Review

S.G.L.I. and V.G.L.I

(Serviceman's or Veteran's Group Life Insurance: life insurance for active and retired members of the military)

how insurance is sold

-Distribution System -Career Agency System -Personal Producing General Agency System -independent agency system (american agency system) -Managerial System -Mass Marketing

Peril

An immediate, specific event, which causes loss, such as an earthquake or tornado. ___ can also be referred to as the accident itself

Multi-line insurer

An insurance company selling more than one line of insurance

Liquidity

An insurer's ability to make unpredictable payouts to policy owners

National association of insurance commissioners (NAIC)

An organization composed of insurance commissioners from all 50 states, the District of Columbia, and the four US territories. They are responsible for recommending appropriate laws and regulations. They are responsible for the creation of the advertising code, and the unfair trade practices act, and the Medicare supplement insurance minimum standards model act. It has four broad objectives- 1. to encourage uniformity in state insurance laws and regulations 2. To assist in the administration of those laws and regulations by promoting efficiency. 3. To protect the interests of policy owners and consumers. 4. To preserve state regulation of the insurance business.

Reserves

Are the accounting measurement of an insurers future obligations to its policy holders. They are classified as liabilities on the insurance companies, accounting statement since they must be settled at a future date. __ are set aside by an insurance company and designated for the payment of future claims

medicaid

Asset protection can be provided by a long-term care partnership policy if the policyholder qualifies for

Morale hazard

Careless attitude, reckless, driving, jumping off a cliff, stealing, racing motorcycles, carefree, Carol is lifestyle, this attitude causes an indifference to loss

An advance premium assessment mutual

Charges a premium at the beginning of the policy period. If the original premiums exceed the operating expenses and losses, the surplus is returned to the policyholders as dividends. However, if total premiums are not enough to meet losses, additional assessments are levied against the members. Normally, the amount of assessment that may be levied is limited either by state law or simply as a provision in the insurer's by-laws.

Moral Hazard

Dishonesty, drugs, alcohol abuse

government insurance

Federal and state government are also insurers. They provide social insurance, to protect against risks by redistributing income to help people who can't afford the cost of losses themselves.

medicaid

Federal program that provides medical benefits for low-income persons.

to an individual policy for a stated period of time

Group Life policies in Florida are required to contain a conversion privilege that allows for conversion?

Independent Agency System (american agency system)

Independent agents represent a number of insurance companies under separate contractual agreements. They may also work for themselves or under other insurance agents. Independent insurance agents have control and ownership over their clients' accounts. This means they may place clients' business with a different insurer when policies are up for renewal. Independent insurance agents earn commissions on the sales they make and overrides on sales made by agents they manage.

NAIFA (National Association of Insurance and Financial Advisors) and NAHU (National Association of Health Underwriters)

Members of these organizations are life and health agents dedicated to supporting the industry and advancing the quality of service provided by insurance professionals. These organizations created a Code of Ethics detailing the expectations of agents in their duties toward clients.

2010 Patient Protection and Affordable Care Act(PPACA)

Often shortened to the affordable care act, represents one of the most significant regulatory overhauls an expansion of coverage in United States history

social security

Old-Age, Survivors, and Disability Insurance (OASDI)- provides income benefits for the elderly (retirement), survivors of those who died young (young child of deceased parent), and those qualifying for federal disability

Types of Hazards

Physical, Moral, Morale

Physical Hazard

Poor health, overweight, blind

Code of ethics, expectations of agents in their duties toward clients

Selling to needs- agents must first determine the consumers needs, and then determine the policy that fits them best Suitability of recommended products- an ethical agent must be able to assess the correlation between a recommended product and the needs of the consumer Full and accurate disclosure- an ethical agent must inform consumers of the benefits and limitations of recommended products. Recommendations must be accurate complete and clear. Documentation- an ethical agent must document each client's meeting and transaction Client services - an ethical agent must know that a cell does not mark the end of a relationship, but rather the beginning of the relationship. Therefore, routine follow-up calls are recommended.

types of government insurance

Social Security - Medicare - Medicaid S.G.L.I. - Serviceman's Group Life Insurance, which is life insurance for members of the military. Tri-Care - this is health insurance for members of the military.

1945 McCarran Ferguson Act

States that while federal government has the authority to regulate the insurance industry, it would not exercise that right if the insurance industry was run effectively and adequately by the states; under this act, the minimum penalty of a producer who has obtained personal info about a client without having a legitimate reason to do so is a fine of 10K

group health insurance available to employers with up to 50 employees

The Florida Employee Health Care Access Act was established to make

Risk

The potential for loss

1999 Gramm-Leach-Bliley Act (Financial Services Modernization Act)

This law repealed the Glass-Steagall Act; this allows Banks, Retail Brokerages and Insurance companies to enter each other's line of business.

mutualization

Transformation of a stock insurer into a mutual insurer.

once each year

Under Florida law, a variable annuity policyowner must be notified of the accumulated value of the contract

reciprocal insurers

Unincorporated groups of individual members that provide insurance for other members through indemnity contracts. Each member acts as both insurer and insured and are managed by Attorney in Fact.

the possible tax ramifications as a result of the transaction

When replacing or exchanging an annuity, the agent must disclose to the annuitant

Misrepresentation

Which Unfair Trade Practice involves an agent suggesting that an insurance policy is like a share of stock?

Career Agency System

With this system commercial insurers establish offices in certain locations. __ agents are recruited to work at these locations. A general agent hires and trains new producers and supervises a number of other producers. All producers under this system are captive agents and employees of the insurer.

Managerial System

With this system, branch offices are established in several locations. Instead of a general agent running the agency, a salaried branch manager is employed by the insurer. The branch manager supervises agents working out of that branch office. The insurer pays the branch manager's salary and pays him a bonus based on the amount and type of insurance sold and number of new agents hired.

10%

a life policy loan in FL cannot charge a fixed rate of interest higher than what?

demutualization

a mutual insurer is converted into a stock insurer

Self-funded plans

a plan in which an employer pays insurance benefits from a fund derived from the employer's current revenues

broker dealer

a variable life insurance agent must be licensed and appointed as a life and variable contract agent, as well as ?

Require evidence of insurability

according to fl law, group life insurance conversion privileges must NOT

Personal Producing General Agent (PPGA)

agents work independently selling policies from several insurance companies. unlike career agency system, agents are not employees of the company. they work for ___. they primarily sell insurance rather than recruiting and training new agents

writing primarily controlled business

an agents license can be suspended or revoked by

Captive Agent

an insurance agent who represents only one insurance company and who is, in effect, an employee of that company

captive insurer

an insurer established and owned by the parent company to insure the parent company's loss exposure

Mass Marketing

another way to sell insurance is thru __ __ methods. direct selling (or direct mail) is a method where agents are not used. instead, policies are marketed through TV, radio ads, print sources like newspaper or magazines, by mail, vending machines and internet

Strong Assessment Mutual Companies

are classified by the way they charge premium.

Independent Rating Services

are credit rating agencies that rate or "grade" the financial strength and stability of insurers based on claims, reserves, and company profits. The nationally recognized statistical rating organizations that rate insurers are A. M. Best, Moody's, Standard and Poor's, and Fitch Ratings. Each rating service has its own rating system, but most use an A to F letter grading scheme.

Guaranty Associations

are established by all states to support insurers and protect consumers in case an insurer becomes insolvent. State life and health guaranty associations provide a safety net for all member life, health and annuities insurers in a particular state. Guaranty associations protect insureds in the event of insurer insolvency, or inability to pay claims up to a certain limit.

Commercial Insurers AKA private insurance companies

are in the business of selling insurance for a profit. ___ insurance is divided into two main groups: stock and mutual insurers.

risk retention groups

are mutual companies formed by a group of people in the same industry or profession. Examples would be pharmacists, dentists, and engineers.

stock companies

are organized and incorporated under state laws for the purpose of making a profit for its stockholders (shareholders)

mutual companies

are owned by their policyholders. they are known as participating insurers because policyholders participate in receiving dividends and electing the board of directors

Fraternal Benefit Societies

are special types of mutual companies, nonprofit religious, ethnic or charitable organizations that provide insurance solely to their members

distrubution systems

are the ways insurance products are marketed and sold to the public. insurance can be purchased through licensed insurance producers who are either agents or brokers or thru a number of other ways. agents are either captive/career agents or independent agents.

2001 USA Patriot Act

as it relates to the insurance industry, is designed to detect and deter terrorists and their funding by imposing anti-money laundering requirements on brokerage firms and financial institutions.

2 years

contestability period in florida

a return of premium

dividends from a mutual insurer are not subject to taxation because the dividends are considered to be ? (the only exception is when the policyowner chooses to let dividends sit and collect interest. in this case, only interest is taxable)

profit

dividends from a stock insurer subject to taxation because they are considered what?

Buyer's Guide

each state requires agents to deliver a buyer's guide to consumers that explain various types of life insurance products and other information on the recommended policy, such as premiums, dividends, and benefit amounts.

1905 The Armstrong Investigation Act

gave the authority to the states to regulate insurance.

Unfair trade practices act

gives chief financial officer the power to investigate insurance companies and producers to impose penalties. In addition to that, the act gives officers the authority to seek a court injunction to restrain insurers from using any methods believed to be unfair.

right to loan proceeds

group life policies must include all provisions except

Tri-Care

health insurance for members of the military and their family

Policy Summary

help consumers evaluate the suitability of the recommended product

primary insurer

in a reinsurance agreement, the insurance company transfers its loss exposure to another insurer is called the ?

stockholders

in a stock company, the directors and officers are responsible to the what?

offered to all insureds in the same actuarial class

in florida, agents are allowed to engage in rebating if

2003 Do Not Call Registry

insurance calls are not exempt from the do not call registry

accidental d and d rider

insurance providing an additional death benefit for a limited time at the lowest possible cost

Lloyd's of London

is not an insurance company. Members of the association form syndicates to underwrite and issue insurance- like coverage. This is a group of investors who share in unusual risk.

Sell the client a more appropriate annuity

k is an agent who made an improper sale of an annuity to a client. which action would the dept of financial services order K to take

reinsurers

make arrangements with other insurance companies to transfer a portion of their risk to the reinsurer. The company transferring the risk is called the Ceding Company and the company assuming the risk is the ___.

service providers

offer benefits to subscribers in return for the payment of a premium; these services are packaged into various plans and those who purchase them are known as subscribers. examples of ___ ___ are health maintenance organizations (HMO) and preferred provider organizations (PPOS)

Pure Assessment Mutual Company

operates based on loss-sharing by group members. No premium is payable in advance. Instead, each member is assessed an individual portion of losses that occur.

Accidental Death and Dismemberment provision

p is blinded in an industrial accident. which provision of life insurance policy will pay a stated benefit amount

1970 Fair Credit Reporting Act

provides individuals privacy protection and fair and accurate credit reporting; insurance companies are required to notify applicants if a credit check will be made on them; under this act, the max penalty of a producer who has obtained consumer information reports under false pretenses is a fine of 5K

self insurers

retain risks and must have a large number of similar risks and enough capital to pay claims. However, they may save money if the loss experience is lower than the expected costs.

1944 United States v. South-Eastern Underwriters Association

ruled that insurance transactions crossing state lines are interstate commerce and are subject to federal regulation. thus, many federal laws were conflicting with existing state laws. this decision did not affect the power of states to regulate insurance

Home Service Insurers AKA industrial insurance

sold by home service or debit life insurance companies. face amounts are small; usually 1000 to 2000 and premiums are paid weekly

1869 Paul v. Virginia

the U.S. Supreme Court ruled that insurance transactions crossing state lines are not interstate commerce.

Advertising code

the code specifies certain words and phrases that are considered misleading and are not to be used in advertising of any kind

31 days

the conversion period for a terminated employee to overt group life coverage to an individual plan is how many days?

15 years

the minimum age at which a person can sign a life insurance application is?

ceding company

the primary insurer that initially writes the insurance; transferring the risk

under a renewable term policy,

the renewable premium is calculated on the basis of the insureds attained age

6 months

the waiting period for a pre existing condition under a medicare supplement policy may not go beyond?

nonparticipating insurers

traditionally, stock insurers are called ___ ___ because policyholders do not participate in receiving dividends or electing the board of directors, unless they are also a stockholder of the company

limitation on preexisting conditions for up to 12 months

under fl law, which of the following provisions is not required in a medicare supplement policy?

Loss

unintentional decrease in the value of an asset due to a peril

Moody's Corporate bond index.

what are adjustable rates for life policy loans in FL based on?

risk management advisors

what is not a legal entity for selling life insurance in FL?

policyholders

when declared, mutual company dividends are paid to the ?

full time employees after the probationary period ends

which employees may not be excluded from a group life plan?

insuring clause

which of the following insurance policy provisions specifies the benefits or services a policy will provide?

independent agent

works for self and sells products for many companies

Mixed Insurer

A company that operates as both a participating and nonparticipating insurer; dividends can never be guaranteed regardless of the type of company offering them

Hazards

A condition or situation that creates or increases a chance of loss. For example, icy roads, driving while intoxicated, and improperly storing toxic waste.

medicare

A federal program of health insurance for persons 65 years of age and older

twisting

A form of misrepresentation in which an agent persuades an insured/owner to cancel, lapse, or switch policies, even when it's to the insured's disadvantage.

48 months

A licensed agent must be appointed by an insurance company to solicit insurance in Florida. The agent's license will terminate if a certain period of time elapses without being appointed. How long is this period of time?

10 %

A life policy loan in Florida cannot charge a fixed rate of interest higher than

Speculative risk

A risk that presents both the chance for loss or gain. An example would be gambling. These risks are not insurable.