Code & Ethics
Corrections
in reports may be requested by individuals. An individual may request that the information be corrected, amended, or deleted. The individual must provide the facts to support the request. Within 30 days of receiving the request, the insurance company, agent, or insurance support organization must (1) correct, amend or delete the portion of record information in dispute or (2) notify the individual that it will not make the alteration in the record, giving the reasons for that refusal and notify the individual of his right to file a statement.
Home service life insurance
is a variation of industrial life insurance. Industrial life insurance policies are small policies essentially to cover a person's last expenses. The agent is responsible for servicing the policies and must personally collect the premiums on a weekly or monthly basis and provide the client with a written receipt. The major difference with home service life is that the face amount is larger. It normally is written for amounts of $10,000 or $15,000 and the premiums are either debited from a bank account or mailed.
The California Code of Regulations (CCR)
is made up of rules issued by the commissioner. The regulations may be changed or withdrawn by the commissioner. The CCRs are needed in order to administer the code. Although the commissioner does not write the code, he is responsible for enforcing the code. Even though the CCRs are not law, they carry the same weight as law. A person who violates a regulation is subject to the same penalty as someone who violates the code.
Cancellation
is the termination of coverage by an insurer during a policy period. It does not mean the termination of the contract at the request of the policyholder.
Direct response
marketing is achieved by advertising through the mail, in newspapers and magazines, on television and radio and the internet. If someone is interested in the advertised products, he/she will respond to the company for more information. Mass marketing is a cost effective method of distribution and may achieve efficient market penetration.
Admitted:
"Admitted" in relation to a person, means entitled to transact insurance business in this State, having complied with the laws imposing conditions precedent to transaction of such business. (CIC 24)
Insurance agent:
"Insurance agent" means a person authorized, by and on behalf of an insurer, to transact all classes of insurance other than life insurance or accident and health insurance. (CIC 1621) An insurance agent by this definition means someone who holds a fire and casualty license. Licenses to act as a fire and casualty agent are of the following types: (1) Property which entitles the licensee to transact insurance coverage on the direct or consequential loss or damage to property of every kind and (2) Casualty which entitles the licensee to transact insurance coverage against legal liability including that for death, injury, disability, or damage to real or personal property. (CIC 1625)
Solicitor:
"Insurance solicitor" means a natural person employed to aid a fire and casualty agent/broker acting as an insurance agent or insurance broker in transacting insurance other than life and accident and health. (CIC 34;1624) Agents are appointed by insurance companies and represent insurance companies. Solicitors are appointed by fire and casualty agents/brokers, not by insurance companies.
Life and disability insurance analyst:
"Life and disability insurance analyst" means a person who, for a fee or compensation of any kind, paid by or derived from any person or source other than an insurer, advises, purports to advise, or offers to advise any person insured under, named as beneficiary of, or having any interest in, a life or disability insurance contract, in any manner concerning that contract or his or her rights in respect thereto. (CIC 32.5)
Non-admitted:
"Non-admitted in relation to a person, means not entitled to transact insurance business in this State, whether by reason of failure to comply with conditions precedent thereto, or by reason of inability so to comply. (CIC 25)
Person:
"Person" means any person, association, organization, partnership, business trust, limited liability company, or corporation. (CIC 19)
Transact:
"Transact" as applied to insurance includes any of the following: (a) Solicitation (CIC 35[a]) (b) Negotiations preliminary to execution (CIC 35[b]) (c) Execution of a contract of insurance (CIC 35[c]) (d) Transaction of matters subsequent to execution of the contract and arising out of it (CIC 35[d]))
Broker-Agent:
A person licensed as a broker-agent shall be deemed to be acting as an insurance agent in the transaction of insurance placed with those insurers for whom a notice of appointment has been filed with the Insurance Commissioner in accordance with Section 1704 and is then in force.
Disability insurance—dual authority:
A person licensed as either a property and casualty agent/broker or as an accident and health agent may be authorized to transact disability insurance for an admitted insurer by filing a notice of appointment from that insurer. (CIC 1673)
Twisting:
A person shall not make any representation or comparison of insurers or policies to an insured which is misleading, for the purpose of inducing or tending to induce him to lapse, forfeit, change or surrender his insurance, whether on a temporary or permanent plan. (CIC 781)
Personal Lines Licensee:
A personal lines licensee is a person authorized to transact automobile insurance, as defined in Section 660, including insurance for recreational vehicles used for noncommercial purposes, personal watercraft insurance, residential property insurance, as defined in Section 10087, including earthquake and flood insurance, inland marine insurance covering personal property, and umbrella or excess liability insurance providing coverage when written over one or more underlying automobile or residential property insurance policies, and a personal lines broker-agent license is a license to so act.
Notice of Legal Action:
Notice of an action commenced against the insurer with respect to a claim, or notice of action against the insured received by the insurer, or notice of action against the principal under a bond, and includes any arbitration proceeding. (Title 10, CCR 2695.2(o)
Boycott, coercion, intimidation.
It is unlawful to commit or conspire to commit an act of boycott, coercion, or intimidation which results in unreasonable restraint of, or monopoly in the business of insurance.
Filing false financial statement.
It is unlawful to knowingly file with any public official or to publish, circulate, or place before the public a false statement of an insurer's financial condition, with intent to deceive.
Civil liability:
(1872.5) No insurer or the insurer's employees, or agents, can be sued for libel, slander, or any other relevant cause of tort action for providing, without malice, any of the following: Any information or reports relating to suspected fraudulent insurance transaction furnished to law enforcement officials or licensing officials governed by the Business and Professions Code. Any reports or information relating to suspected fraudulent insurance transactions furnished to other persons subject to this ruling. Any information or reports required by the code or the commissioner under the authority granted by the code.
Transacting without a license:
(CIC 1631;1633) A person may not conduct any activities of an agent, broker, or solicitor unless he has a license issued by the commissioner authorizing him to act in that capacity. Anyone who acts, offers to act, or assumes to act in a capacity for which a license is required, without holding a license, is guilty of a misdemeanor. This is punishable by a fine not exceeding $50,000 or by imprisonment in a county jail for a period not exceeding one year, or by both fine and imprisonment.
License renewal:
(CIC 1720) An application on a form prescribed by the commissioner for the renewal of a license filed on or before the last day of the period for which the previous license was issued, accompanied by the renewal fee, shall entitle the applicant to continue operating under the existing license for 60 days after its specified expiration date or until notified by the department of insurance that the renewal application is deficient.
Agency names:
(CIC 1724.5, 1729.5) Every individual and organization licensee and every applicant for such a license shall file with the commissioner in writing the true name of the individual or organization and also all fictitious names under which he conducts or intends to conduct his business and after licensing shall file with the commissioner any change in or discontinuance of such names.
Printing license number on documents and advertisements:
(CIC 1725.5) Every licensee shall prominently print his license number on business cards, written price quotations for insurance products, and printed advertisements for insurance products distributed exclusively in California. The license number must be printed in the same size type as any telephone number, address, or fax number. If the licensee maintains more than one organization license, one of the organization license numbers is adequate for compliance.
Fiduciary responsibilities:
(CIC 1733-1735) A fiduciary is a person who is in a position of financial trust.
Aiding non-admitted insurer to transact:
(CIC 1760-1780) Except when performed by a surplus line broker, the following acts are misdemeanors when done in this State: (a) Acting as agent for a non-admitted insurer in the transaction of insurance business in this State. (b) In any manner advertising a non-admitted insurer in this State. (c) In any other manner aiding a non-admitted insurer to transact insurance business in this State. (CIC 703)
Misrepresentation:
(CIC 780-784) A misrepresentation is a false oral or written statement made with the intent to defraud another. An insurer or an insurance licensee shall not cause or permit to be issued, circulated or used, any misrepresentation of the following: (1) The terms of a policy issued by the insurer or sought to be negotiated by the person making or permitting the misrepresentation. (2) The benefits or privileges promised thereunder; (3) The future dividends, payable thereunder. (CIC 780)
Insurance Information and Privacy Protection Act (IPPA):
(CIC 791-791.26) The purpose of this article is to establish standards for the collection, use, and disclosure of information gathered in connection with insurance transactions by insurance institutions, agents or insurance-support organizations; to maintain a balance between the need for information by those conducting the business of insurance and the public's need for fairness in insurance information practices, including the need to minimize intrusiveness; to establish a regulatory mechanism to enable persons to ascertain what information is being or has been collected about them in connection with insurance transactions and to have access to such information for the purpose of verifying or disputing its accuracy; to limit the disclosure of information collected in connection with insurance transactions; and to enable insurance applicants and policyholders to obtain the reasons for any adverse underwriting decision.
California Financial Information Privacy Act
(SB1 or California Financial Code 4050): The intent of this act is to afford greater privacy protections than those provided by the GLBA (Gramm-Leach-Bliley Act). It unites the federal GLBA with the Insurance Information Privacy and Protection Act (IPPA) contained in the insurance code. Enacted in 2003, Cal-GLBA's biggest impact is the required implementation of greater "opt-out/opt-in" choices with enhanced privacy requirements. The following is a comparison of the California law (Cal-GLBA) and the federal law (GLBA).
Fraternal insurers
(fraternal benefit societies or fraternals) are life insurance carriers that are social organizations that normally are involved in charitable activities. Fraternal societies usually are incorporated without capital stock. To be considered a fraternal, the organization must be nonprofit, must have a lodge system with a ritualistic form of work involved, and have an elective form of government. Fraternal society insurance provides benefits for sickness, accident and death and such insurance may be sold only to members of the society for the benefit of its members and their families.
Limited Lines Automobile Insurance Agent
1625.55. (a) A limited lines automobile insurance agent is a person authorized to transact automobile insurance, as defined in Section 660. A limited lines automobile insurance agent license is a license to so act. (b) A license under this section shall be applied for and renewed, following successful completion of a qualifying examination on this code, ethics, and products sold under the license, in the same manner as provided in this chapter for a license to act as a fire and casualty broker-agent. (c) The commissioner shall require in advance a fee for filing any applications, renewals thereof, or changes in outstanding licenses, or for the filing of other required documents at an amount designated in this chapter for a personal lines licensee, and for filing any notice of appointment or notice of termination at an amount specified in Section 1751.3. d) A person licensed as a limited lines automobile insurance agent who makes an application to the commissioner to become a fire and casualty broker-agent pursuant to Section 1625 or a personal lines agent pursuant to Section 1625.5 shall do all of the following: (1) Submit an application on a form provided by the commissioner. (2) Complete prelicensing education as specified in Section 1749. (3) Take and pass a qualifying examination pursuant to Section 1676.
Domestic:
A company is considered to be a domestic insurer in the state where it was organized. Therefore, any company organized under the laws of the state of California is considered to be a domestic insurer in California, whether or not it is admitted to do business in California. (CIC 26)
Reinsurance:
A contract of reinsurance is one by which an insurer procures a third person to insure him against loss or liability by reason of such original insurance. (CIC 620) An insurance company cedes part of the risk to another insurance company. The ceding insurer must disclose all knowledge and information to the reinsurer. The original insured does not need to be informed about the reinsurance contract. The ceding company will continue to service the contract.
Foreign:
A foreign insurer is an insurer organized under the laws of another state within theUnited States, whether or not it is admitted to do business. Thus, a company organized in Arizona is considered to be a foreign insurer in California. (CIC 27)
Effective date of coverage: (C 1730.5)
A life agent and a fire and casualty broker/agent shall provide to all insureds or applicants at the time of application or receipt of premium moneys the effective date of coverage, if known, or the circumstances under which coverage will be effective if there exists conditions precedent to coverage. This section applies only to coverage for personal lines of insurance, such as private passenger automobile, homeowner and renter insurance, personal liability, and individual disability and health insurance.
Life Settlement Broker:
A life settlement broker means a person who, on behalf of an owner and for a fee, commission, or other valuable consideration, offers or attempts to negotiate life settlement contracts between an owner and providers. A life settlement broker represents only the owner and owes a fiduciary duty to the owner to act according to the owner's instructions, and in the best interest of the owner, not withstanding the manner in which the broker is compensated. (CIC 10113.l[b])
Life-only agent:
A life-only agent means an insurance agent authorized, by and on behalf of a life insurer, to transact insurance on human lives including benefits of endowment and annuities, and may include benefits in the event of death or dismemberment by accident and benefits for disability income. (CIC 1626 [1]; 1622)
Surplus Lines Law:
Any person may negotiate and effect insurance to protect himself, herself, or itself against loss, damage, or liability with any non-admitted insurer.
Property & Casualty Licensee (aka Fire & Casualty)
A property and casualty licensee is a person authorized to act as an insurance agent, broker, or solicitor, and a property and casualty broker-agent license is a license so to act. Licenses to act as a property and casualty broker-agent under this chapter shall be of the following types: (1) Property, which shall entitle the licensee to transact insurance coverage on the direct or consequential loss or damage to property of every kind, some examples include auto,homeowners, flood, earthquake, commercial property. (2) Casualty, which shall entitle the licensee to transact insurance coverage against legal liability, including that for death, injury, disability, or damage to real or personal property some examples include liability, commercial general liability
Public insurance adjuster: (CIC 15000)
A public insurance adjuster is a licensed individual who, for compensation, works on behalf of an insured in settling a claim for loss or damage under a policy covering real or personal property.
Representation:
A representation is a statement to the best knowledge and belief of the party making the statement. A representation can be written or oral. The language of a representation is to be interpreted by the same rules as a contract in general. A representation as to the future is a promise, unless it is merely a statement of belief or an expectation. A representation cannot qualify an express provision in a contract of insurance, but it may qualify an implied warranty. A representation may be made at the time of, or before, issuance of the policy. A representation may be altered or withdrawn before the insurance is effected, but not afterwards. (CIC 355) The completion of the contract of insurance is the time to which a representation must be presumed to refer.
Surplus lines broker: (CIC 1760)
A surplus lines broker places insurance with non-admitted insurers. A surplus lines broker may act as an agent for a non-admitted insurer in the transaction of insurance business in California, advertise a non-admitted insurer, and aid a non-admitted insurer to transact insurance business in California.
Warranty:
A warranty is a guaranteed truth. Warranties are either express or implied. A statement in a policy of a matter relating to the person or thing insured, or to the risk, as a fact, is an express warranty thereof. An implied warranty is a statement, not in writing, that insurable conditions exist. An implied warranty is included in the policy even though not specifically stated in it. A representation in an insurance contract qualifies as an implied warranty.
Claimant:
Any person who asserts a right of recovery under a surety bond, an attorney, any person authorized by operation of law to represent the claimant, or any of the following persons properly designated by the claimant: an insurance adjuster, a public adjuster, or any member of the claimant's family. (Title 10, CCR 2695.2(c)
Title 18 United State Code Sections 1033-1034:
According to Section 1033 it is a criminal offense for an individual who has been convicted of a felony involving dishonesty or breach of trust to willfully engage or participate in the business of insurance unless that person has first obtained the written consent of the appropriate regulatory official. Furthermore, it is a criminal offense for any person to willfully employ or willfully permit such prohibited persons to participate in the business of insurance without the required written consent.
Agency system:
Agents are appointed by insurers and solicit applications on behalf of insurers. Agents may be either exclusive or independent. The majority of policies are sold using the agency system.
Advertising membership in the state's Guarantee Association.
Although membership in the California Insurance Guarantee Association is required for all insurers which offer the kinds of insurance protected by the Association, a member insurer may not advertise directly or indirectly that it is an Association member or that it is insured against insolvency.
Accident and health agent:
An accident and health license entitles the licensee to transact insurance coverage for sickness, bodily injury, or accidental death and may include benefits for disability income. (CIC 1626[2]) An accident and health agent may be authorized to transact 24-hour care coverage pursuant to certain requirements. (CIC 32)
Adjuster: (CIC 14000)
An adjuster is a licensed person, other than a private investigator, who for a fee or other consideration, investigates and collects information for the purpose of adjusting or disposing of a claim under an insurance policy. It is most often a property and casualty policy.
Administrator:
An administrator is a person who collects premiums from and who settles or adjusts claims on behalf of employers in connection with life or health insurance coverage or annuities.
Alien:
An alien insurer is an insurer organized under the laws of any jurisdiction other than a state of theUnited States, whether or not admitted to do business in California. For instance, a company organized in Canada is considered alien.
Managing General Agent (MGA):
Any person, firm, association, partnership, or corporation who negotiates and binds ceding reinsurance contracts on behalf of an insurer or manages all or part of the insurance business of an insurer (including the management of a separate division, department or underwriting office). An MGA acts as an agent for that insurer and produces and underwrites an amount of gross direct written premium equal to or more than 5 % of the policyholder surplus as reported in the last annual statement of: (CIC 769.81[c]) (1) adjusts or pays claims in excess of an amount determined by the commissioner, or (2) negotiates reinsurance on behalf of the insurer.
License qualifications:
An applicant for an insurance license must submit (1) the Department of Insurance application form, (2) fees, and (3) certificates showing completion of the necessary course material. When applying as a life-only agent or an accident and health agent, the candidate must complete 20 hours of the material applicable to the license as well as 12 hours on code and ethics. If applying for a life-only/accident and health license, 40 hours of course material must be completed in addition to the 12 hours on code and ethics. The property/casualty (also called fire and casualty) agent, solicitor, and broker must complete 40 hours of material regarding the lines of insurance they may sell as well as 12 hours of code and ethics. However, starting on January 1, 2011, individuals and business entities may apply for only the property-agent license or only the casualty broker-agent license. In this case, the separate licenses will require 20 hours of pre-licensing plus the 12 hours on code and ethics. A person applying for a property and casualty personal lines license will need to complete 20 hours of study regarding personal lines and 12 hours of code and ethics. The commissioner may make an investigation or may require additional information, documents, or statements to determine if the applicant has met all the requirements for a license. The applicant will be required to pass the state licensing examination and achieve a score of 70% correct.
Broker: (a)
An insurance broker is a person who, for compensation and on behalf of another person, transacts insurance other than life, disability, or health insurance with, but not on behalf of, an admitted insurer. It shall be presumed that the person is acting as an insurance broker if the person is licensed to act as an insurance broker, maintains the bond required by this chapter, and discloses, in a written agreement signed by the consumer
Notice of information practices:
An insurance company or agent must provide a notice of information practices to all applicants or policyholders (1) when the policy is delivered if the only information to be used is collected from the applicant, insured or public records or (2) at the time of application if personal information will be collected from any source other than the applicant, insured or public records.
Solicitor:
An insurance solicitor is a natural person employed to aid an insurance agent or insurance broker in transacting insurance other than life. There is no such thing as a Life solicitor or Accident & Health solicitor. Agents are appointed by insurance companies and represent insurance companies. Solicitors are appointed by fire and casualty agents/brokers that have permanent licences', not by insurance companies. A solicitor cannot be appointed by more than one agent/broker at a time. Solicitors have no power to bind coverage. Solicitors are licensed to sell property and casualty products and may hold either a Fire & Casualty broker/agent or a Personal Lines broker/agent license. (CIC 1624)
Bail Licensee:
An insurer shall not execute an undertaking of bail except by and through a person holding a bail license. A person shall not in this state solicit or negotiate in respect to execution or delivery of an undertaking of bail or bail bond by an insurer, or execute or deliver such an undertaking of bail or bail bond. (CIC 1800)
Insurable events:
Any contingent or unknown event, whether past or future, which may damage a person having an insurable interest, or create a liability against him, may be insured against. (CIC 250) In life or disability insurance, insurable interest shall be required to exist at the time the contract of life or disability interest becomes effective, but it need not exist at the time the loss occurs. (CIC 10110) In fire and casualty insurance, insurable interest is required at the inception of the policy and when the loss occurs.
Proof of Claim:
Any documentation in the claimant's possession submitted to the insurer that provides any evidence of the claim and that supports the magnitude or the amount of the claimed loss. (Title 10, CCR 2695.2(s)
Parties to the contract:
Any person capable of making a contract may be an insurer, subject to the restrictions imposed by the code. (CIC 150) Any person except a public enemy may be insured. (CIC 151)
Insurer:
Any person capable of making a contract may be an insurer, subject to the restrictions of the code. (CIC 150)
Domestic, foreign and alien insurers:
Companies may be classified according to where the company is domiciled meaning where the company has its principal legal residence, where it was organized, or where it was incorporated.
Policy defined:
The written instrument, in which a contract of insurance is set forth, is the policy. (CIC 380)
Concealment:
Concealment is defined as the neglect to communicate that which a party knows and ought to communicate. Whether or not concealment is intentional or unintentional, the injured party has the right to rescind the insurance contract. Rescission means the contract is made null and void. All parties to a contract shall communicate in good faith all information believed to be material to the contract.
File and Record Documentation: (Title 10, CCR 2695.3)
Every licensee's claim files shall be subject to examination by the commissioner. These files shall contain all documents, notes and work papers (including copies of all correspondence) that 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.
Health Insurance Portability and Accountability Act (HIPAA):
HIPAA was enacted in 1996 and affects almost all healthcare providers. This law defines that the information in client files belongs to the client and must be protected. HIPAA has made sweeping changes in the way that medical information is handled and protected.
Unfair discrimination.
It is prohibited to make or allow unfair discrimination between persons of the same class and life expectancy in the rates charged or the terms, conditions, benefits, or dividends of a life insurance policy or an annuity. Differences based on sex are permitted if they can be substantiated by mortality data and other statistical information.
ERRORS AND OMISSIONS INSURANCE
Insurance agents can be held legally liable for the consequences of any errors or omissions they have made while conducting their business. For this reason, insurance agents need to carry professional liability insurance which is called errors and omissions insurance (E&O). E&O insurance provides coverage for an act, error, or omission the agent makes in rendering or failing to render professional services in the conduct of his/her insurance profession.
Insurance:
Insurance is a contract whereby one undertakes to indemnify another against loss, damage, or liability arising from a contingent of unknown event. (CIC 22) In insurance the risk of loss is transferred to the insurer by the policyholder. There are many risks that may be insured as noted by the number of lines of insurance recognized by the California Department of Insurance.
Advertising insurance that the insurer will not sell.
It is a $10,000 fine. This section does not apply to an insurer which refuses to sell a policy on the basis of its underwriting guidelines. This section does not apply to advertisements by an insurer where the ads are broadcasted (TV, radio) and originate from outside the state.
Fraudulent claims:
It is against the law for a person to knowingly: Present a false or fraudulent claim for payment of a loss. Present multiple claims for the same loss or injury, including claims to more than one insurer, with intent to defraud. Cause or participate in a vehicle collision or other vehicular accident. Present a false or fraudulent claim for a loss due to theft, destruction, damage, or conversion of a motor vehicle, motor vehicle part, or motor vehicle contents. Prepare, make or subscribe any writing to support a false or fraudulent claim. Assist, abet, solicit, or conspire with any person who knowingly commits any of these violations. Make a false or fraudulent claim for payment of a health care benefit. Submit a claim for a health care benefit which was not used by the claimant. Present multiple claims for payment of the same health care benefit with intent to defraud. Present for payment any undercharges for health care benefits on behalf of a claimant unless known overcharges for health care benefits for that claimant are presented for reconciliation at the same time. (CIC 1871.4)
False entries.
It is against the law to knowingly make an entry or deliberately omit an entry of a material fact in a book, report, statement or record which an insurer is required to file with the insurance department or any other public agency with intent to deceive a public official or examiner.
Misrepresentation.
It is against the law to make, issue, or circulate any estimate, illustration, circular or statement which: Misrepresents the benefits, terms, or advantages of an insurance policy. Misrepresents the dividends to be paid on an insurance policy. Misrepresents the dividends paid in the past on a policy or similar policies. Misrepresents the financial condition of an insurer or the legal reserve system used by an insurer. Uses a policy name that misrepresents the true nature of a policy or class of policies. Makes a misrepresentation to a policyholder that induces that policyholder to lapse, forfeit, or surrender his policy.
Untrue or deceptive information about a person engaged in insurance.
It is an unfair practice to advertise or distribute information about the insurance business, an insurer, or any person engaged in the business of insurance which is untrue, deceptive, or misleading.
Materiality:
Materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due, in forming his estimate of the disadvantages of the proposed contract, or in making his inquiries. (CIC 334)
Opinion:
Neither party to a contract of insurance is bound to communicate, even upon inquiry, information of his own judgment upon the matters in question. (CIC 339)
Standards for Prompt, Fair and Equitable Settlements: (Title 10, CCR 2695.7)
No insurer shall discriminate in its claims settlement practices based upon the claimant's age, race, gender, income, religion, language, sexual orientation, ancestry, national origin, or physical disability, or upon the territory of the property or person insured. (Title 10, CCR 2695.7(a) Upon receiving proof of claim every insurer shall immediately, but in no event more than 40 calendar days later, accept or deny the claim, in whole or in part. The amounts accepted or denied shall be clearly documented in the claim file unless the claim has been denied in its entirety. This time frame does not apply to disability insurance, disability income insurance, mortgage guaranty insurance, or automobile repair bills arising from collision and comprehensive claims. (Title 10, CCR 2695.7(b)
Free insurance:
No insurer shall participate in any plan to offer or effect any kind or kinds of insurance or annuities in this state as an inducement to the purchase or rental by the public of any property, real or personal or mixed, or services, without a separate charge to the insured for such insurance, nor shall any agent, broker, or solicitor arrange the sale of any such insurance. (CIC 777.1) This article does not apply to insurance offered as a guarantee of the performance of goods which is insurance to protect the purchasers of such goods nor does it apply to any title insurance or life or disability insurance written to pay off the balance of a debt in the event of the death or disability of the insured.
Absence of Binding Authority:
Surplus lines brokers cannot bind risk with non-admitted insurers. Additionally, No surplus line broker shall issue any evidence of insurance or cause or purport to cause any risk to be insured by a non-admitted insurer or advise any insured or applicant for insurance that coverage has been or will be obtained from a non-admitted insurer unless: a) The broker has prior written authority from the non-admitted insurer to cause the risk to be insured; (b) The broker has received advice in the ordinary course of business that the coverage has been obtained (c) A policy of insurance covering the insured for the risk has actually been issued by the nonadmitted insurer and delivered to the insured or his or her representative.
Gramm-Leach-Bliley Act:
The Financial Modernization Act of 1999, know as the "Gramm-Leach-Bliley Act" or GLB Act, has provisions to protect consumers' personal financial information held by financial institutions. There are three main parts to the privacy requirements. They are (1) the Financial Privacy Rule, (2) Safeguard Rule, and (3) pretexting provisions.
Penalties:
The commissioner has the right to examine and investigate every insurance organization or agent doing business in the state to determine if the privacy laws have been violated. If the commissioner has reason to believe that the law is being violated, he may serve notice and conduct a hearing into the allegation. An insurance support organization transacting business outside of the state, which has an effect on a person residing in California, is deemed to have appointed the commissioner to accept service of process on its behalf, provided that the commissioner sends a copy of the service by registered mail to the insurance support organization.
License revocation or suspension:
The commissioner may suspend or revoke a permanent license for any of the same grounds for which a license application may be denied. As noted above, some grounds require a hearing while others do not. (CIC 1738)
Unfair trade practices:
The insurance industry is subject to the laws of California which apply to all types of business, including, but not limited to, the Unruh Civil Rights Act, anti-trust, and unfair business practice laws. The purpose of the rules regarding unfair practices is to define and regulate trade practices in the business of insurance that are considered to be unfair, deceptive, or misleading. These provisions apply to all types of insurers and to all producers engaged in the insurance business. No one may engage in any practice that is prohibited by law or that is considered to be an unfair method of competition or an unfair or deceptive trade practice in the business of insurance.
Rescission:
To rescind a contract is to terminate or void the contract. The policy is considered null and void from the beginning and treated as if it had never existed. As noted above, a wronged party has the right to rescind the contract when there has been a material concealment whether intentional or unintentional (CIC 331), an intentional and fraudulent omission proving the falsity of a warranty (CIC 338), a material false representation (CIC 359), or a violation of a material warranty or other material provision of a policy (CIC 447).
Duties upon Receipt of Communications: (Title 10. CCR 2695.5)
Upon receiving any written or oral inquiry from the Department of Insurance concerning a claim, every licensee shall immediately, but in no event more than 21 calendar day of receipt of that inquiry, furnish the Department of Insurance with a complete written response based on the facts known by the licensee. The response is to address all inquiries made by the Department of Insurance and include copies of any documentation and claim files requested.
Certificate of convenience:
Upon the filing of an application for a license, the commissioner may make such investigation and require the filing of such supplementary documents, affidavits and statements as may be necessary to obtain a full disclosure of such information as will aid him in determining whether the prerequisites for the license have been met. If the applicant makes a showing satisfactory to the commissioner that he meets all such prerequisites, the commissioner may issue a certificate of convenience and, upon the applicant meeting any applicable examination requirements, may issue a permanent license. (CIC 1666)
Notice of appointment as an agent:
When a notice of appointment is filed with the Department of Insurance for a person licensed as a broker/agent by an insurer, that person is deemed to be acting as an agent for that insurer (CIC 1731)
Implied declarations with appointment:
When an insurer or licensed property and casualty broker/agent files an appointment for an agent or solicitor applying for an original license, the insurer or broker/agent is declaring that the applicant is of good reputation and is worthy of the license sought. If an applicant will not be issued a certificate of convenience pending examination, the insurer or broker/agent who files the appointment is declaring that the applicant has had the required experience or instruction in the classes of insurance for which the license is sought or that he/she will be given the necessary instruction within 30 days after the license is issued. If the applicant is a co-partnership, corporation, or association, the insurer making the appointment is deemed to have declared that the applicant is of good reputation and worthy of the license sought. This applies to the business organization and to each individual authorized to exercise agency powers who is named in the application. These implied declarations apply to any additional persons added to the license at a later date.
The notice must be in writing and must state:
Whether personal information may be collected from persons other than the applicant proposed for coverage. The types of personal information that may be collected and the types of sources and investigative techniques that may be used to collect the information. The circumstances under which the disclosures may be made without prior authorization. A description of the applicant's rights and the manner in which those rights may be exercised. That information obtained from a report prepared by an insurance support organization may be retained by the insurance support organization and disclosed to other persons.
Stock insurers
are corporations organized for the purpose of making a profit for their stockholders. A stock company raises money by selling shares of stock; the stockholders are the owners of the company; and the affairs of the company are handled by a board of directors elected by the stockholders. The type of policy issued by stock companies is called non-participating (non-par) as the policyholders do not share in the company's profits. When declared, dividends are paid to the stockholders.
Mutual insurers
are corporations owned by the policyowners. When a person buys an insurance policy from a mutual insurer that person is becoming an owner in the company as well as a policyholder. As an owner, the policyholder votes for the board of directors. The policies issued by mutual insurers are referred to as participating (par) policies as any surplus is returned to the policyowner in the form of a dividend. Surplus can be defined as excess earned or saved by the insurance company. Earned surplus is generated by: Mortality-----fewer people die than expected Interest------company earns more interest than assumed Expenses---company overhead is less than projected
Disclosure authorizations
are forms or statements with which a person authorizes personal or confidential information about him to be disclosed. This authorization must: Be written in plain language. Be dated. Specify the types of persons authorized to disclose information (i.e. friends, neighbors, employer). Specify the nature of the information authorized to be disclosed (habits, personal traits). Name the insurance institution or agent to whom the individual authorizes information to be disclosed. Specify the purposes for which the information is collected (e.g. to underwrite an application for insurance). Specify the length of time for which the disclosure authorization is valid. The maximum length of time for life, health or disability insurance is 30 months and one year for property and casualty insurance. Advise the individual that he is entitled to receive a copy of the authorization form. This section shall not be construed to require any authorization for the receipt of personal or privileged information about an individual.
The California Insurance Code (CIC)
consists of statutes written and passed by the state legislature. The governor signs these statutes into law. The insurance code is changed by the legislature passing a new statute that amends or repeals an existing statute. The code originally consisted of six divisions, but two divisions have been repealed. The remaining four divisions are (1) general rules governing insurance, (2) classes of insurance, (3) the insurance commissioner, and (4) insurance adjusters. Each division is further broken down into parts, chapters, and articles.
The Financial Privacy Rule
governs the collection and disclosure of customers' personal financial information by financial institutions and other companies who receive such information. Customers are entitled to receive a privacy notice every year. The notice must be given to the customers or consumers by mail or in person. The privacy notice must be a clear, conspicuous, and accurate statement of the company's privacy practices. It should include what information the company collects about its consumers or customers, with whom the information is shared, and how it safeguards the information. The notice applies to the "nonpublic personal information" the company gathers and discloses about it customers and consumers. Customers and consumers have the right to "opt out" of having their information shared with certain third parties. The GLB Act does not give consumers the right to opt out when the financial institution shares other information with its affiliates.
Insolvency
means any impairment of minimum "paid-in capital" required of an insurer for the class(es) of insurance which it transacts. An insurer cannot escape the condition of insolvency by being able to provide for all its liabilities and for reinsurance of all outstanding risks. An insurer must also be possessed of additional assets equivalent to such aggregate "paid-in capital" required by the code after making provision for all such liabilities and for such reinsurance. (CIC 985)
The pretexting provision
prohibits the practice of obtaining customer information from financial institutions under false pretenses. A pretext interview is an interview whereby a person, in an effort to get confidential information about another person: (1) pretends to be someone he is not; (2) pretends to represent a person he is not in fact representing; (3) misrepresents the true purpose of the interview; or (4) refuses to identify himself upon request. Pretext interviews may not be used by anyone engaged in the business of insurance except when investigating claims where there is a reasonable basis for suspecting fraud, criminal activity, material misrepresentation or non-disclosure.
Renewal
refers to continued coverage under the policy for an additional period of time upon expiration of the current policy period.
Lapse
refers to policy termination due to non-payment of the premium by the policyholder. A policy will lapse at the end of the grace period, which is a period of time after the premium due date, during which the policy remains in force without penalty.
Non-renewal
refers to the giving of notice by the insurer to the policyholder that the insurer is unwilling to renew a policy.
The Safeguards Rule
requires all financial institutions to design, implement, and maintain safeguards to protect customer information. This rule applies not only to financial institutions that collect information from their own customers, but it also applies to financial institutions such as credit reporting agencies that receive customer information from other financial institutions.