Final Test-P&C

Federal Violent Crime Control & Law Enforcement Act

*It prohibits anyone who has been convicted of a state or federal felony involving dishonesty or breach of trust from engaging in the insurance business without a consent waiver from the Commissioner. *There is no statute of limitations. *It prohibits fraud, embezzlement, falsification of company records, or coercion in insurance transactions in interstate commerce. *Penalties range from $5,000 to $10,000, imprisonment from 10 to 15 years, or both fine and imprisonment. Violations may result in both civil (monetary, regulatory) and criminal (fines and/or jail) penalties.

Warranties

*Specific agreements are made between the insured and insurer that certain conditions will be met. *Warranties, become a part of the policy and can void the policy if they are breached, whether the breach was intentional or unintentional

Representations

*statements that the applicant believes are true *a policy cannot be voided on the basis of a representation

How much continuing education credits do you need each year?

22 is the magic number

Home Owners Policy: Regarding, medical payments

3 years coverage F

An insurance company may Non-Renew and give the consumer how many days notice?

30 days written notice

Which of these losses would be fully covered under Coverage C of the homeowners policy

A $2,000 laptop computer the insured uses for her in-home accounting business

Legal Purpose

A contract that is against public policy (offensive to the best interests of the public) or in violation of the law is not enforceable. (Homer's Law finally makes strangling child illegal in 2042)

Adhesion

A contract where one party has more power than the other party in drafting the contract; an insurance policy is an adhesion contract— the insurer is the one with more power

Fiduciary

A fiduciary is a person who stands in a special relationship of trust to another person. Agents have fiduciary duties toward their clients, especially regarding handling premiums. Agents also owe a fiduciary responsibility to the insurer and must always make decisions in the insurer's best interest.

Doctrine of reasonable expectations

A policy includes coverages that an average person would reasonably expect it to include, regardless of what the policy actually provides

Actuarial and Statistical Department

Actuaries determine the rates to be charged for various types of insurance.

Countersigning

Agent signs each new policy prepared by the company before delivering it to the insured. Required to validate a contract

Personal Injury

An Injury arising from slander, libel, or false arrest would be known as a personal Injury. In this picture Homer is being falsely arrested for shooting Mr. Burns

Apparent Authority

An agent has what ever authority a reasonable person would assume he has

Fraternal Benefit Society

An incorporated society or order, without capital stock, that is operated on the lodge system and is conducted solely for the benefit of its members and their beneficiaries and not for profit; Fraternal benefit societies offer insurance that is available only to members

Insurance Agent

An individual or organization that legally represents another; a state-licensed professional who represents the insurance company in the sale and servicing of insurance; the direct link between the insurance company and the policyholder *Selling Insurance *Issuing & Countersigning *Collecting premiums *Providing a link between insured and ins company

Stock Company

An insurance company owned by its stockholders; profits are shared by the stockholders; policyholders are not entitled to share in company profits

Reciprocal Company

An unincorporated group of members that share insurance responsibilities with other members; it is managed by an attorney-in-fact (give and take)

Hazard

Anything that increases chance of loss: Overloaded Power Outlet

Physical Hazard

Arises from the condition, occupancy, or use of the property itself

Which of the following statements regarding workers compensation laws is CORRECT?

Benefits are paid to workers injured on the job regardless of who is at fault.

Elements of a Valid Contract

C: Competent Parties. L: Legal Purpose. A: Agreement. (Offer & Acceptance) C: Consideration.

Peril

Cause of Loss: Lightning

Definitions:

Clarifies the meaning of certain terms used in the policy.

Aleatory:

Contingent on an uncertain event (a loss) that provides for unequal transfer of value between the parties

C.A.R.T.

Control: an example is Safety training for welding tools Avoidance: an example is never get a car Retention: an example is paying for it themselves Transfer: an example is buying Insurance

The extra expense coverage form provides

Coverage that will permit the insured to continue in business without interruption following a property damage loss

D.I.C.E.D. Diced

Declarations. Insuring Agreement. Conditions. Exclusions. Definitions.

Elements of Insurability

Definite: Unexpected: Financial Hardship: Calculable: Affordable: Loss are Predictable: Adequate Spread of Risk

Fraud

Deliberate misrepresentation (intentional) that causes harm: ■ Someone deliberately lies. ■ The intent of the lie is for someone else to rely on that lie. ■ Another person relies on that lie. ■ The other person suffers harm as a result of relying on that lie.

Conditions:

Describes the rights and duties & obligations of the insured and the insurance company under the policy

Insuring Agreement:

Describes what is covered and the perils the policy insures against

Broker Consults for insured customers

Doesn't have the authority to bind insurer to an insurance contract.

Insurance Marketing Systems

Exclusive Agency (Captive Agency System) Direct Writer Direct Response Independent agency

Expense Ratio

Expense Ratio is equal to a underwriting expenses divided by the written premium

NOT COVERED: Basic Commercial Property Causes of Loss form

Falling objects

Surety Association of America

Functions as a rating bureau for surety bonds

Fidelity bond

Guarantees an employee's honest discharge of duty, and, are written to protect an insured, against dishonest acts by employees.

Morale Hazard

Hazard created by an individual's tendency to contribute to a loss through his own irresponsible actions or carelessness.

Reinsurance

Insurance companies themselves often purchase insurance to cover their own exposure to loss. May call for losses to be shared on a pro rata basis. (Helps protect from catastrophic losses & from wild fluctuations in underwriting results)

Risk Retention Group (RRG)

Insurance company formed by several organizations to cover those organizations' liability loss exposures; risk retention groups are exempt from most state laws that govern insurance companies

Insurance Solicitor -Works for insurance company insurer

Insurance professional who sells insurance and collects premiums but cannot issue or countersign policies

Mutual Company

Insureds are also owners of the company. *Pays dividends to it's policyholders.

Punitive Damages OR Exemplary Damages:

Intended to punish the defendant and make an example of them to discourage others from behaving the same way

Implied authority

Is authority given by the insurance company to the agent that is not formally expressed or communicated. This implied authority allows the agent to perform all of the usual and necessary tasks to sell and service insurance contracts and to fully exercise the agent's express authority.

Negligence

Lack of reasonable care that is required, to protect others from the unreasonable chance of harm. TO ESTABLISH NEGLIGENCE: *Legal Duty Owed *Breach of Legal duty owed *Proximate cause *Damages

Contract

Legal agreement between two competent parties that promises a certain performance in exchange for a certain consideration. In this picture Bart has sold his soul to Millhouse.

Casualty Insurance

Line of insurance that includes a wide variety of unrelated coverages: Liability Auto Workers' compensation Aviation Crime Surety bonds

Exclusions:

Lists property, perils, persons, or situations that are not covered under the policy

Loss Ratio

Loss Ratio is equal to an incurred losses divided by earned premium

Special Damages

Medical expenses Lost wages Funeral expenses Cost to repair or replace damaged property

What could be scheduled under Miscellaneous Type Vehicles Endorsement to the PAP?

Motorcycle

Fair Credit Reporting Act

Occupation, is excluded in this report. Federal law that allows consumers who are denied insurance because of information contained in a credit report to be notified and allowed to obtain the information used in the report from the reporting agency

Alien

Pacific Home Town Insurance-in Mexico

Domestic

Pacific Home Town Insurance-in Oregon

Foreign

Pacific Home Town Insurance-in Washington

General Damages

Pain and suffering and disfigurement, mental anguish and loss of companionship

What is the purpose of section 1 of a workers compensation policy?

Pay for liability resulting from business operations in states where biz opperates

NOT covered under BOP:

Personal property off premises. Covered Options Are: Outdoor Signs Money & Securities Mechanical Breakdown

The commercial building and Business personal property form covers

Personal property within 100 feet of the building

National Association of Insurance Commissioners N.A.I.C.

Purpose is to promote uniformity in regulation by drafting model laws and regulations. (50 people, 1 from each state)

Premium

Rate per unit X # of units So, an insured who purchases $60,000 of insurance at a rate of $2 per $1,000 would pay a premium of $120 (2 × 60 = 120).

Property Insurance

Risks that we will suffer financial loss because something we own is damaged or destroyed Dwelling Homeowners commercial property Inland Marine Ocean Marine Crime

Dog Bites:

Section 2, Liability. Coverage F only

Consultant

Sells and consults insurance advice for a sum of money

Errors & Omissions (E&O) insurance

Should be purchased by agents to protect themselves against legal liability arising from inadvertent errors or omissions

Declarations:

Shows who is insured, what property or risk is covered, when and where the coverage is effective, and how much coverage applies.

Negligence Defense

Statue of Limitations Assumption of Risk Intervening Cause

Adverse Selection

Tendency for people with a greater-than-average exposure to loss to purchase insurance

T.R.I.A.

Terrorism Risk Insurance Act will pay a maximum of 100 billion dollars annually.

OREGON FAIR PLAN: Fire Extended Coverage VM&M

The Association may: ■ employ personnel and subcontract services required to provide insurance; ■ borrow funds; ■ sue and be sued; ■ negotiate and execute contracts; ■ refund excess amounts collected from members; and ■ perform such other acts as are necessary to carry out the duties imposed on it.

Pro Rata

The company retains only the earned premium and is not permitted to keep an extra amount for expenses.

Which of the following losses would NOT be recoverable under the liability coverage of the homeowners policy?

The named insured's son damages the family's garage with his car. Someone not related must incur the damages or injury

The Obligee

The party to whom the principal makes the promise, and, for whose protection the bond is being written.

The Surety

The party, often the insurance company, who agrees to be responsible for loss, that may result, if the principal does not keep his promise.

Principal

The person who promises to do, or, not do, a specific thing. This is the person or company bonded or contractor

Liability Risk

The risk that we will suffer financial loss as a result of our actions toward others

Concealment

The withholding of a material fact involved in the contract on which the insurer relies on. it involves WITHHOLDING, rather than misstating, a MATERIAL FACT. In this picture Bart is withholding the material fact from Marge that he took the bulldozer and caused vandalism.

USA PATRIOT Act (Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism of 2001)

This law gives the federal government broad power to curtail attempts to launder money and finance terrorist activities, and includes the following:

Short Rate

This means that when the INSURED CUSTOMER cancels before the expiration date, the company not only keeps the premium for insurance already provided but also keeps an allowance for expenses, such as issuing the policy.

Twisting

Twisting is a form of misrepresentation in which the agent convinces the client to cancel already-existing insurance and buy another policy from the agent, to the detriment of the insured. Twisting is illegal.

Requires a person to prove that automobile liability insurance is in effect and is usually tied to vehicle registration?

Uninsured motorists

Indemnity

When a loss occurs, an individual should be restored to the approximate financial condition he was in before the loss, no more and no less.

Moral Hazard

Willing to create a loss situation on purpose just to collect from the insurance

Which of the following would NOT be part of the duties of the Oregon STATE Insurance Commissioner?

Write new insurance laws. Oregon state commissioner: Laura Cali 4 Areas of Responsibility: C.A.R.E. Companies Agents Ratification Enforcement

Competent Parties

a person who is a minor, insane, or under the influence of alcohol or drugs is considered incompetent.

Misrepresentation

a written or verbal misstatement of a MATERIAL fact involved in the contract on which the insurer relies. Misrepresentation will VOID the policy only if it concerns a material fact. A material fact is a fact that would cause an insurer to decline a risk, charge a different premium, or change the provisions of the policy that was issued.

Exclusive Agency like Farmers Insurance

company contracts with agencies, which are independent businesses, to represent and sell insurance only for that insurance company.

NCCI: National Council on Compensation Insurance

is a rating bureau with jurisdiction over workers' compensation.

Express authority

is the authority specifically given to an agent, either orally or in writing, by the principal. Written authority is usually provided through an agency agreement that allows the agent to countersign, issue, and deliver policies and provide other customary services on all contracts accepted by the insurer from the agent.

Waiver

is the intentional relinquishment of a known right

Insurance Guaranty Associations

provide funds for payment of unpaid claims when an insurer becomes insolvent

On a claims-made liability policy, the specific date shown in the declarations indicates

retro-active date

Direct Writer

the insurance company's agents are actually employees. They may receive a salary, be paid by commission, or a combination of both.

The garage policy does not cover

the insured's medical bills

Federal Violent Crime Control and Law Enforcement Act

■ It prohibits anyone who has been convicted of a state or federal felony involving dishonesty or breach of trust from engaging in the insurance business without a consent waiver from the Commissioner. ■ There is no statute of limitations. ■ It prohibits fraud, embezzlement, falsification of company records, or coercion in insurance transactions in interstate commerce. ■ Penalties range from $5,000 to $10,000, imprisonment from 10 to 15 years, or both fine and imprisonment. Violations may result in both civil (monetary, regulatory) and criminal (fines and/or jail) penalties.

An Insurance Company may cancel a policy within the first 60 days, and, must give a 10 day written notice

■ Material misrepresentation by the insured-30 days' notice required. ■ Substantial change in risk insured-30 days' notice required. ■ Nonpayment of premium-10 days' notice required.