Insurance License Ch. 1

Insurer

The insurance company

Insured

The person who bought the insurance

Named Insured (1)

Covers anyone listed in the policy

Named Insured

Who receives the broadest coverage of all persons listed in the policy?

First Named Insured

The person or business whose name appears first in the policy

Additional Insured

This would be a mortgagee or lienholder

Principle of Indemnity

The insured will be restored to the same financial condition as before the loss

Depreciation

What is used in determining the how much is paid for the loss in the principle of indemnity.

Underwriting

The process of evaluating risk and deciding the insurability of a potential policyholder.

Insurable Interest

Must exist at the Time of the Loss

Occurrence

Exposure to the same harmful conditions over a period of time leading to a loss (damage)

Cancellation

Discontinuation of a policy prior to expiration date of the policy

Nonrenewal

The discontinuation of a policy at the expiration date of the existing policy

Binder

A written or verbal agreement showing certain amounts of coverage are in force on a specified date as temporary proof of insurance.

Binders

What terminates when the policy is issued?

Upon policy issuance

Which of the following triggers the end of a binder’s effectiveness?

Endorsement

A policy form used to revise coverage in an in-force property or casualty policy. Making a change.

Arbitration

Claims dispute resolution method designed to settle a question of coverage.

Arbitration

When an insurer and insured cannot agree on the definition of a coverage or peril.

Appraisal

Claims dispute resolution method designed to settle a question about the amount of claim payout.

The Commissioner of Insurance

Who is appointed by the Governor?

Commissioner’s powers

Only to enforce insurance rules and law,

Examination of Books and Records

What must be conducted at least once every 5 years?

When to release the funds

The Department does not have the right to tell an insurer…

Domestic Insurer

Home office or incorporated in Texas

Foreign Insurer

Home office or incorporated in any state except Tx

Alien Insurer

Home office or incorporated in another country, not in the US

Admitted Insurers (1)

Allowed to transact insurance in Tx

Admitted Insurers

Who has a Certificate of Authority, like a license for the insurer

10:30 Rule

10 days notice for revoking certificate of authority, 30 days for the hearing

Non-Admitted Insurers

No Certificate of Authority

Surplus Lines insurer

Who is not allowed to be a member of Texas Select because they are non-admitted

Texas Property and Casualty Association

Who pays claims for insolvent (bankrupt) admitted insurers?

Stock insurer

Owned by its stockholders, called shareholders, dividends are not guaranteed.

Mutual insurer

Owned by its policyholders, dividends are not guaranteed

Transacting Insurance

Collection of any consideration for any type of insurance including a premium, commission, or any fee. NOT SETTING UP APPOINTMENTS OR PAYING CLAIMS

Must have a certificate of authority

What is true of Lloyds of Texas?

High school diploma, US citizen, 21 yrs old

Who isn’t required to be an agent?

One

How many officers must be licensed to have a corporation?

180 days

How long is an agent’s license valid for?

Certificate signed by an agent, 40 hours of supervised training

What do you need to get for a temporary license/

Nonresident Agent

Receive license in own state first then can have license in another.

Limited Lines Agent

limited types of insurance

Surplus License

Required if agent wishes to place insurance with on-admitted insurers who have no Certificate of Authority

Managing General Agent

Required to supervise others

Adjuster

Investigates and settles claims for an Insurer

Be appointed by an insurer

If you pass exam then receive license you still can’t sell policies because you must what?

24 total hours in 24 months, 3 ethic hours

How long is Continued Education?

$50 for every hour not properly done in 90 days

Fee for not doing continued education

Fiduciary Duty

Keeping premium funds in an account separate from their personal funds. Someone must do the right thing financially.

Boycott

Refusing to do business with someone

Coercion

Compelling someone to act against their own interest

Controlled Business

Selling only to your family, friends, etc. Must make yourself available to the general public

Defamation

Any written or spoken statement about a person that is false and critical

Sex and gender

What can be used to determine rates?

False Advertising

An insurer who misled the public about its assets, corporate structure, financial standing or age is guilty

Unfair Comparisons

Agents and advertisements made compare 2 policies that are incomparable or incomplete comparisons to sell policies

Unfair Claims Settlement Practices

Failing to provide explanation for claim denial or refusing to pay claims without conducting a reasonable investigation

Disciplining a license

Filing for bankruptcy is not cause for denying or losing your license

inform their insurer

A producer who has their license suspended must …

5 years

If an individual’s license was denied, they must wait how long before reapplying?

Fair Credit Reporting Act of 1971

Protects the public by ensuring the data collected on an applicant is kept confidential, accurate, and used for a proper purpose

At the time of application

When does the applicant get notified that a credit report will be obtained?

Credit reporting agency

If their are an inaccuracies on a credit report, who must the applicant call?

McCarran-Ferguson Act

Allows insurers to share relevant information among each other

Financial Services Modernization Act

Allows banks, security companies, and insurers to merge

Terrorism Risk Insurance Act

Makes terrorism insurance available through Commercial insurers.

acts or war

The definition of acts or terrorism excludes what?

Risk Management

Chance or likelihood for a loss

Speculative Risk

A possibility of loss, no loss, or gain

Pure Risk

A possibility of loss or no loss (insure)

Law of large numbers

It is difficult to insure items that are one of a kind

easier

The larger the number the ____ it is to predict claims

Peril

The cause of a loss such as fire, lightning, wind or hail

Hazard

Situation or product that increases the probability of a loss

Physical hazard

physical conditions that increase the chance of a loss

Morale Hazard

Indifference or carelessness that increases probability of loss

Transfer

By purchasing insurance, an insured transfers the risk to the insurer

4

How many elements of a legal contract

Not Negotiation

What is not an element of a legal contract

Agreement

Offer AND accept

Offer

An applicant submits an application

Acceptance

The insurer issues the policy

Payment of premium

What is the insured’s consideration in an insurance policy?

Contract of Adhesion

Take it or leave it basis

Representation

Statements on the application believed to be true to one’s knowledge

Warranty

A statement made by an applicant in the policy that guarantees something to be true

Misrepresentation

A lie, and if proof, voids the policy

Concealment

The withholding or hiding of known material facts

Declarations Page

Who what when where how much

3 P’s Found in the insuring agreement

Insurers Promise to Pay, Perils

Insuring Agreement

Insurance Company’s promise to pay covered losses

Conditions

Where you find the obligations and duties of each party, the insured and insurer

Cancellation

10 Days for Non-Pay!

Liberalization Clause

If the insurer broadens coverage with no increase in premium

Mortgage Clause

In the event of a loss payment is made to mortgagee up to its insurable interest in the property and in order or precedence

Non Renewal

The insurer no longer covers the property after the expiration of the existing policy

Pro Rata

The insurer only pays its proportional share of the loss

Subrogation

An insured assigns their right to recover damages from a third party responsible for causing a loss to their own insurer