12 - California Laws and Ethics Pertinent to Insurance

Income Qualifications

Adjusted Gross Income (AGI): Your total ("gross") income for the tax year, minus allowed deductions such as conventional IRA contributions, student loan interest, and more. Modified Adjusted Gross Income (MAGI): is the figure used to determine eligibility for premium PPACA tax credits and other savings for Marketplace health insurance plans, Medicaid, and the Children's Health Insurance Program (CHIP). For most people, MAGI is identical or very close to adjusted gross income. MAGI adds any applicable untaxed foreign income, non-taxable Social Security benefits, and tax-exempt interest to your adjusted gross income (AGI). MAGI doesn't include Supplemental Security Income (SSI). MAGI Requirements for MEDI-CAL: The California Medical Assistance Program (Medi-Cal) is the name of California's Medicaid welfare program. Medi-Cal is an entitlement program jointly financed by the Federal and State governments covering low-income adults, families with children, seniors, persons with disabilities, pregnant women, children in foster care and former foster youth up to age 26. Individuals age 19 through 64 qualify with household income up to 138 percent of the Federal Poverty Level (FPL). Children under age 19 qualify if household income is up to 266 percent FPL. Patient Protection and Affordable Care Act (PPACA): The Patient Protection and Affordable Care Act was enacted to ensure that all Americans have access to quality, affordable health care and will create the transformation within the health care system necessary to contain costs. PPACA created new entities called American Health Benefits Exchanges through which individuals, small businesses, and those who do not have access to affordable employer coverage, can purchase coverages. "Exchanges" are created by the Affordable Care Act (ACA) health reform bill to help individuals and small businesses purchase health insurance coverage. In California the exchange is called, "Covered California." The purposes of the exchange include: -Reduce the number of uninsured in the state -Facilitate the purchase and sale of qualified health plans in the individual market -Assist qualified employers in the state in enrolling their employees in qualified health plans -Assists individuals in accessing public programs, premium tax credits, and cost-sharing reductions Under the Affordable Care Act (ACA), the health insurance exchange will perform all of the following roles: -Certify health plans as qualified, based on pre-determined criteria -Utilize individual, unique formats for presenting health benefit plan options -Verify and resolve inconsistent information provided to the exchange by applicants <p> <strong>The SHOP Marketplace</strong> <br><br> In addition to providing an exchange for individual coverage, Covered California also provides for a Small Business Health Options Program Exchange. The Small Business Health Options Program (SHOP) Marketplace helps businesses provide health coverage to their employees. The SHOP Marketplace is open to employers with 50 or fewer full-time-equivalent employees (FTEs). As of January 1, 2014, employers with no more than 25 full time equivalent employees with average annual wages of less than $50,000 may be eligible for a tax credit of up to 50% of the premiums paid by the employer. The employer must purchase health insurance through the SHOP program to qualify. The Patient Protection and Affordable Care Act (ACA) requires adjusted community rating in the small group market. Small group health plans must be guaranteed issue and may vary rates only based on whether the policy covers an individual or family, geographic area, age, and tobacco use. Certified Insurance Agent: An agent certified by the Exchange to transact in the individual and Small Business Health Options Program (SHOP) Exchanges. Metal levels A Qualified Health Plan (QHP) is an insurance plan that's certified by the Health Insurance Marketplace, provides essential health benefits, follows established limits on cost-sharing (like deductibles, copayments, and out-of-pocket maximum amounts), and meets other requirements under the Affordable Care Act. All qualified health plans meet the Affordable Care Act requirement for having health coverage, known as "minimum essential coverage." There are four tiers of "qualifying health plans" you or your employer can purchase on the exchange. They range from lower quality, but more affordable "Bronze plans", to "Silver plans" to a more expensive plan with better coverage called a "Gold plan". There is also a "Platinum plan" which is the highest quality and cost plan. Lower premium plans will have higher deductibles, less benefits and larger out of pocket costs. The actuarial level is calculated as the percentage of total average cost for covered benefits that a plan will cover. -Bronze Plans: 60% actuarial level of coverage provided -Silver Plans: 70% actuarial level of coverage provided -Gold Plans: 80% actuarial level of coverage provided -Platinum Plans: 90% actuarial level of coverage provided Actuarial Value is the percentage of total average costs for covered benefits that a plan will cover. For example: if a plan has an actuarial value of 80%, on average, you would be responsible for 20% of the costs of all covered benefits.

Advertisement and the "cold lead device" disclosure [CIC 10234.9(c)]

Every insurer providing long-term care coverage in California shall provide a copy of any advertisement intended for use in California to the commissioner for review at least 30 days before dissemination. The advertisement shall comply with all laws in California. In addition, the advertisement shall be retained by the insurer for at least three years. <u>An advertisement designed to produce leads must prominently disclose that "an insurance agent will contact you" if that is the case</u>. An agent, broker, or other person who contacts a consumer as a result of receiving information generated by a cold lead device, shall immediately disclose that fact to the consumer. Marketing standards and responsibilities [CIC 10234.93, 10234.95(c)(3)] Every insurer of long-term care in California shall: -Establish marketing procedures to ensure that any comparison of policies by its agents or other producers will be fair and accurate. -Establish marketing procedures to ensure that excessive insurance is not sold or issued. -Submit to the commissioner a list of all agents or other insurer representatives authorized to solicit individual consumers for the sale of long-term care insurance. These submissions shall be updated at least semiannually. -Ensure that each agent or other insurer representative authorized to transact long-term care insurance satisfactorily completes the mandatory initial training and continuing education. Licensees shall complete the initial training requirements of this section prior to being authorized to solicit individual consumers for the sale of long-term care insurance. -Display prominently on page one of the policy or certificate and the outline of coverage: "Notice to buyer: This policy may not cover all of the costs associated with long-term care incurred by the buyer during the period of coverage. The buyer is advised to review carefully all policy limitations." Inquire and otherwise make every reasonable effort to identify whether a prospective applicant or enrollee for long-term care insurance already has accident and sickness or long-term care insurance and the types and amounts of any such insurance. Every insurer or entity marketing long-term care insurance shall establish auditable procedures for verifying compliance with this subdivision. Every insurer shall provide to a prospective applicant, at the time of solicitation, written notice that the Health Insurance Counseling and Advocacy Program (HICAP) provides health insurance counseling to senior California residents free of charge. Every agent shall provide the name, address, and telephone number of the local HICAP program and the statewide HICAP number, 1-800-434-0222. Provide a copy of the long-term care insurance shoppers guide developed by the California Department of Aging to each prospective applicant prior to the presentation of an application or enrollment form for insurance. Clearly post on its Internet Web site and provide written notice at the time of solicitation that a specimen individual policy form or group master policy and certificate form for each policy form offered in this state is available to a prospective applicant upon request. The individual specimen policy form or group master policy and certificate form shall be provided to a requesting party within 15 calendar days of receipt of a request. During the solicitation of a long term care insurance policy, certificate, or rider, the agent and insurer shall develop procedures that take into consideration, when determining whether the applicant meets the standards developed by the insurer, the following: -The ability to pay for the proposed coverage and other pertinent financial information related to the purchase of the coverage. -The applicant's goals or needs with respect to long-term care and the advantages and disadvantages of insurance to meet these goals or needs. -The value, benefits, and costs of the applicant's existing insurance, if any, when compared to the values, benefits, and costs of the recommended purchase or replacement. The issuer, and where an agent is involved, the agent, shall make reasonable efforts to obtain information necessary to determine if the customer meets the suitability standards. The efforts shall include presentation to the applicant, at or prior to application, of the "Long-Term Care Insurance Personal Worksheet," contained in the Long-Term Care Insurance Model Regulations of the National Association of Insurance Commissioners. The personal worksheet used by the insurer shall contain, at a minimum, the information in the NAIC worksheet in not less than 12-point type. The insurer may request the applicant to provide additional information to comply with its suitability standards. In the premium section of the personal worksheet, the insurer shall disclose all rate increases and rate increase requests for all policies, whether issued by the insurer or purchased or acquired from another insurer, in the United States for the current year and for nine preceding years. The premium section shall include a statement that reads as follows: "A rate guide is available that compares the policies sold by different insurers, the benefits provided in those policies, and sample premiums. The rate guide also provides a history of the rate increases, if any, for the policies issued by different insurers in each state in which they do business, for the current year and for the nine preceding years. You can obtain a copy of this rate guide by calling the Department of Insurance's consumer toll-free telephone number (1-800-927-HELP), by calling the Health Insurance Counseling and Advocacy Program (HICAP) toll-free telephone number (1-800-434-0222), or by accessing the Department of Insurance's Internet Web site (www.insurance.ca.gov)."

license qualification (1666,1668-1669,1738)

upon the filing of an application for a license, the commissioner may make such investigation and require the filing of such supplementary documents, affidavits and statements as may be necessary to obtain a full disclosure of such information as will aid him in determining whether the prerequisites for the license have been met. it the applicant makes a showing satisfactory to the commissioner that he meets all such prerequisites, the commissioner, if the applicant be elite then therefor, may issue a certificate of convenience, and upon the applicant meeting any applicable examination requirements may issue a permanent license. the commissioner may place on probation, suspend, revoke, refuse to renew, or deny a license to any person who has: -the applicant is not properly qualified to perform the duties of a person holding the license applied for; -the granting of the license will be against public interest; -the applicant does not intend actively and in good faith to carry on as a business with the general public the transactions which would be permitted by the issuance of the license applied for; -the applicant is not of good business reputation; -the applicant is lacking in integrity; -the applicant has been refused a professional, occupational, or vocational license or had such a license suspended or revoked by any licensing authority for reasons that preclude the hearing of the license applied for; -the applicant seeks the license for the purpose of avoiding or preventing the operation or enforcement of the insurance laws of this state; -the applicant has been refused a professional, occupational, or vocational license or had such a license suspended or revoked by any licensing authority for reasons that should preclude the granting of the license applied for; -the applicant has knowingly or willfully made a misstatement in an application to the commissioner for a license, or in a document filed in support of such an application, or has made a false statement in testimony given under oath before the commissioner or any other person acting in his or her stead; -the applicant has shown incompetency or untrustworthiness in the conduct of any business, or has by commission of a wrongful act or practice in the course of any business exposes the public or those dealing with him or her to the danger of loss; -the applicant has knowingly misrepresented the terms or effect of an insurance policy or contract; -violating california insurance laws (CIC, CCR) regulations, subpoena, or orders from the insurance commissioner -forging a name to an insurance document or application -cheating on an insurance license examination -knowingly accepting insurance business from an unlicensed individual -providing time the commissioner a false certificate regarding educational sources completed -knowingly violating the law against twisting -misrepresenting a material fact regarding insurance coverage -violating long-term care requirements -conspiring to produce nonadmitted insurance in violation of the law -the applicant has failed to perform a duty expressly enjoined upon him or her by a provision of his code or has commuted an act expressly forbidden by such a provision; -the applicant has been convicted of: *a felony *a misdemeanor denounced by this code or other laws regulating insurance *a public offense having as one of its necessary elements a fraudulent act or an act of dishonesty is acceptance, custody, or payment of money or property -the applicant has aided or abetted any person in an act of omission which would constitute grounds for the suspension, revocation, or refusal of a license or certificate issued under this code to the person aided or abetted -the applicant has permitted any works in his or her employ to violate any provisions of his code -the applicant has dilated any provision of law relating to conduct of business which could lawfully be done only under authority conferred by such license -the applicant has submitted to the commissioner a false or fraudulent certificate pursuant to subdivision (d) of section 1749.5 a judgment, plea, or verdict of guilty, or a plea of nolo contenders is deemed to be a conviction within the meaning of this section.

Notices [CIC 38, 38.5]

Unless expressly otherwise provided, any notice required to be given to any person may be given by mailing notice, postage prepaid, addressed to the person to be notified, at his residence or principal place of business in this State. Any written record required to be given sent by first-class mail, regular mail, or does not specify a method of delivery, to any person by a licensee, if not excluded, may be provided by electronic transmission, if each party has agreed to conduct the transaction by electronic means, and if the licensee complies with this section. Exclusions to electronic communication include the following policies: -Medicare supplement policies -Long-term care insurance -Group disability policies -Nonprofit hospital service plans -Liability, workers' compensation, and common carrier liability insurance In order to transmit a record electronically, a licensee shall comply with all of the following: 1. Acquires consent of the person to opt in to receive the record by electronic transmission verbally, in writing, or electronically prior to providing the record by electronic transmission. If consent is acquired verbally, the licensee shall confirm consent in writing or electronically. The licensee shall retain a record of the person's consent to receive the record by electronic transmission with the policy information so that it is retrievable upon request by the department while the policy is in force and for five years thereafter. 2. A licensee discloses, in writing or electronically, to the person all of the following: -The opt in to receive the record by electronic transmission is voluntary. -That the person may opt out of receiving the record by electronic transmission at any time, and the process or system for the person to opt out. -A description of the record that the person will receive by electronic transmission. -The process or system to report a change or correction in the person's email address. -The licensee's contact information, which includes, but is not limited to, a toll-free number or the licensee's Internet Web site address. -The email address of the person who has consented to electronic transmission 3. The licensee shall annually provide one free printed copy of any record described in this subdivision upon request by the person. 4. If the licensee is required to transmit a record by return receipt, registered mail, certified mail, signed written receipt of delivery, or other method of delivery evidencing actual receipt by the person, and if the licensee is not otherwise prohibited from transmitting the record, the licensee shall maintain a process or system that demonstrates proof of delivery and actual receipt of the record by the person. A licensee may demonstrate actual delivery and receipt by any of the following: -The person acknowledges receipt of the electronic transmission of the record by executing an electronic signature. -The record is posted on the licensee's secure Internet Web site, and there is evidence demonstrating that the person logged onto the licensee's secure Internet Web site and downloaded, printed, or otherwise acknowledged receipt of the record. -The record is transmitted to the named insured through an application on a personal electronic device that is secured by password, biometric identifier, or other technology, and there is evidence demonstrating that the person logged into the application and viewed or otherwise acknowledged receipt of the record. -If a licensee is unable to demonstrate actual delivery and receipt pursuant to this paragraph, the licensee shall resend the record by regular mail to the person in the manner originally specified by the underlying provision of this code. 5. A notice of lapse, nonrenewal, cancellation, or termination of any product subject to this section may be transmitted electronically if the licensee demonstrates proof of delivery as set forth above and complies with the other provisions in this section. 6. Upon a licensee receiving information indicating that the record sent by electronic transmission was not received by the person, the licensee shall, within five business days, either: -Contact the person to confirm or update the person's email address and resend the record by electronic transmission. or -Resend the record initially provided by electronic transmission by regular mail to the insured at the address shown on the policy, or, if the underlying statute requires delivery in a specified manner, send the record in that specified manner. 7. The licensee shall not charge any person who declines to opt in to receive a record through electronic transmission from receiving a record electronically. The licensee shall not provide a discount or an incentive to any person to opt in to receive electronic records. 8. The licensee shall verify a person's email address via paper writing sent by regular mail when more than 12 months have elapsed since the licensee's last electronic communication.

RECORDKEEPING REQUIREMENTS

Agents and insurers must keep full and accurate records of all insurance business in which they are involved. Most records must be kept for at least five years. Agent Recordkeeping The Commissioner shall specify the manner and type of records to be maintained by licensees acting as agents and brokers, and the location where records must be kept. Every licensee employing an insurance solicitor shall keep the records for insurance transacted by the solicitor as the licensee's employee. Agents must also maintain records of the written disclosure required concerning the effective date of personal lines coverages. Agents must provide applicants with the effective date of coverage at the time of application or when the premium is first received Life agents must keep transaction records for 5 years. Agents (all classes other than life) must keep all client, policy, and transaction records for a minimum of 2 years. If the agent has not kept the required records, the Commissioner may order the agent to establish the records within 60 days. Failure to comply is grounds for license suspension or revocation. Insurer records Insurers transacting life or disability insurance must maintain the following records, which the Commissioner may request for examination: -Original application for each insurance policy or contract sold in California -Premiums received by the insurer for each policy or contract issued -Production records showing all policies or contracts sold by each agent for each of the preceding five calendar years -Records identifying any agent other than the agent appearing on the application, who handled any part of an insurance transaction for which the other agent was not compensated -Correspondence, solicitations, or proposals sent to a prospect, applicant, or insured -Any written comparison of benefits, limitations, exclusions, costs of existing accident, sickness, or long-term care coverage, and proposed coverage -A copy of the outline of coverage or other required disclosure statement -Copies of correspondence between the policyholder, the proposed policyholder, or anyone acting on behalf of this person and the agent or insurer Records must be kept for at least two years following actual policy delivery, or two years from the date of application if no policy was issued -Life insurance companies transacting life insurance in California must maintain the original application for each insurance policy sold in California for 2 years. Examination of records The Commissioner must examine the financial affairs of each insurer operating in California prior to issuing a certificate of authority. At the very least, a company shall be then examined once every 5 years. Any person making false reports, statements, or willful omitting material facts with the intent to deceive any agent or examiner lawfully appointed to examine the conditions or affairs of an insurer may be found guilty of an unfair trade practice. Other Required Record keeping [CCR 2695.3] -Informational records about transactions conducted under the agent/broker license must be kept for 18 months -Detailed bank records must be kept for 5 years -Applications, premium and production records, coverage and correspondence from date of policy delivery, or application must be kept for two years -Any materials used in a life insurance policy replacement must be kept for three years -Advertisements used to solicit long-term care insurance must be kept for three years -Claim data including claim number, line of coverage, date of loss and date of payment of the claim, date of acceptance, denial or date closed without payment shall be maintained for all open and closed files for the current year and the four preceding years. The file shall include the date the licensee received, processed and transmitted or mailed every material and relevant document in the file; and must be capable of duplication to hard copy.

Person [CIC 19, 150]

"Person" means any person, association, organization, partnership, business trust, limited liability company, or corporation. Any person capable of making a contract may be an insurer A person shall be considered a resident of this state if the person's last known mailing address, as shown in the records of the insurance institution, agent, or insurance-support organization, is located in this state.

Accident and Health license

Accident and Health, which entitles the licensee to transact insurance coverage for sickness, bodilyinjury, or accidental death and may include benefits for disability income.

Notice of Legal Action [CCR 2695.2(o)]

Notice of Legal Action means notice of an action commenced against the insurer with respect to a claim, or notice of action against the insured received by the insurer, or notice of action against the principal under a bond, and includes any arbitration proceeding;

materiality

is relevant information that would probably influence a party's assessment of a proposed contract

california code of regulations (CCR)

the california code of regulations is necessary to administer the california insurance code. while the CIC is written and passed by the executive and legislative branches of the california state government, the CCR consists of rules issued CIC and may be changed or withdrawn by the commissioner as he seems necessary. whole it is true that the california code of regulations are not technically laws, they carry the same weight as laws and any person who violates a a regulation is subject to the same penalty as someone who violates the code.

Proof of Claim [CCR 2695 2(s)]

Any documentation in the claimant's possession submitted to the insurer that provides any evidence of the claim and that supports the magnitude or the amount of the claimed loss. (Title 10, CCR 2695.2(s)

California Partnership for Long-Term Care [CCR 58056]

Issuers must provide written evidence to the Department of Insurance that procedures are in place to assure that no agent, broker, solicitor, or individual will be authorized to market, sell, solicit, or otherwise contact any person for the purpose of marketing a Partnership Long-Term Care Insurance Policy or Certificate unless the agent, broker, solicitor, or individual has completed eight (8) hours of education on long-term care in general <b>and</b> eight (8) hours of training in a live classroom setting on the California Partnership for Long-Term Care in particular. Long-term care regulations To meet the chronically ill requirement of a Long-Term Care policy, an individual MUST be unable to perform a minimum of two activities of daily living. When an agent sells a replacement long-term care policy, the agent's first year sales commission will be determined based on the difference between the new and original policy annual premiums ETHICS AND ETHICAL CONDUCT It is the responsibility of insurers and their producers to act in a fiduciary capacity when engaging in any insurance transactions. In addition, as part of this fiduciary responsibility, insurers and producers must act ethically and within the legal parameters of the California Insurance Code. Ethical conduct generally stems from a "code of ethics" or a code of conduct. As mentioned, producers should not engage in any of the unfair sales and marketing practices that were previously described. The basic objective of any code of ethics is to serve the public interest and place the customer's interest first by specifying and enforcing the minimum ethical conduct expected of an insurance producer and its principal (i.e., insurer). In addition, another ultimate goal of any code of conduct is to prevent unethical conduct and unfair practices. According to Section 791 of State law, the California Insurance Code and the California Code of Regulations specify numerous illegal insurance practices and impose sanctions or penalties on those who violate insurance law. The California Code also establishes standards for the collection, use and disclosure of information gathered in the process of engaging in insurance transactions. The purpose of these standards is to maintain a balance between the need for information by those conducting the business of insurance and the public's demand for privacy. State laws alone do not offer a model for how insurance business should be conducted in this State. However, ethical standards illustrated by a code of some kind or by the voluntary compliance of producers and insurers goes beyond the law and defines not only what insurers and producers must do, but what they should do. Ethical conduct is important to the success of insurance producers and the insurance industry. The producer is the first link connecting the public and the insurer. A producer greatly influences the public's attitude toward the insurance industry. In addition, many consumers do not understand how insurance products work. Therefore, a producer often finds himself or herself in the position of recommending to a prospective insured a specific product. The producer must be committed to providing a prospective purchaser an honest explanation of the policies and services he or she offers. Generally, a producer will base sales activity on the assumption that insurance solves problems and reduces uncertainty. Therefore, producers assist their clients in identifying insurance needs and demonstrating how such needs can be satisfied utilizing insurance products. The producer's interests and biases should not be a factor in any insurance transaction. Producers should remain independent and objective in their evaluations and recommend insurance products that will meet the needs of and benefit the policyowner. The producer is also responsible for confidentiality and the submission of applications and timely policy delivery. Insurance producers greatly influence the public's attitude toward the industry. Relationships are built between the client and the producer when the latter determines a potential client's insurance needs, recommends a product or solution and develops a longterm relationship following the sale. An insurance producer is also obligated to inform the client about insurance products and solutions truthfully while acting with a high degree of professionalism and in a fiduciary capacity. Section 791.03 of the CIC states that an insurance producer has a greater fiduciary responsibility when dealing with senior citizens. Greater ethical concerns are associated with seniors due to their susceptibility to deceptive practices. One illustration of this involves pretext interviews. These are interviews that are conducted under false pretenses. The CIC does not permit the use of pretext interviews in order to obtain information that may be used in an insurance transaction. The California Insurance Code and the California Code of Regulations identify numerous illegal sales and marketing practices. However, regulations pertaining to these illegal activities provide no descriptions of ethical behavior. Producers are held to an ethical standard by the insurers they represent and the experience they gain in their profession. <p> As mentioned previously, insurance agents or producers have responsibilities to both their insurer and their policyowners. Licensees must protect the interests of the insurer as well as the client. They need to work together with the underwriting department in order to reduce and avoid adverse selection. The producer's initial responsibility to the insurer involves field underwriting, which is the initial step in the underwriting process. In some cases, the producer or "field underwriter" is known as a pre-selector of risks. Agents and other producers may also engage in post-selection activities as well in order to maintain persistency. Persistency has to do with keeping business "on the books." This may be accomplished by continual servicing or other contact with the client. Sections 10382 through 10384 of the CIC identify specific provisions of the California Insurance Code with regard to the alteration of applications and post-claims underwriting of disability insurance. No alteration of an application for disability insurance may be made by a licensee without the knowledge and permission of the applicant. The insurer may make insertions for administrative purposes as long as they are clearly indicated as such. Anyone who engages in an illegal alteration is guilty of a misdemeanor. In addition, no insurer issuing disability insurance or insurance covering hospital, medical or surgical expenses can engage in the practice of post-claims underwriting. This type of underwriting involves the rescinding, canceling or limiting of a policy of insurance due to the insurer's failure to resolve all reasonable questions arising from an application for insurance before issuing the policy. To summarize, an agent, broker or producer must always act in an ethical and fiduciary capacity. He or she must always place the interest of the customer first. In other words, the needs of the customer must be determined and only those products and services that can satisfy such needs should be recommended by the licensee. Further, the licensee must accurately and truthfully represent these products and services, avoid inaccurate remarks about the competition and provide exemplary service to all customers. When a licensee is interviewing a customer, he or she must use simple and understandable language (i.e., laymen's language). In addition, the relationship between the licensee and the customer is of paramount importance as well. The producer must maintain contact with the client and conduct periodic reviews of insurance needs, while protecting the confidential relationship that exists. It is also the responsibility of any licensed insurance producer to increase his or her level of competence and professionalism by completing continuing education courses throughout their career. The State of California has in place continuing education requirements to ensure that licensees maintain competence and trustworthiness. Licensees should never engage in any unfair sales or marketing practices such as defamation, which involves making false statements or inaccurate remarks concerning a competitor. This also indicates that the licensee must obey all insurance laws and regulations. However, even though the California Insurance Code and the CCR identify many unethical and / or illegal practices, they are not a complete guide to ethical behavior.

Long-term Care Insurance [CIC 10231, 10234, CCR 58056]

Long-term care insurance includes any insurance policy, certificate, or rider advertised, marketed, offered, solicited, or designed to provide coverage for diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services that are provided in a setting other than an acute care unit of a hospital. Long-term care insurance includes all products containing any of the following benefit types: coverage for institutional care including care in a nursing home, convalescent facility, extended care facility, custodial care facility, skilled nursing facility, or personal care home; home care coverage including home health care, personal care, homemaker services, hospice, or respite care; or community-based coverage including adult day care, hospice, or respite care. Long-term care insurance includes disability based long-term care policies but does not include insurance designed primarily to provide Medicare supplement or major medical expense coverage. The commissioner shall review and approve individual and group policies, certificates, riders, and outlines of coverage. Duty of honesty, good faith, and fair dealing [CIC 10234.8] With regard to long-term care insurance, all insurers, brokers, agents, and others engaged in the business of insurance owe a policyholder or a prospective policyholder a duty of honesty, and a duty of good faith and fair dealing. Conduct of an insurer, broker, or agent during the offer and sale of a policy previous to the purchase is relevant to any action alleging a breach of the duty of honesty, and a duty of good faith and fair dealing. Unnecessary Replacement of Long-term Care Insurance [CIC 10234.85] No insurer, broker, agent, or other person shall cause a policyholder to replace a long term care insurance policy unnecessarily. Nothing in this section shall be construed to allow an insurer, broker, agent, or other person to cause a policyholder to replace a long term care insurance policy that will result in a decrease in benefits and an increase in premium. It shall be presumed that any third or greater policy sold to a policyholder in any 12-month period is unnecessary within the meaning of this section. The exception is instances in which a policy is replaced solely for the purpose of consolidating policies with a single insurer.

Medicare Supplement Policies [CIC 10192.1 - 10192.20]

Minimum Standards [CIC 10192.8] Medicare supplement policies advertised and issued in this state are closely regulated by the California Department of Insurance. The minimum standards for all Medicare supplement policies as set by the CDI. The following general standards apply to Medicare supplement policies and certificates and are in addition to all other requirements -Loss resulting from sickness must be covered on the same basis as loss resulting from an accident.</li> -Policies must build in automatic annual adjustments to account for increases in Medicare's cost-sharing amounts (deductibles and co-payments).</li> -Policies must only be contestable for a two-year period which begins on the effective date of coverage. Once issued, policies cannot be canceled or non-renewed for reasons other than non-payment of premium or material misrepresentation. -If the Medicare supplement policy is terminated by the master policyholder and is not replaced, the issuer shall offer certificate holders an the option to enroll in an individual Medicare supplement policy which either provides for continuation of the benefits contained in the group policy or provides for benefits that otherwise meet the requirements of one of the standardized policies defined in this article. -If an individual is a certificate holder in a group Medicare supplement policy and the individual terminates membership in the group, the issuer shall offer the certificate holder the opportunity to convert to an individual policy or at the option of the group policyholder, offer the certificate holder continuation of coverage under the group policy -If a group Medicare supplement policy is replaced by another group Medicare supplement policy purchased by the same policyholder, the issuer of the replacement policy shall offer coverage to all persons covered under the old group policy on its date of termination. Coverage under the new policy shall not result in any exclusion for preexisting conditions that would have been covered under the group policy being replaced. If the Medicare supplement policy or certificate has been in force for six months or more, the replacing issuer shall not impose an exclusion or limitation based on a preexisting condition. If the original coverage has been in force for less than six months, the replacing issuer shall waive any time period applicable to preexisting conditions, waiting periods, elimination periods, or probationary periods in the new policy or certificate to the extent the time was spent under the original coverage. -Termination of a Medicare supplement policy or certificate shall be without prejudice to any continuous loss that commenced while the policy was in force, but the extension of benefits beyond the period during which the policy was in force may be predicated upon the continuous total disability of the insured, limited to the duration of the policy benefit period, if any, or payment of the maximum benefits. Receipt of Medicare Part D benefits shall not be considered in determining a continuous loss. -Except for non-payment of premium, spousal coverage may not be terminated solely due to the occurrence of an event specified for termination of coverage of the insured. -Coverage must not be limited coverage to a single disease or affliction. -Medicare supplement policy termination cannot reduce the benefits for any continuous loss or claim that started prior to termination. -Medicare Supplement Buyer's Guide must be provided to all applicants. This guide must be in the form developed jointly by the National Association of Insurance Commissioners and the Health Care Financing Administration. This guide must be delivered to the applicant at the time the application is taken and the agent must obtain an acknowledgment of receipt from the applicant. In the case of direct response insurers, the guide must be delivered to the applicant upon request but never later than at the time the policy is delivered. -An outline of coverage must be given to all applicants at the time of the sales presentation or at the time application is made. Direct response insurers must obtain a written acknowledgment of receipt of the outline of coverage from the applicant. If the Medicare supplement policy that is issued differs from the outline, a substitute outline of coverage must be provided at the time of delivery and must have a prominent notice to the buyer to read the outline carefully as it is not identical to the previous outline provided. -All insurers must disclose on the cover page of the outline of coverage the loss ratio of the policy during the preceding year. -If replacement is involved, the insurer must provide the applicant with the appropriate replacement information. -The insured must be given a free-look period of 30 days in which to review the policy and, if dissatisfied for any reason, may return the policy for a full refund of premium. -Benefits and premiums under the policy or certificate shall be suspended at the request of the policyholder or certificate holder for a period not to exceed 24 months, in which the policyholder or certificate holder has applied for and is determined to be entitled to medical assistance under Medi-Cal, but only if the policyholder or certificate holder notifies the issuer of the policy or certificate within 90 days after the date the individual becomes entitled to assistance. If suspension occurs and if the policyholder or certificate holder loses entitlement to medical assistance under Medi-Cal, the policy or certificate shall be automatically reinstituted as of the termination of entitlement if the policyholder or certificate holder provides notice of loss of entitlement within 90 days after the date of loss and pays the premium attributable to the period, effective as of the date of termination of entitlement or equivalent coverage shall be provided if the prior form is no longer available. Each Medicare supplement policy shall provide that benefits and premiums under the policy shall be suspended (for any period that may be provided by federal regulation) at the request of the policyholder if the policyholder is covered under a group health plan. If suspension occurs and if the policyholder or certificate holder loses coverage under the group health plan, the policy shall be automatically reinstituted if the policyholder provides notice of loss of coverage within 90 days after the date of the loss and pays the applicable premium. Reinstitution of coverages shall comply with all of the following requirements: -Not provide for any waiting period with respect to treatment of preexisting conditions. -Provide for resumption of coverage that is substantially equivalent to coverage in effect before the date of suspension. -Provide for classification of premiums on terms at least as favorable to the policyholder or certificate holder as the premium classification terms that would have applied to the policyholder or certificate holder had the coverage not been suspended

DEFINITION OF REPLACEMENT

Replacement means a transaction in which new life insurance or a new annuity is to be purchased, and it is known or should be known to the proposing producer that existing life insurance or annuity has been or will be: (1) lapsed, forfeited, surrendered or otherwise terminated; (2) converted to reduced paid-up insurance, continued as extended term insurance or otherwise reduced in value by the use of non-forfeiture benefits or other policy values; (3) amended so as to effect either a reduction in benefits or in the term for which coverage would otherwise remain in force or for which benefits would be paid; (4) reissued with any reduction in cash value; or (5) pledged as collateral or subjected to borrowing, whether in a single loan or under a schedule of borrowing over time for total amounts exceeding 25 percent of the policy's loan value. Conservation — An attempt by the existing insurer or its producer to dissuade a policyholder from replacing existing life insurance or an annuity. Conservation does not include routine administrative procedures, such as late payment reminders, late payment offers or reinstatement offers. Duties Regarding Replacement — With each application submitted to the insurer, all producers must also submit: a statement signed by the applicant indicating whether existing life insurance or an annuity will be replaced; and a signed statement as to whether the agent knows replacement is or may be involved in the transaction. Where a replacement is involved, the producer is required to: (1) provide to the applicant a Notice Regarding Replacement of Life Insurance signed by both the applicant and the producer. The notice must be left with the applicant and must be provided no later than at the time of application; (2) obtain with each application a list of all existing life insurance or annuities to be replaced; (3) leave with the applicant the original or a copy of all printed communications used for presentation to the applicant; and (4) submit to the replacing insurer a copy of the replacement notice with the application. Every producer who uses written or printed communications in a conservation effort must leave with the applicant the original or the conservation materials used. Insurer Duties Regarding Replacement — Insurers have certain responsibilities in regard to replacement. In such cases, all life insurers must: (1) inform its field representatives or other personnel responsible for compliance with this law of its requirements; and (2) require with each completed application for life insurance or annuity a statement signed by the applicant as to whether such proposed insurance or annuity will replace existing life insurance or annuity. In addition, every life insurer must require with each application for life insurance or annuity, a statement signed by the producer if he or she knows that a replacement is involved in the transaction. Where replacement is involved, the life insurer must: (1) require from the producer a list of all of the applicant's existing insurance policies to be replaced and a copy of the replacement notice provided the applicant; (2) within three working days of the date the application is received by the replacing insurer, send to each insurer whose business is being replaced a written notice of replacement including information and a policy summary containing data on the proposed policy or annuity; and (3) keep a copy of the notice regarding replacement, the policy summary, the contract summary and any ledger statements used for a period of at least three years. Any insurer who engages in conservation must, within twenty days of the date it receives the aforementioned written material, provide the policyowner a policy summary of the existing life insurance. The existing insurer must maintain evidence of policy summaries, contract summaries or ledger statements used in any conservation for at least three years. The replacing insurer must also provide that the applicant has a right to an unconditional refund of all premiums paid. This right may be exercised within a period of 20 days beginning from the date of policy delivery. Replacement Involving Direct Response Insurers — Section 10509 of the CIC states that a direct response insurer is one that markets insurance by mail without utilizing producers, agents or brokers. If a direct response insurer does not propose the replacement, and a replacement is involved, the insurer must send to the applicant with the policy a Notice Regarding Replacement. If the direct response insurer proposed the replacement, this same Notice Regarding Replacement must be provided to applicants or prospective applicants. In addition, the direct response insurer must request from the applicant a list of all existing life insurance or annuity contracts to be replaced, identified by name of insurer and policyowner or attachment to the application. Every existing insurer whose business will be replaced must be sent a written notice informing it of the replacement. Replacement Penalties — Any producer or insurer who recommends the replacement or conservation of an existing policy by engaging in a materially inaccurate presentation, unfair comparison or an inaccurate description of policies violates California replacement regulations. Any producer or other person engaged in the insurance business, other than an insurer, who violates this section of the CIC, is liable for a penalty of not less than $250 for the first violation. A second violation or a knowing violation is punishable by a penalty of $1000 to $25,000. Insurers who violate this section of the CIC are liable for a penalty of at least $2,500 for the first violation. Employers may discontinue an existing group life or disability policy and replace it with another policy. All discontinued group life policies must include a reasonable extension of the death benefit with respect to employees who become totally disabled while insured under the policy and who continue to be totally disabled at the date of policy discontinuance. Section 10128.2 of the CIC states that if a group policy contains a life insurance benefit but does not contain an extension of benefits feature, it must provide totally disabled employees the same conversation rights to an individual life insurance policy at the time of policy discontinuance that employees would have had if their employment or association membership had terminated on the same date. Any insurer that provides replacement coverage for hospital, medical or surgical benefits on an expense incurred or service basis within sixty days from the date of discontinuance of a prior policy must immediately cover all employees and dependents who were covered under the previous policy at the date of discontinuance. Until an employee or dependent entitled to coverage under a succeeding insurer's policy qualifies for full benefits, the level of benefits may not be lower than the benefits provided under the prior insurer's policy, reduced by the amount of benefits paid by the prior insurer. The employee or dependent must continue to be covered by the succeeding insurer until the earlier of: (1) the date of coverage would terminate for an employee or dependent in accordance with the provisions of the succeeding insurer's policy; or (2) in the case of a totally disabled employee or dependent who was entitled to an extension of prior benefits, the date the extension period ends or, if the prior insurer's policy is not subject to this section of the CIC, the date to which benefits would have been extended had the prior insurer's policy been subject to this section of California regulations. Coverage for dependents of insured employees [CIC 10270.65] If hereafter any dividend is paid or any premium refunded under any policy of group disability insurance heretofore or hereafter issued, the excess, if any, of the aggregate dividends or premium refunds under such policy over the aggregate expenditures for insurance under such policy made from funds contributed by the policyholder, or by an employer of such insured persons or by union or association to which insured persons belong, including expenditures made in connection with the administration of such policy, shall be applied by the policyholder for the benefit of such insured employees generally or their dependents or insured members generally or their dependents. For the purpose of this section and at the option of the policyholder, "policy" may include all group life and disability insurance policies of the policyholder.

Underwriting of AIDS Risks [CIC 799]

The purposes of this article are to establish standards for the performance by life and disability income insurers of their duty to avoid making or permitting unfair distinctions between individuals of the same class in the underwriting of life or disability income insurance for the risks of acquired immune deficiency syndrome (AIDS) and AIDS-related conditions (ARC); to establish mandatory and uniform minimum standards for assessing AIDS and ARC risks for determining insurability which are deemed to be sufficiently reliable to be used for life and disability income insurance risk classification and underwriting purposes; to require the maintenance of strict confidentiality of personal information obtained through testing; and to require informed consent before any insurer tests for HIV. A life or disability income insurer may not require an applicant to undergo an HIV antibody test unless the cost of the test is borne by the insurer. No life or disability income insurer shall consider the marital status or known or suspected homosexuality or bisexuality of an applicant for life insurance or disability income insurance in determining whether to require an HIV antibody test of that applicant. No life or disability income insurer shall require an HIV antibody test if the results of the test would be used exclusively or nonexclusively for the purpose of determining eligibility for hospital, medical, or surgical insurance coverage or eligibility for coverage under a nonprofit hospital service plan or health care service plan. No insurer shall test for HIV or for the presence of antibodies to HIV for the purpose of determining insurability other than in accordance with the informed consent, counseling, and privacy protection provisions. Notwithstanding any other provision of law, this constitutes the exclusive requirements for counseling, informed consent, and privacy protection for that testing. An insurer that requests an applicant to take an HIV-related test shall obtain the applicant's written informed consent for the test. Written informed consent shall include a description of the test to be performed, including its purpose, potential uses, and limitations, the meaning of its results, procedures for notifying the applicant of the results, and the right to confidential treatment of the results. Prior to the applicant's execution of the consent, the insurer shall: 1. Provide the applicant printed material describing HIV, its causes and symptoms, the manner in which it is spread, the test or tests used to detect HIV or the HIV antibody, and what a person can do whose test results are positive or negative. 2. Provide the applicant a list of counseling resources available, where the applicant can obtain assistance in understanding the meaning of the test and its results. The list may be provided from publicly available information. The insurance code requires strict confidentiality of personal information obtained through HIV testing and requires informed consent before any insurer tests for HIV. The insurer shall notify an applicant of a positive test result by notifying the applicant's designated physician. If the applicant tested has not given written consent authorizing a physician to receive the test results, the applicant shall be urged, at the time the applicant is informed of the positive test results, to contact a private physician, the county department of health, the State Department of Health Services, local medical societies, or alternative test sites for appropriate counseling. Any person who negligently discloses results of an HIV antibody test to any third party, in a manner that identifies or provides identifying characteristics of the person to whom the test results apply, except pursuant to a written authorization, shall be assessed a civil penalty in an amount not to exceed one thousand dollars ($1,000) plus court costs, as determined by the court, which penalty and costs shall be paid to the subject of the test. Any person who willfully discloses the results of an HIV antibody test to any third party, in a manner that identifies or provides identifying characteristics of the person to whom the test results apply, except pursuant to a written authorization, shall be assessed a civil penalty in an amount not less than one thousand dollars ($1,000) and not more than five thousand dollars ($5,000) plus court costs, as determined by the court, which penalty and costs shall be paid to the subject of the test. Any person who willfully or negligently discloses the results of an HIV antibody test to a third party, in a manner that identifies or provides identifying characteristics of the person to whom the test results apply, except pursuant to a written authorization, that results in economic, bodily, or psychological harm to the subject of the test, is guilty of a misdemeanor punishable by imprisonment in the county jail for a period not to exceed one year, by a fine of not to exceed ten thousand dollars ($10,000), or by both that fine and imprisonment. Each disclosure made in violation of this section is a separate and actionable offense.

UNFAIR CLAIM SETTLEMENT PRACTICES

UNFAIR CLAIM SETTLEMENT PRACTICES The following acts, omissions, or practices are defined as unfair and deceptive claim settlement practices when knowingly committed or performed with such frequency as to indicate a general business practice, and are prohibited: -Misrepresenting to insured's pertinent facts or policy provisions relating to coverage at issue -Failing to acknowledge and act reasonably promptly upon communications with respect to an insurance claim -Failing to adopt and implement reasonable standards for prompt investigation and processing of insured's claims -Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements are completed and submitted by insured's -Not attempting in good faith to effect prompt, fair and equitable settlements of claims on which liability has become reasonably clear; Refusing or delaying a settlement solely because there is other insurance available to partially or entirely satisfy the claim loss; the claimant who has a right to recover from more than one insurer has the right to choose the coverage from which to recover and the order in which payment is to be made -Compelling insured's to initiate suits to recover amounts due under an insurance policy by offering substantially less than the amount ultimately recovered in those suits -Failing to provide a reasonable basis for the denial of a claim upon request -Attempting to settle a claim by an insured for less than the amount to which a reasonable person would have believed he or she was entitled by reference to written or printed advertising material accompanying or made part of an application. -Attempting to settle claims on the basis of an application that was altered without notice to, or knowledge or consent of, the insured, his or her representative, agent, or broker. -Making known to insureds or claimants a practice of the insurer of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration. -Delaying the investigation or payment of claims by requiring an insured, claimant, or the physician of either, to submit a preliminary claim report, and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information. -Directly advising a claimant not to obtain the services of an attorney. -Misleading a claimant as to the applicable statute of limitations. -Delaying the payment or provision of hospital, medical, or surgical benefits for services provided with respect to acquired immune deficiency syndrome or AIDS-related complex for more than 60 days after the insurer has received a claim for those benefits, where the delay in claim payment is for the purpose of investigating whether the condition preexisted the coverage. However, this 60-day period shall not include any time during which the insurer is awaiting a response for relevant medical information from a health care provider. -Every admitted insurer in California must maintain a unit to investigate possible fraudulent claims -An insurer's claim form must carry the statement: "For your protection, California law requires the following to appear on this form" (or similar wording) followed by "A person who knowingly presents a false or fraudulent claim for the payment of a loss is guilty of a crime and may be subject to fines and confinement in state prison". (CIC 1871.2) The person may be found guilty of perjury.

impairment

impairment means that the necessary paid-in capital of the insurer has been compromised

Insurance Transactions [CIC 35, 1631]

"Insurance Transaction" includes any of the following: -Solicitation or inducement to purchase insurance -Negotiations preliminary to execution or toward the sale of insurance -Executing a contract of insurance -Transaction of matters subsequent to execution of the contract and arising out of it. For example, advising on coverages and claims

hearings

the commissioner may call and hold hearings for any purpose deemed necessary. the hearing must be held within 30 days after the notice is served. within 30 days after the hearing, the commissioner shall issue an order specifying the amount of the penalties to be paid.

examination of records

the commissioner must examine the financial affairs of each insurer operating in california prior to issuing a certificate of authority. at least; a coma oh shall be examined once every 5 years.

Life settlement broker

A life settlement broker is person who, on behalf of an owner for a fee, commission, or other valuable consideration, offers or attempts to negotiate life settlement contracts (viatical) between an owner and providers.A life settlement broker represents only the person wishing to sell their life policy (the policy owner) to a third party. A life settlement broker has a fiduciary duty to the policy owner to act according to the owner's instructions, and in the best interest of the owner, notwithstanding the manner in which the broker is compensated.

Prepaid commissions

Agents commonly receive commissions based on advance payments of annual premiums. The commissions are not earned until the premium is earned.

Insurance broker

An insurance broker is a person who, for compensation and on behalf of another person, transacts insurance other than life, disability, or health with, but not on behalf of, an insurer. There is no life brokers or health brokers in California.

Medical Loss Ratio

Medical Loss Ratio (MLR) is a measurement used by the Affordable Care Act to motivate health plans to provide value to enrollees. For example, if an insurer uses 80 cents out of every premium dollar to pay its customers' medical claims and activities that improve the quality of care, the company has a medical loss ratio of 80%. A medical loss ratio of 80% stipulates that the insurer is using the remaining 20 cents of each premium dollar to pay overhead expenses, such as marketing, profits, salaries, administrative costs, and agent commissions. Under the Affordable Care Act, the Medical Loss Ratio (MLR) limits the portion of premium dollars health insurers may spend on administration, marketing, and profits. Under health care reform, health insurers must publicly report the portion of premium dollars spent on health care and quality improvement and other activities in each state they operate. The MLR for individual plans is 80% while the MLR for group plans is 85%. Any insurer that fails the MLR test in a calendar year for all plans in a given market segment (individual or group) must refund excess premiums to consumers enrolled in plans in that market segment

AGENTS, BROKERS, SOLICITORS, and Analysts [CIC 31-33, 1011.3, 1631, 1633, 1621, 1626, 1704, 1749, 1749.02, 1749.33, 1848, CCR 6800]

Unless exempt, a person shall not solicit, negotiate, or effect contracts of insurance, unless the person holds a valid license from the commissioner authorizing the person to act in that capacity. The issuance of a certificate of authority to an insurer does not exempt an insurer from complying with this article. Any person who transacts insurance without a valid license is guilty of a misdemeanor punishable by a fine not exceeding $50,000, by imprisonment in a county jail for a period not exceeding one year, or by both a fine and imprisonment.

statutes rules and regulations governing insurance in california

insurance professional in california are required to have knowledge of the california insurance code and the california code of regulations. while these documents identify many unethical and illegal practices, they are not complete guide to ethical behavior.

buyer's guide

is a consumer publication that describes the type of coverage being offered and provides general information to help the applicant compare different policies and reach an informed decision about wether the proposed coverage is appropriate

california insurance code (CIC)

the california insurance code consists of statutes established by the state legislature and signed into law by the governor of california. there are five devisions in the CIC: general rules governing insurance, classes of insurance, the insurance commissioner, affordable housing entities risk retention pool, and insurance adjusters. the california insurance code is updated by the legislature passing new statues to add to, amend, or repeal existing statues.

Warranties [CIC 440-449]

A warranty is either express or implied. A statement in a policy of a matter relating to the person or thing insured, or to the risk, as a fact, is an express warranty. Every express warranty made at or before the execution of a policy shall be contained in the policy itself. A warranty may relate to the past, the present, the future, or to any or all of these. The violation of a material warranty or other material provision of a policy, on the part of either party, entitles the other to rescind.

Insurance Information and Privacy Protection Act (IPPA) [CIC 791-791.26]

The CIC states that the Insurance Information and Privacy Protection Act is designed to protect the public against the publishing or making public personal information of an individual. This regulation requires that an insurer provide a clear and conspicuous notice that accurately reflects its privacy policy. Whenever an application is completed, a policy is delivered or a policy is renewed and personal information is collected from an insured or applicant, a written notice should be provided to them. At the latest, this notice must be provided by the time a policy is delivered. This notice shall state: (1) if personal information is to be collected from persons other than the individual proposed for coverage; (2) what type of information is going to be collected; (3) the circumstances under which disclosure of personal information may be made without authorization of the applicant/insured; and (4) the fact that information obtained from a report prepared by an insurance-support organization may be retained by the organization and disclosed to other persons. Insurers are allowed to secure personal information in order to make underwriting decisions according to the Fair Credit Reporting Act and California regulations. The CIC also provides an individual with the ability to access the personal information compiled by an insurance company or organization. Once a request is made, the insurance organization must provide the individual with the information in writing, by phone or by some other means (i.e., mail) within 30 days. The insurer must also notify the individual of any other person to whom such information was provided during the previous two years. If any of the information is untrue, false or incorrect, the individual may request the insurance organization to amend it or make appropriate changes. Once requested, the insurance organization has 30 days to make corrections or to inform the individual that it is refusing to do so (and the reasons for the refusal). An "insurance organization" also includes an institutional source or insurance support organization. Section 791 of the CIC states that the Act prohibits the use of pretext interviews which are those conducted under false pretenses to obtain information in connection with an insurance transaction (except in cases where there is a reasonable basis for suspecting criminal activity, fraud, material misrepresentation or material non-disclosure in connection with a claim). Insurance institutions and producers must provide a notice of information practices to all applicants or policyholders in connection with insurance transactions. In the case of a written application for insurance, a notice must be provided no later than: (1) at the time of policy delivery when personal information is collected only from the applicant, an insured or public record; or (2) at the time the collection of personal information is collected from a source other than the applicant, an insured or public record. In the case of policy renewal, a notice must be provided no later than the policy renewal date or the date upon which policy renewal is confirmed. No notice is required if personal information is collected only from the policyowner, an insured or public record, or if a notice has been provided within the previous twenty-four months. In the case of policy reinstatement or change in insurance benefits, a notice must be provided no later than the time a request for reinstatement or change in benefits is received by the insurer. No notice is required if personal information is collected only from the policyowner, an insured or public record, or if a notice has been provided within twenty-four months. The notice of information must state the following: (1)whether personal information may be collected from persons other than the proposed insured; (2) the types of personal information that may be collected and the types of sources and investigative techniques that may be used; (3) the circumstances under which disclosure of certain information may be made without prior authorization; (4) description of the insured's right to the recorded personal information about him or her and the insured's right to request corrections to this information; and (5) that information obtained from an insurance support organization may be retained by the insurance support organization and disclosed to other persons. An insurance institution or agent must clearly specify any questions designed solely for marketing or research purposes. If the Commissioner has reason to believe that any person is violating this Act, he or she will be issued a cease and desist order. The penalty for violating a cease and desist order is up to $10,000 for each violation, or up to $50,000 if the Commissioner finds that violations have occurred with such frequency as to constitute a general business practice. If the guilty party knows or should have known he or she was committing a violation of the Act, a license may be suspended or revoked. Anyone who knowingly and willfully obtains information about an individual from an insurance institution, producer or insurance support organization under false pretenses will be fined up to $10,000 and/or imprisonment for up to one year. The CIC states that the insurance industry must ensure that professional responsibilities of insurance producers to the public are upheld. Life insurance producers have fiduciary responsibilities to an insurer and a policyowner and must act in good faith to all parties. If, after a hearing, the commissioner determines that the insurance institution, agent or insurance-support organization charged has engaged in conduct or practices in violation of this Act, the commissioner shall issue and cause to be served an order requiring such insurance institution, agent or insurance-support organization to cease and desist from the conduct or practices constituting a violation of this article. Any person who violates a cease and desist order of the commissioner may, after notice and hearing and upon order of the commissioner, be subject to one or more of the following penalties, at the discretion of the commissioner: A monetary fine of not more than $10,000 for each violation; or not more than $50,000 if the commissioner finds that violations have occurred with such frequency as to constitute a general business practice; or Suspension or revocation of an insurance institution's or agent's license if the insurance institution or agent knew or reasonably should have known it was in violation of this article. Any person whose rights are violated may apply to any court of competent jurisdiction, for appropriate equitable relief. An insurance institution, agent or insurance-support organization which discloses information in violation of this section shall be liable for damages sustained by the individual about whom the information relates. However no individual shall be entitled to a monetary award which exceeds the actual damages sustained by the individual as a result of such violation. Any person who knowingly and willfully obtains information about an individual from an insurance institution, agent or insurance-support organization under false pretenses shall be fined not more than $10,000 or imprisoned for not more than one year, or both.

claimant

a person who assets a right of recovery under an insurance policy

hearings

the commissioner may call and hold hearings for any purpose deemed necessary: the hearing must be held within 39 days after the notice is served. within 30 days after the hearing, the commissioner shall issue an order specifying the amount of penalties to be paid.

Life Licensee

A life licensee is a person authorized to act as a life agent on behalf of a life insurer or a disability insurer to transact life insurance, accident and health insurance, or life and accident and health insurance. Licenses to act as a life agent include the following types: -Life-only, which license shall entitle the licensee to transact insurance coverage on human lives, including benefits of endowment and annuities, and may include benefits in the event of death or dismemberment by accident and benefits for disability income. A life agent may be authorized to transact 24-hour care coverage, provided they meet the education requirements.

california department of insurance

the california department of insurance (CDI) is responsible for: -overseeing insurer insolvency -licensing agents and brokers -conducting market conduct reviews -resolving consumer complaints -investigating and prosecuting insurance fraud -protect consumers -jurisdiction over entities that provide coverages designated to pay for health care providers' services and expenses unless health care providers are appropriately licensed or certified by other governmental agencies -the primary regulator of issuers or most preferred provider organization (PPO) and exclusive provider organization (EPO) plans and other disability insurance companies

cease and desist orded

the commissioner may issue a cease-and-desist order to any person found to have committed an unfair or deceptive act or has violated a state insurance law. person found to have violated a cease and desist order, may face a fine not to exceed $5,000, $55,000 if the violation was found to be willful.

Licensing Regulations

Background Change [CIC 1729.2]: An applicant or licensee shall notify the commissioner within 30 days when any of the background information set forth in this section changes after the application has been submitted or the license has been issued. If the licensee is listed as an endorsee on any business entity license, the licensee shall also provide this notice to any officer, director, or partner listed on that business entity license. This includes requirement includes disclosing any administrative action in any jurisdiction. Change in address [1729]:If an agent changes his/her address, the agent must notify the Department of Insurance immediately. This applies to physical and email addresses. Effective date of coverage [CIC 1730.5]: A life agent, a property broker-agent, and a casualty broker-agent shall provide to all insureds or applicants at the time of application or receipt of premium moneys the effective date of coverage, if known, or the circumstances under which coverage will be effective if there exists conditions precedent to coverage. This section shall apply only to coverage for personal lines of insurance, such as private passenger automobile, homeowner and renter insurance, personal liability, and individual disability and health insurance. License Renewal Application [CIC 1720] At least 60 days before a permanent license is due to expire, the Commissioner will mail an application to renew the license to the licensee. A licensee who has applied to renew a license under this chapter shall be entitled to continue operating under the existing license for 60 days after its specified expiration date, or until notified by the department that the renewal application is deficient, whichever comes first, if the applicant has satisfied all license renewal requirements, including, but not limited to, the following: -The submission of the applicable renewal application and fee on or before the expiration date of the license. -The satisfaction of all required continuing education or training requirements. -This section shall not apply to any license that is suspended or revoked. License Reinstatement The application to renew an expired (lapsed) license may be filed up to one year from the expiration date. The request to reinstate a license must include a reinstatement application, renewal fee plus a reinstatement fee, and proof of completion of continuation education requirements.

insolvency

insurer insolvency is the impairment of an insurer's capital, financial stability, and financial strength to the point where policyholders and the public may be harmed

cease and desist order

the commissioner may issue a cease-and-desist order to any person found to have committed an unfair or deceptive act or has violated a state insurance law

Printing license number on documents and advertisements [CIC 1725.5]

Every licensee shall prominently print his license number on business cards, written price quotations for insurance products, and printed advertisements for insurance products distributed exclusively in California. The license number must be printed in the same size type as any telephone number, address, or fax number. If the licensee maintains more than one organization license, one of the organization license numbers is adequate for compliance. INTERNET ADVERTISING A person who is licensed in this state as an insurance agent or broker, advertises insurance on the Internet, and transacts insurance in this state, must identify all of the following information on the Internet, whether the insurance agent or broker maintains his Internet presence or whether the presence is maintained on his behalf: -His name, as it appears on his insurance license, and any fictitious name approved by the Commissioner -state of his domicile and principal place of business -His license number A person will be deemed to be transacting insurance in this state when the person advertises on the Internet, whether or not the insurance agent or broker maintains her Internet presence or if it is maintained on her behalf, and does any of the following: -Provides an insurance premium quote to a California resident -Accepts an application for coverage from a California resident -Communicates with a California resident regarding one or more terms of an agreement to provide insurance or an insurance policy

Long-term Care Education [CIC 10234.93, 10295.1 CCR 58056]

Eight (8) hours of training specifically relating to long-term care is required prior to any agent becoming authorized to sell LTC insurance products. Long-term care training is required when an agent is transacting accelerated death benefit provisions or riders that require services to the chronically ill insured, but is not required when transacting accelerated death benefit provisions or riders that do not require services An accelerated death benefit must allow and explain that an insured may take the accelerated death benefit in a lump sum (meaning the claim is paid in a single payment) on the occurrence of a qualifying event, as well as an option to receive the benefit in periodic payments for a certain period only. Insurers shall ensure that agents offering, marketing, or selling accelerated death benefits on their behalf are able to describe the differences between benefits provided under an accelerated death benefit and benefits provided under long-term care insurance, as follows: -The difference between the benefits afforded to an insured through an accelerated death benefit and a long-term care insurance policy or rider. -The differences between benefit eligibility criteria. -Whether an elimination period applies to either an accelerated death benefit or long-term care insurance and a description of the elimination period. -The benefits under the accelerated death benefit or long-term care insurance if benefits are never needed. -The benefits under the accelerated death benefit or long-term insurance if benefits are needed. -Restrictions on benefit amounts. -Tax treatment of benefits. -Income and death benefit considerations. -Completion of California agent education or continuing education for long-term care insurance shall meet the requirements of this section. Agents who transact California Partnership Long-Term Care Insurance Policies or Certificates must meet long-term care education requirements plus

Core Benefits

Insurers offering Medicare Supplement policies in California must offer Medicare Supplement Plan A and either Plan C or F. Every issuer of Medicare supplement insurance benefit plans shall make available a policy or certificate including only the following basic "core" package of benefits to each prospective insured. -Coverage of Part A Medicare eligible expenses for hospitalization to the extent not covered by Medicare from the 61st day through the 90th day, inclusive, in any Medicare benefit period. -Coverage of Part A Medicare eligible expenses incurred for hospitalization to the extent not covered by Medicare for each Medicare lifetime inpatient reserve day used. -Upon exhaustion of the Medicare hospital inpatient coverage, including the lifetime reserve days, coverage of 100 percent of the Medicare Part A eligible expenses for hospitalization, subject to a lifetime maximum benefit of an additional 365 days. -Coverage under Medicare Parts A and B for the reasonable cost of the first three pints of blood, or equivalent quantities of packed red blood cells. -Coverage for the coinsurance or copayment amount, of Medicare eligible expenses under Part B regardless of hospital confinement, subject to the Medicare Part B deductible. -Coverage of cost sharing for all Part A Medicare eligible hospice care and respite care expenses. The following additional benefits shall be included in Medicare supplement benefit plans B, C, D, F, high deductible F, G, M, and N: -Medicare Part A deductible amount per benefit period. -Skilled nursing facility care, coverage for the actual billed charges up to the coinsurance amount from the 21st day through the 100th day in a Medicare benefit period for post-hospital skilled nursing facility care eligible under Medicare Part A. -Medicare Part B deductible amount per calendar year regardless of hospital confinement. -100% of Medicare Part B excess charges, coverage for all of the difference between the actual Medicare Part B charges as billed, not to exceed any charge limitation established by the Medicare Program or state law, and the Medicare-approved Part B charge. -Medically necessary emergency care in a foreign country, coverage to the extent not covered by Medicare for 80 percent of the billed charges for Medicare-eligible expenses for medically necessary emergency hospital, physician, and medical care received in a foreign country, which care would have been covered by Medicare if provided in the United States, subject to a calendar year deductible of two hundred fifty dollars ($250), and a lifetime maximum benefit of fifty thousand dollars ($50,000).

CALIFORNIA LIFE AND HEALTH INSURANCE GUARANTEE ASSOCIATION

The California Life and Health Insurance Guarantee Association is used to rehabilitate insolvent (financially incapacitated) insurers. Most life insurance policies, health insurance policies, and annuity contracts are protected. Self-funded coverage is not protected. Agents are prohibited from using the existence of the California Life and Health Insurance Guarantee Association for selling, soliciting, or inducing purchase of an insurance policy. It is considered an unfair method of competition for an agent to advertise that the insurer (to which the agent is appointed with) is a member of the California Life and Health Insurance Guarantee Association.

Essential health benefits

The exchange shall allow any qualified plans that meet the minimum standards established by the exchange to be offered in the exchange. All plans must include the following essential health benefits: -Ambulatory patient services -Emergency services -Hospitalization -Pregnancy, maternity and newborn care -Mental health and substance use disorder services, including behavioral health treatment -Prescription drugs -Rehabilitative services and devices -Laboratory services -Preventative and wellness services and chronic disease management -Pediatric services, including oral and vision care Preexisting conditions All new group and individual policies must be guaranteed issue. Additionally, health plans cannot limit or deny benefits or deny coverage for a child younger than age 19 because of preexisting conditions. This applies to both group and individual policies. Lifetime and annual limits The ACA prohibits health plans from putting lifetime dollar limits on most benefits that are received by an insured. As of January 1, 2014, there are no annual dollar limits for essential coverage. Plans are allowed to put an annual dollar limit on health care services that are not considered essential Grandfathered Plans Grandfathered plans are plans that were purchased before March 23, 2010. These plans do not have to follow the ACA's rules and regulations or offer the same benefits, rights and protections as new plans. However, a grandfathered plan cannot impose lifetime limits on how much health care coverage people may receive.</u> Grandfathered health plans may lose their grandfathered status if the insurer significantly raises co-insurance charges, deductibles, or co-payment charges. Enrollment Periods The Open Enrollment Period (OEP) is a designated period of time each year during which individuals or employees can enroll in a health insurance plan or make changes to their coverage. Federal regulations designate November 1 to December 15 as the official open enrollment period, with coverage beginning January 1 of the coming year. California opted to supplement that with special enrollment periods to bring the open enrollment period to 90 days. Covered California's open enrollment period begins on October 15, and will continue until January 15. Coverage purchased between October 15 and December 15 will be effective January 1 of the coming year, while coverage purchased between December 16 and January 15 will be effective February 1.

Duties upon Receipt of Communications [CCR 2695.5]

Upon receiving any written or oral inquiry from the Department of Insurance concerning a claim, every licensee shall immediately, no more than 21 calendar days of receipt of that inquiry, furnish the Department of Insurance with a complete written response based on the facts as then known by the licensee. A complete written response addresses all issues raised by the Department of Insurance in its inquiry and includes copies of any documentation and claim files requested. This section is not intended to permit delay in responding to inquiries by Department personnel conducting a scheduled examination on the insurer's premises. Upon receiving any communication from a claimant, regarding a claim, that reasonably suggests that a response is expected, every licensee shall immediately, no more than 15 calendar days after receipt of that communication, furnish the claimant with a complete response based on the facts as then known by the licensee. This subsection shall not apply to require communication with a claimant subsequent to receipt by the licensee of a notice of legal action by that claimant. Designation by the claimant of an insurance adjuster, a public adjuster, or any member of the claimant's family shall be in writing, signed and dated by the claimant, and shall indicate that the designated person is authorized to handle the claim. All designations shall be transmitted to the insurer and shall be valid from the date of execution until the claim is settled or the designation is revoked. Upon receiving notice of claim, every insurer shall immediately, but in no event more than fifteen (15) calendar days later, do the following unless the notice of claim received is a notice of legal action: -Acknowledge receipt of such notice to the claimant unless payment is made within that period of time. If the acknowledgment is not in writing, a notation of acknowledgment shall be made in the insurer's claim file and dated. Failure of an insurance agent or claims agent to promptly transmit notice of claim to the insurer shall be imputed to the insurer except where the subject policy was issued pursuant to the California Automobile Assigned Risk Program. -Provide to the claimant necessary forms, instructions, and reasonable assistance, including but not limited to, specifying the information the claimant must provide for proof of claim; -Begin any necessary investigation of the claim. An insurer may not require that the notice of claim under a policy be provided in writing unless such requirement is specified in the insurance policy or an endorsement thereto.

Third-party administrator [CIC 1759]

A third-party administrator is a firm that provides administrative services for employers and other associations having group insurance policies. The third-party administrator acts as a liaison between the insurer and the employer in matters such as certifying eligibility, preparing reports required by the state, and processing claims. The use of third-party administrators has become common as a result of employers self-funding health benefits. For the purpose of this section, administrator means any person who collects any charge or premium from, or who adjusts or settles claims on, residents of this state in connection with life or health insurance coverage or annuities other than any of the following: *An employer on behalf of its employees or the employees of one or more subsidiary or affiliated corporations of that employer. *A union on behalf of its members. *An insurance company which is either licensed in this state or acting as an insurer with respect to a policy lawfully issued and delivered by it in and pursuant to the laws of a state in which the insurer was authorized to do an insurance business or prepaid hospital or health care service plan (including their sales representatives licensed in this state when engaged in the performance of their duties). *A life or health agent or broker licensed in this state, whose activities are limited exclusively to the sale of insurance. *A creditor on behalf of its debtors with respect to insurance covering a debt between the creditor and its debtors. *A trust, its trustees, agents, and employees acting thereunder, established in conformity with 29 U.S.C. Sec. 186. *A trust exempt from taxation under Section 501(a) of the Internal Revenue Code, its trustees, and employees acting thereunder, or a custodian, its agents and employees acting pursuant to a custodian account which meets the requirements of Section 401(f) of the Internal Revenue Code. *A bank, credit union or other financial institution which is subject to supervision or examination by federal or state regulatory authorities. *A company which advances for and collects any premium or charge from its credit card holders who have authorized it to do so, provided the company does not adjust or settle claims. *A person who adjusts or settles claims in the normal course of his or her practice or employment as an attorney at law, and who does not collect any charge or premium in connection with life or health insurance coverage or annuities. *An adjuster licensed by the Insurance Commissioner when engaged in the performance of his or her duties. *A nonprofit agricultural association.

ADMITTED AND NONADMITTED INSURERS [CIC 24, 25, 703, 1760-1780]

Admitted Insurer Admitted means means entitled to transact insurance business in this state, having complied with the laws imposing conditions precedent to transaction of such business. The Commissioner will examine the financial affairs of all insurers before issuing a certificate of authority to transact business in California. An admitted insurer has received a Certificate of Authority from the insurance department to transact insurance business in this state and may also be referred to as an authorized insurer or admitted carrier. The State Compensation Insurance Fund shall be deemed to be admitted pursuant to authority to transact workers' compensation insurance granted by the Legislature. The commissioner shall not revoke or suspend the State Compensation Insurance Fund's authority to transact workers' compensation insurance. Nonadmitted Insurer Nonadmitted means not entitled to transact insurance business in this state. Nonadmitted insurers either have not yet applied for a Certificate of Authority or their application has been denied. Nonadmitted insurers may not transact insurance in this state. A nonadmitted insurer may also be referred to as an unauthorized insurer.

Agent appointments [CIC 1704]

Agent An agent is any person who sells, solicits, or negotiates insurance contracts for compensation on behalf of an insurer. This includes submitting applications to the insurer, collecting premiums, and delivering policies to policyowners. Each agency that transacts insurance must be licensed by the insurance department. The authority to transact insurance under an appointment becomes effective as of the date the notice of appointment is signed. A licensee may not transact insurance business in California until the licensee is appointed by an insurer. Each appointment shall continue in force until cancellation or expiration of the license applied for or held at the time of appointment, or the filing of a notice of termination by the appointing insurer, agent or broker, or the appointed person. Upon termination of all of an agent's appointments, the agent's license will not be canceled, but become inactive. A licensed life agent may present a proposal for insurance to a prospective policyholder on behalf of a life insurer for which the life agent is not specifically appointed, and may also transmit an application for insurance to that insurer. If a policy of insurance is issued pursuant to that application, the insurer is considered to have authorized the agent to act on its behalf, and the insurer is responsible for all actions of the agent that relate to the application and policy as if the agent had been duly appointed for the insurer. <u>If a life agent sells a policy to a prospect on behalf of an insurer without an appointment, the insurer must submit a notice of appointment to the Commissioner within 14 days. A licensed life agent who is not specifically appointed for a particular life insurer may not present a proposal to a prospective policyholder for insurance with that insurer or transmit an application for insurance to that insurer if the insurer <u>requires all its life agents to represent only that insurer or a group of affiliated insurers of which that insurer is a member or to submit risks to that insurer or group of affiliated insurers prior to submitting them to other insurers. Every property broker-agent, casualty broker-agent, personal lines broker-agent, or limited lines automobile insurance agent acting in the capacity of an insurance solicitor shall have filed on his or her behalf with the commissioner a notice executed by an insurance agent or insurance broker appointing and agreeing to employ the solicitor as an employee within this state.

PERMITTED COMMISSIONS [CIC 10192.16]

An issuer or other entity may provide commission or other compensation to an agent or other representative for the sale of a Medicare supplement policy or certificate only if the first year commission or other first year compensation is no more than 200 percent of the commission or other compensation paid for selling or servicing the policy or certificate in the second year or period. Every insurer shall file with the commissioner its commission structure or an explanation of the insurer's plan to comply with this provision. The commission or other compensation provided in subsequent renewal years must be the same as that provided in the second year or period and must be provided for no fewer than five renewal years. No issuer or other entity shall provide compensation to its agents or other producers, and no agent or producer shall receive compensation, greater than the renewal compensation payable by the replacing issuer on renewal policies or certificates if an existing policy or certificate is replaced.

Other ACA requirements

As defined by the Affordable Care Act, the MAXIMUM amount an individual can contribute to a Flexible Savings Account is $2,700 in 2019 Under the Affordable Care Act (ACA), parents can insure their dependent adult children through age 25 (up to their 26th birthday), even if they are married or not living with their parents. Additionally, COBRA permits a child who "ages out" of a group health plan to continue coverage under the group plan for up to 36 months. The individual mandate—officially called the individual shared responsibility provision—requires virtually all citizens and legal residents of the United States to have health insurance. People who don't have health insurance must pay a penalty tax called the <b>shared responsibility payment</b> (also known as the individual mandate penalty) unless they're eligible for an exemption from the penalty. If an insurer fails to adhere to the Affordable Care Act requirements related to internal appeals, the internal appeal may be deemed exhausted for purposes of submitting an external review Agents writing applications for QHPs through Covered California must first complete all Covered California agent agreements and certification requirements. Recertification is required every five years following initial certification. Employer Shared Responsibility Provisions</strong>: Applicable large employers (ALEs) must either offer minimum essential coverage that is "affordable" and that provides "minimum value" to their full-time employees (and their dependents), or potentially make an employer shared responsibility payment to the IRS. ALEs with 50 or more full-time and full-time equivalent employees that don't offer insurance that meets certain minimum standards may be subject to the payment. According to the Affordable Care Act, if a large employer does NOT provide health insurance and owes an employer mandate penalty, the annual penalty is calculated by multiplying $2,000 by the number of full time employees minus 30.

Financial Assistance

As previously discussed, one of the notable differences between group and individual insurance is the cost of insurance for the consumer. The PPACA aims to reduce this burden by providing many people who buy their own health insurance with financial assistance to lower their costs. Low-income individuals and families whose incomes are between 100% and 400% of the federal poverty level will receive federal subsidies on a sliding scale if they purchase insurance via an exchange. There are two kinds of assistance or subsidies available to those who qualify: the Advanced Premium Tax Credit and Cost Sharing Reduction. The Advanced Premium Tax Credit (APTC) is a federal tax credit for individuals that lessens the amount they pay for health insurance premiums for health insurance on the Marketplace. The Advanced Premium Tax Credit goes toward your health insurance premium, what you pay each month to maintain your health coverage, and can be applied it to bronze, silver, gold, or platinum plans. In California the APTC amount is Calculated by California Health Benefit Exchange (Covered California) and paid by the Exchange to insurers. If at the end of the year you've taken more premium tax credit in advance than you're due based on your final income, you'll have to pay back the excess when you file your federal tax return. If you've taken less than you qualify for, the difference would be included in your tax refund. Consumers must purchase a QHP through Covered California to obtain Premium Tax Credits. A Cost Sharing Reduction (CSR) is a discount that lowers the amount a covered insured must pay for deductibles, copayments, and coinsurance. In the Health Insurance Marketplace, cost-sharing reductions are often called "extra savings." CSRs may only be applied to silver plans. Consumers qualify for varying CSRs between 138% and 250% FPL. General eligibility for financial assistance under the PPACA: -Household income is not nore than 400 percent above the Federal Poverty Level. Most people in this range will be eligible, but not everyone. -Employer doesn't offer health insurance that costs less than 9.5 percent of my income and pays at least 60 percent of covered benefits. -Not eligible for health insurance through a government program like Medicaid or Medicare. -If married, file a joint return. -Not claimed as a dependent by another person.

ERRORS AND OMISSIONS INSURANCE

ERRORS AND OMISSIONS INSURANCE An agent has a duty to evaluate a client's insurance needs and to make proper insurance recommendations. A failure to address an insurance need, or a recommendation that leaves a serious gap in coverage, could leave an insurer with a loss that is not covered but should have been covered. In such cases, the insured may have a valid legal claim against the agent for damages. Just as doctors should have malpractice insurance to protect against legal liability arising from their professional services, insurance agents need <errors and omissions (E&O) professional liability insurance. Under this insurance, the insurer agrees to pay sums that the agent legally is obligated to pay for injuries resulting from professional services that he rendered or failed to render. There is no "standard E&O policy."E&O policies normally contain high deductibles ($1,000+), coverage written on a limit per claim basis, and high limits (often ranging from $100,000 to millions of dollars). In addition to monetary protection, companies providing E&O coverage may also defend an agent against unfounded or frivolous charges. E&O insurance policies typically do not have many exclusions outside of protection for criminal or intentional acts, liability assumed under contract, or bodily and personal injury. Insurance agents may purchase an individual E&O policy, a policy through the agency, or through the insurance company

Commissions

In most cases, only licensed insurance representatives with current agency contracts can receive commissions. Heirs of a licensed representative may also receive commissions after the death of the licensed representative.

DOMESTIC, FOREIGN, AND ALIEN COMPANIES

Insurance companies are classified according to the location of its corporation. Regardless of where the insurance company is incorporated, it still has to get a Certificate of Authority before transacting insurance within a state. The following definitions apply: Domestic insurance company: A company that resides and is incorporated under the laws of the state in which its home office is located. A company chartered in California would be a domestic company in California. Foreign insurance company: A company whose home office is located in another state.It is considered to be a foreign company in all states except for its home office. A company chartered in Texas would be a foreign company in California Alien insurance company:A company that is chartered and organized in any country other than the United States.It is considered an alien company in all states. A company chartered in Canada would be an alien company in California.

Conservation [CIC 1013, 1016]

If an insurance company is in an impaired financial condition, the Commissioner may file an application for an order to take control of its affairs for the purpose of improving its condition. This action is known as <strong>conservation</strong>. In the case of the insolvency of an admitted insurer, the commissioner shall prepare a report, which shall be a public record, with respect to the causes and factors which contributed to that insolvency. The report shall be submitted to the Governor and to the Legislature no later than one year from the date of the insolvency. Whenever the above conditions exist or it appears that irreparable loss and injury to property or business may occur, the commissioner, without notice and before applying to the court for any order, shall take possession of the property, business, books, records and accounts and of the offices and premises occupied for the transaction of business and retain possession subject to the order of the court. Any person having possession of and refusing to deliver any of the books, records or assets of a person against whom a seizure order has been issued, shall be guilty of a misdemeanor and punishable by fine not exceeding one thousand dollars or imprisonment not exceeding one year, or both such fine and imprisonment. If at any time after instituting proceeding under this article, it shall appear to the commissioner that it would be futile to proceed as conservator with the conduct of the business of that person, he or she may apply to the court for an order to liquidate and wind up the business of the person. Upon a full hearing of that application, the court may make an order directing the winding up and liquidation of the business of that person by the commissioner, as liquidator. The court may issue an order to liquidate and wind up the business based solely on the verified application and hearing, without further hearing, or may issue an order to liquidate and wind up the business of the person upon application by the commissioner. The court's order may direct the winding up and liquidation of the business of the person by the commissioner, as liquidator.

Misrepresentation of Policies [CIC 780-784]

It is illegal for an insurer or officer or agent thereof, or an insurance broker or solicitor, to misrepresent any fact about an insurance policy, such as policy terms, benefits, cost, future dividends to an insured, applicant, or prospective applicant. A person shall not make any statement that is known, or should have been known, to be a misrepresentation for the purpose of inducing a person to take out a policy of insurance, refuse to accept a policy issued, or to lapse, forfeit or surrender an issued insurance policy.

False and Fraudulent Claims Act

It is illegal to commit an act of insurance fraud, which is defined as any intentional act occurring in the course of insurance business that attempts to deceive or misrepresent a material fact. Any person who, in the absence of fraud or bad faith, reports information regarding an act of insurance fraud will be given immunity. A fraudulent insurance act may include any of the following: -Collecting a premium for insurance that is not provided -Present documentation in support of a claim or viatical statement knowing that the document contains false or misleading information -Willfully collecting a premium that exceeds the amount of the actual premium -Misappropriate or unreasonably withhold premiums or returned premiums -Misappropriate benefits under a policy -Knowingly or willfully make a false or fraudulent representation in reference to an insurance application -Place insurance with an unauthorized insurer -Knowingly write or place a policy through, or pay a commission to, a person who is not properly licensed -Exhibit a false account, document, or advertisement about the affairs of an insurer

Open Enrollment and Guaranteed Issue Periods [CIC 10192.11, 10192.12]

Medicare supplements cannot be denied due to the applicant's health, claims experience, or medical condition for the first six months a Medicare beneficiary age 65 or older first enrolls in Medicare Part B. An individual enrolled in Medicare by reason of disability shall be entitled to open enrollment in a described in this section for six months after the date of his or her enrollment in Medicare Part B, or if notified retroactively of his or her eligibility for Medicare, for six months following notice of eligibility. Additionally, an individual enrolled in Medicare Part B is entitled to open enrollment for six months following (1) the effective date of termination from any employer-sponsored health plan including an employer-sponsored retiree health plan. (2) The effective date of loss of eligibility due to the divorce or death of a spouse, from any employer-sponsored health plan including an employer-sponsored retiree health plan. (3) Termination of health care services for a military retiree or the retiree's Medicare eligible spouse or dependent as a result of a military base closure or loss of access to health care services because the base no longer offers services or because the individual relocates. An individual enrolled in Medicare Part B is entitled to open enrollment if the individual was covered under a policy, certificate, or contract providing Medicare supplement coverage but that coverage terminated because the individual established residence at a location not served by the plan. An individual whose coverage was terminated by a Medicare Advantage plan shall be entitled to an additional 60-day open enrollment period to be added on to any open enrollment period authorized by federal law or regulation, for any Medicare supplement coverage provided by Medicare supplement issuers and available on a guaranteed basis under state and federal law or regulation for persons terminated by their Medicare Advantage plan. An individual shall be entitled to an annual open enrollment period lasting 30 days or more, commencing with the individual's birthday</u>, during which time that person may purchase any Medicare supplement policy that offers benefits equal to or lesser than those provided by the previous coverage. An issuer shall notify a policyholder of his/her rights at least 30 days and no more than 60 days before the beginning of the open enrollment period. An individual enrolled in Medicare Part B is entitled to open enrollment described in this section upon being notified that, because of an increase in the individual's income or assets, he or she is no longer eligible for Medi-Cal benefits or he or she is only eligible for Medi-Cal benefits with a share of cost and certifies at the time of application that he or she has not met the share of cost. With respect to the guaranteed issue of a Medicare supplement policy, an eligible persons is an one who who seek to enroll under the policy, and who submit evidence of the date of termination or disenrollment or enrollment in Medicare Part D with the application for a Medicare supplement policy. If the termination of enrollment was involuntary, the guaranteed issue period begins on the date that the applicable coverage terminates or ceases. If the termination of enrollment is voluntary, the guaranteed issue period begins 60 days before the effective date of the disenrollment and lasts for 63 days after the effective date of the disenrollment.

Disclosure requirements for Medicare Supplement Policies

Outline of coverage [CIC 10192.17(l)(3)(G)]: An outline of coverage must be provided to the purchaser which shall disclose the following: The text shall read: "This policy may not fully cover all of your medical costs." "Neither this company nor any of its agents are connected with Medicare." "This outline of coverage does not give all the details of Medicare coverage. Contact your local social security office or consult 'The Medicare Handbook' for more details." "For additional information concerning policy benefits, contact the Health Insurance Counseling and Advocacy Program (HICAP) or your agent. Application [CIC 10192.18(a)(6)]: The application for a Medicare Supplement Policy in California must include the following notice: Counseling services are available in this state to provide advice concerning your purchase of Medicare supplement insurance and concerning medical assistance through the Medi-Cal program, including benefits as a qualified Medicare beneficiary (QMB) and a specified low-income Medicare beneficiary (SLMB). If you want to discuss buying Medicare supplement insurance with a trained insurance counselor, call the California Department of Insurance's toll-free telephone number 1-800-927-HELP, or access the department's Internet Web site, www.insurance.ca.gov, and ask how to contact your local Health Insurance Counseling and Advocacy Program (HICAP) office. HICAP is a service provided free of charge by the State of California. Replacement [CIC 10192.18(e)]: a Notice Regarding Replacement must be provided to all individuals who are considering lapsing an existing plan and replacing it with a new one. These individuals must be made aware that they may be relinquishing accrued benefits in an existing plan. Therefore, they will be able to make an informed decision whether or not to replace an existing plan.

AGENT RESPONSIBILITIES

Sales presentations Frequently, agents are required to provide applicants with the following documents at the time of application: -policy summary: is a document that summarizes the coverages, benefits, limitations, exclusions, and terms of the policy proposed for sale -buyer's guide: is a consumer publication that describes the type of coverage being offered and provides general information to help the applicant compare different policies and reach an informed decision about whether the proposed coverage is appropriate Field underwriting Because an agent has personal contact with an applicant, the agent plays an important part in the risk selection process by engaging in field underwriting.Completing the application completely and accurately is one of the most important functions of an agent. The agent may not omit pertinent information or report it inaccurately in order to get the policy issued. A signed and witnessed copy of the application becomes part of the policy, which is the legal contract between the insured and the insurer. The agent may need to assist in scheduling the applicant for a physical examination. The agent may have to verify the applicant is still in good health at time of delivery. If the proposed insured is rated as a substandard risk or declined for the insurance, it is the agent's role as a field underwriter to explain the reasons for the underwriting decision. There may be some underwriting forms (amendments or revisions) that must be signed by the applicant when the policy is delivered, and it is the agent's responsibility to obtain the signatures and return the signed forms to the home office.

Insolvency [CIC 36, 985]

The definition of an insolvent insurer includes either: (1) Any impairment of minimum "paid-in capital" or "capital paid in," as defined in Section 36, required in the aggregate of an insurer by the provisions of this code for the class, or classes, of insurance that it transacts anywhere; and, (2) An inability of the insurer to meet its financial obligations when they are do. An insolvent insurer's financial stability and financial strength is to the point where policyholders and the public may be harmed. In order to be solvent, an insurer must not only be able to provide for its liabilities and reinsure capital risks, but must also possess additional assets equivalent to the required paid-in capital.

REPLACEMENT

This section of the CIC describes the act of replacement. Replacement is a legal activity. Replacement occurs when a new policy is written in order to take the place of a policy already in existence. When a life insurance policy is replaced, the policyowner surrenders a current plan of life insurance and purchases another. When this occurs, the policyowner may lose specific accrued policy benefits. The newly purchased policy may have a higher premium rate based on the insured's attained age. The policy must pay the initial costs of issuing a policy all over again. Replacement is a legal activity. However, replacement regulations do not apply to: (1) credit life insurance; (2) group life insurance or group annuities; (3) an application to the existing insurer that issued the existing life insurance when a contractual change or a conversion privilege is being exercised; (4) proposed life insurance that is to replace life insurance under a binding or conditional receipt issued by the same insurer; or (5) transactions where the replacing insurer and the existing insurer are the same. The CIC also stipulates that to protect purchasers of individual life insurance and annuities, certain rules and guidelines with regard to replacement must be followed. The purpose of such laws is to make sure that the buyer receives the type of information needed to make a decision that is in his or her best interest and to reduce the opportunity for misrepresentation and incomplete disclosures. The State of California has established penalties for failure to comply with these requirements.

UNFAIR TRADE PRACTICE

UNFAIR TRADE PRACTICES Misrepresentation It is an illegal practice to misrepresent any fact about an insurance policy, such as policy terms, benefits, value, cost, effective date, future dividends, or existence of a contract of insurance. False advertising It is an illegal practice to falsely advertise insurance products or services in any way. This includescirculating statements, letters, or statements in newspapers, magazines or other solicitation materials. Twisting Twisting involves making a false written or oral statement made by an agent for the purpose of replacing an existing policy with another, often to the detriment of the insured. Defamation It is an illegal practice to make any public statement or advertisement that contains false or malicious information or unsubstantiated criticisms about an insurance company. False financial statements It is illegal to publish any false financial statement regarding the financial condition of an insurer with the intent to deceive. Boycott, coercion, and intimidation It is an illegal practice to commit or coordinate any act or boycott, coercion, or intimidation in order to restrain or monopolize the business of insurance. Rebating It is illegal to offer a premium rebate or a special advantage of any kind to consumers as an inducement to purchase 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 issuance of life insurance policies, which is based on mortality. Also, no insurer or agent may cancel or refuse to underwrite or renew a particular insurance risk based on race, color, creed, sex, sexual orientation, or blindness of an applicant or policyholder. Undefined Violations The Commissioner has authority to take action against methods of competition, or acts or practices, that are not specifically defined and prohibited by the Code, but which nonetheless appear to be unfair or deceptive.

examination of records

the commissioner must examine the financial affairs of each insurer operating in california prior to issuing a certificate of authority. at the very least, a company shall be then examined once every 5 years

Felony Convictions Involving Dishonesty or Breach of Trust [Title 18 U.S.C. § 1033 AND 1034]

Written Consent in Regards to Interstate Commerce Pursuant to Title 18 U.S.C. § 1033 AND 1034, it is a criminal offense for an individual who has been convicted of a felony involving dishonesty or breach of trust or any violation of 18 U.S.C. § 1033, to willfully engage or participate (in any capacity) in the business of insurance without first obtaining a "Letter of Written Consent to Engage in the Business of Insurance" from the regulating insurance department of the individual's state of residence. Furthermore, it is a criminal offense for any person to willfully employ or willfully permit such "prohibited persons" to participate in the business of insurance without the required written consent. A "Prohibited Person" may be an officer, director or employee of an insurance agency or an insurance company, an agent, solicitor, broker, consultant, third party administrator, managing general agent, or subcontractor representing an insurance agency or insurance company who engages in or transacts the business of insurance. For the purpose of this act, the following definitions apply: A "felony" means: "Any crime for which the maximum authorized punishment exceeds one year. Felony includes any crime in any other state, commonwealth, territory or possession that is identified as a felony in that state, or if not identified as a felony, any offense for which the maximum authorized punishment exceeds one year incarceration. In California, it includes any felony crime of dishonesty, breach of trust or violation of Title 18 U.S.C. § 1033 which has been set aside pursuant to California Penal Code Section 1203.4. A "conviction" means: A finding of guilt or a plea of guilty, nolo contendere or no contest in a criminal court of the United States or in any state, commonwealth or possession. Successful completion of deferred adjudication and conditional discharges are not convictions. (CCR 2175.2(f)) "Breach of Trust" means: Crimes including, but not limited to, any offense involving misuse, misapplication, or misappropriation of (1) anything of value held as a fiduciary or (2) anything of value of a public, private or charitable entity. (CCR 2175.2(c))

continuing education

all agents must complete 24 hours of continuing education each two-year license renewal period. four of those hours must be in ethics.

Special Enrollment Period (SEP)

is a period outside of open enrollment in which you can get coverage due to qualifying life events. Life changes that can qualify you for a Special Enrollment Period include: -Changes in household: You may qualify for a Special Enrollment Period if you or anyone in your household in the past 60 days: *Got Married *Had a baby, adopted a child, or placed a child for foster care *Got divorced or legally separated and lost health insurance *Died -Changes in residence: Household moves that qualify you for a Special Enrollment Period: *Moving to a new home in a new ZIP code or county *Moving to the U.S. from a foreign country or United States territory *If you're a student, moving to or from the place you attend school *If you're a seasonal worker, moving to or from the place you both live and work *Moving to or from a shelter or other transitional housing -Loss of health insurance: You may qualify for a Special Enrollment Period if you or anyone in your household lost qualifying health coverage in the past 60 days OR expects to lose coverage in the next 60 days. *Losing job-based coverage *Losing individual health coverage for a plan or policy you bought yourself *Losing eligibility for Medicaid or CHIP *Losing eligibility for Medicare *Losing coverage through a family member *Changes that make you no longer eligible for Medicaid or the Children's Health Insurance Program (CHIP) Other qualifying changes: Other life circumstances that may qualify you for a Special Enrollment Period: *Gaining membership in a federally recognized tribe or status as an Alaska Native Claims Settlement Act (ANCSA) Corporation shareholder *Becoming newly eligible for Marketplace coverage because you became a U.S. citizen *Leaving incarceration *Starting or ending service as an AmeriCorps State and National, VISTA, or NCCC member

Paid-in capital [CIC35]

is the value of an insurer's assets in excess of the sum of its liabilities for losses reported, expenses, taxes, and all other indebtedness and reinsurance of outstanding risks as provided by law. In the case of a foreign mutual insurer not issuing or having outstanding capital stock, the value of its assets in excess of the sum of its liabilities for losses reported, expenses, taxes, and all other indebtedness and reinsurance of outstanding risks as provided by law. Such foreign mutual insurer shall not be admitted, however, unless its paid-in capital is composed of available cash assets amounting to at least $200,000.00. In the case of a foreign joint stock and mutual insurer, its paid-in capital computed, according to its desire. In the case of all other insurers, the lower of the following amounts: (1) The value of its assets in excess of the sum of its liabilities for losses reported, expenses, taxes, and all other indebtedness and reinsurance of outstanding risks as provided by law. (2) The aggregate par value of its issued shares of stock, including treasury shares. Impairment means that the necessary paid-in capital of the insurer has been compromised.

agent records

life insurance agents must keep transaction records for 5 years

controlling person

means a person who possesses, directly or indirectly, the lower to deject or cause the direction of the management and policies of the organization, wether through the ownership of voting securities, by contract other than a commercial contact for goods or non-management services, or otherwise, including, but not limited to, power that is the result of an official position with or corporate office held by the person. control shall be presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing, more than 10 percent of the voting securities of the organization. this presumption may be rebutted by a showing that control does not exist in fact. the commissioner may, after furnishing all persons in interest notice and opportunity to be heard, determine that control exists in fact, notwithstanding the absence of a presumption to that effect.

California ethics

"Dishonesty" means: A crime which includes, but is not limited to, any offense involving perjury, bribery, forgery, counterfeiting, false or misleading oral or written statements, deception, fraud, schemes or artifices to deceive or defraud, material misrepresentations and the failure to disclose material facts. (CCR 2175.2(g)). The California Department of Insurance has jurisdiction under this act to consider requests for written consent filed by prohibited persons who propose to participate in the business of insurance in California with a domestic insurer or a resident licensee. Such prohibited persons who propose to engage in the business of insurance in California shall; File a 1033 consent waiver application, pay the application fee, provide all required documentation, receive written consent before engaging in such business. The Attorney General may bring a civil action in the appropriate United States district court against any person who engages in conduct constituting an offense under section 1033 and, upon proof of such conduct by a preponderance of the evidence, such person shall be subject to a civil penalty of not more than $50,000 for each violation or the amount of compensation which the person received or offered for the prohibited conduct, whichever amount is greater. If the offense has contributed to the decision of a court of appropriate jurisdiction to issue an order directing the conservation, rehabilitation, or liquidation of an insurer, such penalty shall be remitted to the appropriate regulatory official for the benefit of the policyholders, claimants, and creditors of such insurer. The imposition of a civil penalty under this subsection does not preclude any other criminal or civil statutory, common law, or administrative remedy, which is available by law to the United States or any other person. If the Attorney General has reason to believe that a person is engaged in conduct constituting an offense under section 1033, the Attorney General may petition an appropriate United States district court for an order prohibiting that person from engaging in such conduct. The court may issue an order prohibiting that person from engaging in such conduct if the court finds that the conduct constitutes such an offense. The filing of a petition under this section does not preclude any other remedy which is available by law to the United States or any other person.

GENETIC TESTING [CIC 10146, 10147(b)]

"Genetic characteristics" means any scientifically or medically identifiable gene or chromosome that is known to be a cause of disease or disorder that is presently not associated with any symptoms of any disease or disorder. Insurers cannot engage in unfair discrimination among individuals of the same class in the underwriting of life or disability income insurance on the basis of a person's genetic characteristics. An insurer that requests an applicant to take a genetic characteristic test shall obtain the applicant's written informed consent for the test. Written informed consent shall include a description of the test to be performed, including its purpose, potential uses, and limitations, the meaning of its results, procedures for notifying the applicant of the results, and the right to confidential treatment of the results. <p> No life or disability income insurer shall require a genetic characteristic test if the results of the test would be used exclusively or nonexclusively for the purpose of determining eligibility for hospital, medical, or surgical insurance coverage or eligibility for coverage under a non-profit hospital service plan or health care service plan. <br><br> No policy shall limit benefits otherwise payable if loss is caused or contributed to by the presence or absence of genetic characteristics. <br><br> Any person who negligently discloses results of a test for a genetic characteristic to any third party, in a manner which identifies or provides identifying characteristics of the person to whom the test results apply, except pursuant to a written authorization, shall be assessed a civil penalty in an amount not to exceed one thousand dollars ($1,000) plus court costs, as determined by the court, which penalty and costs shall be paid to the subject of the test. <br><br> Any person who willfully discloses the results of a test for a genetic characteristic to any third party, in a manner which identifies or provides identifying characteristics of the person to whom the test results apply, except pursuant to a written authorization, shall be assessed a civil penalty in an amount not less than one thousand dollars ($1,000) and no more than five thousand dollars ($5,000) plus court costs, as determined by the court, which penalty and costs shall be paid to the subject of the test. Any person who willfully or negligently discloses the results of a test for a genetic characteristic to a third party, in a manner which identifies or provides identifying characteristics of the person to whom the test results apply, except pursuant to a written authorization, which results in economic, bodily, or emotional harm to the subject of the test, is guilty of a misdemeanor punishable by imprisonment in a county jail for a period not to exceed one year, by a fine of not to exceed ten thousand dollars ($10,000), or by both that fine and imprisonment. Each disclosure made in violation of this section is a separate and actionable offense. Any person who commits any act described described above shall be liable to the subject for all actual damages, including damages for economic, bodily, or emotional harm which is proximately caused by the act.

ERMINATION OF LICENSE [CIC 1708-1712.5]

A licensee may voluntarily surrender his license for cancellation at any time by delivering the license to the commissioner. To return the old license to the commissioner with signatures of the original members is not a requirement. If the license is in the possession of the insurer or the licensee's employer, the license may be surrendered by providing written notice to the commissioner of the licensee's desire to cancel. All licenses issued to a natural person terminate when the person dies. -An organization ceases to exist as an entity eligible to hold a license upon the following: -A co-partnership dissolves or there is a change in membership. -An association terminates. -A corporation is dissolved. A co-partnership may continue to transact business under its license if: -The surviving partnership files an application within 30 days registering the change in membership, pays the required fee, and furnishes the required bond (if acting as a broker). -At least one partner from the predecessor partnership continues to exercise the powers of agency or brokership with the new partnership. -The application is signed by a general partner. When a licensed entity terminates, its right to transact insurance also terminates. However, a natural person, partnership, association, or corporation may continue to operate under an existing license as a different organization if: A natural person is named to exercise the agency or brokerage powers. There has been no substantial change in ownership or control of the licensed insurance business. Within 30 days after the change, the person or successor partnership, association or corporation files a license application and pays necessary fees. The license of an organization licensed as a life-only agent, accident and health agent, property and casualty broker/agent, or personal lines broker/agent becomes inoperative when the last natural person named on the license is removed or is no longer eligible to be licensed. The license will not be reactivated unless all deficiencies are corrected, including the addition of a natural person to transact insurance under the organization's license.

Life and disability analyst [CIC 1848]

A life and disability analyst is someone who requires a license and charges a fee to review an insured's life or disability policy. A licensee shall not receive any fee unless that fee is based upon a written agreement signed by the party to be charged. The agreement shall include a statement that information and services concerning insurance policies may be obtained directly from the insurer without cost, a statement outlining the services to be performed for which a fee is to be charged, and the fee to be charged. Additionally, if the licensee is also licensed, there shall be a statement in the agreement indicating that the licensee is so licensed and, as such, receives commissions for the sale of products. A copy of every such agreement shall be retained by the licensee for not less than three years after the services have been fully performed.

Application Questions Inappropriate sales and replacement [CIC 10192.18, 10192.20]

A person cannot have more than one Medicare Supplement plan. As such, applications must include a question to identify persons who already are enrolled in a Medicare Supplement plan. When selling Medicare Supplement policies in California, agents are required by law to ask the following mandatory questions of the applicant. Specifically - "Do you have or are you currently covered by: 1. A Medicare Supplement Policy? 2. A Medicare Advantage Policy? 3. Medi-Cal? 4. Other Medical Insurance?" 5. The agent must also ask the applicant, "Is this Medicare Supplement policy intended to replace an existing Medicare Supplement policy? The purpose of these questions is to determine if in fact the policy is appropriate for the potential insured. Selling duplicate coverage is unethical. Therefore, the replacement question must also be asked and recorded on the application. In addition to the practices prohibited by this code or any other law, the following acts and practices are prohibited: -Twisting, which means knowingly making any misleading representation or incomplete or fraudulent comparison of any insurance policies or insurers for the purpose of inducing or tending to induce, any person to lapse, forfeit, surrender, terminate, retain, pledge, assign, borrow on, or convert an insurance policy or to take out a policy of insurance with another insurer.</li> -High pressure tactics, which means employing any method of marketing having the effect of or tending to induce the purchase of insurance through force, fright, threat, whether explicit or implied, or undue pressure to purchase or recommend the purchase of insurance.</li> -Cold lead advertising, which means making use directly or indirectly of any method of marketing that fails to disclose in a conspicuous manner that a purpose of the method of marketing is the solicitation of insurance and that contact will be made by an insurance agent or insurance company. -The terms "Medicare supplement," "Medigap," "Medicare Wrap-Around" and words of similar import shall not be used unless the policy is issued in compliance with this article.

california insurance code (cont ii.)

A person shall not make any representation or comparison of insurers or policies to an insured which is misleading, for the purpose of inducing him or her to lapse, forfeit, change or surrender his or her insurance. Any person engaging in misrepresentation of policies shall be punishable by a fine not exceeding twenty-five thousand dollars ($25,000), or in a case in which the loss of the victim exceeds ten thousand dollars ($10,000), by a fine not exceeding three times the amount of the loss suffered by the victim, by imprisonment in a county jail for a period not to exceed one year, or by both a fine and imprisonment. Restitution to the victim shall be satisfied before any fine imposed by this section is collected. Additionally, if the violation was intentional, the commissioner, may suspend the license of any such person for not exceeding three years after conducting a hearing. If an insurer knowingly violates or knowingly permits any officer, agent, or employee so to do, the commissioner, after a hearing, may suspend the insurer's certificate of authority to do the class of insurance in respect to which the violation occurred.

Claimant [CCR 2695.2(c)]

A person who asserts a right of recovery under an insurance policy is called the claimant.

representations [CIC 350-361]

A representation is a statement made by the applicant which they consider to be true and accurate to the best of the applicant's belief. It is used by the insurer to evaluate whether or not to issue a policy. A representation may be altered or withdrawn before the insurance is effected, but not afterwards. A representation is false when the facts fail to correspond with its assertions or stipulations. A representation cannot qualify an express provision in a contract of insurance; but it may qualify an implied warranty.

Surplus lines broker [CIC 703, 1760-1780]

A surplus lines broker places insurance with non-admitted insurers. The following acts are considered unlawfully acting as an insurer without a certificate of authority and are prohibited except when performed by surplus lines brokers: -Acting as an agent for a nonadmitted insurer in the transaction of insurance business in California for a home state insured. -Advertising a nonadmitted insurer in California in any maner -Aiding a nonadmitted carrier in any other way to transact insurance in California for a home state insured A person found guilty of unauthorized dealings with a non-admitted insurer may be penalized by the commissioner and the state. A licensee who misrepresents to any surplus lines broker any material fact regarding insurance coverage, or facts regarding rules of submission or rates, or conspires to procure non-admitted insurance in violation of the law, may have his license suspended, revoked, or denied. Any person who willfully violates the surplus lines regulations is guilty of a misdemeanor and is punishable by a fine not exceeding $10,000, or imprisonment in the state prison, or in a county jail, for not exceeding one year, or both. In addition to any penalty provided for commission of misdemeanors, a person violating any provision of this section shall forfeit to this state the sum of five hundred dollars ($500), together with one hundred dollars ($100) for each month or fraction thereof during which he or she continues the violation. When a surplus line broker's license is revoked for any reason other than the insufficiency of his sureties, a new license shall not be issued to him within one year after such revocation and until all indebtedness of the broker on former business has been paid to the commissioner. Any person may negotiate and effect insurance to protect himself, herself, or itself against loss, damage, or liability with any nonadmitted insurer. The provisions limiting the insurance that may be placed with nonadmitted insurers and requiring any report thereof shall not apply to: 1. Reinsurance of the liability of an admitted insurer. 2. Insurance against perils of navigation, transit or transportation upon hulls, freights or disbursements, or other shipowner interests; upon goods, wares, merchandise and all other personal property and interests therein, in the course of exportation from or importation into any country, or transportation coastwise, including transportation by land or water from point of origin to final destination and including war risks; and marine builder's risks, drydocks and marine railways, including insurance of ship repairer's liability, and protection and indemnity insurance, but excluding insurance covering bridges or tunnels. 3. Aircraft or spacecraft insurance. 4.Insurance on property or operations of railroads engaged in interstate commerce. The insurance specified in bullets (2), (3), and (4) above may be placed with a nonadmitted insurer only by and through a special lines' surplus line broker. A surplus line broker may solicit and place insurance for a home state insured with nonadmitted insurers only if that insurance cannot be procured from insurers admitted for the particular class or classes of insurance and that actually write the particular type of insurance in this state. Each surplus line broker shall be responsible to ensure that a diligent search is made among insurers that are admitted to transact and are actually writing the particular type of insurance in this state before procuring the insurance for a home state insured from a nonadmitted insurer. Each surplus line broker shall file a standardized form to be prescribed by the commissioner setting forth the diligent efforts to place the coverage with admitted insurers and the results of these efforts. The form shall be signed by a person licensed under this code who has made the diligent search required by this section or who supervised an unlicensed person or persons who actually conducted the search. The insurance shall not be placed with a nonadmitted insurer for the purpose of procuring a rate lower than the lowest rate that will be accepted by any admitted insurer. It shall be conclusively presumed that insurance is placed in violation of this section if the insurance is actually placed with a nonadmitted insurer at a lower rate of premium or lower premium than the lowest rate of premium or the lowest premium that could be obtained from an admitted insurer unless, at the time the insurance attaches, there is filed with the commissioner a statement describing the insurance, specifying the rate and the nearest procurable rates from admitted insurers. The statement shall include an explanation of the reasons that the insurance must be placed with a nonadmitted insurer even though it is available from an admitted insurer. Every nonadmitted insurer and surplus line broker shall be responsible to ensure that, at the time of accepting an application for an insurance policy, other than a renewal of that policy, the signature of the applicant on the disclosure statement is obtained. The surplus line broker shall maintain a copy of the signed disclosure statement in his or her records for a period of at least five years. The disclosure statement shall be in boldface 16-point type on a freestanding document. In addition, every policy or certificate issued by a nonadmitted insurer shall contain the disclosure statement in boldface 16-point type on the front page of the policy. If the applicant has not received and completed the signed disclosure form, he or she may cancel the insurance so placed. The cancellation shall be on a pro rata basis as to premium, and the applicant shall be entitled to the return of any broker's fees charged for the placement. The following notice shall be provided to home state insureds and home state insured applicants for insurance, and shall be printed in English and in the language principally used by the surplus line broker and nonadmitted insurer to advertise, solicit, or negotiate the sale and purchase of surplus line insurance. The surplus line broker and nonadmitted insurer shall use the appropriate bracketed language for application and issued policy disclosures: NOTICE: THE INSURANCE POLICY THAT YOU [HAVE PURCHASED] [ARE APPLYING TO PURCHASE] IS BEING ISSUED BY AN INSURER THAT IS NOT LICENSED BY THE STATE OF CALIFORNIA. THESE COMPANIES ARE CALLED "NONADMITTED" OR "SURPLUS LINE" INSURERS. THE INSURER IS NOT SUBJECT TO THE FINANCIAL SOLVENCY REGULATION AND ENFORCEMENT THAT APPLY TO CALIFORNIA LICENSED INSURERS. THE INSURER DOES NOT PARTICIPATE IN ANY OF THE INSURANCE GUARANTEE FUNDS CREATED BY CALIFORNIA LAW. THEREFORE, THESE FUNDS WILL NOT PAY YOUR CLAIMS OR PROTECT YOUR ASSETS IF THE INSURER BECOMES INSOLVENT AND IS UNABLE TO MAKE PAYMENTS AS PROMISED. THE INSURER SHOULD BE LICENSED EITHER AS A FOREIGN INSURER IN ANOTHER STATE IN THE UNITED STATES OR AS A NON-UNITED STATES (ALIEN) INSURER. YOU SHOULD ASK QUESTIONS OF YOUR INSURANCE AGENT, BROKER, OR "SURPLUS LINE" BROKER OR CONTACT THE CALIFORNIA DEPARTMENT OF INSURANCE AT THE FOLLOWING TOLL-FREE TELEPHONE NUMBER ____ OR INTERNET WEB SITE WWW.INSURANCE.CA.GOV. ASK WHETHER OR NOT THE INSURER IS LICENSED AS A FOREIGN OR NON-UNITED STATES (ALIEN) INSURER AND FOR ADDITIONAL INFORMATION ABOUT THE INSURER. YOU MAY ALSO CONTACT THE NAIC'S INTERNET WEB SITE AT WWW.NAIC.ORG. FOREIGN INSURERS SHOULD BE LICENSED BY A STATE IN THE UNITED STATES AND YOU MAY CONTACT THAT STATE'S DEPARTMENT OF INSURANCE TO OBTAIN MORE INFORMATION ABOUT THAT INSURER. FOR NON-UNITED STATES (ALIEN) INSURERS, THE INSURER SHOULD BE LICENSED BY A COUNTRY OUTSIDE OF THE UNITED STATES AND SHOULD BE ON THE NAIC'S INTERNATIONAL INSURERS DEPARTMENT (IID) LISTING OF APPROVED NONADMITTED NON-UNITED STATES INSURERS. ASK YOUR AGENT, BROKER, OR "SURPLUS LINE" BROKER TO OBTAIN MORE INFORMATION ABOUT THAT INSURER. CALIFORNIA MAINTAINS A LIST OF APPROVED SURPLUS LINE INSURERS. ASK YOUR AGENT OR BROKER IF THE INSURER IS ON THAT LIST, OR VIEW THAT LIST AT THE INTERNET WEB SITE OF THE CALIFORNIA DEPARTMENT OF INSURANCE: WWW.INSURANCE.CA.GOV. IF YOU, AS THE APPLICANT, REQUIRED THAT THE INSURANCE POLICY YOU HAVE PURCHASED BE BOUND IMMEDIATELY, EITHER BECAUSE EXISTING COVERAGE WAS GOING TO LAPSE WITHIN TWO BUSINESS DAYS OR BECAUSE YOU WERE REQUIRED TO HAVE COVERAGE WITHIN TWO BUSINESS DAYS, AND YOU DID NOT RECEIVE THIS DISCLOSURE FORM AND A REQUEST FOR YOUR SIGNATURE UNTIL AFTER COVERAGE BECAME EFFECTIVE, YOU HAVE THE RIGHT TO CANCEL THIS POLICY WITHIN FIVE DAYS OF RECEIVING THIS DISCLOSURE. IF YOU CANCEL COVERAGE, THE PREMIUM WILL BE PRORATED AND ANY BROKER'S FEE CHARGED FOR THIS INSURANCE WILL BE RETURNED TO YOU." The producer shall insert the current toll-free telephone number of the Department of Insurance as provided in paragraph 4 of the notice. Surplus line brokers may advertise and solicit using print, electronic media, direct mail, and all other advertising or marketing media. These advertisements and solicitations may include a description of nonadmitted insurance products available through the surplus line broker, and may include the name of any nonadmitted insurer, provided that all of the following apply: (a) the insurer is authorized to accept placements from the surplus line broker, (b) a nonadmitted insurer's name is not used in connection with any nonadmitted insurance product of that insurer, (c) the unlicensed status of the insurer or of the insurance products is disclosed in type of a size no smaller than any telephone number, address, or fax number appearing in the advertisement or solicitation, and (d) the advertisement or solicitation does not contain any assertion, representation, or statement with respect to the business of insurance, or with respect to any person in the conduct of his or her insurance business, that is untrue, deceptive, or misleading, and that is known, or that by the exercise of reasonable care should be known, to be untrue, deceptive, or misleading. If the insurance is available from an eligible nonadmitted insurer that is a member of a group of insurers, advertisements and solicitations in accordance with this section may include the name of the group. A surplus line broker's advertisements and solicitations shall not include any information about a nonadmitted insurer's premiums or rates. Every California home state insured for whom insurance has been effected with nonadmitted insurers shall, upon request in writing by the commissioner, produce for the commissioner's examination all policies, contracts, and other documents evidencing that insurance, and shall disclose to the commissioner the amount of the gross premiums paid or agreed to be paid for that insurance. For refusal to obey that request, the insured shall forfeit to the State of California the sum of one thousand dollars ($1,000) for each refusal.

Continuing Education [CIC 1749.3-1749.33, CCR 58056]

All agents must complete 24 hours of continuing education each two-year license renewal period, three of those hours must be in Ethics. -A life-only agent licensee shall satisfactorily complete 24 hours of instruction, of which three hours shall be in ethics, prior to renewal of the license. These hours of instruction may be completed at any time prior to renewal of the license. -life-only agents also licensed as a property and casualty broker-agent must complete 24 hours of continuing education in either license type, three (3) hours of which must be in ethics -A life-only agent who sells annuity products to individual consumers must complete eight (8) hours of initial training prior to soliciting for sales. Four (4) hours of subsequent training every two years prior to license renewal. -the total hours of continuing education required for the life-only agent are not increased by the above -An accident and health agent licensee shall satisfactorily complete 24 hours of instruction, of which three hours shall be in ethics, prior to renewal of the license. These hours of instruction may be completed at any time prior to renewal of the license. -An agent licensed as both a life-only agent and as an accident and health agent shall satisfactorily complete a total of 24 hours of instruction, of which three hours shall be in ethics, prior to renewal of the license. These hours of instruction may be completed at any time prior to renewal of the license. -An accident and health agents also licensed as a property and casualty broker-agent may complete 24 hours of continuing education in either license type, three (3) hours of which must be in ethics. -Agents transacting long-term care insurance must complete eight (8) hours per year of LTC CE each of the first four years of licensing and then eight (8) hours per license term of LTC CE beginning with the second renewal. -Additionally, agents who transact California Partnership Long-Term Care Insurance Policies or Certificates must complete eight (8) hours of education in a live classroom setting on the California Partnership for Long-Term Care. For licensees issued a license after January 1, 1992, the Partnership education requirement shall be met by completing four (4) hours of such education in each licensure year. -These hours of long-term care and long-term care partnership continuing education count toward the required continuing education hours needed by the licensees. The total hours of continuing education required for the accident and health agent are not increased by the education requirements for LTC or CPLTC.

Insurance Solicitor

An insurance solicitor is a person authorized to assist a broker or agent in transacting insurance.In California, there is no such license as "life solicitor or "accident and health solicitor".

AGENCY NAMES [CIC 1724.5, 1729.5]

Every individual and organization licensee and every applicant for such a license shall file with the commissioner in writing the true name of the individual or organization and also all fictitious names under which he conducts or intends to conduct his business and after licensing shall file with the commissioner any change in or discontinuance of such names. The commissioner may in writing disapprove the use of any true or fictitious name (other than the bona fide natural name of an individual) by any licensee on any of the following grounds: 1. Such name is an interference with or is too similar to a name already filed and in use by another licensee; 2. The use of the name may mislead the public in any respect; 3.The name states, infers or implies that the licensee is an insurer, motor club, hospital service plan or entitled to engage in insurance activities not permitted under licenses held or applied for; 4. The name states or implies that the licensee is an underwriter. This subdivision shall not prevent a natural person who is a life licensee from describing himself as an "underwriter" or from using the designation "Chartered Life Underwriter" if entitled thereto nor shall it prevent a natural person who is a fire and casualty licensee from using the designation "Chartered Property and Casualty Underwriter" if entitled thereto nor a producers trade association each member of which is also separately licensed from having a name containing the word underwriter; or 5. The licensee has already filed and not discontinued the use of more than two names including the true name. This subdivision shall not prevent a licensee who has lawfully purchased or succeeded to the business or businesses of other licensees from using for each such business not more than two additional names, true or fictitious, consisting of names used by his predecessors in the conduct of such businesses. A licensee may not use a true or fictitious name after being notified by the commissioner in writing that such use is contrary to this section. If the commissioner determines that there are facts in mitigation in connection with the continued use of such name he may permit its use for a specified reasonable period of time if in connection therewith he imposes such conditions as will protect the public and achieve the purposes of this section. Any such permission and any such conditions shall be written. A property broker-agent, casualty broker-agent, or life agent who has a service contract with a corporation licensed under this code or who is a stockholder or member of any incorporated association or corporation organized under the Corporations Code for the purpose of providing services to property broker-agents, casualty broker-agents, or life agents may use the name of that corporation or association on any stationery or advertisements and other written or printed matter used to identify the business of the property broker-agent, casualty broker-agent, or life agent provided that the name of the property broker-agent, casualty broker-agent, or life agent is clearly identified as bearing only that relationship to the corporation or association in one of the following ways: -"Representing ____;" -"A stockholder of ____;"-"Placing business through ____;" -"Using services of ____." The use of the corporation or association name in the manner provided in this section shall not constitute such use as would mislead the public.

FREE INSURANCE [CIC 777.1]

FREE INSURANCE [CIC 777.1] No insurer, agent, or broker shall participate in any plan to offer insurance or annuities as an inducement to the purchase or rental by the public of any real or personal property, or services, without any separate charge for the insurance. Willful violators may have their license suspended or revoked for up to one year. Exceptions include: -Insurance with newspaper subscriptions -In connection with purchase of shares in credit union -Insurance that guarantees performance of goods -Title insurance or credit life or disability in connection with loan -Motor club insurance -Incidental when cost is $1 or less per year

Fiduciary responsibility [CIC 1733-1735

Fiduciary responsibility [CIC 1733-1735] A fiduciary is a person or organization holding the funds or property of another in trust. Agents have a fiduciary responsibility for all funds collected from clients. Agents must not mingle these funds with their own personal funds or any other funds.Agents should protect the confidential relationship they have with their clients. Any person who diverts or appropriates such fiduciary funds to personal use is guilty of theft and may be punished for theft as provided by law. When receiving fiduciary funds, a licensed person shall do one of the following: Remit premiums, less commissions, and return premiums received or held by him or her to the insurer or the person entitled thereto. Maintain the funds in a trust account in a bank or savings and loan association, separate from any other account, in an amount at least equal to the premiums and return premiums, net of commissions, received by him or her and unpaid. United States government bonds and treasury certificates or other obligations for which the full faith and credit of the United States are pledged for payment of principal and interest. Certificates of deposit of banks or savings and loan associations, which are insured by the Federal Deposit Insurance Corporation (FDIC). Repurchase agreements collateralized by securities issued by the United States government. Either of the following: Bonds and other obligations of this state or of any local agency or district of the State of California having the power, without limit as to rate or amount, to levy taxes or assessments upon all property within its boundaries subject to taxation or assessment by the local agency or district to pay the principal and interest of the obligations. Revenue bonds and other obligations payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by this state, or a local agency or district, or by a department, board, agency, or authority thereof.

Penalties

If the commissioner has reason to believe that a person has been engaged or is engaging in any unfair method of competition or any unfair or deceptive act he shall conduct a hearing. Any person who engages in an unfair method of competition or deceptive act is liable to the state for a fine of up to $5,000 per violation. If the act is determined to be willful, the fine will not exceed $10,000 per act.

Commissioner's Annual Rate Guide [CIC 10192.20(e)(4)]:

States that each insurer that markets Medicare Supplement insurance in this State shall provide on the application form a statement that reads as follows: "A rate guide is available that compares the policies sold by different insurers. You can obtain a copy of this rate guide by calling the Department of Insurance's consumer toll-free telephone number (1-800-927-HELP), by calling the Health Insurance Counseling and Advocacy Program (HICAP) toll-free telephone number (1-800-434-0222), or by accessing the Department of Insurance's Internet Web site (www.insurance.ca.gov)." There are also mandatory statements (not questions) that must be disclosed to everyone considering the purchase of a Medicare Supplement policy. Again, these statements are designed to protect and inform the consumer by providing full and fair disclosure of all important facts and issues related to Medicare Supplement plans. Specifically the following statements must be mentioned to the potential purchaser as follows: 1. "You do not need more than one Medicare Supplement Policy." 2. "If you have existing coverage, you may want to evaluate whether you need multiple coverage." 3. "You may be eligible for Medi-Cal benefits and may not need a Medicare Supplement policy!" 4. "If you become eligible for Medi-Cal, you can suspend your Medicare Supplement policy for up to 24 months provided you do so within 90 days of becoming eligible for Medi-Cal. If you lose your Medi-Cal eligibility you can reinstate your Medicare Supplement policy if you reinstate within a 90-day period. 5. "If you enrolled in a Medicare Supplement Policy due to disability, then later become covered by a group or union based group health plan, you can: (a) Suspend your Medicare Supplement Plan while covered under the group insurance plan and then reinstate the same or similar plan within 90 days of losing your group benefits." 6. "Free counseling services are available that address the issues of Medicare Supplement and Medi-Cal benefits and eligibility. These services are provided via the HICAP program."

Prelicensing Education [1749 - 1749.9]

The California Department of Insurance requires all new applicants for license as a property broker-agent, casualty broker-agent, limited lines automobile insurance agent, personal lines broker-agent, life-only agent, or accident and health agent to meet prelicensing education standards as follows -Require a minimum of 20 hours of prelicensing study as a prerequisite to qualification for a property broker-agent license. -Require a minimum of 20 hours of prelicensing study as a prerequisite to qualification for a casualty broker-agent license. -Individuals wishing to obtain both the property and casualty license must complete 40 hours of prelicensing instruction in the areas of property and casualty insurance. -Require a minimum of 20 hours of prelicensing study as a prerequisite for qualification for a life-only agent license. -Require a minimum of 20 hours of prelicensing study as a prerequisite for qualification for an accident and health insurance agent license. This curriculum shall also include instruction in workers' compensation and general principles of employers' liability. -Individuals wishing to obtain both life-only and accident and health licenses must complete 40 hours of pre-licensing instruction in the areas of life, accident and health insurance. -Require a minimum of 20 hours of prelicensing study as a prerequisite for qualification for a limited lines automobile insurance agent license. -Require a minimum of 20 hours of prelicensing study as a prerequisite for qualification for a personal lines broker-agent license. -In addition to the 20 hours of prelicensing education required to qualify for a license as a property broker-agent, casualty broker-agent, personal lines broker-agent, a life-only agent, or an accident and health agent, or the 20 hours of prelicensing education required to qualify for a license as a limited lines automobile insurance agent, the department shall require -12 hours of study on ethics and this code -Where an applicant seeks a license for more than one of the following license types: a property broker-agent license, a casualty broker-agent license, a personal lines broker-agent license, a life-only license, or an accident and health license, the applicant shall only be required to complete one 12-hour course on ethics and this code. -Prelicensing education requirements do not apply to a life agent who is limited by the terms of a written agreement with the insurer, which filed on that life agent's behalf a notice of appointment with the commissioner, to transact only specific life insurance policies or annuities that have an initial face amount of twenty thousand dollars ($20,000) or less that are designated by the purchaser for the payment of funeral and burial expenses.

policy [CIC 380-381]

a "policy" as described by the california insurance code is a written contract in which one party promises to indemnify another against loss that arises from an unknown event. the financial rating of the insurer is not required to be specified in the insurance policy. according to the california insurance code, an insurance policy must specify all of the following -the parties between whom the correct is made -the property or life insured -the interest of the insured in the property insured, if he is not the absolute owner thereof -risks insured against -the period during which the insurance is to continue -either: *a statement of the premium ( or ) *if the insurance is of a character where the race the premium is only determinable upon the termination of the contact, a statement of the basis and rates upon the final premium is to be determined and paid

agent

an insurance agent is a person authorized, by and on behalf of an insurer to transact all classes of insurance other than life, disability, or health insurance, on behalf of an admitted insurance company

insurance agent

an insurance agent is a person authorized, by and on behalf of an insurer to transact all classes of insurance other than life, disability, or health insurance, on behalf of an admitted insurance company

insurance broker

an insurance broker is a person who, for compensation and on behalf of another person, transacts insurance other than life, disability, or health with, but not on behalf of, an insurer. there is no such license issued in california.

notice

an order or notice of the commissioner must be in writing and signed by the commissioner or an authorized representative. the order of the commissioner shall state: -its effective date -it's purpose -the grounds on which it is based -the provisions under which action is taken

notice

an order or notice of the commissioner must be in writing signed by the commissioner or an authorized representative

insurance (section 22 of CIC)

as defined in the california insurance code, "insurance" is a contract to indemnify against loss

insurable events [CIC 250]

as defined in the california insurance code, insurable events included any contingent or unknown event, wether past or future, which may damnify a person having an insurable interest, or create a liability against him. this specifically excludes: a lottery or its outcome, policy executed by way of gaming or wagering, and as of Jan 1, 1986, coverage for the payment of any damages awarded to a person because of sedition 1029.8 of the code of civil procedure

concealment, materiality and recession [CIC 330-339,447]

concealment: is defined as the neglect to communicate that which a party knows and ought to communicate. wether or not concealment is intentional or unintentional, the injured party has the right to rescind the insurance contract. rescission: means the contract is made null and void. each party to a contact of insurance shall communicate to the other, in good faith, all facts within his knowledge which are or which he believes to be material to the contract and as to which he makes no warranty, and which the other has not the means of ascertaining. neither party to a contract or insurance is bound to communicate information of the matters following, expect in answer to the inquiries of the other: 1. those which the other knows 2 those which, in the exercise of ordinary care, the other outgoing to know and of which the party has no reason to suppose him ignorant 3. those which the other waives communication 4. those which prove or tend to prove existence of a risk excluded by a warranty, and which are not other user material 5. those which relate a risk excepted from insurance, and which are not otherwise material. 6. neither party to a contact or insurance is bound to communicate, even upon inquiry, information of his own judgement upon the matters in question materiality: is relevant information that would probably influence a party's assessment of a pros posed contact. materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due, on forming his estimate of the disadvantages of the proposed contract, or in making his inquiries each party to a contract of insurance is bound to known: 1. all the general causes which are open to his inquiry equally with that of the other, and which may affect either the political or material perils contemplated 2. all the general usages of trade the right to information of material facts may be waived, either (a) by the terms of insurance or (b) by neglect to make inquires as to such facts, where they are distinctly implies in other facts of which information is communicated. information of the nature or amount of the interest of one insured need not be communicated unless in answer to an inquiry, except as prescribed by section 381, or by the provisions of the insurance contract if such provisions are prescribed by this code as part of a standard form. an insurer has the right of recession when: *an intentional and fraudulent omission, on the part of one insured, to communicate information of matters proving or tending to prove the falsity of a warranty, entitles the insurer to rescind *if a representation is false in a material point, whether affirmative to rescind *if a representation is false in a material point, whether affirmative or promissory *the violation of a material warranty or other material provision of a policy, on the part of either party thereto, entitles the other to rescind

conservation

if an insurance company is in an impaired financial condition, the commissioner may file an application for an order to take control of its affairs for the purpose of improving its condition. this act is known as conservation.

california insurance code

in addition to the items listed in the prior section, the following acts shall constitute cause to suspend or revoke any permanent license issued pursuant to this chapter: 1. the license we has induced a client, wether directly or indirectly, to co-sign or make a loan, make an investment, make a gift, including a testamentary gift, or provide any future benefit through a right of survivorship to the licenses, or to any of the persons listed in line 5 below. 2. the licensee has induced a client, whether directly or indirectly, to make the licensee or any of the persons listed in line 5 below a beneficiary under the terms of any inter vivos or testamentary trust or the owner or beneficiary of a life insurance policy or an annuity policy. 3. the licensee has inducted a client, wether directly or indirectly, to make the licensee, or a person who is register as a domestic partner of the licensee, or is related to the licensee by birth, marriage, or adoption, a trustee under the terms of any inter vivos or testamentary trust. however, if the licensee is also licensed as an attorney in any state, the license may be made a trustee under the terms if any inter vivos testamentary trust, process that the licensee is not a seller of insurance to the trustor of the trust 4. the license, who has a power of attorney for a client has sold to the client or has used the power of attorney to purchase an insurance product on behalf of the client for which the licensee has received a commission 5. lines 1 and 2 shall also apply if the licensee induces the client to provide the benefit in those lines to the following people: a person who is related to the licensee by birth, marriage, or adoption, a friend or business acquaintance of the licensee , person who is register as a domestic partner of the licensee. 6. this section shall not apply to situations in which the client is: a person related to the licensee by birth, marriage, or adoption, or who is registered as a domestic partner of the licensee. the commissioner may deny an application for any licenses issued, and may suspend or revoke the permanent license of any organization is any of the following: -the controlling person has previously engaged in a fraudulent practice or act has conducted business in a dishonest manner -the controlling person has shown incompetency or untrustworthiness in the conduct of any business, or has by commission of a wrongful act or practice in the course of any business exposed the public or those dealing with him or her to the danger of loss -the controlling person has failed to perform a duty expressly enjoined join him or her by a provision of this code or has commuted an act expressly for forbidden by a profound of this code -the controlling person has been convicted of: *a felony *a misdemeanor denounced by his code or other laws regulating insurance *a public offense having as one of its necessary elements a fraudulent act or an act of dishonesty in acceptance, custody, or payment. of money or property *a judgement, plea, or verdict of guilty, or a plea of nolo contenders is deemed to be a concision within the meaning of this section *the controlling person has aided or abetted any person in an act or omission that would constitute grounds for the suspension, revocation, or refusal of a license or certificate issued under this code to the person aided or abetted *the controlling person has permitted any person in his or her employe to violate any provision of this code *the controlling person has violated any provision of law relating to conduct of business that could lawfully be done only under authority conferred by a license under this chapter

Twenty-four hour coverage

is defined as the joint issuance of a workers' compensation policy with a disability insurance policy, health care service plan contract, or other medical insurance coverage for nonoccupational injuries and illnesses. This product shall not include a life insurance policy. Any accident and health agent who wishes to sell 24-hour care coverage, shall complete a course, program of instruction, or seminar of an approved continuing education provider on workers' compensation and general principles of employer liability, which shall be completed by examination approved by the commissioner as part of the continuing education course, program of instruction, or seminar prior to selling this coverage. The required number of instruction hours shall be equal to but no greater than that required by the curriculum board for the prelicensing requirements of a property broker-agent or a casualty broker-agent on these subjects. For resident licensees, this requirement shall count toward the licensee's continuing education requirement, but may still result in completing more than the minimum number of continuing education hours set forth in this section. Nothing in this section shall be deemed to allow an accident and health agent to satisfy the obligations set forth in this section by other than a proctored examination administered or approved by the department.

california insurance code (cont.)

the commissioner may, without any hearing, deny an application or suspend or revoke any permanent license issued if the applicant (or holder of permanent license) has done one or more of the following: * been convicted of a felony; or a misdemeanor denounced by this code or by other laws regulating insurance * a judgement, plea, or verdict of guilty, or a plea of nolo contendere is deemed to be a conviction within the meaning of this subdivision * had a previous application for a professional occupational, or vocational license denied for cause by any licensing authority, within fire years of the date of filing the application to be acted upon, on grounds that should preclude the granting of a license by the commissioner under this chapter in the event the commissioner issued an order based on a plea that does not at any time result in a judgement of conviction, the commissioner shall vacate the order upon petition by the applicant.

california insurance commissioner (CIC 12900,129121)

the commissioner of insurance oversees the insurance industry in california. this is an elected position that is held for a term of 4 years with a two-term limit. the election of commissioner takes place during the same general election as the approval of the legislature. the commissioner shall perform all duties imposed upon him or her by the provisions of this code and other laws regulating the business of insurance in this state and shall enforce the execution of those provisions and laws. we will discuss many responsibilities of the commissioners throughout this chapter. in general, the commissioner's duties and powers include; -revokes and suspends licenses for just cause -licenses regulates and examines insurance companies -enforce state insurance laws and regulations -investigate complaints regarding the insurance industry -provide consumer education -establish fees for services -adopt emergency regulations if necessary -report annually to the government -rate regulation -consumer protection -insurance domains solvency surveillance

commissioner of insurance

the commissioner oversees the insurance industry in california. this is an elected position that is held for a term or 4 years with a two-term limit