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68 Cards in this Set
- Front
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Marketing System: Agent |
A relationship in which a person is authorized to represent and act for another person or corporation.
An agent or producer is a person who is authorized to act on behalf of another party, individual or corporation, is known as a principal. |
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Exclusive (Captive) vs Indepednent |
Exclusive: represent a single insurer and are obligated to submit business to only that company. Independent: represent a number of companies. Pays expenses out of commissions that are gained by writing insurance |
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Marketing System: Direct Response |
Sell insurance directly to insureds through their own employees, through he mail or via the internet. Use this method instead of using exclusive or independent agents. |
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Marketing System: Home Service |
Insurers who employ home agents or producers to sell industrial life insurance on which a premium is usually collected on a weekly basis at the home of the policy holder. |
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Transact Insurance |
Any of the following: 1) Solicitation 2) Negotiations preliminary to execution 3) Execution of a contract of insurance 4) Transaction of matters subsequent to execution of the contract and arising out of it |
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Penalty for Transacting Insurance without a license |
Misdemeanor: punishable by a fine of $50,000 and/or imprisonment in a county jail for period not exceeding 1 year |
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What conduct is prohibited by Title 18 United States Code Section 1033? |
A person who has been convicted of a felony involving breach of trust, dishonesty, or insurance crimes as defined in 18 USC Section 1033, is prohibited from engaging in insurance activities without the prior written consent of the Commissioner. |
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Penalty for Violating Title 18 Section 1033 |
1 - 15 years of imprisonment Civil Penalty: $50,000 or less for each violation OR the amount of compensation received for each violation, whichever is greater |
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Reporting of Administrative Actions and Criminal Convictions |
1) When background information changes 2) Any type of Criminal conviction 3) Administrative action regarding a professional or occupational license 4) Any licensee's attempt to discharge in a personal or organizational bankruptcy regarding insurance premiums or fiduciary funds owed to a company Notification must be made to the commissioner in writing within 30 days of the change |
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Agent vs Broker |
Agent: a person authorized, by and on behalf of an insurer, to transact all classes of insurance other than life insurance Broker: A person who, for compensation and on behalf of another person, transacts other than life with, but not on behalf of, an insurer |
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Are there such people as Life Broker? Or Health Broker? |
No |
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Life Settlement Brokers |
A person, who on behalf of a policy owner, and for a fee, commission, or other valuable consideration, attempts to negotiate life settlement contracts between an owner and provider |
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Acting as an agent for an insurer you are not appointed too |
Submit insurance application on behalf of the insured If a policy is issued than it is said the insurer has accepted the appointment and will notify the commissioner within 14 days |
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Insurance Agent vs Insurance Broker vs Insurance Solicitator |
Insurance Agent: a person authorized, by and on behalf of an insurer, to transact all classes of insurance other than life, disability or health insurance Insurance Broker: a person who, for compensation and on behalf of another person, transacts insurance other than life, disability, or health insurance with, but not on behalf of, an admitted insurer Insurance Solicitor: a natural person employed to aid an insurance agent or insurance broker transacting insurance other than life, disability or health insurance |
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Insurance Agent Error and Omission Insurance |
Need: protect producers from financial losses they might incur for giving incorrect advice (an error) or for not providing a client with information regarding an important issue (an omission) Types: Occurrence Basis: Insurer obligated to cover the claim regardless if the policy is still no longer in force Claims Basis: must submit a claim while the policy is still in force (More Common/Restrictive) Types of Losses Covered: negligence, errors and omissions and other aspects of rendering or failing to render professional services Does NOT cover fraudulent, dishonest or criminal acts |
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Acts prohibited with regard to non-admitted insurers (Unless a surplus line broker) |
1) Acting as agent for a non-admitted insurer in the transaction of insurance business in this state 2) In any manner advertising a non-admitted insurer in this state 3) In any other manner aiding a non-admitted insurer to transact insurance business in this state |
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Prohibitions of Free Insurance |
No insurer may offer any kind of insurance as an inducement tot he purchase or rental of any real estate or personal property or services without a separate charge tot he insured for such insurance |
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Rules Regarding Internet Advertisements |
Identify the Following Information: 1) Their name, as it appears on the insurance license, or any other fictitious name approved by the commissioner 2) The state of their domicile and principal place of business 3) Their license number |
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Filing of a Notice of Appointment |
Must be appointed to transact insurance for a insurer Authority to transact insurance by appoint becomes effective as of the date of appointment is signed Upon termination of all appointments, the permanent license shall not be canceld, but shall become inactive |
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Inactive License |
License is not canceled but can become inactive. A license may be reactivated at any time prior to its expiration by the filing of a new appointment |
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Cancellation of a license |
May surrender any license at any time. If the license is with the licensee, they deliver the document to the commissioner. If the license is with the employer, it may be surrendered by written notice to the Commissioner. |
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Fiduciary |
Agents have a fiduciary responsibility when they deal with, handle, supervise, or hold in trust and confidence the affairs of another, especially when it pertains to financial matters. |
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Producer fiduciary duties described in the Code |
All funds received by any licensee are received and held by the person in a fiduciary capacity. Any person who diverts such funds to their own use is guilty of theft. However, you may commingle with such fiduciary funds for the purpose of advancing premiums, establishing reserves for the paying of return commissions. |
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Managing General Agent |
A licensed property broker-agent and casualty broker-agent, or a life agent who has a written management contract and appointment on file with the commissioner with one or more admitted insurers covering business transacted by the insurer. Power to appoint, supervise and terminate the appointment of local agents in their territory. |
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Continuing Education |
Agents: 24 hours of approved continuing education each two-year license term Agent writing LTC: initial 8 hour LTC training course. Additionally, 8 hours LTC training every year for the first (4) years they are licensed Agents writing California Partnership Coverage: all the requirements of LTC. Additionally, 8 hours of classroom every two-year license term. |
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Place the customers interest first |
Avoid conflicts of interest. First obligation is to serve the client and provide the best coverage. |
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Know your job - continue to increase your level of competence |
Complete continuing education requirements Continue to gain professional licenses |
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Identify the customers needs and recommend products and services that meet those needs |
Develop initial customer profile to determine needs Provide information about products and changes in the industry |
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Accurately and Truthfully represent products and services |
Products play a vital role in providing financial protection to individuals It is unfair trade practice to to misrepresent the benefits or advantages of an insurance policy |
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Admitted vs Non-admitted Insurer |
Admitted: entitled to transact insurance business in this state Non-admitted: not entitled to transact insurance business in the state |
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Domestic vs Foreign vs Alien Insurers |
Domestic: organized under the laws of this state (whether admitted or not) Foreign: not organized under the laws of this state (whether admitted or not) Alien: A foreign insurer organized under the laws of any jurisdiction other than the USA |
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Regulation of Admitted Insurer |
Aka: Authorized insurers Must file thier rates and policy forms with the commissioner Rates cannot be too high, too low or unfairly discriminatory and policy forms must be in the best interest of the public Must become members of the Insurance Guarantee Fund May only do business with admitted insurers also it is done through a licensed surplus broker |
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Regulation of Non-Admitted Insurers |
Aka Unauthorized Insurers The logic is that if the Commissioner does not let such insurers operate, then some clients might not be able to find insurance coverage at all. Not required to join the Insurance Guarantee Fund Not required to submit rates or policy forms to the commissioner |
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Home State Insured |
A person whose home state is California, may negotiate and effect insurance to protect themselves against loss, damage or liability with any eligible non-admitted insurer. Insurance found through a licensed surplus line broker Insurance shall not be placed with a non-admitted insurer for the purpose of procuring a rate lower than the lowest rate that will be accepted by the admitted insurer Broker must conduct a diligent search: 3 admitted insurers decline the risk Broker must disclose, to the client, they are signing with a non-admitted insurer and that the insurer is not part of the Insurance Guarantee Fund. |
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Surplus Line Broker |
Applicant for becoming a Surplus Line Broker, must file a bond to the people of the state of California in the sum of $50,000 Must hold an existing license to act as a property broker-agent and casualty broker-agent On or before March 1st, each year, must pay a premium tax of 3% to the commissioner for the gross premiums collected |
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Penalty for Unlawfully Acting as an Insurer |
Misdemeanor Also must forfeit to the state $500, plus $100 for each month the violation continues |
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Who may an insurer? |
Any person capable of making a contract, subject to the restrictions imposed by the code |
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Person |
Means any person, association, organization, partnership, business trust, LLC or corporation |
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Mutual Insurer |
Mutual Insurer: A corporation with no stockholders. Ownership rests with the policyholders. Dividends are never guaranteed. Dividends are not taxable since it is viewed as an over payment of premiums. |
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Stock Insurer |
Issues shares to the stockholders who provided capital for the company Management rest with the Board of Directors, who is elected by the shareholders. |
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Fraternal Insurer |
Exist as social organizations and usually engage in charitable and benevolent activities. Usually only write insurance for applicants who are also members of the fraternal organizations |
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De-Mutualization |
The process whereby a mutual insurer becomes a stock company. |
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California Insurance Code and How it Can be Changed |
CIC A body of laws (statutes) that have been passed by the legislature and signed into law by the governor in order to protect the insurance buying public Changed by the legislature passing a new statute amending, modifying or repealing an existing one. |
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California Code of Regulations and How it Can be Changed |
CCR body of administrative rules and regulations that have been adopted by the Commissioner, after drafting proposed regulations and holding hearings, in order to either clarify the intent of the CIC or to regulate an area that has not been addressed by the CIC May only be changed by the Commissioner |
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How is the insurance Commissioner selected? Duties? |
Elected by the people at the same time, place and manner as the Governor not to exceed two (2) four year terms. Shall preform all the duties granted to him under the CIC |
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Gramm- Leach-Bliley Act |
Federal Act Protects the rights of insurance applicants, policyholders and other persons who are the subject of information collected, received or maintained in connection with insurance transactions Privacy law information must be provided with any completed insurance application either at the time of the policy delivery or in regards to renewals, at least annually |
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Requirements of Financial Institutions to Safeguard Consumer Information |
GLBA requires companies defined under the law as financial institutions under FTC jurisdiction to ensure the security and confidentiality of customer information Safeguard Rule: requires companies to develop a written information security plan that describes their program to protect customer information |
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California Financial Privacy Act |
Afford persons greater privacy protections than those provided in the federal GLBA |
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Insurance Information and Privacy Protection Act |
To establish standards for collection, use and disclosure of information gathered in connect with insurance transactions. To enable applicants to obtain reasons for adverse underwriting decisions. Adverse Underwriting Decision: declination of coverage, termination of coverage or the failure of an agent to apply for coverage with a specific insurer that the agent represents and that is requested by the applicant. |
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Consumer Report |
Any written communication of information bearing on a natural persons creditworthiness, character, general reputation, personal characteristics, or mode of living that is used in connection with an insurance transaction |
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Consumer Reporting Agency |
Any person who regularly engages in the practice of preparing consumer reports for a monetary fee and furnishes such reports to others |
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Personal Information |
Any information gathered in connection with an insurance transaction from which judgements can be made about an individuals character |
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Pretext Interview |
An interview where a person, in an attempt to obtain information about a natural person pretends to be someone they are not or misrepresents the true purpose of the interview |
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Privileged Information |
Individual information that relates to a claim for insurance benefits or a civil or criminal proceeding involving an individual |
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Residual Market Mechanism |
Means the California FAIR Plan Association or assigned risk plan |
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Practices of Insurance Information and Privacy Protection Act |
Institution or agent must clearly specify those questions designed to obtain information solely for marketing or research purposes No insurer, agent or institution can request an investigative report unless the individual is informed they may quest a copy of such report If an adverse underwriting decision is reached, the individual must be provided a specific reason for the decision |
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Health Insurance Portability and Accountability Act (HIPAA) |
Federal law that addresses the issue of probationary periods for pre-existing conditions that could occur when an insured changes group medical expense insurance carriers due to a change in employment Commonly known as "portability" of coverage Under the federal Patient Protection and Affordable care act, as of January 1, 2014 pre-exiting condition exclusions are prohibited on all medical expense plans |
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HIPAA Privacy Rule |
Establishes national standards for the protection of certain health information. Addresses the use and disclosure of "protected health information" by organizations subject tot he privacy rule, known as "covered entities" Major purpose is to define and limit the use of an individuals protected health information by covered entities. Except, where it is allowed under the act or with written permission from the individual. |
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Scope and Correct Application of the Conservation Proceedings |
If an insurer continuing to do is business is deemed hazardous to its policyholders, or creditors or to the public, by the court or the commissioner, than the commissioner has the right to seize all books, records, property and assets, and to conduct, as conservator, the business of the insurer. If it is viewed as futile to continue as conservator of the business, the Commissioner may liquidate and wind up the business of such insurer |
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Insolvent Insurer |
1) Any impairment of minimum "paid-in capital" or "capital paid in", as defined in Section 36, required in the aggregate of an insurer by the provisions of this code for the class, or classes, of insurance that it transacts anywhere 2) An inability of the insurer to meet its financial obligations as they are due Insurer cannot escape the condition of insolvency by being able to provide for all its liabilities and for reinsurance of all outstanding risks. Insurer must also possess additional assets equivalent to such aggregate "pain-in capital or "capital paid in" |
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Paid-In Capital |
Equals the value of its assets in excess of the sum of its liabilites |
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Penalty for refusal to deliver any books, records, or assets to the Commissioner once a seizure order as been executed in an insolvency proceeding? |
Misdemeanor |
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Common Circumstances that would suggest the possibility of fraud? |
Insurance fraud occurs when someone knowingly lies to obtain some benefit or advantage to which they are not otherwise entitled Most often, their investigation involve criminal acts involving automobile property and personal injury, Workers Compensation, health insurance and residential and commercial property claims. |
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Efforts to Combat Fraud |
Fraud Division of the Insurance Department was established to enforce and to administer the provisions of the Insurance Frauds Prevention Act. If an insured signs a fraudulent claim form, the insured may be guilty of prejury |
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Be able to identify the scope and correct application of the False and Fraudulent Claims article of the Code |
Unlawful to do the following: 1) Make any knowingly false or fraudulent material statement for the purpose of obtaining or denying compensation 2) Present a knowingly false or fraudulent written or oral material statement 3) Knowingly assist or solicit a person in an unlawful act 4) Make a knowingly false or fraudulent statement with regard to entitlement to benefits with the intent to discourage an injured worker from pursuing a claim. |
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Claimant |
A first or third party claimant is any person who asserts a right of recovery First Party Claimant: Any person asserting a right under an insurance policy as a named insured, other insured or beneficiary Third-Party Claimant: Any person asserting a clam against any person or the interest insured under an insurance policy |
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Notice of Legal Action |
Notice of an action commenced against the insurer with respect to a claim, or notice of action against the insured received by the insurer, or notice of action against the principal under a bond, and includes any arbitration proceeding |
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Proof of Claims |
Any evidence or documentation in the possession of the insurer |
