Maryland Life License

license reinstatement expired 60 days or LESS

Commissioner reinstates license retroactively

3

Insurers must retain records for ___ years per policy

Duration of Producer License

Issued for 2 YEARS. expires on the 2-year anniversary of the ISSUANCE DATE.

5th

Licensee has to remit collected premiums by the ___ business dat, or else be deposited in an appropriately identified separate account at a state authorized bank

Nonparticipating policies

Policyowners do not share in profits nor losses

Participating policies

Policyowners share in profits and losses

PREMIUM = ??

RISK plus EXPENSES minus INTEREST

5

Records for a replacement transaction must be kept for __ years or until the next Insurance Department examination

Methods of Risk Management

STARR

applicant

a person applying for insurance

fiduciary

a person in a position of trust, who handles funds for the insured

indemnity

a provision in an insurance policy that in the event of loss a beneficiary is permitted to collect only to the extent of the financial loss and not for financial gain

aleatory contract

an exchange of unequal amounts or values

peril

cause of loss

penalty for insurance fraud

fined and/or imprisoned for UP TO 10 YEARS

NAIC

the National Association of Insurance Commissioners resolves insurance regulatory problems

insurance

the transfer of risk

Exclusive Agency System

- 1 agent, 1 company - exclusive - commission - renewal with appointing company

Requirement for an Insurance License Applicant

- 18 YEARS OLD or older - Trustworthy and of good character - Meet education and experience requirements - $54 FEE - File application (and anyother required information) with the Commissioner

elements of a legal contract

- Agreement - Consideration - Competent parties - Legal purpose

Federal Regulations

- Fair Credit Reporting Act - Consumer Report - Investigative Consumer Report - Section 1033

types of business entities

- Limited Liability Company - Partnership - Corporation

Types of private insurance companies

- Ownership Insurers - Authorized/ Admitted Insurers - Domestic, Foreign, Alien Insurers - Marketing/ Distribution Systems - Financial Status/ Independent Rating Service

Types of Licensees

- Producers - Advisers - Business Entity - Temporary Licensee - Nonresidents - Viatical Settlement Brokers

DISTINCT elements of an INSURANCE contract

- aleatory - contract of adhesion - unilateral - conditional

Commissioner of Insurance

- appointed by the Governor, with consent of the Senate - 4 YEAR TERM - has can have any financial interest in any insurer - responsible for enforcing insurance laws - investigates complaints - prepares an annual fiscal report - can EXTEND THE GRACE PERIOD of a premium payment for UP TO 60 DAYS in case of emergency - EXAMINES domestic insurers at least EVERY 5 YEARS

Variable Whole Life Insurance Policy

- cash value increases & decreases depending on investments - fixed premium - guaranteed death benefit

penalty for failure to respond to the Commissioner's request

- convicted of a MISDEMEANOR - $1000 FINE, and/or - IMPRISONMENT for up to 6 MONTHS

Whole Life Insurance

- flexibility - high current interest rates - "un-bundling"

Viatical settlement broker licensee

- must be licensed as a life insurance producer - works on behalf of a viator - negotiates settlement contracts between viator and viatical settlement providers - compensation is paid by the viatical settlement provider - must register with the Commissioner registration may be renewed EVERY OTHER YEAR with APPLICATION and FEE

Business entity licensee

- must have at least 1 LICENSED INDIVIDUAL working for them - must be licensed for the type of insurance they'll be selling - must be appointed by at least 1 INSURER

Accelerated benefits/Living benefits

- pays a percentage of death benefits prior to death - balance of benefits is paid to beneficiary upon death of the insured - provides benefits prior to death for terminal illness, long term care, or permanent confinement in a nursing home

Life and Health Insurance Guaranty Association

- private, nonprofit, nonstock entity - protects state residents against impaired insurers - protects the insurer from catastrophic losses - all admitted insurers must be members - its is an UNFAIR TRADE PRACTICE to publicize membership in the association

Legal purpose

1. insurable interest 2. consent of the insured

Certificate of Authority

A document that authorizes a company to transact business in a specific state

Misrepresentation

A false statement made on an application which, if material, may be grounds for denying a claim within a specific time

Key Employee (Key Person) Insurance

A life policy that insures a business against financial loss due to the death of a vital employee which the business is the applicant, owner, and beneficiary

Interest Sensitive Whole Life Policy

A whole life policy whose premiums and cash values may be adjusted according to the insurer's claims, expenses, and investment performance

Independent Rating Services

AM Best, Fitch, Standard & Poor's, Moody's, Weiss

Agent

An individual who is licensed to sell, negotiate, or effect insurance contracts on behalf of the insurer.

Authorized/Admitted

An insurer authorized to sell insurance with a state after being granted a Certificate of Authority

beginning and annually

Maryland law requires a licensee to provide Privacy Policy Notices at the ______ of the relationship with the consumer and _____ thereafter

No License, No ___________

No ____________, No Commission

Agreement =

Offer + Acceptance

Mutual companies

Owned by the policyowners. Issue PARTICIPATING policies. Policyowners are entitled to dividends. Dividends are nontaxable and not guaranteed.

24, 2, 3

Producers (except for title) are required to complete ____ credit hours of continuing education every ___ years with at least ___ hours in ethics

Insurable Risk

Pure Risk! Chance. Definite & measurable. Statistically predictable. Not catastrophic. Randomly selected & large loss exposure.

Stock Companies

Type of private insurance company. Owned by stockholders. Stockholders provide capital and share in profits and losses of the Stock Insurance Companies that issue NONparticipating policies. Policyowners don't receive dividends. Stockholders DO receive taxable dividends.

insurance policy

a contract between a policyowner (and/or insured) and an insurance company which agrees to pay the insured or the beneficiary for loss caused by a specific events

Letter of Concent

a fiduciary can NOT commingle funds with private funds without a _____ __ _____ from the insurer

reciprocity

a mutual interchange of rights and privileges

the Payor Provision of a child life insurance policy

allows premiums to be waived in the event of the death or disability of the person responsible for the premium payments

Alien

an insurer incorporated in another country

Producer licensee

anyone who legally performs activities of an insurance agent or broker in Maryland. an AGENT must be appointed by at least 1 AUTHORIZED INSURANCE COMPANY, however BROKERS need not.

inducement

anything used or given to persuade or motivate; an incentive

Implied Authority

authority that is not expressed or written in the contract but which the producer is assumed to have in order to transact business

ambiguities in a contract of adhesion

because only the insurance company has the right to draw up a contract, any ambiguity in the contract should be interpreted IN FAVOR OF THE INSURED

Hazard

condition or situation that increases the probability of loss

Reinsurance

contract under which an insurance company (reinsurer) indemnifies another for part or all of its liabilities

Law of agency

defines the relationship between the principal (insurer) and the producer - a producer represents the insurer, not the insured - knowledge of the producer is presumed to be knowledge of the insurer - the insurer is fully responsible for the producer within contract

penalty for insurance fraud that jeopardizes the insurer

fined and/or imprisoned for UP TO 15 YEARS

Adviser licensee

give advice to clients about insurance exposures and coverages and make recommendations. - be in good standing of an Actuary Society or - be an Underwriter or Employee Benefits Specialist or Certified Financial Planner or - successfully complete an equivalent course of study and become a Certified Insurance Counselor AND - post a SINGLE SURETY BOND of $1,000

Consideration

in a contract, something of value each party gives to the other

domestic insurer

incorporated in this state

Temporary licensee

issued to maintain the existing business in the event of disability or death of the primary producer

blank forms

it is ILLEGAL to allow a client to sign a blank or incomplete application

Unfair Claims Settlement Practices Act

legislature adopted by the NAIC to prevent the improper avoidance of a claim by an insurer or an attempt to unjustly reduce the size of a claim

Defamation

maliciously critical statements, oral or written, intended to injure agents or companies in the sale of insurance

risk purchasing group

offers insurance to groups of similar business with similar exposure to risk (more property & casualty insurance)

unilateral contract

only the insurer is legally bound, not the insured

$50,000

penalty for violating Section 1033 no more than _____ PER VIOLATION or the amount of illegal compensation received, whichever is greater

$2,500 per violation

penalty for violation of the Unfair Claim Settlement Practices Act

contract of adhesion

prepared by one of the parties and accepted or rejected by the other, not drawn up through negotiations

30

producers are required to report all felony convictions to the Commissioner's office within ____ DAYS of the 1st court appearance

Fair Credit Reporting Act

protects consumers against the circulation of inaccurate or obsolete information

Guaranteed Insurability Rider

provides the right to buy additional insurance in the future regardless of Mary's health

The statements on the insurance application are considered to be...

representations

30

required to notify the Commissioner of address and name change within ___ days

assumed names

required to notify the Commissioner of any fictitious or assumed names the agent may use when conducting business eg. Dr. Mimi

conditional contract

requires that certain conditions must be met by the policyowner and the company in order for the contract to be executed

pure risk

situation that can only result in a loss or no change

MIA

the Maryland Insurance Administration, makes sure insurance POLICIES are UNDERSTANDABLE and RATES are RESPONSIBLE - rates are not excessive, inadequate, or unfairly discriminatory

NCOIL

the National Conference of Insurance Legislators helps legislators make informed decisions on insurance issues affecting their constituents

Expressed Authority

the authority granted by the principal to the producer as written in the contract

insurer (principal)

the company who issues an insurance policy

reasonable expectation

the insured could reasonably expect coverage based on the producer's words and actions

Law of Large Numbers

the larger the number of people with a similar exposure to loss, the more predictable actual losses will be

premium

the money paid to the insurance company for the insurance policy

speculative risk

the opportunity for loss or gain

insured

the person covered by the insurance policy - this person may or may not be the policyowner

policyowner

the person entitled to exercise the rights and privileges in the policy

Adverse Selection

the tendency for poor risk people to buy insurance versus good risk people

Corporation

type of business entity. - is formed according to state law - has a board of directors and executive officers - investors receive proof of ownership in the form of shares

Limited Liability Company

type of business entity. LLC or "domestic limited liability company" means a permitted form of unincorporated business organization

Partnership

type of business entity. two or more persons engaged in a common enterprise

Unauthorized (nonadmitted)

unauthorized to transact business in the state

rebating

unfair trade practice. any inducement offered in the sale of insurance products that is not specified in the policy

twisting

unfair trade practice. misleading comparison of policies to persuade a policyowner to cancel, lapse, or switch policies

Unfair Discrimination

unfair trade practice. to discriminate between individuals of the same class and life expectancy for the rates, premiums, or benefits

1033 waiver

written consent from a Commissioner for an individual convicted of a crime involving dishonesty to work in the business of insurance