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37 Cards in this Set
- Front
- Back
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Insured |
Person/entity that has insurance protection under a policy for a covered loss. |
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Insurers |
An insurance company or carrier that provides insurance coverage by issuing particular insurance policies or contracts. |
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Insurance Agencies |
Independent sales organizations that provides services and distributes insurance policies to customers. |
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Insurance Agents |
Licensed Individuals representing an insurance company when transacting with an insurance business. |
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Legislative Branch |
Writes and passes state insurance laws or statutes, designed to protect the insuring public. |
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Judicial Branch |
Interprets and determines the constitutionality of statutes. |
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Executive Branch |
Enforces existing statutes that are in place.
The commissioner that represents this branch has power to issue rules and regulations to enforce these statutes. |
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National Association of Insurance Commissioners (NAIC) |
A regulatory support org. created and governed by chief insurance regulators and commissioners from all 50 states and 5 US territories.
- Have no legal authority to enact or enforce insurance laws. - Primary goal is to promote state uniformity. |
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Stock Insurance Companies |
Stock insurers are owned by its stock holders.
- Issues non-participating policies. - Policy holders are not entitled to dividends. |
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Mutual Insurance Companies |
Owned by Policy holders and referred to as members. - If declared by the board of directors, policy holders may receive non-taxable dividends as a return of unused premium. - Dividends are not guaranteed, return of premium is based on surplus at End of Year. - Mutual Insurance Companies issues participating policies. |
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Fraternal Insurers |
Aka Fraternal Benefit Societies. - Engage in charitable & benevolent activities that provide primarily life insurance to its members. - Organized on a non-profit basis. |
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Insurer Domiciles |
Domicile is a location or jurisdiction where an insurer is formed or incorporated. |
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Insurer Domicile Type 1: Domestic Insurer |
An insurer organized under the laws of a state in which it is placing its business. - Only domestic when the business, is in the state it incorporated in. |
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Insurer Domicile Type 2: Foreign Insurer |
Placed business anywhere in the US, but the jurisdiction it originated from. |
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Insurer Domicile Type 3: Alien Insurer |
Placed business within the US, but was organized under another countries laws. |
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Authorization |
An admitted/authorized insurer is approved to transact insurance in a given state only if a Certificate of Authority is granted from the Department of Insurance. - Authorization is unrelated to an insurers domicile. |
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Non-admitted/Unauthorized Insurer |
An insurer that is not authorized to transact insurance in a given state, either by failing to comply with state requirements or by not seeking admission. |
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Fair Credit Reporting Act (FCRA) Part 1 |
- Protects the consumers right to the privacy of credit and financial information, ensuring all data is confidential, accurate relevant and properly used. - Allows credit reports to be obtained to determine financial and moral status of an applicant. - Insurer must give pre-notification to the insurance applicant that a credit report may be requested as part of the underwriting requirements and must have pre-authorization by obtaining the applicants written consent to request the report. |
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Fair Credit Reporting Act (FCRA) Part 2 |
- If coverage is denied the insurer must provide a post-notification to the applicant stating why they were denied, that they have a right to request a copy of the report and how to request the report from the consumer agency that filed it.
- Insurer/Producer does not provide the report.
- If the applicant challenged the accuracy of the report, the credit reporting agency is required to reinvestigate and fix any inaccuracies found.
- The applicant is entitled to be informed of anyone who requested a copy of the report in the prior 6 months. |
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US Patriot Act |
Helps detect & prevent illegal activity (drug trafficking, money laundering, and terrorism). |
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Anti-Money Laundering (AML) The Currency Transaction Report: |
Filed with (FINCEN) the Financial Crimes Reporting Network through the Department of Treasury for every cash transaction exceeding $10,000 and wire transfer exceeding $3,000. |
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Contract Law |
- The insurance company promises to make payments for a loss from an unexpected event.
- Contract law involves the exchange of a small premium (expense) for promise of a payment for a large uncertain loss. |
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Principle of Indemnity
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Designed to restore the insured to the same physical/financial condition that existed prior to the loss, without a profit or gain. |
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Indemnify |
To compensate for a loss or make one whole again. - In insurance it may not be possible to truly indemnify someone. So, Indemnity takes the form of cash (death or disability income benefit) or (a physician/doctor payment). |
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Insurable Interest |
Requires financial/economic hardship in the event of a loss or sickness, death or accident of the insured. - Must have an insurable interest between the person buying insurance, the policy owner and the person insured under the policy. - Each person has an unlimited insurable interest in his/her own life. - Life and Health Insurance requires Insurable interest must exist at the time of application not at the time of loss. - Lack of insurable interest makes purchase or payment claims illegal, since policy benefits the person without a loss and is considered a gain. |
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Elements of a Legal Contract Part 1: Competent Parties |
Must have legal capacity to enter into a contract. An insured is assumed competent unless: - Minors: age 16 or below. - Mentally incompetent. - Under the influence of drugs or alcohol. |
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Elements of a Legal Contract Part 2: Legal Purpose |
- May not be issued for any illegal activity or immoral purpose. - Intentional acts like arson or murder can remove the legal aspect of purchasing insurance. - Insurable interest, contract must be issued in good faith and owner can't try to gain from a loss. |
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Elements of a Legal Contract Part 3: Agreement (Offer & Acceptance)
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- Legal contract requires an aggreement which includes an offer and acceptance. - Offer: Insured completes the application and pays the initial premium payment. - Acceptance: An approved application allowing policy issue. - The premium & issued policy form an agreement. - If no premium with the application, the insurer may still issue a policy. - The Policy: is the offer & the premium, when the premium is paid it becomes the acceptance. |
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Elements of a Legal Contract Part 4: Consideration |
Exchange of value that makes a contract binding. - The insured's consideration is the payment of premium & agrreement to abide by the conditions of the contract. - The insurers promise to indemnify in event of a loss is its consideration, as is specified in the insuring clause of the policy. |
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Contract of Adhesion |
- Insurance is considered as part of the contract of adhesion. - A contract is written by one party, the insurance company, without any input from the applicant (non-negotiable). - The Insurer prepares the contract and presents it to the applicant on a "Take-it or Leave-it" basis. |
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Aleatory Contract |
- Based on an uncertain event or "by chance". - Can't be known in advance whether the insurer will have to pay a loss during the policy term, or whether the insured will make premium payments without receiving anything in return. - Both parties agree to the terms of the contract despite the uncertainty. - Very likely to be an unequal exchange of consideration by either party, dependent if a loss does occur & to what extent. |
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Conditional Contract |
- When both parties must perform duties to make the contract comfortable. - Insured can only collect if there is a covered loss. - Insurer can only pay a claim to the insured if their list of conditions have been met. |
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Unilateral Contract |
- Where one party is legally bound to the contractual obligations. - As long as the insured meets all the conditions, the insurer will make an enforceable promise of future performance, and can be charged with breach of contract if obligations are not met. - The insured can cancel the policy at any time & can't be legally forced to pay premiums. |
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Representations |
- Statements made by the applicant on the application. - The applicant makes statements that are believed to be true or are substantially true to the best of their knowledge. |
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Material Vs Immaterial Representations |
- Material Statements that impact the acceptance of an insurable risk: involving rating of acceptable risk, or the decision to accept or decline risk. - Immaterial Representation does not affect the acceptance of rating of risk. |
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Misrepresentations |
- A false statement contained within the application. - If it is material to the issuance of coverage: the issuer would not have issued a policy had the misrepresentation not been made, or premium charges would have been higher, coverage limited or coverage not applied at all. - A material misrepresentation may void the policy. |
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Warranties |
- Material statements in the application or stipulations in policy that are guaranteed to be true in all respects. - If warranties are later discovered untrue or breached, coverage and the contract may be voided. |
