L&H 3 Flashcards
What is the purpose of Insurance Guaranty Associations?
To protect policy owners, insureds and beneficiaries from Financial losses caused by insolvent insurers
Why: The Guaranty Association is a nonprofit legal entity formed to protect customers from the incompetence and insolvency of insurers. The association is funded through assessment of member insurers and is liable for the lesser of the state-mandated benefits of the insurer’s contractual obligations.
What type of licensee represents the insurance company?
The agent
Why: An agent represents the insurer (principal). While acting under the authority of the contract given by the insurer, the acts of an agent are considered to be the acts of the insurer.
Whom does an insurance agent represent?
Insurance Company
Why: An agent always represents the insurer and the agent’s actions are deemed to be the insurer’s actions.
What are the three types of agent authority?
Express, implied and apparent
Why: The powers and authorities that an agent May exercise are express and implied. Apparent authority is the assumption of authority based on the actions, words, and deeds of the principal.
What is the best way to handle incomplete insurance applications?
Return the application to the applicant for completion
Why: Any unanswered questions need to be answered before the policy is issued. If a policy is issued with questions left unanswered, it will be interpreted as if the insurer waived its right to have an answer.
When a change needs to be made on the application for the insurance, which is the best method for correcting the information?
Complete a new application or ask the applicant to initial the correction on the original application
Why: If a change is necessary that agent may have the applicant complete a new application, or make and initial the change on the original application.
What is the name of the process that insurance companies use to determine whether an applicant is insurable?
Underwriting
Why: Underwriting is a risk selection and classification process, the purpose of which is to evaluate risk to determine which applicants to ensure and what coverage to offer.
Whose responsibility is it to determine that all of the questions on an insurance application are answered?
The agent’s
Why: It is the responsibility of the agent to make sure that the application is complete, accurate and properly signed.
A situation in which a person can only experience a loss and no gain presents what type of risk?
Pure Risk
Why: Pure Risk refers to situations that can only result in a loss or no change and is the only insurable type of risk.
What law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated?
Law of large Numbers
Why: The law of large numbers states that the larger the number of people with a similar exposure to loss, the more predictable actual losses will be.
What law protects consumers about the circulation of inaccurate or obsolete information?
The Fair Credit Reporting Act
Why: The Fair Credit Reporting Act governs what information is collected and who may receive the information.
What type of policy issues certificates of insurance to the insureds?
Group Policy
Why: In a group policy, the actual policy (Master policy) is issued to the sponsor of the group. The employees are the insureds, who are issued certificates of insurance.
Who is responsible for the contents of insurance advertisements?
The Insurance Company
Why: All advertisements are the responsibility of the insurer.
What document describes the specific information about a policy?
Policy Summary
Why: The policies summary provides specific information about the insurance company and the policy issued, such as the company name, type of coverage, benefits, exclusions, cost and policy terms.
