Louisiana life and health chp 1

Alien

formed outside the U.S.

Exclusive Agency/Captive Agents

his system is exclusive and producers with exclusive sales contracts can only sell policy products for one company. A Captive or Exclusive Agent can make override commissions from other agents and can be self-employed, but the contract this producer signs states that the book of business and all renewals are owned by the insurer, not the producer.

Individual Producer requirements

i) Be at least 18 years of age ii) Reside in or work mainly from an office located in Louisiana iii) Complete pre-licensing education required to prepare for state required exam* iv) Paid their fees and submitted an application (Form 1546A) v) Successfully pass their required exam with 70% or higher*

Temporary licenses three circumstances

i) Death-If a residential licensee dies, their representative may be granted a temporary license to wrap up their business. ii) Disability -If a residential licensee becomes disabled, their legally appointed representative, usually through power of attorney, is granted a temporary license to handle their business. iii) Active Military Service -A residential licensee may designate a person to handle their insurance business operations while they are actively serving

Violations of license

i) Failure to comply with state or federal laws for licensees ii) Giving false information on any license or renewal application iii)Not accounting for or sending in premium money or commingling funds iv)Committing fraud or practicing dishonesty with regard to insurance v) Being careless or lacking ability to perform insurance related business operations vi)Falsifying a contract, binders, rider, plan benefits, or insurance applications vii) Unfair trade practices with regard to insurance viii) Pleading nolo contendere(no contest) or being convicted of a felony, being involved in a felony pretrial diversion or being convicted of misdemeanors with moral turpitude issues or public corruption ix)Cheating on an insurance exam or getting a license fraudulently x) Going insolvent because of not submitting premiums or excessive debts due to premiums or other funds to insurers or insureds xi)Forgery on any insurance document xii)Accepting insurance business from an unlicensed person knowingly xiii) Getting a licensed solely to do controlled business xiv) Having a license revoked from Louisiana or any other state xv) Violating federal insurance laws xvi) Not submitting evidence in a felony case xvii)Failing to pay court imposed child support xviii)Failing to pay state income taxes xix) Associating with people in the business of insurance who were convicted of a felony

Unfair claims settlement practices

i) Issuing policies with misrepresented facts or coverage provisions ii) Not acting promptly when presented with claims iii)Denying claim payments without a practical investigation of the facts given iv)Denying claims after proof of loss was submitted v) Not settling claims fairly when liability is obvious vi)Convincing the insured to sue to recover more from an insurance policy by offering less with an unfair settlement vii) Settling for less than a prudent person expected from marketing material when purchasing a policy viii) Settling claims based upon information from altered applications without the knowledge of the insured ix)Sending claim payments without statements documenting the coverage for that claim x) Telling insured to appeal arbitrations to make them accept less than they would get awarded in an arbitration xi)Making claimants submit preliminary claims reports and subsequent claims reports that have essentially similar information pertinent to settling the claim xii)Not settling the claim under one coverage in a policy to persuade the claimant to settle under another coverage portion xiii) Not providing explanations based on policy terms or law for the denial of a claim xiv) Not providing forms needed to file the claim to the claimant within 15 days of the claimant request for the appropriate forms.

Boycott, coercion, and intimidation

illegal acts intended to stop fair trade or monopolize insurance business are prohibited.

Direct Marketing

includes mail, phone or internet marketing directly from the insurance company to the public. These direct insurers may set up call centers with licensed agents as employees and pay commissions to the employees for sales. This method is most commonly used to market policies offering low premiums and usually limited benefits.

Domestic

incorporated in Louisiana

Foreign

incorporated in states (or U.S. territories) other than Louisiana

Reinsurance companies

insurers that insure other insurance companies against the risk of higher than expected losses. Two methods of reinsurance are used:

False financial statements

intentionally deceiving the public or a regulator as to the financial standing of an insurer is prohibited.

The stop loss coverage

is a policy to have the insurance company pay any losses over an agreed amount to protect the insured if his losses are more than he has in reserve to pay losses.

Adverse selection

lower or poorer risks more prone to losses than normal risks. Underwriters filter what risks are accepted by monitoring which policies are issued and making sure that the book of business for an insurer has more good risks than poor risks, thereby protecting the insurer from adverse selection. The three most common ways to avoid adverse selection are:

McCarran-Ferguson Act

of 1945 said the federal government had the right to regulate insurance only to the extent it is not regulated by state law. In effect, the insurance industry is exempt from most federal anti-trust laws.

Gramm-Leach-Bliley Act (GLBA)

officially titled the Financial Services Modernization Act of 1999, removed the barriers between commercial banking, investment banking, and insurance. Financial holding companies can combine any financial related activities. They still have to answer to regulators for each activity they participate in. The law set standards for financial privacy. First, the company's policies regarding customer information have to be disclosed at the beginning of the relationship. Second, any customer records to be shared with related companies or others must be disclosed to the consumer prior to releasing the information and allowing them to "opt-out". Health information rules are stricter, requiring the consumer to actually "opt-in" before health information can be shared.

Defamation

oral or written statements trying to injure a person or entity is prohibited, especially when it is critical of the financial status of a person or insurer.

Stock companies

owned by stockholders that invest in the company to keep it going. Stockholders receive dividends if profits are earned and some profits are retained to build the business. Stock dividends are taxable at capital gains rates.

Mutual companies

owned by the policyholders that purchase policies created by the insurer. Premium dollars that are collected in excess of what is needed to run in a given year is given back to the policyholder (return of premium) similar to a dividend. However, in this structure, it is never called a dividend so as to not be confused with stock companies. Returns of premium are tax free.

Self-insurers

people or entities that formally setup an alternative for protection against losses, such as earmarking a certain amount of money for risks they are exposed to instead of purchasing a policy to cover the entire risk.

Physical hazards

physical condition or status that increases the chance for a loss, like high blood pressure, blindness, being a smoker and other such tangible conditions.

Higher rates

rating up; charging higher risks more in premium.

Reinsurance treaty

re-insuring all of the risks of an insurance company over an agreed amount, usually for a year or longer. Therefore, if the insurance company has losses that exceed their reserves available to pay claims, they have reinsurance to pay the excess claims.

Facultative reinsurance

re-insuring specific policies of an insurer. Often, companies writing large life insurance policies will ask other companies to share the risk in exchange for part of the premium to minimize the risk of having to pay a large multi-million dollar claim all at once.

Morale hazards

recklessness and irresponsibility, or blatant lack of concern for handling risks in a prudent manner, such as driving without a seatbelt or leaving the keys in the car while unlocked and going into a store.

Declination/Rejection

refusing coverage altogether because the overall risk is too great or speculative.

Churning

related to twisting) using misrepresentation to replace a competitor's policy with one from a company represented by the producer to get the larger first-year commission, even if it is not in the best interests of the consumer.

Retention

retaining risk involves bearing the loss yourself if the loss occurs. A deductible is the most familiar retention method used by people today. When a person buys an insurance policy, you may transfer some risk amount to an insurer in the policy you purchase and the deductible would represent the risk of loss you will bear or retain. If you can afford the total cost of a potential loss, complete retention of risk would be self-insurance.

Transfer

shifting the loss from a risk to another party by contract is a common form of transferring risks, which is done through the purchase of an insurance policy. This is considered the most effective way to handle most risk.

The Violent Crime Control and Law Enforcement Act of 1994

states that anyone working in insurance that affects interstate commerce must receive written authority to work in insurance from a regulatory official - Commissioner, Deputy Commissioner, etc. called a 1033 waiver. This act makes it illegal for anyone convicted of crimes involving dishonesty or breach of trust to work in the business of insurance without fulfilling this requirement first. A felon violating this Act can be imprisoned up to five years.

Avoidance

staying away from a risk altogether. For example, a person may try to avoid dying in a plane crash by choosing never to fly in a plane at all. Avoidance is a method one can choose to use, but it is not a very realistic method to use for most risks in our everyday life. Some risks can more easily be avoided. Not smoking or not drinking and driving could be practical ways to avoid risk. Not jumping out of a perfectly good airplane is considered by many to be a practical method to avoid certain risk.

Loss

the decline in value of a person or thing, the decrease that is suffered after a peril occurs, i.e. reduced income due to the premature death of a working spouse.

Apparent Authority

the insurance companies give apparent authority to a producer when they indicate by their actions they are giving authority. It becomes apparent by the insurer's actions and expectations that the producer indeed has authority to sell products for that company. Apparent authority is conferred onto a producer when the insurer gives the producer a rate book and access to software to quote new policies that weren't mentioned in his contract. This is important to note because the insurer is not allowed to let producers quote without being liable for that same producers actions toward a client.

Implied Authority

the law implies that a producer has authority to do the things necessary to function as an insurance agent of the insurer in order to do what he has expressed authority to do, like help the client complete an application or collect the first month's premium. He would have to do those things to accomplish selling the policies he has express authority to sell. Implied authority is inherent to the nature of sales contracts and the expectations therein. Implications are those things that are understood as part of the job but are not specifically spelled out, point-by-point, in the contract.

Advertising

the state regulates the marketing and advertising of insurance policies. The insurer is held responsible for the content of advertisements. Ads cannot be misleading and cannot have illustrations that are considered deceptive. All ads used must be kept on file until the next time the state examines the insurer.

Reciprocal Insurers

these are groups of people that use individual indemnity agreements to insure each other as a group. Each member of the group is called a subscriber. Each subscriber pays premiums into an account. Usually, an advisory committee of subscribers oversees an attorney-in-fact who handles all of the claims, underwriting, and other insurance company functions.

Surplus lines

these insurers provide policy products that authorized insurers do not provide. They are unadmitted, unauthorized companies that are only allowed to provide a few products to the state that are specifically approved by the Commissioner. Unadmitted and unauthorized means that they did not obtain a certificate of authority from the Department to operate as a regular insurer in the state. There is an approved surplus line list the Department provides for the public for certain types of hard-to-insure situations.

Independent Agency/American Agency

this marketing system allows a producer to be non-exclusive, meaning open to sell different policy products for several different insurers all at once. This producer is an independent contractor, self-employed and owns his renewal book of business and places clients where he sees fit.

Reduction

this method decreases the possibility or significance of the loss when the loss cannot be avoided. Annual physicals and specific medical exams are examples of reducing health risks. Smoke detector or auto alarm installations can be ways to reduce risks with property.

stop-loss coverage

to cover a portion of a risk.

Vending Machines

travel accident policies have commonly been sold at airports from vending machines. They generally offer a low premium and cover a single trip.

Express Authority

whein a producer is given authority to do certain things on behalf of the insurance company because those functions were expressed orally or in writing, usually in a written contract between the insurer and the producer in clearly definitive terms.

Twisting

when a producer influences a consumer to replace a present policy with a different one. This is only acceptable if the producer gave the consumer better coverage or a better deal.

The renewal fee for a Louisiana producer

$50.00

Financial status

(Independent Rating Services) - Agencies that publish regular information about the strength and stability of insurers stay up to date on the insurers' claims, reserves, profits and investments. Examples of the agencies that do this work are A.M. Best, Standard & Poor's, Moody's, Weiss, etc.

CE requirement hours

24

Misrepresentation

A false statement of a material fact made with the intent to induce some action by another party.

Business Entity Producer

A legal business entity, such as a corporation, partnership, limited liability company or the like, may also be a producer and conduct insurance business in this state. A business entity must get a producer's license in the business's name. The business must first have a licensed individual producer with a license for the same lines of insurance before applying for an producer's license for the business. Business entities have several other pieces of documentation required to accompany their application to the state.

Insurer as Principal

Agency is a legal term that applies to someone representing someone else. In the law of agency, or an agency relationship, acts of the agent or representative are deemed to be acts of the principal. With insurers and producers, insurers are the principal and producers, acting in the scope of their responsibility, are acting for the insurer.

Individual Producer

An individual producer is a person licensed to quote insurance policies, market and sell insurance products, and consult others with regard to insurance. Most people in Louisiana are accustomed to calling these persons insurance agents, but the term referring to them is officially insurance producers.

Appointments

An insurer must appoint a producer to sell their products before the producer can start selling them. The insurer files a notice with the Commissioner within 15 days of the contract made with the producer. The Commissioner lets the insurer know the appointment is approved within 30 days of the notice if the Department finds the producer fit for appointment. If the producer is not eligible for appointment, the Department sends a notice to the insurer in 15 days.

Certificate of Authority

An insurer must first get a certificate of authority from the Commissioner to sell insurance products in this state. The certificate of authority makes the insurer an admitted company and proves that the Department of Insurance finds the company financially sound and structured well enough to meet the requirements of the state insurance code to conduct insurance business in Louisiana.

False advertising

Any advertising, print, multimedia, internet or otherwise, cannot deceive the public in anyway and misrepresenting terms, benefits, advantages, dividends, financial strength, or misrepresenting the intent of a policy, loans or assignments, or saying an insurance policy is the same as a share of stock are all prohibited acts.

Payment to unlicensed entities

Any unlicensed business entity paying or accepting illegal commissions will be fined between $2,000 and $50,000 and/or receive a maximum of 3 years in jail. Any violator involved with a license will have it suspended or revoked.

Authorized vs. Unauthorized insurers

Authorized or admitted insurers have a certificate of authority from the state Department to sell its insurance products in the state and unauthorized insurers do not have a certificate of authority.

Elements of a legal contract

Basically, a legal contract is an agreement between two or more parties that is enforceable by law which must have the following four elements:

Perils

Causes of loss or actual events from which decreases are suffered, that are covered by the insurance policy like the premature death of a working spouse, disease, accidental injury (Life and Health) or wind, hail, fire, burglary or flood (Property and Casualty).

Consumer Reports

Equifax, Experian, Dun & Bradstreet, and agencies like these provide information regarding credit, character, and habits of a consumer

Pure risks

INSURABLE - no opportunity for financial gain. You only lose or stay the same, there is no opportunity for gain in a pure risk and this is the type of risks that an insurer can create a policy product to protect.

Change of Address

If a producer changes their mailing, work, or home address, the Department must be notified within 10 days of the change on an official "Change of Address" form available on the Louisiana Department of Insurance website or face a $50 fine.

Controlled business

If a producer only gets into the insurance business in Louisiana to sell only to themselves, their family and employer, they are writing controlled business and that is illegal. The Commissioner determines controlled business by looking at a producer's book of business for a 12 month period. If during a year, a producer's commissions earned from policies sold to themselves, their family and employer is more than 25% of the total commissions for that year, it is considered controlled business.

Assumed Names

If a producer uses a name other than their legal name, they must notify the Department in writing BEFORE using that name while doing business in this state. If it is a trade name for a business, you must register the name with the Secretary of State If the producer is found using a name that has not been approved by the Commissioner prior to its use, they will be fined $250. The Commissioner will notify this producer to stop using this unapproved name, but if they continue to break this rule, they can get fined up to $5,000.

Reapplication

If a producer's license is revoked, it may be possible to reapply. If a producer accepted the revocation without asking for a review or appeal of the decision, he may apply to the Commissioner for permission to reapply for a license after one year. If the producer appealed the decision, but the revocation was upheld, he may apply to the Commissioner for permission to reapply for a license after five years. If a license is reissued after revocation, if the producer is found guilty of another violation, he will be revoked without the right to apply for permission to reapply up to five years.

Insolvency

If an insurer finds themselves insolvent or in financial difficulty, the Department of Insurance will take control of company financial management. If they believe the company can be put back in sound financial shape, they will try rehabilitation. If not, they will begin liquidation proceedings.

Reporting of Actions

If any court, judge, or jurisdiction or governmental agency in Louisiana or anywhere takes any administrative action against a producer, that producer must report this final disposition or ruling to the Commissioner within 30 days of the disposition. District court convictions usually come with a bill of information on the case or an indictment sheet. All producers that undergo this process with any court must provide a copy of this document to Commissioner within 30 days from the date on the document.

Producer's License

In the Louisiana Insurance Code, all persons or business entities referred to as an agent, broker, solicitor, or surplus lines broker that sell, solicit, or negotiate insurance are required to be licensed as an insurance producer.

Non-Resident

Individuals not living in Louisiana and those without an office in Louisiana may get a Non-Resident license to sell insurance in this state. States that have reciprocal laws and privileges, meaning that the laws in both states are similar, will grant a non-resident license to an applicant as long as that individual's resident license is in good standing with their home state. To apply for a Non-Resident license, an individual completes a Uniform Application approved by the National Association of Insurance Commissioners (NAIC), the organization in charge of insurance laws for all states, and pay their fees. A producer moving from one state to another has 90 days after establishing legal residence to become a resident licensee. They will generally be exempt from having to take a new course or exam if they were in good standing in their home state with an insurance license for the same line(s) of authority they are applying for and the application is received within 90 days of the cancellation of their previous license.

Investigative Consumer Reports

Information from these reports may come directly from interviews with friends and neighbors and affiliates of the consumers and cannot be made without consent within 3 days of the request. When a consumer wants information in this report, it must be sent to them in 5 days by the insurer or reporting agency.

Risk Management

Insurance is our most common form of risk management. In a policy contract, one party is transferring the risk of financial loss to an insurance company so that the insurer absorbs the costs associated with the risk instead of the loss being suffered by that party. In the insurance industry, every type of loss has specific terminology and an amount directly related to each type, as you will find throughout this course. These terms are extremely important in underwriting, sales and claims because of legalities attached to each term within a policy. The fundamental terms are in this chapter.

Managerial Branch

Insurer's who use this system set up branches and branch managers and pay a salary to the manager to run the branch. The manager is an employee of the insurer, but may have assigned employees or independent contractors sell the policies of this insurer.

Domestic, foreign and alien insurers

Insurers are categorized by their state of incorporation or where their corporate charter was organized.

Fraternal benefit societies

Knights of Columbus, Kiwanis, Freemasons, lodges, guilds, and other such associations are some examples of fraternal benefit societies that may provide insurance to their members. They are exempt from some normal regulations because their policies are not sold to the public.

Expiration

Licenses expire every 2 years, unless the Commissioner decides to revoke, non-renew or suspend the license.

Lloyd's Underwriters

Lloyd's of London is not an insurance company. They put groups of investors (called a syndicate) willing to back the risk of a policy in exchange for receiving a premium with people who want insurance. Lloyd's handles the administration, claims, forms, underwriting, etc. for part of the fee.

Shared Commissions

NO license, NO commission! Paying and accepting a commission when you have no insurance license is illegal. Persons found breaking this law are fined between $1,000 and $5,000 and/or receive a maximum of 2 years in jail.

Speculative risks

NOT INSURABLE - opportunity for financial gain, loss or reward is possible. An example of this may be going to Harrah's casino and betting on black. Your chance of hitting it big is equal to your chance of losing it all. This would be a speculative risk and these are uninsurable because no insurer wants these odds on each product they sell.

Elements of insurable risks

Not all pure risks are insurable. Insurers will review pure risks to an even more defined level to insure that only indemnification would occur. They do this by looking for certain elements in the risk such as:a) The losses must be unexpected and out of the control of the insured and the loss must be hard to falsify, such as in a death claim. b) The amount of the loss has to be able to be determined and the insurer must have the ability to quantify the value of the loss so that a claims amount can be applied so that the insurance company will indemnify the loss to the limits available. c) There has to be a large homogenous group so that the pool can help absorb the costs of the losses that occur and a large enough group to be able to predict the amount of losses within an acceptable degree of certainty. d) The loss must not be completely disastrous - Insurers need to be able to research cost-related statistics with regard to a risk so as to prepare for an approximate amount to cover the loss in a claim. Disastrous events such as 9/11 and Hurricane Katrina are extraordinary catastrophes for any insurer and are usually harder to predict than the normal insurable losses they are accustomed to handling. It can't be so disastrous that all the insurance companies involved may not have enough money to pay claims and would be bankrupt. e) Must not be mandatory or forced to take on every risk - An insurer needs to be able to require an underwriting process to assess each applicant and not be forced by authorities to take all risks that apply for coverage. This gives the insurer the opportunity to set guidelines and premium rates applicable to the risks they absorb in every policy contract.They must be able to limit the policy to predictable losses and make sure they will be able to pay the claims while charging a premium the consumer can pay. f) Predictable frequencies - An insurer needs to have the ability to predict the frequency of probable losses. g) The loss must be large - enough to be worth the trouble of insuring it, or it would not be practical to do so.

Rebating

Offering and accepting any incentives for buying a policy, including money, unauthorized discounts or money back, special favors or personal services, are all illegal acts.

Private vs. Government insurers

Private insurers are the brand name corporations authorized to offer insurance products to the public. Government insurance programs are available when private insurance products may not exist or when the private insurers see the risks as too disastrous or speculative. Examples are Medicare, Social Security, Federal Crop Insurance, National Flood Insurance, Louisiana Coastal Plan, etc.

Renewal

Producers can renew their license by sending their renewal application along with their renewal fees to the Louisiana Department of Insurance by the last day of their own birth month. The Louisiana Department of Insurance (LDI) now offers electronic online renewal. Any continuing education you have completed and was reported should be listed online at the time of your renewal. Any continuing education hours lacking or not yet reported, you should send a copy of the certificates to the Louisiana Department of Insurance (fax or mail). If they do not have a record of your continuing education prior to the expiration date, your license will expire and not yet be renewed.

Responsibilities to the applicant/insured

Producers have to be fair, honest, and ethical and carry out their financial or fiduciary responsibilities in an ethical way with regard to premium dollars for the client. The money should never be commingled with the producer's personal money and should be taken promptly to the insurer for issuance of the policy.

Continuing Education Requirements

Producers must submit the correct amount of Continuing Education required hours to the Department every renewal period according the licenses they hold.

Law of Large Numbers

Simply put, this principle states that the larger the homogenous group an insurer covers, the prediction for his losses for that group is more statistically accurate. The larger the group, the closer your losses should be to the overall worldwide statistics.

Violations

The Department of Insurance and the Commissioner can revoke, non-renew, suspend, or refuse to issue any producer's license, as well as charge fines up to $500. per violation or $10,000. for all violations per calendar year per person

) Producer/Insurer relationship

The producer and the insurer have an agency relationship. The client pays the insurer and the insurer pays the agent. Therefore, a producer legally represents who pays him-the insurer. As the producer acts, the insurance company is concerned about the information relayed to the public by the producer because it is responsible for all of the producers' acts and expects the producer to live up to the contract. When a client pays a producer premium for a policy, it is just like paying the insurer and the producer must be responsible.

Risk

The uncertainty or chance of a loss occurring. An insurance policy's main intent is to indemnify a party with insurable interest in a financial loss of a person or some property. Indemnification is to make whole or to restore a person back to where they were before the financial loss. So that insurers can bear the losses they absorb and make a profit, they must design products that indemnify only and they must not sell products that may reward a person for their losses. In general, the insurance company is only responsible up to what you actually lost. You are not entitled to make a profit. The entire insurance industry is based on selling policy contracts that promise protection against risk or offer some level of risk protection or risk management. Every insurer is only looking to bring the insured back to a restoration point after certain events and the language in a policy reflects the insurer's liability, or promise, to the insured that the insurance company will pay for a certain amount to help the insured recover from a significant financial loss. If this concept is kept in mind, anyone can understand basic insurance concepts, policy language, legal clauses within policies, exclusions and why they exist, and most of the products sold in the entire insurance industry.

Disciplinary Actions

There are certain disciplinary actions the Commissioner has the authority to take against anyone in the insurance business if they are found in violation of the Louisiana Insurance Code.

Fair Credit Reporting Act (FCRA)

This federal law was enacted in 1971 and is administered by the Federal Trade Commission. It makes clear that consumers have the right to know what information is being circulated about them and that the information is accurate and relevant for purposes that it is being accessed. Reports under this act are divided into two categories

General Agency

This is a marketing system where an insurer allows a business-owner called a General Agent or Managing General Agent (MGA) to represent their products to a certain protected or exclusive region and assigns that general agent to the region in an exclusive contract. This producer can appoint subagents, make override commission from them, and may receive support compensation from the insurer for office expenses or advertising, if it is in the general agent's contract.

Cease and desist

This is the legal term for the order to STOP. It is an official legal document that will require an individual to stop doing something.

Term and Renewal

To maintain your license, every licensee must complete a certain number of hours in continuing education, maintain satisfactory conduct, and of course, send in the renewal application and pay renewal fees every renewal term. Your license is only issued once and you must renew it every term to keep it active. The final approval to renew your license rests with the Commissioner, as he decides to renew or not to renew

Hearings

When someone accuses a producer of violating the Insurance Code and demands a hearing, that hearing must be held within 30 days of the demand. It can be postponed if both parties agree to postpone it, but once the demand is on record, the hearing must happen in no more than 60 days of the original demand.

Exposure(s)

a measurement of risks present or units used to assess risks such as, age, sex, chronic medical conditions, occupations and many other such units used to assess how much risk may be present. A large number of units having similar risks present are considered homogenous and insurers prefer to insure large homogenous groups.

Hazard(s)

a situation increasing the odds of a loss or a circumstance that increases risks or exposure to risks. Three main classes of hazards exists in the insurance industry:

Duties and powers of the Commissioner

a) Issuing or revoking licenses and certificates of authority b) Hire employees and examiners and examine the records of any insurer or producer c) Subpoena witnesses and conduct hearings for alleged violations of the Insurance Code d) Giving out cease and desist orders and impose penalties for violations of the Insurance Code

Temporary licenses

are valid only for 180 days

Unfair discrimination

changing rates based on marital status, race, color, national origin, creed or ancestry within the same mortality class is illegal.

Restriction of coverage

coverages with exclusions, i.e. pre-existing condition exclusions.

Moral hazards

dishonest acts and fraud, such as lying in an application or claims form, or having a conviction of arson or murder.

Sharing

establishing a homogenous group with which to share the risks for similar losses. Several contractors could decide to form a group to share the risk of worker's compensation. If they are small companies, and one of them had an injured worker, and they were self-insured, the claim may be financially catastrophic for the company. If several companies formed a group to share the risk, they would all share in paying any claim instead of just one of them having the risk of paying a claim alone