Vermont insurance law is in Title 8 of the Vermont Statutes Annotated (8 V.S.A.), chapters 101 to 147, with regulations adopted by the Department of Financial Regulation. Auto financial responsibility is in Title 23, workers compensation in Title 21 and the premium tax in Title 32. This guide covers the Vermont rules on the regulator, producer licensing, appointments, CE, unfair practices, penalties and the guaranty associations. The general concepts (agency law, types of insurers, what twisting and rebating are) are in the national Insurance Regulation guide.

About the exam

Vermont's exams are given by Prometric, at a test center or remotely through Prometric's ProProctor. Vermont sells all seven resident exams, including the combined ones:

• The exam may include unscored experimental questions mixed in with the scored ones. They don't count and don't use up your test time.
• A combination exam produces one final score. You must pass the whole exam.
• You must apply for the license within 24 months after the exam date (8 V.S.A. § 4800(3)(D)(i)). DFR asks residents to wait 48 hours after passing before applying electronically through NIPR.

The regulator

• The Department of Financial Regulation (DFR) supervises insurers and producers through its Insurance Division (8 V.S.A. § 11). DFR also regulates banking, securities and captives.
• DFR is run by the Commissioner of Financial Regulation, appointed by the Governor with the advice and consent of the Senate, biennially in February (8 V.S.A. § 12).
• The Commissioner and Department staff may not be an officer, director, employee or attorney of any institution DFR supervises. Owning a policy on the same terms as the public is allowed (§ 11(b)).
• Each domestic insurer is examined at least every three years, or up to five years if it has satisfactory annual independent audits (§ 3563). The insurer must give free access to all its books and records (§ 3565(b)).
• An insurer needs a certificate of authority (§ 3368). Surplus lines business and reinsurance are exceptions. Transacting without one carries a penalty of $500 to $5,000 per violation. The contracts stay valid for insureds, but the insurer can't sue in Vermont courts on that business until it is authorized.
• Policy forms are filed at least 30 days before use and are deemed approved if the Commissioner doesn't act. The Commissioner may extend the period once by up to 30 more days (§ 3541(b)). Surety bonds and specially rated inland marine are exempt.
• Every insurer must keep an anti-fraud plan to prevent, detect, investigate and report fraud (§ 4750).
• Premium tax is 2% of gross Vermont premiums, excluding reinsurance (32 V.S.A. § 8551).

Producer licensing (8 V.S.A. ch. 131)

Definitions (§ 4813a):

• Solicit means attempting to sell insurance or urging a person to apply for a particular kind of insurance from a particular insurer.
• Negotiate means conferring with or advising a purchaser about a particular contract's benefits, terms or conditions.
• A license by itself gives no authority to represent or bind an insurer. That comes from an appointment and agency contract (§ 4813a(5)).

Lines of authority (§ 4813g(a)):

• Life
• Accident and health or sickness
• Property (direct or consequential loss to property)
• Casualty (legal liability)
• Variable life and variable annuity products, a separate line
• Personal lines (P&C sold to individuals and families for noncommercial purposes)

Applicants (§§ 4800, 4813f):

• An individual must be at least 18, competent and trustworthy, have paid the fees and passed the exam for each line.
• A resident is someone who lives in Vermont or keeps a principal place of business here. A resident license is an election of Vermont residency and is void if the licensee claims residency or a resident license elsewhere.
• A business entity designates a licensed producer, a natural person, responsible for its compliance.
• A producer notifies the Commissioner before using an assumed name (§ 4813j).

Not required to be licensed includes a salaried full-time employee who only advises the employer about its own insurance and takes no commission (§ 4813d(b)(7)).

Nonresidents and movers:

• A nonresident in good standing in the home state is licensed by reciprocity (§ 4813h(a)). The application appoints the Commissioner to receive service of process.
• A resident who moves away files the new address and a certification from the new state within 30 days (§ 4813h(c)).
• A producer moving to Vermont applies within 90 days of establishing residence and needs no exam or prelicensing for lines already held (§ 4813i(b)).

Temporary licenses (§ 4813k) last up to 180 days, with no exam. They can go to the surviving spouse or personal representative of a producer who dies or becomes disabled, or the designee of a producer entering active military service. The Commissioner may require a sponsor.

License term (§ 4798):

• Producer licenses expire April 1 of the odd-numbered year after issue and renew for 24 months. The fee is not prorated.
• Other license types expire April 1 of even-numbered years.
• Appointments expire June 1 each year. Insurers return an annual renewal list.

Other licenses (§ 4791):

• A consultant gives insurance advice for a fee. Consultants can't hold a producer license at the same time, post a $5,000 bond and may not be paid by producers or insurers for consulting.
• A public adjuster works for the insured. An adjuster works for insurers.
• An appraiser appraises auto losses for insurers.
• Workers compensation claims need a separate workers compensation adjuster license (§ 4793(c)).

Reporting duties

• Address change: within 30 days (§ 4800(3)(F)).
• Administrative action in another jurisdiction: within 30 days of the final disposition, with a copy of the order (§ 4813o(a)).
• Criminal prosecution: within 30 days of the initial pretrial hearing date, with the complaint (§ 4813o(b)).

Appointments and terminations (§§ 4813l, 4813m)

• A producer acting as an insurer's agent must be appointed, with a separate appointment for each line. A producer who isn't acting as an insurer's agent doesn't need one.
• The insurer files the appointment within 15 days after the agency contract is signed or the first application is submitted, whichever is sooner.
• On a termination, for cause or not, the insurer notifies the Commissioner within 30 days after it takes effect. It mails the producer a copy within 15 days, by certified mail or overnight carrier if for cause. The producer has 30 days to file written comments.
• Failing to report, or reporting with actual malice, can bring a $10,000 penalty.
• A producer acting as an insurer's agent represents the insurer, and the insurer is responsible for the producer's acts (§ 4813c(c)). A producer who isn't the insurer's agent generally represents the insured, but an insurer that delivers a policy to that producer authorizes the producer to collect the premium due at delivery (§ 4813c(d)).

Continuing education (§ 4800a; Reg. I-2000-02)

• 24 hours every two-year period, at least 3 hours of ethics.
• No carry-over of extra hours. Agency-management courses count for at most 6 hours.
• Sales, motivation, communication skills and prelicensing courses don't qualify.
• The Commissioner may grant an extension of up to 6 months for good cause. A license is suspended if CE still isn't done after the extension.
• A nonresident who meets a home-state CE requirement is exempt.
• A producer selling long-term care completes a one-time 8-hour course, with at least 2 hours of Vermont-specific content, and 4 hours of LTC training every 24 months (Reg. H-2009-01).

Commissions, fees and controlled business

• No commission to anyone required to be licensed who isn't (§ 4796(a)). Renewal commissions may go to someone licensed at the time of sale (§ 4796(c)).
• A referral fee may be paid to a person who doesn't sell, solicit or negotiate, unless it would be a rebate (§ 4796(d)).
• A producer who charges a client a fee needs a prior written agreement with the client (§ 4724(14)).
• Controlled business (§ 4795) is insurance on the licensee, immediate family or employer. A license is treated as used for controlled business when those commissions exceed 25% of all commissions in 12 months. The rule does not apply to life insurance.

Unfair trade practices (8 V.S.A. § 4724)

Vermont's list includes:

• Misrepresentation and false comparisons, and twisting to induce a lapse or replacement (§ 4724(1))
• False advertising (§ 4724(2))
• Defamation of anyone's financial condition (§ 4724(3))
• Boycott, coercion or intimidation (§ 4724(4))
• Unfair discrimination, including on sex, sexual orientation, gender identity or marital status (§ 4724(7)). Insurers may not ask about sexual orientation or gender identity.
• Rebating (§ 4724(8); § 3702 for life; § 3861 for fire and casualty). Under § 3861 the person who accepts a rebate also violates the law.
• Value-added services tied to the coverage, such as loss mitigation, are allowed if reasonably priced and offered without unfair discrimination. The insurer reports each one to the Commissioner within 10 days. Advertising insurance as "free" or "no cost" is prohibited.
• Unfair claims settlement practices (§ 4724(9))
• Failing to keep a complaint record since the last exam (§ 4724(10))
• Failing to act as a fiduciary for premiums (§ 4724(12))
• Selling a policy the producer has reason to know is unsuitable (§ 4724(16))
• HIV testing only with written informed consent, and no conditioning coverage on genetic testing (§ 4724(20), (22))

Fiduciary funds (Reg. 95-1). Premiums sent on by the end of the next business day count as remitted immediately. Otherwise they go into a trust account.

Credit and coercion (§ 4725). A lender may not require a borrower to buy insurance through a particular insurer or agent. It may require adequate coverage and be named on the policy.

Penalties

• Cease and desist orders are reviewed de novo in the Washington Superior Court. Review doesn't stay the order unless the court grants a stay (§ 3661(a)(1)).
• Grounds for license action (§ 4804(a)) include:
  • false information on the application
  • a felony or a misdemeanor involving moral turpitude
  • forging a name on an application
  • knowingly taking business from an unlicensed person
  • unpaid child support or state income tax
• A denied applicant may demand a hearing, held within 30 days of the demand (§ 4804(c)).
• Federal law (18 U.S.C. § 1033) bars people convicted of certain crimes from the business without written consent.

Captives and surplus lines

• DFR describes Vermont as the world's largest captive insurance domicile (8 V.S.A. ch. 141). A captive insures the risks of its owners and affiliates.
• A captive may not write personal auto or homeowners coverage (§ 6002).
• A Vermont risk retention group writes only liability insurance for its members.
• Surplus lines coverage is placed through a licensed surplus lines broker only when it isn't reasonably available from admitted insurers. The tax is 3% (§§ 5024, 5035). See the Other Casualty guide.

Guaranty associations

• Vermont Life and Health Insurance Guaranty Association (8 V.S.A. ch. 112). Limits under § 4173:
  • $300,000 life death benefit ($100,000 cash value)
  • $250,000 annuities
  • $500,000 health benefit plans
  • $300,000 disability income and LTC
• Since May 1, 2024, the approved summary document must be delivered with each covered policy (§ 4189(b)). The association may not be used in selling (§ 4189(a)).
• Vermont Property and Casualty Insurance Guaranty Association. It pays covered claims under $500,000, and workers compensation claims without that cap. Unearned premium is covered above $25 (§ 3615). It doesn't cover life, health, title, surety, credit, mortgage guaranty or ocean marine (§ 3611).
• Surplus lines policies must carry a notice that an insurer default is not covered by the guaranty association (§ 5028).

Common exam traps

• The regulator is DFR and its head is the Commissioner of Financial Regulation. Vermont has no stand-alone "Department of Insurance."
• CE is 24 hours with 3 ethics, and extra hours don't carry over.
• Producer licenses expire April 1 of odd years. Appointments expire June 1.
• Appointment filing is 15 days. Termination notice is 30 days.
• An out-of-state administrative action is reported 30 days after final disposition. A criminal prosecution is reported 30 days after the initial pretrial hearing.
• Controlled business is 25%, and life is excluded.
• A referral fee to a non-soliciting person is legal in Vermont.
• Accepting a rebate is a violation, not just giving one.