How to use this chapter
Everything before this point is national material. This chapter is the Michigan portion — the part of the exam that tests whether you know Michigan's regulator, Michigan's licensing rules, and Michigan's market-conduct law.
Two habits will serve you: learn the rule, then the number (rules are stable, numbers get amended, so every changeable figure here is flagged verify current with the Michigan Department of Insurance and Financial Services (DIFS)), and know the citation family, not the citation (citations let you look up current text; they are not memory work).
Michigan insurance law lives in one place: the Insurance Code of 1956, 1956 PA 218, MCL 500.100 to 500.8302. Chapter 5 = privacy. Chapter 12 = producers. Chapter 20 = unfair trade practices. Chapters 34 and 40 = required health and life policy provisions. Chapter 38 = Medicare supplement. Chapter 41a = annuity best interest. Chapter 45 = fraud. Chapter 77 = the guaranty association. Rules filling in the statutory outline sit in the Michigan Administrative Code, R 500 series.
1. The regulator: DIFS and its Director
Michigan's insurance regulator is the Department of Insurance and Financial Services (DIFS), a principal state department headed by a Director. DIFS was created by Executive Order 2013-1, which moved the former Office of Financial and Insurance Regulation out of LARA and transferred to the DIFS Director all authority previously held by the Commissioner of Insurance.
That matters for reading the statute. The 1956 Code was written when Michigan had a standalone "commissioner of insurance," so older sections say commissioner while amended sections say director. Both mean the DIFS Director. Exam items may use either word.
Powers of the Director:
- Rulemaking and interpretation. Promulgates rules necessary to enforce Michigan's insurance laws (MCL 500.210); acts through orders made in the reasonable exercise of discretion (MCL 500.205). DIFS also issues bulletins — interpretive guidance that is not statute but should not be ignored.
- Examinations of insurers. Examines insurers' affairs, accounts, and records and issues a written report, with a hearing process before it becomes final (MCL 500.222).
- Examinations of producers. Separately, the Director may examine the accounts, records, and transactions of any agent, surplus lines agent, general agent, adjuster, public adjuster, or counselor, as often as he considers advisable (MCL 500.249), and may require fingerprints for criminal history checks (MCL 500.249a).
- Market-conduct investigations. Upon probable cause, the Director may investigate any person in the business of insurance for unfair methods of competition or unfair or deceptive acts (MCL 500.2028), followed by a contested-case hearing under the Administrative Procedures Act of 1969 (MCL 500.2029–500.2034).
- Enforcement. After opportunity for hearing, the Director issues written findings and a cease and desist order, and may order civil fines, refunds of overcharges, restitution, and suspension or revocation (MCL 500.1244); may seek an injunction in the Court of Claims; and may summarily suspend a license where the public interest requires immediate action (MCL 500.1242). Fines run per violation, higher where the person knew or should have known of the violation, subject to a cap per order, with a larger structure for knowingly violating a cease and desist order. Verify current fine amounts with DIFS.
- Judicial review of final orders is available (MCL 500.244).
DIFS also runs the consumer complaint function, and a producer who receives a written complaint about an insurer must promptly forward it unless he resolves it to the insured's satisfaction within a reasonable time (MCL 500.2026(2)).
2. Producer licensing
The license and its lines. No person may sell, solicit, or negotiate insurance in Michigan without a producer license for that line (MCL 500.1201a). MCL 500.1206(1) lists the qualifications: Life (including endowments and annuities, and optionally AD&D and disability income); Accident and health or sickness; Property; Casualty; Variable life and variable annuity products; Personal lines; Credit; and other lines permitted by law. A Michigan L&H producer normally holds Life plus Accident and Health or Sickness. Selling variable products requires the separate variable qualification plus applicable securities registration.
Resident requirements (MCL 500.1205). DIFS may approve a resident individual license only if the applicant is at least 18, has committed no act on the MCL 500.1239(1) mandatory-denial list, has completed the prelicensing course of study for each qualification, has paid the applicable fees (MCL 500.240), and has passed the examination for each qualification. Application is on the uniform application, declared true under penalty of refusal, suspension, or revocation; DIFS may require verifying documents and must find the applicant possesses good moral character (MCL 500.1239(3); defined at MCL 500.1200). Agencies must also be licensed: uniform business entity application, entity fee, a designated individual licensed producer responsible for compliance, and no MCL 500.1239(1) acts.
Prelicensing and the exam. Michigan requires a registered prelicensing program of study, with the completion certificate showing the course was finished not more than 12 months before DIFS receives the exam application (MCL 500.1204(2)). The exam is entry level and tests the qualification, a producer's duties, and Michigan insurance laws and regulations. Curriculum content is set by rule (R 500.4): a minimum number of study hours per line, mostly on that line's principles, plus a dedicated block on professional ethics and Michigan insurance law, with a larger combined requirement for candidates taking both lines together. Verify current prelicensing hours and fees with DIFS. The Director may waive the exam or program-of-study requirement for a limited license, an applicant licensed within the preceding 12 months, holders of listed designations (CPCU, CLU, CIC, AAI, ChFC, CEBS, CFP, FLMI, LUTCF, RHU, REBC, HIA, ARM), or a degree with an insurance concentration. Exam fees are nonrefundable; a candidate who fails to appear or fails must reapply and pay again.
Appointment (MCL 500.1208a). A license lets you sell; an appointment lets you represent a carrier. A producer may not act as an insurer's agent, and may not bind coverage for it, unless appointed. The insurer files the notice of appointment in a DIFS-approved format within 15 days after the agency contract is executed or the first application is submitted, whichever is first, with the fee. On termination, the insurer notifies DIFS and, where the termination was for cause, reports the reasons (MCL 500.1208b, 500.1209); good-faith reporting carries statutory immunity. Verify current windows and fees with DIFS.
License duration and CE (MCL 500.1204c). Michigan licenses do not expire on a calendar date. Under MCL 500.1206(2), the license remains in effect unless revoked or suspended, as long as education requirements are met by the due date — CE compliance is the renewal event. Hours are reviewed every 2 years on a DIFS schedule that may be staggered. Before the review date the producer must complete the statutory number of approved CE hours (classroom, home study, or online), including a required minimum in ethics in insurance. Verify current CE totals and the ethics minimum with DIFS. Approved life-health subjects include life and health principles, estate planning and taxation, ethics, insurance law, policy provisions, actuarial considerations, agency management (excluding marketing instruction), and long-term care. Excess non-ethics hours may carry over to the next cycle up to a cap; ethics hours may not carry over. The Director waives CE for military service or severe hardship, and for producers licensed only for travel/baggage or only for limited line credit insurance, and may enter reciprocal CE agreements with other states.
The grace period — a favorite exam item. If CE is not met by the expiration date, the producer gets a grace period to finish. During it the producer may not solicit or sell new policies, bind coverage, or otherwise act as a producer, but may service policies previously sold and receive commissions on prior sales. If CE is still incomplete when the grace period ends, the Director shall cancel the license, and the person must reapply under MCL 500.1204. Verify the current grace-period length with DIFS. A producer who sells his insurance business without meeting CE is under the same servicing-only restriction for a limited period.
A license that lapses for a non-CE reason may be reinstated without retaking the exam within 12 months (MCL 500.1206(3)). Name or address changes go to DIFS within 30 days (MCL 500.1206(5); see also MCL 500.1238).
Temporary licenses (MCL 500.1211b). The Director may issue a temporary license without examination, for a limited period, to service an insurance business: to the surviving spouse or court-appointed personal representative of a producer who dies or becomes disabled; to a member or employee of a licensed entity on the death or disability of its designated individual; to the designee of a producer entering active military service; or where the public interest is otherwise best served. The Director may limit authority, require a sponsoring producer or insurer responsible for the licensee's acts, and revoke the license if the public is endangered; it ends when the business is disposed of. Verify the current maximum duration with DIFS.
Nonresident licenses. Michigan licenses nonresidents reciprocally (MCL 500.1206a; see also 500.1204e, 500.1206b): licensed and in good standing in the home state, uniform application, Michigan fees, and a home state granting equivalent privileges to Michigan residents. A qualifying nonresident is exempt from Michigan prelicensing and examination, and home-state discipline is grounds for Michigan action.
Grounds for denial and discipline (MCL 500.1239). Under subsection (1) DIFS shall not issue a license, and may discipline an existing one, for: obtaining a license by misrepresentation or fraud; improperly withholding, misappropriating, or converting money or property received in the insurance business; intentionally misrepresenting contract or application terms; a felony conviction within 10 years before the application; regardless of date, a felony involving violence (including domestic violence), criminal sexual conduct, or a fiduciary or financial felony such as fraud, embezzlement, bribery, or extortion; having committed an unfair trade practice or insurance fraud; fraudulent, coercive, or dishonest practices, or incompetence, untrustworthiness, or financial irresponsibility; forging another's name on an insurance document; and knowingly accepting business from an unlicensed individual.
Under subsection (2) DIFS may refuse to issue, and may discipline, for: materially untrue application information; other felony convictions; a license denied, suspended, or revoked elsewhere; improperly using notes on a licensing exam; violating any insurance law, regulation, subpoena, or regulator's order; failing to comply with a child support order; and failing to pay applicable state business taxes.
DIFS must give written notice of a denial and its reason, and the applicant has 30 days to demand a hearing (MCL 500.1239(4)). An agency's license is at risk where a licensee's violation was known or should have been known by a partner, officer, or manager, went unreported, and no corrective action was taken. Surrender does not end jurisdiction — DIFS may enforce the Code even after a license is surrendered or lapses (MCL 500.1239(7)).
Insurance fraud is a felony. Chapter 45 defines fraudulent insurance acts — knowingly, with intent to injure, defraud, or deceive, presenting false material information supporting an application or claim, conspiring in such statements, soliciting risks for an insolvent insurer, diverting insurer funds, or acting as a runner, capper, or steerer (MCL 500.4503) — punishable as a felony, with a heavier term for conspiracy, plus restitution (MCL 500.4511). Verify current penalties with current Michigan law.
3. Marketing and sales conduct: Michigan's unfair trade practices law
Michigan has an unfair trade practices act: Chapter 20, MCL 500.2001 to 500.2093. Its command is short — no person shall engage in a trade practice defined in chapter 20 or determined under it to be an unfair method of competition or unfair or deceptive act (MCL 500.2003) — and "person" expressly includes producers, solicitors, counselors, and adjusters. This chapter aims at you, not just at carriers.
Misrepresentation (MCL 500.2005). It is an unfair method of competition to make or circulate an estimate, illustration, circular, statement, sales presentation, or comparison that — by omission of a material fact or an incorrect statement of a material fact — misrepresents policy terms, benefits, advantages, or conditions; misrepresents dividends or surplus, past or projected; makes a misleading statement about an insurer's financial condition or the legal reserve system; uses a policy name misrepresenting its true nature; makes a misrepresentation to induce lapse, forfeiture, exchange, conversion, or surrender of a policy (twisting); makes a misrepresentation to effect a pledge, assignment, or policy loan; misrepresents a policy as a security; or misrepresents the nature or extent of coverage afforded by the Michigan Life and Health Insurance Guaranty Association.
Churning, pressure marketing, disguised solicitation (MCL 500.2005a). Michigan separately prohibits knowingly making a misleading or incomplete or fraudulent comparison of policies to induce a lapse, surrender, conversion, or switch of carriers; marketing that induces purchase through force, fright, or threat, explicit or implied, or undue pressure; and any marketing method that fails to disclose conspicuously that its purpose is the solicitation of insurance and that an agent or company will make contact. Lead cards and "free retirement review" mailers that hide the insurance purpose violate this.
Advertising (MCL 500.2007). Publishing or circulating — in print, by letter, poster, radio, "or in any other way" — an advertisement or statement about the business of insurance that is untrue, deceptive, or misleading. The catch-all reaches digital and social media exactly as it reached posters in 1956.
Defamation (MCL 500.2009). Circulating, or aiding the circulation of, a statement that is false or maliciously critical of or derogatory to the financial condition of a person in the insurance business, calculated to injure that person.
Coercion (MCL 500.2012). Agreeing to commit, or by concerted action committing, boycott, coercion, or intimidation that tends to result in unreasonable restraint of the business of insurance.
Unfair discrimination. Prohibited between individuals of the same class and equal expectation of life in life and annuity rates, dividends, benefits, or terms (MCL 500.2019), and between individuals of the same class and essentially the same hazard in accident and health premiums, benefits, or terms (MCL 500.2020). Under MCL 500.2027, refusing to insure, refusing to continue to insure, or limiting coverage because of race, color, creed, marital status, sex, national origin, gender, gender identity or expression, or sexual orientation (added by 2023 PA 156), or because of residence, age, disability, or lawful occupation absent a reasonable relationship to risk, is prohibited — as is charging different rates on those bases without sound actuarial support. Michigan also bars refusing coverage solely because another insurer declined, bars discrimination against domestic violence victims (MCL 500.3406j), and bars life insurance discrimination against living organ donors (MCL 500.4002).
Rebating (MCL 500.2024). Michigan prohibits rebating. Except as expressly allowed by law, it is an unfair method of competition to make a life, annuity, or accident and health contract — or any agreement about it other than as plainly expressed in the contract issued — or to give or offer, directly or indirectly, as an inducement to insurance: any rebate of premium; any special favor or advantage in dividends or benefits; any valuable consideration or inducement not specified in the contract; or securities or profits accrued on them. Related sections make rebating grounds for license revocation as well as a misdemeanor (MCL 500.2064, 500.2066, 500.2068, 500.2069) and make it unlawful for an insured to knowingly accept a rebate (MCL 500.2070) — in Michigan the client who takes the rebate is exposed too. A narrow merchandise exception lets a life insurer or producer give a life applicant an article of small stated value, with a separate larger annual allowance in property-casualty (MCL 500.2024a, 500.2024b). Verify current merchandise value limits with DIFS. Michigan also bars issuing stock, benefit certificates, or advisory board contracts promising returns or profits as an inducement to insurance (MCL 500.2017), and false application statements made to obtain a fee or commission (MCL 500.2018).
Commissions and sharing (MCL 500.1240). An insurer or producer shall not pay a commission, service fee, or other valuable consideration to a person for selling, soliciting, or negotiating insurance in Michigan if that person must be licensed and is not; and a person shall not accept such compensation. Renewal and deferred commissions may still be paid to someone properly licensed at the time of the sale. An insurer or producer may pay or assign commissions to an agency or to persons who do not sell, solicit, or negotiate — unless the payment would violate the anti-rebating section. That proviso stops "referral fees" from becoming disguised rebates. Michigan also caps first-year versus renewal compensation on Medicare-eligible disability policies and bars new preexisting-condition waiting periods on same-insurer replacements (MCL 500.2011) — its anti-churning rule for senior health sales.
Fiduciary duty with premiums (MCL 500.1207). An agent is a fiduciary for all money received in that capacity. Premiums and return premiums are fiduciary money: segregate them; do not commingle. Those records are examinable by DIFS, and misappropriation sits on the mandatory-denial list — the fastest way to lose a Michigan license.
Claims conduct (MCL 500.2026). Michigan has an unfair claims settlement practices provision. Unfair claims acts — other than isolated incidents, i.e., a course of conduct indicating a persistent tendency — include misrepresenting facts or policy provisions; failing to acknowledge or act promptly on claim communications; failing to adopt reasonable prompt-investigation standards; refusing to pay without reasonable investigation; failing to affirm or deny coverage within a reasonable time after proofs of loss; failing to attempt good-faith prompt, fair, equitable settlement where liability is reasonably clear; compelling litigation by offering substantially less than owed; altering applications without consent; using duplicative claim-form demands to delay; and failing to give a prompt, reasonable explanation for a denial or compromise offer.
Prompt payment (MCL 500.2006). Benefits must be paid timely or the payer owes statutory interest, and failure to pay claims or that interest is itself an unfair trade practice unless the claim is reasonably in dispute. The statute sets a window for the insurer to specify in writing what constitutes satisfactory proof of loss, and a window after proof of loss within which payment counts as timely. Verify current interest rate and timing windows with DIFS.