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Broker Guide

VIEWS: 70 PAGES: 98

									July 2007              Broker Guide




www.optimahealth.com
               Optima Health
               Broker Guide
                   2007




Release Date: 07/01/07
Revision Date: 06/12/07
                                                                                                                                        Contents
Small Group (2-99 eligibles) Enrollment
and Underwriting Guidelines ...........................................1
                                                                                                    Pre-existing Condition Clause ................................. 18
          Eligible Employers & Employees ............................1                              HIPAA Special Enrollment Provisions ................... 18
          Employees NOT Eligible ...........................................2                       Creditable Coverage ................................................ 19
          Out-of-Area Employees.............................................2                       Proof of Prior Coverage........................................... 19
          Eligible Dependents...................................................2                   Common Ownership Companies............................. 19
          Dependents NOT Eligible..........................................3                        “Class” Groups ........................................................ 20
          Out-of-Area Dependent Children ..............................3                            Participation Requirements ..................................... 20
          Dependent Verification..............................................3                     Misstatement of Age or Class.................................. 20
          Member Plan Changes ...............................................4                      Work-related Illness and/or Injury .......................... 20
          Pre-existing Condition Clause ...................................4                        Risk Acceptance ...................................................... 20
          HIPAA Special Enrollment Provisions......................4                                Size and Underwriting Limits.................................. 21
          Creditable Coverage ..................................................5                   Request for Proposals .............................................. 21
          Proof of Prior Coverage.............................................5                     Agent Checks .......................................................... 21
          Employer Contribution ..............................................6
          Common Ownership Companies ...............................6                      Broker Policies & Procedures .................................... 22
          “Class” Groups ..........................................................6
          Participation Requirements........................................6                       Agent/Broker Appointment Policy.......................... 22
          Employer Application................................................7                     Commissions Policy ................................................ 23
          Employee Application/Health Questionnaire ............7                                   Commission Schedule ............................................. 24
             Large Group Underwriting and Enrollment Guidelines
          Waivers......................................................................8
                      Eligible Employers & Employees                                                AOR/BOR Change Letter........................................ 25
                      Employees Commission
          Virginia Employment NOT Eligible                                                          Proposal Preparation for Brokers ............................ 25
          Quarterly Wage and Earnings Report ........................8
          Misstatement of Age or Class....................................9                Substitute Form W-9 (SF-W9) ...................................... 27
          Employer Enrollment Check .....................................9
          Work Related Illness and/or Injury............................9                  Virginia Bureau of Insurance
                                                                                           Administrative Letters
          Underwriting – Small Group
          Small and Mid-Sized Group New Business.............10                                     Administrative Letter 2001-10
          Risk Acceptance ......................................................11                  Administrative Letter 2002-1
          Additional UW Requirements/Information .............12                                    Administrative Letter 2002-8
          Under Contract Group .............................................12                      Administrative Letter 2002-8 conversion table
          Membership Changes ..............................................12                       Administrative Letter 2002-9
          Plan Changes ...........................................................13                Administrative Letter 2006-1
          Premium Payments ..................................................13                     Administrative Letter 2006-4
          Reinstatement of Groups Terminated                                                        Administrative Letter 2006-7
          for Non-payment of Premium..................................14                            Administrative Letter 2006-11
              Optima Broker Guide 2000
          Renewal Proposals...................................................14                    Administrative Letter 2007-3
                                                                                                    Administrative Letter 2007-4
Large Group (100+ eligibles) Enrollment                                                             Administrative Letter 2007-5
and Underwriting Guidelines .................................... 15
                                                                                           Virginia Bureau of Insurance Site Map
          Eligible Employers & Employees............................15
          Employees NOT Eligible.........................................15
          Out-of-Area Employees...........................................16
          Eligible Dependents.................................................16
          Dependents NOT Eligible........................................16
          Dependent Verification............................................17
          Out-of-Area Dependent Children ............................17
          Member Plan Changes .............................................18




   Optima Health Broker Guide 2007                                                                                                                                i
Small Group Enrollment and Underwriting Guidelines
                                    Small Group (2-99 eligibles)
                        Enrollment and Underwriting Guidelines

Eligible Employers

    •    Corporations, partnerships or sole proprietorships with a clear employer/employee relationship.
         Associations and 1099 employee relationships are not eligible for group coverage.
    •    Financially stable business organizations with at least two eligible employees (including owners
         and partners), but not more than 99 eligible employees.
    •    Employers with a payroll deduction system established for employee contributions.
    •    The employer group must not have been formed for the sole purpose of securing insurance.
    •    The employer group must be located within the Optima Health Plan service area.
    •    Optima Health must be the only group health care coverage offered to all employees. Optima
         Health must be the only health care option offered to the local employees of a national company.


Eligible Employees
An employee is eligible for Coverage if he/she:

    1.   is employed by the group; and
    2.   resides or works in the service area or is an out-of area employee (and no more than 35% of the
         eligible and enrolled employees are out of area); and
    3.   is actively at work performing all of his or her usual occupation duties; and
    4.   is working regularly at least 25 hours per week, 50 weeks per year; and
    5.   is at least 17 years of age; and
    6.   within 31 days of the effective date of coverage files a complete enrollment application, including
         any applicable premium or fees, with the Plan; and
    7.   does not knowingly give incorrect, incomplete, or deceptive information regarding his/her
         eligibility for coverage to the Plan or to the Employer Group; and
    8.   does not knowingly give incorrect, incomplete or deceptive information regarding his/her
         dependents eligibility for coverage to the Plan or to the Employer Group; and
    9.   meets any other requirements as specified herein, or as specified by the Plan or by the Employer
         Group.

    •    The employee must appear on the employer’s most recent Virginia Employment Commission
         Quarterly Report. Employers must provide proof of true and active employee status for
         employees not listed (new hires, owners) on most recent Virginia Employment Commission
         Quarterly Report.

    •    Self-employed proprietors, directors or partners of a company are not excluded, provided they
         meet the criteria listed above. Sole proprietors, directors, partners, or principals for any 2 person
         group, or any other group not required or able to submit a Virginia Employment Commission
         Quarterly Wage and Earnings Report (VEC) will be required to submit one or all of the following:

         -   Declaration Letter attesting to the fact that they meet the above listed criteria
         -   A list of all current employees and social security number(s)
         -   Copy of Business License
         -   Papers of incorporation listing principals/officers of the company
         -   Partnership agreement
         -   W2 form (if applying for coverage at year end and prior to next quarterly VEC reporting)
         -   1040 Schedule C or F



Optima Health Broker Guide 2007                                                                              1
                                           Small Group Enrollment and Underwriting Guidelines


        -    IRS Schedule K1 (Form 1065 or 11205) or,
        -    IRS Form 1120
        -    Payroll Summary

    •   For current groups, the employees must meet the new hire-waiting period established by the
        employer. New groups can waive the new hire waiting period at the time of the group’s initial
        enrollment with Optima Health Plan (OHP) or Optima Health Insurance Company (OHIC), but
        only if they do so for all of the employees. After initial enrollment, the new hire waiting period
        can only be changed at renewal.


Employees NOT Eligible

    •   Employees who engage in foreign travel exceeding 90 consecutive days.
    •   Independent contractors (1099) of the employer.
    •   Part-time (employees who work less than the minimum hours required by the Plan or the
        employer), leased, temporary, seasonal, retired or pensioned employees.
    •    Directors and officers not otherwise eligible as active, full-time employees.
    •   Retirees or pensioned employees


Out-of-Area Employees
Employees who reside and work outside of the service area, or spend more than 90 consecutive days for
business purposes outside of the service area, (foreign travel excluded) can be included in the quote and
will be offered one of the Out-of-Area PPO (OOA PPO) plans. No more than 35 percent of the covered
employees can be covered under the OOA PPO. If more than 35 percent of the group’s eligible employees
are outside of the service area, the group will either be quoted without the OOA employees or Optima
Health will be unable to provide a quote for the entire group.

The networks used for the PPO and OOA PPO products, which provide access to in-network providers, are
the Optima Health Insurance Company PPO network and a contracted national PPO network. Members
accessing care through the participating PPO network providers will be eligible to receive care for covered
services at the in-network benefit level of their PPO plan.


Eligible Dependents

    •   The legal spouse of the insured employee.
    •   The insured employee’s unmarried children under 19 years of age who are dependent upon the
        employee and who are natural children, or legally adopted children, or children under the legal
        custody of the insured. Stepchildren, whether residing with the member or not, are also eligible.
        Foster children are not eligible. Grandchildren are only eligible with proof of legal guardianship.
        (Coverage terminates at the end of the month in which the child turns 19 years of age.)
    •   The insured employee’s unmarried children (as defined above) who are enrolled full time
        (undergraduates with 12 or more credit hours per semester; graduate students with six or more
        credit hours per semester) in an accredited university or college, who are not employed anywhere
        on a full-time basis and who are dependent upon the insured employee. (Coverage terminates at
        the end of the month in which the child turns 24 years of age or is no longer a full-time student.)
    •   Unmarried dependent children (as defined above) over age 19 who are both (i) incapable of self-
        sustaining employment by reason of mental or physical disability and (ii) chiefly dependent upon
        the Subscriber for support and maintenance will continue to be eligible for coverage.

Optima Health Broker Guide 2007                                                                               2
                                             Small Group Enrollment and Underwriting Guidelines

The Subscriber must give the Plan acceptable proof of incapacity and dependency within 31 days of the
child’s reaching the specified age. Proof of incapacity consists of a statement by a licensed psychologist,
psychiatrist, or other Physician stating the Dependent is incapable of self-sustaining employment by reason
of disability from mental or physical disability. The Plan may require subsequent statements not more than
once a year.


Dependents NOT Eligible

    •    Any spouse or child in the military service or government service of any country
    •    Married children
    •    Dependent children over age 19 who are not enrolled as full time students
    •    Dependent children over age 24 regardless of student status
    •    Any spouse or child who is insured as an employee of the employer
    •    Grandchildren for which the employee does not have legal custody
    •    Foster children
    •    Dependents who engage in foreign travel exceeding 90 consecutive days
    •    Individuals no longer legally married to eligible employee
    •    Domestic partners


Out-of-Area Dependent Children
Employers with employees who are requesting coverage for eligible dependent children who reside outside
of the Optima Health Plan (OHP) or Optima Health Insurance Company (OHIC) service area may elect to
purchase the Out-of-Area Dependent rider. This rider allows for dependent children living outside of the
service area to receive services from any provider at in-network benefit levels. Providers outside of the
service area may require payments from subscriber/dependent at the time services are rendered. Subscriber
may then submit the claim to the Plan for reimbursement of charges less applicable in-network copayments
or coinsurance requirements.

The addition of this rider to a new or existing group will add a surcharge to the entire group's premium on
all plans purchased, not just on the plan chosen by the member(s) who currently enroll OOA children. The
rider will remain as a benefit of the group, until written notification is received by the group benefit
representative to request removal of the rider at the group's next renewal date.

Group's electing this rider must have employees with out of area dependents complete an Out of Area
Dependent Notification form annually for each out of area dependent.

NOTE: This rider will not be added to a group on a retroactive basis.


Dependent Verification
OHP or OHIC may, at its discretion, require verification of dependent status from the group or subscriber at
any time prior to or after coverage is effective. The following are the most common forms of verification:

    •    Birth certificate
    •    Marriage certificate
    •    Adoption certificate
    •    Custody papers

The Plan reserves the right to request or review at any time, at its sole and absolute discretion, proof of
eligibility of any Subscriber or Dependent. Should the Plan discover at any time that any Subscriber or
Dependent is not eligible for coverage, never was eligible for coverage, and/or submitted false proof of
eligibility for coverage, then the Plan may, at its sole discretion, either refund all or part of the premium

Optima Health Broker Guide 2007                                                                                 3
                                             Small Group Enrollment and Underwriting Guidelines

payment made on behalf of the Subscriber/Dependent to the Group and retract all or part of any claims paid
from the provider(s), or retain the premium paid on behalf of the ineligible Subscriber/Dependent up until
the date the Plan became aware of the ineligibility and cancel the Subscriber’s/Dependent’s coverage after
the date through which premiums were paid. Disenrollment of a Subscriber or Dependent due to
ineligibility for coverage may result in the reversal and/or denial of claims during the period of ineligibility.
The Subscriber/Dependent may be held responsible for any charges for claims for services during the
period of ineligibility.


Member Plan Changes
Members may only enroll for benefits or change benefit plans once per year during the group’s established
Open Enrollment period. The group’s Open Enrollment period can be no greater than 60 days prior to the
group’s anniversary date, and all member enrollment/change applications must be signed no later than the
end of the renewal month, or earlier if required by the Group.

Members that request initial enrollment, or changes from one plan to another, outside of the Group
established Open Enrollment period must meet the following criteria:

     •   Eligibility after completion of new hire waiting period; or
     •   Life events (marriage, birth or adoption of a child, etc.); or
     •   Loss of coverage under another plan or reduction in hours; or
     •   Reasons defined by Section 125 guidelines; or
     •   HIPAA “Special Enrollment Provisions”.


Pre-Existing Condition Guidelines
A pre-existing condition means a condition (whether physical or mental) regardless of the cause of the
cause of the condition, for which medical advice, diagnosis, care or treatment was recommended or
received within the 6-month period ending on the Member’s enrollment date. The enrollment date is the
earlier of the first day of medical coverage or the first day of any waiting period for coverage.

The Pre-Existing Condition waiting period does not apply to:

1.   A newborn, adopted child under age 18, or a child under age 18 placed for adoption as long as the
     child became covered under health coverage within 30 days of the birth, adoption or placement for
     adoption and provided that the child does not incur a subsequent 63-day break in coverage; or
2.   Pregnancy; or
3.   Genetic information; or
4.   Covered Services for breast cancer when the Member has been breast cancer free for at least five years.

Pre-Existing Condition guidelines are applied to members of groups which:

     •   Have 2-14 eligible employees and offer any Optima Health plans; or
     •   Have 15+ eligible employees, and offer Optima Health PPO plans and do not have group coverage
         in force prior to enrolling with Optima Health.


HIPAA Special Enrollment Provisions
The Plan provides special late enrollment periods for eligible employees and Dependents that fall into the
following categories:




Optima Health Broker Guide 2007                                                                                4
                                           Small Group Enrollment and Underwriting Guidelines

A. Late enrollees with other coverage. Employees or Dependents who initially decline Coverage
   because they have other group health coverage or other health insurance will be allowed to enroll late
   without evidence of insurability if the following conditions are met:

    1.   The employee and/or Dependent is eligible under the Plan’s terms; and

    2.   When the employee declined enrollment for the employee or Dependent, either the employee or
         Dependent had COBRA continuation coverage under another plan and that coverage has since run
         out; or if the other Coverage was not under COBRA , either the other coverage has ended because
         of loss of eligibility, or the employer has stopped contributions toward the other coverage; and.

    3.   An individual must request enrollment no more than 31 days from the time that he or she knew or
         should have known that his or/her other Coverage had ended. Late enrollment is effective no later
         than the first day of the first calendar month after the date the Plan receives a completed request
         for enrollment.

B. Late enrollees due to marriage, birth, adoption, or placement for adoption. If a Dependent is
   added through marriage, birth, adoption, or placement for adoption, the employee and Dependents may
   apply for Coverage through special late enrollment. Individuals in this category do not have to have
   previously declined Coverage because of other Coverage. Individuals must request Coverage within 31
   days of marriage, birth, adoption, or placement for adoption. Coverage starts on the date of the
   marriage, birth, adoption or placement for adoption.


Creditable Coverage
For members enrolling in groups subject to pre-existing condition guidelines, the pre-existing condition
period may be reduced by any periods of creditable coverage, provided there has been no break in coverage
exceeding 63 consecutive days. Employer-imposed waiting periods do not count as lapses in coverage.
Coverages considered creditable include:

    1. Group health plans, including COBRA continuation coverage;
    2. Health insurance coverage (care under any hospital or medical service policy or certificate,
       hospital or medical service plan contract, or HMO contract offered by a health insurer;)
    3. Individual coverage;
    4. Medicare Part A, B, ;
    5. Medicaid;
    6. Military service related care such as CHAMPUS;
    7. A medical care program of the Indian Health Service or of a tribal organization;
    8. A state health benefits risk pool;
    9. A health program offered under the Federal Employees Health Benefits Program;
   10. A public health plan. (Any plan established or maintained by a State, the U.S. government, a
       foreign country, or any political subdivision of a State, the U.S. government, or a foreign country
       that provides health coverage to individuals who are enrolled in the Plan;)
   11. A health plan offered under the Peace Corps Act;
   12. A State Children’s Health Insurance Program under Title XXI of the Social Security Act.


Proof of Prior Coverage
At the time of enrollment, members with creditable prior coverage must submit proof of this coverage with
their enrollment application. The following are examples of acceptable documentation:

    •    Letter or Certificate of Creditable coverage from the previous insurance company.
    •    Letter or Certificate of Creditable coverage from the current or previous employer(s).
    •    Defense Enrollment/Eligibility Records (DEERS) and a copy of the front and back of military
         identification card.

Optima Health Broker Guide 2007                                                                              5
                                           Small Group Enrollment and Underwriting Guidelines

Policies/Procedures for Groups Applying for Coverage
Employer Contribution

    •   The employer contribution must be fair, equitable and non-discriminatory toward any employee
        class.
    •   On a monthly basis, the employer must contribute a minimum of 50 percent of the single
        employee premium using one of the following formulas:
        a. 50 percent of the highest single premium contributed to each employee’s premium;
        b. 50 percent of each employee’s single premium contributed to his or her own premium;
        c. 50 percent of the average single premium contributed to each employee’s premium.
    •   For Age/Gender banded groups (2-14 employees) the minimum contribution will be 50% of the
        single rate for the Age/Gender band for each employee
    •   Verification of minimum Employer Contribution may be required and verified using the following:
        a. Payroll records
        b. Survey of enrolled employees


Common Ownership Companies
Common ownership companies are eligible, given the following stipulations:

    •   There must be a principal owner with majority ownership in all companies.
    •   Multiple partner companies must provide documentation of partnership arrangements, as well as
        written documentation signed by all partners outlining parties eligible to authorize changes to the
        group's employee benefit package and broker arrangements.
    •   There must be a clear and demonstratable relationship to each of the sub companies.
    •   All of the employees will be used to determine rating and plan selection.
    •   Each company must maintain the same eligibility requirements, employer contribution and benefit
        plan.
    •   At any time the group requests to divide the companies into separate group plans, the group will
        be re-underwritten using current quarter rates. Each company will be separately evaluated to
        determine an appropriate rating level and given a new contract period. Additional documentation
        may be requested, such as waivers and/or applications/ health questionnaires, from any employee
        not currently enrolled in the group’s plan.


“Class” Groups
Employers with fewer than 100 total eligible employees may not elect to cover only certain classes of
employees (e.g., - hourly vs. salary). They may, however, elect to have different new hire waiting periods
and employer contributions.


Participation Requirements
Firms with only two or three employees are required to have 100 percent participation. Groups with four or
more are required to have 75 percent participation of eligible employees. Employees who waive coverage
to stay on another qualifying plan (such as Medicare, CHAMPUS or spouse’s employer-sponsored plan)
are not considered eligible employees (for the purpose of the participation calculation) and will not count
against the group’s participation. To determine group participation:

ABC Company       30 Total eligible employees (all full time employees working 25+ hours weekly)
                 -10 Employees enrolled on spouse’s or other plan (must have waiver)
             =    20 Eligible employees to be counted toward participation requirement


Optima Health Broker Guide 2007                                                                           6
                                            Small Group Enrollment and Underwriting Guidelines


75% participation would require that 15 of the 20 potential enrolling employees participate on the plan.
Participation is a continuing requirement. Participation requirements must be met at the time the group is
underwritten, and throughout their enrollment under the plan(s). Failure to maintain required participation
levels may result in termination of the group at any time the participation falls below the required level.
Renewal of a group may be contingent upon re-verification of group’s employee participation.


Employer Application
The Employer Group Application must be submitted to show that the employer has authorized the
submission of an application for group health insurance. A legal representative of the employer with
signature authority must sign the application.


Employee Application/Health Questionnaire for Groups with 2 – 24 Enrolled Employees
Each employee applying for coverage must complete an Employee Application/Health Questionnaire. The
Application/Health Questionnaire must be completed and signed by the employee and Benefits
Administrator. When requesting coverage for dependents, their enrollment and health information must
also be provided. NOTE: All sections of the Application/Health Questionnaire must be completed prior to
submission. Incomplete applications may be returned to the employee for completion and may delay the
underwriting and/or enrollment process.

Optima Health Plan and Optima Health Insurance Company will not accept any Employee Applications/
Health Questionnaires signed and dated by the applicant more than 60 days prior to the effective date of
coverage. NOTE: Any applications signed more than 60 days prior to the effective date will require
a new application.

Employees who decline coverage for any reason, and later decide they want to apply for coverage, will
only be eligible for coverage on the first of the month after receipt of their completed Application/Health
Questionnaire if there is a Qualifying Life Event. A 12-month pre-existing condition period may apply.
Please refer to Pre-Existing Condition guidelines on page 4 for more information.

New applications submitted for an effective date within 90 days of the group’s initial effective date, or
renewal date, may require the group to be resubmitted to underwriting for re-evaluation and rate
adjustment.

IMPORTANT: Agent/Brokers and/or group representatives should NEVER complete an application for an
applicant. In the event it is determined that an application has been completed by someone other than the
applicant, or a court appointed representative for the applicant (documentation will be required), the
information provided will be considered fraudulent and the group will be ineligible for coverage.


Employer Group Health Questionnaire and Employee Application Groups with 25+
Enrolled Employees
Groups with 25+ enrolled employees may apply for coverage by submitting an Optima Health Employer
Group Health Questionnaire and a complete employee census to include the following information:

    •    Name of Employee (optional)
    •    Date of Birth of Employee (required)
    •    Sex of Employee (required)
    •    Social Security Number of Employee and Dependants (required)
    •    Level or Tier of Coverage (required) as follows:
         - Employee


Optima Health Broker Guide 2007                                                                               7
                                             Small Group Enrollment and Underwriting Guidelines

         -    Employee + 1 child
         -    Employee + Spouse
         -    Employee + Children
         -    Family
         -    Waiver – Other Coverage
         -    Waiver - Other

If group accepts final underwritten rates, for enrollment purposes, employees applying for coverage must
complete Page 1 and Page 2 of the Employee Application/Health Questionnaire. The Application portion
(Page 1 and Page 2) must be completed and signed by the employee and Benefits Administrator. When
requesting coverage for dependents, their enrollment information must also be provided. NOTE: The
medical information section (Page 3 and Page 4 of the application does not need to be submitted; however,
all sections of the Application (Page 1 and Page 2) must be completed prior to enrollment. Incomplete
applications may be returned to employee for completion and may delay the underwriting and/or
enrollment process.

Optima Health Plan and Optima Health Insurance Company will not accept any Employer Group Health
Questionnaires signed and dated more than 60 days prior to the effective date of coverage. NOTE: Any
applications signed more than 60 days prior to the effective date will require a new application.

Employees who decline coverage for any reason, and later decide they want to apply for coverage, will
only be eligible for coverage on the first of the month after receipt of their completed Application if there is
a Qualifying Life Event. A 12-month pre-existing condition period may apply. Please refer to Pre-Existing
Condition guidelines on page 4 for more information.


Waivers
Eligible Employees who do not want coverage for themselves and/or any of their dependents are required
to complete and sign the waiver section of the Application/Health Questionnaire. Employees have the
option of the following waiver selections:

    •    Self, which will include all dependents
    •    Spouse only
    •    Child or children only
    •    Spouse and child or children
    •    Reason for waiver.
         - Carrier and Policy of other insurance if reason for waiver is other insurance
         - Optima Health reserves the right to verify other insurance coverage.


Virginia Employment Commission Quarterly Wage and Earnings Report
Along with the Employee Applications/Health Questionnaires and/or Employer Group Health
Questionnaire and completed Employer Group Application, groups applying for coverage must also supply
(may be required prior to submission for underwriting) a copy of the group’s most recent Virginia
Employment Commission Quarterly Wage and Earnings Report (VEC).

The VEC report must clearly indicate the current status of each employee on the report:

    •    Full Time (FT)
    •    Part Time (PT) (Must work at least 25+ hours weekly to be eligible)
    •    Not Eligible (NE) - Please note class of ineligibility - i.e., part time less than 25 hours, in new hire
         waiting period, active duty
    •    Terminated (T) (Must provide date of termination)
    •    Waiving Coverage (W) (Waiver section of Application/Health Questionnaire must be completed)


Optima Health Broker Guide 2007                                                                                 8
                                            Small Group Enrollment and Underwriting Guidelines

A letter signed by an authorized representative of the group is required to verify eligibility for any newly
hired employees or owners that are not listed on the VEC report. In addition, changes/deletions made on
the actual VEC report should be signed and dated by an authorized representative of the group.

If the company does not file a VEC (Corporation, Partnership, Sole Proprietorship companies, Church or
Non-Profit organizations), the following information may be required:

    •    Declaration Letter listing all current eligible employees and social security numbers
    •    Copy of Business License
    •    Papers of incorporation listing principals/officers of the company
    •    Partnership agreement
    •    W2 form (if applying for coverage at year end and prior to next quarterly VEC reporting, and/or
         employee is not considered a Principal/Owner of the company)
    •    1040 Schedule C or F
    •    IRS Schedule K1 (Form 1065 or 11205) or,
    •    IRS Form 1120
    •    Payroll Summary

Additional VEC reports, or any of the documentation mentioned above, may be requested at any time after
enrollment to verify group's continued compliance with participation requirements.


Misstatement of Age or Class
If the age, sex or level/tier of coverage of any insured employee has been misstated, the member’s correct
age, sex or level/tier of coverage shall determine the amount payable under the group policy. All premiums
due as a result of such misstatement will be adjusted and reflected on the group bill. Documentation may
be required to validate corrections to previously stated information.

Rates presented on proposals reflect current census data. Birthdays occurring prior to the effective date may
cause a change in premium.


Employer Enrollment Check
An initial employer enrollment check made payable to Optima Health Plan or Optima Health Insurance
Company for the first month’s premium will need to be submitted prior to enrollment. Groups should not
submit the initial premium check until after underwriting and final rate determination has been made. All
deposits and premium payments must be from the group in the form of a company check, money order, or
cashier’s check.

Optima Health Plan and Optima Health Insurance Company will not accept personal checks from the Agent
or Broker in lieu of a check from the employer group.


Work Related Illness and/or Injury
Employers with two employees are not required to maintain a Worker's Compensation policy. Claims for
work related illness/injury for enrolled employees of a two-person group would be covered according to the
Plan guidelines.

Employers with three or more employees (full time and/or part time) are required to maintain a Worker's
Compensation policy. Work related illness/injury claims incurred by employees of an employer group of
three or more employees will not be covered under their group health insurance policy. This will apply to
all employees, owners, Directors and/or Officers of the company. Optima Health may require that the
group provide the Workers’ Compensation carrier name and policy number.


Optima Health Broker Guide 2007                                                                             9
                                            Small Group Enrollment and Underwriting Guidelines


Underwriting Guidelines/Policies/Procedures
Small and Mid-Sized Group New Business
Small Group is considered to be employer groups with 2 – 49 eligible employees. Mid-Sized Group is
considered to be employer groups with 50 – 99 eligible employees. The eligible count includes employees
waiving coverage. The number of eligible employees is the determining factor when it comes to
differentiating if a group is small group vs. mid-sized group vs. large group, not the number of employees
actually enrolling.

Please allow no less than five (5) business days for the completion of underwriting. Occasionally
additional information may be required for the purposes of underwriting which may increase the turn
around time for final rate determination e.g. - request for Attending Physician Statements. Return of
incomplete applications to group/employee may also cause delays in the underwriting process. Please
ensure all areas on the application are complete prior to submission to avoid unnecessary delays.

Groups requesting a 1st of the month effective date will need to be submitted to underwriting prior to the
close of business on the 5th of the effective month. All additional information necessary for enrollment will
need to be complete prior to the close of business on the 10th of the effective month.

Groups requesting a 15th of the month effective date will need to be submitted to underwriting prior to the
close of business on the 20th of the effective month. All additional information necessary for enrollment
will need to be complete prior to the close of business on the 25th of the effective month.

The following items are required to complete the underwriting process:

    •    Employer Group Application.
    •    Groups w/ 2 – 24 enrolling employees: Complete Employee Application/Health Questionnaires
         for every employee who is applying for coverage. Applications/Health Questionnaires must be
         signed and dated by applicant prior to underwriting. NOTE: Any applications signed more
         than 60 days prior to the effective date will require a new, updated application.
    •    Groups w/ 25+ enrolling employees: Employer Group Health Questionnaire and employee
         applications (Page 1 and Page 2) completed for all employees applying for coverage.
    •    Waivers for eligible employees who are not electing coverage.
    •    VEC, Declaration letter or other required eligibility documentation.
    •    Proof of prior coverage for employees enrolling on plans subject to Pre-Existing Conditions.
         Please refer to Pre-Existing Condition guidelines on page 4 and acceptable forms of Proof of Prior
         Coverage on page 5 for more information.

The Underwriters may conduct a personal history interview with the subscriber and/or subscriber’s spouse
regarding medical information provided. Medical evaluation of the group is based on the following three
risk categories:

    1.   Known – Any chronic medical condition that requires medication on a regular basis (i.e.
         hypertension, diabetes, elevated cholesterol, etc.). The Underwriter will “price out” the cost of
         every prescription currently being used by any member of the group. The Average Wholesale
         Price (AWP) for the 12-month contract period is calculated and the pharmacy copays are
         deducted. Also included in the “known” grouping would be pending surgeries or procedures,
         pregnancies, ongoing therapies, durable medical equipment and home health care services.

    2.   Probable – Any progressive disease or disorder that historically leads to complications. The
         complications are sometimes due to the natural progression of the condition or can also be due to
         non-compliance by the member. An example of non-compliance could be a diabetic who does not
         check blood sugar levels on a regular basis, or follow the physician recommended dietary
         guidelines. In a non-compliant or poorly managed situation the risk may be higher due to the
         accelerated progression of the disease.

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                                           Small Group Enrollment and Underwriting Guidelines


    3.   Potential – Any acute or chronic condition that has some potential for complications. It is very
         important for the underwriter to evaluate these conditions when determining the degree of risk to
         assign to the group. Example: A person who has had a Coronary Artery Bypass Graft (CABG)
         has the (rare) potential for the graft to fail.

The costs used to assess risk are based on fees negotiated with our contracted pharmacies, facilities and
medical providers. The risk assessment is confidential and under no circumstances will any medical
information about any member be given to the broker or the group. The Account Executive that is working
with the agent or broker will act as the liaison between the agent or broker and the Underwriter for the
group. The agent or broker should not contact the Underwriter directly. The Underwriter or Small Group
Underwriting Manager will review questions regarding any underwriting decision.


Risk Acceptance
Optima Health Plan and Optima Health Insurance Company’s approval of coverage for eligible employees
or dependents is subject to the completeness and accuracy of the Employee Application/Health
Questionnaire and/or the Employer Group Health Questionnaire, and the Employer Group Application.

Omission of information on the Employee Application/Health Questionnaire, the Employer Group Health
Questionnaire, or the Employer Group Application whether intentional or unintentional, will result in the
termination of coverage if, in Optima Health Plan or Optima Health Insurance Company’s sole judgment,
the omitted information was material to the person(s)’ or group’s eligibility or insurability.

Any information obtained regarding the group's compliance (or non-compliance) with new or renewing
group caveats will be investigated as necessary. Non-compliance with said caveats, whether intentional or
unintentional, will result in the termination of coverage if, in Optima Health Plan or Optima Health
Insurance Company's sole judgement, the non-compliance is material to the group's eligibility or
insurability. Groups are required to comply with requests for information germane to the investigation
within timelines provided. Failure to provide information may also result in termination of coverage.

Groups requesting coverage that have terminated prior Optima Health Plan or Optima Health Insurance
coverage, voluntarily or involuntarily, will be subject to all new business underwriting enrollment and
eligibility requirements.

Note: In the event group termination was due to non-payment of premium, group eligibility will be based
on all new business requirements, and subject to reinstatement guidelines as outlined in this guide.

Optima Health Plan and Optima Health Insurance Company may terminate coverage if:
 • Either company determines that information obtained throughout the group’s enrollment is material to
     the group’s current eligibility or insurability;
 • Such information is in regard to current or previous compliance (or non-compliance) with the
     policies, procedures and/or guidelines of either Optima Health Plan or Optima Health Insurance
     Company.

New Employee Applications/Health Questionnaires submitted within 90 days of the group’s initial
effective date or renewal date may require the group to be resubmitted to underwriting for reevaluation and
possible rate adjustment.

IMPORTANT: Agent/Brokers and/or group representatives should NEVER complete an application for an
applicant. In the event it is determined that an application has been completed by someone other than the
applicant, or a court appointed representative for the applicant (documentation will be required), the
information provided will be considered fraudulent and the group will be ineligible for coverage.




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                                            Small Group Enrollment and Underwriting Guidelines

Additional Underwriting Requirements/Information
If actual enrollment on the initial effective date varies from the census used to calculate rates by 15% or
more, the group may be re-rated.

Groups with 2 – 14 employees will be rated using age/gender banding. Groups with 15 or more will be
rated using composite rating methodology.

Groups requesting two plan offerings must have a minimum of 5 enrolling employees. Groups requesting
three plan offerings must have a minimum of 15 enrolling employees. A surcharge may apply for selecting
more than one benefit offering. *HMO Plans not available in all service areas.

Groups that have a change in their enrollment that would change which rating structure would apply
(age/gender band vs. composite) will be changed to the appropriate rate structure at the group’s next
renewal date.

Rates presented on proposals reflect current census data. Birthdays occurring prior to effective date may
cause a change in premium.

Companies originally written as small or mid-sized groups (2 – 99 eligibles) that increase their employee
base to 100 or more eligibles during the contract year will remain small group until renewal. At renewal,
such groups will be reviewed on a case-by-case basis to determine large group vs. small group status. The
same review will apply to large groups that fall below 100 eligibles during the contract year.

If an existing group splits for any reason (e.g., change in ownership or sale of division), then all formed
companies of the group will be reevaluated using current quarter rates to establish appropriate rating levels
and given a new contract period. Additional documentation may be requested, such as waivers and/or
applications/health questionnaires, from any employee not currently enrolled in the group’s plan.


Under Contract Groups
Under no circumstances can the size of the group fall below two (2) enrolled employees. A group that has
only one contract may have 90 days or until group renewal date (whichever comes first) to achieve two
contracts or they will be cancelled.

If the group is receiving cancellation notice due to under contract requirement, in conjunction with the
cancellation notification the group will be issued a benefit renewal reflecting a maximum rate increase.

Groups that increase their eligible employees to the required minimum of two (2) will be re-underwritten if
the additional application is received by the renewal deadline and new renewal rates may be established.

If the group’s minimum participation is not increased prior to the group’s renewal date, the notice of
termination of coverage will stand.


Membership Changes
Membership changes can be made effective the 1st of any month throughout the contract year (not
retrospectively). Any changes will be subject to the following guidelines:

    1.   All changes must be submitted within 30 days of new hire eligibility or a HIPAA “Special
         Enrollment Provision” (Qualifying Life Event).
    2.   Requests to add a new employee, or to add spouse and/or dependents to an existing employee’s
         coverage, must be submitted on an Optima Health Employee Application/Health Questionnaire.
         Applications/Health Questionnaires must be complete and accurate. Newly enrolled members


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                                            Small Group Enrollment and Underwriting Guidelines

         may be subject to a 12-month pre-existing condition limitation. Pre-existing condition limitations
         may be reduced by any periods of creditable coverage. Please refer to Pre-Existing Condition
         guidelines on page 4 and acceptable forms of Proof of Prior Coverage on page 5 for more
         information.
    3.   Applications to add newborns or adopted children must be received within 31 days from the date
         of birth or placement. Documentation must be provided to show the date of birth or adoption.
    4.   The Application/Health Questionnaire must be signed by the applicant and submitted within 30
         days of the requested effective date.
    5.   Membership additions/changes that are submitted within 90 days of the group’s initial effective or
         renewal date may require the group to be resubmitted to underwriting for reevaluation and rate
         adjustment.

Termination of existing employees, spouse and/or dependents must be communicated to the Plan within 60
days of the requested effective date. The Plan may not honor requests to retroactively terminate members
if the member has incurred claims. At no time will retroactive requests to terminate be accepted beyond 30
days from the actual termination date. Coverage will be terminated on the last day of the month.
Terminations may be communicated to the Plan by:

    1.   Submitting an Optima Health Employee Application/Health Questionnaire indicating cancellation
         of (a) all covered members, (b) cancellation of spouse and/or dependents. Please indicate
         cancellation date.
    2.   If submitting group bill prior to the due date, employer may line through terminated employee
         name on the Group Bill Reconciliation Sheet and indicate effective date of cancellation.
    3.   Benefits Administrator may indicate cancellation and effective date of cancellation via fax or mail
         to the health plan.


Plan Changes
Plan changes should be done at the time of renewal. However, Optima Health will allow one plan change
per year during the contract year subject to the following guidelines:

    1.   The request must be received in writing from the company or the agent/broker.
    2.   Benefit changes requested outside of group anniversary (renewal cycle) will be submitted to
         underwriting for review.
    3.   Off anniversary plan change requests will be reviewed within five (5) business days of the request.

If, after underwriting review, it is determined that the plan change reflects a DECREASE in benefit value,
the group will NOT be re-underwritten. New benefits (and rates reflecting benefit decrease) will go into
effect on the next full or “clean” billing cycle and will run for the remainder of the group’s contract term.

If, after underwriting review, it is determined that the plan change reflects an INCREASE in benefit value,
the group will be re-underwritten. If the benefit increase is approved, new rates will be issued and a new
12-month contract will ensue.

REMINDER: Effective dates for benefit changes requested off anniversary date will be determined by
Optima Health, and will be contingent upon the next effective date in which retroactive adjustments to the
billing would be avoided.

Under no circumstances will Optima Health allow retroactive plan changes.


Premium Payments
Premium payments are due on the first of each month. A group’s failure to pay premiums within the 31-
day grace period will result in termination of the group health plan.


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                                           Small Group Enrollment and Underwriting Guidelines


Reinstatement of Groups Terminated for Non-Payment of Premium
Groups cancelled for non-payment may be eligible for reinstatement under the following guidelines:

         •   Payment of past due premium is received by Optima Health no later than close of business on
             the 5th of the month following date of cancellation.
         •   Payment of past due and current month’s premium payment is received by Optima Health
             between the 6th – last day of the month following date of cancellation.

Note: Groups and members will NOT be reinstated in the system until payments are received and posted
according to the above guidelines.

Groups submitting premium payments after the above referenced time lines will be ineligible for
reinstatement and must reapply for coverage as a new group. At that time the group will be subject to new
business underwriting and enrollment guidelines. All past due premiums must be received in order to be
considered for underwriting and enrollment.

OHP and OHIC will require payment of any uncollected premiums owed by the group at the time of
termination, and the first month's premium deposit prior to reenrollment.

If group terminations have been due to premium payments being returned for insufficient funds, the Plan
will require future premiums to be paid with certified funds for a period of 12 months.

Groups that have been terminated three times within a rolling 24 month period will be required to pay all
past due and current premiums within 15 days of the date of termination and elect auto-debit of all future
premium payments. Group’s not electing the auto-debit premium payment options will be ineligible to be
rewritten as a new business case for a period of one year following their last termination date.


Renewal Proposals
Proposals for renewing groups will be prepared and forwarded to the current Agent or Broker of Record
(AOR/BOR) 30 - 60 days prior to the group's renewal date. Groups will be notified that their renewal
information has been forwarded to the AOR/BOR. Complete proposals are not forwarded to the group
directly; administrators will receive only the notification of renewal and the proposed renewal rates.
It is the responsibility of the current AOR/BOR to deliver and review the proposed rates, benefits,
and plan changes promptly to their group.

NOTE: Groups receiving a 35% or greater renewal increase must receive their renewal rates at least 60
days prior to their renewal date. Groups receiving less than a 35% rate increase must receive their rates at
least 30 days prior to their renewal date.

The AOR/BOR is required to notify their OHP/OHIC Account Executive of the group's renewal decision a
minimum of 10 days prior to the renewal date. In the event the renewal determination is not communicated
10 days prior to renewal, OHP/OHIC will automatically renew the group's coverage at the proposed rates.
Any requests for plan changes made after the notification deadline will then be subject to the guidelines
outlined in the Plan Changes section of this guide.




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Large Group Enrollment and Underwriting Guidelines
                          Large Group (100+ eligibles)
               Enrollment and Underwriting Guidelines
Eligible Employers
    •    Corporations, partnerships or sole proprietorships with a clear employer/employee relationship.
         Associations and 1099 employee relationships are not eligible for group coverage.
    •    Financially stable business organizations with at least 100 eligible employees (including owners
         and partners).
    •    Employers with a payroll deduction system established for employee contributions.
    •    On a monthly basis, the employer must contribute a minimum of 50 percent of the single
         employee premium. It must be fair, equitable and non-discriminatory toward any employee class.
    •    The employer group must not have been formed for the sole purpose of securing insurance.


Eligible Employees
An employee is eligible for Coverage if he/she:

    1.   is employed by the group; and
    2.   resides or works in the service area or is an out-of area employee (and no more than 50% of the
         eligible and enrolled employees are out of area with no more than 10% out of state); and
    3.   is actively at work performing all of his or her usual occupation; and
    4.   is working regularly at least 25 hours per week, 50 weeks per year; and
    5.   is at least 17 years of age; and
    6.   within 31 days of the effective date of coverage files a complete enrollment application, including
         any applicable premium or fees, with the Plan ; and
    7.   does not knowingly give incorrect, incomplete, or deceptive information regarding his/her
         eligibility for coverage to the Plan or to the Employer Group; and
    8.   does not knowingly give incorrect, incomplete or deceptive information regarding his/her
         dependents eligibility for coverage to the Plan or to the Employer Group; and
    9.   meets any other requirements as specified herein, or as specified by the Plan or by the Employer
         Group.

    Note: For current groups, the employees must meet the new hire-waiting period established by the
    employer. New groups can waive the new hire waiting period at the time of the group’s initial
    enrollment with Optima Health Plan (OHP) or Optima Health Insurance Company (OHIC), but only if
    they do so for all of the employees. After initial enrollment, the new hire waiting period can only be
    changed at renewal.


Employees NOT Eligible

    •    Employees who engage in foreign travel exceeding 90 consecutive days are not eligible.
    •    Independent contractors (1099) of the employer are not eligible as employees.
    •    Part-time (employees who work less than the minimum hours required by the Plan or the
         employer), leased, temporary or seasonal employees are not eligible.
    •    Directors and officers not otherwise eligible as active, full-time employees are not eligible simply
         because of their status.




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                                           Large Group Enrollment and Underwriting Guidelines


Out-of-Area Employees
Employees who reside and work outside of the service area, or spend more than 90 consecutive days for
business purposes outside of the service area (foreign travel excluded) can be included in the quote and will
be offered one of the Out-of-Area PPO (OOA PPO) plans. No more than 50 percent of the eligible
employees can reside out of the Optima Health service area (within Virginia) and no more than 10% may
reside out of the Optima Health service area (outside of Virginia). If the employer group exceeds either of
these out of area percentages, and an exception is not approved, the group will either be quoted without the
OOA employees or Optima Health will be unable to provide a quote for the entire group.

The networks provided through this plan, which provide members access to in-network providers, are
Optima Health Insurance Company PPO network and a contracted national PPO network. Members
accessing care through a participating PPO network provider will be eligible to receive care for covered
services at the in-network benefit level of the OOA PPO plan.


Eligible Dependents

    •    The legal spouse of the insured employee.
    •    The insured employee’s unmarried children under 19 years of age who are dependent upon the
         employee and who are natural children, or legally adopted children, or children under the legal
         custody of the insured. Stepchildren, whether residing with the member or not, are also eligible.
         Foster children are not eligible. Grandchildren are only eligible with proof of legal guardianship.
         (Coverage terminates at the end of the month in which the child turns 19 years of age. Dependent
         age limits may be modified upon group request and underwriting approval at initial enrollment or
         prior to annual renewal.)
    •    The insured employee’s unmarried children who are enrolled full time (undergraduates with 12 or
         more credit hours per semester; graduates with six or more credit hours per semester) in an
         accredited university or college, and are not employed anywhere on a full-time basis. (Coverage
         terminates at the end of the month in which the child turns 24 years of age or is no longer a full-
         time student. Dependent age limits may be modified upon group request and underwriting
         approval at initial enrollment or prior to annual renewal.)
    •    Unmarried dependent children over age 19 who are both (i) incapable of self-sustaining
         employment by reason of mental or physical disability and (ii) chiefly dependent upon the
         Subscriber for support and maintenance will continue to be eligible for coverage. The Subscriber
         must give the Plan acceptable proof of incapacity and dependency within 31 days of the child’s
         reaching the specified age. Proof of incapacity consists of a statement by a licensed psychologist,
         psychiatrist, or other Physician stating the Dependent is incapable of self-sustaining employment
         by reason of disability from mental or physical disability. The Plan may require subsequent
         statements not more than once a year.
    •    Domestic partners may be eligible depending on the group’s criteria and history. An additional
         premium may be associated with the addition of this eligible class.


Dependents NOT Eligible
    •    Any spouse or child in the military service or government service of any country.
    •    Married children.
    •    Dependent children over age 19 who are not enrolled as full time students. (Dependent age limits
         may be modified upon group request and underwriting approval at initial enrollment or prior to
         annual renewal.)



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                                             Large Group Enrollment and Underwriting Guidelines


    •    Dependent children over age 24 regardless of student status. (Dependent age limits may be
         modified upon group request and underwriting approval at initial enrollment or prior to annual
         renewal.)
    •    Any spouse or child who is insured as an employee of the employer.
    •    Grandchildren for which the employee does not have legal custody.
    •    Foster children.
    •    Dependents who engage in foreign travel exceeding 90 consecutive days.
    •    Individuals no longer legally married to an eligible employee.


Dependent Verification
OHP or OHIC may, at its discretion, require verification of dependent status from the group or subscriber at
any time prior to or after coverage is effective. In these cases, some form of verification is required prior to
the dependent being added to the plan. The following are the most common forms of verification:

    •    Birth certificate
    •    Marriage certificate
    •    Adoption certificate
    •    Custody papers

The Plan reserves the right to request or review at any time, at its sole and absolute discretion, proof of
eligibility of any Subscriber or Dependent. Should the Plan discover at any time that any Subscriber or
Dependent is not eligible for coverage, never was eligible for coverage, and/or submitted false proof of
eligibility for coverage, then the Plan may, at its sole discretion, either refund all or part of the premium
payment made on behalf of the Subscriber/Dependent to the Group and retract all or part of any claims paid
from the provider(s), or retain the premium paid on behalf of the ineligible Subscriber/Dependent up until
the date the Plan became aware of the ineligibility and cancel the Subscriber’s/Dependent’s coverage after
the date through which premiums were paid. Disenrollment of a Subscriber or Dependent due to
ineligibility for coverage may result in the reversal and/or denial of claims during the period of ineligibility.
The Subscriber/Dependent may be held responsible for any charges for claims for services during the
period of ineligibility.


Out-of-Area Dependent Children
Employers with employees who are requesting coverage for eligible dependent children who reside outside
of the Optima Health Plan (OHP) or Optima Health Insurance Company (OHIC) service area may elect to
purchase the Out-of-Area Dependent rider. This rider allows for dependent children living outside of the
service area to receive services from any provider at in-network benefit levels. Providers outside of the
service area may require payments from subscriber/dependent at the time services are rendered. Subscriber
may then submit the claim to the Plan for reimbursement of charges less applicable in-network copayments
or coinsurance requirements.

The addition of this rider to a new or existing group will add a surcharge to the entire group's premium on
all plans purchased, not just on the plan chosen by the member(s) who currently enroll OOA children. The
rider will remain as a benefit of the group, until written notification is received by the group benefit
representative to request removal of the rider at the group's next renewal date.

Group's electing this rider must have employees with out of area dependents complete an Out of Area
Dependent Notification form annually for each out of area dependent.

NOTE: This rider will not be added to a group on a retroactive basis.




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                                           Large Group Enrollment and Underwriting Guidelines


Member Plan Changes
Members may only enroll for benefits of change benefits once per year during the Open Enrollment period
(30 days preceeding a new plan year). Exceptions are allowed for HIPAA “Special Enrollment Provisions”
(Qualifying Life Events).

Newly enrolled PPO members may be subject to a 12-month pre-existing condition limitation. Pre-existing
conditions will be excluded from coverage for 12 months from the date of enrollment. A pre-existing
condition is any medical condition for which medical advice; diagnosis, care or treatment was
recommended or received within the six-month period prior to the enrollment date. (The enrollment date is
the earlier of the first day of medical coverage or the first day of any waiting period for coverage.)
Exceptions to the pre-existing condition limitations include:

    •    Pregnancy
    •    Newborns who are enrolled within 31 days from the date of birth
    •    Adopted children who are enrolled within 31 days of the adoption or placement


Pre-Existing Condition Guidelines
A pre-existing condition means a condition (whether physical or mental) regardless of the cause of the
condition, for which medical advice, diagnosis, care or treatment was recommended or received within the
6-month period ending on the Member’s enrollment date. The enrollment date is the earlier of the first day
of medical coverage or the first day of any waiting period for coverage.

The Pre-Existing Condition waiting period does not apply to:

    1.   A newborn, adopted child under age 18, or a child under age 18 placed for adoption as long as the
         child became covered under health coverage within 30 days of the birth, adoption or placement for
         adoption and provided that the child does not incur a subsequent 63-day break in coverage; or
    2.   Pregnancy; or
    3.   Genetic information; or
    4.   Covered Services for breast cancer when the Member has been breast cancer free for at least five
         years


HIPAA Special Enrollment Provisions

The Plan provides special late enrollment periods for eligible employees and dependents that fall into the
following categories:

A. Late enrollees with other coverage. Employees or Dependents who initially decline Coverage
   because they have other group health coverage or other health insurance will be allowed to enroll late
   without evidence of insurability if the following conditions are met:

    1.   The employee and/or Dependent is eligible under the Plan’s terms; and

    2.   When the employee declined enrollment for the employee or Dependent, either the employee or
         Dependent had COBRA continuation coverage under another Plan and that coverage has since run
         out; or if the other Coverage was not under COBRA, either the other coverage has ended because
         of loss of eligibility, or the employer has stopped contributions toward the other coverage; and.

    3.   An individual must request enrollment no more than 31 days from the time that he or she knew or
         should have known that his or/her other Coverage had ended. Late enrollment is effective no later



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                                             Large Group Enrollment and Underwriting Guidelines


      than the first day of the first calendar month after the date the Plan receives a completed request for
     enrollment.

B.   Late enrollees due to marriage, birth, adoption, or placement for adoption. If a Dependent is
     added through marriage, birth, adoption, or placement for adoption, the employee and Dependents may
     apply for Coverage through special late enrollment. Individuals in this category do not have to have
     previously declined Coverage because of other Coverage. Individuals must request Coverage within 31
     days of marriage, birth, adoption, or placement for adoption. Coverage starts on the date of the
     marriage, birth, adoption or placement for adoption.


Creditable Coverage
The pre-existing condition period may be reduced by any periods of creditable coverage, provided there has
been no break in coverage exceeding 63 consecutive days. Employer-imposed waiting periods do not count
as lapses in coverage. Coverages considered creditable include:

     1.  Group health plans, including COBRA continuation coverage;
     2.  Health insurance coverage (care under any hospital or medical service policy or certificate,
         hospital or medical service plan contract, or HMO contract offered by a health insurer;)
     3. Individual coverage;
     4. Medicare Part A, B, ;
     5. Medicaid;
     6. Military service related care such as CHAMPUS;
     7. A medical care program of the Indian Health Service or of a tribal organization;
     8. A state health benefits risk pool;
     9. A health program offered under the Federal Employees Health Benefits Program;
     10. A public health plan. (Any plan established or maintained by a State, the U.S. government, a
         foreign country, or any political subdivision of a State, the U.S. government, or a foreign country
         that provides health coverage to individuals who are enrolled in the Plan;)
     11. A health plan offered under the Peace Corps Act;
     12. A State Children’s Health Insurance Program under Title XXI of the Social Security Act.


Proof of Prior Coverage
At the time of enrollment, members with creditable coverage must submit proof of this coverage with their
enrollment application. The following are examples of acceptable documentation:

              •    Letter or Certificate of Creditable coverage from the previous insurance company.
              •    Letter or Certificate of Creditable coverage from the current or previous employer(s).
              •    Defense Enrollment/Eligibility Records (DEERS) and a copy of the front and back of
                   military identification card.


Policies/Procedures for Groups Applying for Coverage
Common Ownership Companies
Common ownership companies are eligible given the following stipulations:

     1.   There must be a principal owner with majority ownership in all companies.
     2.   Multiple partner companies must provide documentation of partnership arrangements, as well as
          written documentation signed by all partners outlining parties eligible to authorize changes to the
          group's employee benefit package and broker arrangements.


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                                            Large Group Enrollment and Underwriting Guidelines


    3.   There must be a clear and demonstrable relationship to each of the sub companies.
    4.   All of the employees will be used to determine rating and plan selection.
    5.   Each company must maintain the same eligibility requirements, employer contribution and benefit
         plan.
    6.   In the event that the group wishes to divide the companies into separate group plans, each
         company will be separately evaluated to determine rating and plan coverage.


“Class” Groups
Employers may elect to cover only certain classes of employees. They must show a clear and non-
discriminatory separation (hourly or salary, full or part-time) between classes. They may also choose to
have different new hire waiting periods and employer contributions. The determination of discrimination
will not be made by Optima Health. Employers are strongly encouraged to consult with their legal advisors
on this matter.


Participation Requirements
Groups are required to have 75 percent participation of eligible employees. Employees who waive coverage
to stay on another qualifying plan (such as Medicare, CHAMPUS or spouse’s employer-sponsored plan)
are not considered eligible employees, for purposes of calculating participation, and will not count against
the group’s participation.

Participation is a continuing requirement. Failure to maintain the applicable participation level may result
in termination. Renewal of a group may be contingent upon re-verification of group’s employee
participation.


Misstatement of Age or Class
If the age, sex or insurance class of any insured employee has been misstated, the member’s correct age,
sex or class shall determine the amount payable under the group policy. All premiums due as a result of
such misstatement will be adjusted and reflected on the group bill.


Work Related Illness and/or Injury
Work related illnesses and/or injuries are not covered by Optima Health Plan (OHP) or Optima Health
Insurance Company (OHIC) group policies for groups with more than 3 employees.


Risk Acceptance
Optima Health Plan and Optima Health Insurance Company's approval of coverage for eligible employees
or dependents is subject to the completeness and accuracy of the Employer Application / Health
Questionnaire.

Omission of information on the Employer Group Application/Health Questionnaire or the Employee
Application, whether intentional or unintentional, will result in the termination of coverage if, in Optima
Health Plan or Optima Health Insurance Company's sole judgment, the omitted information was material to
the person's or group's insurability.




Optima Health Broker Guide 2007                                                                            20
                                            Large Group Enrollment and Underwriting Guidelines


Size and Underwriting Limits
Large group is considered to be employer groups with 100 or more eligible employees. The number of
eligible employees is the determining factor when it comes to differentiating if a group is small group vs.
large group, not the number of employees actually enrolled.

Final enrollment determines the rating structure and the actual rates used to enroll the group.

Companies originally written as large groups that become companies with fewer than 100 eligible
employees during the contract year will remain large groups until renewal. At renewal, such groups will be
reviewed on a case-by-case basis to determine large group vs. small group status. The same review will
apply to small groups that increase above 99 eligible employees during the contract year.


Request For Proposals
The following information is needed to receive a basic quote from Optima Health:

    •    Complete and accurate employee census, showing DOB, gender, tier, plan and zip code.
    •    Current rates.
    •    Current plan design(s).


The following additional information is needed to receive the most competitive quote from Optima Health:

    •    Groups current and renewal rates.
    •    Current and proposed renewal benefit summaries, noting changes.
    •    Benefit summaries and rates for the experience period, noting any changes in the experience
         period.
    •    Completed Optima Health Employer Group Health Questionnaire signed by the employer or
         benefits administrator.
    •    24 months of claims experience with corresponding employee and member enrollment by month
    •    High claimant information.
    •    Carrier history.
    •    Employer contribution.


Agent Checks
Optima Health Plan and Optima Health Insurance Company will not accept personal checks from the Agent
or Broker in lieu of a check from the employer group.




Optima Health Broker Guide 2007                                                                               21
Broker Policies and Procedures
                                 Broker Policies and Procedures
Agent/Broker Appointment Policy
   Appointment Policy Statement
   Optima Health Plan (OHP) and Optima Health Insurance Company (OHIC) require that all
   Agents/Brokers and Agencies be appointed before the release of any marketing materials, proposal
   quotes or information regarding new and existing business. Appointments with OHP and OHIC are
   not guaranteed. All requests are subject to review and approval of designated OHP and OHIC
   management.


   Appointment Procedure
   To gain an appointment, the Agent/Broker and Agency (if commissions are to be paid to an Agency)
   must have a valid Life & Health license from the Commonwealth of Virginia. The following need to
   be submitted to obtain appointment:

       a) A copy of the Life & Health license or Certifying Letter for the Agent/Broker
       b) A copy of the Life & Health license for the Agency or Certifying Letter (if commissions are
          to be paid to an Agency)
       c) A completed Substitute Form W-9
       d) $24.00 check payable to Optima Health must be submitted for agent/broker appointment (this
          ensures appointment to Optima Health Plan and Optima Health Insurance Company)
       AND:
       e) $24.00 check payable to Optima Health (in addition to $24.00 check for agent/broker
          appointment) for Agency appointment (if commissions are to be paid to an Agency). If the
          agency is already appointed, the fee for an individual appointment applies.
       f) An executed Broker Agreement

   NOTE: Optima Health Plan and Optima Health Insurance Company require that all Agent/Brokers
   and Agencies obtain appointment to both companies.


   Broker Training
   All newly appointed brokers may be required to attend a Product Training class. Failure to attend
   product training could result in the cancellation of the appointment with Optima Health Plan (OHP)
   and Optima Health Insurance Company (OHIC).


   Points to Remember
   •   If an Agent/Broker assigns payment of commissions to an Agency, both the Agent/Broker and
       Agency must be listed as the Agency of Record and both must be appointed.
   •   Optima Health will pay the annual state fee for renewing appointments provided an Agent/Broker
       or Agency has active business. If an Agent/Broker or Agency fails to maintain active business for
       a period of 12 months, the appointment will be terminated.
   •   Optima Health Plan and Optima Health Insurance Company reserve the right to amend the Plan's
       requirements for obtaining and maintaining appointment at any time.

   This policy ensures our compliance with the State Corporation Commission Bureau of Insurance
   regulations and laws as outlined in the Bureau of Insurance Administrative Letter 2002–1 included in
   this Guide.




Optima Health Broker Guide 2007                                                                         22
                                                                      Broker Policies and Procedures


Commissions Policy
   Commissions Policy Statement
   Optima Health will pay commissions to any broker who is appointed with Optima Health, in good
   standing with the Bureau of Insurance (BOI) and is designated as the Agent or Broker of Record by a
   group.


   Guidelines
   •   Commissions will be paid, starting with the first premium paid, after Optima Health receives
       notification of appointment from the BOI. Commissions will not be paid retroactively for
       premiums received before the appointment date or for months invoiced prior to an AOR/BOR
       change or prior to the appointment date.
   •   Commissions will continue to be paid to the Agent of Record as long as the agent remains licensed
       and in good standing for Life & Health with the Virginia BOI. If the BOI revokes an agent’s
       license for any reason, commissions will terminate with the last premium received by OHP or
       OHIC prior to the termination date. Agents voluntarily forfeiting their licenses will be paid
       commissions through the next renewal date of the group, or until such time as an agent/broker
       change letter is received by Optima Health. Please note that this is not a policy of the
       Commonwealth of Virginia State Corporation Commission Bureau of Insurance, but a
       policy of Optima Health Plan and Optima Health Insurance Company.
   •   Commissions are paid to the AOR/BOR designated by the customer based on premium received.
       Optima Health will not advance commissions or pay commissions on an average expected annual
       premium basis. For information regarding current commission schedules, please refer to the
       Broker Commission Schedule Policy included in this guide, or included as an attachment to the
       Broker Agreement.
   •   Commissions will continue to be paid to the AOR/BOR for the term of the group's enrollment, or
       until: an AOR/BOR termination/change letter (as outlined below) is received by Optima Health,
       there is notification of license termination from the BOI, or there is a change to current policies
       and procedures outlined in this guide, or as amended in the Broker Agreement, as determined
       appropriate by Optima Health Plan and Optima Health Insurance Company.


   State and Federal Regulations
   According to the Commonwealth of Virginia, State Corporation Commission, Bureau of Insurance,
   Code of Virginia: Agents/Agencies are not eligible to receive commission compensation on any
   premiums paid on new or existing business prior to licensing through the Virginia Bureau of Insurance
   and prior to being appointed with Optima Health Plan and Optima Health Insurance Company. All
   appointed agents are required to review the Administrative Letters on the BOI’s web page,
   http://www.scc.virginia.gov/division/boi/webpages/boiadminltrsforagents.htm.

   Federal Law requires a customer with more than 100 contracts to disclose and file certain financial
   information annually. This means that as an Insurance Company, we must report to the customers the
   amount of commission paid to their Agent of Record. While most brokers, agents, and consultants are
   aware of this, it is your responsibility to explain our commission payment structure on all quotes with
   more than 100 contracts at the time of proposal.


   Reissue of Terminated Groups
   If a group is re-enrolling after a termination period of greater than 12 months, commissions will be
   paid at the new business commission level in place as of the new effective date of coverage.


Optima Health Broker Guide 2007                                                                           23
                                                                              Broker Policies and Procedures


   If a group that had previously been enrolled with Optima Health Plan (OHP) or Optima Health
   Insurance Company (OHIC) for one or more years is re-enrolling after a termination period less than
   12 months, with the same Agent / Broker or Agency designation in place as at the time of termination,
   commission will be paid based on the renewing commission level in place as of the new effective date
   of coverage.

   If a group that had previously been enrolled with Optima Health Plan (OHP) or Optima Health
   Insurance Company (OHIC) for one or more years is re-enrolling after a termination period less than
   12 months, assigning a new Agent/Broker or Agency designation from that at the time of termination,
   commission will be paid based on the new business commission level in place as of the new effective
   date of coverage.

   If a group that had previously been enrolled with Optima Health Plan (OHP) or Optima Health
   Insurance Company (OHIC) less than one year:
        1. Is re-enrolling after a termination period less than 12 months,
        2. With the same Agent/Broker or Agency designation in place as at the time of termination;
   Then commission will be paid based on the new business commission level in place as of the new
   effective date of coverage for the remaining number of months that would have been paid as new
   under the initial group contract. After such time period, commissions will revert to the renewing
   commission level in place on that date.

   If a group that had previously been enrolled with Optima Health Plan (OHP) or Optima Health
   Insurance Company (OHIC) for less than one year:
        1. Is re-enrolling after a termination period less than 12 months, and
        2. Is assigning a new Agent/Broker or Agency designation different from that at the time of
            termination;
   Then commission will be paid based on the new business commission level in place as of the new
   effective date of coverage.


   Spin-off Groups
   Commission for groups forming as a result of a change in ownership, sale of division, etc. which are
   being established with employees from an existing "base" group will be determined by the commission
   level currently in place for the base group. The existing commission level will be paid regardless of
   the addition of employees not currently insured under the base group, and/or the introduction of a new
   broker.


Commission Schedule
   Group Business - Effective January 1, 2007
                                                        First Year                  Renewal Years
          2 - 14            Eligible*                     9%                           6%
         15 - 24            Eligible*                     7%                           5%
         25 - 50            Eligible*                     5%                           5%
         51 - 99            Eligible*                     3.5%                         3.5%
        100 - 249           Eligible*                     2.25%                        2.25%
        250+                Eligible*                     Add on                       Add On
   * Eligible employees not potential enrollee’s (that is, eligible includes employees that are waived for the
   participation calculation)

   Commission amounts are calculated as a percentage of paid premiums.
   Commissions for groups with more than 250 eligible employees are built into the rates at the time of
   underwriting and will affect the final rates.


Optima Health Broker Guide 2007                                                                                  24
                                                                    Broker Policies and Procedures


Agent of Record/Broker of Record Change Letter
   The AOR/BOR change will take effect on the first of the month, after OHP or OHIC receives the
   change notification. AOR/BOR changes are also subject to the following guidelines:

       •   Change letter must be on company letterhead, and signed by an officer of the company or the
           Benefits Administrator as designated on the group's original Employer Group Application or
           written change to the BA received during the group’s history.
       •   The new Agent or Broker must be appointed with Optima Health Plan (OHP) and Optima
           Health Insurance Company (OHIC), and be in good standing with the Virginia Bureau of
           Insurance (BOI).
       •   The new Agent or Broker, the current Agent or Broker, and the group contact will all be
           notified as to the receipt of the letter and the date that the change will take effect.
       •   Group information will be released to the new Agent or Broker after verification and approval
           is received from the group contact.
       •   Commissions payable on any premiums billed and due for periods prior to the effective date
           of the new agent of record change will be payable to the previous agent. Commissions will be
           paid to the new agent of record beginning with the month’s premiums billed and due on or
           after the effective date of the agent of record change. The new agent will NOT receive
           commissions on premiums due for billing periods prior to the AOR change.
       •   The current broker can have the AOR/BOR change letter rescinded before the effective date
           of change by providing a letter from the group requesting that the change be cancelled.


Proposal Preparation for Brokers
   Proposal Preparation Policy Statement
   Optima Health Plan (OHP) and Optima Health Insurance Company (OHIC) will provide proposals to
   its appointed brokers who show proof that the employer with whom they are working wishes to obtain
   a quote. Proof can be in the form of an Agent of Record Letter, census information, submission of
   Optima Health Employee Application/Health Questionnaires or a Large Group Employer Group
   Health Questionnaire.

   The broker should allow a turnaround time of five to 10 business days for small group proposals (2 –
   99 eligible) and 10 business days for large group proposals (100+ eligible).


   Quote and Proposal Criteria

   •   Small and Mid-sized Groups (2 – 99 eligibles) can be quoted on census information or medical
       information if Optima Health Employee Application/Health Questionnaires or Employers Group
       Health Questionnaire is submitted. Census generated proposals will be quoted on an illustrative
       basis only. Submission for underwriting which include Employee Application/Health
       Questionnaire or Employer Group Health Questionnaires proposals will be quoted at the
       applicable medically underwritten rate level.
   •   Large Group (100+ eligible) proposals will be quoted based on the census and any credible claims
       information that can be obtained. Proposal rates will be determined by using a combination of
       Community Rating and Experience Rating based on the credibility of the claims experience
       provided. Quotes will only be released after OHP or OHIC receives an Employer Group Health
       Questionnaire signed by an authorized company representative.



Optima Health Broker Guide 2007                                                                       25
                                                                   Broker Policies and Procedures


   Points to Remember
   OHP and OHIC will release quotes to multiple brokers until such time as the group makes a final
   determination on broker designation. Final determination will be based on which broker submits
   group's initial premium check (small group only) and final enrollment information; or when written
   documentation is received from an authorized representative of the group. In the event multiple
   brokers have obtained quotes on a group, prior to enrollment, a representative from OHP or OHIC will
   contact the group's benefit administrator/owner to verify final agent/broker designation. Proposals
   generated to each broker will be based on information provided by that broker only. Quotes may vary
   accordingly.




Optima Health Broker Guide 2007                                                                      26
Substitute Form W-9 (SF-W9)
                                Optima Health Plan
                         Optima Health Insurance Company
                              4417 Corporation Lane
                             Virginia Beach, VA 23462
                                  (757) 687-6030
                                (757) 687-6031 Fax


                         SUBSTITUTE FORM W-9 (SF-W9)

Please complete the information on the reverse side of this form. We are required by the
IRS to obtain this information when making reportable payments to you. If we do not
obtain this information, our payments to you may be subject to 31% federal income tax
back up withholding and you could be subject to a $50 penalty by Internal Revenue Code
Section 6723. Backup withholding is not a failure to pay you. It is an advance to the IRS
on your behalf.

Below are the different types of tax status. Please complete the appropriate information
based on your tax status.

If your tax status, business name, or tax identification number has changed during the tax
year, please provide us with both sets of information and the date of the change.

Taxpayer              Business Name          Taxpayer Name         Taxpayer ID Number
Individual            Individual’s Name      Same                  SSN#
Sole Proprietor       Payee/DBA Name         Owner’s Name          SSN or Fed ID #
Corporation           Payee/DBA Name         Name on Fed ID #      Federal ID #

Please return this form within 10 days or Fax to (757) 687-6031.

If you have any questions about this form, call (757) 687-6067.




Optima Health Broker Guide 2007                                                         27
          Optima Health Plan Substitute Form W-9 (SF-W9)
If commissions will be paid to an agency please fill out Section A using the agency’s tax information and have the agent
        fill out Section B.
If commissions will be paid to an individual please fill out Section A using the agent's social security # and do not fill out
        Section B.

  Section A: Please check the appropriate category to which commissions will be assigned and paid.
                                                                          Office Use Only: V# _______________
 Check Only One:
      _____ Individual                     Social Security #          ______________________
      _____ Sole Proprietor                Federal ID #               ______________________
      _____ Corporation                    Federal ID #               ______________________
      _____ Other                          Federal ID #               ______________________

Enter the following information in accordance with the TAX ID # used above:

Legal Name: ___________________________________________________________________
(Must match name on your federal return)
Trade Name: __________________________________________________________________
(if applicable)
Mailing Address: ______________________________________________________________
                 _____________________________________________________________

Mailing Address: _______________________________________________________________
(for commission checks, if different)
                  _____________________________________________________________

Agent Telephone #: _____________________ Agent Fax #: ________________________
Agent Pager #: ____________ Agent Cell #: _____________ Agent E-Mail: ______________


Please answer the following questions:
1. Is this organization tax exempt under IRS Code Section 501(a)?         YES      NO
2. Is this a Minority-Owned, Woman-Owned and/or Small Business?           YES      NO


Certification: Under penalties of perjury, I certify that:
The taxpayer identification name and number shown on this form is correct and I have _____/have not_____ been notified
by the IRS that I am subject to backup withholding. If yes, date of notification ______________.

Signature ____________________________________                  Date _____________________


  Section B: Please complete the following information if agent is assigning commissions to
  be paid directly to the agency listed in Section A.


PLEASE READ: All rights and responsibilities are assigned to the agency named above. In the event that the relationship
between the above named agency and the undersigned agent is dissolved, all responsibility for servicing accounts and all
commissions will remain with the agency unless the group submits an agent of record change.

Agent's Printed Name ______________________________             Agent's Signature ______________________________

Agent's Social Security Number ______________________           Date ___________________
VA BOI Administrative Letters & Site Map
         ALFRED W. GROSS                                                                              P.O. BOX 1157
    COMMISSIONER OF INSURANCE                                                                  RICHMOND, VIRGINIA 23218
  STATE CORPORATION COMMISSION                                                                 TELEPHONE: (804) 371-9741
       BUREAU OF INSURANCE                                                                     TDD/VOICE: (804) 371-9206
                                                                                                http://www.scc.virginia.gov




                                                   November 1, 2001

                                                                                   ADMINISTRATIVE LETTER 2001-10


TO:    All Entities Licensed by and/or Reporting to the Bureau of Insurance

RE:    Executive Order Blocking Property and Prohibiting Transactions
       With Persons Who Permit, Threaten to Commit, or Support Terrorism


        In response to the terrorist attacks in New York, Pennsylvania, and at the Pentagon on September 11, 2001,
President Bush issued an executive order, effective September 24, 2001, which provides that all property and
interests in property of the persons and entities described in the Executive Order or listed in the Annex to the Order
that are either in the United States or that come into the United States, or that come within the possession or control of
United States persons are blocked. This includes, but is not limited to, the making or receiving of any contribution of
funds, goods, or services to or for the benefit of those persons or entities described in the Order, or listed in the Annex
to the Order, or otherwise determined to be subject to the Order.

       The purpose of this administrative letter is to advise all entities regulated by, or reporting to, the Bureau of
Insurance to become familiar with their obligations under the Executive Order. I am requesting that all insurers
provide copies of this administrative letter to their appointed agents in Virginia and, most importantly, to any of their
employees or representatives responsible for the payment of claims or benefits to policyholders, claimants, or
beneficiaries, as well as policy loans and loan payments. All companies should review their records for any
information that may be relevant to the Executive Order.

       Companies should also review the United States Department of the Treasury, Office of Foreign Assets Control,
web site, www.treas.gov/ofac, which contains the Executive Order, the annex to the Order, and other valuable
information. The web site will also provide additional updated information regarding the Order and the Annex, as it
becomes available. Special notice should be taken of the web site document titled Foreign Assets Control
Regulations and the Insurance Industry. This document explains the obligations of the insurance industry under the
Executive Order and provides instructions for ensuring compliance. Questions regarding the Executive Order should
be directed to the Office of Foreign Assets Control. Entities found to have violated this Executive Order may be
subject to sanction.

                                                     Cordially,



                                                     Alfred W. Gross
                                                     Commissioner of Insurance

/dpb
       ALFRED W. GROSS                                                                   P.O. BOX 1157
  COMMISSIONER OF INSURANCE                                                       RICHMOND, VIRGINIA 23218
STATE CORPORATION COMMISSION                                                      TELEPHONE: (804) 371-9741
     BUREAU OF INSURANCE                                                          TDD/VOICE: (804) 371-9206
                                                                                   http://www.scc.virginia.gov




                                           January 17, 2002


                                                               Administrative Letter 2002-1


      TO:    ALL INSURANCE COMPANIES; HEALTH, DENTAL, OPTOMETRIC AND LEGAL
             SERVICES PLANS; AND HEALTH MAINTENANCE ORGANIZATIONS LICENSED
             IN VIRGINIA

      RE:    PROCEDURES TO RECOGNIZE MILITARY CALL–UP TO ACTIVE DUTY –
             AGENT LICENSING AND AGENT APPOINTMENT PROCESSES


      I am sending this administrative letter to all insurers with the request that they
      provide copies of it to their appointed agents in Virginia. Prospectively, insurers
      may instead provide their newly appointed agents with directions to review this
      letter by accessing the Bureau of Insurance Internet web site at:
      http://www.state.va.us/scc/division/boi/webpages/administrativeltrsselection.htm.

      I am also sending copies of this administrative letter to the various agents
      associations in Virginia, with the request that they, too, attempt to disseminate this
      information to their members.

      Finally, I am sending this administrative letter to the Bureau’s contracted licensing
      examination provider (Experior Assessments) with the request that this information
      be incorporated into future editions of the Licensing Information Bulletin and be
      provided in communications with those preparing candidates for the licensing
      examinations.

             In view of the extraordinary circumstances resulting from the events of September
      11, 2001, situations are likely to arise in which applicants for insurance agent licenses may
      be precluded from meeting certain license application deadlines, and in which those
      holding agent licenses may be precluded from meeting certain appointment deadlines, due
      to unexpected activation of military units in which they serve as reserves.

            The Bureau of Insurance wishes to be as understanding as possible in such
      circumstances so that those serving our country are not unduly penalized. Fortunately,
      the Code of Virginia provides sufficient leeway to permit the State Corporation
Administrative Letter 2002-1
January 17, 2002
Page 2


Commission, through its Bureau of Insurance, to make exceptions where good cause is
shown.


•   The first circumstance in which a problem might arise is where a candidate for licensing
    has registered for a licensing examination to be taken within one year of completing
    prelicensing requirements as required by § 38.2-1816 B. That section also provides:
    “The Commission, however, may waive this time limit in individual circumstances in
    accordance with such criteria as may be prescribed.”

    The Bureau would take the position (and would so instruct its contracted licensing
    examination provider) that if the applicant is called to active duty prior to the scheduled
    examination date, the time limit will toll during the period that the applicant is on active
    duty. Upon release from active duty, and upon providing to the Bureau’s contracted
    licensing examination provider proof of having been on active duty and proof of the
    date of release from active duty, the period will begin to run again and the applicant will
    be permitted to re-schedule the examination WITHOUT PENALTY.

        It should be noted that the prelicensing study course requirement in § 38.2-
        1816 is repealed effective September 1, 2002, after which this particular
        exception will become moot.


        All other citations herein are to the provisions as they will be in effect on
        September 1, 2002.

• § 38.2-1817 F requires an applicant for a license requiring an examination to take the
   examination within ninety calendar days from the date the registration is accepted.
   Failure to do so results in forfeiture of the examination fee and withdrawal of the
   registration for the examination.

    The Bureau would take the position (and would so instruct its contracted licensing
    examination provider) that if the applicant is called to active duty prior to the end of the
    three month period, the applicant will be given a new period of three months following
    release from active duty to schedule and take the examination, WITHOUT PENALTY.
    The rationale behind this position would be that the time period in the statute was
    created in contemplation of the agent having a full ninety calendar days in which to act.
    Upon release from active duty, and upon providing to the Bureau’s contracted licensing
    examination provider proof of having been on active duty and proof of the date of
    release from active duty, the applicant will be given a new period of three months in
    which to schedule and take the examination.

• The next circumstance that might occur would come under the purview of § 38.2- 1817
   G, which requires the applicant to apply for and be issued the license within 183 days
   following the date the applicant passes the required examination. Failure to meet this
   deadline results in invalidation of the examination grade and a requirement to register
   for, pay for, and pass the examination again. A similar requirement is found in § 38.2-
   1819 B.
Administrative Letter 2002-1
January 17, 2002
Page 3


    The Bureau would take the position that if the applicant is called to active duty prior to
    the deadline, the time limit will toll during the period that the applicant is on active duty.
    The rationale behind this position would be that the time period in the statute was
    created in contemplation of the agent having a full 183 calendar days in which to act.
    Upon release from active duty, and upon providing to the Bureau proof of having been
    on active duty and proof of the date of release from active duty, the period will begin to
    run again and the applicant will be permitted to apply for the license WITHOUT
    PENALTY within the extended deadline period.

•   § 38.2-1817 H provides that an individual who applies for a resident agent’s license,
    and who was previously licensed for the same lines of authority in the individual’s
    former home state will be exempt from the licensing examination, but only if the
    application in Virginia is made while the individual is still licensed in the former home
    state or within ninety calendar days of the cancellation of the applicant’s previous
    license in the home state. Similarly, § 38.2-1818 B gives an individual moving to
    Virginia a period of ninety calendar days to obtain a Virginia resident license without
    being subject to prelicensing examination requirements.

    The Bureau would take the position that if the applicant is called to active duty while in
    the process of relocating to Virginia, the applicant should not be penalized by being
    required to take the examination because the ninety-day period elapsed in the interim.
    Instead, the Bureau would grant the applicant a new period of ninety days following the
    applicant’s release from active duty. The rationale behind this position would be that
    the time period in the statute was created in contemplation of the agent having a full
    ninety calendar days in which to act. Upon release from active duty, the applicant will
    have a new period of ninety days in which to apply for a resident Virginia license, upon
    providing to the Bureau proof of having been on active duty and proof of the date of
    release from active duty.

•   § 38.2-1818 A provides a grace period for an agent who holds a nonresident Virginia
    license to obtain a resident license without penalty for a period of ninety calendar days
    from the date the agent becomes a Virginia resident. Failure to apply for and be issued
    a resident license by the end of the ninety calendar day period subjects the agent to
    termination of the license authority and thus would impose a requirement that the agent
    satisfy Virginia prelicensing examination requirements before a new resident license
    could be issued.

    The Bureau would take the position that if the applicant is called to active duty after
    establishing Virginia residence and prior to the expiration of the ninety calendar day
    period provided in § 38.2-1818 A, the agent will be given a period of ninety calendar
    days following release from active duty in which to secure the Virginia resident license.
    The rationale behind this position would be that the time period in the statute was
    created in contemplation of the agent having a full ninety calendar days in which to act.
    Upon release from active duty, and upon providing to the Bureau proof of having been
    on active duty and proof that the application is submitted within ninety calendar days of
    the date of release from active duty, the application will be considered and if approved
    will be issued without regard to the expiration of the ninety calendar day period
    interrupted by the agent’s active military service.
Administrative Letter 2002-1
January 17, 2002
Page 4




•   § 38.2-1825 B states that a license shall automatically terminate after a period of 183
    days during which no active appointment supporting such license was in effect. This
    would apply both to the situation where a new licensee fails to obtain his first
    appointment within 183 days or at the end of 183 days where the last supporting
    appointment of an existing agent’s license terminated. The section further provides
    that “[t]he Commission may, upon a showing of good cause…, waive or extend this
    requirement.”

    The Bureau would take the position that if the applicant is called to active duty either
    during the 183 days immediately following issuance of a license, or within 183 days
    immediately following termination of the agent’s last supporting appointment under a
    license, the time limit will toll during the period that the applicant is on active duty.
    Upon release from active duty, and upon providing to the Bureau proof of having been
    on active duty and proof of the date of release from active duty, the period will begin to
    run again and the applicant will have the remainder of the extended period in which to
    secure an appropriate supporting appointment.

•   Finally, there is a possibility that the duration of a temporary license issued pursuant to
    § 38.2-1830 B could be affected by the licensee being called to active military duty.
    That section also provides, in subsection G, that “[t]he Commission, in its sole
    discretion and for good cause shown may renew licenses granted under this section.”

    The Bureau would take the position that if the applicant is called to active duty after
    being issued a temporary license and prior to expiration of the temporary license at the
    end of 90 days, the effective period of the license will toll during the period the licensee
    is on active duty, thereby effectively “renewing” the license for the extended period of
    time. Upon release from active duty, and upon providing to the Bureau proof of having
    been on active duty and proof of the date of release from active duty, the period will
    begin to run again and the applicant’s temporary license will continue in force until the
    end of the extended ninety-day period.

•   We recognize that not every possible situation may have been addressed above. It
    would be the Bureau’s intent that similar situations be addressed consistently with the
    situations herein addressed. Examples would be for licenses such as “consultant”,
    “surplus lines broker”, “managing general agent”, and “viatical settlement broker” which
    are renewable licenses. Renewal dates would be extended upon submission of proof
    of having been on active duty and proof of the date of release from active duty.

•   We also recognize that the Bureau is not the entity responsible for development and
    administration of Virginia’s insurance continuing education program; that responsibility
    lies with the Virginia Insurance Continuing Education Board (Board) created and
    operating under Article 7 of Chapter 18 of Title 38.2 of the Code of Virginia. The
    Bureau, however, would urge the Board to adopt procedures consistent with the spirit
    of those described above for continuing education compliance and granting full or
    partial waivers, pursuant to § 38.2-1870.
Administrative Letter 2002-1
January 17, 2002
Page 5


        Throughout this document, we have made reference to “proof of having been on
active duty and proof of the date of release from active duty”. While acknowledging that
other forms of proof may, in the future, prove to be sufficient, at this time the Bureau is
defining the terms to require the individual to provide copies of the ORDERS showing the
activation date and copies of the AMENDED ORDERS showing the date of rescission of
active duty status. It is our understanding that these documents are used consistently
throughout the United States armed forces.

      It would be the Bureau’s intent to interpret these procedures more liberally rather
than more stringently. That is, in lieu of adhering strictly to a set number of days,
reasonable adherence to the deadlines and extended deadlines will be accepted.

       Finally, we would urge those affected by the call to active military duty to provide,
whenever possible, prior notice to the Bureau (or the C.E. Board’s administrator, as
appropriate) of having received orders so that the individual’s file can be appropriately
annotated, subject to later submission of proof of having been on active duty and proof of
the date of release from active duty.

      Further information may be obtained by contacting the Bureau’s Agent Licensing
Section through our Interactive Voice Response system at 804-371-9631 or on the
Bureau’s Web Site at: http://www.state.va.us/scc/division/boi.




                                                Sincerely,



                                                Alfred W. Gross
                                                Commissioner of Insurance



AWG/gm
       ALFRED W. GROSS                                                                            P.O. BOX 1157
  COMMISSIONER OF INSURANCE                                                                RICHMOND, VIRGINIA 23218
STATE CORPORATION COMMISSION                                                               TELEPHONE: (804) 371-9741
     BUREAU OF INSURANCE                                                                   TDD/VOICE: (804) 371-9206
                                                                                            http://www.scc.virginia.gov



                                                  July 26, 2002


                                                                     Administrative Letter 2002-8

      TO:    ALL INSURANCE COMPANIES; HEALTH, DENTAL, OPTOMETRIC AND LEGAL
             SERVICES PLANS; AND HEALTH MAINTENANCE ORGANIZATIONS LICENSED IN
             VIRGINIA

      RE:    CHANGES IN LAWS GOVERNING LICENSING OF VARIOUS TYPES OF INSURANCE
             AGENTS AND PRODUCERS

             The purpose of this administrative letter is to discuss the many changes in Virginia’s laws
      governing the licensing and other activities of insurance agents, consultants, and other licensees.
      Because of the importance that the content of this letter be widely disseminated, I am sending
      this administrative letter to all insurers with the request that they instruct their currently
      appointed agents to review it by accessing it via the Bureau of Insurance web site at:

            http://www.state.va.us/scc/division/boi/webpages/administrativeltrsselection.htm

              I am also requesting that such insurers include, commencing immediately, an
      instruction to each newly appointed Virginia agent to review this administrative letter at the
      above website address. Bureau of Insurance staff will review whether companies have carried
      out this request during regular and special market conduct examinations, and as part of consumer
      complaint and agent investigations conducted by the Bureau.

              Finally, I am sending copies of this administrative letter to the various agent associations in
      Virginia, with the request that they, too, attempt to disseminate this information to their members,
      and to their national offices.

       Statutory provisions referred to in this memorandum may be viewed via the Bureau’s Web site at:

                 http://www.state.va.us/scc/division/boi/webpages/administrativeltrs.htm

              As most recipients of this administrative letter are aware, there has been a concerted effort
      over the past few years for states to adopt reciprocal producer licensing requirements so as to
      make the licensing process simpler for those seeking to be licensed in a number of states.
      Spurred on by the action of Congress in enacting the Financial Services Modernization Act of 1999
      (known popularly as the Gramm-Leach-Bliley Act or “GLBA”), the states undertook serious efforts
      to incorporate into their statutes the provisions of the NAIC Producer Licensing Model Act (PLMA),
      which has been determined to satisfy the federal requirements for reciprocity. The goal, which
      has been reached and exceeded, was that at least 29 states adopt reciprocal agent licensing
      requirements by November 12, 2002 (3 years from the effective date of GLBA).
Administrative Letter 2002-8
July 26, 2002
Page 2


        Legislation was introduced in the 2001 Virginia General Assembly to initiate substantial
changes to Chapter 18 of Title 38.2, as well as certain related provisions. The bill was passed by
the General Assembly and signed into law by the governor. The effective dates of the majority of
provisions in the 2001 bill were delayed until September 1, 2002, in order to afford sufficient time
for the Bureau to implement major revisions to its processes and automated systems, but yet to be
in effect prior to the federal deadline. This goal, too, has been reached.

       The Bureau will be sending out a number of communications dealing with the changes to
our law. A new administrative letter, replacing Administrative Letter 1997-1 will be disseminated
separately, and will address the questions regarding when a license is or is not required.

Because many of these communications directly impact agents and agencies, it is crucial that
companies, agencies and associations receiving this letter remind licensed individuals and
business entities of the importance of making sure their current RESIDENCE address is on file
with the Bureau. A form for making such notification, the VIRGINIA SERVICE REQUEST FORM
(PIN 5001) is available through the Bureau’s Interactive Voice Response (IVR) phone system at:

                                          804.371.9631
or via the Bureau’s Web site at:

       http://www.state.va.us/scc/division/boi/webpages/formsapplications.htm.

       This administrative letter will address some changes in very general terms, because
separate notifications will be sent directly to those affected. Other changes will be addressed in
more detail. In the remainder of this administrative letter, we will address the following topics:

                                LICENSE CONVERSIONS
                            NON-STANDARD LICENSES (NSL)
                            NEW LICENSING REQUIREMENTS
                               NONRESIDENT LICENSING
                                    APPOINTMENTS
                 MISCELLANEOUS DISCLOSURE AND DISCIPLINARY ACTIONS
                               CONTINUING EDUCATION
                    TABLES OF CONVERSION AND NEW LICENSE TYPES

                                    LICENSE CONVERSIONS

       The new law creates certain new license types, eliminates certain license types, and
consolidates certain restricted license types by creating three new general limited lines licenses.
We will address each separately, below.

Life & Health license split into 2 separate licenses –

•   In order to create consistency among the states, the NAIC’s PLMA recognizes two separate
    license types, rather than a single Life & Health license. Effective on September 1, 2002, then,
    all agents holding the Life & Health (Type 001) license will be issued two new licenses – a “Life
    and Annuities” (Type 007) and a “Health” (Type 008) license. This process will be automatic,
    and will require no action on the part of the licensee or the appointing insurers. The agent’s
    authority under the 2 new licenses will be exactly the same as it was under the former Life &
Administrative Letter 2002-8
July 26, 2002
Page 3


    Health license, as can be determined from reviewing the attached Conversion Table and Table
    of License Types.

•   Each individual and agency holding a Life & Health license will be receiving in the mail a
    notification of this action, along with new licenses to replace the combination license. Along
    with this notification, the licensee will receive a memorandum explaining the implications of
    this action.

•   There will be NO change in the appointment process, nor will the Bureau require a separate
    appointment under each of the 2 new licenses. Insurers authorized to issue “LH”
    appointments will continue to do so, and one LH appointment will support both the 007 and
    008 licenses as long as the appointment remains active.

Consolidation and conversion of limited lines licenses –

•    In recent years, Virginia has issued as many as 19 different types of limited lines or restricted
     licenses. Under the new law, this number has been reduced to 7. While the 3 temporary
     license types will remain, as will the “motor vehicle rental contract agent” license, all of the
     other limited lines licenses will be consolidated into three new license types: Limited Lines
     Life & Health (Type 080); Limited Lines Property & Casualty (Type 081), and Limited
     Lines Credit (Type 015). The attached tables show the manner in which the licenses will be
     consolidated. Therefore, all agents holding one or more of the 15 discontinued limited lines
     licenses will receive one or more of the 3 new limited lines licenses.

•    As is the case for the Life & Health license conversions discussed above, this process will be
     automatic, and will require no affirmative action on the part of the agent or the appointing
     insurer. Converted licenses, along with an explanatory memorandum, will be furnished directly
     to each affected licensee, with license effective dates of September 1, 2002.

Conversion of “partial qualification” licenses –

•    These licenses were issued prior to July 1, 1979, and are held only by Virginia residents.
     They provided authority to sell selected types of insurance, but not the full authority permitted
     by the Life & Health or Property & Casualty licenses that the Bureau issued subsequently. We
     have referred to the above licenses as “partial qualification” licenses in order to differentiate
     them from the “full” Life & Health or Property & Casualty licenses. The “partial qualification”
     licenses can be seen on the attached Conversion Table.

•    Changes in Virginia law effective September 1, 2002 (§ 38.2-1824 B) require that each
     “partial qualification” license be converted to a “full” authority license. Again, this process is
     automatic, and does not require any specific action on the part of licensees or appointing
     insurers. Converted licenses, along with an explanatory memorandum, including an
     explanation as to how the new licenses will be subject to continuing education requirements,
     will be furnished directly to each affected licensee, with license effective dates of September 1,
     2002.

•   In adopting the new law, the Virginia General Assembly made it clear that no “partial
    qualification” agent’s authority should be reduced by conversion. Therefore, authority under
    the newly issued license is at least equal to, and in many cases is greater than the authority
    under the partial qualification licenses.
Administrative Letter 2002-8
July 26, 2002
Page 4


                               NON-STANDARD LICENSES (NSL)

       We refer to the following as “non-standard” or NSL licenses: Life & Health Insurance
Consultant (Type 059); Property & Casualty Insurance Consultant (Type 058); Surplus Lines
Broker (Type 065); Viatical Settlement Broker (Type 064); Managing General Agent (Type
061); Reinsurance Intermediary Broker (Type 062); and Reinsurance Intermediary Manager
(Type 063). In revising the licensing statutes, every effort was made to make these license types
reciprocal with other states, although not all were actually subject to the federal requirements.
Although these licenses are basically unchanged, there are some things that licensees and others
should keep in mind:

•   The laws governing licensing and activities of both types of Insurance Consultants can be
    found in Article 4 of Chapter 18 of Title 38.2. The annual license renewal application deadline
    and renewal dates have been changed to be consistent with all other NSL licenses.

•   While Chapter 48 of Title 38.2 still contains the general requirements for the Surplus Lines
    Insurance law, the LICENSING requirements for Surplus Lines Brokers have been moved from
    that chapter to Article 5.1 of Chapter 18.

•   While Chapter 57 of Title 38.2 still contains the general requirements for Viatical Settlements,
    the LICENSING requirements for Viatical Settlement Brokers have been moved from that
    chapter to Article 6.1 of Chapter 18.

•   The laws and licensing requirements applicable to Reinsurance Intermediary Brokers and
    Reinsurance Intermediary Managers, which were formerly found in Article 5 of Chapter 18 of
    Title 38.2 can now be found in Article 8 of Chapter 13.

•   The laws and licensing requirements applicable to Managing General Agents, which were
    formerly found in Article 6 of Chapter 18 of Title 38.2 can now be found in Article 9 of Chapter
    13.

•   Efforts were made to conform the licensing requirements for the NSL licenses discussed above
    as closely as possible to those applicable to other licenses issued pursuant to Chapter 18 of
    Title 38.2.

Insurers, please note that the previous requirement for Managing General Agents to be
appointed has been REPEALED.

•   All of the NSL licenses are subject to renewal requirements. Regardless of what the renewal
    dates might have been in the past, ALL of the NSL licenses will now be renewable with
    effective dates of July 1. Licenses administered under Chapter 13 of Title 38.2 are renewable
    every other year, while the Insurance Consultant, Surplus Lines Broker and Viatical Settlement
    Broker licenses are renewable annually. Application for renewal, along with payment of the
    required renewal fee, must be made on or before June 1 of the renewal year or the license will
    terminate on June 30 of that year. In those instances where the renewal date under the former
    law was prior to July 1, licensees will be granted an automatic extension at the end of the
    current renewal period so that the new renewal date can become July 1.
Administrative Letter 2002-8
July 26, 2002
Page 5


•   The movement of the Reinsurance Intermediary and Managing General Agent licensing
    requirements to Chapter 13 was accomplished primarily for the purpose of re-assigning
    responsibility for licensing and renewal of these entities to the Bureau’s Financial Regulation
    Division instead of the Agents Licensing Section. Commencing September 1, 2002, then, ALL
    communications relating to these license types should be directed to the Financial Regulation
    Division. Contact information is as follows:

                                            Bureau of Insurance
                                        Financial Regulation Division
                                               P.O. Box 1157
                                         Richmond, Virginia 23218

                               Telephone calls should be made to 804.371.9637
                                  Telefaxes should be sent to 804.371.9511

•   Those with an interest in NSL licenses are urged to review the new laws carefully. There are
    some substantive changes that cannot be addressed in depth in this administrative letter.

                                  NEW LICENSING REQUIREMENTS

Elimination of pre-licensing study course requirement –

         Bureau staff recommended to the General Assembly that it repeal the required 45 hour
prelicensing study course requirement, and this change takes effect for licenses applied for after
passing the appropriate examination on or after September 1, 2002. There were a number of
reasons for making this recommendation. First, after 12 successful years of administration of the
automated licensing examinations, it has been more than amply demonstrated that the
examinations administered by our outside contractor are fair, unbiased, appropriate for Virginia,
and adequately test the candidate’s entry-level knowledge. Second, we concluded that no viable
purpose was served by the imposition of an arbitrary number of prelicensing examination
preparation hours. If a candidate can pass the examination, it should not matter how or for how
many hours the candidate prepared. Third, in light of the increased availability of “distance
learning” options for candidates, and particularly those in areas not easily accessible to classroom
courses, it can no longer be successfully argued that one form of preparation is necessarily
superior to another. “Distance learning” has been permitted in lieu of classroom study for a few
years, and we have seen no diminution in the number of candidates successfully passing the
examinations. And, while enforcement of the 45 hour classroom requirement was problematic, any
attempt to enforce a specific hourly requirement for “distance learning” courses was untenable.
We therefore concluded that candidates should be permitted to choose the methodology they wish
to utilize in preparing for the examination, and professional educators should be permitted to
determine the appropriate form and length of examination preparatory courses. We believe that
most candidates should and will continue to take study courses, even if not required to do so by
law, and that elimination of the statutory requirement may even have the beneficial result of
removing from the marketplace the types of “study course mill” operations that have existed for
many years for no viable purpose other than to issue to the candidate an official certificate of
course completion.
Administrative Letter 2002-8
July 26, 2002
Page 6


New and modified licensing examinations –

       Beginning on the first testing day after September 1, 2002, Experior Assessments will be
administering the following examinations for the licenses described:

        Life & Annuities Exam - for those wishing to apply ONLY for the Life & Annuities (Type
        007) license.

        Health Exam – for those wishing to apply ONLY for the Health (Type 008) license.

        Life & Health Exam – for those wishing to apply for BOTH the Life & Annuities (Type 007)
        and the Health (Type 008) licenses.

        Personal Lines Exam - for those wishing to apply for a Personal Lines (Type 032) property
        and casualty license.

        Property & Casualty Exam – for those new applicants OR those already holding a Personal
        Lines license who wish to obtain full property & casualty authority, including both personal
        and commercial lines, and to apply for the full Property & Casualty (Type 030) license.

        Title Exam - for those wishing to apply for a Title (Type 033) license.

Additional information regarding registration, updated content outlines, and other relevant
information is provided in the 2002-2003 edition of the Virginia Licensing Information Bulletin, now
available from Experior for examinations administered on or after September 1, 2002.

Penalty for failing examination three times changed –

        Under prior law, a candidate who failed the examination 3 times was required to take the
prelicensing study course again before being permitted to sit for the examination. With the
elimination of the prelicensing study course requirement, the statutory penalty has been changed,
and the candidate will henceforth be required to wait a minimum of 30 calendar days before being
permitted to take the examination again after failing the examination 3 times.

Consolidation of limited lines licenses –

        Although we have discussed this in some depth already in the section dealing with license
conversions, we want to stress again that under the new law we have reduced some 19 former
restricted license types to 4 clear and simple limited lines licenses: Limited Lines Life & Health
(Type 080); Limited Lines Property & Casualty (Type 081) ; Limited Lines Credit (Type 015); and
Motor Vehicle Rental Contract (Type 024).

Adoption of consistent definitions – [See § 38.2-1800]

      Definitions of terms such as “business entity,” “home state,” “solicit”, “sell,” and negotiate,”
have been modified so as to be more consistent with definitions used in other states.

        Throughout the definitions and elsewhere, we attempted to recognize the term “producer”
so as allow it to be used interchangeably with “agent” and “insurance agent”. This means that
rather than change the word “agent” to “producer” throughout the chapter, and rather than ignoring
Administrative Letter 2002-8
July 26, 2002
Page 7


the word “producer” that is used in the PLMA and in many other states, we chose to clarify in the
definitions that “agent” and “producer” are synonymous.

        In order to reduce the number of disputes arising from misunderstandings, references to
time frames, such as “30 days” have been clarified so that they refer either to “business” days or
“calendar” days, depending upon the context. Companies and agents are on notice from this point
forward that when we talk about “30 calendar days” or “183 calendar days” (i.e. 6 months plus a
few extra days’ leeway), these are STATUTORY requirements, not administrative requirements.
This means that we have NO authority to make exceptions or grant extensions.

License applications –

       As has been the case for some time, Virginia will continue to accept (both for resident and
nonresident license applications) either our own license application form or, where applicable the
NAIC Uniform Application for Individuals or the NAIC Uniform Application for Business Entities.

       Our own basic application for individual license types 007, 008, 030, 032, and 033 (PIN
3001) can be found in the latest edition of the Virginia Licensing Information Bulletin, or any of our
applications may be requested by telephone to 804.371.9631, or may be downloaded and printed
from the Bureau’s web site at:

               http://www.state.va.us/scc/division/boi/webpages/formsapplications.htm

       Those choosing to use the NAIC Uniform Applications may obtain them directly from the
National Insurance Producer Registry web site at:

                    http://www.licenseregistry.com/uniform_nonres_licensing.htm

Specific requirements applicable to business entity licensing –

       Specific requirements for licensing business entities have been added to codify long-
standing administrative requirements implemented to address long-standing gaps in the statutory
requirements. We are confident that these changes will put the requirements for business entities
squarely within the statutory framework, and will reduce confusion among applicants. [See § 38.2-
1820]

Who needs to be licensed? Who is exempt? –

        As stated above, the Bureau is issuing an updated version of Administrative Letter 1997-1
to deal with this topic in more depth, but it should be noted that the law now contains a specific
provision consistent with the PLMA, and intended to clarify in detail who needs to be licensed and
who does not. This, too, will clear up a number of areas of confusion and misconception that have
surfaced over the years. [See § 38.2-1821.1]

Grounds for license refusal, suspension or revocation clarified and expanded –

The grounds upon which the Commission may deny a license or seek the suspension or
revocation of a license have been expanded and made more consistent with the grounds utilized in
other states. [See § 38.2-1831]
Administrative Letter 2002-8
July 26, 2002
Page 8


Temporary licenses -

        Temporary licenses issued on or after September 1, 2002 will expire in 180 calendar days,
rather than 90 days as under current law. The law was also modified to clarify that temporary
licenses are permitted to be issued only to individuals, and not to business entities. [See § 38.2-
1830]

Revised and expanded definition of “resident” – [See § 38.2-1800.1]

       We have made an effort to clarify who qualifies as a “resident” for purposes of licensing.
We have also expanded the definition so as to permit certain individuals who would not otherwise
meet the definition of a “resident” for any state to qualify for resident licensing in Virginia.

     An Individual may be deemed to be a resident of Virginia if the individual can provide
documentation that the individual:
     • maintains his principal place of residence within Virginia;
     • declares himself to be a Virginia resident on his federal tax return; and
     • declares himself to be a Virginia resident for purposes of paying Virginia income tax and
         personal property taxes

        The Commission may also consider other documentation furnished by the individual,
including, but not limited to, a valid current Virginia driver's license or voter registration card, as
additional proof of residency.

        One potential problem in the PLMA was that some states define a “resident” agent based
upon the licensee’s place of residence (such as Virginia), while other states may decide to define a
“resident” agent based upon the licensee’s principal place of business. It is conceivable, then, that
an individual residing in a state that bases residency on principal place of business, and having his
principal place of business in Virginia would satisfy the “resident” definition of neither state. For
purposes of reciprocity, an agent MUST be a “resident” agent somewhere.

        For this reason, Virginia’s law has been expanded so that an individual residing outside of
Virginia may be considered a resident for purposes of issuance of a license pursuant to this
chapter if:
        • the individual’s principal place of business is in Virginia;
        • the individual is able to demonstrate to the satisfaction of the Commission that the laws
            of his state of residence prevent him from obtaining a resident agent license in that
            state; and
        • the individual affirmatively chooses to qualify as and be treated as a resident of Virginia
            for purposes of licensing and continuing education, both in Virginia and in the state in
            which the individual resides, if applicable.

       A Business Entity may be deemed to be a resident of Virginia if the business entity can
provide documentation that the business entity:
       • if a domestic corporation, has filed its articles of incorporation with the clerk of the
          Commission, and has been issued a charter by the Commission;
       • if a domestic limited liability company, has filed its articles of organization with the clerk
          of the Commission, and has been issued a certificate of organization by the
          Commission;
Administrative Letter 2002-8
July 26, 2002
Page 9


        •   if a domestic limited partnership, has applied for and received a certificate of limited
            partnership from the clerk of the Commission;
        •   if a domestic partnership, has filed its partnership agreement with the clerk of the
            appropriate court; or
        •   if a foreign business entity, that it is not licensed as a resident agency in any other
            jurisdiction, and demonstrates to the satisfaction of the Commission that its principal
            place of business is within the Commonwealth of Virginia.

            Note: Legislation enacted by the 2002 General Assembly removed the
            requirement that the articles of incorporation of a corporation, or the
            articles of organization of a limited liability company, or the partnership
            agreement of a limited or general partnership must specify the authority of
            the business entity to act as an insurance agency.

Revised requirements for agents moving to Virginia –

       Licensees moving to Virginia from another jurisdiction are obligated by law to notify the
Bureau of Insurance of their new residence address within 30 calendar days. Issuance of new
licenses, or conversion of existing licenses will be based upon the following, which can be found in
§ 38.2-1818 of the Code of Virginia, as amended:

•   Licensees who already hold one or more active NONRESIDENT VIRGINIA LICENSES
    when they relocate to Virginia will be permitted to continue to operate under the nonresident
    license(s) for a maximum period of 90 calendar days from the date they move to Virginia.
    During that 90 day period, licensees must submit an application and a clearance letter from the
    insurance department in the state in which they held their RESIDENT license(s), and pay the
    license processing fee(s) to receive resident license(s) equivalent to the nonresident license(s)
    they already hold.

    1. Assuming they do so within the 90 days, their nonresident license(s) will terminate
       simultaneously with the effective date of their new resident license(s), and all appointments
       in effect under the previous nonresident license(s) will automatically be converted to
       resident appointments under the new license(s).
    2. However, licensees who fail to convert a nonresident license to a resident license within the
       90 day period, will have their nonresident license and all appointments under that license
       administratively terminated at the end of the 90 days. If this occurs, the individual will be
       treated as if (s)he never held a Virginia license, and, will be required to satisfy any and all
       prelicensing requirements applicable to the license type for which (s)he is applying,
       including passing any prelicensing examination, and including submission of a new
       application, criminal history record from the former home state, and fee. Once the new
       license is issued, the licensee will be required to obtain new appointments from each
       company (s)he wishes to represent in Virginia.

•   Licensees who do NOT hold a current NONRESIDENT VIRGINIA LICENSE when they
    move into Virginia, but who held equivalent authority in their former state of residence also
    have a period of 90 calendar days in which to file an application, clearance letter, and pay the
    required fee for each license applied for. HOWEVER SUCH INDIVIDUALS ARE PROHIBITED
    FROM SELLING, SOLICITING, OR NEGOTIATING INSURANCE IN VIRGINIA UNTIL SUCH
    TIME AS THE LICENSE APPLIED FOR HAS BEEN ISSUED.
Administrative Letter 2002-8
July 26, 2002
Page 10


    1. If the application for a resident license is filed within the 90 day period, the applicant will not
       be required to satisfy any prelicensing examination requirements.
    2. Applicants failing to file their applications within the 90 day period described above will not
       be entitled to reciprocity, and will be required to satisfy any and all Virginia prelicensing
       requirements before a resident license will be issued.

                                     NONRESIDENT LICENSING

        One of the primary goals of reciprocity under GLBA was to remove barriers for nonresidents
seeking licensure in states in which they do not reside. While Virginia had already eliminated most
such barriers, the revised statutes dealing with nonresident licensing have been updated to
conform more closely with the PLMA. We attempted to make nonresident licensing requirements
comparable not only for agents and consultants, but also for applicants for NSL licenses. Our
intent was to impose no requirements upon nonresident applicants that are not equally imposed
upon resident applicants, and to grant full reciprocity to recognition of licenses issued by other
states when holders of such licenses apply for license authority in Virginia.

        Under the new laws, effective September 1, 2002, the following will apply to nonresident
licensing:

An individual or business entity that is licensed in his or its state of residence may obtain
equivalent license authority in Virginia if:

    •   The applicant presents proof in a form acceptable to the Commission that the applicant is
        currently licensed as a resident and in good standing in the applicant’s home state (i.e. a
        Letter Of Certification);

    •   The applicant has presented a proper request for licensure and has paid all required fees;

    •   The applicant has submitted or transmitted to the Commission the application for licensure
        that the applicant submitted to the home state, or in lieu thereof, a completed NAIC Uniform
        Application.

            NOTE:     We would remind applicants that if the information contained on
            the application originally filed in the home state is outdated, particularly
            demographic information, the applicant would be well advised to provide
            updated information concurrent with the application filing, so that our
            records will be accurate.

    •   The applicant’s home state issues nonresident agent licenses to residents of Virginia on the
        same basis; and

    •   The applicant, if a corporation, limited liability company, or limited partnership has obtained
        from the clerk of the Commission a certificate of authority, certificate of registration, or
        certificate of limited partnership, respectively.

            NOTE: This is the equivalent of obtaining a certificate of authority from
            the Secretary of State in most other states. This requirement applies to
            ANY foreign or alien business entity seeking to do business in Virginia,
            and is not specific to the business of insurance. We included this
Administrative Letter 2002-8
July 26, 2002
Page 11


            provision in Chapter 18, even though not technically a part of the PLMA,
            as a courtesy, so that nonresident business entities seeking insurance
            licenses in Virginia would not overlook this requirement.

What licenses will be issued to nonresidents?

        •   Any license that Virginia issues to residents can also be issued to nonresidents,
            PROVIDED that the nonresident holds equivalent home state authority.

        •   As more and more states adopt the PLMA, the instances of “equivalent authority” will
            become more common. At this point, for the major license types (Life & Annuities,
            Health, Personal Lines, Property & Casualty, and Title) the Letter of Certification from
            the applicant’s home state must show that the applicant has authority for ALL of the
            lines of authority shown for that license type in the attached Tables. If the nonresident
            applicant has authority that is more limited than what the Virginia license includes, then
            pursuant to § 38.2-1836 F the Bureau may choose to issue a Restricted Nonresident
            Life & Annuities (Type 082), or a Restricted Nonresident Health (Type 083), or a
            Restricted Nonresident Personal Lines (Type 084), or a Restricted Nonresident
            Property & Casualty (Type 085) license. These restricted nonresident licenses will
            grant to the licensee authority equal to but no broader than the home state authority the
            licensee holds.

            For example, if an agent from another state holds a LIFE license, but the license does
            not include the authority to sell annuities, as the Life & Annuities license does in
            Virginia, the applicant will NOT be issued a Life & Annuities (Type 007) license, but will
            instead be issued a Restricted Nonresident Life & Annuities License, under which the
            licensee’s authority in Virginia will be restricted to selling life insurance only, since that
            is the limitation on the licensee’s home state authority.

        •   With respect to limited lines agents from other states seeking to become licensed in
            Virginia, we will grant a Virginia limited lines license to any nonresident applicant whose
            home state authority includes at least 1 of the lines of authority included in that Virginia
            limited lines license. Pursuant to § 38.2-1836 F, however, if the applicant’s home state
            authority is narrower than that provided by the Virginia limited lines license, or is for a
            line of business not included under any Virginia licenses, the applicant will be issued
            one of the Restricted Nonresident licenses in Virginia and the licensee’s authority will
            be restricted to that which (s)he holds in the home state.

        •   Nonresidents may also apply for NSL licenses, such as Life & Health Consultant,
            Property & Casualty Consultant, Surplus Lines Broker, and Viatical Settlement Broker.
            Under the revised laws providing for pure reciprocity, however, nonresident applicants
            for such licenses in Virginia MUST hold the same authority in their home state.

            For example, in the past Virginia has issued Surplus Lines Broker (SLB) licenses to
            nonresidents from states in which no SLB license existed, provided the applicant had
            Property & Casualty authority in the home state. Henceforth, the SLB license cannot be
            issued to a nonresident applicant unless the nonresident applicant holds specific
            license authority to act as a Surplus Lines Broker (or equivalent title) in the home
            state.
Administrative Letter 2002-8
July 26, 2002
Page 12




                                         APPOINTMENTS

The Appointment Process

        For the immediate future, Virginia WILL continue to require that agents be appointed by
each company within the time frames that have existed for many years. Further, Virginia WILL
continue to require that the appointment be specific and authorized under the insurer’s license
authority in Virginia.

       An insurer appointing an agent retains a great deal of responsibility (and liability) with
regard to the appointment. It is the APPOINTING INSURER’S RESPONSIBILITY, both generally
and by statute:

        •   to make certain that the agent being appointed is appropriately licensed to sell the
            products that the company is authorizing the agent to sell; and

        •   to make certain that it does not authorize or permit the appointee to sell products
            beyond the scope of that agent’s license authority in Virginia.

Failure to adhere to these requirements can and will result in initiation of disciplinary proceedings
against both the agent acting beyond the scope of the license AND the insurer who allows the
agent to do so. We have provided, below, recommendations for the best and quickest means by
which appointing insurers may verify the license authority of those they wish to appoint.

       This administrative letter is not intended to provide examples of each and every possible
scenario that might arise, but we will provide a few examples intended to demonstrate the thought
process that appointing insurers are expected to utilize in making appointments:

        •   Life & Annuities license
            Health license
            Limited Lines Life & Health license
            Limited Lines Credit license –
            An insurer that itself has life, annuities, accident and sickness, credit life, or credit
            accident and sickness insurance authority and verifies that the agent has one or more
            of the above licenses would utilize an LH appointment. This includes a “Property &
            Casualty” insurer that also has the “accident and sickness” or the “credit accident and
            sickness” line of authority.

        •   Personal Lines license
            Property & Casualty license
            Limited Lines Property & Casualty license
            Limited Lines Credit license –
            An insurer that itself has property & casualty authority and verifies that the agent has
            one of the above licenses would utilize a PC appointment. As noted above, a “Property
            & Casualty” insurer that also has the “accident and sickness” or the “credit accident and
            sickness” line of authority would need to appoint the holder of a Limited Lines Credit
            license with both a PC and a LH appointment in order for that agent to sell all of
            insurer’s authorized lines of credit insurance.
Administrative Letter 2002-8
July 26, 2002
Page 13




        •   Title license –
             An insurer that itself has title insurance authority, and verifies that the agent has a Title
             license would utilize a TI appointment.

        •   Motor Vehicle Rental Contract Agent license
            If the agent is to sell both the accident and sickness products and the property &
            casualty products authorized by the Motor Vehicle Rental Contract Agent license, the
            agent would need at least 1 LH appointment, either from a life & health insurer or from a
            property & casualty insurer with “accident and sickness” authority, AND 1 PC
            appointment from an insurer with property & casualty authority.

       Insurers should be able to extrapolate from the above examples in determining what types
of appointment to file.

Single Appointment may support multiple licenses

       A single appointment may support more than one license at the same time. For example:
An agent holding both a Life & Annuities license and a Health license needs only 1 LH appointment
to be in effect to support both licenses. Conversely, however, this means that if the last LH
appointment is terminated, and a new LH appointment is not obtained within 6 months, BOTH
licenses will terminate.

Electronic Appointments

       Insurers are encouraged to make use of the ability to submit appointments and appointment
terminations electronically. Electronic appointments and terminations save time, effort, and paper
on both ends of the transaction. For further information, insurers should contact the National
Insurance Producer Registry through its web site at:

                    http://www.licenseregistry.com/nipr_information/address.html

Dual Appointments

        In most cases, a single appointment by an insurer will be sufficient. There are, however,
certain instances, described in more detail above, where the authority that the appointing insurer
wishes to impart to the licensee combines both Life/Health AND Property/Casualty.

       For an individual insurer, the most common occurrence of this is where a
Property/Casualty insurer whose authority includes “accident and sickness” insurance wants to
appoint an agent to sell all of its lines of business. In this case, the agent would have to hold
licenses authorizing him to sell both accident and sickness (i.e. “health”) insurance and
property/casualty insurance. The company would have to appoint the agent with a LH
appointment under the license authorizing the agent to sell health insurance AND with a PC
appointment under the license authorizing the agent to sell property/casualty insurance.

       Other examples, described above, relate to those holding the Limited Lines Credit license
and the Motor Vehicle Rental Contract license.
Administrative Letter 2002-8
July 26, 2002
Page 14


Appointment termination

       Additional notice requirements and filing deadlines, almost verbatim from PLMA, are placed
upon insurers and agents when an appointment is terminated for “cause”. This includes notice to
the Commission, immunity provisions, and protection of confidentiality of documentation. [See
§ 38.2-1834.1] Insurers, agencies and agents are urged to review these new provisions.

            Note: 2002 legislation corrected an error in § 38.2-1834.1 E 1 to make it
            clear that information is protected when collected or provided in an
            investigation by the Commission pursuant to the whole of Chapter 18,
            rather than pursuant only to § 38.2-1834.1.


WE REMIND INSURERS THAT THE BURDEN OF DETERMINING THE APPROPRIATE
APPOINTMENT TYPE, FILING IT CORRECTLY, AND PAYING THE APPOINTMENT
PROCESSING FEE (EVEN IF THE APPOINTMENT IS REJECTED) RESTS ENTIRELY WITH
THEM.


The Interactive Voice Response (IVR) System

THE NEED TO VERIFY THE AGENT’S LICENSE AUTHORITY BEFORE THE APPOINTMENT IS
SUBMITTED IS VITAL.

THE BEST ALTERNATIVE is to utilize the Bureau’s IVR system, which allows insurers to verify the
license status of an individual or business entity quickly and efficiently, 24 hours per day, 7 days
per week, using the Bureau’s Interactive Voice Response (IVR) telephone number: (804) 371-
9631.

THE NEXT BEST ALTERNATIVE is to ask the individual or business entity to obtain a certification
from the Bureau.

THE WORST ALTERNATIVE is to ask the individual or business entity to send a copy of the
license. Remember that Virginia licenses are perpetual, so a copy of a license issued a number of
years ago may not necessarily be current.

The IVR system is an advanced telephone system which combines the best attributes of technology
and human resources to provide complete customer service. Our IVR System allows you to obtain
information at your convenience, 24 hours a day, seven days a week. However, there are certain
times when the licensing and appointment information will not be available due to system
maintenance. The schedule for the system to be down is as follows:
                                Monday - Friday from 7 p.m. - 9 p.m.
                                    Thursday - 3 a.m. - 5 a.m.
                                     Sunday - 4 a.m. - 8 a.m.

Some of the specific features you may find useful are:

•   Audiotext which, with the use of a touch-tone phone, directs your call to the area of interest to
    you

•   Ability to obtain license and appointment information
Administrative Letter 2002-8
July 26, 2002
Page 15


•   Explanation of licensing procedures

•   Ability to have forms and procedures faxed to you

                               NAVIGATING THROUGH THE IVR SYSTEM
Upon entering the IVR system, you will be able to access information from one of five areas:
       1. Licensing Information on a particular agent or agency
       2. Appointment Information on an agent or agency with a particular Insurance Carrier
       3. Procedures – various Bureau licensing and other procedures may be selected from a
           menu, and you may either listen to the procedure or have it faxed to you.
       4. Fax Back System – select from a menu of various forms, procedures and other
           documents to be faxed to you
       5. Confirm that you have the Bureau’s current Mailing and Overnight Addresses

Press * at any time to return to the Main Menu.

If you need to speak directly with one of our licensing staff (Monday through Friday 8:15 - 5:00) you
may Press 0 at any time while you are in the IVR system and we will respond to your call in the
order received.

                               QUICK REFERENCE FOR IVR INQUIRIES
                                      Agent Licensing Information

                                       Press 1 from Main Menu
                               Press 1 for Agent Licensing Information
                                 Enter 9-digit Social Security Number
                                 Press 1 if number entered is correct
                                Press 2 if number entered is incorrect
                           Select License Type by following instructions OR
                                     Press 9 for All License Types

                                     Agency Licensing Information

                                       Press 1 from Main Menu
                              Press 2 for Agency Licensing Information
                                      Enter 9-digit Tax Id Number
                                 Press 1 if number entered is correct
                                Press 2 if number entered is incorrect
                           Select License Type by following instructions OR
                                     Press 9 for All License Types

                                   Appointment Information for Agent

                                          Press 2 from Main Menu
                                             Enter NAIC Number
                                 Press 1 if NAIC Number entered is correct
                                Press 2 if NAIC Number entered is incorrect
                               Press 1 to check appointment status for agent
                                    Enter 9-digit Social Security Number
Administrative Letter 2002-8
July 26, 2002
Page 16


                                Press 1 if number entered is correct
                               Press 2 if number entered is incorrect

                               Appointment Information for Agency

                                       Press 2 from Main Menu
                                         Enter NAIC Number
                             Press 1 if NAIC Number entered is correct
                            Press 2 if NAIC Number entered is incorrect
                           Press 2 to check appointment status for agency
                                     Enter 9-digit Tax Id Number
                                Press 1 if number entered is correct
                               Press 2 if number entered is incorrect

Appointment fees

•   Until July 1, 2001, the appointment fee ($14) was charged to the insurer only where the
    appointment was successfully processed. Insurers had no incentive to check their own records
    or to verify the agent’s license authority before submitting appointments because there was no
    penalty imposed when they failed to do so. This resulted in a large number of invalid and
    rejected appointments, usually where either the agent did not hold a Virginia license or where
    the insurer already had an appointment on file for the agent. This problem was compounded
    as companies began filing appointments electronically. The Bureau concluded that the only
    reasonable means of addressing this growing problem was to impose the appointment fee as a
    nonrefundable appointment processing fee applicable to each transaction, regardless of
    whether the appointment is successfully processed. This change, we believe should serve as
    an incentive for insurers to check their appointment records more carefully, and, more
    importantly, verify that an agent is properly licensed before accepting business from that agent.
    We have provided, above, instructions as to how insurers may access license AND
    appointment information about individuals or business entities at any time, through the
    Bureau’s IVR system. We urge insurers to take advantage of this service. [See §§ 38.2-1833
    C and 38.2-1834 B]

•   The statutory maximum for the appointment fee has been set at $15 for many years. The
    current fee established by the Commission is $14. For the simple purpose of anticipating
    possible future increases to cover increased processing and resource costs as the Bureau
    moves forward in automating the licensing and appointment processes, the maximum statutory
    fee has been raised to $25. However, there are no plans at this time to increase the fee from
    its current level of $14. [See § 38.2-1833 C]

•   Until July 1, 2001, appointment and appointment renewal fees were billed on a quarterly basis.
    Quarterly appointment fees were due “immediately” upon receipt of the bill by the insurer;
    annual renewal fees were due on or before August 1. However, there was no statutory
    sanction for those insurers who paid late or not at all until the next quarterly billing. The law
    was changed, effective July 1, 2001, as follows:

    1. First, instead of being due “immediately,” quarterly billings are now payable 40 calendar
       days after posting, which gives insurers a more reasonable period of time in which to remit
       payment. However, failure by the insurer to remit payment so as to be received by the due
       date now results in an automatic penalty of $50 per calendar day until payment is received
Administrative Letter 2002-8
July 26, 2002
Page 17


        in full. [See § 38.2-1833 H] We expected and found there to be a learning curve regarding
        this new requirement, and a number of insurers have found themselves required to pay the
        statutory late penalty for missing the appointment (or appointment renewal) deadline. Our
        long-term goal is that everyone will remit appointment fees in a timely manner, and we will
        not have to assess ANY penalties.

    2. Second, the Commission now has the statutory right (but not the obligation) to terminate
       any appointments or appointment renewals for which the appointment fee or renewal fee
       has not been paid by the statutory deadline. Some insurers have attempted to avoid
       payment of the penalty by simply submitting the overdue fee. It is our position that failure to
       pay the penalty is continuing noncompliance. A company that pays the overdue
       appointment or appointment renewal fee but fails to pay the $50 per day penalty will remain
       subject to the administrative appointment termination sanction described above.

    3. It is anticipated that the option to terminate appointments will be utilized only where an
       insurer has been dilatory on an habitual basis, or where payment is inordinately late, or
       where the insurer ignores repeated warnings. [See §§ 38.2-1833 and 38.2-1834]


                MISCELLANEOUS DISCLOSURE AND DISCIPLINARY ACTIONS


New Ocean Marine insurance disclosure requirement for agents

         A new subsection has been added to § 38.2-1802, requiring licensed agents who sell,
solicit, or negotiate ocean marine insurance on behalf of an unlicensed insurer to give a notice to
the insured (prior to placement of the insurance) advising the insured that, in the event of an
insolvency, there will be no protection under the Virginia Property and Casualty Insurance
Guaranty Association. The notice must also state that the insured may not be protected under the
insurance laws of the Commonwealth. This requirement has been added to the code to make
consumers aware that the Bureau may not be able to help them if a problem arises when coverage
has been placed with an unlicensed insurer. The notice must be signed and dated by the agent
and the insured, and the agent must keep a copy of the notice for three years. The Commission
has prescribed the content of this notice, which is available on the Bureau’s web site at:
          http://www.state.va.us/scc/division/boi/webpages/unlicensedoceanmarinedisclosure.htm.
[See § 38.2-1802 D]

Expanded grounds for refusal to issue a license or for license revocation, suspension or
probation –

        The Commission’s grounds for refusal to issue a license, or revoke or suspend a license or
place a licensee on probation have been conformed to the PLMA. With minor necessary
variations, similar grounds now exist with regard to all NSL licenses as well. These sanctions are
in addition to the Commission’s right to impose a fine or other penalty pursuant to § 38.2-218. The
grounds are [See § 38.2-1831]:

        1. Providing materially incorrect, misleading, incomplete or untrue information in the license
        application or any other document filed with the Commission;
        2. Violating any insurance laws, or violating any regulation, subpoena or order of the
        Commission or of another state's insurance regulatory authority;
Administrative Letter 2002-8
July 26, 2002
Page 18


        3. Obtaining or attempting to obtain a license through misrepresentation or fraud;
        4. Engaging in the practice of rebating;
        5. Engaging in twisting or any form thereof, where "twisting" means inducing an insured to
        terminate an existing policy and purchase a new policy through misrepresentation;
        6. Improperly withholding, misappropriating or converting any moneys or properties
        received in the course of doing insurance business;
        7. Intentionally misrepresenting the terms of an actual or proposed insurance contract or
        application for insurance;
        8. Having admitted or been found to have committed any insurance unfair trade practice or
        fraud;
        9. Having been convicted of a felony;
        10. Using fraudulent, coercive, or dishonest practices, or demonstrating incompetence, or
        untrustworthiness in the conduct of business in this Commonwealth or elsewhere, or
        demonstrating financial irresponsibility in the handling of applicant, policyholder, agency, or
        insurance company funds;
        11. Having an insurance producer license, or its equivalent, denied, suspended or revoked
        in any other state, province, district or territory;
        12. Forging another's name to an application for insurance or to any document related to an
        insurance transaction;
        13. Improperly using notes or any other reference material to complete an examination for
        an insurance license;
        14. Knowingly accepting insurance business from an individual who is not licensed;
        15. Failing to comply with an administrative or court order imposing a child support
        obligation; or
        16. Failing to pay state income tax or comply with any administrative or court order directing
        payment of state income tax.

        The Commission is also given greater leeway in determining when a licensee whose
license has been revoked may re-apply for licensure. It should be noted that the right to re-apply
does NOT necessarily mean that the license application will be approved; the Commission retains
the right to refuse to issue a new license. Under prior law, the Commission could not prohibit a
licensee whose license was revoked from re-applying after the expiration of a two year period.
Under the new law, however, the period is automatically five years unless the Commission
establishes a lesser or greater amount of time in its Order. [See § 38.2-1832 A]

New accountability for business entities -

        Specific provisions have been added to provide accountability for licensed business entities
in the area of disciplinary proceedings against their agents and employees. Under these new
accountability provisions, the license of a business entity may be suspended, revoked or refused if
the Commission finds, after notice and an opportunity to be heard, that a violation by an individual
licensee acting at the direction of, on behalf of, or with the permission of the business entity was
known to be a violation by one or more of the partners, officers or managers acting on behalf of the
business entity, and the violation was neither reported to the Commission nor corrective action
taken. [See § 38.2-1832 B]
Administrative Letter 2002-8
July 26, 2002
Page 19


                                    CONTINUING EDUCATION


        Virginia’s insurance agent continuing education program was created in 1993, with the
assistance of industry and agent association representatives. The program is administered by the
Virginia Insurance Continuing Education Board, which consists of 12 representatives of various
constituency groups appointed by the Commissioner of Insurance. The Board, in turn, contracts
with an outside administrator (currently Experior Assessments, LLC) for day-to-day operation of the
program.

       The Bureau made a concerted effort over the years to establish reciprocity agreements with
as many states as possible. Virginia was often the first state to contact another state that had just
created its own continuing education program, asking that state to execute a reciprocity
agreement. At present, all states have some form of continuing education, and Virginia is
reciprocal with all of them. Until January 1, 2003, however, reciprocity is through individual
agreements rather than by statute.

        Because Virginia’s continuing education program operates on a biennial basis, with a new
biennium beginning on January 1, 2003, the law implementing reciprocity will not take effect until
that date. Effective for the biennium beginning on January 1, 2003, however, continuing
education requirements have been made fully reciprocal for agents and consultants who satisfy
whatever level of continuing education is required in their home state, and who provide
satisfactory certification thereof. [See § 38.2-1869 B]

            NOTE: We would remind agents and other interested parties that
            NONRESIDENTS, while not required to complete Virginia hourly course
            requirements, ARE AND WILL CONTINUE TO BE REQUIRED TO
            COMPLY WITH VIRGINIA’S CE LAW by submitting to the Board’s
            administrator (Experior) proof of home state continuing education
            compliance (usually in the form of a Letter of Certification) and paying the
            requisite filing fee so that all required documents and fees are RECEIVED
            by Experior on or before the the statutory deadlines. Failure to do so will
            result in license termination in Virginia.

        There are no substantive changes to the program for the current (2001-2002) biennium. All
requirements will remain the same, as will course completion and filing deadlines. See the
attached CONVERSION TABLE for the new licenses subject to continuing education. As
discussed earlier, even the separation of the existing Life & Health license into separate “Life &
Annuity” and “Health” licenses will have no impact upon the number of hours or types of courses
the resident licensee will be required to complete.

        The latest edition of the Board’s Virginia Insurance Continuing Education Handbook
provides additional detail on the continuing education program. One substantive change that will
take effect beginning in the 2003-2004 biennium is that the exemption for resident licensees who
passed the prelicensing examination and obtained their license during the first year of the
biennium is eliminated. This exemption was based upon the presumption that the licensee had
completed a pre-licensing study course prior to taking the examination. With the elimination of the
pre-licensing study course requirement, this presumption is no longer valid. Therefore, all
resident licensees who become licensed in the first year of the biennium (commencing with the
Administrative Letter 2002-8
July 26, 2002
Page 20


2003-2004 biennium) and are issued one or more of the licenses for which continuing education is
required will be subject to continuing education requirements.


                     CONVERSION TABLE AND TABLE OF LICENSE TYPES

       Throughout this document, reference has been made to the Conversion Table and Table of
License Types.

        Both documents are attached to and made a part of this administrative letter.

       The CONVERSION TABLE shows all of the license types that WERE being issued prior to
September 1, 2002, what license types will NOW be issued in their stead (including to those
current licensees who will automatically receive converted licenses), whether a prelicensing
examination is required, and whether the license is subject to continuing education requirements.

         The TABLE OF LICENSE TYPES shows for each of the license types that will be issued
on and after September 1, 2002, the lines of insurance that the licensee will be authorized to sell,
solicit and negotiate in Virginia under that license.

        It is our hope that the contents of this administrative letter will provide useful information to
the insurers, agents, and agencies, and we encourage its wide dissemination. As stated at the
outset, this letter is currently available (or will be available shortly) through the Bureau’s Web site,
from which it may readily be downloaded, copied, printed, and otherwise disseminated.

       Questions regarding the content of this letter should be directed to the Bureau’s Agents
Licensing Section at (804) 371-9631.


                                                              Sincerely,



                                                              Alfred W. Gross
                                                              Commissioner of Insurance

AWG/me
Enclosure
                                      VIRGINIA LICENSE TYPES
                                         AS EFFECTIVE 9/1/02
                             TITLE 38.2, CHAPTER 18, CODE OF VIRGINIA

                                         CONVERSION TABLE
                                                                                    EXAM                     C.E.
CURRENT LICENSE       CODE      NEW LICENSE EFFECTIVE 9/1/02              CODE   REQUIRED FOR             REQUIRED?
                                                                                  RESIDENTS?
                                                                                       YES                     YES
                               Life & Annuities       Those holding the   007     Separate Life &        16 hours every 2
                                                        current L&H               Annuities Exam          years, whether
   Life & Health                                         license will              and Separate          holding either or
                      001
                                                        automatically              Health Exam             both licenses
                                                                                        OR
                                    Health            receive both new    008    Combination Exam
                                                           licenses.
                                                                                        YES                   YES
Property & Casualty   030    Property and Casualty (includes Personal     030                            16 hours every 2
                                   Lines and Commercial Lines)                                                years
                                                                                        YES                      YES
      NONE             —                 Personal Lines                   032                            16 hours every 2
                                                                                                                years
                                                                                        YES                      YES
       Title          033                     Title                       033                            16 hours every 2
                                                                                                                years
                                                                                         YES,                    YES,
                                                                                   unless applicant       but if consultant
                                                                                 already holds Life &   complies with C.E.
  L&H Consultant      059                L&H Consultant                   059       Annuities AND       for Life & Annuities
                                                                                    Health licenses          and Health
                                                                                                             license, no
                                                                                                              additional
                                                                                                            requirement.
                                                                                       YES,                      YES,
                                                                                  unless applicant        but if consultant
 P&C Consultant       058                P&C Consultant                   058     already holds a       complies with C.E.
                                                                                    P&C license           for P&C license,
                                                                                                            no additional
                                                                                                            requirement.
                                                                                        EXAM                   C.E.
CURRENT LICENSE          CODE      NEW LICENSE EFFECTIVE 9/1/02               CODE   REQUIRED FOR           REQUIRED?
                                                                                      RESIDENTS?
                                                                                                                  NO,
                                                                                                          but loss of Life &
                                          Variable Contracts                  009         YES,            Annuities license
 Variable Contracts      009    (agent must as a prerequisite hold a Life &          NASD series 6 or 7   for    failure   to
                                                                                                          comply with C.E.
                                           Annuities license)
                                                                                                          will terminate this
                                                                                                          license as well.
 Partial Qualification                                                                  Automatic                 YES
   Life & Annuity        007               Life and Annuities                 007       Conversion          16 hours every 2
                                                                                                                 years
Partial Qualification                                                                   Automatic                 YES
Accident & Sickness      008                     Health                       008       Conversion          16 hours every 2
                                                                                                                 years
 Partial Qualification                                                                  Automatic                 YES
         Auto            052              Property & Casualty                 030       Conversion          16 hours every 2
                                                                                                                 years
 Partial Qualification                                                                  Automatic                 YES
         Fire            054              Property & Casualty                 030       Conversion          16 hours every 2
                                                                                                                 years
 Partial Qualification                                                                  Automatic                 YES
       Casualty          053              Property & Casualty                 030       Conversion          16 hours every 2
                                                                                                                 years
 Partial Qualification                                                                  Automatic                 YES
  Fidelity & Surety      055              Property & Casualty                 030       Conversion          16 hours every 2
                                                                                                                 years

  Temporary L&H          003                Temporary L&H                     003           NO                   NO
Temporary L&H (Debit                        Temporary L&H                                   NO                   NO
       only)             006                  (Debit Only)                    006
  Temporary P&C          031                Temporary P&C                     031           NO                   NO




                                                            2
                                                                                       EXAM          C.E.
CURRENT LICENSE      CODE      NEW LICENSE EFFECTIVE 9/1/02                 CODE   REQUIRED FOR   REQUIRED?
                                                                                    RESIDENTS?
  Limited Burial     010

  Prepaid Legal      041
                                   Limited Lines Life & Health              080        NO            NO
  Prepaid Dental     045
                             (Anyone holding 1 or more of the licenses
Prepaid Optometric   046    listed will be converted to this new license)

Mutual Assessment    012
       L&H

  Travel Accident    014

 Automobile Club     070

  Ocean Marine       034
                               Limited Lines Property & Casualty            081        NO            NO
 Travel Baggage      036
                             (Anyone holding 1 or more of the licenses
Mutual Assessment    035    listed will be converted to this new license)
       P&C

  Pet Accident,
  Sickness, and      025
  Hospitalization




                                                          3
                                                                                          EXAM          C.E.
CURRENT LICENSE         CODE      NEW LICENSE EFFECTIVE 9/1/02                 CODE   REQUIRED FOR   REQUIRED?
                                                                                       RESIDENTS?
 Credit Life & Health    15

       Credit
Property/Involuntary     39
  Unemployment                            Limited Lines Credit                 015        NO              NO

Mortgage Accident &             (Anyone holding 1 or more of the licenses
Sickness/Mortgage        16    listed will be converted to this new license)
    Redemption

 Mortgage Guaranty       37

Motor Vehicle Rental    024         Motor Vehicle Rental Contract              024        NO              NO
      Contract

  Managing General      061            Managing General Agent                  061        NO              NO
         Agent
     Reinsurance        062       Reinsurance Intermediary Broker              062        NO              NO
 Intermediary Broker
     Reinsurance        063      Reinsurance Intermediary Manager              063        NO              NO
Intermediary Manager
  Viatical Settlement   064           Viatical Settlement Broker               064        NO              NO
        Broker
                                                                                          NO              NO
                                                                                                      (Failure of a
Surplus Lines Broker    065              Surplus Lines Broker                  065                        Virginia
                                                                                                     RESIDENT to
                               (For Virginia RESIDENTS, Property & Casualty                          maintain P&C
                                           License is a prerequisite)                                  license will
                                                                                                     terminate SLB
                                                                                                         license)




                                                             4
                                        TABLE OF VIRGINIA LICENSE TYPES
                                                AS EFFECTIVE 9/1/02
                                    TITLE 38.2, CHAPTER 18, CODE OF VIRGINIA
The following describe the license types that will be issued once the amended law takes effect, and provides the lines of authority
and product lines that agents holding each license will be authorized to sell, solicit, or negotiate.

                   PERSONAL LINES LICENSE – (Resident or Nonresident) – LICENSE TYPE CODE: 032

This license WILL require an examination FOR RESIDENT APPLICANTS, and WILL be subject to continuing education
requirements (16 hours per biennium).

License will entitle licensee to sell, solicit and negotiate the following classes of insurance and products, but only for
transactions involving insurance primarily for personal, family, or household, rather than professional or business
needs:

      Fire                                         Miscellaneous Property                    Water Damage
      Burglary & Theft                             Glass                                     Animal
      Personal Injury Liability                    Property Damage Liability                 Motor Vehicle
      Aircraft                                     Marine (Inland and Ocean)                 Home Protection
      Homeowners                                   Farmowners                                Mutual Assessment P&C
      Credit Involuntary Unemployment              Credit Property                           Mortgage Guaranty
      Travel Baggage                               Automobile Club                           Legal Services
      Pet Accident, Sickness, & Hospitalization




                                                                5
                PROPERTY & CASUALTY LICENSE - (Resident or Nonresident) – LICENSE TYPE CODE: 030

This license WILL require an examination FOR RESIDENT APPLICANTS, and WILL be subject to continuing education
requirements (16 hours per biennium). However, once an agent holds this license, there is no further need for a Personal Lines
License, so C.E. requirements are not duplicative.

License will entitle licensee to sell, solicit and negotiate both personal lines and commercial lines in all of the following classes
of insurance:

        Fire                                           Miscellaneous Property               Water Damage
        Burglary & Theft                               Glass                                Animal
        Personal Injury Liability                      Property Damage Liability            Motor Vehicle
        Aircraft                                       Marine (Inland and Ocean)            Home Protection
        Homeowners                                     Farmowners                           Mutual Assessment P&C
        Credit Involuntary Unemployment                Credit Property                      Mortgage Guaranty
        Travel Baggage                                 Automobile Club                      Legal Services
        Boiler & Machinery                             Commercial Multi-peril               Credit
        Fidelity                                       Surety
        Pet Accident, Sickness, & Hospitalization                         Workers Comp. & Employers’ Liability


                  LIFE AND ANNUITIES LICENSE – (Resident or Nonresident) – LICENSE TYPE CODE: 007

This license WILL require an examination FOR RESIDENT APPLICANTS, and WILL be subject to continuing education
requirements (16 hours per biennium). However, an agent holding both this license and a Health License will be required to
complete a TOTAL of 16 hours.

License will entitle licensee to sell, solicit and negotiate the following classes of insurance:

           Life Insurance (except Variable)                              Industrial Life Insurance
           Modified Guaranteed Life Insurance                            Annuities (except Variable)
           Modified Guaranteed Annuities                                 Burial Insurance (in any permitted amount)
           Mutual Assessment Life (all products)                         Credit Life Insurance
           Prepaid Legal Plans                                           Mortgage Redemption Insurance



                                                                     6
                 VARIABLE CONTRACT LICENSE – (Resident or Nonresident) – LICENSE TYPE CODE: 009

This license requires that the licensee at all times have a Resident or Nonresident Life and Annuities license in effect. Series 6 or
Series 7 NASD examination required FOR RESIDENT APPLICANTS. No discrete C.E. requirement, except that loss of Life
and Annuities license due to C.E. noncompliance will also result in termination of Variable Contract license.

License will entitle licensee to sell, solicit and negotiate the following classes of insurance:

            Variable Life                                                 Variable Annuities



                            HEALTH LICENSE – (Resident or Nonresident) – LICENSE TYPE CODE: 008

This license WILL require an examination FOR RESIDENT APPLICANTS, and WILL be subject to continuing education
requirements (16 hours per biennium). However, an agent holding both a Health License AND a Life & Annuities License will be
required to complete a TOTAL of 16 hours.

License will entitle licensee to sell, solicit and negotiate the following classes of insurance:

            Accident and Sickness                                        Credit Accident and Sickness
            Health Services Plans                                        Health Maintenance Organizations
            Dental Services Plans                                        Optometric Services Plans
            Travel Accident                                              Mortgage Accident & Sickness
            Mutual Assessment Health (all products)




                                                                     7
                 LIMITED LINES CREDIT LICENSE – (Resident or Nonresident) – LICENSE TYPE CODE: 015

This license WILL NOT require an examination, and WILL NOT be subject to continuing education requirements.

License will entitle licensee to sell, solicit and negotiate the following classes of insurance:

             Credit Life                                                      Credit Accident & Sickness
             Credit Involuntary Unemployment                                  Credit Property
             Mortgage Accident & Sickness                                     Mortgage Redemption
             Mortgage Guaranty


            LIMITED LINES LIFE & HEALTH LICENSE – (Resident or Nonresident) – LICENSE TYPE CODE: 080

This license WILL NOT require an examination, and WILL NOT be subject to continuing education requirements.

License will entitle licensee to sell, solicit and negotiate the following classes of insurance:

             Prepaid Dental                              Prepaid Optometric
             Prepaid Legal                               Limited Burial (Group Certificates < $5,000 only)
             Mutual Assessment Life & Health (only those Travel Accident
             products authorized under § 38.2-3919)


       LIMITED LINES PROPERTY & CASUALTY LICENSE – (Resident or Nonresident) – LICENSE TYPE CODE: 081

This license WILL NOT require an examination, and WILL NOT be subject to continuing education requirements.

License will entitle licensee to sell, solicit and negotiate the following classes of insurance:

       Automobile Club             Home Protection
       Legal Services              Mutual Assessment Property & Casualty (only those products authorized under § 38.2-
                                   2525)
       Ocean Marine                Pet Accident, Sickness & Hospitalization
       Travel Baggage


                                                                     8
   MOTOR VEHICLE RENTAL CONTRACT AGENT LICENSE – (Resident or Nonresident) – LICENSE TYPE CODE: 024

This license WILL NOT require an examination, and WILL NOT be subject to continuing education requirements.

License can be issued only to a person who (i) is a selling agent of a motor vehicle rental company that is in the business of
providing primarily private passenger motor vehicles to the public under a rental agreement for a period of less than 6 months and
(ii) whose license is restricted to selling, soliciting, and negotiating ONLY the following insurance coverages, and solely in
connection with and incidental to the rental contract:

           Personal accident insurance that provides benefits in the Liability coverage sold to the renter in excess of
           event of accidental death or injury occurring during the the rental company’s obligations under §§ 38.2-
           rental period                                               2204, 38.2-2205, or Title 46.2 of the Code of
                                                                       Virginia
           Personal effects insurance which provides coverages for Other travel-related or vehicle-related insurance
           the loss of or damage to the personal effects of the renter coverage that a motor vehicle rental company
           and other vehicle occupants while such personal effects offers in connection with and incidental to the
           are in or upon the rental vehicle during the rental period  rental of vehicles.
           Roadside assistance and emergency sickness protection programs


      RESTRICTED NONRESIDENT LIFE & ANNUITIES LICENSE – (Nonresident Only) – LICENSE TYPE CODE: 082

If a nonresident’s home state authority does not include all of the lines of authority authorized under a Virginia Life & Annuities
License, this license will be issued to the nonresident applicant and will include ONLY those authorities authorized under the
agent’s home state license.


            RESTRICTED NONRESIDENT HEALTH LICENSE – (Nonresident Only) – LICENSE TYPE CODE: 083

If a nonresident’s home state authority does not include all of the lines of authority authorized under a Virginia Health License, this
license will be issued to the nonresident applicant and will include ONLY those authorities authorized under the agent’s home
state license.




                                                                  9
      RESTRICTED NONRESIDENT PERSONAL LINES LICENSE – (Nonresident Only) – LICENSE TYPE CODE: 084

If a nonresident’s home state authority does not include all of the lines of authority authorized under a Virginia Personal Lines
License, this license will be issued to the nonresident applicant and will include ONLY those authorities authorized under the
agent’s home state license.


  RESTRICTED NONRESIDENT PROPERTY & CASUALTY LICENSE – (Nonresident Only) – LICENSE TYPE CODE: 085

If a nonresident’s home state authority does not include all of the lines of authority authorized under a Virginia Property & Casualty
License, this license will be issued to the nonresident applicant and will include ONLY those authorities authorized under the
agent’s home state license.


               SURPLUS LINES BROKER LICENSE – (Resident or Nonresident) – LICENSE TYPE CODE: 065

In Virginia, holding a Property & Casualty License is a prerequisite, and the Surplus Lines Broker license is not subject to
examination or continuing education.

For Nonresidents, the license will be issued ONLY if the applicant holds equivalent Surplus Lines Broker authority in his home
state.


                VIATICAL SETTLEMENT BROKER – (Resident or Nonresident) – LICENSE TYPE CODE: 064

No examination or continuing education requirements.



                        TITLE INSURANCE - (Resident or Nonresident) – LICENSE TYPE CODE: 033

This license WILL require an examination FOR RESIDENT APPLICANTS, and WILL be subject to continuing education
requirements (16 hours per biennium).




                                                                 10
       ALFRED W. GROSS                                                                   P.O. BOX 1157
  COMMISSIONER OF INSURANCE                                                       RICHMOND, VIRGINIA 23218
STATE CORPORATION COMMISSION                                                      TELEPHONE: (804) 371-9741
     BUREAU OF INSURANCE                                                          TDD/VOICE: (804) 371-9206
                                                                                   http://www.scc.virginia.gov


                                             July 26, 2002


                                                               Administrative Letter 2002-9

      TO:    ALL INSURANCE COMPANIES; HEALTH, DENTAL, OPTOMETRIC AND LEGAL
             SERVICES PLANS; AND HEALTH MAINTENANCE ORGANIZATIONS LICENSED
             IN VIRGINIA

      RE:    INSURANCE ACTIVITIES REQUIRING PERSONS TO BE LICENSED



                 Note: This Administrative Letter replaces and supersedes
                   Administrative Letter 1997-1, dated March 10, 1997

             The Bureau of Insurance receives a great many inquiries regarding what activities
      require agents/agencies to be licensed in Virginia and what activities are and are not
      permitted for those who are not licensed as insurance agents in Virginia. Because much of
      Chapter 18 of Title 38.2 of the Code of Virginia has recently been amended, I am sending
      this new administrative letter, replacing Administrative Letter 1997-1, to all insurers
      with the request that they instruct their currently appointed agents to review it by
      accessing it via the Bureau of Insurance web site at:

        http://www.state.va.us/scc/division/boi/webpages/administrativeltrsselection.htm

             I am also requesting that such insurers include, commencing immediately, an
      instruction to each newly appointed Virginia agent to review this administrative
      letter at the above website address. Bureau of Insurance staff will review whether
      companies have carried out this request during regular and special market conduct
      examinations, and as part of consumer complaint and agent investigations conducted by
      the Bureau.

            Finally, I am sending copies of this administrative letter to the various agent
      associations in Virginia, with the request that they, too, attempt to disseminate this
      information to their members.

      Statutory provisions referred to in this administrative letter may be viewed via the Bureau’s
      Web site at:
             http://www.state.va.us/scc/division/boi/webpages/administrativeltrs.htm
Administrative Letter 2002-9
July 26, 2002
Page 2


                               WHO NEEDS TO BE LICENSED?

       The analysis begins with § 38.2-1822 of the Code of Virginia, as amended, which
states, in subsection A:

            A. No person shall act, and no insurer or licensed agent shall
            knowingly permit a person to act, in this Commonwealth as an
            agent of an insurer licensed to transact the business of insurance in
            this Commonwealth without first obtaining a license in a manner
            and in a form prescribed by the Commission. As used in this
            section, “act as an agent” means selling, soliciting, or negotiating
            contracts of insurance or annuity on behalf of an insurer licensed in
            this Commonwealth or receiving or sharing, directly or indirectly,
            any commission or other valuable consideration arising from the
            sale, solicitation, or negotiation of any such contract, or both. No
            person shall submit business to any joint underwriting association
            or any plan established under this title for the equitable distribution
            of risks among insurers unless the person holds a valid license to
            transact the class of insurance involved. (underlining added)

        It is the Bureau’s position that the above section clearly requires any person or
entity that sells, solicits, or negotiates contracts of insurance or annuity in Virginia on
behalf of an insurer licensed in Virginia to hold a valid insurance agent’s license in Virginia.
We also consistently maintain that any entity, be it an insurer, agency or agent, that
receives a commission from an insurer, directly or indirectly (whether characterized as an
“override,” “fee,” or otherwise), arising from the sale of a contract of insurance or annuity,
even if there was no active “selling, soliciting, or negotiating” by that entity, must be
licensed and appointed in Virginia. It should be noted that the word “or”, not the word
“and” appears immediately before the word “receiving” in the statute quoted above. This
means, to us, that satisfying either of the two criteria defining the term “act as an agent”
will suffice. We have, over the years, noted that a number of insurers and agencies,
especially large agencies located outside of Virginia that recruit agents to sell for them in
Virginia, do not appear to be aware of this licensing requirement. The Bureau has initiated
disciplinary proceedings against such agencies and insurers where it could be
demonstrated that the above law had been violated.

       The more common question, however, appears to be the extent to which
individuals who are not licensed insurance agents, but who are employed by a
licensed insurance company or agency, may participate in the transaction of insurance
matters. A new statutory provision, designated § 38.2-1821.1, provides more specific
guidance than existed under prior law. Nevertheless, there is continued room for
confusion.

      Perhaps if we establish the authority and responsibility of a person who is licensed
as an insurance agent, the limitations of what may be done by a person who is not
licensed as an insurance agent will become clear.
Administrative Letter 2002-9
July 26, 2002
Page 3




       As stated in the statute quoted above, anyone who “sells, solicits, or negotiates”
contracts of insurance or annuity must be licensed as an agent. These terms are now
specifically defined in § 38.2-1800 as follows:

        •   To “sell” means to exchange a contract of insurance by any means, for money or
            its equivalent, on behalf of an insurer.

        •   To “solicit” means attempting to sell insurance or asking or urging a person to
            apply for a particular class of insurance from one or more insurers.

        •   To “negotiate” means the act of conferring directly with or offering advice directly
            to a purchaser or prospective purchaser of a particular contract of insurance
            concerning any of the substantive benefits, terms or conditions of the contract,
            provided that the person engaged in that act either sells insurance or obtains
            insurance from insurers for purchasers.

        When an insurance company is issued a license to transact business in Virginia, the
insurer is, in theory, authorized to sell, solicit, or negotiate contracts of insurance. Insurers
generally appoint individuals, or business entities to act as their agents in carrying out
these functions. This authority (appointment) creates an agent-principal relationship in
which an act by an agent becomes, in general terms, binding upon the insurer. This
agent-principal relationship is created by an agreement between the insurer and the agent.
The Bureau is made aware of this relationship by the process of the insurer filing a
notification of appointment. The Bureau records the appointment, provided that the
appointed agent holds a valid license for the type of appointment being recorded. The
Bureau will then issue to the agent an “Acknowledgment of Appointment” (currently in the
form of a wallet-sized card) and will also notify the appointing insurer when the
appointment has been recorded (currently in the form of a computer-produced list of
appointments processed for each insurer on a daily basis, and sent to each insurer for
each day during which appointments are processed for that insurer). Although there are
some minor variations, especially when a licensed agent first begins to represent an
insurer, it is with the Acknowledgment of Appointment that the agent is fully authorized to
sell, solicit, or negotiate insurance on behalf of the appointing insurer in Virginia.

        Public interest is involved in the competent and trustworthy transaction of insurance.
The proper analysis of a client’s exposure to risks and the recommendation of appropriate
insurance to cover that exposure are of paramount importance. Pursuant to statutory
requirements, individuals must be licensed as insurance agents prior to selling, soliciting,
or negotiating contracts of insurance or annuity. In most cases, depending on the kinds of
insurance they propose to transact, individuals must pass an examination demonstrating
sufficient knowledge of the classes of insurance that will be involved in the transactions.
Further, again with certain exemptions, licensed insurance agents must continue to
demonstrate such knowledge by completing continuing education requirements on a
biennial basis.
Administrative Letter 2002-9
July 26, 2002
Page 4


       In contrast to licensed agents, unlicensed persons have not established that they
have either the required knowledge of insurance (by having completed the prelicensing
examination and met ongoing continuing education requirements) or the authority to sell,
solicit, or negotiate, contracts of insurance or annuity (by having obtained the appropriate
license).

       In light of recent changes in federal law regarding reciprocity between states
regarding the licensing of nonresident agents contained in the Gramm-Leach-Bliley Act, as
well as evolving conditions in the insurance market, such as the conducting of some
insurance business over the internet, the growing use of “call centers” and the increased
use of customer service representatives (CSRs) for servicing existing policyholders’ needs,
the Bureau recognizes that the balance point between service and sales has shifted. The
Bureau recognizes that the services provided by CSRs can be beneficial for the customer,
and it is not our purpose to unduly constrain such activities. At the same time, the
Bureau remains firm in its position that there are a number of activities that should
and must be carried out only by licensed insurance agents (producers).

       An unlicensed person may discuss, in general, insurance matters regarding both
coverage and rates. An unlicensed person may also list available products and services in
response to an inquiry made by an existing policyholder with regard to the existing policy.
If, however, such discussion develops into an explanation of the ramifications of options,
how choosing one option or another will affect coverage, or similar discussion
(negotiation), then insurance knowledge is necessary and licensure is required. When
discussion reaches the point where the unlicensed individual is providing the existing
policyholder with information beyond the list of options and the price of each option, the
matter should be turned over immediately to a licensed agent. A licensed agent is not
prohibited from using an unlicensed person in a clerical capacity under his or her direct
supervision, nor does the Code of Virginia prohibit the unlicensed person from receiving or
passing on to the agent for his or her attention any insurance inquiries or requests of a
particular nature, or from taking the necessary steps to implement changes that an existing
policyholder has requested be made to an existing policy. Later in this administrative
letter you will find a chart showing some examples of insurance activities in which
an unlicensed person may or may not engage.

        It is, admittedly, difficult to specify all acts that may be done legally by a person who
is not a licensed agent. Where there is any doubt regarding the activities of an unlicensed
person, the following question should be asked:


        Does the action involve the areas of selling, soliciting, or negotiating
        contracts of insurance or annuity as those terms are described in this letter?

        If the answer is “Yes,” the matter should be handled by a licensed insurance agent.
        Additionally, one should analyze whether the action falls within one of the
        exceptions to the requirement for licensure enumerated in § 38.2-1821.1. If the
Administrative Letter 2002-9
July 26, 2002
Page 5


        answer is not clear, additional guidance should be sought from appropriate legal
        advisors, or the matter should be handled by a licensed insurance agent.

       A license authorizes an agent to sell, solicit, or negotiate certain types of insurance.
If an agent exceeds his authority, he is in violation of Virginia law. Insurers and agents are
advised to review § 38.2-1833 of the Code of Virginia which states, in part, that “every
licensed agent may solicit applications for insurance for any one or more of the classes of
insurance for which he is licensed....” Therefore, it is not only the agent’s responsibility to
make sure that he is properly licensed for the classes of insurance he is selling, but it is
also the responsibility of the insurer to verify that an agent is properly licensed before
appointing that agent. This should include not only verification that the agent holds a valid
and current Virginia license, but that the agent holds the appropriate Virginia license. If
an insurer accepts an application from an agent, issues a policy, and subsequently learns
that the agent is not licensed for the class of insurance involved in the transaction, the
insurer has violated Virginia law.


The Bureau urges insurers to STOP asking agents to provide copies of their
licenses as proof of current licensing in Virginia, as this is not valid proof of current
status. Remember that, unlike other states, agents’ licenses in Virginia are
perpetual, so asking to see a license is not, in most cases, going to provide current
information.

Instead, insurers can quickly verify an agent’s current license status by calling the
Bureau’s Interactive Voice Response (IVR) number (804-371-9631) and following the
directions using the agent’s identification number (usually the Social Security
number). Complete instructions for using the IVR System can also be found on the
Bureau’s Web site at: http://www.state.va.us/scc/division/boi/webpages/ivr.htm

As an alternative, although more time-consuming, the insurer could require the
agent to provide a recent Letter of Certification issued by the Bureau. This letter
shows the agent’s current name, residence address, licenses held and the date of
issue for each, and the agent’s current continuing education compliance status, if
applicable. Whether through the IVR system or in the form of a Letter of
Certification, this information is far more reliable than a copy of a license that may
have been issued or terminated many years ago.


        If an insurer fails to submit to the Bureau a notification of appointment of an agent
who has sold, solicited, or negotiated a contract of insurance on the insurer’s behalf, within
30 calendar days of the date of execution of the first insurance application submitted by
that agent, the insurer is in violation of Virginia law. If an agent continues to sell, solicit, or
negotiate contracts of insurance on behalf of an insurer beyond a period 45 calendar days
after the date of execution of the first insurance application submitted to that insurer by the
agent, where the agent has not received an Acknowledgment of Appointment card from
the Bureau, the agent is in violation of Virginia law. If the insurer continues to accept such
Administrative Letter 2002-9
July 26, 2002
Page 6


applications, the insurer, too, is in violation of Virginia law. Finally, if an agent or insurer
allows (whether purposefully or unwittingly) an unlicensed person to “act as an agent” in
this Commonwealth, the agent or insurer (or both) are in violation of Virginia law.

       The following chart provides some examples of what the Bureau believes are
acceptable activities for those who do not hold licenses, and examples of activities that are
not acceptable. This list is by no means intended to be all-inclusive, and, obviously, there
are lines that may be crossed in what is categorized as acceptable activities that will
render the activities unacceptable. As with anything else, a reasonable and common
sense standard needs to be applied to each situation. Perhaps, however, the following
chart will provide at least some guidance:


                                   AN UNLICENSED PERSON

May                                              May Not

 •    Assist    with           completion   of    •   Counsel or advise what coverage to
      applications                                    buy

 •    Quote rates as general information          •   Urge or advise insuring with any
                                                      particular insurance company

 •    Receive and implement requests              •   Indicate that requested coverage is
      from existing policyholders for                 or will be bound or issued, except
      changes in existing policies, or                for changes specifically requested
      receive requests for new insurance              by existing policyholders on
      for transmittal to a licensed agent             existing policies

 •    Receive payments for coverage               •   Solicit additional business when
      (receipt must show agent or                     receiving payment
      company for which payment is
      received)

 •    Arrange appointments for licensed           •   Solicit sales for an agent over the
      agent                                           phone or otherwise

 •    Be compensated on a “unit of time           •   Be compensated on a commission
      or work” basis                                  basis, i.e. contingent upon the sale
                                                      of    an      insurance    contract,
                                                      percentage of premium generated,
                                                      or the amount of commission
                                                      earned.
Administrative Letter 2002-9
July 26, 2002
Page 7


                               OTHER UNLICENSED PERSONS

       No insurance company should accept, or act upon, any request for coverage
submitted by a person purporting to be the agent making the request or application for
coverage (other than a person seeking to buy coverage on himself or on property of his
own or his employer) without first ascertaining that such person is properly licensed for the
class of insurance involved in the transaction. No agent or agency should accept a
request for such coverage without ascertaining that such person is properly licensed for
the class of insurance that is involved in the transaction. Section 38.2-1812 of the Code of
Virginia, as amended, specifies that no insurance company shall pay commission to an
agent, directly or indirectly, unless the person is a duly appointed agent of the insurance
company (except agents who produce residual market coverage) and was, at the time of
the transaction giving rise to the commission, a validly licensed (and appointed, if
appointment is called for) agent in Virginia for the class of insurance involved. No agent or
agency should split or share a commission with any person not also licensed for the same
class of insurance involved in the transactions.

        We would urge insurers to require verification of current licensure of an agent or
agency prior to appointing that agent or agency. We suggest that the insurer verify current
licensure either by calling the Bureau’s Interactive Voice Response (IVR) number (804-
371-9631) or by requiring the agent to furnish to the insurer a current (no more than 90
calendar days old) CERTIFICATION from the Bureau. A certification is a more valid
means of proof of licensure than is a copy of the agent’s original license, because a
certification indicates the agent’s or agency’s CURRENT status, including continuing
education compliance.


                                      “ENROLLERS”

       The following explains the Bureau’s position on whether those who “enroll”
individuals under a group master insurance policy (including all types of credit insurance)
are required to be licensed as agents. It is clear that the person who sells the group
master contract must be a licensed and appointed agent, but the licensing requirement is
not as clear for the person whose responsibility it is to enroll people under the existing
group contract.

1. If all the person is doing is enrolling an employee or customer under a group master
   policy for which the “enroller” receives no commission, the person does not need to be
   licensed. This position is based upon the statutory language found in § 38.2-1822,
   which was quoted earlier in this administrative letter. The key phrase here is that the
   term “act as an agent” includes selling, soliciting, or negotiating contracts of insurance,
   and the certificate issued to an individual obtaining coverage under a group contract is
   not considered to be a contract of insurance.

2. However, if the person doing the enrolling receives a commission for enrolling
   employees or customers under the group contract, the employee must be licensed.
Administrative Letter 2002-9
July 26, 2002
Page 8


    This position is also based upon the language in § 38.2-1822, which further provides
    that the phrase “act as an agent” applies where the person is “receiving or sharing,
    directly or indirectly, any commission or other valuable consideration...” (underlining
    added). In addition, § 38.2-1812 provides that:

            A. No insurer shall pay directly or indirectly any commission or
            other valuable consideration to any person for services as an
            agent...within this Commonwealth unless the person is then a duly
            appointed agent of such insurer and, at the time of the transaction
            out of which arose the right to such commission or other valuable
            consideration, held a valid license as an agent...for the class of
            insurance involved.
            B. No person other than a duly licensed and appointed agent...may
            accept any such commission or other valuable consideration unless
            such person, at the time of the transaction out of which arose the
            right to such commission or other valuable consideration, held a
            valid license as an agent...for the class of insurance involved.
            (underlining added)

The Bureau has taken the position that if the commission or valuable consideration is tied
to the enrollment, i.e. the enroller is paid a certain percentage of the premium for each
individual enrolled, or is paid a set fee for each person enrolled, we would require the
enroller to be licensed. If the enroller is simply paid a salary, and one of the job duties is
enrolling, the enroller need not be licensed. If the enroller is given a bonus, and the bonus
can be tied to the number of enrollments or the premium volume resulting from the
enrollments, we would consider this to be commission and the enroller would need to be
licensed. Obviously, we cannot address each and every potential situation, but the above
should provide sufficient guidance.

3. With regard to a store, bank or dealership providing its customers with the opportunity
   to purchase credit insurance coverage, our position would be similar. If the store, bank
   or dealership is being paid a commission, it would need to be licensed as an agency.
   There is, however, an exception provided in § 38.2-3733.A of the Code of Virginia,
   which states:

            A portion of the premium for credit life insurance or credit accident
            and sickness insurance may be allowed by the insurer to a creditor
            for providing and servicing such insurance.

                      HOME OFFICE EMPLOYEES OR CONTRACTORS

        The last subject that we want to address is what activities may or may not be
performed by home office employees (or those contracted to perform such services).
Newly enacted § 38.2-1821.1 B provides a list of activities that may be performed by
officers, directors, and employees of insurers and agencies. We urge you to review these
new provisions, which should serve to clarify a number of areas of confusion over the
Administrative Letter 2002-9
July 26, 2002
Page 9


years. Generally speaking, the law will now permit such individuals to be involved in
functions that are only indirectly related to the sale, solicitation or negotiation of insurance,
and provided they receive no direct or indirect commission for such services. These new
requirements do not conflict with existing language in the chapters of Title 38.2 dealing
with health services plans (§ 38.2-4224), health maintenance organizations (§ 38.2-4313),
legal services plans (§ 38.2-4415), and dental or optometric services plans (§ 38.2-4519).
For example, § 38.2-4224 provides as follows:

            Subscription contracts may be solicited only through…insurance
            agents licensed in accordance with Chapter 18 of this title. Home
            office salaried officers whose principal duties and responsibilities do
            not include negotiation or solicitation of subscription contracts shall
            not be required to be licensed. (underlining added)

Accordingly, other employees of the entities authorized under Chapters 42, 43, 44, and 45
who sell, solicit, or negotiate contracts of insurance MUST be licensed as agents. Further,
home office salaried officers whose principal duties and responsibilities DO include
negotiation or solicitation of contracts of insurance must be properly licensed.

        Therefore, with the exceptions noted above, the basic premise is substantially the
same as outlined earlier in this administrative letter. Whether the individual involved is an
officer, employee, independent contractor, telephone solicitor, or the like, if the person is
either selling, soliciting, or negotiating contracts of insurance, and/or is receiving direct or
indirect commission or other valuable consideration, the person must be licensed as an
agent.

       We take the position that those who, on behalf of an insurer, are making or
receiving telephone calls or sending or receiving telefaxes, or utilizing the Internet, must, if
they fall within the parameters set forth in this administrative letter, be properly licensed
and appointed in Virginia, regardless of whether they reside in Virginia.

      It is our hope that the contents of this administrative letter will provide useful
information to the insurers, agents, and agencies who receive it. Questions regarding the
content of this letter should be directed to the Bureau’s Agents Licensing Section at (804)
371-9631.


                                                         Sincerely,



                                                         Alfred W. Gross
                                                         Commissioner of Insurance
                                                                                  P.O. BOX 1157
    ALFRED W. GROSS                                                        RICHMOND, VIRGINIA 23218
COMMISSIONER OF INSURANCE                                                  TELEPHONE: (804) 371-9741
                                                                           TDD/VOICE: (804) 371-9206
                                                                            http://www.scc.virginia.gov


                            STATE CORPORATION COMMISSION
                                 BUREAU OF INSURANCE




                                    February 9, 2006


                                                             Administrative Letter 2006-1


To:    All Entities with Authority to License and Appoint Agents in the
       Commonwealth of Virginia and Other Interested Parties

Re:    Implementation of Procedure Change in Requesting Letters of Certification


      Please distribute to the appropriate personnel within your company and notify
your appointed agents of these changes.

        The purpose of this Administrative Letter is to provide information concerning a
revision to the Bureau of Insurance’s procedures regarding requests for Letters of
Certification.

        Like other state insurance departments, the Bureau no longer relies on paper
Letters of Certification when processing license applications. Instead, it relies on the
NAIC’s state producer licensing database (SPLD) to license and monitor resident and
nonresident agents. This is based on the Bureau’s participation in the national initiative
for uniformity of state insurance regulation.

        Despite this change to the licensing processing, the Bureau continues to receive
requests for paper Letters of Certification from licensees. As an accommodation to
these licensees, the Bureau is pleased to announce that requests for Letters of
Certification can now be made online through the Bureau’s website without charge.
Letters of Certification can be ordered and printed from the Bureau’s website at:

           http://www.scc.virginia.gov/division/boi/webpages/boiproducer.htm.

        Effective immediately, the Bureau will no longer produce paper Letters of
Certification when licenses and duplicate licenses are issued. Because the Letter of
Certification request is available online, the Service Request form PIN5001 is no longer
required to request a Letter of Certification.
Administrative Letter 2006-1
February 9, 2006
Page 2 of 2



      Should you have any question please direct them to:


                                     Preston Winn
                                      Supervisor
                                Agent Licensing Division
                                    P. O. Box 1157
                               Richmond, Virginia 23218
                                    804-371-9631



                                         Cordially,



                                         Alfred W. Gross
                                         Commissioner of Insurance

AWG:ln
                                                                                 P.O. BOX 1157
    ALFRED W. GROSS                                                       RICHMOND, VIRGINIA 23218
COMMISSIONER OF INSURANCE                                                 TELEPHONE: (804) 371-9741
                                                                          TDD/VOICE: (804) 371-9206
                                                                           http://www.scc.virginia.gov


                            STATE CORPORATION COMMISSION
                                 BUREAU OF INSURANCE

                                     March 16, 2006

                                                             Administrative Letter 2006-4

To:    All Entities with Authority to License and Appoint Agents in the
       Commonwealth of Virginia and Other Interested Parties

Re:    Implementation of Procedure Change in Requesting a Duplicate License

      Please distribute to the appropriate personnel within your company and notify
your appointed agents of these changes.

       The purpose of this Administrative Letter is to provide information concerning a
revision to the Bureau of Insurance’s procedures regarding requests for Duplicate
Licenses.

      The Bureau is pleased to announce that Duplicate Licenses can be requested
and immediately printed, without charge, from the Bureau’s website at:

               http://www.scc.virginia.gov/division/boi/webpages/boiproducer.htm

      Effective immediately, the Bureau will no longer provide copies of paper
Licenses to agents or companies.

       Should you have any question please direct them to:

                                      Preston Winn
                                       Supervisor
                                 Agent Licensing Division
                                     P. O. Box 1157
                                Richmond, Virginia 23218
                                     804-371-9631
                                   804-371-9290 (Fax)

                                         Cordially,




                                         Alfred W. Gross
                                         Commissioner of Insurance

AWG/ln
                                                                              P.O. BOX 1157
    ALFRED W. GROSS                                                    RICHMOND, VIRGINIA 23218
COMMISSIONER OF INSURANCE                                              TELEPHONE: (804) 371-9741
                                                                       TDD/VOICE: (804) 371-9206
                                                                        http://www.scc.virginia.gov


                            STATE CORPORATION COMMISSION
                                 BUREAU OF INSURANCE

                                     April 18, 2006

                                                          Administrative Letter 2006-7

To:    All Entities with Authority to License and Appoint Agents in the
       Commonwealth of Virginia and Other Interested Parties

Re:    Online Address Changes


      Please distribute to the appropriate personnel within your company and notify
your appointed agents of these changes.

      On January 12, 2006, the Bureau of Insurance began accepting online address
changes via the Bureau’s website at http://boi.scc.virginia.gov/agentUpdate/.

       We encourage individual producers and agencies to take advantage of this
online service. It is no longer a requirement to submit address changes on the paper
Service Request (PIN5001) Form.

       Agency address changes must be made by the officer/principal of the agency.

      The website address http://boi.scc.virginia.gov/agentUpdate/ will prompt the
producer to set up an account by creating a username and password to access the
address change feature. There is no fee involved in establishing this account.

      This online address change request CAN NOT be used in changing a producer’s
address from state to state.

     When entering the address change, do not use any punctuation (periods,
commas, etc.) in the address fields.

     DO NOT USE A COMPANY’S OR ANY BUSINESS ADDRESS (INCLUDING
PO BOX) AS THE INDIVIDUAL PRODUCER’S RESIDENCE OR MAILING ADDRESS.
VIRGINIA INSURANCE STATUTES REQUIRE THE INDIVIDUAL PRODUCER’S
RESIDENCE (STREET) ADDRESS TO BE THE MAILING ADDRESS OF RECORD.
Administrative Letter 2006-7
April 18, 2006
Page 2 of 2



      Should you have any question please direct them to:

                                     Preston Winn
                                      Supervisor
                                Agent Licensing Division
                                    P. O. Box 1157
                               Richmond, Virginia 23218
                                    804-371-9631
                                  804-371-9290 (Fax)

                                         Cordially,



                                         Alfred W. Gross
                                         Commissioner of Insurance
AWG:ln
                                                                                        P.O. BOX 1157
    ALFRED W. GROSS                                                              RICHMOND, VIRGINIA 23218
COMMISSIONER OF INSURANCE                                                        TELEPHONE: (804) 371-9741
                                                                                 TDD/VOICE: (804) 371-9206
                                                                                  http://www.scc.virginia.gov


                            STATE CORPORATION COMMISSION
                                 BUREAU OF INSURANCE

                                         June 28, 2006

                                                                   Administrative Letter 2006-11

To:    All Entities with Authority to License and Appoint Agents in the
       Commonwealth of Virginia and Other Interested Parties

Re:    Procedural Change: Displaying National Producer Numbers (NPN) in Lieu of
       Social Security/DMV-Assigned Numbers on Bureau of Insurance Correspondence


       Please distribute to the appropriate personnel within your company and notify your
appointed producers of this change.

        The Bureau of Insurance (Bureau) has implemented use of the National Producer
Number (NPN). The NPN is the number assigned by the National Insurance Producer Registry
(NIPR). It may be used instead of the producer’s Social Security/DMV assigned number to
access information or obtain documents from the Bureau, thereby alleviating concerns of
identity theft.

         The producer’s NPN is printed on new licenses issued, duplicate licenses, and letters of
certification processed online from the Bureau’s website at:

                  http://www.scc.virginia.gov/division/boi/webpages/boiproducer.htm.

     The Bureau will continue to require applicants to provide their Social Security
Number when applying for an insurance agent license.

       Should you have any question please direct them to:

                                         Preston Winn
                                          Supervisor
                                    Agent Licensing Division
                                        P. O. Box 1157
                                   Richmond, Virginia 23218
                                        804-371-9631
                                      804-371-9290 (Fax)

                                                           Cordially,



                                                           Alfred W. Gross
                                                           Commissioner of Insurance

AWG/ln
    ALFRED W. GROSS                                                                        P.O. BOX 1157
COMMISSIONER OF INSURANCE                                                           RICHMOND, VIRGINIA 23218
                                                                                    TELEPHONE: (804) 371-9741
                                                                                    TDD/VOICE: (804) 371-9206
                                                                                     http://www.scc.virginia.gov


                                 STATE CORPORATION COMMISSION
                                      BUREAU OF INSURANCE

                                               May 1, 2007

                                                              A Administrative Letter 2007 - 3

        TO:     All Companies Licensed to Write Accident and Sickness Insurance in
                Virginia

        RE:     Chapter 200 of Title 14 of the Virginia Administrative Code
                Rules Governing Long-Term Care Insurance
                Long-Term Care Partnership Program

               The State Corporation Commission recently adopted revisions to the Rules
        Governing Long-Term Care Insurance, 14 VAC 5-200-10 et seq., (the Rules). The
        Rules were revised primarily to address requirements necessary to establish a Public-
        Private Long-Term Care Partnership Program (Partnership Program), between the
        Commonwealth of Virginia and private insurance companies. The revisions to the
        Rules will become effective September 1, 2007, concurrent with the implementation
        date of the Partnership Program in Virginia. The purpose of this letter is to provide
        general guidance to companies that are considering offering Long-Term Care
        Partnership policies (Partnership Policies), in Virginia. This letter focuses only on two
        processes related to the sale of Partnership Policies in Virginia – agent training and
        Partnership Product qualification. Insurers are expected and required to review the
        revised Rules in their entirety to ensure that they are compliant with all the requirements
        in the Rules, including those that may not necessarily relate directly to the Partnership
        Program.

           I.      Agent Training

            Licensed agents may not sell a Partnership Policy in Virginia unless and until they
        have received the requisite eight (8) hours of initial training addressed in the Rules at 14
        VAC 5-200-205 E. Thereafter, agents must receive at least four (4) hours of ongoing
        training every twenty-four (24) months. All training must be approved by the Insurance
        Continuing Education (CE) Board and must, at a minimum, consist of the specific topics
        identified in the Rules. Insurers will be responsible for ensuring that their agents are
        appropriately trained, for maintaining documentation of such training, and for producing
        training records upon request by the Bureau. Agents who meet all Partnership training
        requirements will be considered to be "qualified" to sell Partnership policies. Insurers
        are cautioned to take steps to prevent the sale of Partnership policies by agents who
        have not met these qualification requirements.
Administrative Letter 2007-3
Page 2 of 3


                                       Initial Training

   •     An agent must satisfactorily complete a course consisting of at least two (2)
         hours, covering the topics identified in 14 VAC 5-200-205 E 3 (a). The course
         must be designated as CE for Long-Term Care Partnership in Virginia.

   •     To facilitate a transition toward sales of Partnership Policies, recent relevant
         training may be used to satisfy all or part of the remaining six (6) hours of the
         initial training requirements, subject to the following:

              Any agent who completes the Partnership-specific course covering
              the topics identified in 14 VAC 5-200-205 E 3 (a) prior to January 1,
              2008 may receive credit for up to six (6) hours of CE approved
              training covering the topics identified in 14 VAC 5-200-205 E 3 (b
              through f), and completed between January 1, 2005 and September
              1, 2007.

              Any agent who completes the Partnership-specific course covering
              the topics identified in 14 VAC 5-200-205 E 3 (a) on or after January
              1, 2008 may receive credit for up to six (6) hours of CE approved
              training covering the topics identified in 14 VAC 5-200-205 E 3 (b
              through f), and completed on or after January 1, 2007.

              All previous training must be designated as CE for long-term care.
              Training received in another state will be recognized to complete the
              requirements relating to the topics identified in 14 VAC 5-200-205 E
              3 (b through f) as long as the training is CE approved and identified
              as CE for long-term care.


                                     Ongoing Training

   •     The four (4) hours of ongoing training must, at a minimum, consist of two (2)
         hours relating to the topics identified in 14 VAC 5-200-205 E 3 (a), and two (2)
         hours relating to the topics identified in 14 VAC 5-200-205 E 3 (b through f).


   II.      Product Qualification

    Partnership policies issued or issued for delivery in Virginia must be approved by the
Commission in accordance with § 38.2-316 of the Code of Virginia, and all applicable
statutes and rules. Policies submitted for approval as Partnership Policies must also be
accompanied by a Partnership Certification Form in the format prescribed in Form 200-
C of the Rules.
Administrative Letter 2007-3
Page 3 of 3



   Insurers seeking approval to use a previously approved long-term care policy form
as a Partnership Policy must submit a copy of the previously approved policy form
appropriately book-marked to demonstrate compliance with all items identified in the
accompanying Partnership Certification Form, along with the approval date of the policy.

    To facilitate the product approval process during the transitional period prior to
September 1, 2007, the Bureau will accept and review submissions of Partnership
Policies prior to that date and will notify insurers of the outcome of its review
immediately upon conclusion. However, actual approval dates of qualified Partnership
policies will not precede September 1, 2007 and the sales or issuances of Partnership
Policies may not occur prior to September 1, 2007 under any circumstances.

   Questions concerning agent training may be addressed to:

                                        Preston Winn
                                Supervisor, Agents Licensing
                                    Bureau of Insurance
                         Agent Regulation and Administration Division
                                       P.O. Box 1157
                                   Richmond, VA 23218
                                   Phone: 804-786-9521


   Questions concerning Partnership Product qualification may be addressed to:

                                        Mary Ann Mason
                               Senior Insurance Market Examiner
                                      Bureau of Insurance
                                    Life and Health Division
                                         P.O. Box 1157
                                     Richmond, VA 23218
                                     Phone: 804-371-9348




                                                       Cordially,



                                                       Alfred W. Gross
                                                       Commissioner of Insurance

AWG/jkc
      ALFRED W. GROSS                                                                 P.O. BOX 1157
  COMMISSIONER OF INSURANCE                                                    RICHMOND, VIRGINIA 23218
                                                                               TELEPHONE: (804) 371-9741
                                                                               TDD/VOICE: (804) 371-9206
                                                                                http://www.scc.virginia.gov


                        STATE CORPORATION COMMISSION
                             BUREAU OF INSURANCE

                                      May 7, 2007


                                                ADMINISTRATIVE LETTER 2007-4


TO:   All Entities with Authority to License and Appoint Agents in the
      Commonwealth of Virginia and Other Interested Parties

RE:   Change in Vendor Providing Insurance License Examinations

Please distribute to the appropriate personnel within your company, and notify your
appointed agents of the following changes:

Effective June 1, 2007, insurance license examinations for the Virginia State
Corporation Commission’s Bureau of Insurance will be administered by Promissor, Inc.
(Promissor’s website is www.promissor.com). The last examinations to be handled by
Thomson Prometric on behalf of the Bureau will be administered on May 31, 2007.

Promissor will operate testing centers in the following Virginia cities: Bristol,
Chesapeake, Leesburg, Lynchburg, Newport News, Richmond, Roanoke, and Vienna.
Promissor will also make available testing centers in Johnson City, TN; Salisbury, MD;
and Washington, DC.

The Virginia Insurance Licensing Candidate Handbook (Virginia Handbook) will be
available for download from the Promissor website beginning May 11, 2007. The new
Examination Content Outlines will be included in the on-line version of the Virginia
Handbook. Printed copies of the handbook will not be available until early summer.

Candidates may register for examinations administered by Promissor beginning
May 15, 2007 online at www.promissor.com or via telephone at (888) 204-6272.
Please note that candidates will not be able to access scheduling services for
examinations administered by Promissor by internet or telephone prior to May 15.
Attempts to use the Promissor scheduling services before the effective date will result in
an automated response advising that such services will not be activated until May 15.
Administrative Letter 2007-4
May 7, 2007
Page Two



The examination fee will be $58 for each insurance examination. Additional
information will be posted on both the Promissor website and the Bureau of Insurance
website (http://www.scc.virginia.gov/division/boi) as it becomes available.

Any questions regarding the change in testing vendors may be directed to the Bureau of
Insurance via email at bureauofinsurance@scc.virginia.gov or you may direct them to:


                               J. Preston Winn, Supervisor
                                 Agents Licensing Section
                                   Bureau of Insurance
                                      P. O. Box 1157
                                   Richmond, VA 23218
                               (804) 371-9631 (Telephone)
                                (804) 371-9290 (Facsimile)

                                                 Cordially,



                                                 Alfred W. Gross
                                                 Commissioner of Insurance

AWG
    ALFRED W. GROSS                                                                      P.O. BOX 1157
COMMISSIONER OF INSURANCE                                                         RICHMOND, VIRGINIA 23218
                                                                                  TELEPHONE: (804) 371-9741
                                                                                  TDD/VOICE: (804) 371-9206
                                                                                   http://www.scc.virginia.gov


                                STATE CORPORATION COMMISSION
                                     BUREAU OF INSURANCE


                                              May 7, 2007



                                                                    Administrative Letter 2007-5


        TO:    All Entities with Authority to Appoint Agents in Virginia and Other
               Interested Parties

        RE:    Administrative Changes and Changes in Laws Governing Agent Licensing

              Please distribute to the appropriate personnel within your company, and notify
        agents of the changes.

               The purpose of this Administrative Letter is to advise insurers and insurance
        agents regarding a change in the agent appointment fee and a change in Chapter 18 of
        Title 38.2 of the Code of Virginia, both of which are effective as of July 1, 2007.

        Agent Appointment Fees

               The State Corporation Commission has determined that the agent appointment
        fee should be reduced to $12. In 2002 the statutory maximum for the appointment fee
        was raised to $25 in order to address possible future increases to cover increased
        processing costs; however, such costs have not yet increased as anticipated; therefore,
        the Commission determined that the appointment fee shall be reduced from $14 to $12,
        effective July 1, 2007.

        The 2006-2007 appointment renewal invoices for the fiscal year ending June 30, 2007
        and the appointment billing for the quarter ending June 30, 2007 will be billed on or
        about July 2, 2007 at the current $14 amount.

        The appointment fees billed to insurers and payable on November 10, 2007 for the
        quarter ending September 30, 2007 (and for each quarter thereafter) will be billed at the
        reduced $12 amount.

        Sections 38.2-1833 and 1834 of the Code of Virginia can be reviewed on the General
        Assembly Legislative Information System website at http://leg1.state.va.us/cgi-
        bin/legp504.exe?000+cod+TOC38020000018000000000000.
Administrative Letter 2007-05
May 7, 2007
Page 2



Automatic Agent License Termination

        Section 38.2-1825 B of the Code of Virginia provides as follows:

        An agent's license shall automatically terminate after a period of 183
        calendar days during which no appointment of such agent under
        such license was in effect. The Commission may, upon a showing of
        good cause and upon payment of any prescribed fee, waive or
        extend this requirement. As used herein, the term "good cause" shall
        not include negligence, clerical error, or administrative oversight by
        the licensee or the appointing insurer.

The Bureau of Insurance recommended to the 2007 Session of the Virginia General
Assembly that it repeal this subsection. The General Assembly enacted, and Governor
Kaine signed, House Bill 3016, which repeals § 38.2-1825 B and reenacts the
remainder of § 38.2-1825 of the Code of Virginia, effective July 1, 2007. Section 38.2-
1825 can be reviewed on the General Assembly Legislative Information System website
at http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+38.2-1825.       The change to
§ 38.2-1825 does not affect the requirements contained in other licensing and
appointment statutes as prescribed in Chapter 18 of Title 38.2 of the Code of Virginia.

        This Administrative Letter is available on the Bureau of Insurance website at
http://www.scc.virginia.gov/division/boi/webpages/boiadministrativeltrs.htm.

       Questions relating to this Administrative Letter should be directed to:

                                J. Preston Winn, Supervisor
                                 Agents Licensing Section
                                    Bureau of Insurance
                                       P. O. Box 1157
                                    Richmond, VA 23218
                                804-371-9631 (Telephone)
                                 804-371-9290 (Facsimile)


                                                 Cordially,



                                                 Alfred W. Gross
                                                 Commissioner of Insurance
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