Distribution Systems - Section 2 Flashcards
Independent agencies/agent
Appointed to represent several insurers. Self - employed
Exclusive/captive agencies/agent
appointed to represent a single insurer or a group of related insurers. Self employed
Direct writer
Uses sales representative who are considered employees, not self-employed
Direct mail/response
no agent
Agents actions
Insurer’s principal’s actions
Producers
agents, brokers, solicitors = field underwriters
Property & Casualty or Personal Lines Licenses can transact as an :
agent, broker or solicitor, depending on the type of appointment on file with the department of insurance and the relationship/contract with the insurer
Solicitor’s license
There is NO solicitor’s license
- solicitor is a position that can be held with a property & casualty or personal lines license
3 types of authority
1 - express authority
2- implied authority
3- apparent authority
Express authority
explicit, definite agreement (WRITTEN)
Implied authority
not expressly granted under an agency contract, but it is actual authority that the producer has to transact (NOT WRITTEN)
Apparent authority
the authority a producer seems to have because of certain actions taken on his or her part
Preselection
Preselect good risks
-producer should disclose all material info to insurer on the application so home office underwriter can make a fair underwriting decison
Post-selection
underwriter evaluates and rates a risk based on information in the application as well as other sources
-after prospective insured is chosen by the producer and the app is submitted, the home office underwriter begins the process of posts election
Life - only agent
- Life insurance
- Accident and health insurance
- Life and accident and health insurance
Accident & health agent
act on behalf of insurance coverage for sickness, bodily injury or accidental death and may include benefits for disability income
Life and disability insurance analyst
for a fee, advises advise any person insured under named as beneficiary of or having any interest in, a life or disability insurance contract
Insurance agent
person authorized, by and on behalf of the insurer to transact all classes of insurance other than life, disability or health insurance
Life license
person authorized to act on behalf of a life insurer or disability insurer to transact life insurance, accident and health insurance and life and accident and health insurance
Insurance broker
Person who for compensation transacts insurance other than life, disability or health insurance
Insurance solicitor
a natural person employed to aid an insurance agent or insurance broker transacting insurance other than life, disability or health insurance
A person shall not:
solicit, negotiate or effect contracts of insurance unless the person holds a valid license
Person who has been convicted of a:
felony, breach of trust, dishonesty or insurance crimes is prohibited from engaging in insurance activities without written consent
Prohibited acts
Knowingly, with intent to deceive make a false material statement or report in connection with any financial report presented to any insurance regulatory agency
2 - willfully embezzling any of the monies funds or premiums of any person engaged in the business of insurance
3 - Knowingly making any false entry of material fact in any report of statement with the intent to deceive any person about the financial condition of such business
4 - by threats of force or threatening letter corruptly influencing obstructing or impeding the proper admin of law
Insurance agent
means a person authorized by and on behalf of an insurer to transact all classes of insurance
Insurance solicitor
a natural person employed to aid an insurance agent or broker in transacting insurance other than life insurance
- solicitors represent the agent or broker who appointed them
- works only property & casualty no life
errors and omissions insurance
- written on an occurrence basis, most policies are now written on claims made basis, which are more restrictive
- designed to protect the insured against legal liability resulting from negligence
types of losses commonly covered and not covered (errors and omissions
-a type or professional liability that is designed to protect the insured against legal liability resulting from negligence
The need for the coverage (errors and omissions policies)
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)
Records insurer and agents must maintain
- to preserve records for a minimum of five years
Records may be:
originals, carbon or facsimile copies, microfilm copies or electronic date processing records
Fiduciary responsibility
when they deal with, handle, supervise or hold in trust and confidence the affairs of another, especially when it pertains to financial matter
Producer fiduciary duties is:
any such person who diverts those fiduciary funds to their own use is guilty of theft
A managing general agent
licensed property broker who has a written management contract and an appointment on file with the commissioner with one or more admitted insurers covering business transacted by the insurer.
Admitted
means entitled to transact insurance business in this state
Non-admitted
not entitled to transact insurance business in this state
Domestic
organized under the laws of this state
Foreign
not organized under the laws of this state
The term alien insurer
means a foreign insurer organized under the laws of any jurisdiction other than a state of the US
Home state insured
person whose home state is CA may negotiate and effect insurance to protect themselves against loss, damage or liability with any eligible non-admitted insurer
Surplus line broker
shall file a bond to the people of the state of CA in the sum of $50,000.
Marketing or sales
this department is responsible for the distribution of an insurer’s products in the marketplace
Underwriting
this department is responsible for the evaluation selection and classification of insurable risks
Claims
this department receives, evaluates and handles claims by claimants for payment
Actuarial
this department uses mathematics and statistics to develop morality and morbidity tables
Mutual insurer
although a mutual insurer is a corporation, there are no stockholders. Ownership rests with the policyholders
Stock insurer
a stock insurance company issues shares to the stockholders who provided capital for the insurer
Reciprocal insurers
unincorporated groups of individuals whose provide insurance for one another by exchanging reciprocal agreements of indemnity
Risk Retention Groups (RRGs)
formed because some commercials clients found that they could not find an insurer who would write their commercial liability at all or a price they could afford
- RRG is a risk bearing entity that must be chartered and licensed as an insurance company in only one state, its charter state or state of domicile, whose primary purpose is to assume and spread the commercial liability risk of its members
- NO FIRE OR PROPERTY INS*
The purpose of CA Risk Retention Act are to
A - regulate the formation and operation or risk retention groups
B - promote the formation and operation of risk retention groups and purchasing groups in the state
C - authorize the formation of a risk retention group for directors and officers of corporations
