Insurance - Chapter 11

mutual company

"owned" by its policyholders, is incorporated without capital stock, and issues participating policies. If the mutual insurer realizes profits, it may "mutually" share these with its policyholders in the form of a dividend. Policyholders, not stockholders, appoint or elect its directors and officers.

Surplus Lines

An agent licensed in Texas may not issue an insurance contract/policy with an eligible surplus lines insurer unless the agent possesses a surplus lines license issued by the Texas Department of Insurance.

misrepresentation

An agent who tells a client that dividends are guaranteed may be guilty of

Truncated coverage

Insurance purchased for a period that is less than the length of a debt; or Insurance that does not cover the entire length of a loan.

grace period

Life and annuity contracts issued in Texas must include a ________ of at least thirty (30) days.

Employer Shared Responsibility Payment (ESRP)

The Affordable Care Act requires certain employers, with at least 50 full-time employees, to offer health insurance coverage to its full-time employees and their dependents that meets certain minimum standards set by the Affordable Care Act. If they do not, they are required to make a tax payment called the Employer Shared Responsibility Payment (ESRP).

Who owns a stock insurance company?

stockholders

A new general property and casualty licensee must complete at LEAST ____ hours of continuing education within 24 months of initial licensure

24

An individual life insurance policy issued in TX must have a grace period for premium payment of

31 days

Settlement on Maturity

A life insurance policy may not contain a provision for a settlement at maturity that is less than the face amount of the policy. A life insurance policy may provide for a settlement that will be less than the amount required if the death of the insured is: By the insured's own hand (i.e., suicide) regardless of whether the insured is sane or insane; Caused by following a hazardous occupation that is stated in the policy; or The result of aviation activities under conditions specified in the policy.

rebating

A producer or agent may not offer anything of value to a client, or prospective client, that is not part of the written insurance or annuity contract in order to induce that person to purchase or renew insurance coverage or an annuit

$25

A promotional advertising item is not considered a rebate unless it has a value equal to or less than what amount?

With whom may an agent legally share commissions?

Another agent with the same line of insurance

GROUP ELIGIBILITY AND UNDERWRITING REQUIREMENTS

Covered employees or members possess one incident of ownership in the group policy, the right to name a beneficiary

Provisions required in life insurance policies

Free look, grace period, entire contract

Group life policies MUST include all of the following provisions

Free look, incontestable, and conversion

emergency license

If an agent dies, becomes disabled, or is found to be insolvent and unable to pay for premiums as they become due to an insurer they represent, the Department may issue to an applicant for an agent license an ______ without examination, on receipt of proof that the _____ is necessary to preserve the agency assets of the deceased, disabled, or insolvent agent

restitution

If an agent violates or fails to comply with any rule of the Commissioner or any statute of the TIC, the Commissioner may direct that agent to pay complete ____ to each Texas resident, each Texas insured, and each entity operating in Texas who is harmed by the violation or failure to comply

disability probation

In appropriate situations, the Commissioner may place an agent on _______________ rather than revoke their insurance license if the agent is suffering from a mental, physical, or emotional condition that prevents the agent from carrying out their professional responsibilities to clients/insureds, the profession itself, or the public.

six (6) days

Initially, the Commissioner will send a notice of hearing to the licensee or insurer in question. The notice must include a written finding of the unfair act and list the charges or accusations being levied against the licensee or insurer. Once notice is served, a hearing will be held no sooner than______ after the notice is provided.

The Commissioner of Insurance has the power and duty to do what:

Issue a cease-and-desist order, Issue insurance licenses, and regulate the business of insurance in TX

Legal Action

Life insurance policies issued in Texas may not contain a provision limiting the timeframe for an insured to take legal action against an insurer to less than two (2) years after the reason for legal action being taken has occurred.

POLICY LOANS

Life insurance policies issued in Texas that include cash value must also provide for policy loans against the built-up equity. Any loan amounts not repaid by the policyowner may be deducted by the insurer from the cash value when the policy is surrendered or from the death benefit when the insured party dies.

long-term care insurance policy

No _______ may be cancelled, non-renewed, or otherwise terminated on the grounds of age or the deterioration of the mental or physical health of the insured individual.

Backdating

No life insurance policy may be issued in Texas if it contains any provision that says the policy was issued or took effect more than six (6) months before the application was made if the insured would be rated at a younger age by doing so

not considered rebating

Paying bonuses to life insurance or annuity policyholders, or abating their premiums out of surplus accumulated from nonparticipating insurance, provided the bonuses are fair and equitable to all policyholders; For industrial debit life insurance policyholders who have continuously paid premiums directly to an insurer's office, making allowance for an amount presenting the savings in collection expenses; or Readjusting the rate of premium for a group insurance policy based on the loss or expense experience, made retroactive only for that policy year.

ten (10) days'

The Department of Insurance must provide an insurer at least ______ written notice of its intention to suspend, revoke, or modify the carrier's authority to transact insurance business. This written notice must specify the reason for the suspension or revocation

What's true about the commissioner of insurance

The commissioner regulates the business of insurance in TX, ensures that TX insurance laws are executed, and protects and ensures the fair treatment of consumers. He is not elected, the governor appoints the commissioner to a 2 year term

right to convert

The insurer must notify a debtor at least fifteen (15) days prior to the expiration of truncated credit insurance coverage of the __________ the coverage to an individual plan. If proper notice is not provided by the insurer, the debtor will have fifteen (15) days to convert the coverage after they actually receive the notice.

Individual Mandate

The law requires shared responsibility on the part of most individuals to have minimum acceptable coverage or pay a tax penalty beginning in 2014. Exemptions are allowed for those who cannot afford coverage, religious objectors, or if the individual has income below the tax filing threshold. Under the Tax Cuts and Jobs Act, the amount of the individual shared responsibility payment is reduced to zero for months beginning after December 31, 2018. Therefore, starting effective 2019, the federal Shared Responsibility Payment no longer applies. However, some states have their own individual health insurance mandate, requiring residents to have qualifying health coverage or pay a fee with their state taxes.

certificate of authority

This certificate authorizes the insurer to conduct insurance transactions in Texas and is the insurer's "license" to transact insurance business. Once issued, this certificate remains in effect until suspended or revoked by the Commissioner.

FRATERNALS

This insurance organization provides insurance benefits only for its members. may also be described as any incorporated society, order, or supreme lodge (incorporated or not) that operates without capital stock, is conducted solely for the benefit of its members and their beneficiaries, and is not for profit.

Contributory Group Plan —

This is a policy where any part of the premium is to be contributed by the insured persons. It may be placed in force only if at least seventy-five percent (75%) of the eligible group members elect to make the required contributions, subject to possible insurability requirements

Noncontributory Group Plan

This is a policy where no part of the premium is to be paid from funds contributed by the employee or member and the policy must insure one-hundred percent (100%) of all eligible group members, subject to any insurability requirements.

Denying an insured's claim without indicating the basis for the denial under the policy is considered an unfair claims settlement practice [T/F]?

True

What is required for an agent whose license has been revoked?

Wait at least 5 years before applying for a new license

the agent

Who is liable when an insured suffers a loss on a policy sold by an agent through an insurer not authorized to conduct business in TX

authority

a certificate of _________ permits an insurance company to transact business in texas

a group life insurance policy must contain

a conversion provision

What is the monetary penalty for willfully violating a cease and desist order

a fine up to 500

Adjuster

an individual who determines or settles losses to commercial or personal property on behalf of a client/insured

admitted company

an insurer that is authorized by a certificate of authority, granted by the Commissioner or Department, to transact business in a state for specific types of insurance stated in the certificate.

Managing General Agent

any person who has the authority to accept or process insurance policies on behalf of the insurer. Any person, firm, or corporation must hold a license in order to act as this

Long-term care insurance contract

any policy, certificate, rider, or evidence of coverage that is advertised, marketed, offered, or designed to provide coverage for not less than twelve (12) consecutive months for each covered person on an expense incurred, indemnity, prepaid, per diem, or other basis. An LTC insurance contract covers one or more necessary or medically necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services administered in a setting other than an acute care unit of a hospital (i.e., does not cover hospital confinement). It also includes a policy or rider that pays benefits based on the impairment of cognitive ability or the loss of functional capacity.

An individual whose license application is denied or whose license has been revoked may not

apply for any license within five (5) years of the effective date of the denial or revocation, or the date of the final court order if there was a judicial review of the Department's action.

Controlled Business

can be defined as policies written on people that the licensed agent has direct influence over. This includes: Family; Employers; and/or Any company to which the agent has stock control. Obtaining a license for the primary purpose of writing controlled business is prohibited. At least 25% of the total volume of premiums must be collected from persons other than the agent, or individuals or entities "controlled" by the agent.

Prescription Drugs:

covers drugs prescribed by a doctor to treat an acute illness like an infection or an ongoing condition such as high blood pressure.

Maternity and Newborn Care

describe the ongoing care an insured woman receives during her pregnancy and during and after labor. It also provides care for newly born children.

Mental Health and Substance Use Disorder Services

describes the care an insured receives for behavioral health treatment. It includes the evaluation, diagnosis, and treatment of mental health and substance abuse issues.

Minimum essential benefits

does not include certain specialized coverage, such as coverage only for vision care or dental care, Workers' Compensation, or coverage only for a specific disease or condition. Under the law, minimum essential coverage also includes any additional types of coverage that are designated by the Department of Health and Human Services (HHS) or, as detailed by the proposed regulation, when the sponsor of the coverage follows a process outlined in the regulations to be recognized as minimum essential coverage.

Health Maintenance Organizations (HMOs)

finance health care services for their members through prepaid financing. In the State of Texas, HMOs must be authorized to conduct business by the Commissioner. HMOs are alternative health care providers characterized by prepaid financing, managed care, and the delivery of medical services. Members of an HMO are referred to assubscribers or enrollees. These alternative health care providers differ from insurance companies in that they provide comprehensive health care but also deliver that care as well. Insurers do not deliver nor provide medical services

Group life insurance on an employee's spouse may not exceed ____ of the amount of insurance on the life of the insured employee under the group policy

half

Hospitalization Coverage

healthcare that an insured receives as an inpatient in a hospital, such as room and board, nursing care, physician's expenses, diagnostic testing, and drugs administered during the hospital stay.

Ambulatory Patient Services:

healthcare that an insured receives without being admitted to a hospital. Some examples are visiting a walk-in clinic, physician's office, or same-day surgery center.

An employee group policy may not be issued

if the entire premium is to be paid by insured employees

Preventive and Wellness Services, Chronic Disease Management:

include routine physicals, screenings, and immunizations. Chronic disease management is an integrated approach to manage an ongoing condition, like asthma or diabetes.

Laboratory Services

include the testing of blood, tissues, and other substances derived from a patient to help a doctor diagnose a medical condition and monitor the effectiveness of treatment.

Which group may not be insured by a group life insurance policy?

individuals who are related by blood, marriage or legal adoption

TEXAS LLOYDS

insurance companies regulated by the Texas Insurance Code. Texas Lloyds primarily write special risks not written by standard insurance companies. A Texas Lloyds company is an arrangement between an attorney-in-fact and must have at least 10 underwriters to provide property and casualty insurance (a Texas Lloyds company does not provide life insurance).

Truncated credit life

insurance coverage may be offered only for loans and transactions having a term of eight (8) years or more and only on a form specifically filed for use with such loans and credit transactions.

Credit life insurance is

insurance issued on a debtor to cover outstanding loan balances

non-admitted company

is an insurer that has not received or has yet to apply for a certificate of authority and is generally not authorized to transact insurance business in a state

Emergency Services

is healthcare that an insured receives for conditions that, if not immediately treated, could lead to severe disability or death.

Pediatric Services

is the care that an insured child receives.

Risk manager

manages the pure risks to which a company might be subjected. It involves analyzing all exposures to the possibility of loss and determining how to handle these exposures through such practices as avoiding the risk, reducing the risk, retaining the risk, or transferring the risk usually by insurance.

Advanced Premium Tax Credit (APTC)

may be available to certain households with income not more than 400 percent federal poverty line (FPL) for your family size. The ________ is a federal tax credit for individuals that lessens the amount they pay for health insurance premiums for health insurance on the Marketplace.

Truncated accident and health insurance coverage

may be offered only for loans and transactions having a term of six (6) years or more.

A policyowner / insured under a group policy

may make an absolute or collateral assignment of all rights and benefits provided by the policy to any individual, firm, or other legal entity. In simple terms this is known as assigning a beneficiary.

Illustration"

means a presentation or depiction that includes nonguaranteed elements of a life insurance policy over a period of years.

Sales material"

means a sales illustration and any other written, printed, or electronically presented information: Created, completed, or provided by the insurer or agent; and Used in the presentation to the policy or contract owner relating to the policy or contract purchased.

Direct-response solicitation

means a solicitation made: By a sponsoring or endorsing entity or individually; and Solely through mails, telephone, the Internet, or other mass communication media.

"Replacement"

means a transaction in which a new policy or contract is to be purchased and the proposing agent or insurer knows that, because of the transaction, an existing policy or contract has been or is to be: Lapsed, forfeited, surrendered or partially surrendered, assigned to a replacing insurer, or otherwise terminated; Converted to reduced paid-up insurance, continued as extended term insurance, or otherwise reduced in value by the use of nonforfeiture benefits or other policy values; Amended so as to cause a reduction in benefits or in the term for which coverage would otherwise remain in force or for which benefits would be paid; Reissued with any reduction in cash value; or Used in a financed purchase.

Registered contract"

means a variable annuity contract or variable life insurance policy subject to the prospectus delivery requirements of the Securities Act of 1933.

"Existing policy or contract"

means an individual life insurance policy or annuity contract that is in force, including a policy under a binding or conditional receipt.

"Guaranty association"

means any mechanism or other laws of Texas, or a similar mechanism in another state, that is created for the payment of claims or the continuation of policy obligations on behalf of financially impaired or insolvent insurers.

Replacing insurer"

means the insurer that issues or proposes to issue a new policy or contract that: Replaces an existing policy or contract; or Is a financed purchase.

"Existing insurer"

means the insurer whose policy or contract will be changed or affected by a replacement.

Financed purchase"

means the purchase of a new policy that involves the use of funds to pay all or part of any premium due on the new policy obtained by: The withdrawal or surrender of an existing policy; or Borrowing from values of an existing policy.

An employee group policy

must cover at least ten (10) employees at the date of issue.

FREE-LOOK

n Texas, if the buyer's guide and disclosure document required are not provided at or before the time of application, a free-look period of at least fifteen (15) calendar days must be provided during which the applicant may return the contract without penalty and for a full refund. Notice of the free-look period must be provided to consumers and included on or attached to the cover page of the delivered annuity contract. The free-look period begins on the date the consumer receives the contract

When will a hearing be held after a notice of hearing, alleging participation in an unfair or deceptive act, is served to a licensee or insurer by the Commissioner?

no sooner than 6 days

Domestic Insurer

one that has its principal or home office in a state where it is authorized. In other words, _____ is chartered in or formed under the laws of the State where it is authorized. For example, Nationwide Insurance Company of Columbus, Ohio operates as a domestic insurer in the State of Ohio.

foreign insurer

one that is authorized in one State, but its charter or principal office is in another State. Nationwide Insurance Company is also authorized in the State of Illinois, even though their home office is in Ohio. Therefore, it operates throughout the State of Illinois as a __________.

alien insurer

one which is authorized in any State within the U.S., but its principal office is located outside of the U.S. Sun Financial Services of Toronto, Canada is an example of __________

stock company

owned by its stockholders. Policies issued by a stock company are called nonparticipating and do not pay dividends to policyholders. Any profits realized by the stock company are distributed to the shareholders or stockholders. Stockholders, not policyholders, appoint or elect its directors and officers.

group life insurance

policies must insure the lives of more than one (1) individual (at least two (2) or more) and may be issued on a group basis to one of the following eligible groups: Employee groups; Labor union groups; Government employee association groups; Debtor groups; Trustee groups; Association or trust groups; Wholesale or franchise groups; Agents of principal groups; The Veterans Land Board of Texas; Nonprofit organizations; and Any other group approved by the Commissioner of Insurance.

Rehabilitative and Habilitative Services and Devices

refer to services and devices that help an insured with injuries, disabilities, or chronic conditions gain or recover mental and physical skills.

The purpose of replacement regulations

regulate the activities of insurers and agents with respect to the replacement of existing life insurance and to protect the interests of life insurance and annuity purchasers by establishing minimum standards of conduct to be observed in replacement or financed purchase transactions by: Assuring that the purchaser receives information they need to make a decision that reflects their own best interests; Reducing the opportunity for misrepresentation and incomplete disclosures; and Establishing penalties for failure to comply with the requirements of Texas replacement law.

insurers must offer applicants for LTC coverage

the ability to purchase inflation protection. No insurer or other entity may offer a long-term care insurance policy or certificate in Texas unless it also offers to the prospective insured the option to purchase a policy that provides for benefit levels to increase throughout the interval of coverage to account for reasonably anticipated increases in the costs of long-term care services covered by the policy. In addition, an insurer must also offer an applicant the right to purchase non-forfeiture benefits.

Why would the Insurance Commissioner examine the records of an insurance company?

to determine the solvency of the company

ABC Insurance Company is actively engaging in boycott, coercion, and intimidation that results in the unreasonable restraint of trade. ABC is committing a prohibited act under Texas insurance laws covering

unfair methods of competition