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NY Adj Ex - Ch2
Insurance Regulation
| Term | Definition |
|---|---|
| responsibility to regulate the insurance industry is held by | federal & state governments |
| authority granted to state government was granted through passage of | Public Law 15, McCarren-Ferguson Act |
| Public Law 15, McCarren-Ferguson Act, passed by Congress 1945; declares that regulation of insurance companies should | remain with the individual states |
| McCarren-Ferguson Act reserves for the federal government the authority to regulate insurance in areas of | fair labor standards & anti-trust matters |
| carries major burden of regulating insurance affairs, including ethical code of conduct of adjusters, agents, producers & anyone licensed to conduct business within it borders | states |
| main role is enforcement of state laws & regulations which are intended to promote the welfare of the general public & protect the public's interests | insurance commissioner/director/superintendent & insurance department |
| the insurance commissioner/director/superintendent & insurance department accomplish their main role by monitoring the __ __ of insurance companies | financial solvency |
| the insurance commissioner/director/superintendent & insurance department accomplish their main role by monitoring the __ of individual insurance agents | conduct |
| the insurance commissioner/director/superintendent & insurance department accomplish their main role by reviewing & approving | rates, policies, & forms |
| the insurance commissioner/director/superintendent & insurance department accomplish their main role by assuring the public of insurance __ | availability |
| insurer's rates are filed with the states based on __ __ of various classes of risks | loss ratios |
| supposed to be competitive & affordable to general public; loss costs are based on combined loss & expense ratios | rates |
| 2 most important components of an insurance rate | combined loss & expense ratios |
| all states has enacted laws that provide insurance commissioner/director with power to __ __ in regard to possible unlawful acts in performance of agents, adjusters, & companies | conduct hearings |
| following a hearing insurance commissioner/director may issue a __ __ __ order demanding that the offender immediately refrain from committing the offense | cease & desist |
| the insurance commissioner/director may suspend, revoke, or fine the offender depending on | nature of offenses &/or if act was intentional |
| company approved to do business in a given state is known as __ __ and is considered to be authorized | admitted company |
| said to be unauthorized & cannot conduct business in that state | nonadmitted company |
| once a company is approved for a given state that given __ __ __ to operate in the state | certificate of authority |
| companies that may operate in state and are not considered an admitted company are | surplus lines companies |
| collect a premium tax on all business written through them which is them remitted to the state | surplus lines agents |
| surplus lines companies do not file their rates & forms not do they participate in the state's __ __ that pay covered losses of insolvent insurers | guaranty fund |
| Lloyds of London is considered __ __ company | surplus lines |
| insurance company formed & domiciled under the laws of a particular state | domestic insurer |
| insurance company formed under laws of US or particular state of US | foreign insurer |
| insurance company formed under laws of a country other than US, its districts/territories, etc. | alien insurer |
| incorporated insurance company with its capital divided into shares | stock company |
| incorporated insurance company without permanent stock that is owned by its policyholders | mutual company |
| members agree to share costs; Lloyds of London is an example; consists of members represented by underwriters who place risk among it members; in case of loss amount paid is shared by participating members | reciprocals |
| incorporated society/order without capital stock that is operated on lodge system & conducted solely for benefit of its members & their beneficiaries, & not for profit | fraternal benefit society |
| fraternals offer insurance that is available __ to their members | only |
| most fraternals write only | life & health insurance |
| allowed manufacturers to establish self-insurance programs/group captive insurance to protect against exposures | risk retention groups |
| ability for risk retention groups to purchase liability insurance on a group basis through | purchasing groups |
| Congress passed 1981, to give product manufacturers more options when insuring against product liability | Liability Risk Retention Act |
| Liability Risk Retention Act limits __ __ to regulate product liability insurance | states' authority |
| risk retention & purchasing groups are regulated in the state that they are __ but cant transact business in all other __ | domiciled; states |
| risk retention & purchasing groups are __ __ writing workers comp & PL insurance | prohibited from |
| 1986 Liability Risk Retention Act was amended giving the right to form these groups in | nearly all businesses |
| war risk, nuclear energy liability, flood, federal crop & federal crime are all | federal government insurance |
| at the state level the government is involved in providing | unemployment insurance |
| when permitted by its articles of incorporation, articles of organization, operating agreement, or charter, may apply to commissioner for a license to conduct any/all insurance, except work comp, PL auto, or HO insurance | captive insurance company |
| part/all of risk of loss I borne without benefit of insurance coverage to fall back on if a loss occurs | self-insurance |
| exclusive agency system, direct writer system, direct response system, or independent age3ncy system are the four __ __ systems used to market insurance | basic distribution |
| insurance company contracts with agencies, independent businesses, to represent & sell insurance only for that insurer | exclusive/captive agency system |
| insurance company's agents are actually employees | direct writer system |
| there are no agents; sell insurance through direct mail/over the phone | direct response system |
| agencies that are independent contractors contract w/several carriers to represent & sell for those companies | independent agency system |
| agent that represents more than one carrier is known as | independent agent |
| one of the most widely used indicators of financial health or lack thereof in the insurance industry | company ratings |
| granted powers by carrier to bind/accept risks on behalf of carrier | insurance agents |
| insurance agents are to act within limitations specified in contract between them & carrier | agent authority |
| authority specifically given to agent either in writing/orally | express authority |
| allows the agent to perform all the usual task required to sell/service insurance contracts & to exercise the agent's express authority | implied authority |
| doctrine that assumes that agent has authority that a normal prudent person would think/be lead to believe they have | apparent authority |
| selling insurance, collecting premiums, servicing contract, issuing/countersigning policies, & acting as rep for carrier & link between insured & insurer | agent's responsibilities |
| purpose is to define certain practices which constitute unfair methods of competition/unfair/deceptive acts/practices | unfair Trade Practices |
| occurs if the buyer of policy receives any part of the agent's commission/anything of significant value as an inducement to purchase a policy | rebating |
| state regulations for rebating are very strict & are designed to | prohibit discrimination in favor of/against policy owners |
| illegal inducements to buy include offering/paying/allowing any rebate or other inducement not specified in policy /any special favor/advantage concerning dividends or other benefits that will accrue in order to | place, negotiate, or renew the policy |
| illegal inducements to buy include offering/selling/purchasing anything of value __ __ in the policy | not specified |
| illegal inducements to buy include offering/paying/allowing any rebate of any __ on any insurance policy/annuity contract | premium |
| unethical act of persuading policy owner to drop a policy solely for the purpose of selling another policy without regard to possible disadvantage to the policy owner | twisting |
| by definition, twisting involves some kind of ___ by agent to convince policy owner to __ insurance companies/policies | misrepresentation; switch |
| persuading a policy owner to __ a whole life policy and use the cash to make other investments falls under twisting category | surrender |
| any false/malicious communication, written/oral that injures another's reputation, fame, or character | defamation |
| no person shall make, issue, circulate, or cause to be made issued or circulated any estimate, circular, statement, sales presentation, omission, or comparison which | leads to misrepresentation & false advertising |
| company &/or agent must act in good faith in claim settlements & promptly pay its obligation to the insured in event of loss | unfair claim settlement practices |
| defined as a person/institution that has responsibility for the money. property, or financial affairs of another | fiduciary |
| agents have fiduciary __ toward their clients as well as the insurer for collection & handling of premiums. | duties |
| agent is not supposed to __ the funds of others with their personal funds | co-mingle |
| agent is also charged to comply with terms of the agency contract in __ __ that are within the limitations & spirit of the agreement | accepting risks |
| person shall not enter into any agreement to commit any act of __, __, or __ resulting in unreasonable restraint of, or monopoly in, the business of insurance | coercion; boycott; intimidation |
| define premium as the consideration for insurance | insurance codes |
| any & all charges made by an agent when taking an application, issuing a policy, and for services rendered are all | premium charges |
| __ paid to an agent by insurer constitutes entire compensation due to the agent in connection with solicitation, negotiation, making/serving an insurance policy | commission |
| when an agent charges an extra fee, this charge amount to an __ of premium constituting unfair discrimination against the insured charged | overcharge |
| agent will be charged for engaging in an unfair trade practice & subject to __ __ of law governing that activity | appropriate penalties |
| neither agent/insurance carriers are permitted to __ against perspective insureds | discriminate |
| a person cannot be given a __ __ for coverage than a person in identical circumstances | different rate |
| applies to all persons & to all insurance policies & insurance contracts except Worker's comp insurance. title insurance, & fidelity/surety bonds | Unfair Trade Practices regulation |
| Unfair Trade Practices regulation is not exclusive, and other acts, not herein specified, may also | constitute unfair claims settlement practices |
| acronym FAIR stands for | Fair Access to Insurance Requirements |
| no application for insurance can be rejected simply because of environmental hazards that are beyond the control of the insured | under the FAIR plan |
| most states have enacted __ __ to pay covered losses of insolvent insurers; in most states, the maximum limit for any one loss is $300,000 | guaranty plan |
| the deductible under the state government guaranty plan is usually | $100 |
| guaranty plans are funded through __ __ of those carriers writing the covered lines of insurance in the state | assessments made |
| the amount of assessments made, under guaranty plan, is based in | percentage of company's writings |
| companies that write auto coverage in a state must participate in __ __ __ for placement of auto insurance | assigned risk plan |
| plan is designed to provide a market for coverage where the applicant has been unable to obtain coverage in the usual marketplace | assigned risk |
| in assigned risk, the carrier is usually required to write the risk for at least __ __ or until coverage is placed outside the plan | three years |
| effective Nov. 26, 2002 Congress passed | Terrorism Risk Insurance Act of 2002 |
| Terrorism Risk Insurance Act (TRIA) of 2002 | established a temp federal program through which the federal government shares with the insurance industry losses resulting from acts of terrorism |
| TRIA Extension Act was passed late 2005 which | extended TRIA program until Dec. 31, 2007 |
| compels insurers to offer terrorism coverage and, in the event of attack, will provide federal funds to assist insurers in paying claims | TRIA program |
| commercial property, commercial casualty, worker's comp & surety coverage insurance are the lines covered by | TRIA |
| crop-hail, livestock, private mortgage guaranty, financial guaranty, medical malpractice, flood, reinsurance/retrocession, & life/health insurance | TRIA exclusions |
| as of Jan 1,2006 TRIA also excludes | commercial auto, crime, surety, farm owners, & professional liability |
| under federal Fair Credit Reporting Act, is any written, oral, or other communication by a consumer that bears on a consumer's creditworthiness, standing, capacity, character, reputation, personal characteristics, or mode of living | consumer report |
| under federal Fair Credit Reporting Act, a consumer report is any written, oral, or other communication by a consumer that is used as a __ in establishing the consumer's eligibility for credit/insurance to be used primarily for personal, family, etc. | factor |
| consumer reporting agency may furnish a consumer report to a person it has reason to believe intendeds to use the information in connection with | credit transaction involving the consumer about whom the information is to be furnished |
| consumer reporting agency may furnish a consumer report to a person it has reason to believe intendeds to use the information for __ purposes | employment |
| consumer reporting agency may furnish a consumer report to a person it has reason to believe intendeds to use the information in connection with __ insurance involving the consumer | underwriting |
| consumer reporting agency may not furnish consumer report that contains __ __ about a consumer unless the consumer consents to the furnishing of the report | medical information |
| punishment for fraud/false statements consists of | fine &/or imprisonment for up to 10 years |
Created by:
lfrancois74
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