California Ethics - Bundled

The maximum fine for committing fraud is the greater of double the value of the fraud or:

$150,000

Any person who is convicted of making a misrepresentation in the insurance business in which the loss is $10,000 or less is punishable by a maximum fine of:

$25,000

What is the maximum fine for transacting insurance business without a license?

$50,000

A representation in an insurance contract qualifies as:

An implied warranty

What type of concealment entitles an injured party to rescission of a contract?

Both intentional and unintentional

Cost-sharing between the insurer and the insured that is often expressed as the percent for insurer and insured is known as:

Coinsurance

The law of large numbers and spreading the uncertainty of loss over a large number of people is:

Insurance

What are the two distinct characteristics that distinguish mutual insurers from stock insurers?

Mutual insurers lack capital stock and profits are distributed among the members

What is the difference between risk and loss?

Risk is the potential of loss, whereas loss is the unintentional decrease in value of an asset due to a peril

What established the standards for the sales and advertising of life insurance to seniors in California?

Senate Bill 620

In the case of a valued contract as in life insurance, the value is set...

before the claim occurs

Agents are not permitted to provide clients a premium...

rebate

Adverse selection is characterized by:

A sick person purchasing health insurance

A nonparticipating insurer is:

A stock insurer

What is the primary purpose of insurance regulation?

Assure a minimum level of standards for insurance transactions

What do the E and O stand for in E&O insurance?

Errors and Omissions

Agents who own the policies they sell and can work for multiple insurers are known as:

Independent agents

A contract where "one party undertakes to indemnify another party against loss, damage, or liability arising from a contingent or unknown event" is the definition in the California Insurance Code of:

Insurance

What is the primary difference in field underwriting for health insurance versus life insurance?

Malingering

Legal liability for civil wrongs such as negligence is what type of law?

Tort law

A person who holds a financial trust is termed a...

fiduciary

Premature death is a feasible risk to insure because...

life insurance protects against the uncertainty of when a person will die, not whether or not a person will die (death is a known eventuality)

Restitution to the victim must be satisfied before any fine imposed is collected when an agent is found guilty of...

misrepresentation

A code of ethics may include...

- an organization's ethical behaviors and principal beliefs - consequences for violation of that code

California insurance agents have an ethical responsibility to their...

- clients - represented insurer(s) - compliance with the state and federal law - knowledge of their job

Stock insurers

- have a capital fund, surplus, and reserves which are financially supported by the company's stockholders - pay dividends to their stockholders - do not pay dividends to policyholders - managed by stockholders

Constructive delivery

- legal way of delivering the policy - handing over control of the policy to another person - occurs when the insurer mails the policy directly to the insured

For insurable risks, the following must be true:

1. Loss must be definite and measurable 2. The loss must be predictable 3. Loss exposures must be chosen randomly 4. Loss must not be catastrophic

Records pertaining to premium correspondence with a client must be kept for a minimum of:

2 years

How many hours of continuing education are required every 2 years for a life or health agent who is also licensed as a property and casualty broker?

24 hours

How long must marketing materials, including advertisements, for long-term care policies need to be retained?

3 years

Once the Commissioner makes written demand for certified copies of agent records, such records must be delivered to the Commissioner within:

30 days

What is the examination period for an applicant for an annuity who is 65 or older?

30 days

How many hours of continuing education are required every 2 years for a life-only agent who sells annuities?

4 hours

Agents must retain records of insurance transaction records for a minimum of:

5 years

What is the maximum number of months a life insurance policy can be backdated in California?

6

Producers wishing to sell long-term care insurance policies must complete how many hours of training as part of their continuing education requirements for the first four 12-month periods?

8

In California, what is the definition of an insurance agent?

A person who transacts insurance, other than life, disability, or health insurance

Mathematicians who analyze statistical risk information for insurance companies are called:

Acturaries

The tendency for poorer than average risks to seek out insurance is the definition of:

Adverse Selection

This employee cannot bind life and health insurance and works for the insurer:

Agent

Who is a person authorized, by and on behalf of an insurer, to transact insurance?

Agent

Who performs field underwriting?

Agent

Typically contains an introduction/preamble, articles/canons, rules for ethical conduct, and professional duties and obligations

An ethical code

A domestic insurer is:

An insurance company conducting business in the state in which it is incorporated

morale hazard

An insured's careless attitude or lack of responsibility

How does the California Insurance Code define a loss?

An unintentional decrease in value of an asset

Difference between Authorized, Unauthorized, and excess and surplus lines insurers

Authorized: also referred to as admitted or licensed insurers Unauthorized: (non-licensed or nonadmitted) do not have licensure because they have not yet applied, have applied and been denied licensure, or are excess and surplus lines insurers excess and surplus lines: considered unauthorized insurers in a state but they are permitted to conduct insurance business in that state

Why are life and health insurance contracts said to be contracts of adhesion?

Because the insurer writes the contract, to which the insured must adhere

noncommercial organizations; however, they are not technically insurers and are better described as service organizations

BlueCross BlueShield organization

What is the state of California's set of laws pertaining to insurance?

California Insurance Code (CIC)

The term describing the insured's notification to the insurer requesting payment for a covered loss is:

Claim

What term means the insured's demand for payment of benefits?

Claim

What is the trigger for unethical behavior?

Conflicts of interest

The term for a person in a special position of trust or confidence:

Fiduciary

What type of risk is flood?

Fundamental

In California, when must an agent contact the Commissioner regarding a change of address?

Immediately upon the change of address

open to inspection or examination by the Commissioner at all times

Life and disability agents' records

Fraternals typically sell what type of insurance?

Life, accident, and health insurance

A market where individuals and groups of people gather to exchange insurance is a:

Lloyd's association

According to the California Insurance Code, how can representations be made?

May be oral or written and may be made at the time of, or before, the issuance of a policy

When is the expiration date for phone numbers added to the Do Not Call List?

Never

What is the maximum fine in California for conviction of twisting?

No more than three times the amount of the loss suffered by the victim

not technically insurers and are better described as service organizations that provide prepaid health plans for medical, surgical, and hospital expenses

Noncommercial insuring organizations

What are the basic elements of a legal contract?

Offer, acceptance, consideration, competent parties, and legal purpose

What is the term used in health insurance for a document that explains the details of the coverage purchased?

Outline of coverage

A mutual company pays dividends to:

Policyholders

Commissions earned on premiums paid in advance of their due date are termed:

Prepaid

When must the information in an illustration be conveyed to the Commissioner?

Prior to marketing a policy

What lines of insurance are represented by insurance solicitors?

Property and casualty

Reinsurance is defined as:

Spreading risk from one insurer to another

A peril is defined as:

The cause of the loss and the event insured against

What is the consequence for an applicant who makes an unintentional misrepresentation on a life insurance policy?

The insurer will pay the death benefit as long as the misrepresentation is not material to the risk

What is the law for obtaining a producer license if someone has previously been found guilty of committing fraud?

The person can be licensed with a waiver from the California Insurance Commissioner

In life and insurance, a person's greatest asset is:

Their earning power

Solicitation, preliminary negotiations, execution of a contract, or transactions of matter subsequent to execution and arising out of an insurance contract is the definition for:

Transact

A life and disability analyst is...

a person who, for a fee paid by someone other than the insurer, advises any person insured under, named as beneficiary of, or having any interest in, a life or disability insurance policy regarding the terms or benefits of the contract, or the person's rights under the contract

An excess and surplus lines insurer is categorized as

an unauthorized insurance company

According to the California Insurance Code, an insurable event is...

any contingent or unknown event, whether past or future, which may indemnify a person having an insurable interest, or create a liability against her

foreign insurer

any insurer that conducts business in a state or district in which it became an incorporated company

A hazard is distinguishable from exposure as being something that...

elevates the chance of a loss occurring

Violation of a law or regulation has much more stringent penalties compared to breaking an...

ethical code

Difference between foreign, alien, and domestic insurers

foreign: An insurer that conducts business in states other than the state in which it was incorporated alien: An insurer that conducts business in countries that it was not incorporated domestic: Conducting business in the state where it was incorporated

Risk sharing is utilized in...

health insurance policies with deductibles, a portion of the loss that the insured is required to pay before the insurer pays

BlueCross health pays for...

hospital costs

The four primary types of agency marketing systems are:

independent insurance agents, exclusive agents, general agency system, and managerial system

A contract where one party undertakes to indemnify another party against loss, damage, or liability arising from a contingent or unknown event is

insurance

Agents are appointed to work on behalf of...

insurance companies

physical hazard

physical characteristics which raise the loss potential for a particular peril (poorly constructed roofs, uneven sidewalks, icy roads, improperly stored toxic waste)

Subrogation

primarily applies to property and casualty and seldom to life and health insurance

Implied authority

that which is conveyed to the insured by the agent's statements and duties

Apparent authority

the customer's perception of the agent's authority based on the relationship between the insurer and the agent

Express authority

the explicit authority granted to the agent by the principal as written in the agency contract

who is legally bound to perform the promises stated in the policy

the insurer

The law of agency states that...

the insurer is the principal in the agent-insurer relationship

Annuities protect against...

the risk of living too long

An insurer's domicile of incorporation is...

the state or district in which it became an incorporated company

Mutualization

the transformation of a stock insurer into a manual insurer

A licensee licensed to act as a viatical settlement broker or provider as of December 31, 2009 is considered...

to have met the requirements for licensure as a life settlement broker or provider

Indemnity

to restore a financial loss to the state prior to the occurrence of the loss