Producer Responsibilities & Duties

Utah law imposes significant responsibilities on P&C producers to protect consumers and maintain industry integrity under Utah Code Title 31A.

Fiduciary Responsibilities

Handling of Funds

Producers have a fiduciary duty when handling client funds:

Fiduciary Obligations:

• Premiums: Hold in trust for insurers and insureds
• Return Premiums: Promptly return unearned premiums to policyholders
• Claims Payments: Promptly deliver claim proceeds to insureds
• Separate Accounts: Maintain separate premium trust account if holding funds
• No Commingling: Don't mix insurance funds with personal funds

Prohibited Actions:

• Using premium funds for personal purposes (misappropriation/conversion)
• Delaying premium payment to insurers to earn interest
• Retaining claim payments intended for insureds
• Mixing insurance funds with operating or personal funds

Exam Tip: Misappropriation of premiums is called "conversion" and is a serious violation under Utah law that can result in license revocation and criminal prosecution.

Premium Payment Handling

Proper Premium Handling:

1. Receipt of Premium:

   • Provide receipt if requested
   • Document payment method and amount
   • Note effective date of coverage

2. Premium Trust Account (if maintaining):

   • Deposit premiums in separate trust account
   • Account must be clearly identified as trust account
   • No commingling with personal or business operating funds

3. Remittance to Insurer:

   • Forward premiums to insurer per agency agreement
   • Typically within 30 days or per contract terms
   • Maintain records of remittances

4. Return of Premiums:

   • Promptly return unearned premium to insured
   • Typically within 30 days of cancellation or policy change
   • Include any refund due

Disclosure Requirements

Required Disclosures

Producers must disclose certain information to consumers:

Misrepresentation Prohibitions

Prohibited Misrepresentations under Utah Code Title 31A:

About Policies:

• ✗ Falsely describing policy benefits or coverage
• ✗ Omitting material exclusions or limitations
• ✗ Misrepresenting policy terms or conditions
• ✗ Exaggerating benefits beyond actual provisions

About Companies:

• ✗ Falsely representing insurer's financial condition
• ✗ Misrepresenting insurer's licensing status
• ✗ Making false comparisons with other insurers
• ✗ Implying state or government endorsement

About Premiums:

• ✗ Misrepresenting premium amounts or payment terms
• ✗ Falsely promising future dividends or refunds
• ✗ Misrepresenting the tax treatment of premiums
• ✗ Hiding fees or additional charges

Exam Tip: Misrepresentation—knowingly making false statements to induce someone to buy insurance—is one of the most serious producer violations under Utah law and can result in immediate license revocation.

Unfair Trade Practices

Utah Code Title 31A Chapter 31 prohibits specific unfair practices:

Prohibited Practices

Rebating:

• Offering premium rebates or valuable inducements not specified in policy
• Giving special favors or advantages not available to all insureds in same class
• Exception: Promotional items of minimal value are typically allowed

Twisting:

• Using misrepresentation to induce insured to lapse, forfeit, or change policies
• Making false comparisons between existing and proposed coverage
• Convincing client to replace coverage to earn new commission without client benefit

Churning:

• Excessive replacement of policies for producer's benefit (commission generation)
• Replacing policies frequently without valid insurance reason
• Pattern of unnecessary policy changes

Discrimination:

• Unfairly discriminating between individuals of same class and risk
• Charging different rates without actuarial justification
• Denying coverage based on prohibited factors (race, religion, national origin, etc.)

Defamation:

• Making false or malicious statements about competitors
• Injuring reputation of other insurers or producers
• Spreading false rumors about financial condition

Exam Tip: Rebating is offering valuable inducements not specified in the policy. Small promotional items (pens, calendars under $25) are typically permissible. Large inducements (cash back, gift cards, electronics) are prohibited rebating under Utah law.

Record Keeping Requirements

Required Records

Producers must maintain adequate records per Utah regulations:

Required Documentation:

• Applications and policy documents
• Correspondence with insureds
• Premium payment records
• Commission statements
• Client disclosure forms
• Complaint records
• Continuing education certificates

Retention Period:

• Minimum: 5 years for most insurance records
• Longer for Claims: Until final disposition plus retention period
• CE Records: At least through next renewal cycle plus audit period
• Electronic Storage: Acceptable if readily accessible and secure

Department Access to Records

Commissioner Authority:

• Utah Insurance Department may examine producer records at any time
• Producers must make records available upon request within specified timeframe
• Failure to produce records can result in license suspension
• Records must be maintained in Utah or readily accessible to Department

Reporting Requirements

Change of Information

Must Report Within 30 Days:

Criminal Convictions and Regulatory Actions

Immediate Reporting Required:

• Criminal conviction of felony
• Criminal conviction of misdemeanor involving dishonesty or breach of trust
• Administrative action by any insurance regulatory authority
• License suspension or revocation in another state

Failure to Report:

• Can result in license suspension or revocation
• May be treated as separate violation from underlying conduct
• "Failure to report" is a commonly tested violation on exams

Exam Tip: Address changes must be reported within 30 days. Criminal convictions and regulatory actions must be reported immediately. These are commonly tested timeframes on the Utah P&C exam.

License Suspension and Revocation

Grounds for Discipline

The Commissioner may suspend, revoke, or refuse to renew a license for:

Violations:

• Providing false information on license application
• Misappropriation or conversion of premiums or other funds
• Demonstrating lack of trustworthiness or competence
• Misrepresenting terms of insurance policies
• Failing to comply with Utah insurance laws
• Failing to complete continuing education requirements
• Allowing license to be used by unlicensed person

Criminal Issues:

• Conviction of felony
• Conviction of crime involving dishonesty or breach of trust
• Pleading guilty or nolo contendere to serious crime

Regulatory Issues:

• License suspended or revoked in another state
• Disciplinary action by another insurance regulator
• Failure to respond to Department inquiries
• Refusal to provide records for examination

Penalties and Disciplinary Actions

Available Penalties under Utah Code:

Aggravating Factors:

• Prior violations or disciplinary history
• Harm to consumers
• Pattern of misconduct
• Intentional violations
• Failure to cooperate with investigation

Exam Tip: The Commissioner can fine up to $10,000 PER VIOLATION. Multiple violations can result in substantial cumulative fines of $50,000 or more.

Errors & Omissions Insurance

E&O Insurance

While Utah does not mandate E&O insurance for producers, it is highly recommended:

Why Carry E&O:

• Protects against claims of negligence or mistakes
• Covers legal defense costs
• Common appointing company requirement
• Professional protection for producer's assets

What E&O Covers:

• Errors in coverage advice
• Omissions in policy placement
• Failure to obtain requested coverage
• Mistakes in policy servicing
• Negligent misrepresentation claims

What E&O Doesn't Cover:

• Intentional misconduct or fraud
• Criminal acts
• Premium misappropriation
• Willful violations of law (unfair practices, etc.)

Exam Tip: Utah does not mandate E&O insurance for P&C producers by statute, but many appointing companies require it as a condition of appointment. Always check with your appointing company.