AD Ch15

Engaging in an unfair method of competition unwillingly subjects an agent to a civil penalty up to _______ per violation.

$5,000

Funds controlled by the Guarantee Association are used to:

pay claims of insolvent insurers.

Examination of Insurers

The commissioner conducts examinations on every domestic insurer in this state not less frequently than every 5 years.

All of the following are considered duties of the California Insurance Commissioner, except:

set insurance rates.

After expiration or cancellation, agents and brokers must keep records of every insurance transaction for at least ___ years.

5

Under the California Insurance Code, records must be kept by agents for at least _____ years following actual policy delivery, or the date of application if no policy is issued.

5

The Commissioner must approve which of the following agency names:

a bona fide natural name of an individual

Which of the following is not an unfair discriminatory practice:

using an applicant's birthplace for purposes of identifying the applicant.

Notice of Legal Action

Notice of an action begun against the insurer with respect to a claim, or against the insured by the insurer, or against the principal under a bond, and includes any proceeding arbitration.

Rehabilitation and Liquidation

Regardless of the regulations and controls, a few insurers find themselves in financial difficulty. When this happens, the commissioner will step in and attempt to help the insurer become solvent again.

Some risks can be placed only with non-admitted insurers such as -

Shipowner interest, international maritime transportation Marine builder's risk, dry docks Aircraft or spacecraft insurnace property or operations of railroads engaged in interstate commerce.

Arson Reporting Database

The Arson Information Reporting System permits insurers, law enforcement agencies, fire investigative agencies, and district attorneys to deposit arson case information in a common database within the Department of Justice. The purpose of the database is to identify patterns by claimants engaged in arson and to prevent insurance fraud by arson.

Insurance Commissioner

elected by the people and may serve up to two 4-year terms. Terms run concurrently with that of the governor, and in the vent a commissioner does not complete a term of office, the governer is authorized to appoint a new commissioner.

A Life and Disability Insurance Analyst must have a written agreement signed in advance stating the service to be performed for a fee, the amount of the fee and must be retained for:

3 years

A licensee who has applied to renew a license will be entitled to continue operating under the existing license for _____ days after its specified expiration date, or until notified by the Department that the renewal application is deficient, whichever comes first.

60

Which of the following statements is incorrect?

A The Insurance Code identifies all possible ethical issues which may arise B Insurance producers must be aware of both the Insurance Code and the Code of Regulations C Ethics are based on an accepted standard of right and wrong behaviors D The Insurance Code identifies many ethical situations which may arise CORRECT = A

Representations

A representation may be altered or withdrawn before the insurance is effected, but not afterwards. An applicant for insurance may correct a misrepresentation prior to the issuance of a policy. Once a policy is issued, and until a policy becomes incontestable, a material misrepresentation in the application may result in denial of a claim and/or rescission of the contract by the insurer. A representation is false when the facts fail to correspond with its assertions or stipulations. If a representation is false in a material point, whether affirmative or promissory, the injured party is entitled to rescind the contract from the time the representation becomes false.

Solicitors

An Insurance Solicitor is employed to aid a property and casualty broker-agent acting as an insurance agent or insurance broker in transacting insurance other than life, disability, or health. There is no such license as "Life Solicitor or Health Solicitor" Only life licensees may transact life and disability insurance, according to their individual licensing.

Administrator

An administrator is any person who collects any charges or premium from, or who adjusts or settles claims on, residents of this state in connection with life, health or annuity insurance coverage and must hold a Certificate of Registration as an administrator issued by the Commissioner. An administrator must have a written agreement with an insurer. A copy of the agreement must be kept for 5 years after the agreement has ended.

Which statement is false regarding fraudulent claims in California?

Any insurer belives that a fraudulent claim is being jmade shall report the fraudulent claim to the Bureau of Fraudulent claims within 30 days of such discovery.

Claimant

Any person who asserts a right of recovery under a surety bond or insurance policy.

A life or accident and health agent must provide at the time of ___________ the effective date of coverage, if known, or the circumstances under which coverage will be effective if there exists conditions precedent to coverage.

Application or receipt of premium

Entering into an agreement that would result in an unreasonable restraint of, or monopoly in the business of insurance is considered:

Boycott, Coercion or Intimidation

A person cannot transact any class of insurance business in this state without first being admitted or authorized by securing a(n)___________ from the Commissioner.

Certificate of Authority

Automobile Losses

Every insurer must report covered automobiles involved in theft and salvage total losses, including the vehicle identification number and any other information as may be required, to the National Automobile Theft Bureau or a similar central organization engaged in automobile loss prevention. Prior to the payment of total theft losses, insurers must comply with verification procedures in accordance with regulations adopted by the Commissioner.

Life and Disability Analyst

Has any interest in a life or disability insurance contract or has questions regarding the rights in his/her contract Reviews clients' incomes, insurance and investments Makes recommendations

Liquidation

If it is not prudent to proceed as a conservator, the commissioner may apply to the court and after a full hearing the court may order the winding up and liquidation of the insolvent insurer with the commissioner as liquidator.

California Insurance Code

Is the set of statutes enacted by the state legislature which regulate the business of insurance in California. The commissioner does not have the authority to change the insurance code; only the state legislature has the authority to write or amend the insurance code.

An agent's license will remain active as long as all of the following requirements have been met, except:

insurer sales quota

A Life Settlement Broker is exclusively the representative of the __________ who seeks to sell his interest in the policy.

policyowner

In which of the following situations may an unlicensed person conduct business for a licensed Broker-Agent?

when the winding down the business of a deceased or disabled broker-agent, including receiving commissions for anew business prior to death or disability.

Which is not a duty of the Commissioner?

writing insurance laws these are enacted by state legislature

Blindness

An individual or group life, annuity, or disability insurer may not refuse to insure, continue to insure, limit coverage or charge a different rate for the same coverage based on blindness or partial blindness.

Proof of Claim

Any evidence or documentation the insurer has obtained providing any evidence of the claim and reasonably supports the magnitude or the amount of the claimed loss.

An insurer cannot consider sexual orientation in its underwriting criteria or use marital status, living arrangements, occupation, sex, beneficiary designation or Zip Code to determine whether to require a test for the presence of:

HIV

Which of the following is not an example of an unfair trade practice?

advertising on the internet.

The commissioner does not have the authority to

revise or create rules and regulations (after public notice and hearings) as necessary to help carry out the intnet of the code.

Under the California Insurance Code, a licensee may terminate an insurance license by:

surrendering it to the commissioner

General Purpose of the California Insurance Code

1. Prevent insurer insolvency and prevent fraud in the conduct of the insurance business or by individuals. 2. Insure that polciies are reasonably priced and widely available in most lines of insurance. 3. Establish procedures that guide the operation of insurance companies and the activies of agents, brokers and other licenses. 4. Provide the authoirty needed by the Inusrance Commissioner to oversee insurnace agents and companies.

Upon receiving a request for records, insurers and/or agents must deliver the records to the Commissioner within ____ days.

30

The Commissioner's regulations cover all aspects of the business of insurance. Among others, the regulations include topics such as:

Criteria the Commissioner may use to deny an application for an insurance license Fictitious business name approval for insurance producers Bail transactions Insurance for motor vehicles as required by the Vehicle Code Surplus lines of insurance The sale of insurance products in connection with loans or the sale of real or personal property Premium financing and the compensation a person may derive from it Recordkeeping by Agents, Agencies, and Insurers

Code and Ethics

Ethics is a code of conduct based upon an accepted standard of right and wrong. It specifies and explains what is and is not acceptable in regards to behaviors or practices. The california insurnace code and the california code of regulations identify many illegal and unethical behavior for all situations. Insurance agents have a responsibility to be aware of insruance laws and requirements designed to protect consumers.

Insurance Commissioner's Duties and Responsibilities

File and keep all books and papers as required by law Issue Certificates of Authority to companies that meet the requirements of state law Issue, refuse, revoke or suspend licenses or Certificates of Authority Regulate the internal affairs of the Department of Insurance Aid in the interpretation of any state insurance law Make sure that insurer rates are adequate, not excessive, or unfairly discriminatory—but the Commissioner does not set rates Structure and control insolvency procedures Inquire into all violations of insurance laws in this state Subpoena witnesses/documents for testimony on any insurance-related matter

Fraudulent Acts

Fraudulent acts include filing a false claim for loss or injury, filing the same claim for loss or injury with multiple insurers with the intent to defraud, and knowingly participating in an auto collision or other vehicular accident with the intent to present a false or fraudulent claim. The type of insurance fraud which is most prevalent in California concerns Workers' Compensation. Workers' Compensation fraud can arise from both the claims of employees and the acts of employers. Employees who misrepresent their injuries, their ability to work or perform activities of daily living, or recovery status commit fraud. Employers who misreport payroll, pay employees in unreported cash for their regular or overtime wages, privately pay for or discourage workers from seeking treatment following a legitimate injury, or deny employees treatment by threatening to terminate their employment also commit Workers' Compensation fraud.

An insurer is entitled by the law to rescind a policy in the case of:

Intentional or unintentional concealment of information material to the risk being insured An intentional and fraudulent omission of matters proving the falsity of a warranty Material misrepresentation Violation of a warranty

Standards for Prompt, Fair and Equitable Settlements

It is an unfair practice for any insurer to discriminate in the investigation or settlement of a claim on the basis of a person's age, race, gender, income, religion, language, sexual orientation, ancestry, national origin, physical disability, or upon the territory of the property or person. Unless the insurer requires additional information to determine liability for a loss, the insurer is generally expected to either affirm or deny a claim within 40 days of notice of the loss. This time limit does not apply to disability income or health insurance. When a claim cannot be resolved within 40 days, the claimant must be notified of this fact and, as discussed previously, the insurer must continue to communicate the status of the claim no less often than every 30 days. When the insurer approves the claim, in whole or in part, and when necessary, upon receipt of a properly executed release, the insurer is required to make payment to the claimant or an assignee, or take action to perform its claim obligation within 30 days. Disability income insurance claims payments must be made at least once every 30 days until the insurer's obligation to pay claims has ended.

Knowingly committing any of the following acts is a violation of the Unfair Claim Settlement Practices:

Misrepresenting to claimants pertinent facts or provisions in the insurance policy Failing to acknowledge and act promptly on claims Failing to adopt and implement reasonable standards for the prompt investigation of claims Failing to acknowledge claim coverage within a reasonable period of time after proof of loss requirements have been met by the insured Failing to attempt to promptly and fairly settle claims in which liability is clear Offering an insured substantially less than what a lawsuit would award Attempting to settle a claim for less than the amount to which the claimant believed he/she was entitled by reference to written or printed advertising material Attempting to settle a claim based on an application that was altered by the agent Failing to inform the insured or beneficiary, upon request, of the coverage under which payment has been made Failing to settle claims promptly under one portion of the policy in order to influence settlements under other portions of the policy Failing to provide a reasonable explanation for the denial of a claim Directly advising a claimant not to obtain the services of an attorney Misleading a claimant as to the applicable statute of limitations Canceling or refusing to renew a policy based on religious affiliation

Concealment

Neglecting to communicate information that a party knows and ought to communicate, whether intentional or not.

The purpose of a Certificate of Authority is to:

Permit an insurance company to transact business.

Fraudulent Claims

The Fraudulent Claims section of the Code enables the Commissioner and Department of Insurance to more effectively investigate and discover insurance fraud and to halt fraudulent activities. Insurance fraud is particularly problematic in automobile, workers' compensation and health insurance. Any insurer who provides a form to file a claim against it must include the following statement on the form: "For your protection, California law requires the following to appear on this form: Any person who knowingly presents a false or fraudulent claim for the payment of a loss is guilty of a crime and may be subject to fines and confinement in state prison." If an insured signs a false claim form, the insured may be guilty of perjury.

Fraud Protection

The Insurance Department's Fraud Division enforces the provisions prohibiting fraudulent claims. Every admitted insurer must maintain a Special Investigations Unit for the purpose of detecting and investigating fraudulent claims. Insurers are required to notify the local district attorney's office and Fraud Division within 60 days if they have knowledge of actual or suspected fraud.

Every licensee must file with the Commissioner in writing the true name of the individual or organization and all _______names under which business will be conducted.

fictitious Under the california insurance code, every individual and organization licensee and every applicant for a license must file with the commissioner in writing the true name of the individual or organization and all ficticious names under which business will be conducted and, after licensing, must file with the commissioner ant change or discontinuance of such names.

In California, upon receiving any communication from a claimant, regarding a claim, that reasonably suggests that a response is expected, every licensee shall immediately, but in no event more than _____ calendar days after receipt of the communication, furnish the claimant with a complete response based upon the facts as known.

15

An agent whose license is suspended for more than ___ years will need to retake the prelicensing course and pass the qualifying exam.

2

Certificate of Authority

A person cannot transact any class of insurance business in this state without first being admitted or authorized by securing a Certificate of Authority from the Commissioner. The certificate will be issued once the applicant meets the necessary qualifications.

Insurance Claims Analysis Bureau performs the following functions

Collects and compiles information and data from members or subscribers concerning insurance claims. Disseminates information to members or subscribers relating to insurance claims for the purpose of preventing and suppressing insurance fraud. Promotes training and education to further insurer investigation, suppression, and prosecution of insurance fraud. Provides to the Commissioner all California data and information contained in the records of the insurance claims analysis bureau to further the prevention and prosecution of insurance fraud.

Covered Claims

Covered claims include the obligations of an insolvent insurer and are the benefits the association may become liable. The life and annuity payments from the association cannot exceed the lesser of: 80% of the contractual obligations for which the insurer is liable $300,000 in life insurance benefits per life and not more than $100,000 in net cash surrender or withdrawal values $250,000 in present value of an annuity per life including surrender or withdrawal values The association is not liable for more than $300,000 in total for the life of one individual or $5 million in benefits for any owner of multiple policies. The health insurance payments from the association cannot exceed the lesser of the contractual obligations for which the insurer is liable or $200,000 in health care benefits. Coverage includes long-term care and other disability and disability income insurance, and accidental death and dismemberment policies.

File and Record Documentation

Every licensee's claim files are subject to examination by the Commissioner at all times. Claims files are required to contain all documents, notes and work papers, including copies of all correspondence, which reasonably pertain to each claim in such detail that pertinent events and the dates of the events can be reconstructed, and the licensee's actions pertaining to the claim can be determined. Insurers are required to maintain claim data so that it is accessible, legible, and retrievable for examination, and must be able to provide the claim number, line of coverage, date of loss, date of acceptance, date of payment, date of denial or closing without payment. This data must be available for all open and closed files for the current year, and the 4 preceding years. Licensees must also record the date the licensee received, transmitted, or mailed every material and relevant document in the file, or otherwise processed anything relevant to a claim.

Summary Seizure

If it appears to the Commissioner that irreparable loss and injury to the property and business of any person engaged in the insurance business has occurred or is about to occur unless acting immediately, the Commissioner will, without notice and before applying for a court order, take possession of the property, business, books, records and accounts and retain possession subject to the issuance of the court order. It is a misdemeanor to refuse to deliver books, records, or assets to the Commissioner after a seizure order has been issued in an insolvency proceeding. This is punishable by a fine of up to $1,000 and/or imprisonment for up to 1 year.

Duties Upon Receipt of Communication

Insurers (and other licensees) must respond in writing to an insured's or claimant's notice of loss within 15 days of receiving that notice orally or in writing. Agents who receive the first notice of a loss from an insured or claimant must immediately forward that information to the insurer. Upon receiving notice of claim, every insurer must immediately acknowledge the receipt of notice, provide necessary forms to the claimant and begin any necessary investigation. As long as a claim remains in process, and until it has been resolved by denying or affirming the claim, the insurer must communicate with the claimant no less often than every 30 days. Upon receiving any written or oral inquiry from the Department of Insurance concerning a claim, every licensee must respond to the Commissioner immediately within 21 calendar days of the receipt of the inquiry, furnishing a complete written response based on the facts as then known to the licensee. If additional time is required to provide the information requested, the initial response must indicate how much additional time is required.

Rescission

Rescission is the termination of a contract from the beginning as if it had never existed

Penalties

The Commissioner has the power to investigate the affairs of any person engaged in the business of insurance to determine whether such person has been or is engaged in any unfair method of competition or unfair or deceptive act or prohibited practice. If it is believed the person has violated a trade practice, the Commissioner will issue a statement of charges, a statement of potential liability for civil penalties, a show cause order as to why a cease and desist should not be issued, and a 30-day notice of a hearing. If the charges are justified, a civil penalty not to exceed $5,000 for each act will be assessed. If the violation is willful, the maximum penalty is $10,000 for each act. A cease and desist order will be placed requiring the individual to refrain from engaging in the prohibited acts. Violation of a cease and desist order imposes a penalty of up to $5,000 per violation or a maximum penalty of $55,000 if the violation is willful. Subsequent violations will lead to suspension or revocation of a license.

Association provides coverage to persons who own policies and are residents of California. Nonresidents are covered under following conditions

The issuing insurer is domiciled in this state The insurer never held a Certificate of Authority in the state the covered person resides The state in which the person covered resides has an association similar to that of California The person is not eligible for coverage by the association in the state of residence

Which of the following is not a reason why a license may be suspended or revoked after it has been issued?

The licensee does intend actively and in good faith to carry on as a business with the general public the transactions which would be permitted by the issuance of the license applied for Under the California Insurance Code, a reason why a license may be suspended or revoked after it has been issued includes the licensee does not intend actively and in good faith to carry on as a business with the general public the transactions which would be permitted by the issuance of the license applied for.

Which statement is false of the California Life and Health Guarantee Association?

The maximum amount that will be paid to covered person is 500k per life is false.

Penalties for Fraudulent behavior

Violators may be subject to imprisonment in the county jail for 1 year, or state prison for 2, 3, or 5 years and/or a fine of up to $50,000 or double the value of the fraud, whichever is greater. If the violator has a prior felony conviction of the same offense, there will be an additional 2-year sentence for each prior conviction. Insurers, employees or agents are not subject to civil liability for libel, slander, or any other tort by virtue of providing any of the following without malice: Information or reports relating to the suspected fraudulent insurance transaction furnished to law enforcement officials or other persons subject to the California Insurance Code Information or reports required by the Commissioner

Agent vs. Broker vs. Solicitor

cannot be employed by more than one property and casualty broker/agent at the same time. An insurance solicitor cannot at the same time act as either an agent or broker. Agents and brokers cannot act as solicitors at the same time. An insurance agent cannot act as a broker for any insurer by which the agent is actively appointed.

A person will be deemed to be transacting insurance when the person advertises on the internet, and does any of the following, except:

communicates an invitation to inquire