Insurance Regulation Flashcards

Flashcards containing various vocabulary terms and definitions.

Aggrieved

Injured party; someone entitled to begin a lawsuit or request a hearing

Cease and desist

To stop or discontinue

Coercion

Forceful act or threat aimed to influence a person to act against their will

Commission

Payment to the agent by the insurance company for placing insurance, usually a percentage of the policy premium

Commissioner

The head of the state Department of Insurance

Home office (domicile)

A state in which an insurer is organized and has its main place of business

Inducement

An offer that attempts to influence the other party

Insolvent

Unable to meet financial obligations

Line of authority

A type of insurance a producer or a business entity is authorized to transact

Reciprocity/Reciprocal

A mutual interchange of rights and privileges

Statute

A formal written law enacted by legislature; insurance statutes can be found in the state Insurance Code

Life

Coverage on human lives

Accident and health

Coverage for sickness, bodily injury or accidental death, and disability income

Property

Coverage for the direct and consequential loss or damage to property of every kind

Casualty

Coverage against legal liability

Variable life and variable annuities

Coverage under variable life and/or variable annuities

Personal lines

Noncommercial property and/or casualty coverage

Credit

Debt insurance (limited line)

Motor vehicle rental

Auto rental insurance (limited line)

Insurance Producer

Person who sells, solicits or negotiates contracts of insurance

Exclusive General Agent

A licensee which has been granted sole authority to act directly or indirectly as an insurance producer for a domestic insurer with respect to a specific portion of the insurer's business or within a specific territory

Manager

A person that negotiates and binds ceding reinsurance contracts on behalf of a domestic insurer or manages all or part of the insurance business of an insurer and does not act as an agent for that insurer

Certificate of Authority

Indicates that the Commissioner has examined the business and found it to be financially stable and organized in accordance with the Insurance Code

Rebating

Any inducement offered to the insured in the sale of insurance products that is not specified in the policy

Twisting

A misrepresentation, or incomplete or fraudulent comparison of insurance policies that persuades an insured/owner, to their detriment, to cancel, lapse, switch policies, or take out a policy with another insurer

Defamation

Occurs when an oral or written statement is made that is intended to injure a person engaged in the insurance business

Coercion

To require, as a condition to a loan, that the applicant purchase insurance from a specific insurer.

Misappropriation of Funds

occurs when a person in a fiduciary position has used funds in a manner for which they were not intended, such as the wrongful taking or use of money belonging to another

Opt Out

The direction by the consumer that the licensee not disclose the consumer's nonpublic personal financial information to a third party.

Consumer Reports

Written and/or oral information regarding a consumer's credit, character, reputation, or habits collected by a reporting agency from employment records, credit reports, and other public sources.

Investigative Consumer Reports

Similar to consumer reports in that they also provide information on the consumer's character, reputation, and habits, but the primary difference is that the information is obtained through an investigation and interviews with associates, friends and neighbors of the consumer.

What are the most common penalties for violations of insurance statutes?

-fines -cease and desist order -license suspension or revocation

Who must be notified of a producer’s change of address?

Dept of Insurance (Commissioner)

To whom may a certificate of authority be issued?

An insurer authorized to transact business in the state

Who is an insurance agent?

A person authorized to sell, solicit, and negotiate insurance contracts

Who can usually be granted a temporary license?

Producer’s spouse or designee in case the producer dies or becomes disabled

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

What type of licensee represents the insurance company?

Agent

If the Commissioner finds a licensee engaging in an unfair method of competition or an unfair practice, what order will be issued?

A cease and desist order.

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

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

What are producers required to do in order to renew their license?

Complete continuing education hours and pay a renewal fee

For what reason can a temporary license be issued?

For continuation of business in case the licensed producer dies or becomes disabled

Who is responsible for the costs associated with the examination of insurers?

The insurer being examined.

What type of licensee represents the insured?

Broker

On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. What is the company guilty of?

Misrepresentation

In general, who can be excluded from producer licensing and exam requirements?

Insurance company officers, directors, or any other employees who do not transact insurance and who do not receive commissions for their services

What is the purpose of a cease and desist order?

To prevent a producer or insurer from further violation laws for transacting insurance

If an insurer holds a Certificate of Authority, it is known as what type of insurer?

Authorized or admitted

Who may share in the commission from the sale of a life insurance policy?

Only producers properly licensed for the type of insurance transaction

What illegal act does a producer commit when the producer represents a policy in a more favorable light than the policy really is?

Misrepresentation

What type of misrepresentation persuades insured, to their detriment, to cancel, lapse, or switch policies from one to another?

Twisting

If a producer makes maliciously critical statements about another insurer, what is this illegal practice callled?

Defamation

When can the Commissioner examine insurers?

Whenever deemed necessary, but at least every 5 years

Two individuals who are in the same risk and age class are charged different rates for their insurance policies due to an insignificant factor. What is this called?

Discrimination

All of the following violations may result in an agent’s imprisonment except?

Failing to report to the department a criminal prosecution taken against the agent in another jurisdiction

Should an insurance company deny a claim submitted by an insured without providing to that insured a prompt and reasonable explanation of the claim denial, the insurer would be in violation of?

Unfair claim methods and practices regualtions