General Insurance Flashcards
1
Q
Pure risk
A
The chance of loss with NO possibility of gain
2
Q
Speculative risk
A
(Gambling) a risk situation that offers the opportunity for gain
3
Q
Peril
A
A cause of loss
4
Q
Hazard
A
Something that increases the risk
5
Q
Moral hazards
A
The attitudes and habits of an individual (character and reputation)
6
Q
Morale hazards
A
Individuals indifference (apathy) toward loss. A careless person
7
Q
Law of large numbers
A
The larger the number of separate risks of a like nature combined into one group, the more predictable the number of future losses of that group within a given time period
8
Q
A loss exposure
A
Condition that could result in a loss
9
Q
Identifying potential risk situations
A
The application: provides general information about the applicant
Physical examination :reveals hazards related to the health of the applicant for the use
consumer credit reports: include information about the applicants finances, background, habits, and reputation
10
Q
Large number of homogeneous units
A
Risks are not considered insurable unless the insurance company has a large enough number of similar risks and Knows enough about its previous loss experience to be able to predict the future reliably.
11
Q
Loss must be ascertainable
A
The insurer must be able to place a monetary value on the loss.
12
Q
Loss must be uncertain
A
Being unable to predict what is going to happen to the individual exposure unit.
13
Q
Economic hardship
A
The nature of the loss must be such that an economic hardship must occur should the loss occur.
14
Q
Exclusion of catastrophic perils
A
Catastrophic Perils include wars, nuclear risks, and floods. They are excluded from coverage
15
Q
Insurable interest:
A
A person has an insurable interest in another if they would benefit if that other person continues to live.
16
Q
Principle of indemnity:
A
Restores the insured person, in whole or in part, to the condition they enjoyed prior to the loss.
The value is assigned not to the persons life, but to the persons potential earning power
17
Q
Underwriting:
A
The process of examining, accepting, or rejecting insurance risks
18
Q
Agent as underwrite
A
Agents are “frontline” or “field” underwriters
19
Q
Home office underwriters:
A
Evaluates and rate the risk based on the information provided in the application as well as Medical Information Bureau (MIB) reports, med exams, physician statements, special questionnaires, inspection reports, and credit reports
20
Q
Adverse Selection:
A
when clients, due to a particular company’s underwriter standards, take advantage of a situation that ends up costing the insurance company money in excess claims.
21
Q
Profitable distribution of exposures:
A
the risk is transferred from an individual to a group.
22
Q
Contract Law
A
the company has a legally enforceable obligation to make all benefits payable for which premiums have been paid
23
Q
Tort Law
A
tort is civil injury. Most common is neglect: the failure to act as a reasonable person would in the same set of circumstances.
24
Q
Four elements of a contract:
A
- Agreeable, offer and acceptance
- Competent parties
- Legal purpose
- Consideration: exchange of value
25
Doctrine of Adhesion
Any ambiguity will be construed in favor of the insured
26
Conditional Contract
conditions that apply to both parties to the contract
27
Aleatory
the outcome depends upon chance
28
Unilateral:
only one party to the contract, the insurer, makes an enforceable promise to pay a covered claim if the premium has been paid
29
Personal:
concern an individual insured, not the insured's property
30
Utmost good faith:
truth to the best of the client's knowledge, it is assumed that insurance contracts are entered into in good faith
31
Indemnity:
restores the insured person, in whole or in part, to the condition they enjoyed prior to the loss
32
Policy:
the written instrument in which a contract of insurance is set forth
33
Fraud:
an intentional and fraudulent omission
34
Concealment:
neglect to communicate that which a party knows, and ought to communicate
35
Materiality:
the probable and reasonable influence of the facts upon the party to whom the communication is due
36
Representation
- written or oral
- may be made at the time of, or before, issuance of the policy
- altered or withdrawn before the insurance is affected, but not afterwards
- if a representation is false in material point, whether affirmative or promissory, the injured party is entitled to rescind the contract from the time the representation becomes false.
37
Misrepresentation:
shall not cause or permit to be issued, circulated or used, any statement that is known, or should have been known, to be a misrepresentation of the following:
- Terms of policy issued by insurer
- Benefits or privileges promised
- Future dividends payable
- Penalties
38
Six required specifications for all insurance policies
| Policy shall specify:
1. Parties between whom the contract is made
2. The property of life insured
3. The interest of the insured in property insured, if he or she is not the absolute owner thereof
4. The risks insured against
5. The period during which the insured is to continue
6. Either:
- A statement of the premium
- If the insurance is of a character where the exact premium is only determinable upon the termination of the contract, a statement of the basis and rates upon which the final premium is to be determined and paid.
39
Risk
The possibility (uncertainty) that a loss might occur
40
Rescission
to cancel or void a contract and the return of the parties to the position they would have occupied if the contract had not been made
41
Concealment:
whether intentional or unintentional, entities the injured party to rescind insurance.
42
Application
A form on which the prospective insured states facts requested by the insurer
43
Policy
The agreement between the insurer and the insured
44
Rider
A form attached to a policy that modifies the conditions of the policy
45
Cancellation
termination of a contract of insurance mid-term
46
Lapse:
termination of a policy because of failure to pay the premium
47
Renewal:
the automatic continuation of an insurance policy for another policy period
48
Non-renewal:
the discontinuation of an insurance policy at its normal expiration date
49
Grace period:
a period of time after premium date during which a policy remains in force without penalty
50
Rate/premium
the cost per unit charged by an insurer for insurance coverage
51
Earned premium
that portion of the premium paid that the insurer is entitled to for providing insurance coverage
52
Unearned premium
that portion of the premium paid that the insurer is not entitled to
53
Preferred risk
a lower expectation of incurring a loss than a standard risk (Example: applicant who doesn't smoke can expect reduced premium)
54
Standard risk
regarded as average and insurable as standard rates
55
Substandard risk:
regarded as below average (even though they have dangerous occupation, may be insured as substandard risk at higher premium)
56
The Fair Credit Reporting Act:
requires pre-notification of any possible investigation and post-notification if any adverse underwriting action is taken by the company
57
The Medical Information Bureau (MIB)
nonprofit association that maintains medical data on applicants for life or health insurance.
58
Agency
person is authorized to represent and act for another person or corporation
59
An Independent Produce
enters into an agency agreement with one or more insurers
60
Exclusive
producers represent single insurer and are obligated to submit business only to that company
61
Direct response:
sell insurance directly to insured through their own employees, through the mail or via the internet
62
Home service
agents sell industrial life insurance on which premium is usually collected on weekly basis at the home of the policy holder.
63
Fiduciary
a person who is in a position of holding in trust and confidence the affairs of another, especially as it pertains to financial matters
64
Insurer/agency principal to agent
1. Permit the agent to act an fulfill all the terms of the agency contract
2. Recognize all the provisions of the contract
3. Pay compensation when due
4. Keep the agent informed as to new product development as well as marketing methods which will assist in increased efficiency and production
65
Agent to insurer or agency principal:
1. Display loyalty to their insurer or agency principal
2. Obey instructions and act in accordance with directions received
3. Act with degree of care that a prudent and reasonable person would act under the same circumstances
4. Account for all money and property which comes under their care
5. Inform the insurer or agency principal of all relevant facts that are pertinent to the agency relationships
66
Agent to insured/Applicant
1. Accurately assess an individual's need for insurance, the company to be involved, a particular type of policy, specific riders and any other endorsements that should be included
2. Explain the conditions and requirements under which these policies, riders, and endorsements may be obtained
3. Solicit applications for insurance and accept premiums from applicants
4. Provide timely service to applicants and policy holders
67
Express Authority
explicit, definite agreement
68
Implied Authority
is not expressly granted under an agency contract, but it is actual authority the producer has.. by accepting the premiums from the producer, the company has implied that the producer has the authority to conduct this practice
69
Apparent Authority
The authority a producer seems to have
70
Pre-selection
pre-select good risks before being evaluated by home officer underwriter
71
Post selection
process where underwriter evaluates and rates a risk based on information in the application as well as other sources
72
Life agent only
authorized to transact life insurance, accident and health insurance, and life and accident and health insurance
73
Accident and health insurance
transact insurance coverage for sickness, bodily injury, or accidental death and may include benefits for disability income, and 24hr care
74
Life and disability insurance analyst
advises or offers to advise any person insure under, named as beneficiary of, or having interest in, a life or disability insurance contract
75
Life Licensee
person authorized to act as a life agent on behalf of a life or disability insurer
76
Life only
entitle the licensee to transact insurance coverage on human lives, including benefits of endowment and annuities, and may include benefits in the event of death or dismemberment by accident and benefits for disability income
77
Accident and health:
entitle the licensee to contract insurance coverage for sickness, bodily injury, or accidental death and may include benefits for disability income
78
Commissioner may decline to issue a license to an applicant if:
- Has been refused a license or had a license revoked by any public authority
- Has been convicted of a misdemeanor or felony which involved the misappropriation of money or property
79
To transact insurance, includes any of the following:
1. Solicitation
2. Negotiation preliminary to execution
3. Execution of contract insurance
4. Transaction of matters subsequent to execution of the contract and arising out of it
80
Insurance Agent:
person authorized by and on behalf of an insurer, to transact all classes of insurance other than life, disability, or health insurance
81
A Life Licenses:
a person authorized to act on behalf of a life insurer of a disability insurer to transact life insurance; accident and health insurance; and life and accident and health insurance
82
Insurance broker
person who, for compensation and on behalf of another person, transacts insurance other than life, disability, or health insurance with, but not on behalf of, an admitted insurer
83
Insurance solicitor
A natural person employed to aid on insurance agent or insurance broker transaction insurance other than life, disability, or health insurance
- Any person who transacts insurance w/o a valid license so to act is guilty of misdemeanor punishable by fine not exceeding $50,000 or by imprisonment in county jail for period not exceeding one year.
84
Section 1033: Crimes By and Affecting Persons Engaged in the Business of Insurance Whose Activities Affect Interstate Commerce. Prohibited Acts Include:
1. Knowingly with intent to deceive, making false material statements or report in connection w/ any financial report presented to any insurance regulatory agency for purpose of influencing their actions
2. Willfully embezzling monies, funds, or premiums of any person engaged in the business of insurance
3. Knowingly making any false entries on material fact in any report or statement with intent to deceive any person about financial condition or solvency of such business
4. By threats of force or by any threatening letter corruptly influencing, obstructing, or impeding the proper administration of the law
5. Willfully engaging in business of insurance activities that affect interstate commerce if the individual has been convicted of criminal felony involving dishonest or breach of trust
- Criminal penalties can range from one to 15 years of imprisonment, and if found to have committed such offense, that person is subject to civil penalty of not more than $50,000 for each violation.
85
Doctrine of Agency
insurers are responsible for the acts of their agents
86
Insurance solicitor
natural person employed to aid an insurance agent or insurance broker in transacting insurance other than life insurance. Solicitors represent the agent or broker who appointed them.
87
Insurance solicitors can't sell the insurance.
Insurance solicitors can't sell the insurance.
88
Errors and omissions:
type of professional liability that is desired to protect the insured agains legal liability resulting from negligence.
89
Errors and omissions policies:
protect producers from financial losses they might incur for giving incorrect advice (or error) or for not providing a client with information regarding an important issue (or omission)
90
Acts prohibited with regard to non-admitted insurers
1. Acting as an agent for non-admitted insurer in the transaction of insurance business in this state
2. In any manner advertising a non-admitted insurer in this state
3. In any manner aiding a non-admitted insurer to transact insurance business in this state
91
Be able to identify the records an agent must maintain:
1. The application for each policy sold in this state
2. The premiums received for each policy issued
3. The amount of commission paid and to whom
4. A copy of the outline of coverage or disclosure statement required by law or regulation
5. Copies of the correspondence between the policyholder and the agent.
92
Be able to identify the rules regarding internet advertisement:
1. Their name as it appears on their insurance license, and any fictitious name approved by the Commissioner
2. the state of their domicile and principle place of business
3. Their license number
93
Illustration:
a presentation or depiction that includes non-guaranteed elements of a life insurance policy over a period of years
94
Three basic types of illustrations:
1. Basic Illustration
2. Supplement Illustration
3. In force illustration
95
Fiduciary
When they deal with, handle, supervise, or hold in trust and confidence the affairs of another, especially when pertaining to financial matters
96
A Managing General Agent (MGA)
Is a licensed property broker-agent and casualty broker agent, or a life agent who has written management contract and an appointment on file with the Commissioner with one of more admitted insurers covering business transacted by the insurer in a substantial portion of the state of California
97
Life only and/or accident and health agents
must complete 24 hours of approved CE every two year license term
98
Accident and health who market LTC (Long Term Care)
must complete 8 hour, specifically designated, long-term care training course
99
Administrator
Any person who collects any charge or premium from, or who adjusts or settles claims on residents of this state in connection with life or health insurance coverage or annuities.
100
Admitted insurer
entitled to transact insurance business in this state
101
Non-admitted insurer
Not entitled to transact insurance business in this state
102
Domestic insurer
organized under the laws of this state
103
Foreign Insurer
Not organized under the laws of this state
104
Alien insurer
foreign insurer organized under the laws of any jurisdiction othern than a state of the United States
105
Marketing or Sales:
The distribution of an insurer's products in the marketplace
106
Surplus line broker
1. An applicant for a surplus lien broker's license shall file a bond to the people of the state of California in the sum of %50,000
2. They hold an existing license to act as a property broker-agent and casualty broker-agent
3. Every surplus line broker shall annually, on or before March 1 of every year, pay to the Commissioner a premium tax of 3% of the gross premiums charged.
107
The California Insurance Code (CIC)
body of laws (statutes) that have been passed by the legislature and signed into law by the governor in order to protect the insurance buying public.
108
The California Code of Regulations (CCR)
a body of administrative rules and regulations that have been adopted by the Commissioner, after drafting proposed regulations and holding hearings, in order to either clarify the intent of the CIC or to regulate an area that has not been addressed by the CIC.
109
Gramm-Leach-Billey Act (GLBA)
protects the rights of insurance applicants, policyholders, and other persons who are the subject of information collected, received, or maintained in connection with insurance transactions
110
California Financial Information Privacy Act:
afford persons greater privacy protection than those provided by the federal Gramm-Leach-Billey Act.
111
Health Insurance Portability and Accountability Act (HIPAA)
A federal law that addresses the issue of probationary periods for pre-existing conditions that could occur when an insured changes group medical expense insurance carries due to a change in employment.
112
California Life and Health Insurance Guarantee Association (CLHIGA)
is to provide protection against the failure in the performance of contractual obligations under life and health insurance policies and annuity contracts because of the financial impairment or insolvency of the member insurer that issued the policies.
