Legal basis under the Insurance Code
- Section 301 of the Insurance Code defines an insurance broker as representing the insured.
- An insurance broker who represents the insured cannot issue insurance policies under Section 301.
- The circular letter treats policy issuance involvement by brokers as contrary to the Insurance Code framework on who may issue policies.
Who may issue insurance policies
- Insurance policy issuance is limited to insurance companies and their general agents in cases allowed by law.
- An insurance broker must not issue policies and must not involve itself in the process of issuance.
- When a broker attempts to issue policies, the circular letter treats that act as a violation of the Insurance Code scheme.
Prohibited broker conduct
- An insurance broker must not issue an insurance policy.
- An insurance broker must not involve itself in the process of policy issuance.
- Policy issuance by a broker is treated as an act “they are not supposed to do,” creating regulatory grounds for sanctions under the Insurance Code.
Insurance company consent and liability
- An insurance company violates the Insurance Code when it allows an insurance broker to issue policies in its behalf.
- Allowance of broker issuance constitutes a violation whether granted tacitly, through a special power of attorney, or through any other instruments.
- Consent by the insurance company does not remove liability; it reinforces that broker issuance with company consent is a violation.
When sanctions apply
- An insurance company that allows broker issuance is subject to enforcement action.
- An insurance broker that issues policies with the insurance company’s consent is subject to enforcement action.
- Enforcement requires notice and hearing before the application of sanctions.
Consequence: suspension or revocation
- After notice and hearing, violation of the Insurance Code by a sanctioned insurance company or broker is sufficient cause for the suspension or revocation of the certificates of authority.
- The circular letter establishes that consent and authorization instruments provided by the insurer do not prevent suspension or revocation after due process.