Florida 2-15 License

A ________ fine can be assessed for violation of C&D order

$50,000

Rules for acting as Fiduciary

- Agent must keep funds in separate account from person when accepting premiums, etc. - Must keep records of premium payments for 3 years after payment. Does not apply to insurance binders when no policy is ultimately issued + no premium is collected.

Criminal Actions (felonies) by Agents

- Agent must report in writing to the dept within 30 days if he has plead guilty to or been convicted of a felony or crime punishable by imprisonment of one year or more under any law. Written report is required whether or not the agent was convicted by the court.

What specific sales action will result in a permanent revocation of your license?

- Agent or customer service solicits or sale of insurance product to person 65 yrs or older.

Division of Investigative and Forensic Services

- Encompasses all law enforcement and forensic components resides in the DFS. - Investigates wide range of fraudulent acts

Compensation for advice service or counseling by Insurance Agent

- FL law specifies that no policy of life or health may be issued for delivery in this state unless app is taken by, and policy delivered through a licensed agent who will receive usually commissions. - FL law permits a licensed health agent to charge a fee for advice, counsel, or recommendations regarding health ins. Must be in a written contract. - Contract must inform person being charged that any commissions received to agent by insurer will be rebated to that parties within 30 days of receipt. Copy must be retained by agent for 3 years.

Unlicensed Entities

- Florida Law prohibits unauthorized mail order insurers from soliciting in FL. Transaction of insurance must be taken by and the policy delivered through a licensed appointed FL agent. - Also felony of 3rd degree

Prelicensing Education

- Has to be done within 4 years of preceding the license application: - Flor life agent license: completed 40 hours of approved coursework in life ins, annuities, and variable contracts. - Completed a minimum of 60 hours approved coursework in multiple areas of insurance which includes life insurance, annuities, carriable contracts, including 3 hours of ethics. -Combined Life/Health course does not have the 40 hour precourse requirement.

Licensee demographic change

- Licensee must notify the dept in writing within 30 days of a major demographic change. - Licensees who has moved principal place of residence and business from this state shall have her license and all apt's immediately terminated. - Failure to notify dept within required time shall result in fine of $250 for first offense and $500 or suspension and revocation for subsequent offenses.

Maintaining your License

- Must complete a 4-hour law and ethics update course every 2 years. - Also have 20 hour of elective continuing education every 2 years; (24 total) - If licensed for 6 years, only need 16 hours and 4 hour law and ethics course every 2 years.

NAIFA

- National Association of Insurance and Financial Advisors (NAIFA) - Designed to protect agents - Dedicated to supporting life insurance industry

When do terms for appointments expire?

- New apts or continued apts for natural persons, which are effectuated in licensee's birth month shall expire 24 months later on the last day of the licensee's birth month and shall be subject to renewal. - In the case of entities other than natural persons, new apts or continued apts shall expire 24 months later on the last day of the licensee's license issue month and shall be subject to renewal at that time. Apts effectuated during any month other than the licensee's birth month shall be valid for not less than 24 months and no longer than 36 months. Min and Max months are necessary to convert the original issue - Apts renew every 24 months thereafter unless suspended, revoked, or otherwise termed at an earlier age.

COA and penalty for not having one?

- No person may act as an insurer, directly or indirectly transacting insurance in Florida except as authorized by a COA issued to the insurer by the office. - Felony of 3rd degree if not

Department of Consumer Services

- Offers a toll free line to assist insurance consumers with questions and complaints - Any licensed broker/agent must respond within 20 days in writing after receipt of a written request for info after a complaint is made - May take additional action against offenders - Prepare, disseminate and inform consumers

Financial Services Modernization Act

- Revoking the Glass-Steagall Act - This changed the industry so commercial banks, investment banks, retail brokerages, and insurance companies can now enter each other's lines of business

Policyholder's rights

- Right to competitive pricing practices - Right to obtain comprehensive coverage - Right to ethical insurance advertising practices - Right to financially stable insurance co - Right to readable policy

Endowment Policies

- To endow is to "furnish with an income" - A type of life insurance that is payable to the insured if she/he is still living on the policy's maturity date. - Can provide a death benefit to the beneficiary or a living benefit to the policyowner.

Fraud

- can be a reason to void a contract. With Life insurance contracts, insurer usually only has 2 year period from date of issue to challenge validity of contract. (contestability period).

- Insurance co's and producers by statute have ___ days to respond to the dept once notified of a consumer complaint.

20

- Within ____ days after the final deposition of an administrative action taken against a licensee by gov agency - licensee must submit a copy of the order, consent to order, or other relevant legal docs to dept.

30 days

- Agent transacting insurance must maintain in his or her office records for ___ years after policy expiration.

5

Insurance agency must maintain a copy of all rebate schedules for the most recent __ years and their effective dates.

5

Universal Life

A combination of a flexible premium and adjustable life insurance. No new policy needs to be issued when changes are desired. Has mortality Charges each month that increases with age. Partial withdrawals can be made from CV.

Valued Contract

A contract that pays a stated amount in the event of a loss (disability insurance/life insurance).

Estoppel

A legal impediment to denying a fact or restoring a right that has been previously waived.

Similarity of Mutual and Stock Insurance Co's

Both CAN have dividends, although Mutual is known for this

In contract law, contract is to be viewed most favorably to the party that _____________________.

Did not draft it.

Aleatory

Dollar values exchanged may not be equal; element of chance for both contracting parties. Benefits provided may not exceed premiums paid.

The goals of _____ were to encourage individual employers to establish employee health programs

ERISA

By FL law group health insurers are required to offer alcoholism and drug dependency coverage to employers who must offer it to their employees.,

FALSE. Must offer to policyowner, who then has a CHOICE to offer to employees

McCarran-Ferguson Act (1945)

Gave states the authority to regulate insurance

Rating Services

Guides to insurance companies financial integrity and claims-paying ability rated by various services. Standard ones are AM Best, Standard & Poor, Moody's, and Fitch's.

How long does an Agent's License last if no continuing education is done?

License terminates if agent allows 4 years to elapse;

Modified Whole Life

Low premiums in the early years and jumps to a higher premium in the later years and remains fixed thereafter. Premiums increase just once.

Indeterminate Premium Whole Life

Lower premium rate initially (2-3 years) and adjusted (up or down) according to the insurers mortality, expense and investment projections.

Buyer's Guides and Policy Summaries

Most states require insurer to provide both when soliciting insurance sales. Most states require this to be sent before initial premium is accepted;

RRG are a form of ____ insurer

Mutual

Who wrote the Code of Ethics?

NAIFA

Does FL law specify what an insurer must do if an applicant indicates that a variable annuity is the sole source of retirement income?

NO. This is only designed to bring this to attention to the applicant.

NAHU

National Association of Health Underwriters

Under what circumstances can an insurer deny coverage to a firearm owner?

Never

Lucy a Disabled Widow cashes in her $100k annuity. How much excise penalty tax will she have to pay and why?

None because she is disabled even though she is under 59 and a half.

National Association of Insurance Commissioners (NAIC)

Notable accomplishments are creating of Advertising Code and Unfair Trade Practice's Act; -Encourages uniformity in state insurance laws and regulation. - Assist in administration of laws and regs by promoting efficiency.

_________ must examine each domestic insurer once every ___ years or at least ___ every year if a COA is held less than 3 years?

OIR - 5 years - once a year;

Who may issue Cease and Desist Orders and how long is an emergency C&D order effective for?

Office of Financial Regulation and emergency C&D orders are effective for 90 days for insurers who's conduct is likely to cause insolvency;

Insurer must file CoC's. applications, riders, endorsements, and renewal certifications to which office 30 days prior?

Office of Insurance Regulation OIR, at expiration of 30 days form will be deemed approved if not explicitly rejected

3 Basic Kinds of Life Coverage

Ordinary Life, Industrial Life, and Group Insurance

Most states require life insurance policies contain a provision that all statements are deemed ________________, not _______________.

Representations, not warranties.

Office of Insurance Regulation

Responsible for all activities of the Financial Service Commission relating to regulation of insurers and other risk-bearing entities; Duties include: rate-making supervision, policy forms approval, market conduct investigation; Issuing CoAs, applications, riders, etc., assessing insurer solvency, regulating viatical settlements, regulating premium financing arrangements, administrative supervision

Chief Financial Officer (CFO)

Serves as the head of the dept of Financial Services and is a member of the Financial Services Commission; Regulation of insurance agents is directly administered by the CFO and Dept of Financial Services along with insurance fraud and insurance consumer protection;

What type of annuity settlement would be best used to distribute funds from settlement of large sums of money (lawsuits and lotteries)?

Structured Settlement Annuity

True or False? The term "physician" or "medical doctor includes dentists.

TRUE

TAMRA

Tax Reform Act of 1984. This act restricts the payout of endowment policies.

Cash Surrender Value

The accumulated, guaranteed cash value in a Whole Life or Endowment policy at any given point in time. Most contracts do not develop a cash value until after the 3rd year. On Whole Life, the cash value will equal the face amount of the policy at age 100. Synonymous with Cash Value.

Subrogation

The process by which an insurer can, after it has paid a loss under the policy, recover the amount paid from any party (other than the insured) who caused the loss or is otherwise legally liable for the loss.

Who do brokers represent?

Themselves and the policyowner/insured

According to the NAIC Uniform Policy Provisions for health insurances the ____ provision pertains to timely notice given to insurer when a claim is being made

Timely payment of Claims

State Guaranty Associations

To support insurers and to protect consumers if an insurer becomes insolvent. Should an insurer by financially unable to pay it's claims, SGA will step in a conversation the consumers' unpaid claims These state associations are funded by insurance companies through assessments.

What feature of an insurance contract states only one party (the insurer) has any future obligation is reflected as what kind of contract?

Unilateral

Marketing Ethics

Usually overseen by states; conducted by Department of Financial Services. Many regulations are derived from model legislation from NAIC like Unfair Trade Practices Act.

Void Vs. Voidable

Void: agreement without legal effect. Cannot be enforced by either party, missing a key part of contract law. i.e contract with illegal purpose is void. Voidable ex: John's failure to pay premiums

Department of Financial Services

-Issues and regulates agent and agent licenses. Headed by the Chief Financial Officer; OIR regulates insurer activities, together they oversee the insurance industry in accordance to Insurance Code; May conduct any investigation of insurance matters expressed in the code; Can levy fines; May both employ actuaries; Can receive inquiries and complaints from consumers; FL licensed insurers must designate the CFO as their attorney to receive service of all legal process issued in any FL civil action

Annually Renewable Term

-Renews each year without proof of insurability -Premiums increase due to attained age

4 parts of an Insurance Transaction

-Solicitation -Negotiation -Effectuation -Transaction;

Criminal penalties regarding misuse of premiums

-funds diverted are $300 or less, misdemeanor in 1st degree - more than $300 but less than 20k, felony of third degree - 20k or more, but less than 100k, felony in second degree - 100k or more, felony of 1st degree.

Elements of Insurable Risk

-must be due to chance -cannot be catastrophic -must be randomly selected • Loss exposure to be insured must be large - Insurance company must be able to predict loss ( based on law of large numbers) - Loss must be definite and measurable - Time, place, amount, and when payable

Indexed Whole Life

A whole life insurance policy whose death benefit increases according to the rate of inflation. Such policies are usually tied to the Consumer Price Index (CPI).

Modified Endowment Contract (MEC)

Any cash value policy that builds cash value faster than a Seven-Pay Whole Life Contract and therefore loses the tax advantages of life insurance.

Protection against the unintentional lapse of a life insurance policy is afforded through what means?

Automatic Loan Provision

Who administers insurance laws in Florida?

CFO, Financial Services Commission, and Commissioner of the office of OIR administer insurance laws of Florida.

Minimum Deposit Whole Life

Cash values begin immediately and are use to pay future premiums (partially or on full).

Financial Services Commission

Composed of the governor, the CFO, attorney general, the commissioner of agriculture; Supervises the Office of Insurance Regulation and Office of Financial Regulation; Office of Financial Regulation (OFR) regulation of banks, credit unions, other financial institutions, finance co's and the securities industry.

Adhesion

Contract has been prepared by one part, applicant has to "adhere" to terms of contract when they accept it.

Adjustable Life Policy

Whole life insurance policy, but you can change your policy as your needs change. You can change your premium payments to increase or decrease coverage Can be converted to whole life or term, or vice-versa. increase face amounts need EOI. Usually has higher premiums.

Is the variable annuity insurer required to inquire whether an applicant for variable annuity also has any form of fixed dollar income?

YES

Risk Retention Group (RRG)

a mutual insurance company formed to insure people in the same business, occupation, or profession

Representation

a statement believed to be true to the best of one's knowledge

Warranty

a statement that becomes part of the insurance contract and is guaranteed by the maker to be true in all respects

Rebating

occurs if the buyer of an insurance policy receives any part of the producer's commission or anything else of significant value as an inducement to buy the policy. State regs are very strict about rules for this.

Guaranteed Renewable

allows policyholder to renew the term policy before the termination date, without provide EOI. Premiums may be higher.

Fair Credit Reporting Act of 1970

applicant has right to see all the stored information upon which the policy is either approved or denied; - Applicants must be notified (within 3 days) that report has been requested, also must notify applicants that they can request disclosure. - Consumer must be provided with all names of contacts contacted for report for the preceding 6 months. If they are at place of employment, can go back 2 years. - If a bad report is done and insurer rejects application, company must provide name and address of the consumer reporting agency that supplied report. - Also, if requested by applicant, consumer reporting agency (NOT INS CO) must disclose nature and substance of all info except medical contained in consumer's file.

The Florida Health Insurance Plan makes coverage available to individuals who

are high risk and have no other option for similar coverage;

The MIBs main purpose is to

be a reliable source of medical information

Insurable Interest

means that the person acquiring the contract must be subject to loss upon death, illness, or disability of the person being insured. **Must only exist at the time application is made.**

Concealment

defined as the failure by the applicant to disclose a known material fact when applying for insurance.

Credit Life Insurance

designed to cover the life of a debtor and pay the amount due on a loan if the debtor dies before loan is repaid. Beneficiary is usually the lender, usually decreasing term.

In FL a child must be ____ years of age to sign a life insurance application;

fifteen

7 Pay Test

if premiums paid during the first 7 years exceed the net level premium that should have been paid, it is a MEC (Modified Endowment Contract)

Who do Agents represent?

insurance company

Juvenile Insurance

insurance written on lives of children - ordinarily age one day - age 14 to 15. Ownership of policy rests with the adult, adult is premium payor also.

According to agent ethics

it is recommended that agents meet with their clients ____ and complete a review, annually

Lloyd's of London

not an insurer, but a society of members who underwrite insurance in syndicates

Indemnity

pays amount equal to loss; attempts to return insured to original financial position.

Graded Premium Policies

premiums are typically lower that whole life rates for the first year after issue and increase each year until levelling off after the preliminary period (usually 10 yrs) at just above the typical straight whole life policy.

Option to Convert

second option common to most term plans, gives the insured the right to convert or exchange term policy for whole life plan without EOI.

Payor Provision

typically attached to Juvenile Insurance Policies, provides that in the event of death or disability of the adult premium-payor, the premiums will be waived until the insured child reaches a specified age or until the maturity date of the contract which ever comes first.

Waiver

voluntary giving up legal right

Parol Evidence Rule

when parties put agreement in writing, cannot be altered by oral evidence.

Interest Adjusted Net Cost

widely used today to compare policy costs; adds interest to the formula.