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Agents Selling Unlicensed Insurance Coverage Soon May Face Felony Charges


TALLAHASSEE - Effective October 1, Florida-licensed insurance agents who sell unlicensed insurance could face a felony charge and lose their license under a new law pushed by Treasurer and Insurance Commissioner Tom Gallagher during the 2002 legislative session.

During the last two years, the Department of Insurance has shut down six entities selling unlicensed health insurance plans and two entities that were selling unauthorized medical malpractice insurance to health care providers. These entities have left at least 30,000 Floridians with more than $6 million in unpaid claims. In conjunction with barring these entities from doing business in Florida, the department is investigating dozens of licensed agents for selling unauthorized insurance.

"A licensed insurance agent should know whether the product he or she is selling is illegal or properly licensed," Gallagher said. "Although a majority of agents are not marketing unlicensed plans, the new law will hold unscrupulous agents accountable for leading their clients into buying unlicensed coverage."

The new law increases the violation of selling unauthorized insurance from a second-degree misdemeanor to a third-degree felony, punishable by up to five years in prison and a $5,000 fine per count. Florida law already requires anyone who solicits, negotiates or sells an insurance contract for an unauthorized insurer to be held financially responsible for unpaid claims.

While investigating unlicensed entities, department regulators have determined that the operators of unauthorized entities would not have been able to reach potential buyers without the assistance of licensed agents. Both employers and agents have been enticed by the low premiums unlicensed entities charge, but the rates are often not actuarially sound and money is not set aside for reserves. Because unlicensed entities do not participate in a state guaranty fund, a fund covering unpaid claims in the event of bankruptcy, policyholders in unlicensed plans are usually left with unpaid claims when the businesses fold.

The department became aware of the plans shut down so far when policyholders began complaining about slow or no payment of claims. Regulators determined that the entities ran into financial trouble when claims outpaced incoming premiums.

The department's Bureau of Agent and Agency Investigations has 60 investigators available to look into potential violations and take appropriate administrative action against an agent's license. The Division of Insurance Fraud has 119 sworn law-enforcement investigators who can file criminal charges. Further, the department has created an Unauthorized Entities Section dedicated to tracking and taking civil action against these phony plans.

In April, the department launched a media campaign warning employers and individuals to stay away from buying insurance from unlicensed entities. The campaign's message is, "Verify before you buy."

The license status of companies can be determined by calling the department's Consumer Helpline at 1-800-342-2762 or by visiting the department's website at .