California Code and Ethics (Life and Health Insurance)

Definitions and Questions based on the EXAMFX course, First section of basic rules knowledge about general insurances

Definition of Insurance

A Transfer of Risk of loss from an individual or business to an insurance company, under specific terms and conditions stated in a legl contract

Definition of Insurable Events

Any contigent or unknown event which may damnify an insurable interest or create a liability against it. More predictable events are more insurable.

Definition of Insurable Interest

Legal and Policy requirement that states insurance coverage can only be obtained if loss or damage to item or person would result in financial harm

Definition of Reinsurance

A contract under a reinsurer takes on part or all of the ceding insurer’s liabilities over an insurable interest to prevent potential catastrophic loss

Definition of Ceding Insurer

The insurance company under a Reinsurance contract who originally took on an insurable interest, cedes part or all of its liabilites to the Reinsurer (another insurance company)

Definition of Reinsurer

The insurance company under a Reinsurance contract who takes on part or all of an insurable interest’s liabilites from the ceding insurer (originating insurance company)

Definition of Liability Insurance

Insurance against financial loss resulting from inclifcting injury or damage to a person or property of others.

Definition of insuance policy

The written instrument in which a contract of insurance is set forth.

Definition of Fraud

the intnetional misrepresentation or concealment of a material fact to manipulate or cheat another party.

Definition of Misrepresentations

Any information given to an applicant that is untrue regardless of it was intentional or unintentional, grounds for voiding the contract

Definition of Fraudlent

Misrepresentation that is material and intentional

Definition of recission

A rescinding of an insurance policy due to concealment, fraud, or breach of warranty/contract

What is Penal Code Section 550

A law that states it is a felony to intentionally commit or conspire to commit false or fraudlent actions, make multiple claims for a singe loss, or misrepresentation

Definition of Concealment

The intentional withholding of information by the applicant that will result in an imprecise decision for the insurer

Definition of Warranty

A stated or implied Guarantee in a contract

Concept of Materiality

The idea that all parties to a contract are entitled to all information necessary to make an informed decision.

Definition of Representations

Statements that are believed to be true but not guaranteed to be true given to applicants

The 6 Specifics for Insurance Policies

Parties to the contact

The Insurable interests

A statement about the relationship between the insurable interests and the insured

The risks insured against

The length of contract

The total cost and rates of the insurance

Definition of Producer

The insurance agent who works with the insureds

Independent Agent

An agent contracted with multiple insurance companies can offer a wide array of policies

Exclusive/Captive/Career Agent

An exclusive insurance agent who only works with one insurance company

Direct Response Method

When a potential client takes the initiative to respond to an advertisment

Home Service Method

When an agent sells insurance in the home or business and returns to collect the cost in person

1033 Waiver

A waiver written by an insurance official that allows a person with a conviction of a crime involving dishonesty or breach of trust to work as an Insurance Agent

Agents vs. Brokers

Agents represent the insurance company and Brokers represent the clients looking to obtain insurance

4 areas Life Agents can offer policies for

Endowments

Annuities

Death or dismemberment by accident

Disability income

5 areas Accident and Health or sickness Insurance agencts can offer policies for

Sickness

Bodily injury

Accidental death

Disability income

24-hour coverage

what is Errors and Omissions liability Insurance

Insurance for agents or brokers to protect against losses due to negligence

How often must the Insurance License be renewed?

2 years

What if Fiduciary

the reponsibility in handling another person’s finances

Managing General Agent (MGA)

a party that manages ceding reinsurance contracts on behalf of the ceding insurer

What is Rebating

Offering an additional service / items that are not stated in the insurance policy to convince a client to purchase a policy

Within what span of time must an agent respond to a policyholder who contats the insurance company about a claim?

15 days

What determines the importance of a misrepresentation?

The materiality of the concealment

What must an agent do to continue operating under an expired license for a maximum of 60 days?

File an application for renewal and paid the renewal fee on or before the expiration date

What is an insurance company that is not authorized to do business in CA called?

A nonadmitted company

What are the consequences of failure to comply with the Comissioner’s office executing a seizure order

A misdemeanor punishable with a fine of $1000, one year in prison, or both

Who is reponsible for notifying the commissioner of a licensee’s change of address?

the licensee

How does the Commissioner decide if an insurance policy’s rate is fair?

by comparing the rate to the insurance company’s investment income

Who are insurance solicitors?

people who work for a licensed agent or broker, not a company

When can an agent begin to solicit business for a company?

When the insurer signs the appointment form

What are the continiuing education requirements for insurance agents in CA

24 hours every 2 years

What are the continuing education requirements for senior agents for the CA Partnership for long-term policies

8 hours each reporting period

What warning must be written before a fraudulent claim clause in a contract

For your protection, California law requires the following to appear on this form

IF an agent suspects that an application is fraudulent, within what period of time must they submit information to the Fraud Division?

60 days

What are inurance companies that were created under the laws of another country called

Alien Insurer

What happens to an agent’s license if they do not have any active appointments with a company?

it becomes inactive

Dividends paid to policyholders issued by a mutual insurance company are _____

not taxable

How often must each insurer in CA report its financial condition to the Commissioner?

every year on or before March 1

How many names (real or fictitious) may an insurer have?

2

What is Legal Insurance

insurance to potect the insured against the costs from services performed by an attorney

If an insurer issued a policy from an unappointed agent, within how many days must the insurer appoint the agent with the Comissioner?

14 days

What is the penalty for obtaining information under false pretenses

Maximum of $10000 or imprisonment under 1 year

What is the McCarran-Ferguson Act

an Act that allows the state to regulate insurance

What is Surety Insurance

insurance against financial loss from the behavior of persons and outcome of contracts

What is twisting

a type of misrepresentation that persuades an insured to cancel or switch policies

What is the open competition method

A method that allows insurers to quickly change rates in order to beat their competitors

How soon must an insurance company provide all details of an insured’s recorded information if it is requested by the insured?

30 days

What rights and warnings are given to senionrs over 60 years old who purchase a life insurance plan?

They can return the policy for a full refund within 30 days, and in bold print size 12 there must be a notice of that right

What is a surrender charge

a penalty that may be applied to the insured if they cancel a life insurance plan after 30 days of purchase

What rights are given to those less than 60 years of age purchasing a life insurance plan?

the right to return for a full refund within 10-30 days depends on the insurer

What is Replacement in life insurance

the purchase of a new individual life insurance that results in an existing insurance policy to be terminated, the new insurer must send a notice to the old insurer to give them a chance at conservation

What is conservation in lifeinsurance

When an insurance policy is about to be replaced, the old insurer is given a chance to talk with the client and see if they can make any changes to the plan in order to conserve the client

what is theincontestability clause

the insurer cannot contest the statements on an application if the policy has been in effect for two or more years

When employees are covered by a group insurance plan what are they required to recieve?

A certificate of insurance

What is the free-look provision

insurers must provide any individual life insurance customer the ability to retun their new policy within 10-30 days

What is it called when an insured has functionally identical coverages that overlap or duplicate benefits to the extent that the coverage is not cost-effective?

Overloading

What is the minimum penalty for repeated code violation regarding replacement?

$30,000

Where must agents keep records associated with insurance transactions?

at their main place of business

In what print must the warning and notice of the cancellation details of life insurance sold to seniors and elders be printed in?

12-point bold

What is the penalty for releasing an insured’s financial records wihout consent?

$2,500

Which type of organization forms for charitable purposes to support affiliated groups and religous organizations that they may provide insurance for

Fraternal Insurance

Which standard medicare suppliment plan’s core benefits must be offered in all te plans?

Plan A

What must an insurance company do during the open enrollment period for a person eligible for Medicare supplement plans?

The insurance company must sell a Medicare supplement policy, cover all pre-existing conditions and not charge more for the poliy because of past or present health problems

What is Plan A

A Medicare supplement plan that only includes the core benefits

What is Plan B

A Medicare Supplement plan that includes the core benefits plus a deductible for Part A

What is Plan D

A Medicare supplement plan that include the core benefits, the deductible for part A, nursing fcitility access, and a forgeign travel benefit

What is Plan G

A Medicare supplement plan that includes the core benefits, Part A deductible, nursing facitility access, foreign travel benefits, 100% of part B excess charges, and payed services of activities of daily living (ADL)

What are Plans K and L

Medicare supplement plans with lower premiums but higher out of pocket costs

K includes 50% Part A deductible

L includes 75% Part A deductible

What is Long Term Care Insurance

Any insurance polocy that covers dianostic, preventative, maintenance, or personal care services in settings other than a hospital

ex: in a facility, a person’s home, or adult day-care/hospice care

What is a pre-existing condition

a condition for which advice or treatment was recieved within the past 6 months

What are the 6 defined Activities of Daily Living (ADLs)

Eating

Bathing

Bowel and bladder control

Dressing

personal cleansing

Mobility

What type of insurance license is required if an agent wants to handle workers compensation cases?

Accident and Health Insurance

True of False: the Insured’s address is Not included in property insurance policies

True

What are Valued Policies

A policy that provides an agreed upon payment upon loss regardless of the actual value of loss

Ex: sunk cargo ships are hard to estimate value after, so a set price is agreed upon and payed out instead

At least how many days before the effective date of cancellation must an Auto Insurer deliver a notice to the policy holder when cancelling their policy?

20 days

What point type must the written notice on auto insurance policies that states the insurers are not allowed to suggest or make an insured go to a specific car repair shop or car shop be in?

10 point font

What does the Federal Liability Risk Retention Act do?

provides insurance against liability for Risk Retention Groups

What are Risk Retention Groups?

Any corporation or company that needs insurnce coverage for liabilites for their team members

Ex: insurance companies need liability insurance to protect them in case of making a mistake, Errors and Omissions

What is an Open Policy?

A polocy that determines the payment value at the time of loss

Within how many days must aninsurnce agency accept of deny a claim?

40 days

Within how many days must an agent respond to a client who reaches out regarding a claim?

15 days

What is the maximum fine for insurance businesses engaging in unfair methods of competition?

$10,000

True of False: Government records are considered Personably Identifiable Information

False

How many hours of continuing education in ethics must agents complete each licensing term?

3 hours

What must all insurers obtain before transacting in Insurance in their given state?

A Certificate of Authority

What is the term for the method of insurance marketing where new rates are marketed before being filed 15-30 days after its first use?

Use and File rate laws

Which system of rules is used to approve or disapprove rate filings before they’re used?

Prior Approval Rules

Which system of laws allow insurers to file a new rate and immedietley implement the new rate before recieving approval or disapproval of the filed rate?

File and Use rate Laws

What is the California Insurance Code?

Statutes implemented by the state legislature