producer: 15 days.
• Mandatory license denial for a felony in the past 10 years.
• P&C gifts: $50 per year. Life gifts: $5.
• Prompt pay: 60 days, then 12% interest. Health clean claims: 45 days.