Insurance Laws and Rules Flashcards
Define the Insurance Code
They are laws or statues enacted by the Oregon Legislature relating to the insurance business
Can the director make a law
No, only the Oregon Legislature can
What is the difference between a law and a rule
A law is created by the legislature and a rule is created by the department
Who authorizes insurers and producers
The Director
What are 3 examples of producers that may do business without a license
- Surplus lines
- Reinsurance
- Adjuster or attorney
Who is liable for a claim or loss when an unauthorized insurer does not pay a claim or cover a loss
The agent who assisted with the policy, knowing that they were not authorized
How often will the director audit the finances of the insurer
At least every 5 years
When the director is performing their audit, what are the 4 things that they are looking for
- The nature of the insurer’s operations
- Their financial condition
- Their ability to fulfill obligations (pay claims)
- Make sure that they’re in compliance
How does the director examine a foreign and alien insurer
The director can accept the findings of the insurer’s home state director as long as they are accredited by the NAIC and that the NAIC conducted or supervised the examination
How do you exam an alien insurer
You generally base it off of their transactions and affairs in the US
Who pays for the audit and any costs associated with the audit (ie transportation)
The insurance company being examined pays for the cost
When can the director do any audit
Whenever they want
Who can the director do an audit on
Anyone who does or advertises that they do business in Oregon
Can the director examine people directly
yes, they may examine anyone under oath who may have material information
After the chief examiner has completed their audit, within how many days must they get the report to the director
Within 60 days
After the director receives the audit from the examiner, what will they do
- Allow the insurance company to review and comment on the report
- Meet with the insurance company to resolve any questions or obtain further information
- Have the examiner include the additional information in the report
Who is authorized to give orders
The director
Define a final order
It is an order issued by the Director in writing and it must be signed by the director (or someone under their authority), filed in the department, State the effective date, the intent or purpose and the grounds for which the order is on (what insurance code may have been broken)
When is a mailed notice considered given
When it is deposited in a mailbox
What is the cease and desist order for
When a person is engaging or is about to engage in a violation of the code
What does the cease and desist order state
That the person can still do business, but they have to stop the violation
When a person receives a cease and desist order, within how many days can they request a hearing from the date of the mailing
Within 20 days
What if a person who received a cease and desist order does not request a hearing
Then the order becomes final
If a person requests a cease and desist order hearing, within how many days should the hearing take place
Within 30 days after the receipt of the request
If a hearing is requested for a cease and desist when must the person be given notice as to the time and place
At least 7 days prior
What are the 3 options that the director can take against a licensee
They can
- Refuse to issue or renew a license
- Place a licensee on probation
- Suspend a license (temporarily can’t do business)
- Revoke a license or not allow the licensee to do a certain type of business
Define clean sheeting
Hiding an applicant’s medical conditions from the insurance company
For each violation, what is the maximum fine for a company
$10,000
For each violation, what is the maximum fine amount for the individual agent
$1,000
If there is a second penalty, how much can that fine be
It may be up to the amount by which the violator profited from
Where do the fines go
General Fund of the State Treasury
What does a civil penalty stand for
A fine
If a person receives a civil penalty, how many days do they have to request a hearing
20 Days
How many days does a person have to pay a final order (for a fine)
10 days
What if the person does not pay their fine in 10 days
Then the county clerk will record their name and the penalty, and put a lien on any property that they own
What is the criminal penalty for an individual for filing with the Director any information that is known to be materially false or misleading
It can lead to an imprisonment in jail for up to 1 year or a fine of up to $1,000
What is the criminal penalty for a corporation for filing with the Director any information that is known to be materially false or misleading
It can lead to a fine of up to $10,000
Define guaranty associations
They help to detect and prevent insurer insolvencies and help pay claims when insurers cannot
What does the Oregon Life and Health Insurance Guaranty Association do
It pays claims from individual or group life or health insurance policies and annuities for impaired and insolvent insurers
Who has to be apart of Oregon’s Guaranty Association
All authorized life and health insurers
Define an impaired insurer
An insurer that is unable to fulfill their obligations or is insolvent
Define an insolvent insurer
Insurer that is under a liquidation, conservation or rehab order
How much will the Association pay (regardless of the number of the number of policies/contracts) per life for life insurance death benefits, disability insurance and LTC
$300,000
How much will the Association pay (regardless of the number of the number of policies/contracts) per life for cash surrender value
$100,000
How much will the Association pay (regardless of the number of the number of policies/contracts) per life for health insurance
$500,000
How much will the Association pay (regardless of the number of the number of policies/contracts) per life for present value annuity benefits
$250,000
For guaranty associations, what is the total amount payable for any one individual for all policies
$300,000 (except for health)
For guaranty associations, what is the total amount payable for any one policyowner
$5,000,000
Once an insurer is deemed insolvent, within how many days after that point will a guaranty pay for claims
They will cover claims arising within 30 days after an insurer is deemed insolvent
How much will the guaranty pay for a worker’s compensation claim
They will cover the full amount
How much is each insurer charged to pay for the guaranty
Up to 2% of premiums (they can deduct 20% of this from their taxes)
What must a resident consultant have
- Policy with at lest $500,000 in coverage
- 5 years of experience
When is an adjuster license not required
When that adjuster is only adjusting claims for an insurer and is employed by that insurer
If a person is not a resident of Oregon, but they want to sell insurance in Oregon, then what do they need
They can get their nonresident insurance producer license as long as they are licensed in their home state
Define an attorney in fact
The director of the nonresident licensing state (you live in washington, but you want to sell insurance in oregon)
Within how many days should a nonresident producer who moves states, notify the director of a change in address
Within 30 days
What is the point of a temporary producer license
Give it to a surviving spouse or court appointed personal representative when a licensed producer dies or becomes mentally or physically disabled, that way they can either sell the business or give them time to have someone else run it
How long is a temporary license good for
180 days
How long does a producer have to keep records
Three years following the expiration of the policy
When must a producer notify a director (3)
- Before doing business under a different name
- Before changing, deleting or adding another business (a consultant or adjuster can do it after 30 days)
- Within 30 days of changing address, location, residence, etc.
When does a license expire
Every 2 years on the last day of the licensee’s birth month
Within how many months can you reinstate your license
Within 12 months
What do you have to do to reinstate your license (without taking the exam)
- Pay twice or 200% of the unpaid renewal fees
- Satisfy any CEs
How many CE does someone need to complete to renew
24 hours
What CE must you always take
- 3 hours in Oregon statutes and admin rules
- 3 hours in professional ethics for insurance prodcuers
Within how many days does a CE provider have to produce a certificate of completion
Within 15 days
How many years does a CE provider have to keep records of attendance and exam results
3 years
Can the premiums that a producer receive commingle with other funds
No they have to be placed in trust accounts that are separate from all other business and personal funds (accounts have to be in Oregon)
When does a producer have to deposit funds received
Within 7 days
When does the producer have to pay any premium funds owed to an insured
Within 30 days
Is a producer regarded as an agent of the insured
No, they are the agent of the insurer
In order to be an agent of an insurer, the producer must either be:
- An appointed agent
- Affiliated with the producer (if a producer is terminated, the insurer must notify the state within 30 days)
Within how many days must the insurer give notice that the producer’s appointment is going to be terminated
At least 90 days prior to the effective date of the termination (you also have to give a reason)
Within how many days can a producer terminate their appoint
Within 30 days after the effective date (have to give notice to the Director and the insurer)
A person would be guilty of unfair claim settlement practices if they failed to do what
- Represent facts or policy provisions truthfully
- Acknowledge and act promptly on communications relating to claims
Within how many days should you respond to the director in regards to a claim inquiry
Within 21 days
Within how many days should you investigate a claim
Within 45 days
Within how many days from receiving a claim should you notify the claimant that you need more time
30 days
Within how many days from receiving a claim should you give a reason as to why more time is needed
Within 45 days (and then every 45 days after)
How much capital should most insurers have
$2,500,00
How much capital should workers’ comp insurers have
$5,000,000
When applying for an original certificate of authority, how much funds should a domestic insurer have
An additional $500,000
What is a charge made by a producer, with respect to an insurance transaction to a party other than the insurer, which is not a part of the insurer’s rate filing
Service fee
If the director believes that an insurer is being unfairly discriminating, then what happens
The director will give them 10 days to correct the situation
What should the insurer provide the customer with when doing an insurance transaction
They should provide them with a notice of personal information practices
When does the insurer have to provide the privacy policies and practices notice
At least every year
What two sources should you use to make sure your privacy notice is in compliance
- Gramm Leach Bliley Act
- Privacy of consumer financial and health information regulation
Define a rebate
Kickback to a purchaser of insurance by the producer or insurer
Is a rebate legal
No, it is illegal
Are commissions received by the producer on excessive personal or controlled insurance legal
No, these are illegal and considered rebates
For life and health, when are premiums on personal or controlled insurance in excessive
If in one calendar year, they are more than two times the amount of the premiums on noncontrolled life or health insurance (noncontrolled premiums $50,000, then controlled can’t be more than $100,000)
For all types other types of insurance (not life or health) what are the limits on premiums for controlled and noncontrolled
They have to be the same amount (noncontrolled premiums are at $50,000, then controlled premiums can’t be more than $50,000)
What is personal/controlled insurance
If it is insurance that covers the producer or his spouse (or any of his relatives), covers a group of employees under a group policy issued to the producer’s employer, etc. (basically anything personal)
The restrictions on personal/controlled insurance do not apply to who
- Property to cover property with installment
- Person is an individual producer
- Has an individual business
- Has been a broker for at least 25 years and is 65 years old
Define twisting
Make a misrepresentation to a person with ownership rights in life insurance, in order to have their policy lapse, forfeit, surrender, etc. (illegal)
You can only receive commissions if you are what
Licensed
If a person is licensed as both a producer and a consultant, then what may they accept
Commissions and/or a fee
What does every insurer have to do
File their premiums with the director, who will then approve them
Define a service fee
It is a charge from an insurance transaction made by a producer to someone other than the insurer, which is not part of the insurer’s rate filing
When would a producer charge a service fee
If they provide service beyond what is usual and customary in commercial lines insurance
When can a producer not charge someone a combination of commissions and service fees (3)
- Insurance covers an individual’s person, property or liability
- Life or health insurance for groups of fewer than 51 lives
- Commercial or public entity paying $100,000 in premiums
When can you not charge a service fee
When it is for an individual’s person, property or liability
When must the insurer provide their notice of personal information practices
Date of the application (when you give them the policy)
When must a licensee provide clear and conspicuous notice of personal information practices
When he provides insurance products or services to be used primarily for personal, family or household purposes
What lines of coverage can a producer charge service fees on
Commercial lines
An insurer cannot retain risk on any one subject line of insurance in excess of what percentage of its surplus to policyholders unless it reinsurers the excess
10%
Define the retention limit
The maximum amount of insurance an insurer can have at risk on one subject of insurance
In order to insure risk, what does the risk have to be
The risk has to have limited catastrophic potential and cannot be speculative
In the event of a claim and the insurer has reinsurance who pays
The ceding insurer will pay (original insurer) and then the assuming insurer will reimburse the insurer
What are two types of reinsurance
- Treaty (the insurer automatically accepts all exposures)
- Facultative (The reinsurance requires an individual reinsurance agreement for each risk reinsured)
Define mutual companies
They do not have capital stock and they are owned by the policyholders (called members). Any profit goes back to the policyholders
Define reciprocal insurer
Unincorporated group of persons that insure each other by exchanging indemnity agreements through an attorney in fact
Define a fraternal benefit society
Not for profit without capital stock
Define Lloyd’s Association
Voluntary association of individuals or groups that agree to insure a particular risk. Each member is responsible for an agreed portion of the insurance.
What are the 5 rating agencies
AM Best Fitch Moody S&P Weiss Research
Define direct writing
Insurance companies use employees to deal directly with applicants and policyholders
Define direct response
Advertise or use telemarketing
Define vending machines
Used to market travel policies
Define franchise (wholesale) policies
Individual policies sold through employers or associations
How does the general producer system work
They are independent contractors that can appoint other producers to operate there, they are responsible for paying expenses, receiving selling commissions and overrides, perform admin functions
What are two forms that producers can be
- Independent - Receive commissions only, can work for several insurers and own their own policy expirations
- Exclusive (captive) - us at Moda
What does the law of agency do
It lists the rights and duties of principals, agents and third parties in business transactions
How does a law of agency work
The insurer is the principal, who is represented by the an agent, who is a producer (when dealing with third parties)
What are a producer’s three authorities
- Express (stated by the agency)
- Implied (not stated, but assumed)
- Apparent (authority the public believes the producer has)
To be enforceable, what must a contract have
The four elements (CLOC)
What is the punishment if someone breaks a law that relates to fraud and false statements
- Prison up to 15 years
- Fine up to $50,000/violation or the amount of compensation that they received (whichever is greater)
Define a prohibited person
An individual who has been convicted of a felony involving dishonesty, a breach of trust or a violation of the Act
If a prohibited person engages in insurance business, what is their punishment
Prison for up to 5 years
