P&C Insurance Exam Pt. 1

Apparent

Producer level of authority where the agent's agreement does not provide, the insurer does not intend, and appears to be granted by the insurer based on the producer's statements and the actions (or inactions) of the insurer.

Domestic Insurer

An insurance company that conducts business in the state of incorporation.

Nonadmitted

An insurance company that is not licensed to do business in a certain state but is authorized to sell surplus lines insurance there

Foreign Insurer

An insurer is a foreign company in every state outside of its state of headquarter

Unauthorized Insurer

An insurer that does not have a certificate of authority or other license to transact insurance in this state. Punishment: a fine up to $2,000; imprisonment up to six months; or both.

Alien Insurer

A company that is headquartered outside the United States is an alien company in every U.S. state where it is admitted.

Admitted

A company licensed to do business in the state or country in which it writes applications

Producer's Responsibilities

1.) disclosing all pertinent information concerning a proposed policy 2.) not misrepresenting the terms or conditions of a proposed policy 3.) making suitable recommendations that fit the customer's needs and circumstances 4.) submitting applications only to financially sound, solvent insurance companies 5.) applying for and delivering the policy that the applicant intended

General Powers and Duties of Insurance Commissioner [Secs 38a-8, 10]

1.)Enforce and change insurance laws 2.)Develop a program to examine and regulate the financial matters of insurers 3.)Maintains the confidentiality of any documents and information received from any insurance regulator 4.)Maintain the confidentiality of information relating to a person who has filed a complaint or inquiry 5.)Adopt regulations for use by the Division of Consumer Affairs

Resident producer [Sec. 38a-782]

1.)Must be at least 18 years old 2.)Must state that they have not committed an act that would deny their ability to get license 3.)Must complete pre-licensing education 4.)Must pay required fees 5.) Must pass the final exam

Requirements to Act as an Agent [Sec. 38a-702m]

1.)The insurer must file a notice of appointment no later than 15 days after the agency contact is executed or first insurance app submitted. 2.)The insurer may appoint a producer to one or more of its affiliated companies by filing a single appointment request. The insurer must pay the appropriate fee for each affiliated company to which the producer is appointed. 3.)Within 30 days of receiving a notice of appointment, the commissioner must verify that the producer is eligible 4.)If not eligible, the commissioner must notify the insurer within 5 days. 5.)Insurers must pay and remit the required appointment fees

Estoppel

A party that waives its right to enforce a certain contract provision cannot subsequently enforce that right.

Consumer Report

A record containing info supplied by a consumer reporting agency that involves creditworthiness, credit standing, credit capacity, character, reputation, personal characteristics, or lifestyle

Express

Producer level of authority that has a explicitly stated agreement which sets activities the producer is authorized to perform.

Rescission

Act of declaring that an insurance policy was never in effect. Ex. Applicant knew of a potential claim and intentionally concealed it from the insurer resulting in the insurance company rescinding the policy.

Unfair Claim Settlement Practices [Sec 38a-816(6)]

Acts prohibited by law include: 1.) Misrepresenting facts in regards to claim 2.)Failing to respond the claim notice 3.)Failing to use reasonable standards to investigate the claim 4.)denying claims without first conducting a reasonable investigation 5.)Once proof of loss forms have been submitted, failing to accept or deny a claim 6.)Once liability has become reasonably clear, not attempting in good faith to propose a prompt, fair, and equitable settlement 7.)Forcing an insured to file legal action to collect a claim payment 8.)Attempting to settle a claim for less than the amount to which a reasonable person might believe he or she is entitled 9.)Attempting to settle a claim based on an insurance application that was altered without consent 10.)Making claim payments without also providing statements that explain the coverages under which the payments are being made 11.)Delaying claim investigations or payments by requiring an insured or claimant to submit the same information multiple times 12.)Failing to provide a reasonable explanation of the denial of a claim promptly 13.)Attempting to settle a claim with a first party auto insurance claimant for a cash amount less than the insurer would pay if repairs were made

Independent agency system

Agents who sell insurance on a commission or fee basis for one or more insurance companies. This agent retains ownership, use, and control of policy records.

Personal Contracts

Agreement concerning an insured individual, not the insured's property

Capital and Surplus Requirements [Sec 38a-72]

Amount of money needed to establish insurance company (capital) & amount of an insurer's assets that exceeds is liabilities (surplus). Property and casualty insurers can only be granted a certificate of authority in Connecticut if they meet these requirements.

Reciprocal Insurers

An unincorporated group of members that insure each other by exchanging contracts of indemnity that obligate them to collectively pay any member's covered loss. Form of self-insurance that prefunds coverage of future losses through the members' premium deposits.

False Advertising [Secs. 38a-816(1), (21)]

Any untrue, deceptive, or misleading statement about the insurance business or any person conducting the business of insurance.

Twisting [Sec. 38a-826]

Any written or verbal statements that misrepresent or compare inaccurately the terms, conditions, or benefits in any insurance policy with the intention of convincing the policy owner to surrender or lapse it and replace it with a new policy. Penalty for committing twisting is a fine up to $5,000 and/or imprisonment up to 30 days.

Self-Insurers

Businesses that are financially able to self-fund certain risks. They set aside funds to pay claims as well as the administrative costs of running an internal insurance program. Sometimes smaller companies band together to form a self-insurance group.

Nonresident Producers [Sec. 38a-702g, 702n]

Can receive license in CT if: 1.)The person is currently licensed as a resident of another state. 2.)The person has submitted the appropriate license application and fees 3.)The person's home state issues nonresident producer licenses to residents of Connecticut.

Consumer Reporting Agency

Collects and reviews consumer information to provide reports to third parties; engages in collecting and reviewing credit and other consumer information; or uses interstate commerce in the process of preparing and supplying consumer reports.

Hearings [Secs 38a-16, 817, 818]:

Commissioner may conduct investigations to investigate any insurance matter subject to insurance statutes. If the facts presented cause the Commissioner to believe a violation occurred, the Commissioner can ask the Attorney General to seek a restraining order against that person after 10 days.

Surplus Lines

Coverage lines that do not need to be filed with the state. Risk types include adverse loss experience, unusual risks, or something that there is a shortage within the standard market of.

Captive Insurers

Insurance company designed to cover the risks of the "parent" organization(s) . Can provide cost savings, cash-flow benefits, and specialized loss prevention and claims services to their owners.

Concealment

Deliberate withholding of material facts. This would void a contract.

Defamation of Insurer [Sec. 38a-816(3)]

Distribution of any written or verbal statement that is false, maliciously critical of, or derogatory to the financial condition of an insurer if the statement is intended to injure any person engaged in the business of insurance.

Fair Credit Reporting Act [15 USC 1681 to 1681d]

Enacted to require the accuracy of info used in consumer reports and to guarantee the privacy of that information.

Misrepresentation

False statement on material facts. Ex. Applicant saying they have a clean driving record when they have 3 tickets. This would void a contract.

False Financial Statements [Sec. 38a-816(5)]

False statement with respect to the financial condition of an insurer is prohibited.

Risk Retention Groups

Form of captive insurance company that provide their members—who are both the insureds and owners —with coverage for all types of liability risks except workers compensation. Can operate nationwide with far less multistate insurance regulatory control than commercial insurance companies.

Reinsurance Companies

Formal agreement in which both the risk and the premium are shared with one or more insurance companies. The insurer seeking to transfer some of its risk is the ceding company (or cedent). The insurer accepting some of the risk being transferred is the reinsuring company. The ceding company pays a premium to the reinsurer for its share of coverage.

Warranty

Guarantees that something is true and will remain true. For example, a jewelry store owner might state that a burglar alarm system will always be in operation. The insurer may deny paying a claim if the alarm system is not in operating condition when a burglary takes place.

Valued Contracts

Insurer agrees to pay a certain amount for life insurance policy when insured dies. The "value" of the insured is irrelevant. Some prop and cas coverages are this way especially when it is hard to determine an item's value. A value is worked out between insured and insurer.

Conditional Contracts

Insurer's promise to pay benefits is conditional on specified events occurring, including: making premium payments when due, reporting losses promptly and cooperating with the insurer in settling any loss.

Failure to Maintain Complaint Record [Sec. 38a-816(7)]

Insurers and agents are required to maintain records of all complaints received since its last examination by the Department. This includes: total number of complaints, each complaint's classification by line of insurance, nature of each complaint, disposition of each complaint, and time taken to process each complaint

Commissions [Secs. 38a-702l, 734]

Insurers are not permitted to pay commissions to anyone who is not licensed to sell insurance. The penalties for violating the law include a fine between $250 and $2,500; imprisonment between 30 days and three months; or both.

Failure to Remit Premiums [Sec. 38a-712]

Insurers are required to file a report with the Commissioner if any producer fails to pay required premiums within 30 days of their due date. This applies to checks that have insufficient funds and is not honored within 15 days of the date it was returned. This can lead to a license suspension.

Direct Marketing System

Insurers sell insurance directly to consumers through their licensed employees

Exclusive Agency System

Insurers use agents to sell their products. Sometimes called captive agents, these agents represent a single insurance company or, in some cases, a group of insurance companies under similar management.

Certificate of Authority [Sec 38a-41]

Issued by a state to authorize an insurance company to write lines of insurance within that state. To apply for this an insurer must include with its app: a list of the lines of insurance it wishes to write, a certified copy of its charter or articles of organizations, a statement of its financial condition, and evidence that it is in good standing and managed properly.

Temporary Producers [Sec. 38a-702j]

License may be issued for up to 180 days without an examination if it is necessary to service an insurance business.

Indemnity Contracts

Most property and casualty policies. When covered loss occurs, benefit cannot exceed the value of loss or the max benefit limit specified by the policy.

Lloyd's Associations

Not an insurance company. Rather, it is a forum where brokers may find individuals who are willing to help underwrite complex, unique, and large risks. A Lloyd's association's financial strength depends on the financial strength of its individual members. Play a small road in the U.S.

Waiver

Occurs when a party to a contract gives up a right that it knows it holds, either through its actions or failure to enforce the right.

Unilateral Contracts

Only one party makes an enforceable promise. Only the insurer makes a promise that can be enforced. It promises to pay benefits if an insured loss occurs

Cease and Desist Order [Sec. 38a-817]

Ordered when commissioner believes agent is committing unfair trade practices. Order can only be issued after the person is entitled to a hearing no more than 30 days after notice is served. The agent can make their case.

Fraternal Benefit Societies

Organizations of people who share a common ethnic, religious, or vocational affiliation. They may provide insurance to their members through fraternal insurers whose insureds are usually restricted to members of the society.

Fraud & False Statements Regulation [18 USC 1033, 1034]

Outlawed persons convicted of certain felony crimes that involve dishonesty, breach of trust, or a violation of the Act to work in any capacity in the insurance business if their activities affect interstate commerce.

Stock Insurance Companies

Owned by stockholders who purchase shares of stock as an investment.

Mutual Insurance Company

Owned by their policyholders. Mutual companies issue participating policies which distribute the company's surplus "profit" to policyowners in the form of policy dividends.

Certified Insurance Consultants [Sec. 38a-731 to 733, 786]

Person who provides insurance advice, counseling, recommendations, or information pertaining to the terms, conditions, benefits, coverages, or premiums of insurance policies in exchange for a fee.

Rebating [Secs. 38a-816(9), 825]

Practice of paying to, or receiving from, any unlicensed person money or a valuable consideration to encourage or induce the sale or purchase of insurance. Ex. Gifting cash to potential insured to encourage sale of coverage

Implied

Producer level of authority that extends beyond what is explicitly provided in agency agreement but is necessary to carry out the duties expected of the producer.

Purchasing Groups

Purchase liability insurance on a group basis. As with RRG's, the group must have similar businesses or activities.

Unfair Discrimination [Secs. 38a-816(12), (13)]

Refusing to issue new insurance; non-renewing existing insurance; limiting the amount, extent, or kind of insurance available; or charging a different rate for the same coverage based on physical disability; mental or nervous condition, mental retardation; or blindness or partial blindness.

Utmost Good Faith

The expectation is that both parties to the contract are completely honest with each other and disclose all relevant facts. Failure to disclose critical information usually gives the other party the right to void the contract. Applicant is expected to answer the app and claim questions honestly while the insurer is to disclose all relevant info about the policy.

County Mutuals

Type of mutual insurance company that operates in a limited geographical area.

Contracts of Adhesion

With an insurance contract the insurer determines the contract's terms. It is a take-it-or-leave-it proposition. Applicants for insurance have no input in drafting the contract's language; courts have ruled that ambiguities in the contract must be interpreted in the policyholder's favor.

Controlled Business [Sec 38a-782]

Writing of insurance on risks that are owned or controlled by the producer or the producer's spouse, employer, or a business of which the producer has control of stock.

Aleatory Contracts

involve an exchange of potentially unequal values. In an insurance contract, a policyholder may receive a benefit that is entirely out of proportion to the consideration (premium) given.