Basics and State Regulations Flashcards
Risk
The uncertainty or possibility of financial loss.
- Speculative: financial loss - possibility of gain - NOT INSURABLE
- Pure Risk: financial loss - NO possibility of gain - only potential outcome is loss.
Loss
UNINTENDED unforeseen damage or injury measurable in financial terms.
NO INTENDED ACTS!
Peril
The actual CAUSE of a loss. The reason the loss occurred.
Hazard - Definition and Name the Three
Anything that increases the likelihood (frequency) of a loss occurring or the severity of a loss.
- Physical: material or structural features (icy roads, frayed wires)
- Moral: morality or ethics of insured (arson, fraud).
- Morale: human carelessness or irresponsibility (cellphones, garage doors left open).
Physical Hazard
material or structural features - icy roads, frayed wires
Moral Hazard
morality or ethics of insured - arson, fraud
Morale Hazard
human carelessness or irresponsibility - cell phones, garage doors left open
Hazard vs Peril
Hazard: increases likelihood (frequency) of a loss
Peril: the actual CAUSE of the loss
RRAT
Reduce: lower the hazard - loss control (alarm system, guard dog)
Retain: assume the risk - self-ensure or agree to pay deductible
Avoid: eliminate the risk - do not engage in the activity
Transfer: transfer the risk through purchase of INSURANCE
First Dollar Coverage
Self-Insure - provides for the payment of all losses up to the specified limit without any use of deductibles.
Risk Management
process of:
- identifying exposure to risk
- deciding how to handle the financial risk
Reduce, Retain, Avoid, Transfer
Not Predictable
Not Insurable
Insurance
social device for the transfer of an individuals financial risk to a large number of people - POOLING THE RISK - TRANSFER OF FINANCIAL RISK
Transfer of Risk
Insurance
Law of Large Numbers
The larger the number of similar exposure units, the more predictable the future TOTAL losses become.
DOES NOT CONSIDER INDIVIDUAL LOSS.
Insurance Policy - Definition, Parties
A legally binding contract between the insurance company and the insured.
ENFORCEABLE BY THE JUDICIAL SYSTEM
Insurer: The insurance Company
Insured: The person(s) or business covered by the policy
TWO PARTY CONTRACT
Insurance is a ________ party contract
TWO PARTY
Binder
Temporary insurance contract
Temporary protection for a MAXIMUM period of 90 days
A binder can be VERBAL
DOES NOT HAVE TO BE: WRITTEN, DELIVERED OR SIGNED.
Binder does NOT have to be:
Written, Delivered or Signed
Elements of an Insurable Risk
Not all Pure Risks are insurable
- unforseen (accidental), unintended (from the insured’s perspective)
- financial loss
- ascertainable in cause, time, and amount AND occur during the policy period
- insurer must be able to predict the chance of loss - “Law of Large Numbers.”
- economically feasible premium (Flood Insurance)
- excludes catastrophic loss (war or nuclear)
Insurable Interest
is the financial loss a person suffers when property is destroyed
It is created by:
- Ownership
- holding a mortgage
- having responsibility for property in your care (Bailee - auto shop, laundry)
*more than one person can share insurable interest (you and lienholder)
Health & Life: insurable interest must exist only at the time of application.
Personal/Commercial Property & Casualty: insurable interest must exist ONLY at the time of the loss.
READ EVERY QUESTION THREE TIMES
READ EVERY ANSWER
Essential Elements of a Legally Binding Contract
Four -
- Legal Purpose: Must not be against the public interest (chop shop, meth, illegal)
- Agreement: Requires both an OFFER and an ACCEPTANCE
- Offer - made when the applicant signs the application: making a request to the insurance company for coverage
- Acceptance - made when insurance policy is issued
- Competent Parties: at the time of agreement, must be considered legally competent (minors [girl scout], legally insane or intoxicated are NOT competent)
Competent: Elderly, Prisoners, Hospitalized
4 Consideration: Something of value which BOTH parties must give (aka TRADE VALUE)
- Act, Promise or Money
Insurer’s consideration is PROMISE
Insured’s consideration is PREMIUM
Legal Purpose
Must not be against the public interest (chop shop, meth, illegal)
Agreement
Requires both an OFFER and an ACCEPTANCE
- Offer - made when the applicant signs the application: making a request to the insurance company for coverage
- Acceptance - made when insurance policy is issued
Competent Parties Definition
at the time of agreement, must be considered legally competent (minors [girl scout], legally insane or intoxicated are NOT competent)
Competent Parties Examples
Competent: Elderly, Prisoners, Hospitalized
minors [girl scout], legally insane or intoxicated are NOT competent
An agreement must be an Offer and _______
Acceptance
Legally Binding Contract does not have to be:
Written, Delivered, Signed or Reviewed by an attorney
Consideration
Something of value which BOTH parties must give (aka TRADE VALUE)
- Act, Promise or Money
Insurer’s consideration is PROMISE
Insured’s consideration is PREMIUM
What legal concepts affect the validity of a contract?
- Representations (Truth): material facts that the insured believes to be true
Misrepresentation - false information regarding a material fact
Concealment - intentional failure to disclose a material fact
- Warranties: written statements regarding material facts the insured GUARANTEES to be true.
- Breach of warranty AUTOMATICALLY VOIDS THE INSURANCE CONTRACT
- WARRANTIES CARRY GREATER WEIGHT THAN REPRESENTATIONS
Representations
(Truth): material facts that the insured believes to be true
Misrepresentation - false information regarding a material fact
Concealment - intentional failure to disclose a material fact
Misrepresentation
false information regarding a material fact
Concealment
intentional failure to disclose a material fact
Warranties
WRITTEN STATEMENTS regarding material facts the insured GUARANTEES to be true.
- Breach of warranty AUTOMATICALLY VOIDS THE INSURANCE CONTRACT
- WARRANTIES CARRY GREATER WEIGHT THAN REPRESENTATIONS
Warranties carry more weight than ________
Representations
Breach of warranty ___________________
Automatically voids the contract
TRADE VALUE
AKA CONSIDERATION
Something of value which BOTH parties must give
- Act, Promise or Money
Insurer’s consideration is PROMISE
Insured’s consideration is PREMIUM
Speculative Risk
financial loss - possibility of gain - NOT INSURABLE
Pure Risk
financial loss - NO possibility of gain - only potential outcome is loss.
DOES NOT CONSIDER INDIVIDUAL LOSS
Law of Large Numbers
Insurer:
The insurance Company
Insured:
The person(s) or business covered by the policy
Insurable Interest is created by:
- Ownership
- holding a mortgage
- having responsibility for property in your care (Bailee - auto shop, laundry)
*more than one person can share insurable interest (you and lienholder)
Health & Life: insurable interest must exist only at the time of application.
Personal/Commercial Property & Casualty: insurable interest must exist ONLY at the time of the loss.
For Health & Life, when does the insurable interest exist
only at the time of application
For Person/Commercial Property and Casualty, when does the insurable interest exist
only at the time of the loss
Insurer’s consideration is
PROMISE
Insured’s consideration is
PREMIUM
Fraud
knowing misrepresentation of truth or concealment of a material fact TO INDUCE ANOTHER TO ACT TO HIS/HER DETRIMENT
Fraud is a _____ and punishable by:
FELONY
- Up to $10,000
- Up to Ten years in jail
- Combination of both
Insurance is Bi-lateral. T or F?
False - Insurance is NOT bi-lateral
Contract Indemnity
make the insured financially whole again by paying losses but NOT allowing gain (profit)
- designed to avoid over payment
- allows the insured to be reimbursed and restored to his/her ORIGINAL value.
Agreement to Indemnify
AKA Contract Indemnity
make the insured financially whole again by paying losses but NOT allowing gain (profit)
- designed to avoid over payment
- allows the insured to be reimbursed and restored to his/her ORIGINAL value.
Contract of Adhesion
under the policy/contract:
- The insured must ADHERE to the contract terms without negotiation - ACCEPT OR REJECT IN FULL
- Courts will interpret any unclear policy provisions in favor of the insured
- The insured cannot alter a policy provision
Courts will interpret any unclear policy provisions in favor of the insured in favor of ________
THE INSURED
The insured cannot alter a _________
policy provision
Aleatory Contract
- Equal value is not given by both parties
- One Party can benefit more than the other - BASED ON CHANCE (aka the occurrence of an uncertain event)
EQUAL VALUE IS NOT REQUIRED!
Unilateral Contract
- enforceable by only ONE party
- insurer has the DUTY to perform
- contract is enforceable by the insured!
The insured pays the premium, the insurer promises to pay policy proceeds for covered losses
INSURED CAN SUE
INSURED CANNOT
Who can sue in a unilateral insurance contract?
Insured
Conditional Contract
certain conditions (RULE) are required of BOTH PARTIES:
- INSURER must pay the claim based on the valuation method stated in the policy
- INSURED must pay the premiums
- INSURED must protect the property in event of a loss
Contract of Utmost Good Faith
TRUST - Each party is entitled to rely upon the respresentations of the other
- insured tells the truth regarding material facts
- insurer pays in covered loss
Unique Features of the Insurance Contract
Contract of Indemnity (Agreement to Indemnify)
Contract of Adhesion
Aleatory Contract
Unilateral Contract
Condition Contract
Contract of Utmost Good Faith
What does a producer do?
transact insurance
What does an underwriter do?
selects ricks for the insurer
What does the adjuster do?
negotiates claim settlements
What does an actuary do?
mathematician who develops the rates for the insurer
Purpose of insurance regulation
protect the public interest
What are the three sources of regulation of the insurance business?
- State - primary source
- statutes enacted by legislature
- Rules and Regulations made by Insurance Departement - ID enforces provisions of OK Insurance Code
- Rules and Regulations promulgated as often as necessary - Federal - WATCHDOG role
- supervises areas of insurance not covered by state regulation OR WHEN STATE JURISDICTIONS ARE IN CONFLICT. - Self-regulation - NAIC - National Association of Insurance Commissioners
- voluntary - non-profit - promote uniformity - proposing standardized laws (model legislations)
- makes recommendations - no legal authority
Primary Source of Insurance regulation
State
- statutes enacted by legislature
- rules and regulations made by insurance department
- insurance department enforces provisions of OK insurance code
- rule and regulations promulgate as often as necessary
Watchdog role of Insurance Regulation
Federal
-supervises areas of insurance not covered by state regulation OR WHEN STATE JURISDICTIONS ARE IN CONFLICT.
List Seven things about the NAIC:
National Association of Insurance Commissioners
- voluntary
- non-profit
- promote uniformity
- proposes standardized laws (model legislations)
- makes recommendations -
- no legal authority
- OK Insurance Commissioner is a member
Who makes the Rules and regulations concerning insurance on OK?
Insurance Departement
What body enacts laws concerning Insurance in OK?
Legislature
Insurance Department enforces provisions of what?
OK insurance code
When can rules and regulations concerning insurance be added or changed?
as often as necessary - by the insurance department
Oklahoma Department of Insurance
- does not enact law
2. makes and Rules and Regulations to ENFORCE provisions of the Oklahoma Insurance Code
Who is the OK Insurance Commissioner and what is his duty?
John Doak
administration and enforcement of the provisions of the OK Insurance Code
How is the OK Insurance Commissioner chosen, how long is their term and what are the qualifications?
elected
every four years
Qualifications:
- at least 25yo
- resident of OK for at least five years
- minimum of five years experience
- no financial interest in any insurer, agency or transactions (except as a policy owner or claimant)
Does NOT need:
- Education
- Continuting Ed
- Cannot work for insurer
- not appointed
Qualifications for Insurance Commissioner?
Qualifications:
- at least 25yo
- resident of OK for at least five years
- minimum of five years experience
- no financial interest in any insurer, agency or transactions (except as a policy owner or claimant)
Does NOT need:
- Education
- Continuting Ed
- Cannot work for insurer
- not appointed
Not needed to be insurance commisioner
Does NOT need:
- Education
- Continuting Ed
- Cannot work for insurer
- not appointed
Nine general responsibilities of the insurance commissioner:
- adopt rules and regulations
- examine insurance companies
- jurisdiction over complaints against ANYONE engaged in insurance (licensees, insurers)
- Authority to:
- conduct hearings
- issue cease and desist orders
- initiate civil actions
- censure, suspend, revoke or non-renew licenses - approve the monitor the adequacy or insurance company rates
- maintain books and records
- provide annual report to governor regarding financial status of the insurance industry and the TOTAL AMOUNT OF INSURANCE CLAIMS PAID IN THE STATE OF OKLAHOMA
- educate consumers
- deliver all furniture, records, property to successor
Four things the Insurance Commission has authority to do:
- conduct hearings
- issue cease and desist orders
- initiate civil actions
- censure, suspend, revoke or non-renew licenses
Who approves and monitors the adequacy of insurance company rates in OK?
Insurance Commissioner
What annual report does the IC provide the Gov in OK?
- financial status of the insurance industry
- total amount of claims paid in OK
What does the Insurance Commissioner NOT do?
- recruit
- enact law
- develop rates
Another term for Punishment in OK?
Orders
OID
Oklahoma Insurance Commission
What is a hearing used to determine?
if a licensee or insurer violated the insurance code
What must a licensee or insurer do if they receive a written request regarding violations?
Respond IMMEDIATELY
OID must give ____ days WRITTEN notice and not more than ____ days of a hearing
5 days
30 days
Where are hearings conducted concerning violations?
OID office
Three MAJOR facts about OID hearings (where and what isn’t involved):
- at OID office
- no court fees
- no judge
Punishment (orders) which CANNOT be given after a hearing:
- pay restitution
- jury trial
- jail time
Three things about hearings and what the OID can and must do:
- open to the public
- OID can take depositions and subpoena witnesses or evidence
- must summarize findings IN WRITING within 30 days.
Another name for Orders given after a hearing?
Punishment
AFter a hearing, if the OID has determined that a violations Have occurred they may:
- issue cease & desist
- institute a civil suit
- institute a civil penalty (fine) $100-1,000
- Suspend license
- revoke license
After orders (punishment) have been issued, the guilty party may:
- Accept the orders (punishment
- Appeal - 30 days to file - brings the case to COURT - JUDICIAL REVIEW
How long does a licensee have to appeal an order (punishment)?
30 DAYS - JUDICIAL REVIEW
Four types of insurers:
- Stock Companies
- CAPITAL STOCK
- shareholders
- Mutual Company
- NO capital stock
- policyowners (insured)
- policyowners are entitled to the profits of the company
- policyowners elect board of directors (who hires management
- Fraternal (Fraternal Benefit Society)
- society, order or lodge
- NO capital stock
- non-profit
- organized for sole benefit of members
- Federal Gov’t Insurers
- insures EVERYTHING BUT Workers comp
What defines a Stock Company insurer:
- CAPITAL STOCK
- shareholders
What defines a Mutual Company insurer:
- NO capital stock
- policyowners (insured)
- policyowners are entitled to the profits of the company
- policyowners elect board of directors (who hires management
What defines a Fraternal Benefit Society:
- society, order or lodge
- NO capital stock
- non-profit
- organized for sole benefit of members
Federal Gov’t can insure just about everything, BUT the don’t offer:
Worker’s Comp
Which type of insurer has capital stock and shareholders?
Stock Company
Which type of insurer has policyowners?
Mutual Company
Which type of insurer is non-profit and organized only for members of a particular group?
Fraternal Benefit Society
Which type of insurer does not offer Worker’s Comp?
Federal Gov’t
Three types of Insurers by charter (where organized):
- Domestic - under the laws of OK, home office in OK
- Foreign - under the laws of ANOTHER state - office in OK, but home office in another state
- Alien - under the laws of another country - office in OK, but home office in another country
What is a Foreign insurer?
under the laws of ANOTHER state - office in OK, but home office in another state
What is an Alien insurer?
under the laws of another country - office in OK, but home office in another country
Certificate of Authority is obtained by who?
Insurer doing business in OK
Certificate is an insurer’s ________ to do business in OK.
license
What is issued to an insurer and is perpetual and automatically renews on March 1?
Certificate of Authority
Three basic facts about a Certificate of Authority:
- issued to insurer as a license to do business in OK
- perpetual
- automatically renews on March 1, unless insurer fails to renew
An individual must obtain a ______ and an Insurer must obtain a ______ to do insurance business in the state of OK
- License
2. Certificate
What is an Authorized Insurer (Admitted)?
- needs no middle-man
- has a Certificate of Authority
- domestic, foreign, or alien
What is an Unauthorized Insurer (non-admitted)?
- DOES NOT have a certificate of authority
- referred to as SURPLUS LINES insurance
- requires a SURPLUS LINES BROKER (middle man)
- can conduct insurance business for only one reason:
1. type of insurance required is not procurable from an authorized insurer
Another name for Authorized Insurer?
Admitted
Another name for Unauthorized Insurer?
Non-Admitted
What is the MAIN job of the OID?
protect against insurance company insolvency (bankruptcy)
What is a Financial Performance Audit
- examination of an INSURER
- conducted by the OID
- focuses on financial solvency of insurer
- notes changes of management and ownership
- includes reports from actuaries and INDEPENDENT financial examiners
When may the OID examine an insurer?
- as often as necessary
When MUST the OID examine ALL domestic, foreign and alien insurers?
BY LAW - EVERY 5 YEARS
Who pays the cost of a Financial Performance Audit (examination)?
the insurer being examined
When must the chief examiner of a Financial Performance Audit file a report?
within 30 days of completion
How many days does an examined insurer have to make a rebuttal after the final report has been filed?
20 days
After how many days is the examination report made public record?
30 days to file a report upon completion
20 days to make a rebuttal
What is another term used to describe a rebuttal of a Financial Performance Audit (examination)?
Rebuke
What are the four major things a rating service does?
The determine:
- financial strength
- Creditworthiness,
- Investment Vehicles
- Adequacy of reserves
What are four examples of Private Rating Services?
- A.M. Best
- Moody’s
- Weiss,
- Duff & Phelps
Purpose of the Oklahoma Insurance Rating Act:
regulate insurance rates not to be excessive, inadequate or unfairly discriminatory (BY STATISTICS - NOT INDIVIDUALS)
A rate is?
the cost of insurance (premium) per unit of exposure
Who approves the insurance rates in OK?
OID
What is File and Use state?
rates are effective 30 days after filing unless disapproved - WHICH MEANS NOT PRIOR TO APPROVAL
OKLAHOMA IS A FILE AND USE STATE
Rates are developed by an ________ who is a __________ and works for the insurer.
Actuary
Mathematician
Does the OID develope rates?
NO - the actuary working for the insurer does
- the OID REGULATES
What entity regulates insurance rates?
OID
What is the Prospective Loss Cost (Loss Ratio)?
rate which is projected to be paid out in insurance benefits (claims)
does not include insurer expenses
What is the portion of the Rate used to pay operating expenses , producer commissions, etc?
Expenses
If an insurer or rating organization request a hearing to dispute an order (punishment) by the OID, how long before the hearing will the OID give notice?
10 days
If an insurer violates the ratemaking standards in OK, what is the penalty?
Civil Penalty - $100-5,000
What is the purpose of the Adjuster Licensing Act?
- improve efficiency
- permit the use of new technology
- reduce costs associated with issuing and renewing insurance licenses
How long is an Adjuster’s license good for?
it remains in effect unless revoked or suspended as long as fees are paid - perpetual
What are the three primary task of an Adjuster:
- investigate claims
- adjust losses
- negotiate claim settlements
Who negotiates claim settlements?
An Adjuster
An adjuster must be licensed in the class of insurance that they are working in. What are the six classes?
- Property
- Casualty
- WC
- Crime and Fidelity Bonds
- Crop Hail
6, Multi-peril Crop
How long are adjuster licenses issued for?
biennial term - 24 months
What are the four types of adjusters?
- Independent adjuster - works for several companies
- Staff (employee) adjuster - one company
- Apprentice Trainee Adjuster - temp license good for 180 days
- Public Adjuster - exclusively property claims on behalf of the insured
What type of adjuster adjusts exclusively property claims on behalf of the insured?
Public Adjuster
How long is an Apprentice Trainee Adjuster license good for?
180 days
Purpose of the Producer (agent) Licensing Act?
Same as Adjuster:
- improve efficiency
- permit the use of new technology
- reduce costs associated with issuing and renewing insurance licenses
Who must be licensed as a Producer (Agent)?
Anyone transacting insurance - must be appropriate lines
What is included in the definition of “transacting insurance?”
Anyone that:
- Sells - completing app, issuing binder, making policy changes, delivering policy, collecting premium
- Solicit (prospecting) - attempting to sell, asking a person to apply
- Negotiate (quoting) - act of CONFERRING with the buyer about benefits, terms or conditions
What is conferring and who does it?
Discussing the benefits of an insurance contract - Producer (agent)
Who is exempt from licensing?
NOT ENGAGED IN THE SALE, SOLICITATION OR NEGOTIATION OF INSURANCE - NO COMMISSION
officer, director, employees whose duties are executive, managerial or clerical
Receptionist, Actuary, File Clerk, Underwriter
What is prospecting?
Soliciting - attempting to sell, asking a person to apply
What are the three parts of the Law of Agency?
- Principal
- Producer (agent) - authorized to act on behalf of the principal (sell and bind)
- Third Party - client or policyowner
How many insurers can a producer represent?
As many as may appoint them
Five parts of the Appointment of Producer by Insurer:
- insurer must appoint a producer within 15 days after the date of the agency contract or the date the insurer accepts business from the producer
- producer may sell ONLY types of insurance licensed and appointed
- producer may receive commission only if producer is licensed and appointed (may split commission with another)
- insurer terminating a producer appointment must notify the OID within 30 days
- An appointment is for a 12 month period
How long is an appointment of a producer by an insurer for?
12 months
Within how many days must a producer notify the OID after an insurer terminates appointment?
30 days
What must a producer be for them to receive a commission?
licensed in the line of insurance and appointed by insurer
What types of insurance may a producer sell?
only those they are licensed for and appointed for
Within how man days must an insurer appoint a producer after agency contract or acceptance of business?
15 days
What are the five Fiduciary Responsibilities of a Producer (agent)?
Identify, Sell, Explain, Collect, Deliver
- Identify types of FINANCIAL RISK (risk management)
- Sell coverage most SUITABLE for insured (SUITABILITY)
- Explain coverage
- Collect initial premium - forward premium to insurance company - DO NOT COMMINGLE (mix premium with producer’s personal money)
- Deliver policy
What is a Fiduciary?
a person HELD IN TRUST and must place the other party’s interest above his/her own
When can a Conflict of Interest arise between a Producer (agent) and client (insured)?
when a producer’s decision does not fulfill his/her FIDUCIARY RESPONSIBILITY and is influenced by personal interest (MONEY).
Definition of Suitability with respect to Producers (agents):
fiduciary responsibility to SELL THE COVERAGE MOST SUITABLE FOR THE INSURED.
After collecting the initial premium, what is the next step, and what is the MOST important thing to remember in the interim?
Forward the premium to the insurance company
DO NOT COMMINGLE (mix premium with producer’s personal money)
What are the Seven types licenses?
- Producer (agent)
- Customer Service Rep (CSR)
- Limited Insurance Rep
- Temporary Producer
- Managing General Agent
- Insurance Consultant
- Surplus Lines Insurance Broker
How long is a license good for?
Biennial - 24 months
Who must pass a test and complete continuing education to receive a license?
- Producer
- CSR
- Insurance Consultant
Who doesn’t have to pass a test or attend CE to receive a license?
- Limited Insurance Rep
- Temporary Producer
- Managing General Agent
- Surplus Lines Broker
Does CSR have to pass a test?
Yes, and attend CE
Does a Limited Insurance Rep have to pass a test?
No, and no CE
Does a Temporary Producer have to pass a test?
No, no CE
Does a Managing General Agent have to pass a test?
No, no CE
Does an Insurance Consultant have to pass a test?
Yes, and attend CE
Does a Surplus Lines Producer have to pass at test?
No, no CE
Lines that Producer can be licensed in:
- Personal - P&C
- Commercial - P&C
- Life
- Accident & Health
- Title Insurance
Lines that a CSR can be licensed in:
- Personal P&C
2. Commercial P&C
Lines a Limited Insurance Rep can be licensed in:
- Credit - life, disability
- Travel - sickness, accident, interruption - baggage insurance -
- Prepaid Legal
- Car Rental
- Crop
- Vending Machine Insurance (insurance available at vending machines)
What is a common carrier?
transports people or property for hire
Who can offer prepaid legal insurance?
Limited Ins Rep
Who can offer travel insurance?
Limited Ins Rep
Who can offer baggage insurance?
Limited Ins Rep
How long may Temporary Producer be licensed?
180 days without requiring and exam
Five examples of a Temporary Producer:
- Surviving spouse
- court appointed rep
- employee of CORPORATE agency if the agency is licensed to transact
- person designated by licensed producer if the producer is entering military service
- any person the Insurance Commissioner determines would serve the public interest
If a corporate agency is licensed to transact insurance, can a non-licensed employee transact insurance?
Yes - Temporary Producer License - Good for 180 days
If a licensed agent dies or is disabled, what can happen to his/her license?
A Temporary Producer License can be issued to a surviving spouse or legal rep - good for 180 days
What is a Managing General Agent?
- person who supervises business of insurer within OK
- Has the ability to appoint and terminate insurance producers
No exam - No CE
What can a licensed Insurance Consultant do?
- offer advice, counsel, opinion about benefits, advantages or disadvantages of policy
How are Insurance Consultant compensated?
Paid a fee by client - CAN NEVER RECEIVE A COMMISSION OR SELL
Three major aspect of an Insurance Consultant:
- must have written contract - specify fees and nature of work
- cannot concurrently hold a consultant and a producer license
- must SOLELY REPRESENT THE CLIENT
What are the four positions that are not required to hold an Insurance Consultant license?
- producer
- attorney
- trust officer
- cpa
What is a Surplus Lines Broker?
- transact insurance on behalf of a NON-ADMITTED (UNAUTHORIZED) insurance company.
If a client can’t find the type of insurance they need in the state they’re in, may the buy from a Non-Admitted (unauthorized) insurance company?
They MUST purchase it through a licensed SURPLUS LINES BROKER.
If insurance is purchased through a Surplus Lines Broker, what must be on the Dec Page?
Stamped Notification in BOLD FACE TYPE that it is a SURPLUS LINES POLICY and not subject to the protection of the OK P&C Guaranty Association.
Which policy is not subject to the protection of the OK P&C Guaranty Association?
Surplus Lines Policy - This must be stamped in BOLD FACE TYPE on the Dec Page.
Is a Surplus Lines Policy subject to the protection of the OK P&C Guaranty Association?
No - and it must be listed as so on the Dec Page.
What is the Premium Tax on Surplus Line Policies?
6% - broker collects tax and remits to OK on a quarterly basis
How often is the 6% premium tax on surplus line policies remitted to the state?
Quarterly - broker collects and remits
When must Surplus Line Brokers file there annual report?
April 1st - verifying amount of SLs transacted
Does a person have to be a citizen to attain an OK Resident License?
No - but must be legally entitled to work in the US and possess a valid visa with I-9 form (legal alien status)
Oklahoma RESIDENT LICENSE Qualifications:
- Resident of Oklahoma
- Legally entitle to work in the US (but does not have to be a citizen)
- Be competent, trustworthy and financially responsible with good business and personal reputation. AKA NO CONVICTION OF A FELONY
- Be at least 18yo
- Pay OK fees
- Have an insurance appointment (sponsor) - with the exception of Insurance Adjusters
- Pass exam - 70% or better
How old must a person be to attain a Resident License in Oklahoma:
18yo
Who does not have to have a sponsor in order to attain a Resident License in OK?
Insurance Adjuster
Who is exempt from obtaining a Resident License?
- Limited Insurance Rep
- Surplus Lines Broker
- licensed agent/adjuster in another state that moves to OK - must apply for license within 90 DAYS!
What is NOT required to attain a Resident Producer License in OK?
- Education
- Experience
- A particular Residency term (a certain number of years)
If you have filed personal bankruptcy, can you attain a license to transact insurance in OK?
Yes -
Is and education or experience necessary to attain a license to transact insurance in OK?
NO
If a licensed producer or adjuster from another state moves to OK, how long do they have to put in an application for a license WITHOUT taking an exam?
90 days
How long does a producer/adjuster have to reinstate their license if it has expired?
12 months without retaking exam - unless it was revoked or suspended
Penalty of double the renewal fee must be paid
Is there a penalty for letting your producer/adjuster license expire?
DOUBLE THE RENEWAL FEE
What is Controlled Business?
Insurance written on the interests of the PRODUCER, immediate family (within the walls of the home) or employer.
What is the limit on Controlled Business?
25% of the producer’s total commissions - 12 month period
Oklahoma Non-Resident Qualifications:
- Resident of another state - license in good standing
- Be competent, trustworthy and financially responsible with good business and personal reputation. AKA NO CONVICTION OF A FELONY
- Be at least 18yo
- Pay OK fees
- Have an insurance appointment (sponsor) - with the exception of Insurance Adjusters
- Maintain resident license in home state
- Reciprocity waives OK exam if state exposures are the same
How long must a licensee (producer, adjuster, surplus line) maintain policy records?
3 years
How long does a producer/adjuster have to notify the OID if there has been a change of legal name, mailing address or email address?
30 days
$50 fee if not before 30 days
Must a producer notify the OID in the event of an email address change?
Yes - within 30 days
$50 fee if not before 30 days
Must a producer notify the OID if they get married?
No - unless there was a change of name
In what instance must a producer/adjuster notify the OID of a change?
- legal name
- address
- email address
- CONVICTION of a felony
Must a producer notify the OID if they have been charged with a felony?
No - only if they are convicted
How much is the fee if a producer fails to notify the OID of an address change, name change, email address change or the conviction of a felony?
$50 after 30 days
How long does a producer have to notify the OID of a change (name, email, address, felony conviction) before a fee is assessed?
30 days
After the $50 fee has been charged, how many days does the producer have before they are charged another fee? How much?
45 days - $100 - 1,000
Failure to notify OID of address change - what happens, and when?
After 30 days - $50 fee
45 days after the end of the 30 days - $100 - 1,000 fee
Who must notice be give to in the event that the OID suspends/revokes/non-renews a license?
- Licensee
- All appointing insurers
- NAIC
- Other states where producer/adjuster is licensed
Who does the OID NOT have to notify if they suspend/revoke/non-renew a license?
- Insureds
- Clients
- Claimants
Does the OID notify insureds if they suspend/revoke/non-renew a producer/adjuster’s license?
NO
They notify licensee, all appointing insurers, NAIC, and other states where producer/adjuster is licensed.
What are Five major reasons the OID might suspend/revoke/non-renew?
- Providing incorrect, incomplete or untrue info on app
- Convicted of felony
- Forging another’s name on an insurance document
- Failing to pay court-mandated child support
- Failing to pay OK income tax
If a producer is accused of a crime, can the OID suspend/revoke/non-renew their license?
NO - must be convicted of a felony
If a producer has unpaid parking tickets, can the OID suspend/revoke/non-renew their license?
NO
If a producer files for personal bankruptcy, can the OID suspend/revoke/non-renew their license?
NO
If the OID suspends/revokes/non-renews a producer/adjuster license what fine may be leveled against them?
Civil Penalty - $100 - 1,000
If a producer/adjust continues to transact insurance after their license has been suspended/revoked/non-renewed, what are the penalties?
Felony Charge -
Criminal penalties:
- up to $5,000
- 1-5 years in jail
- OR a combination
If a person who was never licensed is caught transacting insurance, what are the penalties?
Misdemeanor Charge
Criminal penalties:
- up to $500
- 6months - 1year in jail
During a Producer’s (Agent’s) biennial term, what are the CE requirements?
24 hours TOTAL - SAME AS ADJUSTER
- 19 CE hours in subjects the producer is licensed in
- 3 CE hours in ethics
- 2 CE hours in legislative update
During an Adjuster’s biennial term, what are the CE requirements?
24 hours TOTAL - SAME AS PRODUCER
- 19 CE hours in subjects the producer is licensed in
- 3 CE hours in ethics
- 2 CE hours in legislative update
During a CSR’s biennial term, what are the CE requirements?
13 hours TOTAL
- 8 CE hours in licensed subjects
- 3 CE hours in ethics
- 2 CE hours in legislative update
Who doesn’t have CE requirements?
non-resident producer/adjusters, limited ins rep, surplus lines broker
What is the CE Carry Over:
Up to 6 CE hours in excess may be carried forward to the next biennial term
What are the Three penalties for not completing CE hours?
- suspend/non-renew
- double license renewal fee
- civil fine - up to $500
What can the OID NOT do if you do not comply with CE hours?
- additional CE hours
- Community service
What are the Three methods for fulfilling CE hours?
- Attend - seminar - NO TEST - 50 minutes of class time = 1hour
- Teach - NO TEST
- Self-study - correspondence or online - MUST PASS A TEST
Is writing an article considered completing CE hours?
NO
What must a CE provider do after completion of a producer/adjuster/CSR’s CE hours?
- Certificate of completion
2. maintain records for 4 years
May a producer/adjuster/CSR complete the same CE course after two years?
Yes
Definition of Defamation?
false or malicious info FOR THE PURPOSE OF INJURING ANY PERSON ENGAGED IN THE INSURANCE BUSINESS
Definition of Boycott, Coercion, Intimidation:
entering agreement that would result in monopoly
Discrimination IS permitted for individuals with increased hazards based on which Four factors?
- ages
- gender
- marital status
- driving record
Definition of twisting:
misrepresentation to persuade in individual to surrender an insurance policy
Definition of Rebating:
offering to make an insurance contract using illegal inducement
What are Five examples of illegal inducement that might be used in rebating:
- guaranteeing dividends
- prizes/tangible property in excess of $100
- premature disposal of a premium note
- stocks, securities or profits from securities
- OFFER OF EMPLOYMENT
Five actions that ARE NOT considered an illegal inducement with regard to selling an insurance contract?
- Splitting commision with licensed producer
- dividends returned by ins co
- premiums returned based on loss history
- premiums reduced
- employees receiving commission for policies on their own lives
Is it allowable for an insurer to use aftermarket/used parts to settle a claim?
Yes
Failing to fully disclose to first party claimants all BENEFITS and/or coverage under a policy:
Prohibited Practice - Unlawful
Penalty: $100 - $5,000
Failing to adopt and implement reasonable standards for “PROMPT” INVESTIGATIONS:
Prohibited Practice - Unlawful
Penalty: $100 - $5,000
Not attempting, in GOOD FAITH, to PROMPTLY, FAIRLY, and EQUITABLE SETTLE CLAIMS when coverage is clear:
Prohibited Practice - Unlawful
Penalty: $100 - $5,000
Failing to keep complete record of complaints up to 3 YEARS:
Prohibited Practice - Unlawful
Penalty: $100 - $5,000
Requesting a refund of a claim payment made to the claimant after 24 months from time of payment:
Prohibited Practice - Unlawful
Penalty: $100 - $5,000
What is the Civil Penalty for PROHIBITED PRACTICES?
Penalty: $100 - $5,000
What is tied to the date of the loss?
NOTHING
Within how many days must an insurer respond to the claimant in the even of a loss?
30 days
Notification given (by claimant) to the ________ is considered notification to the __________.
PRODUCER
INSURER
What is the INSURED’s responsibilities concerning acceptance or denial of a claim?
- complete “PROOF OF LOSS
- within 60 days OF RECEIPT OF BLANK FORMS
- no need to be notarized
Must a Proof of Loss form be notarized?
NO
- submitted within 60 days of receipt of blank forms
How many days does the insured have to complete the Proof of Loss form and from what date?
60 days
- from receipt of blank forms
How many days does the Insurer have to notify the insured as to whether the claim is accepted or denied?
45 days
Must an insurer settle a claim within 45 days?
NO - it must accept or deny the claim, not settle it
How long does an insurer/producer/adjuster have to respond to an inquiry from the OID about the status of a claim?
30 days
How long does an insurer/producer/adjuster have to respond to an inquiry from the claimant about the status of a claim?
30 days
If the insurer fails to comply with an inquiry into the status of a claim by the OID or a claimant results in:
- $100 - $5,000 fine
- Certificate of Authority could be revoked
What are the Three major purposes of the OK P&C Insurance Guaranty Association?
- Provide a mechanism to pay claims and unearned premiums
- Avoid excess delays in claim payments
- Reduce insolvencies by early detection
Does the OK P&C Insurance Guaranty Association determine rates?
NO -
Who does the OK P&C Insurance Guaranty Association protect?
- admitted (authorized) insurers - domestic, foreign, alien
Who directs the OK P&C Insurance Guaranty Association?
12 member board of directors
Is the OK P&C Insurance Guaranty Association under the control of the OID?
NO
What are the three major sources of funding for the OK P&C Insurance Guaranty Association?
- State
- Sales Tax
- Insureds
How is the amount that member insurers are charged calculated for the OK P&C Insurance Guaranty Association?
direct proportion to the insurer’s premium volume
Who does the OK P&C Insurance Guaranty Association NOT protect?
- non-admitted (unauthorized) insurers - surplus lines
- self-insured
- Surety Bonds
- Fraternal
What are 3 separate accounts that the OK P&C Insurance Guaranty Association projects:
- WC
- Automobile
- All other types of P&C
Three maximum obligations the OK P&C Insurance Guaranty Association has:
- FULL amount of WC claim
- up to $10,000 for return of UNEARNED premium
- up to $150,000 PER CLAIMANT for other covered P&C claims
Notification must be made within ___ days of ordering an investigative credit report.
3 days
If a producer/adjuster orders credit reports under false pretense, they are subject to:
CRIMINAL PENALTIES
With regard to the OK Information and Privacy Protection Act, what does Opt-Out refer to?
Opt Out gives the insured (consumer) the right to opt-out or limit the sharing of nonpublic information
