Ch. 10 - Insurance Regulation Flash Cards
On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. What is the company guilty of?
Misrepresentation
When would a misrepresentation on an insurance application be considered fraud?
When it is intentional and material
Who may share in the commission from the sale of an insurance policy?
Only producers licensed for the type of insurance transaction
An agent offers a client free tickets to a sporting event in exchange for the purchase of an insurance policy. What is the agent guilty of?
Rebating
What illegal act does a producer commit when the producer represents a policy in a more favorable light than the policy really is?
Misrepresentation
Which type of misrepresentation persuades an insured, to his or her, detriment, to cancel, lapse, or switch policies from one to another?
Twisting
If a producer makes maliciously critical statements about another insurer, what is this illegal practice called?
Defamation
What type of insurer is formed under the laws of another state?
Foreign
Two individuals who are in the same risk and age class are charged different rates for their insurance policies due to an insignificant factor. What is this called?
Discrimination
To whom may a certificate of authority be issued?
To an insurer authorized to transact business in this state
What is the purpose of a cease and desist order?
To prevent a producer or insurer from further violating laws for transacting insurance.
Who owns stock companies?
Stockholders
A state-issued document empowering an insurance company to become an admitted insurer is called what?
Certificate of Authority
If the Commissioner/Superintendent finds a licensee engaging in an unfair method of competition or an unfair practice, what order will be issued?
Cease and desist order
What are the most common penalties for violations of insurance statutes?
A cease and desist order, a fine, and license suspension or revocation
What type of licensee represents the insurance company?
The agent
What are producers required to do in order to renew their license?
Complete continuing education hours and pay a renewal fee.
If an insurer meets the state’s financial requirements and is approved to transact business in the state, it is considered what type of insurer?
Authorized or admitted
Insurers are classified according to their domicile. What are the three types of insurers?
Domestic, foreign, and alien
Who must be notified of a producer’s change of address?
The Department of Insurance (Commissioner, Director, or Superintendent)
When is controlled business legal?
When the commissions from controlled business do not exceed the aggregate commissions on all the other business (specific limits may vary from state to state)
The requirement that agents must account for and promptly remit all insurance funds collected is known as what type of agent responsibility?
Fiduciary
When can the Commissioner or Director examine insurers?
Whenever deemed necessary, but at least once every 3 to 5 years.
What document is required for an insurance company to transact insurance?
Certificate of Authority
Who is considered a nonresident agent?
An agent who resides and is licensed in another state, but who is authorized to transact insurance in this state.
Who is responsible for the cost associated with the examination of the insurers?
The insurer who is being examined
What is controlled business?
Insurance on the producer’s own life or property, or the lives or property of the producer’s family or business associates.
Who is an insurance agent?
A person authorized to sell, solicit, and negotiate insurance contracts.
In general, who can be excluded from producer licensing and examination requirements?
Insurance company officers, directors, or any other employees who do not transact insurance and who do not receive commissions for their services (usually, their responsibilities included administrative, executive, or clerical).
If an insurer holds a Certificate of Authority, it is known as what type of insurance?
Authorized or admitted
The authority given by an insurer to an agent to transact insurance or adjust claims on the insurer’s behalf.
Appointment
To stop or discontinue
Cease and desist
Payment to the agent by the insurance company for placing insurance, usually a percentage of the policy premium.
Commission
Not subject to an obligation.
Exempt
An offer that attempts to influence the other party.
Inducement
Unable to meet financial obligations
Insolvent:
Conduct that is contrary to community standards of justice, honesty, or good morals.
Moral turpitude
A mutual interchange of rights and privileges.
Reciprocity
Restoration to the original condition or repayment.
Restitution
A formal written law enacted by legislature; insurance statutes can be found in the state Insurance Code.
Statute
Enacted or regulated by a statute.
Statutory
The head of the State Department of Insurance
Superintendent
Insurance that is not available from admitted insurers.
Surplus lines insurance
Examine domestic insurers time frame:
3 years
Hold hearing after issuing a cease and desist order:
15 days
Age to apply for license:
18 years old
Required prelicensing education for each line of authority
20 hours
Period of a temp license:
180 days
Time period for license reinstatement after a lapse
12 months
Time period to file a notice of agent’s appointment with the Superintendent
30 days
Time period to notify Superintendent of appointment termination
30 days
Time period to send copy of notification to agent
15 days
Time period for agent to file written comments concerning notification of appointment termination
30 days
CE required every 2 years
24 hours
CE credits required in ethics:
3 hours
Time to report change of address:
30 days
Time to report admin actions or criminal prosecution:
30 days
Agents cannot seek a new license after surrendering previous existing license for how long?
5 years
Civil penalty per violation in Insurance code
$25,000
Fine for acting without a license -
$25-$500
Fine for failing to file proper fees, taxes, or assessments
$100-$500
Civil penalty for violating the Superintendent’s cease and desist order
$10,000
