Term
| responsibility to regulate the insurance industry |
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Definition
| federal and state government. |
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Term
| Authority to state to regulate insurance industry |
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Definition
Public Law 15 aka McCarren-Ferguson Act
Passed in 1945 declaring regulation of insurance co. should remain with the individual state. |
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Term
| Federal government regualates insurance in following areas |
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Definition
1. fair labor standards
2. and anti-trust matters. |
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Term
| Insurance commissioner/director |
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Definition
main role is enforcement of state laws and regulations which are intended to promote the welfare of the general public and protect the public's interest by:
- monitoring the financial solvency of insurance companies
- monitoring the conduct of individual insurance agents
- reviewing and approving rates, policies and forms
- assuring the public of insurance availability |
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Term
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Definition
are filed with the states based on loss ratios of the various classes of risks.
should be competitive and affordable to the general public
Two most important components are loss combined loss and expense ratios.
No books or tables are used.
estabilished through careful judgment. |
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Term
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Definition
all insurance commissioner/directros with powers to conduct hearing in regard to possible unlawful acts in the performance of agents, adjusters and co.
Following a hearing the commish/ director may issue a cease and desist order demanding the offender immediately refrain from committing offenses.
The comish/director may suspend, revoke or fine the offender depending on the nature of the offenses a/o if the act was intentional. |
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Term
| types of insurance companies |
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Definition
- addmitted co.
- nonadmitted
-surplus lines |
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Term
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Definition
| considered authorized and approved to do business in a given state |
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Term
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Definition
not authorized and cant conduct business in the state.
Once a company is approved they are given a certificate of authority to operate in the state. Insurers will then file rates and forms with the insurance dept. and begin to appoint agents or market through other means |
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Term
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Definition
company who may operate in a state and not be considered an admitted company.
Agents collect a premium taz on all business written which is remitted to the state.
do not file rates
do not file forms
do not participate in the state's guaranty funds that pay covered losses of insolvent insurers. |
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Term
| Classification of insurance companies by location |
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Definition
1. Domestic Insurer
2. Foreign Insurer
3. Alien Insurer |
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Term
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Definition
| an insurance co. formed and domicled under the laws of a particular state. |
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Term
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Definition
| an insurance co. formed under the laws of the US or a particular state of the US |
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Term
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Definition
| an insurance co. formed under the laws of a country other than the US, its districts, territories, commonwealths, possesions and the Panama Canal Zone. |
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Term
| Classification of insurance co by ownership and mode of operation |
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Definition
Stock company
mutual company
reciprocals
fraternal benefit society
risk retention and purchasing groups
Private and government insurers
captive insurance company |
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Term
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Definition
| an incorporated insurance company with its capital divided into shares. Owned by stock holders |
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Term
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Definition
| an incorporated insurance company without permanent stock that is owned by its policyholders. |
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Term
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Definition
| a member agrees to share the risk. Consists of members, represented by underwriters who place the risk among its memembers. In the case of loss, the amount paid is shared by the participating members who accepted the risk. |
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Term
| Fraternal benefit society |
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Definition
| An incorporated society or order, w/o capital stock, that is operated on the lodge system and conducted solely for the benefit of its members and their beneficiaries, and not for profit. They offer insurance that is available only to its members. Most write only life and health insurance. |
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Term
| Risk retention and purchasing groups |
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Definition
In 1981, congress passed Liability Risk Retention Act to give product manufacturers more options when insuring against product liability.
Risk rentention and purchasing groups are regulated in the states where they are domiciled but can transact business in all other states. This exempts them from state insurance regultionsand guaraty funds. Prohibited from writing workers comp and personal lines insurance |
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Term
| 1981 Liability Risk Renention Act |
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Definition
allowed product manufac to establish frp self-insurance programs or grp captive insurance co. called risk retention grops to protect them against product liability exposures and to purchase liab insurance on a grp basis.
Limits the states' authority to regulate product liab insuance.
Ammended in 1986 giving the right to form risk retention grps and purchasing grps to nearly all businesses. |
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Term
| Private and goverment insurers |
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Definition
Companies that are either privately owned or operated by the state or federal government. The gov. sometimes steps in to provide insurance that is not ordinarily available from private insurers.
Some times called residual market insurance. |
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Term
| Types of insurance provided by the Federal gov. |
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Definition
*war risk insurance
*Nulcear energy liability insurance
*flood insurance
*Federal Crop insurance
*Federal crime insurance. |
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Term
| state level insurance involvment |
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Definition
providing unemployment insurance
may provide workers compensation benefits through state funds. |
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Term
| captive insurance company |
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Definition
| may apply to the commissioner for the license to conduct any and all insurance, except workers comp insurance, personal moto veh insurance or homowner insurace. |
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Term
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Definition
| with this option, part or all of the risk of loss is borne w/o the benefit of insurance covg to fall back on if a loss occurs. Some lrg co. are self-insured b/c they have the resources to withstand losses and their claims experience demonstrates that it is cheaper to be rather than pay for insurance covg. |
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Term
| basic distribution systems used to market insurance |
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Definition
- exlusives agency system
- direct writer system
- direct response system
- independent agency system |
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Term
| exclusive (or captive) agency system |
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Definition
| the ins co. contracts w/ agencies, which are independent businesses, to rep and sell insurance only for that ins co. |
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Term
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Definition
| the insurance co.'s agents are actually employees. They may receive a salary, be paid a commision, or combination of both |
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Term
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Definition
| there are no agents. These co. sell through direct mail or over the phone |
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Term
| independent agency system |
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Definition
| agencies that are independent contractors contract with several different companies to represent and sell for those co. An agent who represents more than one company is know as an independent agent. |
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Term
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Definition
based on an analysis of a co's claims experience, investment performance, managment, and other factors.
One of the most widely used indicators of financial health (or lack thereof) in the insurance industry.
A++, A+ Superior - Strongest position
A, A- excellent
B++, B+ Very good
B, B- Good
C++, C+ Fair
C, C- Marginal
D Belown minimum standards
E undersupervision
F in liquidation |
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Term
| general requirements for Licensing |
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Definition
1. applicant be 18 yrs old (most states)
2. be a resident of the state
3. satisfies the insurance department, that the applicant is trustworthy
4. the individual has not committed a felony or had his or her licensed revoked in another state
5. satisfied the requirements of obtaining the license. |
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Term
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Definition
| agents are granted athority by the insurance co to bind or accept risks on behalf of the insurer. |
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Term
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Definition
1. Express
2. Implied
3. Apparent |
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Term
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Definition
| authority specifically given to the agent either in writing or orally. |
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Term
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Definition
| allows the agent to perform all the usual tasks required to sell and service the insurance contract and to exercise the agent's express authority. |
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Term
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Definition
a doctrine that assumes that the agent has the authority that a normal prudent person would think or be lead to believe they have.
Example: the apparent authority to bind insurance coverage. |
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Term
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Definition
1. Selling insurance
2. Collecting premiums
3. Servicing the contract
4. Issuing and countersigning policies
5. They act as the representative for the insurance company and the link between the insured and insurer. |
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Term
| Maintenance of Agent and Adjuster Licenses |
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Definition
1. Must file with the commish department the complete address of his/her principle place of business and the complete address of his/her residence
2. Should there be a charge of address it is the obligation of the agent to notify the insurance commish insurance department of the state in which licensed.
3. In many states there is a requirement to complete some form of continuing education to maintain and insurance license. Left up to state for specifics |
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Term
| Reasons for license revocation, suspension or penatly 1- 6 (11 total) |
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Definition
1. Violated any insurance law or lawful rule, regulation, or order of the comish
2. Improperly withheld, misappropriated, or converted to his own use any money recieved in the course of business that belongs to policyholders, insurers, benes, or others
3. Misrepresented the terms of any existing or proposed insurance contract to the determint of the applicant or insured.
4. Engaged in any pattern of unfair methods of competition or unfair or deceptive acts or proactices in the business of insurance.
5. Forged another person's name to any document or fraudulently procedure a forged
6. Knowingly and willfully made or permitted a false or fradulent statement or misrepresentation in or relative to the adjustment of any claim. |
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Term
| Reasons for license revocation, suspension or penalty 7-11 (11 total) |
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Definition
7. been convicted of or plead nolo contendere to a felony
8. been convicted of or plead nolo contendere to a misdemeanor in connection with their activities as an adjuster or agent.
9. had an agent's broker's, or adjuster's license suspended or revoked in any other state, district, or territory of the US or any province of Canada
11. Committed any other act that inherently demonstates untrustworthiness or lack of competence |
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Term
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Definition
| it is against the law for any person or co. to engage in any unfair methods of competetion or any unfair or deceptive practices by agents companies. |
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Term
| Deemed unfair trad practices |
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Definition
1. rebating
2. twisting
3. Defamation
4. Misrepresentation and false advertising
5. Unfair claim settlement practice
6. fiduciary
7. excessive charges
9. unfair discrimination |
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Term
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Definition
| occurs when the buyr of an insurance policy receives any part of the ageant's commision or anything of significant vlaue as a inducement to purchase a policy |
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Term
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Definition
the unethical act of persuading a policyowner to drop a policy solely for the purpose of selling another policy w/o regard to possible disadvantage to the policyowner.
example: Persuading the policyowner to surrender a whole life policy and use the cash value to make other investments |
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Term
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Definition
any false or malicious communication, written or oral, that injures another reputation, fame, or character.
Individuals and companies can both be defamed.
Example: Spreading rumors, or falshoods about the character of a competing agent or the financial condition of another insurance co. |
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Term
| Misrepresentation and falso Advertising |
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Definition
no person shall make, issue, ciruculate or cause to be made, issued or circulated, any estimate, circular, statement, sales presentation, omission or coparison which:
- misrepresents the benefits, advantages, conditions or terms or dividends or share of the surplus to be received of/on any insurance policy.
-Make any false or misleading statements as to the dividends or share surplus.
-is misleading or misrepresentation as to the financial condition of any person
- use any name or title of any insurance policy or class of insurance policies misrepresenting the true nature thereof
- is a misrep for the purpose of inducing or tendinf to induce the lapse, forfeiture exchange, conversion or surrender of any insurance policy.
- is a misrepresentation for the purpose of effecting a pledge or assignment of of effecting a loan against any insurance policy.
- Misrepresents any insurance policy as being shares of stock. |
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Term
| Unfair claims settlement practice 1 |
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Definition
| - Misrep pertinent facts or insurance policy provisions relationg to covg at issue |
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Term
| Unfair claims settlement practice 2 |
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Definition
| - failing to ack and act reasonably and promptly upon communications w/ respect to claims arising under insurance policies. |
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Term
| Unfair claims settlement practice 3 |
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Definition
| failing to adopt and implement reasonable standards for the prompt investigation od claims arising under insurance policies. |
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Term
| Unfair claims settlement practice 4 |
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Definition
| refusing to pay claims without conducting a reasonable investigation based upon all available info |
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Term
| Unfair claims settlement practice 5 |
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Definition
| failing to affirm or deny covg of claims w/n a reasonable time after proof of loss stmts have been completed |
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Term
| Unfair claims settlement practice 6 |
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Definition
| Not attempting in good faith to effectuate promt, fair and equitable settlements of claims in which liab has become reasonably clear |
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Term
| Unfair claims settlement practice 7 |
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Definition
| compelling insured to institute litigation to recover amounts due under insurance policy by offering sunstantially less than the amounts ultimately recovered in actions brought by such insureds, when such insureds have made claims for amount reasonably similar to the amounts ultimately recovered |
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Term
| Unfair claims settlement practice 8 |
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Definition
| attempting to settle a claim for less than the amount to which a reasonable man would have believed he was entitled by reference to written or printed advertising material accompanying or made part of an application. |
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Term
| Unfair claims settlement practice 9 |
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Definition
| attempt to settle clm on the basis of an app which was altered w/o notice to or the knowledge of, the insd. |
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Term
| Unfair claims settlement practice 10 |
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Definition
| making known to insd or clmt a policy of appealing from arbitration awards in favor of insd or clmts for the purp of compelling them to accept settlments or compromises less than the amount awarded in arbitration |
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Term
| Unfair claims settlement practice 11 |
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Definition
| delaying the investigation or payment of claims by requiring an insd, clmt or the physician of either, to submit a prelim clm report and then requiring the subsequent submission of a formal proof of loss froms, both of which contain substantially the same information . |
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Term
| Unfair claims settlement practice 12 |
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Definition
| failing to promptly settle clms, where liab had become reasonably clear, under one portionof the ins policy covg in irder to influence settlments under other portions of the insurance policy covg |
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Term
| Unfair claims settlement practice 13 |
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Definition
| failing to promp provide a reasonable explanation of the basis in the insurance pol in relation to the facts or applicable law for denial of a clm or the offer of a compromise settlement. |
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Term
| Unfair claims settlement practice 14 |
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Definition
Pailing to notify the 1st party clmt and the provider of services covered under accident and sickness ins and hospital and med service corp ins policies whether the clm has been accepted or denied. And if denied, the reasons for the denial (within a specified # of days from the filing of the proof of loss). Should benefits due the clmt be assigned, notice to the slmt shall not be req. However, should the bene be payable directly to the clmt, notice to the health care provider shall not be req.
if the insurer needs more time to investigate the clm it shall so notify the first party clmt in writing within a specified # of days from the date of the intitial contification and specified # of days, thereafter; but in no instance shall a clm remain unsettled and unpaid for more than a specified # of days from the 1st prty clmts filing of the POL unless there is determined by the commish
1) a legitimate dispute as to covg, liab, dmg
20 the clmt has fraudulently caused or contributed to the loss.
In the event that the insurer fails to pay the clm in full withing a specified # of days from the clmts filing of the proof of loss, except for exemptions provided above, there shall be assessed against the insurer, and paid to the insured, a penalty which will be in addition to the amount of the claim and assed as interest on sich at an amount determined by state law. Any penalty paid by an insurer persuant to this section shall not be a consideration in any filing made by such insurer |
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Term
| Unfair claims settlement practice 15 |
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Definition
| making claims payments to insureds or beneficiaries not accompanied y a statement setting forth the covg under which payments are being made |
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Term
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Definition
a person or institution that has responsibility for the money, property or financial affairs of another.
Example: agent is not to co-mingle with the funds of toher with their personal funds |
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Term
| coercion, boycott, intimidation |
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Definition
| a person shall not enter into any agrement to commit any act of coercion, intimidation or boycott resulting in unreasonable restraint of or monopoly in, the business of insurance |
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Term
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Definition
the insurance codes define premium as the consideration for insurance. Any and all charged made by an agent when taking an application, issuing a policy and for services rendered are all premium charges.
The commission paid to an agent by the insurer constitues the entire compensation due the agent in connection with the solicitation, negotiation, making or servicing an insurance policy.
Example: When an agent charges an extra fee, this amounts to an overcharge of premium constituting unfair discrimination against the insured charged. |
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Term
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Definition
| neither agents or insurance companies are permitted to discriminate against perspective insureds. |
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Term
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Definition
Fair Access to Insurance Reqirements.
no application for insurace can be rejected simply because of environmental hazards that are beyond the control of the insured. |
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Term
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Definition
FAIR plans
guaranty plans
assigned risk plans |
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Term
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Definition
to pay covered losses of insolvent insurers. In most states the maz limit is $300,000 for any one loss.
Also allows for the return of premium on a policy issued by an insolvent insurer. The deductable is usally $100.
Certain types of covg may be exempt such as life and health clms although some states do have a separate guaranty fund for these types of clms. Usually the limit does not apply to Worker;s comp type clms. |
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Term
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Definition
| Companies that write auto covg must participate. It is designed to provide a market for covg where the applicant has been unable to obtain covg in the usual marketplace. Usually required to write the risk for at least three years or until covg is placed outside the plan. |
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Term
| Terroism Risk Insurance act (TRIA) |
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Definition
established after 9/11 that establishes a temp federal program through which the fed govt share with the insurance agency losses resulting from acts of terrorism.
Effectively ensures that terrorism insurance will be available moving forward. |
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Term
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Definition
commercial property insurance
commercial casualty insurance
workers compensation insurance
surety coverages |
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Term
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Definition
crop-hail
livestock
private mortgage guaranty
financial guaranty
medical malpractice
life and health
flood
reinsurance and retrocession insurance |
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Term
| TRIA additionally excludes |
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Definition
| commercial auto, crime, surety, farmowners, and professional liab insurance |
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Term
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Definition
| certified by the secretary of the treasury and the attorney general of the US |
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Term
| to be certified as an act of terrorism it must be |
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Definition
1. an act of terrorism
2. a vilent act or an act that is dangerous to
a0 human life
b) property, or
c) infrastructure
3. resulted in dmg within the US or outside the US in case of
a) air carrier or US flg vessel on which the US income tax is paid and whose insurance covg is subject to regulation in the US, regardless of where the loss occurs, or outside of the US
b)the premises of a US mission; and
c)to have been committed by an individual or individual acting on behalf of any foreign person of the US or to influence the policyor affect the conduct of the US govt by coercion |
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Term
| Not certified by secretary as act of terrorism if: |
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Definition
- the act is committed as part of the course of a war declared by the congress, except that this clause shall nt apply with respect to any covg for workers comp or
- property and casualty insurance losses resulting from the act, in the aggregate, do not exceed $5,000,000/ |
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Term
| Federal subsidizing og the program |
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Definition
| if the combined losses of all insurers involved in the event exceed $100 million the "program trigger" is applicable requiring the govt to share in the losses. Each insurer had a deductible whish is 20% of its total clms for the event. The fed govt will pay 85% of the remaining loss amounts with the insurer still being responsible for another 15% of the claims. If the certified acts of terrorism losses in any one program year exceed $100 bilion for all insurers, the Fed govt pays for losses over that amt. |
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Term
| Revisions as a part of the Terrorism Risk Insurance Extension Actof 2007 |
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Definition
- revised def of a "certified act" of terrorism to remove the req that individuals must be acting on behald of a foreign person or foreign interest.
- req clear and conspicous notice to policyholders of the existence of the $100 billion cap
- Requiring the US treasury to promulgate regulations for determining pro-rata shares of insured losses under the program when insured losses exceed $100 billion
- Requiring the comptroller general to study the availability and affordability of insurance covg for losses caused by terrorist attacks involving nuclear, biological, chemical, or radiological materials and issue a report in one year
- requiring the comptroller gerneal to determine whether there are specific markets in the US wherethere are unique capacity constraints on the amount of terrorisminsurance available and issue a report in 180 days
- requiring the President's working group on Financial Markets to continue an ongoing study of the long-term availability and affordability of terrorism risk insurance;
- accelerating the timing of the madatory recoupment of the fed share though policyholder surcharges. |
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Term
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Definition
any written, oral or other communication by a consumer reporting agency that:
- bears on a consumer's creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics or mode of living and
- is used as a factor in establishing the consumer's eligibility for credit or insurance to be used primarily for personal, family, household purposes, or is used for employment purposes |
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Term
| when a consumer reporting agency may furnish a consumer report |
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Definition
intends to use the info:
1. in connection with a credit transaction involving the consumer about whom the information is to be furnished
2.for employment purposes; or
3. in connection with underwriting insurance involving the consumer. |
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Term
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Definition
lawsuits, judgments, arrests, and convictions that happened with in 7 years before the report.
bankruptcies may be included if they predate the report by 10 years or less.
NO MEDICAL info may be included unless the consumer consents. |
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Term
| restrictions for consumer credit reports do not apply to any CCR in connection w/ |
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Definition
1. a credit transation involving a principal amount of $150,000 or more
2. Life insurance underwriting involving $150,00 or more
3. The employment of any individual at an annual salary that equals or that may reasonably expected to equal $70,000 or more. |
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Term
| consumer's rights to a report |
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Definition
Upon written request made by the consumer, a person who procures an investigative consumer report on the consumer must make a complete and accurate disclosure of the nature and scope of the investigation requested.
Must be made in writing and maild to the consumer no later than five days after the date on which the request for the disclosure was receieved from the consumer or the report was first requested, whichever is later. |
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Term
| Punishment for insurance fraud or false statements |
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Definition
fine and or imprisonment for up to 10 yers.
May be up to 15 yrs if the stmt, report, or overvaluing of land, property or security jeopordized the safety and soundness of an insurer and was a significant cause of the insurer being placed in conservation, rehabilitation or liquidation by an appropriate court. |
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Term
| additional punishment for embezzlement, abstract, purloins or misappropriates any of the money, funds, premiums, credit, or other property of an insurer. |
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Definition
| If the amount or value doesnt exceed $5,000, whoever violates this section will be fined and or imprisoned for up to one year. |
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Term
| false entry, report or statment |
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Definition
fine, up to 10 years.
could be 15 years for jepordizing |
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Term
| punishment for threatening, forcing, or corruptly influencing, obstructing or impeding the due and proper administration of the law under any proceeding involving insurance business |
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Definition
| fined and/or up to 10 years. |
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Term
Punishment for
dishonesty
breach of trust |
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Definition
| fined and/or up to 5 years |
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Term
Federal Trad Commission's creation of Consumer Fraud and Abuse Prevention Act
and its influence on telemarketing sales rule |
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Definition
Cannot call anyone on the national Do Not Call Registry.
prevents prerecorded commercial telemarketing calls unless the telemarketer has obtained permission in writing to recieve such alls from the consumer. |
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Term
| Penalty for prerecorded messages w/o permission |
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Definition
up to $16,000 per call
does not apply to prerecorded messages that are not selling anything.
Example: School delay message or debt collection message. |
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Term
| Controllling the Assault of Non-Solicited Pornography and Marketing Act (CAN-SPAM) |
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Definition
FCC adopted rules prohibiting sending unwanted commercial email messages to wireless devices with out prior permission.
Took affect in March 2005
Commercial message includes statements about an existing account or warranty info about a product already purchased. Also does not cover non-commercial messages such as messages about candidates for public office. |
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Term
| Gramm- leach Bliley (GLB) Act aka Financial Modernization Act of 1999 |
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Definition
Federally enacted in the US to control the ways that financial institutions deal with the private indormation of individuals.
GLB requires companies to give sutomers written privacy notices that explain their information-sharing practices and to safeguard sensitive data. |
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Term
| Three sections of the GLB act |
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Definition
1. Financial Privacy Rule
2. The safeguards Rule
3. The Pretexting provisions |
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Term
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Definition
| regulates the collection and disclosure of private financial information |
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Term
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Definition
| stipulates that financial institutions must implement security programs to protect such information |
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Term
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Definition
| prohibit the practice of pretecting (accessing private information using false pretenses) |
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