Ethics And Laws Flashcards
Code and ethics
Ethics is a code of conduct based upon an accepted standard of right and wrong. Specifies and explains what is and not acceptable in regards to behaviors or practices. The California insurance code and the California code of regulations identify many illegal and unethical practices. However, these are not complete guide to ethical behavior for all situations. Insurance agents have the responsibility to be aware of the insurance laws and requirements designed to protect consumers
The California insurance code
-Prevents insurer Insolvancy and fraud in the conduct of the insurance business or by individuals
-insures that policies are reasonably priced and widely available in most lines of insurance
-establishes procedures that guide the operation of insurance companies, and the activities of agents, brokers, and other licensees.
-provides the authority needed by the insurance commissioner to oversee insurance agents and companies
The California code of regulations
Insurance code does not always define how the laws are enforced. The commissioner in force is the code by writing in adopting regulations that specify the manner of enforcement or provide details that are not explicitly cited in the code. The various regulations enacted by the commissioner are found in the California code of regulations.
The insurance commissioner
The insurance commissioner is elected by the people and may serve up to two 4 year terms
Purpose of certificate of authority is to
Permit an insurance company to transact business
Surplus lines broker
May not issue any binders, other evidence of coverage, or the policy itself without prior written approval from the insurer

An applicant for a surplus lines brokers license must
- Demonstrate competency by holding a license to act as a property broker agent or casualty broker agent
- file a $50,000 bond to the people of the state of California, unless the broker plans to transact only on behalf of a licensed surplus line broker organization
Consequences of being issued a policy by non admitted insurer
-Nonadmitted insurer‘s are not subject to the financial solvency regulation and enforcement that applies to California license insurers
Non-admitted insuresrs do not participate in any of the insurance guarantee funds created by California law, and therefore, these funds will not pay the insurance claims, or protect the insurance assets if the ensurer becomes insultant and is unable to make the payments as promised.
The following are considered misdemeanors with regards to anoadmitted ensure, except when performed by a surplus lines broker
-Transacting insurance business in the state as an agent for a nonadmitted insurer
-Advertising and non-admitted ensure in the state
-Assisting a nonadmitted insurer to transact business in the state
A penalty of $500 along with a fin of $100 per month for each month of violation continues will be assessed against those found violation
A commissioner is responsible for examining every domestic insurer in California at least once every
 5 years
Market conduct regulations include state laws that regulate all of the following
Underwriting, rate making, and claims handling
Funds controlled by the guarantee Association are used for
Paying claims of an insolvant insurers
Unfair practices
The unfair practices article defines unfair and deceptive acts and unfair methods of competition. These practices apply to reciprocal insurers, Lloyds insurers, fraternal benefit societies, life agents, broker agents, surplus line brokers, and special lines surplus line brokers, as well as other persons engaged in the business of insurance.
Unfair discrimination
Making or permitting any unfair discrimination between individuals of the same class and equal expectation of life in the rates charge for any contract of life insurance or life and annuity, in the dividends or other benefits payable, or in any other of the terms and conditions of the contract
Failure or refusal to accept an application
No admitted insurer can fail to accept an application or cancel insurance under conditions less favorable to the insured, except for reasons that apply to all persons of the same marshal status, gender, race, color, religion, national origin, or sexual orientation. These characteristics may not be the sole basis for higher rate, premium, or charge
Income and housing
And insure me not fail too except an application for property insurance, fail or refuse to issue a property policy to an applicant, or cancel a property policy based on a level or source of income of the individual or group residing on the insured property and based on the receipt of housing assistance from local, state, or federal government
Deceptive advertising
Advertising insurance that an insurer will not sell
Advertising of California insurance guarantee association
Making or disseminating in any publication or other advertising device a statement that a named insured or specified ensures are members of the California insurance guarantee association and are insured against insolvency
Unfair trade practice includes
Mis presenting the benefits of an insurance policy, false and treating and insurers records, discriminating between persons of the same class that essentially have the same hazard
Entering into an agreement that would result in unreasonable restraint of, or monopoly in, the business of insurance is considered
Boycott, Coercion, or intimidation
 penalties
The commissioner has the power to investigate the affairs of any person engaged in the business of insurance to determine whether such person has been or is engaged in any unfair method of competition or unfair or deceptive act or prohibited practice. If it is believed that a person has violated a trade practice, the commissioner will issue a statement of charges, statement of potential liability for civil penalties, a show cause order containing a statement of charges, and a 30 day notice of a hearing.
If the charges are justified, a civil penalty will not exceed $5000 for each act will be assessed. If the violation is willful, the maximum penalty is $10,000 for each act. Violation of seize and desist order imposes a penalty of up to $5000 per violation or a maximum penalty of $55,000 if violation is willful.
File and record documentation
Insurers are required to maintain claim data so that it is accessible, legible, and retrievable for examination. They must be able to provide the claim number, line of coverage, dates of loss and payment, and date of acceptance, denial, or closing without payment. This data must be available for all open and closed files for the current year and four preceding years.
Property and casualty insurance in California are expected to either affirm or deny a claim within how many days of receiving proof of the claim?
 40 days
Penalties for fraud
Violators will be subject to imprisonment in the county jail for one year or state prison for two, three, or five years, and/or a fine of up to $150,000 or double the value of fraud, which ever is greater. For workers compensation, and employer knowingly making a fraudulent statement of fact material to the premium, rate, or cost of a policy issued by state compensation insurance fund is subject to the same penalties, except that the fine may be up to $50,000 or double the value of fraud, which ever is greater. If the violator has prior felony conviction of the same offense, there will be an additional two-year sentence for each prior conviction.
Transacting without a license
Any person who acts, offers to act, or assumes to act in capacity for which your license is required without holding and license is guilty of misdemeanor, punishable by a fine of up to $50,000 and/or one year in jail.
Continuing education requirements
An individual licensed as a property or casualty broker agent must complete a minimum of 24 hours of instruction prior to renewal of the license every two years.
Must complete at least 24 hours including 3 hours of ethics of continuing education
An agent‘s license wore main active as long as all of the following requirements have been met
Renewal fees are paid, a notice of appointment is on file with the commissioner, and continuing education is complete
Termination of license
An individual license Will automatically terminate:
- Immediately upon the death of the licensee
- if the license has not been renewed within 12 months following its expiration
An organizational license will automatically terminate if there is
A change in membership of partnership underlined a license, a change in the principal officers of a corporation or LLC, upon termination of an association or dissolution of partnership or corporation, no license principal associated with the organization
 expired license
An application for a no of an expired license without retesting may be filed after the expiration date until the same month and day of the next succeeding year, providing the delinquent fee for that year is paid. The late penalty through renew an expired license is there a new fee plus 50% penalty fee
 license renewal
All licenses renew every two years on the last day of the month and which the license was originally issued. A licensee who has applied to renew a license will be entitled to continue operating under the existing license for 60 days after it’s specified expiration date, or until notified by the department that the renewal application is deficient, which ever comes first.
Every individual license as an insurance agent or broker who transactions insurance in the state and advertises insurance on the Internet most identify the following information
The persons name as filed with the commissioner, The person state of domicile and principal place of business, the persons California insurance license number, the word “insurance”
Insurance names
The commissioner may disapprove of the use of true or fictious names that are misleading, but not a bona fide natural name of an individual.
After expiration or cancellation, agents and brokers must keep records of every insurance transaction for at least how many years
5 years
All licensees must report background information to the California Department of insurance. The following information must be reported
Suspension of a provisional license, misdemeanor convictions, and misappropriation of funds
Ethical conduct
The essential principles of insurance code of ethics
- place the customers interest first
- Know your job and continue to increase your level of competence
- Identify customers needs and recommend products and services that meet those needs
- Accurately and truthfully represent products and services
- Use simple language that the layman can understand
- Stay in touch with customers and conduct periodic coverage reviews
- Protector confidential relationship with your client
- Keep informed of and obey all insurance laws and regulations
- Provide exemplary service to your clients
- Avoid unfair or in accurate remarks about the competition
A contract for pet insurance may be voided from the beginning, and all premium refunded, if returned within how many days after being issued
30
If the commissioner believes a property and casualty broker agent has failed to maintain bank records, the commissioner may issue an order requiring the broker agent to establish and complete those records within what time period
60 days
Any misdemeanor charges against a broker agent must be reported within
30 days
