New Mexico health and life insurance exam

risk

Risk

Uncertainty of financial loss or a chance of loss

hazard

A hazard is a condition that makes a peril more likely to happen or that increases the seriousness of a loss

hazard

Any factor that gives rise to peril

peril

cause of loss

Peril

And immediate specific event causing loss in giving rise to risk

Physical Hazard

Arises from material structural for operational features such as a slippery floor or unsanitary conditions

Moral hazard

Arises from people's habits and values such as filing a false claim

Morale Hazard

Arises from human carelessness or a responsibility such as bailing to take safety precaution

exposure

loss

Last must be measurable, the insurer must be able to place a specific monetary value

Methods of Handling Risk

Avoidance

Retention

Sharing

Reduction

TransferAvoidance

Elements of insurable risks

1.Large numbers of homogeneous units, I large number of similar exposure units is necessary in order for the pooling in sharing mechanisms of insurance to function

2.Los must be measurable by being able to place a specific monetary value on exposures and losses in order to be able to calculate rates in premiums and reach settlements

3. Lost must be uncertain, insurance covers purists which messed inns involve an uncertainty of loss

4.Economic hardship, there must be a significant potential for economic loss a.k.a. a higher dollar value

5.Exclusion of catastrophic perils, Mini policies exclude losses resulting from war nuclear hazards flooded earthquake because the insurance system would collapse if we covered events that caused widespread losses to large numbers at the same time

Adverse selection

Those who are most likely to file claims are the ones most likely to purchase insurance

Reinsurance

A form of insurance whereby one insurance company (the reinsurer) in consideration of a premium paid to it, agrees to indemnify another insurance company (the ceding company) for part or all of its liabilities from insurance policies it has issued.

Types of insurers

Stock companies, mutual companies, fraternal benefit society's, risk retention group's

Stock insurance companies

may issue non- participating policies, stockholder does not have to be policy owner.Stockholders/shareholders own shares in the company a stock company is referred to as non-participating company because they do not participate in dividends resulting from stock ownership.

Mutual insurance companies

owned by policyholdersFunds not paid out after paying claims and other operating costs are returned to the policy owners in the form of policy dividends. Mutual companies are referred to as participating companies because the policy owner is participate in dividends.

Fraternal insurers

Fraternal benefit societies are primarily life insurance carriers that exist as social organizations and usually engage in charitable and benevolent activities.

Fraternal insurers are distinguished by the fact that their membership is usually drawn from those who are also members of a lodge or fraternal organization.

One characteristic of fraternal life insurance is the open contract, which allows fraternal insurers to assess their policyholders in times of financial difficulty.

Risk Retention Group (RRG)

Groups where the members insure each other, using their own capital to write insurance policies.These groups may only provide liability insurance not workers compensation or personal lines insurance

The United States government as insurer

Provides insurance benefits such as Social Security military life insurance benefits federal Employee compensation benefits and various retirement benefit programs

Private versus government insurers

Authorized (admitted)versus unauthorized (nonadmitted)insurers

And insurance company must receive authority from the state insurance department to transact business within a state. An authorized/admitted insurer means and ensure that is entitled to transact with in the state haven't complied with the law and satisfying all conditions to transacting insurance

Insurer's Domicile

Domestic insurers-a company is a domestic insurer in the state in which it is incorporated

Foreign insurer-A company who is licensed to conduct business in state other than the one in Which it is Inc.

Alien insurer-Companies Inc. in a country other than the United States DC or territory

Financial Status (Independent Rating Services)

AM Best

Fitch

Standard and Poor's

Moody's

Weiss

Six types of insurance

Property insurance

Casualty insurance

Annuity

Accident and health or sickness

Variable life and variable annuity products

Credit insurance

Marketing (Distribution) Systems

4 basic distribution systems used to market insurance: ▬Captive: -Insurer contracts with independ agents to represent & sell for only that insurance comp, Typically paid on a commission basis. - Insurance company owns & control all accounts, policy records, & renewals. ▬Direct writer: -Direct writing agent is an employee of the comp, may be paid a salary, commission or both. - Insurance comp owns & controls all accounts, policy records, and renewals. ▬Direct response: -This system does not use agents, but instead solicits through direct mail or telemarketing. -Insurance comp owns & controls all accounts, policy records, and renewals. ▬ Independent Agent: -Independent contractor who contracts with several different companies to represent & sell insurance for those companies - receives only commission. Agent owns & controls the accounts, policy records, and renewals.

Insurer as Principal

The insurer is the source of the authority in which the agent must abide, as stipulated in the agency contract. This means that the insurer is responsible for the agent's acts, as long as they remain in the bounds of the contract.

Insurance producer/insurer

relationship

Authority and powers of insurance producers

Express-written in the contract

Implied-Not written but assumed needed to do to conduct regular business

Apparent-

Responsibilities to the applicant/insured

The producer has responsibilities that are owed to applicants and/or insureds. He or she will:

1. act only in the best interests of his or her clients

2. only provide accurate and up-to-date information and advice to customers about policies and coverages

3. aid with the accurate completion of applications and any other accompanying documentation

4. service policies as necessary and according to the desires of the insured

5. process any coverage changes or cancellations

6. act only within the scope of authority that has been given them by the insurer.

Elements of a Legal Contract

1. Agreement - offer and acceptance

2. Consideration

3. Competent parties

4. Legal purpose

Distinct characteristics of an insurance contract

Contract Of adhesion, personal contract, unilateral contract, conditional contract

Contract of adhesion

A contract of adhesion is prepared by one of the parties (insurer) and accepted or rejected by the other party (insured). Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. In other words, insurance contracts are offered on a "take-it-or-leave-it" basis by an insurer.

Personal contract

An agreement between an insurance company and an individual that states that insurance policies cover the individual's insurable interest.

Unilateral Contract

promise in exchange for an act

Conditional Contract

a contract that becomes enforceable only on the happening or termination of a specified condition

Ambiguities in a contract of adhesion

Because only the insurance company has the right to draw up a contract, and the insured has to adhere to the contract as issued, the courts have held that any ambiguity in the contract should be interpreted in favor of the insured.

Reasonable Expectations

The reasonable expectations of policy owners or beneficiaries will be honored even though the strict terms of the policy do not support these expectations

indemnity

a payment for damage or loss

Utmost good faith

The fair and equal bargaining by both parties in forming the contract, where the applicant must make full disclosure of risk to the company, and the insurance company must be fair in underwriting the risk.

Representations and Warranties

statements of fact about the past and present

Misrepresentations

Warranties

guarantees made by a seller that an article, good or service will conform to a certain standard or will operate in a certain manner

Concealment

Waiver and estoppel

when a provision of an insurance contract is waived (not enforced by the insurance company), the provision cannot subsequently by enforced by the insurance company to justify denial of a claim; the insurer is "(e)stopped" from denying the claim

fraud

A deliberate deception intended to secure an unfair or unlawful gain

Definitions of perils

Accidental injury and sickness

Types of insurance licenses

Insurance producers, brokers, consultants, non-resident, temporary

Superintendent of insurance

Superintendent of insurance makes rules and regulations to help administer the provisions of the New Mexico insurance code the superintendent is appointed by the public regulation commission.

insurance consultant

insurance professional who, for a fee, offers advice on the benefits, advantages, and disadvantages of various policies; they sell advice, not insurance

Non-resident licenses

1.The superintendent kit is your nonresident broker or life and health agent license is in New Mexico to agents and brokers were licensed as residents in another state or country and qualify for a license in New Mexico

2. Nonresident agents must reside in, or be domiciled in, state other than New Mexico or country other than the US

3.Nonresident applicants must designate the superintendent as their attorney for any legal action in the New Mexico Court involving transactions under their license

Continuing education requirements

Continuing education requirements are designed to protect the public and preserve and improve the compliments of licensees all agents are solicitors nonresident agents a nonresident brokers miss attend at least 15 hours of class instruction or lectures approved by the superintendent each year for the kinds of insurance covered in the license at least one hour of continuing education must be in ethics

Compliance. Of continuing education

Compliance. Of continuing education begins October 1 of each year ends September 30 of the following year. Certificate of completion must be filed with the superintendent no later than October 31 of each year

Administrative fines

And live suspension revocation or refusal to continue a license issued under this article the superintendent me let me in administrative find upon the licensee of no less than 100 and no more than $500 if the licensee does not pay after 60 days relations so I'll be suspended revoked or renewal refused

penalty for violation

Any person who willfully misrepresents or withholds requested material information on application for license should be convicted of a misdemeanor punishable by a fine not to exceed $500

Change of address notification

A licensee must notify the superintendent in writing of a change of address within 2o days failure to notify the superintendent of a change of address so subject the licensee to a penalty of $50

Temporary licenses

Temporary licenses are granted for three months and may be extended by the superintendent for another three months upon application and good cause a second temporary license cannot be issued to the same licensee within six months after the initial temporary license expires 68

unfair trade practices

The Unfair Trade Practices Act is divided into two parts: unfair marketing practices and unfair claims practices. In each state, statutes define and prohibit certain trade and claims practices that are unfair, misleading, and deceptive.

Twisting

It is illegal to knowingly make any misleading statement or comparison regarding the terms, conditions, benefits, or advantages of any policy in order to induce any person to lapse, forfeit, surrender, exchange, convert, or otherwise dispose of insurance policy

False advertising

Making miss leading deceptive or untrue statements in the conduct of business

Defamation

It is a misdemeanor to make or circulate any false maliciously critical or derogatory statements regarding inch and insurance financial conditionThat are calculated to injure that insurance or anyone engaged in business with the insurer

Boycott coercion and intimidation

Using threat or force to create a monopoly or restrict fair trade in the transaction of insurance

Unfair discrimination

Applying different standards to insureds that have the same risks of loss

Cease and desist orders

The superintendent can order a cease-and-desist to a person that has engaged in unfair competition competition or deceptive acts or practice. If the person does not make a written request for a hearing regarding the season desist order and does not comply with the order within 20 days after receiving at the prison is subject to penalties for violations of the trade practice laws

Sharing Commissions

An agent or broker may share a commission only with a licensed listed are a licensed agent for the same in sure in which the insured was pleased

Elias and see me not share any commission or compensation for the sale of insurance unless he is licensed to sell that insurance

Sharing commissions between the licensed agents must be an infrequent business practice it should not be a means for the insured to avoid it's responsibility to a point the agent

Fiduciary Responsibility

I'll insurance premiums are fans received by a licensed individuals are held in a fiduciary capacity

If no other agreement exists between ages and insurance agents must remit premium less applicable commissions to be in sure within 15 days of receipt and agents must establish account separate from any personal account and deposit our premiums in them until they can be transferred to the insurer

Consumer information privacy act

The superintendent Authorizes rules to reasonably protect the privacy of insurance consumers non-public personal information leading health and financial information

Licensees must provide a clear inconspicuous notice to Customer's to accurately reflects is privacy policies and practices not less than annually licensees must describe the conditions which a licensee may disclose non-public personal health information or financial information to affiliates or nonaffiliated third parties without authorization from the affected individuals

Required policy provisions for all individual life insurance policies in New Mexico must include

A 30 day grace period for payment of any premium, and incontestability pro vision after two years, and entire contract because it provision, a miss statement of age provision stating that if the insured's age was missed stated on an application any amount payable under the policy will be determined according to how much coverage the premium paid it would have purchased for the correct age, a premium provision stating the amount of the premium and time and manner it must be paid, a dividend provision in participating policy stating that the insurer must annually