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Contract Law Flashcards

1
Q

The Insurance Contract

A

A legal agreement that describes the responsibilities for the insurance company and the insured.

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2
Q

The Doctrine of Utmost Good Faith

A

Mutual reliance on truthfulness

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3
Q

The Binder

A

Provides immediate temporary insurance protection (30/60)

•Evidence of temporary coverage

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4
Q

Listed on The Binder

A
  • The Insurer’s name
  • The effective date of coverage
  • The policy limits
    * Never premium
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5
Q

Three Ways a Binder Can Expire

A
  • Policy is issued
  • One day after a cancellation letter is received from the insurance company
  • Date of expiration when a policy is not going to issued.
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6
Q

Five elements of a legal contract

A
  • Offer
  • Acceptance
  • Consideration
  • Competent Parties
  • Legal purpose
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7
Q

Representation

A

A statement made in an application that is represented as being correct to the best of his or her knowledge at the Time of the application.

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8
Q

Warranty

A

A statement of absolute truth that A condition exist and will continue to exist throughout the policy

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9
Q

Material misrepresentation/material fact

A

A lie that impacts the rate or causes the policy to be rejected

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10
Q

Misrepresentation

A

A written or verbal lie

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11
Q

Concealment

A

Intentionally withholding information; telling a partial truth or hiding information on a material fact.

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12
Q

Fraud

A

Deliberate misrepresentation for financial gain. Attempt to benefit from a lie financially.

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13
Q

Accidental unexpected uncertain

A

Never intentional or predictable

• exception: below the age of reason 12 and younger

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14
Q

Measurable/calculable

A

Definite and verifiable
• amount
•place
•time

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15
Q

Meet the law of large numbers

A
  • Permits and ensure to predict.
  • The greater the numbers the more accurate statistics.
  • large numbers of homogeneous units/risks.
  • Groups with the same perils.
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16
Q

Underwriting

A
  • The process of selecting, classifying and pricing risk for insurance coverage.
  • The most important piece for underwriting is the application.
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17
Q

Unfair discrimination

A 
Illegal treatment based on criteria that does not measure the risk. 
•Color 
•creed 
•religion 
•origin 
•disability
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18
Q

Adverse selection

A

The propensity for those with a greater need to purchase insurance while those with a lesser need are less apt to purchase coverage.

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19
Q

Fair credit reporting act federal government. FCRA

A

Protects consumers privacy
•Equifax
•Trans Union
•Experian.

Federal law regulates:
•Collection
•distribution
•use of consumer credit information.

•Credit reports can only be ordered for underwriting insurance OK so

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20
Q

The insurers Obligation when credit reports are used for the underwriting

A
  • Advise the applicant a credit report will be obtained.
  • Must notify the consumer when there is an adverse section.
  • Not responsible for correcting inaccuracies.
  • Must provide the consumer with the reporting agency to correct their in accuracies (Equifax)
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21
Q

Time frames

A
  • Credit reports can be reviewed back to seven years.

* Bankruptcy can be review back to 10 years.

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22
Q

TRIA

A
  • A federal program that provides coverage from losses resulting from an act of terrorism.
  • Protects consumers by ensuring available and affordable insurance.
  • Protection for commercial insurance only.
    * Not health insurance
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23
Q

Requirements to become commissioner of insurance

A

Gubernatorial appointment/not elected and no set term.
•He serves as the leisure/pleasure of the governor.
•Required to post a $50,000 bond.

•Insurance knowledge and skills. •NAIC(National Association of insurance commissioners) participation

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24
Q

Admitted/Authorized

A

•The commissioner grants the company the right to do business in Indiana.
•Issued a certificate of authority(COA)
The company must have a COA when admitted to do business.

Certificate of authority-A document that is like an agent or broker‘s license but for an insurance company.

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25
Q

To be admitted a company must be:

A
  • Solvent – sound finances/capital money to (pay claims).
  • Have a sound business plan.
  • Integrity-competent agents – good character
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26
Q

License compliance officer

A

Responsible for ensuring the company and all producers agent/broker adhere to state insurance laws.


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27
Q

Insurer origin

A

A classification for where an insurance company was charted, formed, don’t masiled or incorporated

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28
Q

Domestic insurer

A

An insurance company charted or formed in this state (Indiana)

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29
Q

Foreign insurer

A

An insurance company charted or formed outside of this state Indiana, but inside the United States/or US territory.

  • Guam
  • Maryland
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30
Q

Alien insurers

A

An insurance company charted or formed outside of the United States.

  • Mexico
  • Canada
  • European country
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31
Q

Examination

A

Ensures companies meet basic standards

      Admitted companies can be examined whenever the commissioner wants. Admitted companies must be examined every five years.

Domestic insurers-must be examined the commissioner is prohibited from waving examination.

Foreign/alien insurers-their examination can be waived by the commissioner when their company meets NAIC guidelines

The commissioner is never prohibited from the examination of any company

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32
Q

Rehabilitation

A

Due process=notice &hearing

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33
Q

Liquidation

A

All assets are so to pay unpaid policyholder claims

34
Q

P and C guaranty association

A

All licensed property and casualty insurance in Indiana must participate.

  • Pays outstanding claims when the company cannot be saved insolvent.
    * $100,000 per claim
    • $300,000 per occurrence.
35
Q

Commissioner duties

A

•Enforces state insurance laws.

  • Imposes fines to an agent/broker.
  • When possibly guilty/guilty of a violation.

•Issues cease and desist orders to an agent/broker for: It is not issued when a misdemeanor has been committed

36
Q

Issues temporary agent/broker (producer)license

A

Issued: allows a person to act on behalf of a producer agent/broker in any of the following events:
•death
•disability
•deployment.

Valid: 180 days.

37
Q

The commissioner cannot

A
  • Fine policyholders.
  • Incarcerate/prosecute an agent/broker. •Past state insurance laws.
  • Establish new insurance companies. •Ensure insurance coverage is available in all situations.
38
Q

Fiduciary

A

A person in a position of trust who typically takes care of someone’s money.

39
Q

Limited lines producers

A

Only one type of specialty insurance without usually requiring an exam or a continuing education.

40
Q

Title

A

•Must take a 10 hour prelicensing course. •Seven hours of continuing education/2 years

41
Q

Prearranged funeral insurance

A

Must complete a one time 10 hour course

42
Q

Crop

A

•Property and casualty producer exam. •Seven hours of continuing education/2 years

43
Q

Insurance consultant

A

•License to sale insurance advice for a fee. •Never act like a producer (agent/broker)

44
Q

Non-admitted/Unauthorized

A

The company does not comply with state insurance regulations

45
Q

Surplus lines producer

A
  • A producer that sells insurance for companies that are not authorized (unauthorized/non-admitted) by the IDOI
    * first must try to place the insured with an admitted company. Even if the premium is higher.
  • Must pay a gross premium tax of 2.5% on all policies sold two times a year to the IDOI
46
Q

Resident producer license

A

 issued by the commissioner of insurance

47
Q

Resident producer requirements

A
  • Pre-licensing class completed.
    • The certificate is valid for six months.
  • Live or work in the state of Indiana. •Application submitted-paid licensing fees through sircon .
  • Competent, trustworthy and financially responsible.
  • Eighteen or older.
  • Successfully passed state exam.
48
Q

Producer appointments/termination

A
  • An agreement between the producer and the company.

* Must be appointed by a company before engaging in business (sell/service/negotiate)

49
Q

Nonresident producer

A

Requirements:
•complete the NAIC nonresident producer license application.
•Pay nonresident fees.
•An exam is not required.

50
Q

Licensed producer moving to Indiana from another state

A
  • The agent is required to surrender the current resident license to their current home state.
    * Within 90 days.
  • An exam not required.
51
Q

Controlled business

A

Ensures a producer sales policies to the public.
•The producer and their immediate family.
•Employers or employees of the producer.

52
Q

Limit

A

Cannot exceed 25% of the total commission earn in a 12 month period

53
Q

Acting as a consultant

A

A producer can act like a consultant when prior to the transaction, the policyholder: •is giving a full disclosure about how the producer will be compensated.
•Signs consulting forms.

54
Q

Payment of commissions

A
  • To receive a commission the producer must have a license.

* The producer may split a commission with another licensed producer.

55
Q

Deposit premium/premium audit

A

Described as the initial payment

56
Q

Sircon: State insurance regulators connection

A

Timeframe – 30 days
Fine – $100
•possible suspension of the producers insurance license

57
Q

License renewal process

A
  • Renews every two years
  • Pay the renewal fee and complete 24 credits of CE (continuing education)
  • It is your responsibility to track your CE and be aware of your license status and sircon
58
Q

License lapse expire

A

Yes:

  1. pay renewal.
  2. Pay 3X renewal.

No:

  1. pay the renewal.
  2. Penalty 3 X the renewal.
  3. Take CE and regulations exam
59
Q

Administrative action

A

30 days after the final disposition of the matter

60
Q

Criminal action

A

Must be reported not more than 30 days after an initial pre-trial hearing date

61
Q

Violations and fines

A

$50-$10,000
Judicial review: if found guilty/a license is declined the producer must request a hearing with the commissioner within 63 days. Commissioner must conduct a hearing within 30 days.

62
Q

Unfairly discriminating/unfair discrimination

A

Individuals of the same class and equal expectation of live should be charge similar rates

63
Q

Malfeasance

A

Wrongdoing, especially by public official

64
Q

Intimidation

A

The result of an unreasonable restraint of or monopoly in the business of insurance to boycott and Coercion

65
Q

Boycott

A

A Plaines refusal to deal with a disfavor purchaser or seller

66
Q

Coercion

A

A car with someone in the insurance business applies physical or met force or threat of force persuade another to transact insurance

67
Q

Rebates and kickbacks

A

Money may never be given

68
Q

Violation

Failure to follow regulation

A

Failing to act promptly

69
Q

Failure to/denying/refusal:

A
  • Affirm/deny coverage within a reasonable time after proof of loss is completed 60 days.
  • Informed the named insured about the right to select external parts when a car is five years old or newer.
  • Delaying a payment when proof of loss is submitted within the required time 60 days.
  • Denying a claim without investigation. •Attempting to settle a claim for less than reasonable.
70
Q

Unknowing

A

Minimum: $25,000 per violation. Maximum $100,000. 12 month period.

71
Q

Knowing

A

$50,000 per violation minimum. Maximum $250,000. 12 month period.

72
Q

Violation of the cease and desist order-issued by the commissioner of insurance

A

Additional fine up to $25,000 per violation

73
Q

Reckless violations of the Indiana insurance code/criminal violations

A
  • Class A misdemeanor.
  • $5000 fines.
  • One year in jail
74
Q

The commissioner

A

Must notify the insurer about a complaint – 10 days

75
Q

The insurer

A

Must respond back about the complaint to the commissioner – 20 days

76
Q

The commissioner

A

Must notify the insurer when guilty and must give the insurer notice to prepare for a hearing – five days

77
Q

The commissioner

A

Must publish all complaints – annually

78
Q

Fraudulent claim statement/statue

A

Fraud equals felony misrepresentation equals misdemeanor

79
Q

Entities notify when fraud is suspected by the company

A
  • Department of Insurance.
  • Commissioner of insurance.
  • NAIC
80
Q

Lloyds of London

A

Reinsurance is the most important contribution

Contract Law/Underwriting (1 decks)

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