California Laws/Ethics
Errors and Omissions Insurance
- used for the purpose of protecting an agent from this legal liability and provides coverage for legal defense and settlement costs up to a limit -offered with minimum of $1,000,000
Cease and Desist Order
-Can be administered by the Commisioner -Persons who transact insurance without being appropriately licensed -Face administrative penalties of $5000 per day for each violation occured or up to $55,000 for willful violation -Or up to 5 times the amount recieved
Restricted License
-requires the agent to comply with all laws, and complete all CE requirements and license renewals on time for up to four years. The agent must request restoration of the permanent license once the terms of the restricted license have been completed
California Insurance Code
-set of statutes enacted by the state legislature which regulate the business of insurance in California -only the STATE LEGISLATURE has the authority to write or amend the Insurance Code
Claimant
Any person who asserts a right of recovery under a surety bond or insurance policy
Shall
mandatory
May
permissive, unless otherwise apparent from the context
Insurance Claims Analysis Bureau
-Collects and compiles information and data from members or subscribers concerning insurance claims -Disseminates information to members or subscribers relating to insurance claims for the purpose of preventing and suppressing insurance fraud -Promotes training and education to further insurer investigation, suppression, and prosecution of insurance fraud -Provides to the Commissioner all California data and information contained in the records of the insurance claims analysis bureau to further the prevention and prosecution of insurance fraud
Four Broad Powers
-Conferred on the commisssioner and the department of insurance 1. Prevent insurer insolvency and prevent fraud 2. Insure Policies are reasonably priced 3. Establish Procedure that guide the operation of insurance 4. Provide authority needed by insurance commissioner to oversee insurance agents/companies
The Commissioner
-Elected by the people and may serve up to two 4 YEAR TERMS -GOVERNER can appoint -enforces the Code by writing and adopting Regulations that specify the manner of enforcement or provide details on how the code is to be administered -has authority to enact Emergency Regulations without having to follow the normal public hearing process, subject to OAL review and judicial appeal by any person directly impacted by such emergency regulations after they have become effective
California Life and Health Guarantee Association
-Maximum amount payable for a life insurance death is $300,000 -Non-admitted are not covered under this - protect covered persons against failure in the performance of contractual obligations under life, health and annuity contracts due to the impairment or insolvency of the member insurer that issued the policies or contracts -The association provides coverage to persons who own policies and are residents of California -ONLY COVERS GUARANTEED CONTRACTS AND NOT VARIABLE CONTRACTS
Non-Admitted INsurer
-One that has not been authroized to transact insurance in california
Certificate of Authority
-Permits an insurance company to transact business -1 year, and/or a fine not to exceed $100,000. -A person cannot transact any class of insurance business in this state without first being admitted or authorized
Aiding a Non-Admitted Insurer to Transact
-Transacting insurance business in the state as an agent for a non-admitted insurer -Advertising as a non-admitted insurer in this state -Assisting a non-admitted insurer to transact business in this state
Representations
-may be altered or withdrawn before the insurance is effected, but not afterwards. -is false when the facts fail to corresponde with its assertions or stipulations
Admitted Insurer
-one that has complied with the laws of this state to become authorized to transact insurance -issued a Certificate of Authority from the state -sell policies for the standard market, which covers average or better than average risks
Twisting
A form of misrepresentation involving replacement of existing insurance which induces a person to lapse, forfeit, or surrender an existing policy, based on an unfair comparison of features or concealment of material disadvantages of a proposed policy.
Deceptive Advertising
Advertising insurance that an insurer will not sell. An intentional violation is considered a misdemeanor punishable by a fine of up to $10,000. This does not prohibit an insurer from advertising insurance products it is licensed to sell in this state where the product is not available as long as the unavailability is disclosed. This does not apply to advertisements by an insurer where the advertisements are broadcast and originate from outside this state. This also does not apply to any insurer that refuses to sell a policy of insurance on the basis of its underwriting guidelines.
Proof of Claim
Any evidence or documentation the insurer has obtained providing any evidence of the claim and reasonably supports the magnitude or the amount of the claimed loss
Mailing as Proof of Notice
Any notice required to be given to an insured may be mailed, postage paid, and addressed to the policyowner, insured, claimant, or beneficiary to be notified at his/her last known address of record. The written notice may also be provided by electronic transmission if each party has agreed. The affidavit of the person who mails or transmits electronically the notice, stating the facts, is sufficient (prima facie) evidence that the notice was mailed. The policyowner is responsible for notifying the insurer of address changes including any change of email address.
Boycott, Coercion or Intimidation
Entering into any agreement that would result in an unreasonable restraint of, or monopoly in the business of insurance.
False Financial Statements
Filing with any supervisory or other public official any false statement of financial condition of an insurer with intent to deceive.
False Entries
Making any false entry in any book, report, or statement of any insurer with intent to deceive any public official to whom the insurer is required by law to report, or who has authority by law to examine its condition or into any of its affairs, or omitting to make a true entry of any material fact pertaining to the business of the insurer in any book, report, or statement of the insurer
Defamation
Making or disseminating before the public in any newspaper, publication, or advertising device, any statement containing any assertion, representation, or statement with respect to the business of insurance, or with respect to any person in the conduct of insurance business, which is untrue, deceptive, or misleading
Advertising of California Insurance Guarantee Association
Making or disseminating in any publication or other advertising device a statement that a named insured or specified insurers are members of the California Insurance Guarantee Association and are insured against insolvency. All admitted insurers are required to be covered under the association, therefore, advertising membership is not permitted.
Unfair Discriminatino
Making or permitting any unfair discrimination between individuals of the same class and equal expectation of life in the rates charged for any contract of life insurance or life annuity, in the dividends or other benefits payable, or in any other of the terms and conditions of the contract.
Misrepresentation
Making, issuing, or circulating any estimate, illustration, circular, or statement misrepresenting the terms of any policy issued; using any name or title misrepresenting the true nature of any policy or class of policies; misrepresenting the financial condition of any insurer; or making any misrepresentation to a policyholder insured by any company for the purpose of inducing the policyholder to lapse, forfeit, or surrender a policy.
Alteration of Disability Application
No alteration of a written application for a disability policy can be made by any person other than the applicant without written consent. Any alteration made without consent by an officer or employee of the insurer is considered an act by the insurer and is a misdemeanor.
Free insurance
No insurer or agent may participate in any plan to offer or effect any kind of insurance or annuities in this state as an inducement to the purchase or rental by the public of any property, real or personal or mixed, or services, without any separate charge to the insured for such insurance, nor can any agent, broker, or solicitor arrange the sale of any such insurance
Insurance in Connection with Sales or Loans
No person engaged in the business of financing the purchase of real or personal property may require the purchaser of that property to obtain insurance for that property through a particular agent or broker. A lender cannot refuse to accept insurance provided by an acceptable insurer on the grounds that the insurance provides more coverage than is required.
Notice of Legal Action
Notice of an action begun against the insurer with respect to a claim, or against the insured by the insurer, or against the principal under a bond, and includes any proceeding arbitration
Rehabilitation and Liquidation
Regardless of the regulations and controls, a few insurers find themselves in financial difficulty. When this happens, the Commissioner will step in and attempt to help the insurer become solvent again.
Rebating
Returning a portion of the agent's commission or anything of value to an insured as an inducement to buy insurance.
Examination of Insurers
The Commissioner conducts examinations on every domestic insurer in this state not less frequently than every 5 years.
Conservation of Insurers
The Commissioner may file an application with the superior court, and the court may issue an order for the Commissioner to become Conservator of either a financially impaired or insolvent insurer, and be vested with its assets, books, records, property and conduct business
Foreign Mutual Insurers
The paid-in capital of available cash assets must amount to at least $200,000.
Noncompliance
Whenever the Commissioner may have good cause to believe that any property and casualty broker/agent has failed to keep or maintain the records required, the Commissioner may issue an order requiring the licensee to establish and complete those records within 60 days from the date of the order. Notice of the order may be given by certified mail addressed to the office of the licensee. Failure of the licensee to comply with the order within the time specified will be grounds for the suspension or revocation of the license or licenses of the licensee.
Accident and Health Agent
a person authorized to transact coverage for sickness and bodily injury, including disability income.
Life-only agent
a person authorized to transact insurance coverage on human lives including endowments and annuities
Insurer Insolvency
any impairment of minimum "paid-in capital" or "capital paid-in" required of an insurer for the classes of insurance, which it transacts. This means that there is an inability for a company to meet its financial obligations when they are due.
Administrator
is any person who collects any charges or premium from, or who adjusts or settles claims on, residents of this state in connection with life, health or annuity insurance coverage and must hold a Certificate of Registration as an administrator issued by the Commissioner. An administrator must have a written agreement with an insurer. A copy of the agreement must be kept for 5 years after the agreement has ended
Solicitor
is employed to aid a property and casualty broker-agent acting as an insurance agent or insurance broker in transacting insurance other than life, disability, or health
Life Settlement broker
is exclusively the representative of the policyowner who seeks to sell his interest in the policy
Natural Person
living human being
California Long Term Care Education Requirements
must complete an 8-hour course in Long-Term Care insurance in each of their first 4 years of licensing (two terms)
California Annuity Suitability Education Requirements
must complete an initial 8-hour training course prior to soliciting for sales. Agents must complete 4 hours of subsequent training every 2 years prior to license renewal.
Broker
someone who for compensation transacts insurance on behalf of another person, but not an insurer
Domestic Insurers
the value of its assets that are in excess of the sum of its liabilities for losses reported, expenses, taxes, and all other indebtedness or the aggregate par value of its issued shares of stock, including treasury shares, whichever is lower.
