Oklahoma's insurance law is Title 36 of the Oklahoma Statutes, the Oklahoma Insurance Code (36 O.S. 101). The Oklahoma questions on every exam come from the same core: the elected Commissioner, producer licensing and appointments, continuing education, premium handling, unfair trade and claims practices, fraud, and the guaranty associations. This guide lists those rules with their citations. General concepts (what rebating or twisting means, types of insurers, agency law, federal laws such as 18 U.S.C. 1033 and the FCRA) are covered in the national Insurance Regulation guide.

About the exam

Oklahoma's producer exams are delivered by PSI. The passing score is 70% on every exam. Oklahoma sells separate and combined exams for both families of lines.

Exam rules in the Code:

• If you fail, you may retake the exam, but the fee is charged again for each attempt (36 O.S. 1435.6(J)).
• The Commissioner tells you (and any appointing insurer) whether you passed within 10 days (1435.6(I)).
• You must apply for the license within 2 years of passing (1435.6(I)).
• Limited lines producers are exempt from the exam (1435.10(A)).

The regulator

• The Oklahoma Insurance Department carries out the insurance laws (Okla. Const. art. VI, sec. 22). Its chief officer is the Insurance Commissioner (36 O.S. 301).
• The Commissioner is elected statewide for a 4-year term. No one may serve more than 8 years in total; the years need not be consecutive (Okla. Const. art. VI, sec. 23).
• Qualifications (36 O.S. 302): at least age 25, an Oklahoma resident for at least 5 years, and at least 5 years of experience in insurance administration, sales, servicing or regulation. The Commissioner may have no financial interest in a regulated insurer or agency except as a policyholder or claimant.
• The Commissioner administers and enforces the Code, reports annually to the Governor (307), and may adopt bulletins, orders, rules and regulations (307.1). Changing the statutes is the Legislature's job.
• Examinations: as often as the Commissioner thinks appropriate, but every domestic insurer gets a financial exam at least once every 5 years. For a foreign insurer, the Commissioner may accept the home state's report if that department is NAIC-accredited (309.2).
• A final order imposing a fine or restitution can be enforced by recording it with the Oklahoma County district court clerk (312A).

Insurers

• Domestic = formed under Oklahoma law; foreign = formed in another U.S. state; alien = formed in another country (36 O.S. 601-603).
• A stock insurer has capital divided into shares owned by shareholders (2102). A mutual insurer has no capital stock and is owned by its policyholders (2103).
• A fraternal benefit society has no capital stock, operates for its members on a lodge system with a ritualistic form of work and a representative government (2701.1).
• An insurer may transact insurance only under a subsisting certificate of authority from the Commissioner (606(A)).
• Transacting insurance covers solicitation and inducement, preliminary negotiations, effectuating the contract, and matters arising after it takes effect (105).
• Premium tax: the general rate is 2.25% of direct written premiums (624(A)(2)).
• Rates may not be excessive, inadequate or unfairly discriminatory. A rate is not unfairly discriminatory just because it reflects the size or location of the risk (902).
• An unlicensed MEWA that isn't fully insured or ERISA-exempt is treated as an unauthorized insurer (634).

Producer licensing

Lines of authority (36 O.S. 1435.8(A)):

• Life, which includes endowment and annuity benefits.
• Accident and health or sickness, which may include disability income.
• Property and casualty.
• Variable life and variable annuity, a separate line. The producer must also be registered to sell securities.
• Personal lines (property and casualty sold to individuals and families).
• People who sell HMO memberships for commission must comply with the Producer Licensing Act (6917). Workers' compensation producers must also be licensed producers (1435.2(5)).

Who needs a license

• Anyone who sells, solicits or negotiates insurance must be licensed for that line (1435.4(A)).
• Oklahoma's definition of insurance producer expressly includes customer service representatives and insurance consultants (1435.2(7)).
• Negotiate means conferring directly with, or advising, a buyer about the substantive benefits, terms or conditions of a policy (1435.2(15)).
• Exempt from licensing:
  • Insurer and agency employees doing clerical or administrative work who earn no commission (1435.5(B)(1)).
  • Employees who only underwrite, inspect, do loss control or handle claims, with no commission (1435.5(B)(1)(b)).
  • A nonresident selling commercial P&C on a multistate risk who is licensed in the insured's home state (1435.5(B)(6)).
• A license alone gives no authority to represent an insurer (1435.2(9)).

Getting licensed

• Resident applicants must be at least 18 (1435.7(A)(1)).
• A business entity must designate a licensed producer responsible for its compliance. It can't be licensed if anyone whose producer license was revoked owns an interest in it (1435.7(B)).
• Nonresidents get a license if they are in good standing at home and the home state gives Oklahoma residents the same treatment (reciprocity). The application names the Commissioner as agent for service of process (1435.9(A)-(B)).
• Moving to Oklahoma: apply within 90 days of establishing residence. No exam or CE is needed for lines you already held (1435.10(B)).
• Moving away: file the change of address and certification from the new home state within 30 days (1435.9(D)).
• Temporary license: up to 180 days, no exam (1435.12):
  • It can go to the surviving spouse of a deceased or disabled producer, or the designee of a producer entering the Armed Forces.
  • The Commissioner may require a sponsor (a licensed producer or insurer) who takes responsibility for the temporary licensee.
  • It ends automatically if the holder fails the exam, and it can't be given to someone who has already failed.
• Assumed names: notify the Commissioner before using a name other than your legal name (1435.11).

Keeping the license

• A license runs for no more than 24 months, with staggered renewal dates (1435.36(B)).
• Late renewal: a fee paid after the due date carries a penalty of double the unpaid renewal fee. You can reinstate within 12 months without an exam, as long as CE is current and the license wasn't suspended or revoked (1435.8(C)).
• A producer kept from renewing by military service or another extenuating circumstance, such as long-term disability, may ask for a waiver (1435.8(D)).
• Changes of legal name, address or e-mail: report within 30 days. A late report must include a $50 administrative fee (1435.8(F)).
• Reporting duties (1435.18):
  • An administrative action in another state: within 30 days of final disposition.
  • A criminal prosecution: within 30 days of the initial pretrial hearing date.
  • Failing to report brings immediate suspension.

Continuing education

• 21 clock hours plus 3 hours of ethics every two years, 24 hours in all (36 O.S. 1435.29(A)).
• An approved professional designation program (at least 24 hours in 24 months) satisfies the biennial requirement (1435.29(B)(3)).
• Active membership in a professional insurance association can earn up to 1 hour per year (1435.29(B)(5)).
• Exempt: members of the Legislature; limited lines producers; nonresidents who meet an equivalent requirement at home (1435.29(D)-(E)).
• Department CE rules:
  • Up to 6 excess hours carry forward as general hours.
  • A course can't be repeated for credit within the same 24-month period.
  • Providers report completions within 10 business days.

Appointments and terminations

Appointments

• A producer must be appointed before acting as an insurer's agent (36 O.S. 1435.15(A)).
• The insurer files the notice of appointment within 15 days after the agent contract is signed or the first application is submitted, and the insurer pays the appointment fee (1435.15(B), (D)).
• The Commissioner verifies eligibility within 30 days. If the producer isn't eligible, the insurer is told within 5 days (1435.15(C)).
• An insurer may not discriminate among the producers it has appointed (1435.15(E)).

Terminations

• The insurer notifies the Commissioner within 30 days after the effective date of any termination, for cause or not (1435.16(A)-(B)).
• It sends the producer a copy within 15 days. For a for-cause termination, the copy goes by certified mail or national overnight carrier (1435.16(D)(1)).
• The producer may file written comments within 30 days (1435.16(D)(2)).
• The insurer is immune from civil liability for the report unless it acted with actual malice (1435.16(E)).

Commissions, controlled business, records

• No commission may be paid to a person who must be licensed and isn't (36 O.S. 1435.14(A)).
• Renewal commissions may be paid to a former producer who was licensed at the time of the sale (1435.14(C)).
• Commissions may be paid to an agency unless that would be an illegal rebate (1435.14(D)).
• Controlled business: insurance on the licensee, relatives to the second degree, or the licensee's employer. A license is treated as used for controlled business if controlled-business commissions exceed 25% of all commissions in any 12-month period. The rule doesn't apply to title or limited lines producers (1435.21).
• Records: keep transaction records at your place of business for 3 years after the transaction is completed. If the Commissioner examines a producer, the cost is split among the producer's appointing insurers (1435.13(E)).

Premiums and fiduciary funds

• All producers hold premiums in a fiduciary capacity. Withholding, misappropriating or converting them is a ground for discipline (36 O.S. 1435.13(A)(4)).
• Property and casualty producers have specific trust-money rules (1435.13a):
  • Remit premiums, less commission, within 45 days after receipt if the contract sets no due date.
  • Pay return premiums to the client within 30 days.
  • The insurer must return unearned premium within 45 days after a cancellation takes effect.
  • Commingling fiduciary funds with personal funds is prohibited.
  • An insurer must report a producer who is more than 45 days late accounting for premium.
  • Misappropriating $150 or less is a misdemeanor on a first conviction. Larger amounts are a felony, up to a $5,000 fine and 5 years.

Discipline and penalties

Grounds for discipline (36 O.S. 1435.13(A)) include:

• Forgery.
• Using notes during the licensing exam.
• Knowingly accepting business from an unlicensed person.
• Failing to obey a child support order.
• Failing to pay state income tax.
• Failing to answer a Department inquiry.

An agency can lose its license when its officers knew of an employee's violation and didn't report or correct it (1435.13(C)).

Procedure and penalties

• Hearing: after a denial or nonrenewal, demand a hearing in writing within 30 days of the notice (1435.13(B)).
• Fine: up to $1,000 per occurrence, in addition to or instead of license action (1435.13(D)).
• Surrendering or letting the license lapse doesn't end the Commissioner's power to penalize (1435.13(F)).
• Acting after suspension or revocation is a Class D1 felony with a fine up to $5,000. So is helping someone in that position act as a producer. Acting without ever being licensed is a misdemeanor: a fine up to $500 and/or 6 months to 1 year in county jail (1435.26).
• Department inquiries: answer within 20 calendar days. The Commissioner may extend this by up to 7 days for good cause (1250.4(B)).

People with criminal records (Crimes By or Affecting Persons Engaged in the Business of Insurance Act)

• A person convicted of a felony involving dishonesty or breach of trust needs the Commissioner's written consent to work in insurance (36 O.S. 402).
• Violating this brings a civil penalty of up to $10,000 per act and per day (402(C)).
• Emergency cease and desist order (405):
  • Request a hearing by the 30th day after you receive the order.
  • The order stays in effect while the hearing is pending.
  • With no hearing request, it becomes final 31 days after receipt.

Unfair trade practices (36 O.S. 1204)

• Misrepresentation and twisting – misstating policy terms, benefits or advantages, or misrepresenting a policy to induce someone to lapse or replace it (1204(1)).
• False advertising (1204(2)). Example: a car dealer advertising "free auto insurance" with a purchase.
• Defamation of an insurer's financial condition (1204(3)).
• Boycott, coercion and intimidation (1204(4)).
• False financial statements (1204(5)).
• Unfair discrimination:
  • Life: among people of the same class and equal expectation of life (1204(7)(a)).
  • Property and casualty: among insureds with substantially like insuring, risk and exposure factors (1204(7)(c)).
• Rebating – any rebate or valuable consideration not specified in the policy (1204(8)). These are not rebates:
  • Readjusting premium based on loss experience.
  • A reduced rate for payroll deduction that reflects the savings.
  • A life insurer letting bona fide employees earn commission on their own policies.
• Coercion by lenders – requiring a borrower to buy insurance through a particular agent or insurer. A lender may still reject an insurer on reasonable grounds (1204(9)).
• Prohibited inducements (1204(10)) – offering a job, securities, advisory board contracts or special favors, or goods worth more than $100 in total.
• Premium notes – an insurer or agent may not sell or pledge a premium note before the policy is delivered (1204(11)).
• False statements on an application made knowingly by an agent or examining physician are a misdemeanor (1204(12)).
• Bank-name mailers – using an unaffiliated financial institution's name to imply it is the one soliciting (1204(13)).

Enforcement (1206-1211)

• The Commissioner serves a statement of charges and notice of hearing. After the hearing, a cease and desist order can issue.
• Court review: petition within 30 days of service of the order.
• Violating a final order: $100-$1,000 per violation.
• If a practice isn't listed in 1204, the Commissioner can ask the district court to stop it.

Claims practices

• An act listed in the Unfair Claims Settlement Practices Act is a violation when committed flagrantly, in conscious disregard of the Act, or often enough to be a general business practice (36 O.S. 1250.3(B)).
• Examples (1250.5):
  • Knowingly misstating policy terms.
  • Requiring a release broader than the claim being paid.
  • Putting release language on partial-payment checks.
  • Lowballing so that insureds have to sue.
• Complaint records: keep them for the preceding 3 years or since the last financial exam, whichever is longer (1250.5(14)).
• Refund requests: absent fraud, an insurer can't ask for a claim payment back more than 6 months after paying a claimant, or 12 months after paying a health care provider (1250.5(15)).
• Claimant correspondence: answer communications that call for a reply within 30 days (1250.4(C)). Claim files must let pertinent events and dates be reconstructed (1250.4(A)).
• Property and casualty claims (1250.6-1250.7):
  • Acknowledge a claim within 30 days. Notice to the insurer's agent counts as notice to the insurer.
  • Accept or deny a first-party claim within 60 days of proof of loss. A denial based on an exclusion must be in writing and cite the exclusion.
  • Investigations may not run longer than 120 days, except for a supported fraud or arson investigation.
  • After a Governor-declared weather catastrophe, the Commissioner may add 20 days to these deadlines.
• Proof of loss forms and the 60-day rule (3629):
  • Furnish proof of loss forms on written request.
  • Make a written offer of settlement or a rejection within 60 days of proof of loss.
  • If the insured wins more than the offer, the verdict carries 15% annual interest. If the judgment doesn't exceed the offer, the insurer is the prevailing party.
• Penalties: $100-$5,000 per violation (1250.14). An insurer that ignores a cease and desist order can lose its certificate of authority (1250.13).

Fraud

• Every application and claim form must warn that knowingly making a false, incomplete or misleading claim is a felony (36 O.S. 3613.1).
• Presenting a false claim is a Class D3 felony. The fine can reach twice the aggregated loss (21 O.S. 1662).
• The Anti-Fraud Unit sits within the Insurance Department (36 O.S. 361):
  • It can refer crimes to the OSBI or the Attorney General.
  • Its investigative records are confidential.
• Anyone who believes fraud is occurring must notify the Anti-Fraud Unit immediately. Good-faith reporters are immune unless they acted with fraud, bad faith or actual malice (363).

Privacy, credit and electronic delivery

Privacy

• Disclosing nonpublic personal information contrary to Title V of Gramm-Leach-Bliley is prohibited. The statute creates no private right to sue (36 O.S. 307.2).

Credit-based insurance scores (36 O.S. 951-958)

• Scope: personal lines only (private passenger auto, homeowners, dwelling fire and similar).
• What an insurer may not do:
  • Use income in a score.
  • Deny solely because of credit.
  • Act against a consumer solely for having no credit card.
  • Count medical collection accounts against the consumer.
• Timing rules:
  • Adverse action must rest on a report no more than 90 days old.
  • Re-score at least every 36 months.
  • Re-rate on the insured's request at renewal, but not more than once in 12 months.
  • After a successful FCRA dispute, re-rate within 30 days.
• Disclosure: tell the applicant on the application that credit may be used. An adverse-action notice lists up to 4 primary factors.
• An agent who follows the insurer's procedures is indemnified and defended by the insurer.

Electronic delivery (36 O.S. 123)

• Notices may be sent electronically only after the party affirmatively consents. Before consenting, the party is told of the right to paper copies and how to withdraw.
• A proper e-delivery counts the same as first-class or certified mail.
• If the e-mail address goes bad, the insurer must use another lawful method.

Life replacement (Life Insurance and Annuity Policyholders Protection Act)

Scope

• A replacement includes using an existing policy's cash value to buy a new one (36 O.S. 4033).
• The Act doesn't apply to group life, or to replacing nonconvertible term that will expire within 5 years (4032).

The agent's duties

• Get a signed statement on whether the new policy will replace existing coverage (4034(B)).
• Give the applicant the "Notice to Applicants Regarding Replacement", acknowledged before signing the application. It warns that the incontestable and suicide periods start over (4035).
• Send the insurer the notice, the statement and copies of the agent's sales material (4034(D)).

The insurer's duties

• Review the statement within 5 days. If the applicant asks, notify the existing insurer within 5 days (4034(C), (E)).
• Keep copies for 3 years (4034(F)).
• Allow a 20-day right to return for a replacement policy (4034(G)).

Penalty: a violation can bring license action or a fine of up to $1,000 per incident (4038).

Guaranty associations

Oklahoma Life and Health Insurance Guaranty Association (36 O.S. 2022-2043)

• Funded by assessments on member insurers. Keeps health, life and annuity accounts.

• Not covered: Medicare Part C and D plans, and variable values where the owner bears the risk (2025).
• Summary document: must be delivered before or at policy delivery, with a disclaimer that coverage may not apply or may be limited (2043(B)-(C)). For a product the Association doesn't cover because the owner bears the risk, give a separate notice (2043(D)).
• Using the Association's existence to sell is prohibited (2043(A)).

Oklahoma Property and Casualty Insurance Guaranty Association (36 O.S. 2001 et seq.)

• $150,000 per claimant for most covered claims.
• Workers' compensation claims are paid in full.
• Unearned premium: $10,000 per policy.
• $300,000 per cyber event.
• Claims arising after insolvency are covered only if they arise within 30 days, or before the policy expires or is replaced if that comes first (2007).
• Excluded: fidelity and surety bonds, ocean marine, and punitive damages (2003-2004).
• Surplus lines insurers are not members (2004).

Surplus lines

• Coverage may go to a surplus lines insurer only when it can't be obtained from admitted insurers (36 O.S. 1106).
• Eligible insurers: capital and surplus of at least the greater of the state minimum or $15 million. Alien insurers must be on the NAIC Quarterly Listing.
• A surplus lines license is needed only where Oklahoma is the insured's home state (1106(2)).
• Tax: 6%, and no part of it may be rebated (1115(B)). Flood policies are exempt from the tax and from the diligent-search requirement (1115(J), 1106.2).
• The declarations page must say in bold type that the policy isn't protected by any guaranty association (1109(B)).
• The broker posts a $5,000-$40,000 bond (1435.22).
• A licensed producer who brings the risk to the broker may receive the customary commission (1111).
• Someone who places coverage with a nonadmitted insurer without a license is personally liable to the insured (1101(B)).

Common exam traps

• "Appointed by the Governor." The Oklahoma Commissioner is elected: 4-year terms, 8-year limit, minimum age 25.
• CE hours. It's 21 plus 3 ethics = 24, not 24 plus 3.
• Appointment vs. termination deadlines. Appointment: 15 days. Termination notice to the Commissioner: 30 days. Copy to the producer: 15 days.
• Two felony levels. Acting while revoked is a Class D1 felony. Never licensed is a misdemeanor. False claims are a Class D3 felony.
• Controlled business is 25% of commissions, with relatives to the second degree.
• Guaranty limits. P&C is $150,000 per claimant (workers' comp in full). Life is $300,000 death benefit and annuity, $100,000 cash value.
• Replacement free look is 20 days, but the ordinary life free look is 10 days (see the Life Policy Provisions guide).