18. U.S.C. §§ 1033-1034 Overview

The Violent Crime Control and Law Enforcement Act of 1994, Public Law 103-322, H.R. 3355; Title 18, United States Code, Sections 1033-1034 ("the Act") became effective September 13, 1994. It provides criminal and civil enforcement provisions for insurance fraud committed by persons in the insurance industry. The Act also provides penalties for persons who have been convicted of certain prior criminal acts and who willfully engage in the business of insurance affecting interstate commerce, unless such person receives written consent from the appropriate regulatory official. The Act has far-reaching implications for persons involved in the business of insurance or reinsurance in the United States. Insurers, officers, directors, agents, and any employee of an insurance company engaged in the business of insurance could be subject to the requirements of this Act.

The Act's insurance fraud provisions define the crimes and authorize the United States Attorney General to bring civil or criminal actions against offenders.

The Iowa Insurance Division issued a memorandum outlining the Act and notifying insurers that the Division has established guidelines to manage Consent to Work in the Business of Insurance applications.

Persons Required to Obtain Written Consent to Engage in the Business of Insurance

In essence, on September 13,1994, it became illegal for an individual convicted of a crime involving dishonesty, breach of trust or a violation of the Act to work or continue to work in the business of insurance affecting interstate commerce without receiving written consent from an insurance regulatory official authorized to regulate the insurer. Until such time as consent is given, a person who has committed such a crime is considered a "prohibited person" in the insurance industry.

Every prohibited person must be granted written consent to engage in the business of insurance before that person can engage in the business of insurance. The consent must be issued by the appropriate insurance regulatory official and must specify that it is granted for the purpose of 18 U.S.C. § 1033.

A prohibited person who works or continues to work without a written consent risks federal criminal and civil sanctions. The Act contains no grandfather provision for persons already transacting the business of insurance. The Act contains no automatic waivers for individuals who may possess a state insurance license or certificate. Further, there is no time limitation on how far back the felony conviction that triggers the prohibition may have occurred.

Definitions

The "insurance regulatory official" has been interpreted to mean the Commissioner of Insurance.

The term "business of insurance" is broadly defined in 18 U.S.C. § 1033(f)(1) as:

The writing of insurance, or

The reinsuring of risks by an insurer, including all acts necessary or incidental to such writing or reinsuring, and, the activities of persons who act as, or are, officers, directors, agents, or employees of insurers, or who are other persons authorized to act on behalf of such persons.

There is no grandfather provision for those persons covered by this definition and who are currently employed or licensed in the business of insurance.

"Prohibited person" includes but is not limited to, any insurance agency or insurance company employee, agent, solicitor, broker, consultant, third-party administrator, managing general agent, or subcontractor representing an agency or company who engages or participates in the business of insurance as it affects interstate commerce, who has been convicted of any criminal felony involving dishonesty, breach of trust, or a violation of the Act. The determination as to whether the felony falls within the guidelines of dishonesty or breach of trust is made by the federal government.

Jurisdiction

The Iowa Division of Insurance has jurisdiction under 18 U.S.C. § 1033 to consider requests for written consent filed by the following persons:

Officers, Directors, and employees of domestic insurance companies, reinsurance companies, agents, brokers, and solicitors; managing general agents, claims adjusters, resident licensees, and their employees; and

Other persons (e.g.; agents, third -party administrators, independent contractors) who perform substantial insurance-related activities for a domestic insurance company or a resident licensee.

Responsibilities of Prohibited Persons

Prohibited Persons are required to submit a written request to the Commissioner of Insurance for permission to transact the business of insurance in this state on the Division's Consent to Work in the Business of Insurance–Short Form application. They must receive written consent from the Commissioner of Insurance or risk federal prosecution. The prohibited person is responsible for applying for and receiving written consent.

Persons who fail to comply with this Act face federal sanctions, including fines and/or imprisonment.

The state statutory licensing qualifications and requirements are totally separate from any requirements under 18 U.S.C. § 1033. Failure to inform the Division of a prior felony conviction on a license application could result in a violation of this statute, as well as constitute grounds for denial of an insurance producer license.

Responsibilities of Insurers

Insurance companies, as well as persons employing anyone to conduct the business of insurance may be in violation of this statute if they willfully permit participation by a prohibited person, including persons who are already employed or being considered for employment. It is the responsibility of the employer to ensure that any prohibited person who is currently employed or being considered for employment is not permitted to conduct the business of insurance in accordance with 18 U.S.C. §1033(e)(1)(B).

Insurers may also wish to verify the status of a prohibited person who has already received consent to work in the business of insurance with the insurer’s domestic state insurance regulator. Waivers are granted conditionally. If the employer or applicant doesn't meet the enumerated conditions of the waiver, authority to work in the insurance industry may have been revoked.

Consent to Work in the Business of Insurance Application Procedure

The Iowa Insurance Division has established the following application process for those individuals who are considered "prohibited persons" in accordance with 18 U.S.C § 1033(e)(2).

A prohibited person may request an application for consent from the Division or may download the Consent to Work in the Business of Insurance–Short Form application    (Word or PDF).

It is the responsibility of the applicant to read and complete the application in its entirety. Absolute and complete candor is required. Failure to fully and honestly complete the application may result in denial or delay in consideration.

All application packets must include a completed initial application for written consent, including all attachments. (Consent to Work Waiver Application–Short Form)

The completed Consent to Work Waiver Application–Short Form will be reviewed by the committee to determine whether it is necessary for the applicant to complete the Consent to Work Waiver Application–Long Form.

The application must be typed, not handwritten.

The two 2" X 2" black and white recent passport photographs must be attached to the upper right hand corner of the first page of the application.

Please retain a copy of the application and attachments for your records. Any additions or amendments to the application must be forwarded to the Division immediately upon the occurrence of any event that could change, enhance or elaborate any answer on the Waiver application. Failure to file this information in a timely fashion may result in denial of written consent or withdrawal of previously granted consent.

Granting a Consent

18 U.S.C. § 1033 (e)(2) gives complete authority to "…any insurance regulatory official authorized to regulate the insurer…" to grant or withhold written consent. (See Section 3(A)"Jurisdiction")

The Division of Insurance has established a 1033 Advisory Committee, comprised of three individuals employed by the Division to review each application for a Consent to Work.

When the Division receives the completed Short Form Application and all attachments, the Division’s 1033 Advisory Committee will review the entire packet.

The Committee may decide to grant consent to work in the business of insurance to the applicant, may ask the applicant to complete the Consent to Work in the Business of Insurance–Long Form application, or may deny the application.

If the 1033 Advisory Committee feels that the applicant should complete the Consent to Work in the Business of Insurance–Long Form, the Committee will send one to the applicant.

The purpose of the applications are to provide an opportunity to demonstrate that, not withstanding the federal bar, a prohibited person may be fit to participate in the business of insurance and not pose a risk to consumers or insurers. The burden is on the applicant to establish that written consent should be granted.

The Division will honor similar consent actions taken by regulatory officials of other states.

If you have any questions, you may contact the Iowa Insurance Division Market Regulation Bureau at market.regulation@iid.iowa.gov .

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