The Insurance Market
Not a Life Settlement Contract
A policy loan issued by a life insurance company; A loan made by a bank or a lender; A collateral assignment of a life insurance policy by the owner; An agreement between closely related parties (by blood or by law); A bone fide business succession arrangement; Employer-owned life insurance on key employees; An agreement between a service recipient and a service provider; Any other form specified by the Commissioner.
Financing Entity
Any accredited investor who provides funds for the purchase of one or more life settlement contracts and who has an agreement in writing to do so.
Business of Life Settlement
Any activity relating to the solicitation and sale of a life settlement contract to a third party who has not insurable interest in the insured.
Fiduciary
Both the responsibility inherent in handling another person's financial affairs, and the individual with such responsibility. Insurance licensees commonly act as a conduit, receiving and transferring funds from client to insurer, and eventually, from insurer to client.
Legislative Branch
Enacts laws that govern the conduct of the insurance industry with regard to insurance transacted within the state. (primary purpose- making laws)
Judicial Branch
Exercises control by rendering decisions on the meaning of policy terms and ruling on the constitutionality of the state insurance laws and the actions of those administering the law (Primary purpose- interpreting laws)
Independent Agent
Has contracts with more than one insurer and, ideally, is then is an enhanced position to offer clients a wide range of product options.
Executive Branch
Headed by the Commissioner of Insurance, who is the central figure in the regulation of the insurance industry in the state. (Primary purpose- enforcing laws)
Continuing Education Requirement for Agent writing Long-Term Care Insurance
Life-only agents or fire and casualty broker-agents who intend to market long term care insurance must also satisfy the continuing education requirement for those courses. The basic course, which must have LTC 2004 or 2004 LTC in its title, is an 8hr course. It is required in each of the licensing period. These additional requirements are included in the hours required for continuing education, not added to them.
Post-Selection
Once the producer has elected to complete and submit an application, the in-house underwriters begin the "post-selection" process. Using the application as a springboard, the underwriter begins an investigation of the client's complete risk profile.
Financing Transaction
Takes place when a licensed settlement provider obtains funds from the financing entity.
Positively
The agent can represent a product that would otherwise be unavailable to the client.
Direct Response
The necessity of the potential client to take the initiative and respond to the advertisement through a telephone or mail contact with the insurer as directed in the ad.
Insured
The person covered under the policy that is considered for sale in a life settlement contract.
Financial Reports
Using financial inspection reports and/or information from major credit reporting agencies, the insurer can detect whether the client has a history of financial malfeasance.
Producer/ Agency
A legal entity, either human or corporate, that acts on behalf of, or in the place of, its principal. In insurance, the producer is the agent, and the principal is the insurer.
Inactive License
A licensee with no appointments and does not lose license.
Insurance Solicitor
A natural person employed to assist an insurance agent or insurance broker in transacting insurance other than life. In this state is not eligible to act as an insurance agent or broker at the same time. A person authorized to act as either an insurance agent or broker is not eligible at the same to to acts this. May make prospecting telephone calls, set appointments, even offer quotes, or take applications for insurance other than life insurance. May be employed by more than one broker-agent at a time. A notice of appointment appointing may be flied by a second or subsequent fire and casualty broker-agent. In order to perform the duties, the Insurance Code requires that a person hold this license.
Life Agent
Acts on behalf of an insurer and received commission for insurance transactions. Transacts insurance business and created binding contracts.
Responsibilities to the Applicant/ Insured
Although the agents act for the insurer, they are legally obligated to treat applicants and insureds in an ethical manner. Because an agent handles the funds of the insured and the insurer, he/she has fiduciary responsibility.
Adverse Selection
An imbalance of risks or the selection of poor risks- too many substandard compared to to preferred and standard risks.
Life Expectancy
An important concept in life settlement contracts. It refers to a calculation based on the average number of months the insured is projected to live due to medical history and mortality factors (an arithmetic mean).
Notice of Appointment to transact Life Insurance
An insurer is inherently confirming to the Department of Insurance that the applicant has a good reputation and is worthy to be issued the license. This includes confirmation that the applicant has sufficient experience or education or will soon (within 30days) receive sufficient education to meet the requirements of the license. All of this is true for the entity and each of its natural persons if the applicant is a business entity. The proposal results in an applicant to the insurer and a policy is issued, which the insurer is under no obligation to do so. The insurer must file the notice with the Department within 14 days. All payments from the client in regard to such a policy must be made payable to the insurer.
Life Settlement
Any financial transaction in which the owner of a life insurance policy sells a policy that is no longer needed to a third party for some form of compensation, usually cash. The seller (policyowner) could have a life expectancy of more than one year. Policyowners may choose to sell their policies because they feel they are no longer need their coverage, or the premium costs have grown too high to justify continuation of the policy.
Life & Disability Analyst
Any person who receives a fee or other compensation from any person or source other than an insurance company for the purpose of advising or offering to advise an insured, beneficiary, or other person who has an interest in a life or disability insurance contract about their rights, benefits, or any other aspect of the contract. To be licensed a person must be a state resident, at least 18 years old, knowledgeable and competent on the subject of insurance, and be of good business and general reputation. The candidate must take a prelicensing examination no more than 12months prior to applying for this license.
Limited Lines Automobile Insurance Agent
Authorized to transact auto insurance, including automobile liability coverage, physical damage coverage, and collision coverage.
Surplus Line Broker
Authorized to transact insurance with a non-admitted insurer only in a specific class of insurance cannot be obtained from admitted insurers (after proof of a diligent search)
Exclusive/ Captive/ Career Agent
Chooses to have a contract with one company. An agent may choose to do this when he or she finds the insurer's products to be of extraordinary quality and applicability and feels no need to have other insurer relationships. An agent might also make this choice because the insurer only allows its products to be sold through its own, exclusive agents.
Life Settlement Contract
Establishes the terms under which the life settlement provider will pay compensation to the policyowner, in return for the absolute assignment, transfer, sale, or release of any portion of any of the following: The death benefit; Policy ownership; Any beneficial interest; or Interest in a trust of any other entity that owns the policy. Also includes a premium finance loan that is made on or before the date of issuance of the policy if the loan proceeds are not used solely to pay premiums for the policy, and/ or if the owner receives a guarantee of the future life settlement value of the policy.
Producer's Responsibilities
Helping prevent adverse selection; the proper solicitation of applicants; completing the application; obtaining the required signatures; collecting the initial premium and issuing the receipt, if applicable; and delivering the policy.
Written Consent in Regard to Interstate Commerce
If a person transacts insurance in a way that affects interstate commerce and knowingly makes a false material statement/report, alters records with an intention to deceive, or intentionally overvalues any land, property, or security, in an attempt to deceive an insurance regulatory official or agency, the person could be fined and/or imprisoned for a period of up to 10yrs. It is also illegal for those who transact insurance in a way that affects interstate commerce to willfully embezzle, abstract, purloin, or misappropriate any of the moneys, funds, premiums, credits, or other property.
Denial of Applications
If the applicant is unqualified or if licensing the applicant would be against the public's best interest.
Life -Only Agents
In California are authorized to transact insurance on human lives including the following benefits: Endowments; Annuities; Death or dismemberment by accident; Disability income.
Insurer as Principal
In applying the law of agency, the insurer is the principal. The acts of an agent or producer who is acting within the scope of his or her authority are the acts of the insurer.
Insurance Agent
In the state of California does not include a life agent as defined in the Code. Is a person authorized by an insurer to transact all classes of insurance, except life insurance.
Authorized or Admitted Insurers
Insurers who meet the state's financial requirements and are approved to transact business in the state are considered this int the state as a legal insurer.
Life Licensee
Is authorized to act as a life agent, which includes the following two types of licenses: Life-only- for transacting life insurance, endowments and annuities, and benefits for accidental death or dismemberment; and Accident and health- for transacting coverage for sickness, bodily injury, accidental death, and disability income.
Prohibited Actions
No person may perform the activities of an insurance agent or broker without holding the appropriate valid licenses described in the Insurance Code. This includes soliciting, negotiating, and executing contracts of insurance. If violated is guilty of a misdemeanor.
Life Analyst
Not paid a commission by a life insurer either directly or indirectly for an insurance transacted by an analyst. The primary goal is advising an insured, beneficiary, or other person about their rights, benefits, or any other aspect of the insurance contract.
Qualified Institutional Buyer
One that owns and invests at least $100 million in securities and is allowed by the SEC to trade in unregistered securities. A life settlement provider may sell, or in some other manner approved by the Superintendent, transfer ownership of a settled policy to a qualified institutional buyer or other investment entity approved by the Superintendent.
Non-Admitted Insurer
One which has not met the requirements, either by choice or by failure, to legally have its representatives physically present in order to conduct business in California.
Field Underwriter
Refers to the agent and is the company's front line because the agent is usually the one who has solicited the potential insured.
Fiduciary Funds Received
Remit and return premiums received to the insurer (minus commissions due); Maintain fiduciary funds at all times in a trustee bank account separate from any other accounts, in the amount to least equal to the premium and return premiums received by the producer and unpaid to the person entitled to those funds.
Marketing Department
Responsible for advertising, promoting, and distributing an insurer's products to the public. This department also sells the products, trains the producers, and develops any materials related to the marketing process. Also responsible for watching consumer trends and then researching and developing or modifying products and services to meet the needs or demands of the marketplace.
Underwriting Department
Responsible for receiving applications for insurance and then evaluating them according to established guidelines. Applications are either approved or declined. Their main objective is to prevent adverse selection.
Types of insurance Accident & Health Agents transact
Sickness; Bodily injury; Accidental death; Disability income; 24-hour coverage
Fiduciary
Someone in a position of trust. More specifically, it is illegal for insurance producers to commingle premiums collects from the applicants with their own personal funds.
Physician/ Medical Facility Records
The APS (attending physician statement) enables the insurer to receive the complete medical treatment history of the client.
Producer Application Investigation
The Commissioner is authorized to require the provision of any information or documents necessary to make such a determination. After the investigation is complete, the applicant may be authorized to conduct business.
Apparent Authority
The appearance or the assumption of authority based on the actions, words, or deeds of the principal are because of circumstances the principal created.
Express Authority
The authority a principal intends to grant to an agent by means of the agent's contract. It is the authority that is written in the contract.
Current Physical
The insurer can request that the client be examined by a physician and the results submitted for consideration. It is also common to require examination by a paramedical company and the use of blood, urine or saliva samples to check for nicotine or other drug use and the presence of HIV. An ECG may be required.
Owner
The owner of the policy who may seek to enter into a life settlement contract. The term does not include an insurance provider, a qualified institutional buyer, a financing entity, a special purpose entity, or a related provider.
Underwriting
The risk selection and classification process. It involves a careful analysis of many different factors to determine the acceptability of applicants for insurance. In other words, it is the process in which an insurance company determines whether or not a particular applicant is insurable, and if so, what premium to charge.
Personal Interviews
The underwriter may contact persons with information about the applicant by telephone. These may include coworkers, neighbors, relatives or other acquaintances.
Third Party Administrators
These persons must meet all the basic requirements of a life agent and have a written agreement with the insurer specifying their responsibilities and compensation arrangements (if any) with the insurer.
Unauthorized or Non-admitted Insurers
Those insurers who have not been approved to do business in the state. Most states have laws that prohibit these insurers to conduct business in the state, except through licensed excess and surplus line brokers.
Primary Function of Insurance Regulation
To provide a strong, stable, insurance industry that is undiscriminatory and fair to the public. Not a primary objective to interpret policy provisions.
Own the Renewal/ Expiration
What the independent agent is said to do when the time to renew a policy comes. This means that the independent agent can move the client to a different insurer for the renewal. This would best be done only if it is to the client's advantage.
Transacting Insurance
When a person performs any of the following transactions: Solicitation of insurance; Negotiations preliminary to the execution of a contract; The actual execution of a contract; Any transactions that later result from the operation of the contract. Must be licensed as an agent or broker. It is a misdemeanor to transact insurance without a license.
Actuarial Department
Where the science of statistic is put into practice. These are persons who study mortality and morbidity statistics, the nature of claims and actual claims experience, even factoring in the potential for fraudulent claims and the financial impact of those claims- including investigating fraudulent claims and payments. They must also account for the ordinary expenses of doing business, including the payment of claims, as well as make a conservative estimate of earning from invested reserves-- premiums received by the company but not currently needed needed to pay expenses. After all the analyses and calculations have been made, they publish the rates that must be charged for each line of business the company insures, with the intent of achieving profitability.
Errors and Omissions Insurance (E&O)
Written for professionals (such as insurance producers) to provide protection resulting from actions charging that the professional failed to render reasonable duties or services.
An agent/ producer
An individual licensed to sell, solicit or negotiate insurance contracts on behalf of the principal(insurer).
Domestic Insurer
An insurance company that is incorporated in this state. In most cases, the company's home office is the state in which it was formed- the company's domicile.
Broker License Requirements
Complete required prelicensing education (15hr training course) ; Pass the licensing exam; Submit an application to the Commissioner on the approved form; Pay any required fees (a 1yr license fee is $136); and Be determined competent and trustworthy
Twisting
A misrepresentation, or incomplete or fraudulent comparison of insurance policies that persuades an insured/owner, to his or her detriment, to cancel, lapse, or switch policies from one to another.
Fraternal Benefit Society
A voluntarily formed organization that provides insurance benefits for members of an affiliated lodge, religious organization, or fraternal organization with a representative form of government. Sell only to their members and are considered charitable institutions, are not subject to all of the regulations that apply to insurers that offer coverage to the public at large.
False Advertising
Advertisements that include any untrue, deceptive, or misleading statements that apply to the business of insurance or anyone who conducts it. Misrepresenting any of the following: Terms, benefits, conditions, or advantages of any insurance policy; Any dividends to be received from the policy, or previously paid out; Financial condition of any person or the insurance company; and The true purpose of an assignment or loan against a policy. Representing an insurance policy as a share of stock, or using names or titles that may misrepresent the true nature of a policy.
Misrepresentation
An illegal act to issue, publish, or circulate any illustration or sales material that is false, misleading, or deceptive as a policy benefits or terms, the payment of dividends, etc. This also refers to oral statements.
Nonadmitted Insurer
An insurance company that has not applies, or has applied and been denied a Certificate of Authority.
Admitted Insurer
An insurance company that has qualified and received a Certificate of Authority from the Department of Insurance to transact insurance in the state.
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: Insurance adjuster; Public adjuster; or Any member of the claimant's family.
Post-Claims Underwriting
Attempting to do underwriting after issuing a policy and receiving a claim and is illegal.
Uniform Insurers Rehabilitation Act
Describes the steps that the commissioner must take when attempting to either rehabilitate an insolvent or delinquent insurer to sound financial condition or liquidate an insurer that cannot be rehabilitated. The Code also describes the mandatory action the superior court is required to take when the Commissioner presents a petition for either a conservation or liquidation order.
Facultative Treaty
Each risk is considered individually by both parties. A risk is submitted to the reinsurer for acceptance or rejection. If the risk is accepted, the primary insurer may accept or reject the rates and terms of the offer.
California Financial Information Privacy Act
Enacted the most stringent financial privacy protections in the country. The act, which give consumers the final say in the sharing of their information, also restricts financial profiling of consumers and makes consumers aware of their rights through a clearly written and easy-to-understand notice. The 'op-in" rule means that financial institutions must get a consumer's permission before sharing information with outside companies.
California Life and Health Insurance Guarantee Association (CLHIGA)
Exists to pay claims of insureds or beneficiaries when an insurer is insolvent or impaired.
Mutual Companies
Insurance organizations owned by the policyholders. Profits are returned to the policyholders as non-taxable dividends (return of premiums). Dividends are an overpayment or return of the excess premiums that come from a difference between a premium charged and the earnings and actual costs of providing coverage. Are sometimes considered participating companies because policyholders are entitled to a portion of surplus earnings of the company through dividends. A Board of Trustees or Board of Directors is chosen by the policyholders to manage the company.
The Commissioner
Is an elected officer in California. May be elected to serve not more than two 4yr terms. Is expected to be a person knowledgeable in the business of insurance, but cannot be an active agent, officer, director, or employee of an insurance company. Must surrender license if licensed withing 10 days of taking office. At the conclusion of term of office, may have license reinstated for the balance of term without penalties or fees.
California Code of Regulations
Issued by the California Insurance Commissioner that identifies the standards for the Insurance Code and how it is to be administered in the California Administrative Code of Regulations.
Life & Disability Insurance Analyst Licensing Requirements
May not be an employee of an insurance company; Must be a resident of the state of CA; Must be at least 18yrs of age; Must pass the examination; Must be of good reputation; Must have a thorough knowledge of life and disability insurance; Must not be associated with any business that has failed in its fiduciary responsibility toward any other person; Must be "a fit and proper person"; and Must not attempt to avoid or prevent the operation of insurance laws by virtue of being licensed.
Personal Lines Agent
May transact only personal automobile, inland marine for personal property, residential property, and umbrella or excess liability lines of insurance.
Insolvency
Means either of the following: Any impairment of minimum "pain-in capital" required of an insurer by the provisions of the Insurance Code for the class, or classes, of insurance that it transacts anywhere; or An inability of the insurer to meets its financial obligations when they are due.
Unfair Discrimination
Morally unacceptable and illegal. One step in enabling insurers to avoid this is to place insured and applicants in classifications based on acturarially acceptable guidelines. Such classifications upon which risk and insurability can be based will naturally vary with the specific type of coverage.
Life Insurance Illustration
Must be clearly labeled and include (but not be limited to) the following information: Name of insurer; Name and business address of producer or insurer's authorized representative, if any; Name, age and sex of proposed insured, except where a composite illustration is permitted; Underwriting or rating classification upon which the illustration is based; Generic name of the policy, the company product name, if different, and form number. Initial death benefit; Dividend option election or application of non-guaranteed elements, if applicable.
Fair Discrimination
Occurs when an insurer's underwriting department finds information which indicates an increase of risk which can be verified through actuarial (statistical) proof. When the insurer then decided to limit coverage or other policy benefits, increase premiums or refuse coverage for the client (discriminate), it is appropriate for them to do so and the law allows it.
Defamation
Occurs when an oral or written statement is made that is intended to injure a person engage in the insurance business. This also applies to statements that are maliciously critical of the financial condition of any person or a company.
Notice of Legal Action
One that is 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. This includes any arbitration proceeding.
Administrators
Persons who perform life and health insurance related services such as collecting premiums from, or settling claims on behalf of, insurers and insured. Must hold a certificate of registration from the Commissioner of Insurance.
Cal-GLBA
Provides greater privacy protection to consumers than the federal Gramm-Leach-Bliley Act. Outlines consumber privacy choices and rights, and allows California consumers to have greater control over the disclosure of nonpublic personal information.
Reinsurer
The company that, in consideration of the premium paid, assumes a part of the risk over an amount retained by the primary insurer, known as the net line.
Primary Insurer
The insurer covering losses on a first dollar basis (sometimes subject to a deductible), who issues the policy over which reinsurance is purchased. In the reinsurance contract may also be called the ceding company.
California Insurance Code
The primary body of laws established by the state legislature, which regulates the business of insurance in California. The present form of the Code, as amended, was enacted in 1935, as a restatement and expansion of previously established law. It is a dynamic, fluid device constantly being reviewed, amended, added to, and even having outdated sections repealed, all consistent with current issues and practices in the marketplace.
De-mutualization
The process in which a mutual insurer becomes a stock company.
Automatic Treaty
The reinsurer agrees, in advance, to accepts a portion of the gross line of the primary company's risks that meet the reinsurer's underwriting rules.
Discontinuance
The termination of a plan of insurance between the insurer and the entire group of employees. It does not refer to the termination of benefits with regard to an individual employee whose employment is terminated or whose eligibility under the group plan has been affected because of a reduction of work hours or other qualifying factors.
Retrocession
When a reinsurance company reinsures risks with other reinsurance companies.
Insurance Broker
A person who, for compensation and on behalf of a persona other than an insurer, transacts insurance other than life.
Producer/ Insurer Relationship
An agent (or producer) will always be deemed to represent the insurer, not the insured. With regards to an insurance contract, any knowledge of the agent is presumed to be knowledge of the insurer. If the agent is working within the conditions of his/her contract, the company is fully responsible. The agent is responsible to the insurer when completing applications for insurance, submitting the application to the insurer for underwriting, and when issued, delivering the policy to the policy owner and explaining the contract. In addition, if the insured submits payment to the agent, it is the same as submitting a payment to the insurer.
The Law of Agency
Defines the relationship between the principal and the agent/producer: Acts of the agent/producer within the scope of authority are deemed to be the acts of the insurer. It is given that: an agent represents the insurer, not the insured; any knowledge of the agent is presumed to be knowledge of the insurer; if the agent is working withing the conditions of his/her contract, the insurer is fully responsible; when the insured submits payment to the agent, it is the same as submitting a payment to the insurer. The agent is responsible for accurately completing applications for insurance; submitting the application to the insurer for underwriting; and delivering the policy to the policy owner.
Continuing Education Requirements for Agents writing California Partnership Coverage
Life-only agents or fire and casualty broker-agents who intend to sell for Long-term Care insurance must also satisfy the continuing education requirement for those courses. Agents must meet LTC requirements PLUS 4hrs a year for jr agents(first 4yrs), and 8hrs every 2yrs for senior agents. Requirements are included in the basic required hours of continuing education, not in addition to them. Must complete 25hrs of training in the first 4yrs of either license.
Authority and Powers of Producers
The agency contract details the authority an agent has within his/her company. Contractually, only those actions for which the agent is authorized can bind the principal (insurer). In reality, an agent's authority can be quite broad. There are three types of agent authority: express, implied, and apparent.
Pre-Selection
The agent or broker is able to accomplish good pre-selection by a complete, accurate and thorough completion of the insurance application. The application will ask for all of the legally allowed information which an insurer may gather in order to do effective post-selection underwriting. During the application process, the agent is in a position to terminate at any time if he finds that eh client poses an untenable risk to the insurance company, or to explain to the clients why their risk may be higher than normal. The producer is not allowed to collect information which is not asked for on the application, but can seek details for those items which do appear.
Surplus Lines Brokers
A non-admitted insurer can be represented within the borders of CA by these specially licensed individuals. A valid Certificate of Authority must first be secured from the department of insurance prior to conducting business in CA. They are of value to the residents of CA in order for those residents to be able to purchase types of fire and casualty insurance which may not be available from an admitted insurer.
Insurance Agent
A person authorized by and on behalf of an insurer to transact all classes of insurance, except life, disability, or health insurance. The term does not include a life agent.
Notice of Appointment to transact Disability Insurance
A person licensed as a fire and casualty broker-agent, a life-only agent, or an accident and health agent may transact disability insurance on behalf of any insurer which is authorized to transact this insurance if has filed this notice for the purpose of transacting this insurance. The authority to transact becomes effective the day the notice of appt is signed by the insurer.
Life Settlement Producer
A person licensed as a resident or nonresident insurance agent who is qualified to transact life settlements.
Life Settlement Broker
A person who, for compensation, solicits, negotiates, or offers to negotiate a life settlement contract. Represent only the policyowners, and have a fiduciary duty to the owners to act according to their instructions and in their best interest. This category includes persons who would not receive a commission upon completion of a life settlement contract, but charge a fee for their services, whether or not ownership of the policy is transferred.
Foreign Insurer
An insurance company that is incorporated in another state or territorial possession.
Alien Insurer
An insurance company that is incorporated outside the US
Managing General Agent (MGA)
Any person, firm, association, partnership or corporation that negotiates ceding reinsurance contracts on behalf of an insurer or manages the insurance business for that insurer and acts as its agent. Usually have the authority to transfer the funds to the appropriate party; therefore, their fiduciary capacity includes the following: Have a written management contract and an appointment with one or more admitted insurers that cover a substantial portion of the insurance business in the state of California; Manage transactions of either all or some classes of insurance for those insurers; Appoint, supervise and terminate the appointments of local agents; Accept and decline risks; Collect premium funds from producing broker-agents and remit the funds to the insurers.
Reinsurance
Insurance purchased by a primary insurer to protect itself against the catastrophe of a comparatively large single loss or a large number of small losses caused by a single occurrence. Contract is between two parties.
Continuing Education Requirements for Life-only agents who sells annuity products
Is required to complete 8hrs of training prior to soliciting sales of these contracts. Every 2yrs thereafter, agents are required to complete 4hrs of training, which can count toward continuing education requirement. The training must be provided by the Commissioner and will consist of topics related to annuities, California law and regulations, and requirements related to annuities.
Brokers
Legally represent their clients, not insurance companies. They negotiate contracts of insurance on their clients' behalf. Represents, and is expected to act in the best interests of the client, not those of the insurance company. Although could receive compensation from an insurance company for a transaction, typically the broker receives a fee for his or her services directly from the client. It could be unethical for a broker to accept both a fee from the client and a commission from the insurer.
Direct Response Marketing
Mass marketing of insurance products through mail solicitations, print media advertisements, or television and radio. The policies provided are generally low in benefits and low in premiums.
Continuing Education Requirement for Life-only Agents
May only receive credit for CE courses approved for their respective licenses. Agents who hold licenses in more than one line of authority must satisfy the continuing education requirements by completion of the approved courses or programs of instruction for any of the license types.
Life & Disability Insurance Analyst Requirements and Prohibitions for Charging Fees
Not permitted to charge a fee for any services they provide unless they have a signed, written agreement with the party being charged, including a statement of the charge or basis on which charges will be made. They are not permitted to receive a fee from a client for any service which is customarily associated with soliciting or transacting insurance, or for which the analyst is receiving any form of compensation from the insurance company. The written agreement must disclose all information.
Claims Department
Responsible for receiving claim requests, evaluating them in light of the actual contract, paying those claims which are covered by the terms of the contract, and rejecting those which are not. May employ or contract with adjusters or other investigators to assist in the evaluation of claims, or to seek evidence of false or fraudulent claims.
Department of Motor Vehicles
Since statistically half of all accidental deaths in the United States occur as the result of traffic collisions, insurers are very interested in the driving records of their applicants. A poor driving record can result in a rating or even a declination.
Financial Elder Abuse statutes
Specifically addresses insurance agent abuses of persons age 65 or older.
Underwriter label client as
Standard, Sub-Standard or Uninsurable. If the client is sub-standard, she will be offered the opportunity to obtain coverage under a higher than standard premium. The client can, of course, decline to be insured under the stated conditions.
Continuing Education Requirements for Agents who hold Dual Licenses
Th agent may satisfy CE requirement by completing for any of the license types held.
Negatively
The agent is not able to search throughout the industry for a product which will be more to the client's advantage.
Implied Authority
The authority that is not expressed or written into the contract, but which the agent is assumed to have in order to transact the business of insurance for the principal. Is incidental to and derives from express authority since not every single detail of an agent's authoity can be spelled out in the written contract.
Acting as an Agent w/o Appointment
A licensed life or accident and health agent who is not specifically appointed for a particular insurer may not solicit insurance to a prospective client with that insurer or pass on an application for insurance to that insurer if the insurer requires that all its agents represent only that insurer. If an insurer does not specifically require all of its agents to be appointed, then any licensed agent may present a proposal for insurance to a potential client on behalf of an insurer for which the agent is not specifically appointed and may also give an application for insurance to that insurer. If an insurance policy is issued, the insurer is considered to have authorized the agent to act on its behalf, and the insurer is responsible for all actions of the agent that relate to the application and policy as if the agent had been properly appointed for the insurer.
Proof of Claim
Any documentation in the claimant's possession submitted to the insurer which provides evidence of the claim and supports the magnitude or the amount of the claimed loss.
Rebating
Any inducement offered to the insured in the sale of insurance products that is not specified in the policy. Include money, reductions in commissions, stock, bonds, securities and their dividends or profits, special favors or advantages in benefits, and personal services. Both the offer and acceptance of this are illegal.
The Commissioner Responsibilities
Has no power or authority to write or change the law but has the authority to enforce the law; the duty is to issue regulations which establish how the Department of Insurance intends to interpret and enforce the law. The regulations proposed must undergo a public hearing process to determine their fairness or applicability before they may actually go in effect. Oversee the Department of Insurance. Directs all of the DOI's affairs and staff and enforces the Insurance code. To make the final approval of a sanction. Procedure to investigate complaints and respond to inquires and, when warranted, to bring enforcement actions against insurers. Shall provide to the insurer a description of any complaint against the insurer that was received and deemed to be justified at least 30 days prior to public release of a report summarizing the information required.
Home Service (Industrial Life) Insurance
Insurance is exactly what it sounds like. It is the opposite of direct response insurance. With home service products, the agent solicits and sells insurance in the home or business, and returns to collect the premium in person. This type of service generally comes at a very high price, and the purchasers are frequently unsophisticated consumers of financial products. Is written for small amounts (under $1,000) and premiums are collected each week or month. Industrial life insurance is written as whole life, limited pay life, or endowment. Family members covered by this type of insurance are covered from birth to age 65 or 70.
Agents
Legally represent the insurer, not their clients. All of the agent's actions are considered to be made on behalf of the insurer, not the insured.
Fire and Casualty Licensee
May be authorized to transact 24-hour care coverage, and any of the following coverages: Automobile insurance; Personal watercraft; Residential property (including earthquake and flood); Inland marine insurance; and Umbrella or excess liability insurance
Stock Companies
Owned by the stockholders who provide the capital necessary to establish and operate the insurance company. In return for their investments, the stockholders share in any profits or losses. Officers are elected by the stockholders and manage these companies. Issue nonparticipating policies, in which the policy owners do not share in profits or losses arising in the operation of the business. Earnings from operations may be distributed to the stockholders as dividends on stock or may be kept as "retained earnings".
Common forms of Insurance Fraud
Staged automobile accidents; Fraudulent healthcare billings (including HMO and Medi-Cal); False and/or inflated property loss claims; Phony Workers Compensation claims; Fraudulent denial of Workers Comp benefits; Arson for profit; Fake life insurance claims; and Workers comp premium fraud by employers.
The Gramm-Leach-Bliley Act
Stipulates that in general, an insurance company may not disclose nonpublic personal information to a nonaffiliated third party except for the following reasons: The insurance company clearly and conspicuously discloses to the consumer, in writing, that information may be disclosed to a third party; The consumer is given the opportunity, before the time that information is initially disclosed, to direct that information not be disclosed to the third party; and The consumer is given an explanation of how the consumer can exercise a nondisclosure option. Requires two disclosures to a customer: first when the customer relationship is established; secondly, when before disclosing protected information. The customer must receive an annual privacy disclosure. Customers are given the option of not sharing their private information.
