Florida Law — Overview
Effective October 1, 2002, Florida-licensed insurance agents who sell unlicensed insurance could face a felony charge and lose their license under a law enacted in the 2002 legislative session. To make agents aware of the problems caused by unauthorized insurers, all insurance pre-licensing and continuing education courses are to include training on unauthorized entities to combat the sale of phony insurance.
In the years following passage of the law, the Florida Department of Financial Services shut down several entities selling unlicensed health insurance plans and two entities selling unauthorized medical malpractice insurance to health care providers. These entities left tens of thousands of Floridians with millions of dollars in unpaid claims. The department continues investigation of licensed agents for selling unauthorized insurance.
While investigating unlicensed entities, regulators determined that operators of unauthorized entities could not have reached potential buyers without the assistance of licensed agents. Both employers and agents were enticed by low premiums — but the rates were often not actuarially sound and money was not set aside for reserves. Because unlicensed entities do not participate in a state guaranty fund, policyholders are usually left with unpaid claims when the businesses fold.
Penalties Summary
Acting as an Insurer Without a Proper License
- Conviction of a third-degree felony [Florida Statutes Section 624.401]
- Up to $5,000 fine per count
- Up to five years in prison
- Civil liability for all unpaid claims [Florida Statutes Section 626.901(2)]
- Suspension or revocation of all insurance licenses [Florida Statutes Sections 626.621, .611 and .6215]
Aiding and Abetting an Unauthorized Insurer
- Conviction of a third-degree felony [Florida Statutes Section 626.902(1)]
- Civil liability for all unpaid claims [Florida Statutes Section 626.901(2)]
- Suspension or revocation of all insurance licenses [Florida Statutes Sections 626.621, .611 and .6215]
DFS Enforcement Resources
The Florida Department of Financial Services maintains significant enforcement resources dedicated to detecting and prosecuting unauthorized insurance activity:
- The Bureau of Agent and Agency Investigations has 60 investigators available to look into potential violations and take administrative action against an agent’s license.
- The Division of Insurance Fraud has more than 100 sworn law-enforcement investigators who can file criminal charges.
- The department has created an Unauthorized Entities Section dedicated to tracking and taking civil action against phony plans.
The department becomes aware of unlicensed plans primarily when policyholders begin complaining about slow or no payment of claims. Regulators typically determine that the entities ran into financial trouble when claims outpaced incoming premiums — a direct result of rates that were not actuarially sound.
To verify whether an insurer is licensed in Florida or to report a suspected unauthorized entity, contact the Florida Department of Financial Services Consumer Help Line: (850) 413-3089.