Life Insurance - NC
The Commissioner's responsibilities include:
(1) Enforcing insurance laws (via issuing regulations) (2) Issuing subpoenas (3) Administering oaths (4) Instituting civil actions or criminal prosecutions through the attorney general (5) Reviewing annual financial statements of insurers (6) Verifying agent competencies (7) Regulating unfair trade and claims practices (8) Approving rates and forms (policies) (9) Examine or investigate insurance issues (10) Suspending an agent's or adjuster's license prior to a hearing (if necessary) (11)
Insurable Risk Criteria
(1) Low probability of loss occurring (2) Less than catastrophic results (3) Measurable loss (4) Financially significant loss (5) Loss must be accidental and unintended
Insurers can only allow for insurance coverage payment via credit cards if...
(1) all policyholders (current/prospective) are allowed to pay this way (2) the processing fees are paid for by the insurer, not the insured
Appropriate records would include...
(1) policy number (2) date (3) term (4) amount of insurance (5) premiums (6) named insured
Any insurance examination, investigation, or hearing by the Commissioner must be preceded by _____ _____ written notice to all parties stating the nature of the inquiry and any specific charges.
10 days
Claim forms must be provided to the insured within _____ ____ after receiving notification of claim from the insured.
15 days
An insurer has _____ _____ to contest information provided on an insurance application.
2 years
Record keeping for insurers, agencies, or agents is mandatory for _____ _____.
5 years.
Valued Contract
A contract that pays a stated amount in the event of a loss; like life insurance.
Captive / Exclusive Agent
An agent that represents only one insurer.
How frequently does a broker's license need to be renewed?
Annually
Sources of Underwriting Information
Application Physician Records Medical Information Bureau Report (MIB) Paramedical Examination Credit Report Motor Vehicle Report Consumer Investigative Report Employer Life Insurance Agent
Authorization to do insurance business in NC comes in the form of _____ _____ and a company is considered _____ or _____.
Certificate of Authority Admitted Authorized
Deceiving or defrauding an insurer may be guilty of a _____ _____ _____.
Class H felony.
Alien Insurer
Companies incorporated in another country.
Foreign Insurer
Companies incorporated in another state.
Domestic Insurer
Companies incorporated in state.
The Commissioner is a member of the _____ _____ _____.
Council of State.
_____ _____ and _____ _____ may not be required of any borrower by any lender.
Credit life disability insurance
An agent must be licensed by the _____ to be able to do insurance business.
DOI - Department of Insurance
Parts of an Insurance Contract
Declarations Page Insuring Clause/Agreements Conditions Exclusions/Waivers Riders/Endorsements
Loss Ratios
Dividing losses (claims) of insurer by premiums collected.
When does coverage begin after a conditional receipt has been given and coverage is approved?
Either the application date or the date of the medical examination (if required).
Financial loss for insurable interest includes...
Establishes actual monetary loss that would be suffered upon death or disability of someone; Business partners Employer and essential employee Trustee and participant of a pension plan
Insurable Interest
Establishes the privilege to purchase insurance through love and affection (ex - immediate family) or financial loss (ex - business partners).
Regulations
Formal instructions that state and federal government issue for implementing laws.
Rate Factors
Gender Age Health Status Occupation Avocations/Hobbies Family Health History Type of Insurance Face Amount of Insurance
Insuring Clause/Agreements
Heart of contract stating perils that are covered by policy and establishes the insurer's commitment to pay the death benefit. States the insurers promise to pay the beneficiary in the event of the insured's death.
Adverse Selection
High risk people tend to apply for insurance; concept removes randomness from probability and increases claims potentially paid out by insurer.
Where is the promise to pay stated?
In the insuring clause/agreement.
Statutes
Laws enacted by state and federal government that regulate conduct of insurance business.
_____ _____ and _____ _____ determine if an insurer has an underwriting profit or loss.
Loss ratios and expense ratios
Twisting
Misrepresentation of a policy's terms and values to induce the lapse or replacement of an existing contract of insurance to the detriment of the insured.
Riders / Endorsements
Modify the basic contract; have no independent existence; become part of contract.
Unilateral
One-sided; only insured can enforce and terminate the insurance contract; an exchange of an act for a promise.
Adhesion
Only written by one party with no negotiation permitted on contract wording; take it or leave it.
Immediate family members for insurable interest includes.....
Parents Children Grandparents Siblings Self - unlimited insurable interest on own life.
Declarations Page
Personalized part of policy including: Parties of the contract Policy term Amount of coverage (volume) Amount of premiums Object/person insured
_____ factors such as marital status, sexual orientation, etc., do not determine rates.
Protected
Conditions
Provisions and stipulations of policy; rules of conduct for both parties; (ex - policy payment with grace period).
With which type of risk does insurance assist?
Pure risk
Principle of Indemnity
Restoring the insured to the original financial position that was enjoyed prior to a loss, but without gain.
_____ of authority can only be done after a hearing.
Revocation
Representations
Statements made by the applicant on the insurance application that are believed to be true, but are not guaranteed to be true.
Conditional Receipt
States that coverage is afforded on the condition that the application receives company approval.
Consideration Clause
States the insured's consideration - (1) initial premium payment and (2) statements in the application.
Exclusions/Waivers
States what perils or losses are not covered; exclusion are uninsurable things; ex - death as a result of war; must apply to everyone, non-selective.
Who is responsible for a broker's actions?
The broker, not the insurer.
Law of Large Number
The greater the number of exposures, the more accurate the prediction.
Insurance
Transfer of risk; spreading risk of possible loss over a large number of people.
Underwriting
Underwriter uses a specific set of criteria to select insurable applicants and guard against adverse selection.
Aleatory
Unequal exchange of value between parties; policyowner may only have submitted one premium payment before the insured dies but full face amount is available.
Characteristics of Insurance Contract (3)
Unilateral Adhesion Aleatory
Agency
When one party (agent) represents the interest of another party (principal) for the purpose of fulfilling a certain undertaking; most agreements are negotiated (like an employment contract).
Lending institutions cannot require _____ _____ to purchase _____ through them or an affiliate to renew/make a loan.
a borrower insurance
One must have an _____ _____ before becoming a broker, then one must submit an application with the _____ for a _____ _____ and obtain a minimum of a _____ _____ _____.
agent's license DOI broker's license $15,000 brokers bond
All insurance companies must submit an _____ _____ _____ to the DOI (Commissioner) to prove the company remains in good financial standing.
annual financial statement
Brokers represent the _____ or the _____.
applicant insured
Agents receive their authority to do business from the insurer they represent and file an _____ with that insurer with the DOI.
appointment
The Commissioner _____ rates, but does not _____ _____.
approves set rates
An applicant cannot be rated or denied based on discrimination solely on _____, _____ _____, _____, or _____ _____.
blindness partial blindness deafness partial deafness
_____ have the permission to sell products from many companies, whereas _____ usually are only appointed with one company.
brokers agents
If a license is suspended, the licensee _____ _____ _____ _____ during this time.
cannot apply for coverage
The Commissioner of Insurance is the _____ _____ _____ of insurance in the state.
chief regulatory body
The notice of hearing from the Commissioner allows one to first _____ his/her issue/mistake.
correct.
Funneling money into an agent's account or "co-mingling" (mixing client's money and personal money) is a _____ _____.
criminal act.
If there is evidence to charge a person with a _____ _____, the Commissioner may _____ by _____ or cause a person to be _____.
criminal violation arrest warrant arrested
The Commissioner is a _____ official.
elected
Life insurance involves an insurer providing coverage for premium for a policy period; the insurer will pay out the beneficiary known as the _____ _____ in the event of the insured's death.
face amount
Agents handling the money of a client causes business to have a _____ _____.
fiduciary capacity
If a vacancy occurs during a Commissioner's term, the _____ has the authority to appoint someone else till the next election.
governor
Submitting an application without initial premium is soliciting only an offer from the insurer for coverage; no coverage is extended during this assessment period; if approved, the applicant must send in both _____ _____ and a _____ _____ _____ _____ _____ to confirm applicant's health hasn't changed since the application was submitted.
initial premium statement of continued good health
Agents are representatives of the ____
insurer.
Law requires that all _____ agents have an _____ with a company before transactions may be conducted.
licensed appointment
Life insurance agents are _____ _____ in that they _____ _____ their company to the coverage.
limited agents cannot bind
Probability and the law of large numbers helps predict claims by...
looking at past loss experience of a large number of similar "units" over time.
The Commissioner cannot...
make laws.
An insurer must have _____ _____ that would cause underwriting to reconsider deliverance of a policy.
material fact
A _____ may not bar recovery unless deemed material to the acceptance of the risk.
misrepresentation
Without insurable interest, coverage would be speculating on the _____ (death) or _____ (illness/injury) of that person and is not permitted.
mortality; morbidity
Without a Certificate of Authority, companies are referred to as _____ or _____ companies and cannot transact insurance.
non-admitted non-authorized
Life or accident and health insurance agents are _____ _____ to place coverage with non-admitted companies.
not permitted
An agent may _____ _____ and surrender his/her license to avoid criminal prosecution.
plea bargain
The statutes and regulations of the state and federal government aim to promote and protect the _____ _____.
public welfare
Underwriting is the _____ _____ of the insurer.
quality control
Accurate prediction of loss payments is necessary to establish the...
rates (cost/unit) that are to be changed for coverage.
The Department of Insurance (DOI) and the Commissioner can issue _____.
regulations to enforce state laws.
All statements given on an application are considered to be _____.
representations.
Underwriting decisions are determined by...
reviewing the applicant's answers to medical statements and demographics on the initial application.
Agency termination occurs by either party in the contract for reasons including.....
revocation by the principal renunciation by the agent loss of capacity and bankruptcy statutory disqualification changes in state law
Refusal to submit to record examination could be grounds for _____ _____ _____.
revocation of license.
Duties/responsibilities of an agent include _____, _____, and _____ of insurance.
solicit negotiate effectuate
State of NC enacts _____.
statutes
A licensee may _____ his/her license voluntarily if accused of license suspension/revocation for a period of time set by the Commissioner.
surrender
License _____ for agents or adjusters is a responsibility of the Commissioner if one sees it necessary to protect the public.
suspension
_____ is temporary; _____ is permanent.
suspension revocation
Insurable interest is only required at the _____ _____ _____.
time of application.
A Commissioner serves for _____ years via an election and can serve an _____ _____ of terms.
unlimited number
Misrepresented policies can be _____, _____, or _____ _____ _____.
voided, rescinded, or a claim denied.
The Commissioner cannot provide a _____, but he/she can request one.
warrant