THE INSURANCE MARKETPLACE
An independent agent may have contracts with which of the following? A The Commissioner B Brokers C More than one insurer D The Department of Insurance
C More than one insurer Correct! An independent agent may have contracts with more than one insurer.
The Commissioner has the authority to issue a cease and desist order against any person acting as an insurance agent or broker without being licensed. The Commissioner may also impose a penalty for each day the order is violated in what amount? A $5,000 B $2,000 C $2,000 and 6-month jail term D $5,000 and 6-month jail term
A $5,000 correct! According to CIC 12921.8, the Commissioner may impose a fine of up to $5,000 for each day the order is violated. Responsibilities The Commissioner of Insurance has no power or authority to write or change the law but has the authority to enforce the law. The Commissioner's duty is to issue regulations which establish how the Department of Insurance intends to interpret and enforce the law. The regulations proposed by the Commissioner must undergo a public hearing process to determine their fairness or applicability before they may actually go into effect. The Commissioner has the responsibility to oversee the California Department of Insurance (CDI) and direct all of the CDI's affairs and staff. The Commissioner can appoint persons to act on his or her behalf. These representatives can negotiate settlements with agents or insurers who have violated the Code. However, it is the Commissioner's responsibility to make the final approval of a sanction. The Commissioner is responsible for a procedure to investigate complaints and respond to inquiries and, when warranted, to bring enforcement actions against insurers. The system for managing complaints must include the following: A toll-free number published in telephone books throughout the state, dedicated to the handling of complaints and inquiries; Public service announcements to inform consumers of the toll-free telephone number and how to register a complaint or make an inquiry to the department; A simple, standardized complaint form designed to assure that complaints will be properly registered and tracked; Retention of records on complaints for at least 3 years; Guidelines to disseminate complaint and enforcement information to the public that includes license status, number and type of complaints filed within the last calendar year, number and type of violations found, and enforcement actions taken. Also included is the ratio of complaints received to total policies in force, or premium dollars paid in a given line, or both. The Commissioner's duty is to provide to the insurer a description of any complaint against the insurer that the Commissioner received and deemed to be justified at least 30 days prior to public release of a report summarizing the information required. This description includes the name of the complainant, the date it was filed, a description of facts and a statement of the DOI's rationale for determining whether the complaint is valid. The Commissioner must prepare a written report, to be made available by the DOI to interested individuals upon written request, that details complaint and enforcement information on individual insurers in accordance with the CIC. The report must be made available by mail, telephone, internet and email. All public records of the Department and the Commissioner must be available for inspection and copying. The Commissioner receives complaints and inquiries, investigate complaints, prosecute insurers according to guidelines determined by the CIC, and must respond to complaints and inquiries concerning alleged misconduct. The Commissioner must notify the complainant of receipt within 10 working days. The complainant will be notified of final order within 30 days of judgment. The Commissioner has the authority to issue a cease and desist order against any person acting as an insurance agent or broker without being licensed, and against any person transacting insurance without having been issued a certificate of authority. The Commissioner may issue a cease and desist order without holding a hearing prior to issuance of the order, and may also impose a fine of up to $5,000 for each day the order is violated. A person to whom a cease and desist order is issued may request a hearing by filing a request with the Commissioner within 7 days after service of the order. End Quiz Chapter Quiz -Question 1 of 12 Chapter: The Insurance Marketplace The Commissioner has the authority to issue a cease and desist order against any person acting as an insurance agent or broker without being licensed. The Commissioner may also impose a penalty for each day the order is violated in what amount? A$5,000 B$2,000 C$2,000 and 6-month jail term D$5,000 and 6-month jail term Incorrect! According to CIC 12921.8, the Commissioner may impose a fine of up to $5,000 for each day the order is violated.
The rating method which allows insurers to compete with one another by quickly changing rates without review by the state regulators is known as A Prior Approval. B Open Competition. C Use and File. D File and Use.
B Open Competition. Correct! The open method competition allows insurers to compete with one another by quickly changing rates in order to be more competitive in the market place. Review ContentNext Question
Surplus Lines insurance usually involves insurance for which type of individuals? A High-risk individuals B Standard risk individuals C Low-risk individuals D All of these qualify for surplus lines insurance.
A High-risk individuals Correct! Surplus Lines usually involves insurance for high risk individuals and is placed with nonadmitted insurers who specialize in offering insurance to the high risk market.
The Gramm-Leach-Bliley Act was passed to A Protect private customer information filed with a financial institution. B Define insurance as interstate commerce. C Allow consumers access to credit and private consumer reports. D Allow insurance companies access to medical information for underwriting purposes.
A Protect private customer information filed with a financial institution. B Define insu Correct! The Gramm-Leach-Bliley Act was passed to protect private customer information that is filed with a financial institution. Customers must be given two disclosure notices (one at the onset of business and one before information is disclosed), as well as a yearly updated disclosure notice.
The Claims Department would be responsible for investigating which of the following? APossible contradictions in an insurance contract B Possible fraudulent claims by an insured C Possible fraudulent claims by an insurer D Possible violations of ethics laws
B Possible fraudulent claims by an insured Correct! The Claims Department 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.
An insurer incorporated in which of the following locations would be considered a foreign insurer in Washington, D.C.? A Canada B Washington, D.C. C Maryland D Mexico
C Maryland Correct! A foreign insurer is an insurance company that is incorporated in another state or territorial possession. Mexico and Canada are foreign countries, so their insurers will be considered alien. An insurer that is incorporated and that operates in Washington, D.C. would be considered domestic.
A nonadmitted insurer who provides insurance coverages that are not available from an admitted insurer is called a/an A Capitol stock insurer. B Reciprocal insurer. C Surplus lines insurer. D Assessment mutual insurer.
C Surplus lines insurer. correct! Surplus lines insurers are those insurers that do not have a certificate of authority to transact business in the state but are on the Commissioner's approved list to transact business under the state's surplus lines laws.
When doing business in this state an insurance company that is formed under the laws of another state is known as which type of insurer? A Domestic B Alien C Nonadmitted D Foreign
D Foreign Correct! A foreign insurer is one that is formed under the laws of another state. A nonadmitted or unauthorized insurer is an insurance company that has not applied, or has applied and been denied a Certificate of Authority and may not transact insurance.
According to the California code, all of the following are TRUE regarding binding authority for excess and surplus lines insurance EXCEPT A No person shall transact any insurance with nonadmitted insurers except through a licensed surplus lines broker. B Binding authority for excess risk coverage shall identify all persons assuming the risk. C If more than one person is assuming the obligation, the risk will always be equally shared. D If more than one person shall share the risk, the policy shall contain a specification of how the risk is to be shared.
C If more than one person is assuming the obligation, the risk will always be equally shared. correct! The policy itself will identify the proportion of sharing for that particular policy.
An insurance agent, who has been in a sales slump for the last 6 months, has decided that she will offer complimentary health insurance for the first year on every life insurance policy she sells for the next 12 months. This practice is an example of A Free insurance as an inducement to purchase real property and is prohibited by the Code. B An option in a purchase contract and therefore is permitted. C A violation of the Code. D Free insurance as an inducement to purchase real property and is permitted by the Code.
C A violation of the Code. Correct! No policy for which there is not a separate charge can be used as an inducement to purchase or rent real or personal property (CIC 777.1).
No person within the State of California shall transact any insurance on property located or operations conducted within, or on the lives or persons of residents of this State with nonadmitted insurers, EXCEPT A Through certified CAARP brokers. B Through nonresident licensed agent. C Through a licensed surplus line broker. D Through prior approval from the insurer.
C Through a licensed surplus line broker. correct! Any person within this State shall not transact any insurance on property located or operations conducted within, or on the lives or persons of residents of this State with nonadmitted insurers, except by and through a licensed surplus line broker.
To make sure that an agent's license stays active, the agent of an insurer must see that all of the following are done EXCEPT A File a surety bond with the Commissioner. B Be legally appointed with the insurer. C An appointment notice has been executed by the insurer. D A notice of appointment is filed for the agent by the insurer with the Commissioner's office.
A File a surety bond with the Commissioner. Correct! An agent may not act as an agent until legally appointed with the insurer, an appointment notice has been executed by the insurer, and the insurer files a notice of appointment with the Commissioner's office.
What kind of insurers offer rates for insurance coverage to insureds who have an average or better-than-average loss exposure? A Standard market insurers B Admitted insurers C Surplus lines insurers D Excess insurers
A Standard market insurers Correct! Standard market insurers offer coverage to insureds with at least average loss exposure. Excess and surplus lines insurers write insurance coverages in states where an insurer is not licensed and for which there is no readily available admitted market. Such coverages are marketed through nonadmitted insurers who specialize in offering insurance to the high-risk market on an unregulated basis under each state's surplus lines laws. While surplus lines insurers are not admitted, most states require that they be on that state's "approved" list.
Martha claims to have injured her back at work. She tells the doctor that she cannot bend, lift, or even sit comfortably without great pain. Based on Martha's statements, the doctor certifies her disability and she begins to receive disability benefits from the insurer. If it can be shown that Martha did not suffer the injury she has claimed or that she is not suffering the effects she is claiming, she will be charged with A Insurance fraud. B Medical misrepresentation. C Financial abuse of an insurer. D Unfair claims practices.
A Insurance fraud. Correct! This is an example of a person seeking an unlawful gain at the expense of an insurer, a fraud. (CIC 1871.4(a)(1)) Review ContentNext Question Common Circumstances Insurance fraud is a significant problem for insurance companies and insureds alike. Premiums for most forms of insurance have risen in recent years because of the increasing number of fraudulent claims that are being presented to insurers for payment. The most common forms of insurance fraud include claims in the following areas: 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 Compensation benefits; Arson for profit; Fake life insurance claims; and Workers Compensation premium fraud by employers. The California Department of Insurance reported in 2002 that up to 50% of all automobile insurance claims may be fraudulent, many of them being "staged" on paper instead of actually occurring, and that automobile insurance fraud is estimated to cost California consumers as much as $500,000,000 per year. Due in large part to the high cost of medical claims, but also to the large number of fraudulent claims, California also has the highest rates for Workers Compensation insurance, even though the actual compensation benefits are among the lowest in the nation.
Which of the following will NOT be considered unfair discrimination by insurers? A Discriminating in benefits and coverages based on the insured's habits and lifestyle B Charging applicants with similar health histories different premiums based on their ethnicity C Cancelling individual coverage based on the insured's marital status D Assigning different risk classifications to applicants based on gender identity
A Discriminating in benefits and coverages based on the insured's habits and lifestyle Correct! Discriminating between individuals of the same class, with equal life expectancies, or by reason of race, nationality, or ethnic group would be considered unfair discrimination. Insurers are also not allowed to cancel individual coverage due to a change in marital status. Discriminating in benefits based on the insured's habits and lifestyle (such as smoking or dangerous hobbies) is acceptable.
The Commissioner MAY deny an application for license for any applicant who A Has been convicted of a felony. B Is not qualified to accomplish the duties to be performed. C Does not have a good business reputation. D Any of these
D Any of these Correct! Felony conviction, lack of qualifications, and a lack of a good business reputation are all grounds for nonlicensure.
Each of the following factors are used in determining insurance rates EXCEPT A Interest B Mortality C Expenses D Dividends
D Dividends Correct! Dividends are the return of premiums in mutual policies.
An insurance company is domiciled in Montana and transacts insurance in Wyoming. Which term best describes the insurer's classification in Wyoming? A Unauthorized B Foreign C Alien D Domestic
B Foreign Correct! A foreign insurer is domiciled in one state and transacts insurance in another. A domestic insurer transacts insurance in the domicile state (in this case, Montana). An alien insurer is domiciled in one country and transacts insurance in another. Domestic, Foreign, and Alien Insurers Insurance companies are classified according to the location of incorporation (domicile). Regardless of where an insurance company is incorporated, it must obtain a Certificate of Authority before transacting insurance within the state. A domestic insurer is an insurance company that is incorporated in this state. In most cases, the company's home office is in the state in which it was formed - the company's domicile. For instance, a company chartered in Pennsylvania would be considered a Pennsylvania domestic company. A foreign insurer is an insurance company that is incorporated in another state or territorial possession (such as Puerto Rico, Guam or American Samoa). For example, a company chartered in California would be a foreign company within the state of New York. An alien insurer is an insurance company that is incorporated outside the United States.
Under the Privacy Rule for HIPAA, protected information includes all "individually identifiable health information" A Held or transmitted in paper form. B Held or transmitted in any form. C Transmitted electronically only. D Held in a computer format.
B Held or transmitted in any form. Correct! Under the Privacy Rule for HIPAA, protected information includes all "individually identifiable health information" held or transmitted by a covered entity or its business associate, in any form or media, whether electronic, paper or oral. This is called "protected health information". Health Insurance Portability and Accountability Act (HIPAA) Under the Privacy Rule for HIPAA, protected information includes all "individually identifiable health information" held or transmitted by a covered entity or its business associate, in any form or media, whether electronic, paper or oral. This is called protected health information (PHI). Individually identifiable health information including demographic data that relates to past, present or future physical or mental health or condition, or payment information that could easily identify the individual. A covered entity must obtain the individual's written authorization to disclose information that is not for treatment, payment, or health care operations.
Which of the following persons represents several insurance companies but owns the records of the policies sold? A Direct writing agent B Independent agent C Exclusive agent D General agent
B Independent agent Correct! An independent agent represents more than one company at a time. He or she owns the records of all policies sold and is not controlled by any one insurance agency. Agency A producer is 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. An insurance agent must first establish a licensing relationship with the state or states within which the agent wishes to conduct business. This requires meeting educational standards and passing required tests for the type of insurance which will be sold. This licensing relationship is separate from, and can exist without, any agent/insurer relationship being established. The independent agent has contracts with more than one insurer and, ideally, is then in an enhanced position to offer clients a wide range of product options. When the time to renew a policy comes, the independent agent is said to own the renewal or own the expiration. 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. An ethical challenge facing the independent agent is to avoid moving clients simply to generate new or higher commissions. The exclusive or captive or 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. Exclusivity, depending on the viewer, can appear to be a positive or a negative. Positively, the agent can represent a product that would otherwise be unavailable to the client. Negatively, the agent is not able to search throughout the industry for a product which will be more to the client's advantage.
In California, a person applying for an insurance license is considered to have been convicted of a misdemeanor or felony if the person entered all of the following pleas EXCEPT A No contest B Innocent. C Guilty. D Nolo contendere.
B Innocent. Correct! In the state of California, if a person enters a plea of "nolo contendere," or "no contest," and is found guilty, the person will be considered convicted. Denial of Application There are many possible causes given in the Insurance Code for denying an insurance license. Keep in mind that these causes apply to legal "persons" which include individuals and business entities such as agencies and corporations. The applicant can be denied licensure if the applicant is unqualified or if licensing the applicant would be against the public's best interest. An applicant's license could be denied if the applicant has committed any of the following: Has no intention of selling the insurance permitted by the license; Does not have a good business reputation; Lacks integrity; Was denied or lost another state license within the past 5 years for a reason which would also cause an insurance license to be denied; Wants the license to avoid the consequences of insurance law; Has lied on his/her application; Previously acted dishonestly in business; Exposed the public to loss as a result of incompetence or lack of trustworthiness; Lied about an insurance policy; Has either not done something required by, or has done something forbidden by the Insurance Code; Has been convicted of (not charged with) any felony or a misdemeanor violation of insurance law; Has helped someone else commit a crime which would make that other person lose or be denied a license; Has allowed an employee to violate the Insurance Code; Has acted as a licensed person prior to issuing of a license; or Has submitted a fraudulent educational certificate. The applicant may be denied a license without the right to a hearing if the applicant has a history of any of the following conditions: Felony convictions; Misdemeanor violations of insurance law; Denial of an insurance license within the past 5 years; or Insurance license suspension or revocation within the past 5 years. Note that any person caught willfully cheating on the licensing examination will be barred from taking any license examination and from holding an active license for a period of 5 years. In regards to what may constitute a conviction: any applicant for licensure in the state of California will be considered convicted of a misdemeanor or felony if he or she was found guilty or convicted after entering a plea of "nolo contendere," or "no contest." It is important to remember that all convictions, at any time in an applicant's past, must be disclosed on the license application. This also applies to convictions for which the charges were later dismissed or expunged, or for which a person was placed on probation or received a suspended sentence. If an applicant fails to disclose all convictions, the application for a producer license will be denied (CIC 1729.2).
Which of the following is true regarding free insurance issued in this state? A It is allowed as a rider. B It is illegal. C It is illegal with the exception of health insurance. D It is allowed if issued by a government insurer.
B It is illegal. Correct! No policy for which there is not a separate charge can be used as an inducement to purchase or rent real or personal property (CIC 777.1) Prohibition of Free Insurance I.C2.11 (Life and Health)/I.C.2.k (Property and Casualty): Be able to identify the prohibitions of free insurance (CIC 777.1). To protect the integrity of the insurance industry in California, the state has adopted the philosophy that insurance is a product of sufficient importance and that it should be paid for by the insured because of its intrinsic value. To this end, it is illegal for any insurance licensee to offer free insurance as an incentive to conduct some other type of business. If any insurer, agent, broker or solicitor willfully violates this provision, the Insurance Commissioner may suspend or revoke that person's certificate or license or other authority to do business for a period not exceeding 1 year. The following are exceptions to the free insurance prohibition: Insurance provided in connection with newspaper subscriptions; The purchase of credit union shares; Insurance to guarantee the performance of a product and reimburse a customer for losses resulting from such product's failure; Title, life, or disability insurance which will pay off a debt in case a debtor becomes disabled or dies; Services provided by an attorney; and The services of a motor club (AAA, for example) in regard to towing, emergency roadside service, bail bond service, DMV transactions or other normal motor club services that are not defined as the transaction of insurance.
What license allows an agent to transact only automobile, personal watercraft, residential property, earthquake, flood, inland marine and umbrella insurance? A Applicable Lines B Personal Lines C Fire and Casualty D Limited Lines
B Personal Lines Correct! A Personal Lines licensee is authorized to transact specific noncommercial lines of insurance. Personal Lines Licensee A personal lines licensee is a person authorized to transact the following: Automobile insurance including insurance for recreational vehicles used for noncommercial purposes; Personal watercraft insurance; Residential property insurance, 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.
Which of the following insurers are owned by stockholders who have the usual rights of ownership, including the right of voting? A Fraternal B Stock C Mutual D Reciprocal
B Stock Correct! Only stock insurance companies are owned and controlled by stockholders.
Records required to be maintained or to be made available by an insurer include all of the following EXCEPT A A copy of a written comparison of benefits, limitation, exclusions and costs. B A copy of the outline of coverage or disclosure statement as required by law. C Any printed materials generally used by the insurer, either directly or indirectly by its agents. D The original application for each policy sold.
C Any printed materials generally used by the insurer, either directly or indirectly by its agents. Correct! Printed materials are excluded from the CIC 10508, since they have been previously approved by the Commissioner.
If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered to be A Certified. B Qualified. C Approved. D Authorized.
D Authorized. Correct! Insurers who meet the state's financial requirements and are approved to transact business in the state are considered authorized or admitted into the state as a legal insurer. Admitted and Nonadmitted Insurers Before insurers may transact business in a specific state, they must apply for and be granted a license or Certificate of Authority from the state department of insurance and meet any financial (capital and surplus) requirements set by the state. Insurers who meet the state's financial requirements and are approved to transact business in the state are considered authorized or admitted into the state as a legal insurer. Those insurers who have not been approved to do business in the state are considered unauthorized or nonadmitted. Most states have laws that prohibit unauthorized insurers to conduct business in the state, except through licensed excess and surplus lines brokers.
An independent agent may have contracts with which of the following? A The Department of Insurance B The Commissioner C Brokers D More than one insurer
D More than one insurer correct! An independent agent may have contracts with more than one insurer. Agency A producer is 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. An insurance agent must first establish a licensing relationship with the state or states within which the agent wishes to conduct business. This requires meeting educational standards and passing required tests for the type of insurance which will be sold. This licensing relationship is separate from, and can exist without, any agent/insurer relationship being established. The independent agent has contracts with more than one insurer and, ideally, is then in an enhanced position to offer clients a wide range of product options. When the time to renew a policy comes, the independent agent is said to own the renewal or own the expiration. 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. An ethical challenge facing the independent agent is to avoid moving clients simply to generate new or higher commissions. The exclusive or captive or 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. Exclusivity, depending on the viewer, can appear to be a positive or a negative. Positively, the agent can represent a product that would otherwise be unavailable to the client. Negatively, the agent is not able to search throughout the industry for a product which will be more to the client's advantage.
An agent may continue operating under an expired license for a period of 60 days provided that the agent has A Notified the insurer of his plans to renew the license. B Filed an application for renewal and paid the renewal fee on or before the expiration date. C Notified the Commissioner of his plans to renew the license. D Received a written permission from the Commissioner.
B Filed an application for renewal and paid the renewal fee on or before the expiration date. correct! Agent can continue operating under an expired license for 60 days provided that application has been filed and renewal fees paid prior to expiration.
The process of "post-selection" refers to which of the following? A An applicant is choosing an insurance company. B An agent is conducting a second interview with an applicant. C An agent is completing and submitting an application. D An insurer is investigating the client's risk profile.
D An insurer is investigating the client's risk profile. correct! Post-selection is a process of investigating the client's risk profile. After considering all of the information legally available, the underwriters will evaluate and rate the risks.
If the information is used only for identification and not for underwriting purposes, which of the following information about the applicant may be listed on a life insurance application? A Mother's maiden name B Name, age, height, and weight C Birthplace D Hair and eye color
C Birthplace correct! This is permitted by the Code if no discrimination is made against the applicant. (CIC 10142) Unfairly Discriminatory Practices In insurance, there are two types of discrimination. 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 that insurer then decides to limit coverage or other policy benefits, increase premiums or refuse coverage for that client (discriminate), it is appropriate for them to do so and the law allows it. Unfair discrimination is morally unacceptable and illegal. One step in enabling insurers to avoid unfair discrimination is to place insureds and applicants in classifications based on actuarially acceptable guidelines. Such classifications upon which risk and insurability can be based will naturally vary with the specific type of coverage. Generally, they may include the following: Gender; Age; Tobacco use; Height/weight ratio; Geographic location; or Profession and avocations (hobbies). A combination of these may be used, but only if statistics prove that the classification increases the risk for a claim on the specific type of insurance being considered. For example, it would not be acceptable to charge life insurance clients a higher premium based on their ZIP code since their geographic location, as long as it is within the United States, does not increase their risk of death. It would, however, be acceptable to charge the same clients a higher or lower premium for health insurance if the costs of health care in their ZIP code are higher or lower than the average. For this reason, it is common for insurers to apply a rating factor to raise or lower a health insurance premium based solely on ZIP code. Once a client's actuarial classifications have been determined, that client must be treated the same as all other clients within the same classifications. The person may not be provided with different policy benefits or charged a different premium than everyone else in those classifications. The specific classifications which cannot exist include the following: Race; Color; Religion; National origin; Ancestry; Sexual orientation; and Physical and mental impairments which do not increase risk or vision impairment, including blindness. Classifying people according to these would be unfair as these characteristics have no effect on the client's risk. It is forbidden for insurers or their representatives to acquire, request or share such information. It is acceptable to ask an applicant for their place of birth, if that information is used only for identification purposes. In regard to sexual orientation, it would be a blatant violation for an insurer to ask an applicant any question regarding the subject. However, it has been noticed that, while an insurer won't ask a direct question, it may attempt to reach a conclusion concerning sexual orientation through analysis of other factors in the applicant's life and then adjust benefits or premium based on a presumption of an increased risk of AIDS. Therefore, insurers cannot use the following to attempt to make a judgment about sexual orientation: Marital status; Living arrangement; Jobs; Gender; Beneficiary; ZIP code or any other geographic classification; or Any combination of these. It is therefore necessary, if an insurer is concerned about the risk of claims resulting from AIDS and desires to test for HIV, to test everyone under the same guidelines. If an insured who has a condition which is expected to cause death within 1 year requests an experimental treatment and is refused by their insurer, the insurer must provide the following: The specific medical and scientific reasons for the denial and specific references to pertinent policy provisions upon which the denial is based; A description of the alternative medical procedures or treatments covered by the policy, if any; and A description of the appeal/review process within 30 days or 5 days if delaying treatment would be detrimental. Insurers that provide life or health insurance are not allowed to do anything which affects the coverage or premium of anyone because the insurer suspects that the person may become a victim of domestic violence, even if the person has been a victim in the past. Underwriters are, however, allowed to take into consideration an actual medical condition that does exist, as long as they don't consider whether the condition was caused by domestic violence. Intentional acts of the insured can still result in loss of benefits. Domestic violence is defined by Section 6211 of the California Family Code as abuse perpetrated against any of the following: A spouse or former spouse; A cohabitant or former cohabitant; A person with whom the respondent is having or has had dating or engagement relationship; A person with whom the respondent has had a child, where the presumption applies that the male parent is the father of the child of the female parent under the Uniform Parentage Act; A child of a party or a child who is the subject of an action under the Uniform Parentage Act, where the presumption applies that the male parent is the father of the child to be protected; or Any other person related by blood or affinity within the second degree. Medical policies must include coverage for diagnosing and treating severe mental illness for all insureds and serious emotional disturbances of a child just as they do any other condition. This then excludes insurers from providing coverage for such conditions any specific-coverage policy, such as accident only, dental, etc. End Quiz Chapter Quiz -Question 6 of 12 Chapter: The Insurance Marketplace If the information is used only for identification and not for underwriting purposes, which of the following information about the applicant may be listed on a life insurance application? AMother's maiden name BName, age, height, and weight CBirthplace DHair and eye color Incorrect! This is permitted by the Code if no discrimination is made against the applicant. (CIC 10142) Review Content
An agent is a legal person who acts on behalf of A The applicant. B The beneficiary. C Himself/herself. D The principal.
D The principal. Correct! An agent is a legal person who acts on behalf of the principal (insurer).
The process of "post-selection" refers to which of the following? A An agent is conducting a second interview with an applicant. B An agent is completing and submitting an application. C An insurer is investigating the client's risk profile. D An applicant is choosing an insurance company.
C An insurer is investigating the client's risk profile. Correct! Post-selection is a process of investigating the client's risk profile. After considering all of the information legally available, the underwriters will evaluate and rate the risks.
Insurance companies may be classified according to the legal form of their ownership. The type of company organized to return any surplus money to their policyholders is A A mutual insurer. B A reciprocal company. C A fraternal insurer. D A stock company.
A A mutual insurer. Correct! Mutual companies are owned and controlled by their policyholders. Any surplus money is returned to the policyholders as dividends. Mutual and Stock Insurers The following are the most common types of ownership. Mutual companies are owned by the policyowners and issue participating policies. With participating policies, policyowners are entitled to dividends, which, in the case of mutual companies, are a return of excess premiums and are therefore nontaxable. Dividends are generated when the premiums and the earnings combined exceed the actual costs of providing coverage, creating a surplus. Dividends are not guaranteed. Stock companies are owned by the stockholders who provide the capital necessary to establish and operate the insurance company and who share in any profits or losses. Officers are elected by the stockholders and manage stock insurance companies. Traditionally, stock companies issue nonparticipating policies, in which policyowners do not share in profits or losses. A nonparticipating (stock) policy does not pay dividends to policyowners; however, taxable dividends are paid to stockholders.
According to the Law of Agency, a principal is represented by a/an A Agent. B Insurer. C Broker. D Insured.
A Agent. correct! By definition, an agent is a person who acts for another person or entity known as the principal with regard to contractual arrangements with third parties. 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.
Every applicant for an insurance license in this state must have filed on his or her behalf a notice of appointment with which authority? A Better Business Bureau B Insurer C Commissioner D Administrator
C Commissioner correct! The insurer appoints the applicant upon issuance of the license as its agent and files this appointment with the Commissioner. Filing Notice of Appointment An insurance agent or producer cannot legally act as an agent of an insurer unless he or she becomes an appointed agent of that insurer. An insurance producer who does not act as an agent of an authorized insurer does not need to become appointed. In order to validate and legitimatize the agency relationship and the insurance contract, the insurer must submit a notice of appointment within 14 days to the Commissioner. The licensee will be legal to conduct business, and the insurer will become responsible for the acts of the licensee, as of the date the appointment is signed by the insurer. An appointment will cease and the licensee will become unable to conduct business for the insurer when any of the following conditions exist: The licensee loses his/her license; or The licensee is terminated or resigns his/her appointment.
