Final Test-P&C
Federal Violent Crime Control & Law Enforcement Act
*It prohibits anyone who has been convicted of a state or federal felony involving dishonesty or breach of trust from engaging in the insurance business without a consent waiver from the Commissioner. *There is no statute of limitations. *It prohibits fraud, embezzlement, falsification of company records, or coercion in insurance transactions in interstate commerce. *Penalties range from $5,000 to $10,000, imprisonment from 10 to 15 years, or both fine and imprisonment. Violations may result in both civil (monetary, regulatory) and criminal (fines and/or jail) penalties.
Warranties
*Specific agreements are made between the insured and insurer that certain conditions will be met. *Warranties, become a part of the policy and can void the policy if they are breached, whether the breach was intentional or unintentional
Representations
*statements that the applicant believes are true *a policy cannot be voided on the basis of a representation
How much continuing education credits do you need each year?
22 is the magic number
Home Owners Policy: Regarding, medical payments
3 years coverage F
An insurance company may Non-Renew and give the consumer how many days notice?
30 days written notice
Which of these losses would be fully covered under Coverage C of the homeowners policy
A $2,000 laptop computer the insured uses for her in-home accounting business
Legal Purpose
A contract that is against public policy (offensive to the best interests of the public) or in violation of the law is not enforceable. (Homer's Law finally makes strangling child illegal in 2042)
Adhesion
A contract where one party has more power than the other party in drafting the contract; an insurance policy is an adhesion contract— the insurer is the one with more power
Fiduciary
A fiduciary is a person who stands in a special relationship of trust to another person. Agents have fiduciary duties toward their clients, especially regarding handling premiums. Agents also owe a fiduciary responsibility to the insurer and must always make decisions in the insurer's best interest.
Doctrine of reasonable expectations
A policy includes coverages that an average person would reasonably expect it to include, regardless of what the policy actually provides
Actuarial and Statistical Department
Actuaries determine the rates to be charged for various types of insurance.
Countersigning
Agent signs each new policy prepared by the company before delivering it to the insured. Required to validate a contract
Personal Injury
An Injury arising from slander, libel, or false arrest would be known as a personal Injury. In this picture Homer is being falsely arrested for shooting Mr. Burns
Apparent Authority
An agent has what ever authority a reasonable person would assume he has
Fraternal Benefit Society
An incorporated society or order, without capital stock, that is operated on the lodge system and is conducted solely for the benefit of its members and their beneficiaries and not for profit; Fraternal benefit societies offer insurance that is available only to members
Insurance Agent
An individual or organization that legally represents another; a state-licensed professional who represents the insurance company in the sale and servicing of insurance; the direct link between the insurance company and the policyholder *Selling Insurance *Issuing & Countersigning *Collecting premiums *Providing a link between insured and ins company
Stock Company
An insurance company owned by its stockholders; profits are shared by the stockholders; policyholders are not entitled to share in company profits
Reciprocal Company
An unincorporated group of members that share insurance responsibilities with other members; it is managed by an attorney-in-fact (give and take)
Hazard
Anything that increases chance of loss: Overloaded Power Outlet
Physical Hazard
Arises from the condition, occupancy, or use of the property itself
Which of the following statements regarding workers compensation laws is CORRECT?
Benefits are paid to workers injured on the job regardless of who is at fault.
Elements of a Valid Contract
C: Competent Parties. L: Legal Purpose. A: Agreement. (Offer & Acceptance) C: Consideration.
Peril
Cause of Loss: Lightning
Definitions:
Clarifies the meaning of certain terms used in the policy.
Aleatory:
Contingent on an uncertain event (a loss) that provides for unequal transfer of value between the parties
C.A.R.T.
Control: an example is Safety training for welding tools Avoidance: an example is never get a car Retention: an example is paying for it themselves Transfer: an example is buying Insurance
The extra expense coverage form provides
Coverage that will permit the insured to continue in business without interruption following a property damage loss
D.I.C.E.D. Diced
Declarations. Insuring Agreement. Conditions. Exclusions. Definitions.
Elements of Insurability
Definite: Unexpected: Financial Hardship: Calculable: Affordable: Loss are Predictable: Adequate Spread of Risk
Fraud
Deliberate misrepresentation (intentional) that causes harm: ■ Someone deliberately lies. ■ The intent of the lie is for someone else to rely on that lie. ■ Another person relies on that lie. ■ The other person suffers harm as a result of relying on that lie.
Conditions:
Describes the rights and duties & obligations of the insured and the insurance company under the policy
Insuring Agreement:
Describes what is covered and the perils the policy insures against
Broker Consults for insured customers
Doesn't have the authority to bind insurer to an insurance contract.
Insurance Marketing Systems
Exclusive Agency (Captive Agency System) Direct Writer Direct Response Independent agency
Expense Ratio
Expense Ratio is equal to a underwriting expenses divided by the written premium
NOT COVERED: Basic Commercial Property Causes of Loss form
Falling objects
Surety Association of America
Functions as a rating bureau for surety bonds
Fidelity bond
Guarantees an employee's honest discharge of duty, and, are written to protect an insured, against dishonest acts by employees.
Morale Hazard
Hazard created by an individual's tendency to contribute to a loss through his own irresponsible actions or carelessness.
Reinsurance
Insurance companies themselves often purchase insurance to cover their own exposure to loss. May call for losses to be shared on a pro rata basis. (Helps protect from catastrophic losses & from wild fluctuations in underwriting results)
Risk Retention Group (RRG)
Insurance company formed by several organizations to cover those organizations' liability loss exposures; risk retention groups are exempt from most state laws that govern insurance companies
Insurance Solicitor -Works for insurance company insurer
Insurance professional who sells insurance and collects premiums but cannot issue or countersign policies
Mutual Company
Insureds are also owners of the company. *Pays dividends to it's policyholders.
Punitive Damages OR Exemplary Damages:
Intended to punish the defendant and make an example of them to discourage others from behaving the same way
Implied authority
Is authority given by the insurance company to the agent that is not formally expressed or communicated. This implied authority allows the agent to perform all of the usual and necessary tasks to sell and service insurance contracts and to fully exercise the agent's express authority.
Negligence
Lack of reasonable care that is required, to protect others from the unreasonable chance of harm. TO ESTABLISH NEGLIGENCE: *Legal Duty Owed *Breach of Legal duty owed *Proximate cause *Damages
Contract
Legal agreement between two competent parties that promises a certain performance in exchange for a certain consideration. In this picture Bart has sold his soul to Millhouse.
Casualty Insurance
Line of insurance that includes a wide variety of unrelated coverages: Liability Auto Workers' compensation Aviation Crime Surety bonds
Exclusions:
Lists property, perils, persons, or situations that are not covered under the policy
Loss Ratio
Loss Ratio is equal to an incurred losses divided by earned premium
Special Damages
Medical expenses Lost wages Funeral expenses Cost to repair or replace damaged property
What could be scheduled under Miscellaneous Type Vehicles Endorsement to the PAP?
Motorcycle
Fair Credit Reporting Act
Occupation, is excluded in this report. Federal law that allows consumers who are denied insurance because of information contained in a credit report to be notified and allowed to obtain the information used in the report from the reporting agency
Alien
Pacific Home Town Insurance-in Mexico
Domestic
Pacific Home Town Insurance-in Oregon
Foreign
Pacific Home Town Insurance-in Washington
General Damages
Pain and suffering and disfigurement, mental anguish and loss of companionship
What is the purpose of section 1 of a workers compensation policy?
Pay for liability resulting from business operations in states where biz opperates
NOT covered under BOP:
Personal property off premises. Covered Options Are: Outdoor Signs Money & Securities Mechanical Breakdown
The commercial building and Business personal property form covers
Personal property within 100 feet of the building
National Association of Insurance Commissioners N.A.I.C.
Purpose is to promote uniformity in regulation by drafting model laws and regulations. (50 people, 1 from each state)
Premium
Rate per unit X # of units So, an insured who purchases $60,000 of insurance at a rate of $2 per $1,000 would pay a premium of $120 (2 × 60 = 120).
Property Insurance
Risks that we will suffer financial loss because something we own is damaged or destroyed Dwelling Homeowners commercial property Inland Marine Ocean Marine Crime
Dog Bites:
Section 2, Liability. Coverage F only
Consultant
Sells and consults insurance advice for a sum of money
Errors & Omissions (E&O) insurance
Should be purchased by agents to protect themselves against legal liability arising from inadvertent errors or omissions
Declarations:
Shows who is insured, what property or risk is covered, when and where the coverage is effective, and how much coverage applies.
Negligence Defense
Statue of Limitations Assumption of Risk Intervening Cause
Adverse Selection
Tendency for people with a greater-than-average exposure to loss to purchase insurance
T.R.I.A.
Terrorism Risk Insurance Act will pay a maximum of 100 billion dollars annually.
OREGON FAIR PLAN: Fire Extended Coverage VM&M
The Association may: ■ employ personnel and subcontract services required to provide insurance; ■ borrow funds; ■ sue and be sued; ■ negotiate and execute contracts; ■ refund excess amounts collected from members; and ■ perform such other acts as are necessary to carry out the duties imposed on it.
Pro Rata
The company retains only the earned premium and is not permitted to keep an extra amount for expenses.
Which of the following losses would NOT be recoverable under the liability coverage of the homeowners policy?
The named insured's son damages the family's garage with his car. Someone not related must incur the damages or injury
The Obligee
The party to whom the principal makes the promise, and, for whose protection the bond is being written.
The Surety
The party, often the insurance company, who agrees to be responsible for loss, that may result, if the principal does not keep his promise.
Principal
The person who promises to do, or, not do, a specific thing. This is the person or company bonded or contractor
Liability Risk
The risk that we will suffer financial loss as a result of our actions toward others
Concealment
The withholding of a material fact involved in the contract on which the insurer relies on. it involves WITHHOLDING, rather than misstating, a MATERIAL FACT. In this picture Bart is withholding the material fact from Marge that he took the bulldozer and caused vandalism.
USA PATRIOT Act (Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism of 2001)
This law gives the federal government broad power to curtail attempts to launder money and finance terrorist activities, and includes the following:
Short Rate
This means that when the INSURED CUSTOMER cancels before the expiration date, the company not only keeps the premium for insurance already provided but also keeps an allowance for expenses, such as issuing the policy.
Twisting
Twisting is a form of misrepresentation in which the agent convinces the client to cancel already-existing insurance and buy another policy from the agent, to the detriment of the insured. Twisting is illegal.
Requires a person to prove that automobile liability insurance is in effect and is usually tied to vehicle registration?
Uninsured motorists
Indemnity
When a loss occurs, an individual should be restored to the approximate financial condition he was in before the loss, no more and no less.
Moral Hazard
Willing to create a loss situation on purpose just to collect from the insurance
Which of the following would NOT be part of the duties of the Oregon STATE Insurance Commissioner?
Write new insurance laws. Oregon state commissioner: Laura Cali 4 Areas of Responsibility: C.A.R.E. Companies Agents Ratification Enforcement
Competent Parties
a person who is a minor, insane, or under the influence of alcohol or drugs is considered incompetent.
Misrepresentation
a written or verbal misstatement of a MATERIAL fact involved in the contract on which the insurer relies. Misrepresentation will VOID the policy only if it concerns a material fact. A material fact is a fact that would cause an insurer to decline a risk, charge a different premium, or change the provisions of the policy that was issued.
Exclusive Agency like Farmers Insurance
company contracts with agencies, which are independent businesses, to represent and sell insurance only for that insurance company.
NCCI: National Council on Compensation Insurance
is a rating bureau with jurisdiction over workers' compensation.
Express authority
is the authority specifically given to an agent, either orally or in writing, by the principal. Written authority is usually provided through an agency agreement that allows the agent to countersign, issue, and deliver policies and provide other customary services on all contracts accepted by the insurer from the agent.
Waiver
is the intentional relinquishment of a known right
Insurance Guaranty Associations
provide funds for payment of unpaid claims when an insurer becomes insolvent
On a claims-made liability policy, the specific date shown in the declarations indicates
retro-active date
Direct Writer
the insurance company's agents are actually employees. They may receive a salary, be paid by commission, or a combination of both.
The garage policy does not cover
the insured's medical bills
Federal Violent Crime Control and Law Enforcement Act
■ It prohibits anyone who has been convicted of a state or federal felony involving dishonesty or breach of trust from engaging in the insurance business without a consent waiver from the Commissioner. ■ There is no statute of limitations. ■ It prohibits fraud, embezzlement, falsification of company records, or coercion in insurance transactions in interstate commerce. ■ Penalties range from $5,000 to $10,000, imprisonment from 10 to 15 years, or both fine and imprisonment. Violations may result in both civil (monetary, regulatory) and criminal (fines and/or jail) penalties.
An Insurance Company may cancel a policy within the first 60 days, and, must give a 10 day written notice
■ Material misrepresentation by the insured-30 days' notice required. ■ Substantial change in risk insured-30 days' notice required. ■ Nonpayment of premium-10 days' notice required.
