Trade Practices Flashcards
List 4 illegal Misrepresentations that must not be made by a producer
- No one may misrepresent the ______, _______, or _______ of an insurance policy.
- No one may make false or misleading statements about _________ paid or to be paid on a policy or on similar policies, and
- no one may make false or misleading statements about the __________ condition of an insurer.
- It is also unlawful to make ___________ comparisons of policies in order to induce someone to lapse, forfeit, or surrender an insurance policy or buy a policy with another insurer (known as twisting).
- No one may misrepresent the terms, benefits, or advantages of an insurance policy.
- No one may make false or misleading statements about dividends paid or to be paid on a policy or on similar policies, and
- no one may make false or misleading statements about the financial condition of an insurer.
- It is also unlawful to make incomplete comparisons of policies in order to induce someone to lapse, forfeit, or surrender an insurance policy or buy a policy with another insurer (known as twisting).
Anyone who engages in misrepresentation must pay a civil penalty equal to the amount of compensation received from selling a policy.
False Advertising regarding what specifically?
[Sec. 2603]
It is unlawful for an insurer or its officers and agents to circulate a statement or illustration that indicates that the insurer can transact a type of insurance that it is not legally authorized to transact in New York.
What does “Defamation of Insurer” aim to prevent?
[Sec. 2604]
No one may publish or circulate a false or derogatory statement about the financial condition of an insurer, when such a statement is designed to injure anyone in the insurance business.
List 2 forms of Unfair Discrimination
[Secs. 2606 to 2608, 2612]
Unfair discrimination occurs when persons of the same class and substantially equal risk are charged different premiums, fees, or other charges, or when different benefits are paid to these persons.
It also occurs when insurers or producers reject an application, refuse to issue or renew a policy, or pay lower commissions to agents based on an individual’s: race color creed national origin disability sex marital status past treatment for a mental disability status as a victim of domestic violence
What is Rebating and what is the fine?
However, insurers and agents can give merchandise or periodical subscriptions worth up to $_____.
Anyone who engages in rebating will be fined $______ per violation.
Insurers and their agents cannot pay or offer to pay anything of value to induce someone to buy insurance, including a rebate on the premium, part of the agent’s commission, special dividends, stocks or bonds, or anything of value that is not specified in the insurance contract.
However, insurers and agents can give merchandise or periodical subscriptions worth up to $25.
Brokers are also allowed to share commissions with other brokers who have helped with an insurance transaction.
Anyone who engages in rebating will be fined $500 per violation.
List 7 Unfair Claim Settlement Practices
It is an unfair claims settlement practice for insurers to commit the following acts frequently enough to constitute a general business practice.
It is an unfair claims settlement practice for insurers to commit the following acts frequently enough to constitute a general business practice:
- misrepresenting pertinent facts or policy provisions relating to coverages at issue;
- failing to promptly acknowledge communications about claims;
- failing to use standards to promptly investigate claims;
- failing to make a good faith effort to promptly and fairly settle claims for which the insured is clearly liable;
- forcing policyholders or claimants to file lawsuits to have a claim paid by offering substantially less than the amounts eventually recovered through the lawsuits;
- failing to advise claimants whether a claim is accepted or denied within 30 days after receiving proof of loss; or
- failing to provide a reasonable explanation of the basis in the policy for denying a claim.
The Fair Credit Reporting Act of 1970
The Fair Credit Reporting Act of 1970 protects the rights of consumers for whom an inspection report or consumer credit report is made.
The law applies to financial institutions that request this information as well as to insurance companies. Under the FCRA, financial institutions must follow certain procedures when collecting and disclosing information about consumers. The act tries to ensure the confidentiality of this information as well as accuracy and fair disclosure.
The FCRA subjects insurers to the following requirements:
- Insurers must notify insurance applicants (usually within _____ days) that a consumer or inspection report has been requested.
- They must tell an applicant that he or she can ask about the nature and scope of the investigation. If the applicant asks for this, the insurer must provide a summary of the report within _____ days of the request.
- They must give consumers the name of anyone who was contacted in the preceding ____ months to provide information for the report.
Upon the consumer’s request, the consumer reporting agency must give the nature and content of the information contained in the consumer’s file, with the exception of any medical information.
FAIR CREDIT REPORTING AGENCY
- Insurers must notify insurance applicants (usually within 3 days) that a consumer or inspection report has been requested.
- They must tell an applicant that he or she can ask about the nature and scope of the investigation. If the applicant asks for this, the insurer must provide a summary of the report within 5 days of the request.
- They must give consumers the name of anyone who was contacted in the preceding 6 months to provide information for the report. However, persons with a connection to the consumer’s employment over the past two years must be identified.
Upon the consumer’s request, the consumer reporting agency must give the nature and content of the information contained in the consumer’s file, with the exception of any medical information.
Fraud and False Statements Including 1033 Waiver [18 USC 1033, 1034]
Federal law prohibits persons who transact insurance business across state lines from committing acts that involve dishonesty. The law also provides remedies for victims of such dishonest acts.
Under the law, a person is subject to punishment for
- lying, giving false reports, or overvaluing land, property, or securities during an examination by the Department of Insurance;
- embezzling or otherwise misappropriating money, premiums, or other property that belongs to another who is involved in interstate insurance business;
- entering false information in a business’s books, reports, or statements concerning the financial condition or solvency of the business; or
- using threatening letters or communications to obstruct or impede compliance with the law.
Persons who are convicted of committing fraud or false statements are subject to what 4 possible consequencess?
- a fine of up to $50,000 for each violation, or
- the amount of compensation that the person received or offered for the illegal conduct, whichever is greater;
- imprisonment for up to 10 years; or
- both a fine and imprisonment.
However, a person can be imprisoned for up to 15 years if the illegal conduct significantly contributed to an insurer being placed in conservation, rehabilitation, or liquidation.
If the amount of funds embezzled or stolen is less than $5,000, the person may be imprisoned for up to one year.
Anthony becomes a producer for Acme Insurance Company. Acme has not filed the notice of appointment with the Superintendent. It must do so within how many days?
30
15
10
31
The insurer must file a notice of appointment with the Superintendent within 15 days of making the producer its agent or receiving the first insurance application from the producer.
