West Virginia Laws and Rules Pertinent to Insurance
A producer is suggesting replacement if a prospective insured is given all of the following advice EXCEPT: - "Discontinue premiums and put them into a new policy" - "Take Reduced Paid-Up insurance and use present premiums for a new policy" - "Borrow all of your cash value from your current policy to purchase a new policy" - "Convert your Term insurance to Whole Life"
"Convert your Term insurance to Whole Life"
Penalty if the Commissioner finds unknowingly guilty
$1,000 per violation, maximum $10,000 for all violations
The West Virginia Life and Health Guaranty Association guarantees life insurance death benefits up to
$300,000
Penalty if the Commissioner finds knowingly guilty
$5,000 per violation, maximum $100,000 for all violations
For any one person, the Guaranty Association will provide:
- $300,000 in life insurance death benefits - $300,000 for disability income insurance; long-term care insurance - $100,000 in cash values - $500,000 for basic hospital - $250,000 in present value annuity benefits
Duties of the replacing producer
- Present to the applicant a Notice Regarding Replacement that is signed by both the applicant and the producer. A copy must be left with the applicant - Obtain a list of all existing life insurance and/or annuity policies to be replaced including policy numbers and the names of all companies being replaced - Leave the applicant with the original or a copy or written or printed communications used for presentation to the applicant - Submit to the replaced insurance company a copy of the Replacement Notice with the application
Duties of the replacing insurance company
- Require from the producer a list of the applicant's life insurance or annuity contracts to be replaced and a copy of the applicant - Send each existing insurance company a written communication advising of the proposed replacement within a specified period of time of the date that the application is received in the replacing insurance company's home or regional office. A policy summary or ledger statement containing policy data on the proposed life insurance or annuity must be included
In replacement, the old insurance has been or will be:
- lapsed, forfeited, surrendered or partially surrendered, assigned to the 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 - modified to cause a reduction in benefits or length of policy term - subjected to loans exceeding 25% of the cash value - reissued with a reduction in cash value - used in a financed purchase
Types of Unfair Trade Practices
- misrepresentation - false advertising - defamation - boycott, coercion, and intimidation - false financial statements - unfair discrimination - rebating
Mutual Life Insurance Companies
- owned and controlled by its policyowners - policyholders elect a board of trustees or governing body to manage the firm - profits are returned to policyholders in the form of dividends or retained as surplus to meet future obligations - participating - objective is to provide insurance to its owners, the policyowners, at the lowest net cost
Stock Insurance Company
- owned and controlled by stockholders - nonparticipating - objective is to produce profit for its owners, the stockholders
Insurance transactions include any of these:
- solicitation or inducement to purchase insurance - negotiations toward the sale of insurance - executing a contract of insurance - advising on coverages and claims
What must be included when a producer reports a final disposition of an administrative action against the producer to the Insurance Commissioner?
- the initial complaint - a copy of the order - other relevant legal documents
An applicant for a resident producer license in West Virginia must:
-Be at least 18 years of age - Not have committed any act that is grounds for denial, suspension, or revocation - Completed a prelicensing course - Have passed the state exam for the lines of authority in which licensure is sought - Submit application with fees - Not intend to use the license primarily to write controlled business - Be deemed trustworthy and competent
When the Commissioner calls a hearing, at least __ days written notice will be given to all persons affected by the hearing
15
If the West Virginia Insurance Commissioner calls a hearing on a producer's license, the affected producer must be given at LEAST how many days advance written notice?
15 days
An insured or insurer must ask for a rehearing based on a decision by the Insurance Commissioner within ___ days
30
If a producer has been engaged in an administrative action by any government agency, within how many days following the final disposition must the producer report the action to the Insurance Commissioner?
30
Producers must report a change in address or name to the Insurance Commissioner within ___ days of the change
30
Under West Virginia insurance law, an insured or insurer must ask for a rehearing based on a decision by the Insurance Commissioner within how many days?
30
Conversion period from group life to individual
31 days
The conversion period for a terminated employee to convert group life coverage to an individual plan is
31 days
When the Commissioner calls a hearing, it will be held within ___ days
45
At the very least, a company shall be examined once every ___ years by the Commissioner
5
What is the maximum fixed interest rate charged by insurers in West Virginia?
8%
Licensed agents moving to West Virginia from another state have ___ days within cancelling their previous license to apply for a resident license here
90
Alien insurance company
A company that is chartered and organized in any country other than the United States. Ex: A company chartered in Canada would be an alien company in West Virginia
Domestic insurance company
A company that resides and is incorporated under the laws of the state in which the home office is located. Ex: A company domiciled in West Virginia would be a domestic company in West Virginia
Foreign insurance company
A company whose home office is located in another state. Ex: A company domiciled in Pennsylvania would be a foreign company in West Virginia
In West Virginia, the Insurance Commissioner has the power to penalize a producer for a violation in which of the following ways?
A fine, only after a hearing
How long does an insurance policy have the right to defer granting a policy loan?
A maximum of 6 months after receiving a request for the loan
Commingling
A producer who had combined premiums collected with personal funds. PROHIBITED
Producer
An individual who in any manner sells, solicits, or negotiates insurance on behalf of insurance companies for compensation
Unauthorized user / non-admitted company
An insurance company that has been denied or not yet applied for a Certificate of Authority and may not sell insurance in this state
Authorized insurer / admitted insurance company
An insurance company that has qualified and received a Certificate of Authority from Insurance Department to sell insurance in this state
Direct response solicitation
Any offer by an insurance company to persons in this state (either directly or through a third party) to effect life or health insurance coverage which enables the individual to apply for insurance on the basis of the offer
Which resident producers do not need to continue education?
Credit Accident and Sickness Insurance
An offer of life insurance by an insurance company in West Virginia to individuals who are personally invited to apply on the basis of the offer is known as what type of solicitation?
Direct response
What must the Commissioner do before holding a hearing that may lead to the suspension or revocation of the producer's license?
Give written notice
The West Virginia Insurance Commissioner attains office in which of the following ways?
Gubernatorial appointment (Governor of WV)
Courses are approvedfor continuing education credit by the
Insurance Commissioner and the Board of Insurance Agent Education
Boycott, coersian, and intimidation
It is an illegal practice to commit or coordinatie any act or boycott, coercion, or intimidation in order it restrain or monopolize the business of insurance
False advertising
It is an illegal practice to falsely advertise insurance products or publish misleading information about its insurance coverage. This includes making false statements about the financial condition of an insurer
Defamation
It is an illegal practice to make any public statement or advertisement that contains false information or unsubstantial criticisms about an insurance company intended to harm or malign
Misrepresentation
It is an illegal practice to misrepresent any fact about an insurance policy, such as policy terms, benefits, value, cost, effective date, or existence of a contract of insurance
Unfair discrimination
It is an illegal practice to unfairly discriminate against a person in any way on an insurance-related matter. An example would be charging a different rate for someone in the same actuarial class. Fair discrimination is necessary for the insurance of life insurance policies, which is based on mortality
Rebating
It is illegal to offer a prospective client something of value that is not specified in a contract to induce the purchase on an insurance policy
False financial statements
It is illegal to publish any false financial statement regarding a person or entity
Which of the following statements is CORRECT about the replacement of one insurance policy with another?
It is strictly regulated and requires full disclosure by both the producer and the replacing insurance company
Commissions rule
No person shall pay or accept commissions to/from an unlicensed individual for the purpose of selling or negotiating insurance business
When an existing life insurance policy is being reissued with a reduction in cash value, the producer must sign the
Notice Regarding Replacement of Life Insurance or Annuity
Replacement regulations apply to
Ordinary life insurance
A certificate of authority does which of the following?
Permits an insurance company to transact business in West Virginia
Treatment of replacement
Replacement is strictly regulated and requires full disclosure by both the producer and the replacing insurance company
Resident producers continuing education
Resident producers must complete 24 hours of continuing education every 2 years to keep their license active. 3 of those hours must be in ethics
An insurance company must do which of the following to terminate an producer's appointment?
Send notice of termination to the Commissioner
Mass marketed life or health insurance
Sold through a blanket, group, or franchise party, and is sold by direct response solicitation, under which the insured person pays all the insurance costs
Which of the following statements is CORRECT about the authority of the Insurance Commissioner to review Accident & Sickness policy forms for use in West Virginia?
The Commissioner has authority to review these forms if they will be issued for delivery in West Virginia
Fingerprinting
The Commissioner requires fingerprinting and a criminal history background check on all applicants as a condition of licensing
If the Insurance Department discovers that applicants for an insurance license intend to produce insurance principally on themselves, their family, and their property, which of the following will happen?
The applicants will not be issued a license
In group life insurance policies, assignment of benefits is permitted in West Virginia if the assignment is made to all of the following EXCEPT: - the insured's creditors - the insured's spouse - the insured's adult children - the insured's employer
The insured's employer
Within 15 days of notifying the Commissioner of a termination:
The insurer must mail a copy of the notice to the terminated agent, after which the agent will have 30 days to submit written comments to the Commissioner
In West Virginia, if an insurance producer charges a fee for placing an insurance policy, which of the following statements is CORRECT?
The producer must report the placement to his primary insurance company
Which of the following parties must provide an insured with proper disclosure concerning the replacement of an insurance company?
The producer who sells the new insurance policy
Which of the following statements is CORRECT if an insured converts his Life policy to Paid-Up Insurance and buys new insurance?
The transaction is considered replacement
When are proceeds not exempt from a creditor's claims?
When they are payable to the insured's estate
Which activity may result in suspension or revocation of a producer's license? - Writing primarily controlled business - Using the human life value approach - Issuing a conditional receipt - Changing one's business address
Writing primarily controlled business
Which of the following terms defines the authority given to a producer to transact business on behalf of the insurer?
appointment
A producer who holds a resident license in a different state may apply for a nonresident license in West Virginia as long as:
both states have a reciprocal agreement
During a sales presentation for an ordinary life insurance policy, a producer may legally state that the insurance company guarantees: - dividends - cash values - cost indexes - future interest rates
cash values
What signed document starts the free look period?
delivery receipt
Individual life insurance proceeds are exempt from creditor's claims when they are payable to any of the following entities EXCEPT the insured's: - children - spouse - estate - business partner
estate
The life insurance and annuity replacement regulation defines replacement as
exchanging an existing policy for a new policy
The West Virginia Insurance Commissioner may refuse to renew a producer's license for all of the following reasons EXCEPT - violation of an insurance law - incompetence - filing for bankruptcy - untrustworthiness
filing for bankruptcy
Who is exempt from replacement
group life
The Life and Health Guaranty Association is funded by:
insurance companies through assessments
In West Virginia, life or health insurance offered through direct-response solicitation by a sponsoring organization, under which the insured person pays all of his insurance costs, is known as
mass marketed insurance
A producer who allows his or her license to lapse:
may within 12 months from the renewal date reinstate the license without retaking the state licensing exam. However, a penalty of double the unpaid renewal fee will be required
If a producer tells an applicant that an insurance policy is like a share of stock, the producer may be guilty of
misrepresentation
Controlled Business
policies written on people that the licensed producer has direct influence over (family, employers, a company where producer has stock control)
The Replacement of Life Insurance and Annuities regulation is designed to protect the interest of the
policyowner
Obtaining a license for the primary purpose of writing controlled business is:
prohibited
The licensing of insurance producers is needed to:
protect the public
West Virginia Life and Health Guaranty Association
provides claim payments of admitted insolvent (financially incapacitated) insurers
In West Virginia, an individual producer is considered to:
represent the insurance company
An producer that sells an insurance policy for an unauthorized insurer:
runs the risk of being responsible for unpaid claims
An insured who is covered under an employer's Group Life policy for $15,000 has resigned. All of the following statements about conversion privileges are true EXCEPT: - the insured must apply for conversion within 31 days after the date of resignation - conversion is guaranteed by the insurance company if applied for - the insured can convert to a $15,000, 15-Year Level term policy - the premiums will depend on the insured's age and the type of policy
the insured can convert to a $15,000, 15-Year Level term policy
A licensee may not transact insurance business in West Virginia until:
the licensee is appointed by an insurer
If an insurance producer charges a fee for placing an insurance policy:
the producer must report the placement to his primary insurance company
Proceeds from a life insurance policy are protected from any claims by a creditor of the insured as long as:
there is a named beneficiary
When a producer is soliciting a client to effect a contract of insurance, the producer is engaged in
transacting insurance
Insurers are responsible for submitting an appointment notice to the Commissioner when?
within 15 days of an agent's appointment or submission of first insurance application
Producers must report any bankruptcy, felony conviction, or any other administrative action that occurs in West Virginia or another jurisdiction to the Insurance Department when?
within 30 days after the final dispostition
An insurer that terminates an agent appointment must notify the Commissioner when?
within 30 days of the date of termination