Life Insurance Flashcards
Admitted Insurer
An insurer entitled and certified to transact insurance business in California, having complied with the state’s laws associated with transacting such business.
Non-Admitted Insurer
An insurer that is not entitled or certified to transact insurance business in California, having not complied with the laws associated with transacting such business.
domestic insurer
An insurer organized under the laws of California, whether or not admitted.
foreign insurer
An insurer not organized under the laws of California, whether or not admitted.
Alien Insurer
Another country
Insurance
A contract whereby one undertakes, in exchange for consideration, to indemnify another against loss, damage, or liability arising from a contingent or unknown event. Examples of life insurance include whole life, term life, universal life, and variable life insurance. Examples of health insurance include medical expense and Medicare supplement insurance. Examples of property insurance include homeowners, dwelling, marine, commercial property, boiler and machinery, and flood insurance. Examples of casualty insurance include personal auto, commercial auto, commercial general liability, professional liability, workers’ compensation, crime, and surety insurance.
Insurance Commissioner
issioner has the duty and power to
investigate complaints and respond to inquiries;
prosecute insurers or agencies when appropriate;
review insurer rates;
report on complaint and enforcement information regarding individual insurers and agencies;
make all allowable documents available for public inspection;
provide education and information regarding insurance to the general public and to insurers and their agents;
adopt emergency regulations in response to problems;
issue cease and desist orders; and
impose fines.
The Commissioner is an advocate for California insurance consumers and is charged with ensuring that they are well served by the insurance industry, its products, and all those who represent the industry.
Key Points
In the language of the California Insurance Code, the term “shall” is mandatory; the term “may” expresses permission.
The price of insurance for each exposure unit is called the rate.
In California, the Commissioner of Insurance heads the state’s Department of Insurance and serves as an advocate for the state’s insurance consumers.
I
24 Hour Insurance
Twenty-four hour coverage is the joint issuance of a workers’ compensation policy with a disability insurance policy, health-care service plan contract, or other medical insurance coverage for nonoccupational injuries and illnesses.
In California, the insurance business is regulated by
State and federal government
Which of the following entities regulates the business of insurance in California?
State and federal governments
What is the main purpose of the California Department of Insurance
to protect the interests of California insurance consumers
Any person capable of making a contract may be an insurer
it means person, association, organization, partnership, business trust, limited liability company, or corporation capable of making a contract.
To be considered an applicant insurer in CA the commissioner determines each case of what criteria
operating record
management integrity
financial condition and quality of investments
reasonable and sufficient surplus
minimum capital requirements, as specified in state statutes`
Stock insurer
owned by stock holders
Mutual insurer
owned by policyowners
Reinsurance
insurance for insurers
Surplus Lines of Insurance
Property and casualty insurance. Hard to find or hard to place insurance.
De-mutualization
De-mutualization is the process by which a mutual insurer converts to a stock insurer.
A primary insurer is
transfers its loss exposure to another insurer in a reinsurance transaction.
Being admitted to operate as an insurer and to transact one or more lines of insurance in California is
evidenced by a certificate of authority
The prohibition against and penalty for acting on behalf of a nonadmitted insurer does not apply to whom?
licensed surplus lines brokers
Within how many calendar days of receiving proof of a claim, every insurer must either accept or deny the claim
- The insurer must also continue to send the claimant update notices every 30 days until the issue is resolved
In California, when an insurer (or agent) receives any inquiry about a claim, it must respond to the claimant within how many days.
15
disclosing an insurer’s membership in the California Insurance Guarantee Association
It is prohibited
an insurer that cancels a policy based on medical information it requests and receives after the policy was issued
is post-claims underwriting
coverage provided by the California Insurance Guarantee Association
It does not cover benefits of a covered contract that were not guaranteed by the issuing insurer
replacement of a group health insurance policy
The replacement policy must cover eligible employees and dependents
An insurer that, within 60 days, provides a replacement policy for a terminated group health insurance policy must cover all employees and dependents who were validly covered under the previous policy at the time of discontinuance. This coverage extends to eligible former employees. If the succeeding policy has a pre-existing exclusion provision, it cannot be applied to those employees, former employees, and dependents who were validly insured under the prior carrier’s policy on the date of discontinuance.
Who determines whether an insurance trade practice is unfair or deceptive in California?
California Insurance commissioner
For which of the following reason(s) could the California Insurance Commissioner not seize an insurer and impose conservatorship?
failure to exceed projected revenue
an insurer that picks up and assumes coverage for a discontinued employer group medical insurance policy within 60 days of the discontinuance?
may not impose its pre-existing exclusion provision upon those who were covered under the discontinued policy.
an insurer that does not meet the state’s paid-in capital requirement?
Its assets are less than its liabilities.
Under California’s Insurance Information and Privacy Protection Act, when must an insurer obtain authorization to release personal information?
Before disclosing privileged information about a person
What is the primary purpose of California’s Insurance Information and Privacy Protection Act?
to protect the sanctity of personal and privileged information that insurers collect on their policyowners
According to California’s Insurance Information and Privacy Protection Act, under what circumstance(s) does an insurer have to obtain authorization to release personal information?
before disclosing privileged information about a person
Under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), which of the following types of nonpublic personal information can be disclosed only with specific permission from consumers and customers?
health or medical information
Matters that do not have to be communicated in an insurance contract are
known information
Express warranties
Statements of fact in a policy regarding the person or thing insured are express warranties
Twisting is
a form of misrepresentation with the intention of inducing an insured to lapse or surrender an existing contract and purchase another. Those found guilty of twisting may be fined, jailed, and/or subject to license suspension.
California requires all insurance policies to identify six specific points:
1) the parties to the contract; 2) the property or life being insured; 3) the interest of the insured in the property, if he or she does not own it absolutely; 4) the risks insured against; 5) the period over which the insurance extends; and 6) the premium.
Under what basis is a false representation grounds for an insurer to rescind an insurance contract?
if the misrepresentation is material
In California, all of the following must be specified in an insurance contract EXCEPT:
Financial Rating
All of the following statements regarding insurance fraud laws in California are true, EXCEPT
Certain select insurers are chosen by the Department of Insurance to establish and maintain fraud investigation divisions, which then share information with other insurers.
What does a representation in an insurance contract qualify as?
an implied warranty
How does a tort differ from a contract?
A tort arises through the violation of others’ rights or breach of duties owed to them.
All of the following statements about insurers’ anti-fraud activities are correct EXCEPT:
Insurers must penalize insureds who submit fraudulent claim forms.
Which of the following statements about a tort is correct?
A tort is a violation of rights created by law.
life and disability insurance analyst
A person who, for compensation of any kind paid by a source other than an insurer, advises insureds, beneficiaries, or anyone who has an interest in a life or disability insurance contract in any manner concerning that contract or the person’s rights under the contract. Employees of an insurer are not eligible for this kind of license.
insurance solicitor
A natural person employed to aid an insurance agent or insurance broker in transacting insurance other than life, disability, or health insurance. (Note: There is no line of authority as a “life solicitor” or an “accident and health solicitor”.)
certified insurance agent
A person who is certified by the California Health Insurance Exchange (the “Exchange”) to transact insurance in the individual and Small Business Health Options Program (SHOP) Exchanges.
administrator
any person or company, other than the following, that performs administrative services, collects any charges or premiums, or adjusts or settles claims on residents of this state in connection with life or health insurance coverage or annuities:
Managing General Agent (MGA)
negotiates and binds ceding reinsurance contracts on behalf of an insurer or manages all or part of an insurer’s business (including a separate division, department, or underwriting office); or
acts as an agent for that insurer and underwrites an amount of gross premium equal to or more than 5 percent of the policyholder surplus and either
adjusts or pays claims in excess of an amount determined by the commissioner, or
negotiates reinsurance on behalf of the insurer.
Life Settlement Broker
a person who, for a fee or commission, acts on behalf of a policyowner in offering or negotiating a life settlement contract between the policyowner and a life settlement provider. A life settlement broker represents the policyowner and owes a fiduciary duty to obey the owner’s instructions and act in the owner’s best interests.
A life insurance producer who has been licensed as a life agent (or a licensed nonresident producer) in California for at least one year may become a life settlement broker by notifying the Commissioner and paying the required license fee. If the producer has not been licensed as a life agent for at least one year, he or she must first complete at least 15 hours of study in life settlement transactions, apply for the license, and pay the required license fee.
A licensed attorney, certified public accountant, or accredited financial planner who represents the policyowner and who is not paid by the life settlement provider does not need to be licensed as a life settlement broker.
Life Settlement Broker
a person who, for a fee or commission, acts on behalf of a policyowner in offering or negotiating a life settlement contract between the policyowner and a life settlement provider. A life settlement broker represents the policyowner and owes a fiduciary duty to obey the owner’s instructions and act in the owner’s best interests.
A life insurance producer who has been licensed as a life agent (or a licensed nonresident producer) in California for at least one year may become a life settlement broker by notifying the Commissioner and paying the required license fee. If the producer has not been licensed as a life agent for at least one year, he or she must first complete at least 15 hours of study in life settlement transactions, apply for the license, and pay the required license fee.
A licensed attorney, certified public accountant, or accredited financial planner who represents the policyowner and who is not paid by the life settlement provider does not need to be licensed as a life settlement broker.
Life and Disability Analysts
a person who, for compensation paid by a source other than an insurer, advises insureds, beneficiaries, or anyone who has an interest in a life or disability insurance contract in matters concerning the contract.
A licensed life and disability analyst cannot charge a fee for any service that is customarily associated with soliciting or servicing insurance contracts that he or she has written, nor can an analyst charge a fee for servicing contracts from which he or she has received a commission from the insurer. Any fees that are charged and collected must stem from a written agreement, signed by the party who is to pay a fee. The agreement must include a statement that information and services concerning insurance policies may be obtained directly from the insurer without cost. The agreement must also outline the services for which a fee is to be charged and specify the fee.
A life and disability analyst
offers insurance contract advice or guidance to insureds and beneficiaries and is compensated by a source other than an insurer, typically through set fees.
“transacting insurance” means
solicitation [CIC 35(a)], negotiations preliminary to contract execution [CIC 35(b)], execution of a contract of insurance [CIC 35(c)], and conducting matters subsequent to execution of the contract and arising out of it
In California, all of the following are considered transacting insurance for which a license is required EXCEPT
determining premium rates for specific classes of insureds
In California, insurance licensees must include their license numbers and the word “Insurance” on the following:
their business cards
written price quotations for insurance products
print advertisements distributed exclusively in this state for insurance products
Violators of this requirement are subject to a fine of $200 for the first offense, $500 for the second offense, and $1,000 for the third and any subsequent offense.
California-licensed agents or brokers who advertise insurance on the Internet must identify all of the following in their Internet communications:
his or her name as it appears on his or her insurance license (as well as any fictitious name approved by the Commissioner)
his or her license number
his or her state of domicile and principal place of business
Long Life Mutual Insurance Co., Inc. is licensed to conduct business in the state of California. It extends a contract to Joe to solicit and accept applications for insurance coverages on its behalf. In this relationship, what is Long Life?
Principal
What type of activity is an agent specifically authorized to undertake under the terms of his or her agency agreement?
Express
Which of the following is the primary duty a producer owes to his or her clients?
placing the client’s interest first
Which of the following terms describes activity that an agent is specifically authorized to perform according to his or her agency agreement?
Express
Which of the following types of conduct characterizes a producer’s duty to act ethically?
following a code of principles and practices
Certified Financial Planner Board of Standards Ethics Principles
Integrity
Objectivity
Competence
Fairness
Confidentiality
Professionalism
Diligence
With regard to funds they receive in the course of their insurance business, insurance licensees are deemed to be in what role?
Fiduciaries
Which of the following does NOT provide independent ratings of insurance companies’ financial strength and claims-paying abilities?
SEC
For what purpose can an application for insurance ask for information about a person’s birthplace?
To establish the applicant’s identity
Which of the following best defines the main purpose of the California Department of Insurance?
To protect the consumer
In California, the insurance business is regulated by which of the following?
State and Federal Government
The purpose for the Buyer’s Guide, which must be given to every insurance prospect, is to
Explain features and benefits of the kind of insurance they are purchasing
In order for an agent to act for and on behalf of an insurer, the agent must receive which of the following from the insurer?
appointment
Under California’s Insurance Information and Privacy Protection Act, when must an insurer obtain authorization to release personal information?
Before disclosing priviledged information
Tort
A tort is violation of others rights or breach of duties
Long Life Mutual Insurance Co., Inc. is licensed to conduct business in the state of California. It extends a contract to Joe to solicit and accept applications for insurance coverages on its behalf. In this relationship, what is Long Life?
Alien
What action is available to claimants who are denied payment of an insurance claim by an insurer?
Appeal
The main purpose for errors and omissions insurance (E&O) is to
To cover non-wilful
The federal Risk Retention Act of 1986 contains guidelines for which of the following entities?
Risk Retention Groups
Which of the following statements about coverage provided by the California Insurance Guarantee Association is correct?
It does not cover non-guaranteed
How is a primary insurer defined?
Transfer of risk
All the following statements regarding reinsurance are correct EXCEPT
Claims are paid separately by different companies
In California, all of the following are considered transacting insurance for which a license is required EXCEPT:
Determining premium rates
The mathematical concept of probability that helps insurers estimate the statistical likelihood of mortality or morbidity losses at any given age is called the
Law of large numbers
In an insurance transaction, what does the applicant give as consideration?
Initial premium
Which of the following is the basis producers should use to determine a product’s suitability for any given client?
Helping write the policy
The prohibition against and penalty for acting on behalf of a nonadmitted insurer does not apply to whom?
Licensed Surplus Lines broker
To be considered insurable, a risk must meet all the following requirements EXCEPT
Loss must be certain to occur
A producer’s duty to act ethically is best carried out by which of the following?
Certain select insurers are chosen
For which of the following reason(s) could the California Insurance Commissioner NOT seize an insurer and impose conservatorship?
Failure to exceed projected revenut
The insurance company function that is responsible for calculating company mortality and morbidity rates, and calculating dividends on participating life insurance policies, is the
Actuarial Division
Which of the following statements about a tort is correct?
Violation of rights created by law
Coverage provided by the California Insurance Guarantee Association is correctly described by which one of the following statements?
Doesn’t cover non-guaranteed
From an insurance perspective, underwriting is best defined as
insurable risk
The Royale Insurance Company, headquartered in Toronto, Canada, conducts business legally in New York. In New York, Royale is a
Alien
The fact that a health insurance contract generally cannot be transferred to a third party without the insurer’s consent makes it what type of contract?
Personal
Medical expense insurance policies are typically what type of contracts?
Contracts of indemnity
Which of the following statements about representations and warranties is correct?
Insurers can cancel policy if misrepresentation
In California, which of the following has the power to determine what constitutes an unfair or deceptive insurance trade practice?
California
Karen purchased an individual life insurance policy at an early age because of her family’s history of cancer, and now that she has reached the age where her mother died of cancer she is seeking to purchase more coverage. Which of the following describes Karen’s tendency to buy and maintain life insurance?
Adverse selection
Which of the following statements is correct regarding an insurer that picks up and assumes coverage for a discontinued employer group medical insurance policy within 60 days of the discontinuance?
may not impose pre-exisiting exclusion provision
The replacement of a group health insurance policy is correctly described by which one of the following statements?
Must cover eligible employees and dependents
Which of the following statements is true about any advertisement for an educational seminar directed at seniors in which insurance products will be promoted?
Must disclose insurance presentation
Which of the following statements is correct regarding an insurer that does not meet the state’s paid-in capital requirement?
Assets are less than liabilities
What is the term for voluntarily giving up a known right?
Waiver
A producer has a fiduciary responsibility to
Insurer and customer
Which of the following contract characteristics is unique to insurance contracts but not all contracts?
Unilateral
Being admitted to operate as an insurer and to transact one or more lines of insurance in California is
Certificate of Authority
Which of the following statements is correct regarding coverage for experimental medical treatment in California?
Insurer can deny coverage
Which of the following statements about disclosing an insurer’s membership in the California Insurance Guarantee Association is correct?
Disclosure is prohibited
Which of the following best illustrates risk transfer?
Risk transfer
The Excalibur Insurance Company, headquartered in Iowa, conducts business legally in Nebraska. In Nebraska, Excalibur is a(n)
Foreign
What does a representation in an insurance contract qualify as?
Implied warranty
A primary insurer is the insurer that
Transfer it’s loss exposure to reinsurance co
In California, who among the following can legally act on behalf of a nonadmitted insurer?
Surplus lines broker
Under what basis is a false representation grounds for an insurer to rescind an insurance contract?
Material
Tim had paid only four premiums on his health insurance policy when he was diagnosed with cancer. The insurance company paid more than $100,000 to cover the medical bills for his treatment during the next year. This situation demonstrates which of the following characteristics of insurance contracts?
Aleatory
From an insurance perspective, all the following statements regarding risk and loss are correct EXCEPT:
Only speculative risk is insurable
Which of the following statements is correct about the replacement of a group health insurance policy?
Replacement policy cover eligible employees and children
A type of not-for-profit insurance provider that is operated by an organization that has a representative form of leadership, operates on a lodge system, and exists solely for the benefit of its members and their beneficiaries is called a
Fraternal
Which of the following statements about advertising insurance for sale on the Internet is correct in California?
Internet ads okay subject to certain requirements
Under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), which of the following types of nonpublic personal information can be disclosed only with specific permission from consumers and customers?
Health and medical information
Which one of the following insurance sales arrangements is not affiliated with a single insurance company but instead represents multiple companies?
Independent sales office managed by personal producing agent
