Chapter 10: License Maintenance & Ethics
Learning Objectives
Understand:
- Continuing education requirements
- Fiduciary responsibility
- Commission sharing rules
- Referral fees
- Address change notification requirements
Continuing Education (CE) Requirements
FREQUENCY AND HOURS
Renewal Cycle: Every 2 years
Required Hours: 24 hours every 2 years
Breakdown:
- 24 total hours required
- Must include 3 hours of Ethics/Moral and Regulatory Requirements
- Remaining 21 hours can be any approved insurance topics
Memory Trick
24 hours every 2 years | 3 of those must be Ethics
CE Exemptions
For Credit Insurance Only:
- If licensed ONLY for Credit Insurance
- You may have different requirements
- Still must complete Ethics hours
- Check current Michigan DIFS regulations for specifics
Timing
Renewal: Licenses expire at specific dates
CE must be completed: Before license expiration
Failure to complete: License lapses automatically
Fiduciary Responsibility
Fiduciary = Acting in someone else’s best interest
What It Means
As an insurance producer, you have a legal duty to:
1. Act in the best interests of customers
- Not just what makes you the most money
- Recommend what’s best for them
- Even if it means lower commission for you
2. Provide accurate information
- Don’t lie or mislead
- Disclose important facts
- Answer questions honestly
3. Not deceive or misrepresent
- Can’t hide bad terms in fine print
- Can’t exaggerate coverage
- Can’t make false promises
4. Disclose conflicts of interest
- If you benefit from a recommendation, say so
- If you have a personal relationship, disclose it
- Transparency is key
5. To all parties EXCEPT the Commissioner
- You owe fiduciary duty to customer
- You owe fiduciary duty to company
- You do NOT owe fiduciary duty to DIFS
- (DIFS is the regulator; fiduciary applies to business relationships)
Why It Matters
- Protects customers from being exploited
- Makes insurance market fair and honest
- Establishes trust
- Required by law
Commission Sharing and Referral Fees
COMMISSION SHARING
What it means:
- You receive a commission, then share part of it with another person
Who can you share with?
- ONLY with another agent licensed in the same line of insurance
Examples of ALLOWED commission sharing:
- You and another agent co-sell a policy → can split commission
- You refer to another licensed agent → can negotiate commission split
- Team of agents → can share commissions
Examples of NOT ALLOWED:
- Sharing commission with unlicensed person (illegal)
- Sharing with customer (would be rebating)
- Sharing with non-insurance professional
REFERRAL FEES
What they are:
- Money paid for referring a customer to someone else
- May or may not result in a sale
Key Rule: Contingency
ALLOWED: Non-contingent referral fees
- “Refer someone and get $50 regardless of whether they buy”
- Fee is not contingent (dependent) on a sale
- Legal in Michigan
NOT ALLOWED: Contingent referral fees
- “Refer someone and get $50 IF they buy”
- Fee is contingent on the purchase
- This is considered rebating
- Illegal
Memory Trick
Contingent = bad (tied to sale) | Non-contingent = good (paid regardless)
PROCESSING FEES
What they are:
- Fees charged for processing an insurance transaction
- Example: Credit card processing fee
The Rule:
- NOT allowed for credit card payments
- Cannot charge customer extra to pay by credit card
- Credit card companies already charge processing fees
- Cannot double-charge
Why?
- Protects consumers from excessive fees
- Prevents abuse of credit card processing
Examples
NOT ALLOWED:
- “Processing fee: $25 if paying by credit card”
- “$50 surcharge for credit card payments”
- “Credit card convenience fee”
ALLOWED:
- Charging different prices for different payment methods (generally)
- Building credit card fees into the premium itself
CHANGE OF ADDRESS
Notification Requirement
When you move:
- Must notify DIFS within 30 days
- Provide new address
- Keep information current
Why it matters:
- DIFS needs to reach you for notices
- License renewal communications
- Disciplinary matters
- Legal documents
Failure to notify:
- May result in penalty
- Could affect license status
- DIFS can’t contact you
ETHICAL OBLIGATIONS SUMMARY
| Obligation |
Requirement |
Example |
| Best Interest |
Act in customer’s best interest |
Recommend best policy, not highest commission |
| Accuracy |
Provide accurate information |
Don’t exaggerate coverage |
| No Deception |
Don’t mislead or misrepresent |
Don’t hide bad terms |
| Disclose Conflicts |
Tell customer about conflicts |
Disclose if you profit from recommendation |
| Share Only with Licensed Agents |
Commission sharing restricted |
Can’t share with unlicensed person |
| Non-contingent Fees Only |
Referral fees must not depend on sale |
“Refer for $50 regardless” = OK |
| No CC Processing Fees |
Can’t charge for credit card use |
Can’t add surcharge |
| Keep Address Current |
Notify DIFS within 30 days |
Must update if you move |
Key Definitions
- Fiduciary: Acting in someone else’s best interest
- Contingent: Dependent on something happening
- Non-contingent: Not dependent on something happening
- Rebating: Offering something of value to induce a sale (illegal)
- Referral Fee: Payment for referring customer
- Commission: Payment for selling insurance
CHAPTER 10 QUIZ
Question 1
How many continuing education hours are required every 2 years?
- A) 12 hours
- B) 18 hours
- C) 24 hours
- D) 30 hours
Show Answer
**Answer: C**
24 hours of CE every 2 years. 3 of those must be Ethics.
Question 2
How many of those CE hours must be Ethics/Regulatory?
- A) 1 hour
- B) 3 hours
- C) 6 hours
- D) 10 hours
Show Answer
**Answer: B**
3 hours of Ethics/Regulatory every 2 years (out of the 24 total)
Question 3
Can you share a commission with an unlicensed person?
- A) Yes, always
- B) Yes, if they help with the sale
- C) No, only with licensed agents in same line
- D) No, never
Show Answer
**Answer: C**
Can ONLY share commissions with licensed agents in the same line of insurance.
Question 4
How long do you have to notify DIFS of an address change?
- A) 7 days
- B) 15 days
- C) 30 days
- D) 60 days
Show Answer
**Answer: C**
30 days to notify DIFS of address change.
Question 5
Are referral fees allowed if they’re NOT contingent on a purchase?
- A) No, never
- B) Yes, they’re allowed
- C) Only for life insurance
- D) Only if the referrer is licensed
Show Answer
**Answer: B**
Yes, non-contingent referral fees are allowed. "Refer for $50 regardless" = OK. But "Refer for $50 IF they buy" = NOT OK (contingent).
CRITICAL NUMBERS (from Chapter 10)
- Continuing Education: 24 hours every 2 years
- Ethics Hours: 3 hours every 2 years
- Address Change Notification: 30 days
Summary
In this chapter you learned:
- Must complete 24 hours CE every 2 years (3 must be Ethics)
- Have fiduciary duty to act in customer’s best interest
- Can only share commissions with licensed agents in same line
- Non-contingent referral fees allowed; contingent fees not allowed
- Cannot charge processing fees for credit cards
- Must notify DIFS of address change within 30 days
Next: Chapter 11: Unfair Trade Practices