Contract Law/Underwriting > Contract Law > Flashcards

Contract Law Flashcards

(80 cards)

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1
Q

The Insurance Contract

A

A legal agreement that describes the responsibilities for the insurance company and the insured.

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2
Q

The Doctrine of Utmost Good Faith

A

Mutual reliance on truthfulness

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3
Q

The Binder

A

Provides immediate temporary insurance protection (30/60)

•Evidence of temporary coverage

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4
Q

Listed on The Binder

A
  • The Insurer’s name
  • The effective date of coverage
  • The policy limits
    * Never premium
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5
Q

Three Ways a Binder Can Expire

A
  • Policy is issued
  • One day after a cancellation letter is received from the insurance company
  • Date of expiration when a policy is not going to issued.
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6
Q

Five elements of a legal contract

A
  • Offer
  • Acceptance
  • Consideration
  • Competent Parties
  • Legal purpose
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7
Q

Representation

A

A statement made in an application that is represented as being correct to the best of his or her knowledge at the Time of the application.

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8
Q

Warranty

A

A statement of absolute truth that A condition exist and will continue to exist throughout the policy

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9
Q

Material misrepresentation/material fact

A

A lie that impacts the rate or causes the policy to be rejected

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10
Q

Misrepresentation

A

A written or verbal lie

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11
Q

Concealment

A

Intentionally withholding information; telling a partial truth or hiding information on a material fact.

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12
Q

Fraud

A

Deliberate misrepresentation for financial gain. Attempt to benefit from a lie financially.

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13
Q

Accidental unexpected uncertain

A

Never intentional or predictable

• exception: below the age of reason 12 and younger

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14
Q

Measurable/calculable

A

Definite and verifiable
• amount
•place
•time

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15
Q

Meet the law of large numbers

A
  • Permits and ensure to predict.
  • The greater the numbers the more accurate statistics.
  • large numbers of homogeneous units/risks.
  • Groups with the same perils.
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16
Q

Underwriting

A
  • The process of selecting, classifying and pricing risk for insurance coverage.
  • The most important piece for underwriting is the application.
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17
Q

Unfair discrimination

A 
Illegal treatment based on criteria that does not measure the risk. 
•Color 
•creed 
•religion 
•origin 
•disability
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18
Q

Adverse selection

A

The propensity for those with a greater need to purchase insurance while those with a lesser need are less apt to purchase coverage.

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19
Q

Fair credit reporting act federal government. FCRA

A

Protects consumers privacy
•Equifax
•Trans Union
•Experian.

Federal law regulates:
•Collection
•distribution
•use of consumer credit information.

•Credit reports can only be ordered for underwriting insurance OK so

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20
Q

The insurers Obligation when credit reports are used for the underwriting

A
  • Advise the applicant a credit report will be obtained.
  • Must notify the consumer when there is an adverse section.
  • Not responsible for correcting inaccuracies.
  • Must provide the consumer with the reporting agency to correct their in accuracies (Equifax)
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21
Q

Time frames

A
  • Credit reports can be reviewed back to seven years.

* Bankruptcy can be review back to 10 years.

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22
Q

TRIA

A
  • A federal program that provides coverage from losses resulting from an act of terrorism.
  • Protects consumers by ensuring available and affordable insurance.
  • Protection for commercial insurance only.
    * Not health insurance
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23
Q

Requirements to become commissioner of insurance

A

Gubernatorial appointment/not elected and no set term.
•He serves as the leisure/pleasure of the governor.
•Required to post a $50,000 bond.

•Insurance knowledge and skills. •NAIC(National Association of insurance commissioners) participation

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24
Q

Admitted/Authorized

A

•The commissioner grants the company the right to do business in Indiana.
•Issued a certificate of authority(COA)
The company must have a COA when admitted to do business.

Certificate of authority-A document that is like an agent or broker‘s license but for an insurance company.

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25
To be admitted a company must be:
* Solvent – sound finances/capital money to (pay claims). * Have a sound business plan. * Integrity-competent agents – good character
26
License compliance officer
Responsible for ensuring the company and all producers agent/broker adhere to state insurance laws. 
27
Insurer origin
A classification for where an insurance company was charted, formed, don’t masiled or incorporated
28
Domestic insurer
An insurance company charted or formed in this state (Indiana)
29
Foreign insurer
An insurance company charted or formed outside of this state Indiana, but inside the United States/or US territory. * Guam * Maryland
30
Alien insurers
An insurance company charted or formed outside of the United States. * Mexico * Canada * European country
31
Examination
Ensures companies meet basic standards Admitted companies can be examined whenever the commissioner wants. Admitted companies must be examined every five years. Domestic insurers-must be examined the commissioner is prohibited from waving examination. Foreign/alien insurers-their examination can be waived by the commissioner when their company meets NAIC guidelines The commissioner is never prohibited from the examination of any company
32
Rehabilitation
Due process=notice &hearing
33
Liquidation
All assets are so to pay unpaid policyholder claims
34
P and C guaranty association
All licensed property and casualty insurance in Indiana must participate. * Pays outstanding claims when the company cannot be saved insolvent. * $100,000 per claim * $300,000 per occurrence.
35
Commissioner duties
•Enforces state insurance laws. * Imposes fines to an agent/broker. * When possibly guilty/guilty of a violation. •Issues cease and desist orders to an agent/broker for: It is not issued when a misdemeanor has been committed
36
Issues temporary agent/broker (producer)license
Issued: allows a person to act on behalf of a producer agent/broker in any of the following events: •death •disability •deployment. Valid: 180 days.
37
The commissioner cannot
* Fine policyholders. * Incarcerate/prosecute an agent/broker. •Past state insurance laws. * Establish new insurance companies. •Ensure insurance coverage is available in all situations.
38
Fiduciary
A person in a position of trust who typically takes care of someone’s money.
39
Limited lines producers
Only one type of specialty insurance without usually requiring an exam or a continuing education.
40
Title
•Must take a 10 hour prelicensing course. •Seven hours of continuing education/2 years
41
Prearranged funeral insurance
Must complete a one time 10 hour course
42
Crop
•Property and casualty producer exam. •Seven hours of continuing education/2 years
43
Insurance consultant
•License to sale insurance advice for a fee. •Never act like a producer (agent/broker)
44
Non-admitted/Unauthorized
The company does not comply with state insurance regulations
45
Surplus lines producer
* A producer that sells insurance for companies that are not authorized (unauthorized/non-admitted) by the IDOI * first must try to place the insured with an admitted company. Even if the premium is higher. * Must pay a gross premium tax of 2.5% on all policies sold two times a year to the IDOI
46
Resident producer license
 issued by the commissioner of insurance
47
Resident producer requirements
* Pre-licensing class completed. * The certificate is valid for six months. * Live or work in the state of Indiana. •Application submitted-paid licensing fees through sircon . * Competent, trustworthy and financially responsible. * Eighteen or older. * Successfully passed state exam.
48
Producer appointments/termination
* An agreement between the producer and the company. | * Must be appointed by a company before engaging in business (sell/service/negotiate)
49
Nonresident producer
Requirements: •complete the NAIC nonresident producer license application. •Pay nonresident fees. •An exam is not required.
50
Licensed producer moving to Indiana from another state
* The agent is required to surrender the current resident license to their current home state. * Within 90 days. * An exam not required.
51
Controlled business
Ensures a producer sales policies to the public. •The producer and their immediate family. •Employers or employees of the producer.
52
Limit
Cannot exceed 25% of the total commission earn in a 12 month period
53
Acting as a consultant
A producer can act like a consultant when prior to the transaction, the policyholder: •is giving a full disclosure about how the producer will be compensated. •Signs consulting forms.
54
Payment of commissions
* To receive a commission the producer must have a license. | * The producer may split a commission with another licensed producer.
55
Deposit premium/premium audit
Described as the initial payment
56
Sircon: State insurance regulators connection
Timeframe – 30 days Fine – $100 •possible suspension of the producers insurance license
57
License renewal process
* Renews every two years * Pay the renewal fee and complete 24 credits of CE (continuing education) * It is your responsibility to track your CE and be aware of your license status and sircon
58
License lapse expire
Yes: 1. pay renewal. 2. Pay 3X renewal. No: 1. pay the renewal. 2. Penalty 3 X the renewal. 3. Take CE and regulations exam
59
Administrative action
30 days after the final disposition of the matter
60
Criminal action
Must be reported not more than 30 days after an initial pre-trial hearing date
61
Violations and fines
$50-$10,000 Judicial review: if found guilty/a license is declined the producer must request a hearing with the commissioner within 63 days. Commissioner must conduct a hearing within 30 days.
62
Unfairly discriminating/unfair discrimination
Individuals of the same class and equal expectation of live should be charge similar rates
63
Malfeasance
Wrongdoing, especially by public official
64
Intimidation
The result of an unreasonable restraint of or monopoly in the business of insurance to boycott and Coercion
65
Boycott
A Plaines refusal to deal with a disfavor purchaser or seller
66
Coercion
A car with someone in the insurance business applies physical or met force or threat of force persuade another to transact insurance
67
Rebates and kickbacks
Money may never be given
68
Violation Failure to follow regulation
Failing to act promptly
69
Failure to/denying/refusal:
* Affirm/deny coverage within a reasonable time after proof of loss is completed 60 days. * Informed the named insured about the right to select external parts when a car is five years old or newer. * Delaying a payment when proof of loss is submitted within the required time 60 days. * Denying a claim without investigation. •Attempting to settle a claim for less than reasonable.
70
Unknowing
Minimum: $25,000 per violation. Maximum $100,000. 12 month period.
71
Knowing
$50,000 per violation minimum. Maximum $250,000. 12 month period.
72
Violation of the cease and desist order-issued by the commissioner of insurance
Additional fine up to $25,000 per violation
73
Reckless violations of the Indiana insurance code/criminal violations
* Class A misdemeanor. * $5000 fines. * One year in jail
74
The commissioner
Must notify the insurer about a complaint – 10 days
75
The insurer
Must respond back about the complaint to the commissioner – 20 days
76
The commissioner
Must notify the insurer when guilty and must give the insurer notice to prepare for a hearing – five days
77
The commissioner
Must publish all complaints – annually
78
Fraudulent claim statement/statue
Fraud equals felony misrepresentation equals misdemeanor
79
Entities notify when fraud is suspected by the company
* Department of Insurance. * Commissioner of insurance. * NAIC
80
Lloyds of London
Reinsurance is the most important contribution
Contract Law/Underwriting
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