South Carolina's insurance law is Title 38 of the South Carolina Code of Laws, with details in the Department of Insurance regulations, chapter 69 of the Code of Regulations. Examples are Regulation 69-50 on CE, 69-58 on privacy and 69-12.1 on replacement. The South Carolina questions on every exam come from the same core: the Director, producer licensing and appointments, CE, unfair trade and claim practices, fraud, and the guaranty associations. General concepts (insurer types, agency law, what twisting or rebating means, federal law) are in the national Insurance Regulation guide.

About the exam

South Carolina's exams are delivered by Pearson VUE and scored on a scaled score of 70 to pass. South Carolina offers both separate and combined exams.

From the licensing law and the Department:

• The exam tests the lines sought, a producer's duties, and South Carolina insurance law (38-43-100).
• A candidate who fails or misses the exam must reapply and pay all fees again before being rescheduled (38-43-100(E)).
• A passing exam report can be used to apply for 12 months. Wait about 2 days after passing for results to reach NIPR before applying.

The regulator

The Director

• The South Carolina Department of Insurance is headed by the Director of Insurance, appointed by the Governor with the advice and consent of the Senate (38-3-10; 38-1-20(19)).
• Before taking office, the Director must cut all ties with insurers and agencies, except as a policyholder (38-3-100).
• Duties:
  • See that the insurance laws are faithfully executed, and make regulations.
  • Report criminal violations to the Attorney General or other law enforcement (38-3-110).

Hearings

• Notice of a hearing comes at least 30 days ahead and states the subject and any specific charges (38-3-170).
• The Director may punish contempt like a circuit judge.
• Orders must be in writing and signed (38-3-180, 38-3-200).

Examinations

• Financial exam of every licensed insurer at least once every 5 years. Market conduct exams whenever the Director thinks appropriate (38-13-10).
• The insurer pays for outside actuaries and accountants.
• Refusing an exam is grounds to suspend or revoke the certificate of authority.
• After receiving the exam report, the insurer has 30 days to respond (38-13-20, 38-13-30).

Penalties (38-2-10 to 38-2-30)

• Administrative fines don't prevent civil or criminal proceedings for the same conduct.
• Acting without a required license is a misdemeanor: up to $10,000 or 2 years.
• A misdemeanor in Title 38 with no other penalty stated: up to $2,500 and/or 2 years.

Insurers

• Domestic = incorporated in South Carolina; foreign = another U.S. state; alien = another country.
• An admitted insurer is licensed in South Carolina. A nonadmitted insurer isn't (38-1-20).
• An insurer must hold a certificate of authority. It is suspended or revoked if the insurer is in unsound condition or breaks the law, and while suspended the insurer and its agents may write no new business (38-5-120).
• Forms: must be filed and approved before use (38-61-20). A form not acted on within 30 days is deemed approved, but the insurer gives 10 days' notice of intent to use it.
• Rates: may not be excessive, inadequate or unfairly discriminatory (38-73-330). The property and casualty rating chapter doesn't apply to ocean marine or accident and health.
• Unlicensed insurers: a producer who solicits for one, outside the surplus lines law, commits a misdemeanor and is personally liable on the contract.

Producer licensing (chapter 38-43)

Definitions

• Negotiate means conferring with a buyer about the substantive benefits, terms or conditions of a policy.
• Sell means exchanging a policy for money on behalf of an insurer.
• Solicit means urging someone to apply for a particular kind of insurance from a particular company (38-1-20).
• A license alone creates no authority to bind an insurer.

Who needs a license

• A license for the line is needed to sell, solicit or negotiate (38-43-20).
• Exempt:
  • A salaried clerical employee who takes premium payments under a producer's supervision.
  • A salaried employee who advises only their own employer.
• Agencies: a business entity needs an agency license and must designate a person responsible for compliance. A sole proprietor working in their own name doesn't (38-43-30, 38-43-100(I)).

Requirements (38-43-100)

• At least 18.
• No felony conviction within 10 years.
• No misdemeanor involving dishonesty or breach of trust within 5 years.
• Fingerprints for SLED and FBI checks. Prints on file don't need to be redone at renewal.
• Initial and biennial renewal fees are $25 each (38-43-80).

Nonresidents and movers

• Nonresidents get the same lines they hold at home through reciprocity (38-43-70).
• A nonresident who moves to a new home state reports it within 30 days.
• Moving to South Carolina: apply within 90 days of establishing residence, and no exam is needed for lines held.

Temporary license (38-43-102)

• Up to 180 days.
• Examples: a surviving spouse of a deceased producer, or the designee of a producer entering the armed forces.
• A sponsor may be required.
• Not available to someone who is just behind on CE.

Other duties

• Assumed names: notify the Director before using one (38-43-10(C)).
• Changes of legal name or address: report within 30 days. Applicants list business, e-mail, mailing and residential addresses (38-43-107).
• Renewal: biennial, by the last day of the birth month. Producers born in odd years renew in odd years. Active military service allows a waiver (38-43-110).
• Reporting actions (38-43-247):
  • An administrative action elsewhere: within 30 days of final disposition.
  • A criminal conviction: within 30 days of the conviction.
• Records: keep records of policies written, including the amount insured and the premium, for 5 years (38-43-250).

Continuing education (38-43-106; Regulation 69-50)

Hours

• 24 hours every two years, including 3 hours of ethics.
• Producers with both life/health and property/casualty authority complete at least one-third of the hours (8) in each.

Timing and credit

• Due by the last day of the birth month in the compliance year.
• A classroom hour is at least 50 minutes.
• No credit for repeating a course within the period.
• Up to 18 excess hours carry forward.
• Hours earned to keep designations such as CPCU, CIC or RHU can count.

Exempt

• Producers 65 or older with at least 25 years of South Carolina licensure.
• Limited lines producers.
• Nonresidents who meet home-state CE.

Missed CE

• Reinstate within 6 months by completing the hours and paying a $50 penalty.
• After 6 months, the license is canceled. You must retest and reapply.

Appointments and terminations

Appointments (38-43-50)

• The insurer files a notice of appointment within 15 days after the contract is signed or the first application is submitted. The insurer certifies that the producer is trustworthy and qualified.
• The Director verifies eligibility within 30 days. If the producer is ineligible, the insurer is told within 5 days.
• A producer not acting as an insurer's agent needn't be appointed. A P&C producer placing surplus lines through a broker needn't be appointed by the surplus lines insurer.
• Appointment fees are paid every two years by September 30 of even-numbered years. Unpaid appointments are canceled (38-43-80).
• Anyone who collects or sends premiums for an insurer must generally be an appointed producer of that insurer.

Terminations (38-43-55)

• The insurer notifies the Director within 30 days after the termination.
• For a for-cause termination, it sends the producer a copy within 15 days by certified mail or overnight delivery.
• The producer may comment within 30 days.
• The insurer is immune absent actual malice. Termination information is confidential.

Discipline (38-43-130)

Grounds include:

• False application information.
• Misappropriating premiums.
• Discipline in another state.
• Forgery ("dealing unjustly").
• Using notes on the licensing exam.
• Knowingly accepting business from unlicensed people.
• Failing to pay court-ordered child support.

A guilty or nolo contendere plea counts as a conviction.

Procedure

• At least 10 days' notice before probation, suspension or revocation.
• An applicant who is denied may demand a hearing before the Administrative Law Court within 30 days.

Suspension and revocation

• Suspensions last no more than 2 years.
• A revoked producer can't reapply for 2 years.
• If a fine replaces revocation and isn't paid on time (within 30 days at most), the license stands revoked or suspended.

Agencies and lapsed licenses

• An agency can be disciplined for a producer's violation that management knew or should have known about and didn't report or correct.
• Authority continues after a license lapses or is surrendered.

Producer crimes and conduct

• Premiums are held as fiduciary funds. Failing to account for an insurer's collections is a misdemeanor, up to 2 years (38-43-240).
• Fraudulent applications: knowingly submitting an application with false material information to defraud is a felony, up to 5 years and $5,000 (38-43-245).
• Fraudulent premium collection: obtaining a premium by fraud is a misdemeanor, up to 3 years (38-43-190). A producer who negotiates a contract is the insurer's producer for receiving the premium.
• Blank forms: a producer may not sign a blank application or policy (38-43-260).
• Stock sales: a producer may not sell an insurer's stock while selling its policies, or for 30 days after last representing it (38-43-210).
• Commissions (38-43-200):
  • None to unlicensed people who must be licensed.
  • Renewal commissions may go to someone licensed at the time of sale.
  • A service fee to a non-seller can't depend on completing the sale.
• Premium finance: a producer may not require an applicant to use a particular premium finance company that charges a fee (38-5-200). When advancing premiums, a producer may not require the insured to buy another product (38-43-420).

Unfair trade practices (chapter 38-57)

• Misrepresentation (38-57-40), including when adjusting claims (38-57-70).
• False advertising (38-57-50).
• Twisting through incomplete comparisons (38-57-60).
• False financial statements (38-57-80).
• Defamation (38-57-90).
• Boycott (38-57-100).
• Coercion by lenders. A lender may still require reasonable financial and coverage terms (38-57-110).
• Unfair discrimination between insureds of the same class and risk (38-55-50). A reduced rate for payroll deduction savings isn't discrimination (38-57-140).
• Materials soliciting state employees must say the program isn't endorsed by the State unless it is (38-57-45).

Rebating and inducements

• Rebating is prohibited (38-57-130), with exceptions:
  • Value-added products or services that relate to the coverage and reduce risk, enhance health or mitigate loss are allowed. Information from them can't be used in underwriting (2024 amendment).
  • Auto commission rebates: a licensed agent may rebate part of the commission on automobile insurance to the insured (38-43-200(E); 38-55-50).
• Advertising gifts: worth up to $25. Refreshments at a sales presentation: up to $10 per person (38-57-160).
• Prohibited inducements: stock, advisory board seats or jobs (38-57-150).
• "Free" insurance: the word "free" can't be used for life or A&H insurance as an inducement (38-57-170).

Enforcement

• After a hearing, the Director issues a cease and desist order plus penalties.

Claims practices

General rules (chapter 38-59)

• A listed act is an improper claim practice when committed without just cause and often enough to be a general business practice (38-59-20). Examples:
  • Not acknowledging claim communications.
  • Not settling in good faith when liability is reasonably clear.
  • Lowball offers that force suits or require a lawyer.
• Penalties can't be counted as a cost in setting rates (38-59-30).
• Ignoring a cease and desist order for 30 days allows further penalties.
• The article creates no private right of action.

Proof of loss forms (38-59-10)

• If an insurer requiring written proof of loss doesn't furnish forms within 20 days after notice, a written statement of the loss satisfies the policy.
• Individual health policies use a 15-day claim forms provision instead. See the Individual A&H guide.

Fraud (Omnibus Insurance Fraud and Reporting Immunity Act, 38-55-510 et seq.)

Penalties (38-55-540)

• A first offense where the benefit is under $1,000 is a misdemeanor.
• A second or later offense is a felony regardless of amount.
• Full restitution is required.

Reporting

• Anyone with knowledge of a suspected false statement reports it to the Insurance Fraud Division of the Attorney General (38-55-570).
• Allegations are forwarded to SLED for investigation (38-55-560).
• Good-faith reporters are immune (38-55-580).

Privacy (Regulation 69-58)

• An initial privacy notice is due when the customer relationship begins, then at least every 12 months.
• 30 days to opt out is reasonable.
• Health information authorizations last up to 24 months. No authorization is needed for claims administration or underwriting.
• Policy numbers can't be shared for telemarketing.

Guaranty associations

South Carolina Life and Accident and Health Insurance Guaranty Association (chapter 38-29)

• Membership is required. Accounts are kept for accident and health, life and annuities.
• The portion where the owner bears the investment risk isn't covered.
• The summary document is delivered at policy delivery, and the Association can't be used to sell (38-29-200).

South Carolina Property and Casualty Insurance Guaranty Association (chapter 38-31)

• Pays the part of a covered claim over $250 and under $300,000.
• Workers' compensation is paid in full.
• Unearned premium: only the amount over $100.
• Claims after insolvency are covered until 30 days after the determination, or earlier policy expiration or replacement.
• Claims filed more than 18 months after insolvency aren't covered.
• Excluded: title insurance, fidelity and surety bonds, and first-party claims by insureds with net worth over $10 million.
• Assessments: no more than 1% of net direct premiums per account each year.
• Surplus lines insurers aren't members.

Surplus lines (chapter 38-45)

• A resident broker (surplus lines) license requires a P&C license, the broker exam and a $10,000 bond (38-45-20).
• The Director approves eligible nonadmitted insurers for risks that licensed insurers have declined (38-45-90).
• Premium tax: 6% total (4% state + 2% municipal).
• Exempt commercial purchasers may skip the diligent search after disclosure and a written request.

Common exam traps

• The regulator is the Director of Insurance, appointed by the Governor with Senate consent.
• Fines: producers $2,500, or $5,000 if willful. Insurers up to $30,000 if willful.
• CE: 24 hours including 3 ethics. Dual-licensed producers do 8 hours per line. Up to 18 hours carry over. Exempt at 65 with 25 years. Missed CE: 6 months to fix with a $50 penalty.
• Appointment fees: due September 30 of even years.
• Auto commission rebating is legal in South Carolina. Most other rebates are not. Gifts up to $25; refreshments up to $10.
• Revocation: wait 2 years to reapply.
• P&C guaranty: over $250 to under $300,000; WC in full; $10 million net-worth exclusion.