L&H 5 Flashcards
Who must be a member of a state insurance Guaranty Association?
Any authorized insurer within a state
Why: All admitted insurers must be members of the insurance Guaranty Association as a condition of their certificate of authority. The association is funded through assessment of member insurers.
If an insurer meets the state’s Financial requirements and is approved to transact business in the state, it is considered what type of insurer?
Authorized or admitted
Why: An admitted or authorized insurer is an insurance company that has qualified and received a Certificate of Authority from the Department of Insurance to transact insurance in the state.
Who is an insurance agent?
A person authorized to sell, solicit and negotiate insurance contracts
Why: An agent represents the principal (insurer), acting on the insurer’s behalf in contractual agreements with third parties.
The requirement that agents must account for and promptly remit all Insurance funds collected is known as what type of agent responsibility?
Fiduciary
Why: A fiduciary is a producer who handles and sure funds in a trust Capacity.
Who may share in the commissions from the sale of a life insurance policy?
Only producers properly licensed for the type of insurance transaction (e.g., life agents may share commissions for life insurance transactions)
Why: Persons who receive commissions from the sale of insurance policies are required to have a producer’s License. Commission sharing is only allowed between parties licensed in the same line of authority as the insurance transaction.
What is the purpose of a cease and desist order?
To prevent a producer or insurer from further violating laws for transacting insurance
The department of insurance will issue a cease and desist order when the department has reason to believe that a producer or an insurer is in violation of an insurance law or regulation. The order is usually issued after a hearing.
Who must be notified of a producer’s change of address?
The Department of Insurance ( commissioner / director / superintendent)
Why: Every licensee must notify the Department of Insurance of any change of address (business, personal, email), within a period of time specified by a state law.
For what reason can a temporary license be issued?
For continuation of business if a licensed producer dies or becomes disabled
Why: In the event of the death, disability, or military service of a licensed producer, the Department of Insurance May issue a temporary license for a short period Of time to the surviving spouse or an appointed representative of the producer to continue the business of insurance.
Who is responsible for the costs associated with the examination of issuers?
The insurer who is being examined
Why: Costs incurred in the examination of an insurance company are paid by the company being examined.
An agent offers a client free tickets to a sporting event in exchange for the purchase of an insurance policy. What is the agent guilty of?
Rebating
Why: When producers give or promise anything of value that is not specified in the policy, they are guilty of rebating. Both offer and acceptance of rebates are illegal.
What illegal act does a producer commit when the producer represents a policy in a more favorable light than the policy really is?
Misrepresentation
Why? Misrepresentation is issuing, publishing or circulating any illustration or sales material that is false, misleading or deceptive as to policy benefits or terms, or the payment of dividends. This includes oral statements.
Who is considered a nonresident agent?
An agent who resides and is licensed in another state, but who is authorized to transact Insurance in this state
Why: An agent currently licensed in good standing in another state may apply for a nonresident producer license for the same line of authority in this state.
What is the main purpose for requiring a person to be licensed to transact insurance?
To protect the General Public
Why: In order to protect the general public, persons involved in the transaction of insurance must meet certain standards in terms of knowledge of insurance and of character and must be license.
What are agents / producers required to do in order to renew their license?
Complete continuing education hours and pay a renewal fee
Why: Producer licenses normally remain in effect unless suspended or revoked, as long as they are properly renewed. Every licensing period, licensees are required to complete continuing education requirements and pay license renewal fees.
