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Health & Life
PA Health & Life Insurance
| Question | Answer |
|---|---|
| Uncertainty or chance of loss | risk |
| Purchasing insurance and placing risk on an insurer is called | Risk Transferred |
| If you do not purchase insurance, you are considered | Self Insured |
| Not transferring risk to the insurer can be considered | Risk Retention |
| Chance of loss with no chance of gain is what type of risk? | Pure Risk |
| Chance of loss with a chance of gain is what type of risk? | Speculative Risk |
| What is it called when companies share risks between one another? | Reinsurance |
| What is it called when partners share risk? | Risk Sharing |
| What is the law of large numbers and what does it do? | The assumption that as number is insured units increases, predictability of loss will improve. |
| When determining the risk factor for groups in health insurance, what units do actuaries study? | Morbidity Units |
| What would these units be called when dealing with life insurance? | Mortality Units |
| True or False: Actuaries study individuals when determining risk factors? | False |
| What creates an insurable interest? | Risk of Financial loss due to loss of life or property |
| What is the principle of insurance or Indemnity? | The insured should be restored to the same financial condition as they were prior to suffering the loss. |
| How does indemnity change with life insurance? | The Beneficiary will be restored instead of the insured. |
| Insurers must be __ and __ by the insurance department to sell insurance. | Approved / Admitted |
| Non-Admitted companies cannot sell in the state with the exception of what type of brokers? | Excess or Surplus Lines Brokers |
| There are three types of insurers: Domestic, Foreign, and Alien. Explain what the difference is between each. | Domestic: home office in state. Foreign: home office in another state. Alien: Home office in any other country. |
| How can an insurer organized and chartered in another state or country be allowed to sell insurance in Pennsylvania? | Must maintain an office in Pennsylvania |
| Name two objectives of the National Association of Insurance Commissioners. | Help protect policy owners interests and encourage uniformity in state laws & regulations |
| What Act allowed each state to regulate insurance industry in their state? | The McCarran Ferguson Act |
| What type of company is owned by Stock Holders or Share Holders? | Stock Companies |
| What two types of companies elect Board of Directors? | Stock and Mutual |
| Mutual companies are owned by their Policy Holders. There are two types of policies they can issues. What are these two types? | Participating and Non Participating |
| What is the difference between mutual companies participating and non participating plans? | Participating plans pay dividends and non participating plans do not. |
| This type of organization can only sell to members and is tax exempt. (Ex. Moose, Elks, Knights of Columbus) | Fraternal Organizations |
| Who insures a reciprocal company and who do they have manage the company? | Reciprocal companies are a group of individuals that self-insure each other. They then are managed by an attorney in fact. |
| One of the first insurance companies, Lloyds of London still offers clerical services to its members. What is their group considered? | A Self-Funded Syndicated Group |
| A Self-Funded Syndicated Group allows their members to manage their risk in what way? | They allow members to choose the risk they wish to take and they only are fiscally responsible for that risk. |
| How often must insurers be audited by the insurance department to determine if they are solvent? | At least once every 5 years, but can be done more frequently. |
| AM Best and Standard & Poors are the best known companies that rate and grade insurers on their ________ ____________. | Financial Stability |
| True or False: Rating given by these companies can not be shared with clients. | False. These ratings can be shared with clients. |
| What is the purpose of the Pennsylvania Health & Life Guarantee Association? | Protect the public against Insurer's Insolvencies. |
| Who funds the Pennsylvania Health & Life Guarantee Association? | All Health and Life Companies |
| How does the Pennsylvania Health & Life Guarantee Association help protect the public? | Pay claims if the insurer becomes insolvent. |
| Is this fund provided by the Pennsylvania H&L Guarantee Association to be discussed with clients? Why? | No, because not all claims can be paid in full. |
| Independent Producers can represent how many companies? | More than one |
| Captive Producers can represent how many companies? | One Insurer |
| Do Independent or Captive Producers own their book of business, renewals, and fund their own operating expenses? | Independent |
| Do direct writers use their own producers? | No, they go direct to the public thru Mass media. |
| What is the difference between an Appointed and a Non Appointed Producer? | Appointed represents the company. Non Appointed Producers represent themselves or their clients. |
| A Non-Resident Producer is licensed and lives outside of the state. Can they have a business or residence within the state? | No |
| How many days does the Non-Resident Producer have to apply for a residence license if they move to the state? | 90 Days |
| What type of authority do producers have through their Agent or Agency Agreement? | Expressed Authority |
| Expressed Authority needs to be in ____, otherwise it would be considered ________ authority. | Writing / Implied |
| What type of authority do producers have through company forms, business cards, and sample policies? | Apparent Authority |
| What is the purpose of Residual Authority? | No purpose. Does not exist. |
| Apparent Authority also includes a producer's ____ and ____. | Deeds / Actions |
| When a producer has a fiduciary responsibility, what are they able to do? | Trusted to collect and received premiums on behalf of the Insurer. |
| Any funds received from a client by a producer must be placed into what type of account? | Separate Trust Account |
| Does the producer acting in a fiduciary capacity receive direct bill premiums? | No |
| What types of complaints does the producer need to keep for records? | Written complaints |
| What type of policy is purchased by producers to cover them if they are sued by a client? | Errors and Omissions Policies |
| Can any policy protect a producer against the IRS? | No |
| Who are the only ones that can bind a company to a risk? | Underwriters |
| What two things can an underwriter determine for policies? | Effective Date and the Final Premium |
| What is the purpose of an underwriter? | To Avoid averse selection and determine Acceptable Risks. |
| What 4 things can an underwriter NOT use as their rating criteria? | Race, Religion, Nationality, client's level of education |
| What is the underwriter's most important source of information? | The Application |
| When does the under writing process begin? | Once the application is submitted with the premium. |
| Any changes to the application must be ______ by both the client and producer. | Initialed |
| Underwriters can order Inspection Reports and Medical Reports. Where agency supplies the Medical Reports? | Medical Information Bureau (MIB) |
| What is the purpose of a medical report from MIB? | To access risk for both Health and Life Insurance |
| How many board members (directors) does Medial Information Bureau elect? | 12 Directors |
| Who elects the MIB board members? | Member Companies |
| What agency cannot be contacted by insurers reviewing client risk information? | IRS |
| If any company or producer runs an inspection report other than for valid reasons, what act have they violated? | Fair Credit Reporting Act |
| What can and cannot be used as a factor when rating potential clients? | The condition of residence can be used, but not the geographic location of the residence. |
| What is Red Lining and is this practice legal? | Red Lining is discrimination against your geographic area and this is not legal |
| Is any discrimination allowed in this process? Explain | Yes some is allowed, but it must be equal across the board. |
| If an underwriter makes unreasonable demands of an applicant, what is this known as? | Boycotting |
| Once a producer has face to face contact with a client/applicant, what are they considered? | A Field Underwriter |
| What is the purpose of designating a producer as a Field Underwriter? | To avoid needless costs if the applicant doesn't qualify for insurance. |
| Insurance is a ___ party contract. | two |
| What are the four elements needed to have a legal contract? | 1-Agreement/Offer & Acceptance 2-Consideration 3-Mentally competent parties 4-Valid Legal Purpose or Insurable Interest |
| The first element of a legal contract has another name. What else can this be called? | Mutual Consent/ Mutual Assent |
| One the application is submitted with the premium, what is this considered? | The Offer |
| If the application is submitted without the premium, what is it considered? | The Invitation |
| What needs to happen for the offer/invitation to be considered acceptance? | The policy is issued or delivered |
| What would cause the policy to be effective at the time of application? | If the premium was paid at the time of the application |
| If no premium was paid with the application, what statement does the client have to sign? | Statement of Continuing Good Health |
| The second element of a legal contract is consideration, what needs to exchanged for their to be a valid contract? | Money must exchange hands/paying the premium. |
| The third element of a legal contract involves restrictions on who can enter into a contract. Who would be someone that couldn't enter into a contract? | Someone under the age of 18, no one in mental institution, no one intoxicated or under duress |
| Can an alcoholic enter into a legal contract? | Yes, if they are sober at the time of the application |
| Insurance is a _____ contract because only ____ party must live up to the terms of the contract once the premium is paid. | Unilateral/One |
| Insurance contracts are also considered ____ ___ _____ because you take it as presented or leave it. Also considered non negotiable | Contracts of Adhesion |
| If going to arbitration to settle a claim, any ambiguous language is found in favor of whom? | The Insured, because the insurer chose the language used. |
| How many days do most policies have for a Free Look Period? | 10 days |
| For Long term Care and Medigap policies, how long is the Free Look Period? | 30 days |
| This type of contract is an unequal exchange of consideration, in other words, one party will receive more money than they give. | Aleatory Contracts |
| Why are insurance contracts considered conditional? | The company must pay the claim under the condition of client paying premium and complies with contract terms. |
| A statement made by the Insured (Applicant) on the application based on their best knowledge and belief is considered to be: | Representations |
| Who can change a statement made by the insured? | The insured and the producer |
| How would a producer change a statement made by the insured? | The insured and producer would need to initial each change. |
| What are statements made by the insurer considered to be? | Promises or Warranties |
| Who can change statements made by the insurer and how do they need to be changed? | Officer of the Insurer /In Writing |
| If the warranty made by the insurer is in writing what type of warranty would it be? | Expressed |
| If the warranty made by the insurer is not in writing what type of warranty would it be? | Implied |
| What would make up an entire contract? | Application, policy, attached papers and Riders |
| In the event of a dispute, what needs to be reviewed to settle the dispute? | The entire contract |
| A Rider does what to a policy? | Adds on |
| A Waiver does what to a policy? | Takes away |
| What term applies to those that have used a waiver in a policy that surrenders certain rights? | Estoppel |
| Can rights be enforced at a later date with a waiver/ estoppel? | No |
| What clause consists of the signed application and the paid premium, asks both parties to give valuable consideration, and is usually on the first page of the policy. | Consideration Clause |
| What clause contains the promises of the company, it identifies the owner, insured, benficiary, company, benefits, and initial premium? | Insuring Clause |
| This provision stated who the owner is and describes their rights. | Ownership provision |
| What are two rights that the owner of the policy does NOT have? | Change the grace period and changing the insured |
| What rights does the owner of the policy have? | Paying the premium and choosing the policy options. |
| What is the difference between Gross Premium and Net Premium? | Gross Premium is the premium the company charges. Net Premium is the premium the company charges without company expenses |
| What does MIDE HIGH stand for? | Morbidity/Mortality (risk factor), Interest, Duration, Company Expenses |
| What are the different types of risk when assessing a client? | Perferred (lowest premium), Standard (average premium), Substandard (highest premium) and Declined |
| What is the purpose of the Fair Credit Reporting Act? | To protect the consumer |
| If a party is being investigated to be insured, do they need to be notified that a report could be ordered? | Yes |
| If a credit report is ordered, how long does the company have to notify the applicant? | 3 business days |
| Can the Applicant challenge the report issued? | Yes |
| How long does the reporting agency have to correct the report? | 30 days |
| Does any legal action need to happen to have this report corrected? | No |
| Can Inspection Reports be used by an attorney for lawsuits? | No |
| Under the Fair Credit Reporting Act, what happens to those obtaining Consumer information reports under false pretenses? | They will be prosecuted. |
| What information could be contained in a Consumer Report? | Character, Reputation, Credit History |
| What is the purpose of licensing producers? | To Proved they are competent, trust worthy, qualified |
| Anyone that solicits, negotiates, or places risk must have a _____. | License |
| In order to receive a commission, a producer would have to be _____ by that company. | Appointed |
| Who would be exempt from taking the insurance license exam? | CLU's , CPU's, attorneys applying for a title insurance license and temporary license |
| How long does a temporary license last? | 180 days |
| Under a temporary license, what can and cannot be done? | New policies cannot be sold, but existing policies can be serviced. |
| What is the penalty for transacting insurance without a license? | $1,000 |
| How long does the 24 hour Pre-Licensing certificate need to be kept? | 6 years |
| How long is the Pre-Licensing Certificate valid? | 1 year |
| Once the state exam is passed, how long do you have to apply for a license? | 1 year |
| To maintain a license, how many credits do you need to complete and how often? | 24 credits every 2 years |
| How many hours can be carried over to the next licensing period? | 24 credit hours |
| How long do you have to reinstate your license if it expires? | 1 year |
| Are there any exceptions that extend the time to renew an expired license? | Yes, active military service |
| The Insurance Commissioner cannot do the following four things: | ask a producer to do community service, post a bond, or sentence a producer to jail or prosecute a producer |
| Anyone participating in the Insurance Industry who violates interstate commerce regulations can face jail time for how long? | 10 years |
| If the violation includes physical harm or causes the insurer to become insolvent, how much jail time can they serve? | 15 years |
| True or False: Risk managers or those who predict risk do not need a license. | True |
| To obtain another line of insurance, what steps do you take? | Pass the appropriate test and apply for a Revised License. |
| When one line of insurance is suspended or terminated, how many others are suspended or terminated? | All are suspended or terminated |
| Who is the producer's primary obligation to once they have been appointed? | The Insurer |
| What is the producer's obligation to their clients referred to? | Utmost good faith |
| There are certain things that should not be done while trying to sell or replace a policy, what does the state insurance department refer to those as? | Unfair Trade Practices |
| Offering your client a percentage of your commission is called: | Rebating |
| Guaranteeing dividends in exchange for an expensive good is called: | Illegal Inducement |
| Failing to disclose to the other party an important material fact is called: | Concealment |
| Causing duress or selling by threat/intimidation is called: | Coersion |
| Intentionally giving untrue or false information (Lying) is called: | Misrepresentation |
| Inducing the insured to lapse, forfeit or surrender his policy through misrepresentations to their detriment is called: | Twisting |
| Making incomplete comparisons for the sole purpose of replacing a client's policy is called: | Twisting |
| When a producer induces his client to terminate a perfectly good policy just so producer can write a new policy with new policy commission is called: | Churning |
| A policy can be denied, delayed or refused by an insurer as long as they provide these three things: | reasons, explanations, notices in writing |
| If the three things listed above have not been provided, the insurer may be facing an ____ ____ ____ _____ | Unfair Claim Settlement Practice |
| To be able to arbitrate, mediate, negotiate, compromise, or settle, the insurer and client must complete this ___ _______. | in writing |
| True or False: Health policies can provide a retirement income. | False |
| How long can the insurer contest answers on the submitted application? | up to 3 years |
| If fraud is committed on a submitted application, how long do they have to contest those answers? | Forever |
| Even though the policy is in effect, no benefits will be paid during what time period? | Probationary Period |
| In the Accidental Death and Dismemberment policy, the death benefit is referred to as | The Principal Sum |
| In the Accidental Death and Dismemberment policy, what is the Dismemberment benefit called? | Capital Sum |
| In a Group AD&D policy, the premiums are deducted by whom under what Category? | by the employer as a business expense |
| What is it called when a health policy will not cover more than a specific number of visits to the doctor or therapist? | Limitation |
| When a health policy reduces the coverage as claims are paid, you can have coverage increased in the future by using what term? | Restoration of Benefits |
| If someone needs surgery but not hospitalization, what type of services would they need? | Ambulatory services or Out Patient Care |
| A Hospital Pre Certification is used to discourage what? | Unnecessary Operations |
| If you have a health plan with a high deductible that is not a group plan, what type of account could you use to supplement costs? | Health Saving Account |
| How much of a penalty for using an HSA for anything other than medical expenses? | 20% |
| How much can an individual contribute to their HSA every year? | $3,850.00 |
| How much can a family contribute to their HSA every year? | $7,750.00 |
| If you are over 55 and under 65, how much can you additionally contribute each year under the Catch Up Law? | $1,000.00 |
| What type of medical savings plan is IRS approved and Employer funded? | Health Reimbursement Account |
| What type of medical savings plan has the employee allow their income to be lowered so the amount can be placed in a savings account for medical expenses? | Flexible Spending Account (FSA) |
| What type of medical savings plan is for self-employed individuals? | Medical Savings Account (MSA) |
| How long are health policies contracts written for? | 1 year |
| This type of policy allows the insured to renew the policy usually up to age 65 and the policy can only be cancel due to NON payment of premiums. | Non-Cancelable |
| A Non-Cancelable policy would be most beneficial to whom? | The insured |
| This type of policy allows the insured to renew usually up to age 65 and the company can increase rates as long as it is done for an entire class. | Guaranteed Renewable |
| This type of policy can be renewed up to age 65, but the company reserves the right to not renew. | Conditionally Renewable |
| This restrictive type of renewal policy leaves the option to renew or not renew up to the insurer. | Optionally Renewable |
| This type of policy can be terminated by the insurer at any time, but will return any unearned premiums to the policy holder. | Cancelable |
| There are twelve mandatory policy provisions, name the first two. | 1-Entire contract provision - application, policy, attached papers make up the whole policy and it can only be changed by Officer of the Company. 2-Time Limit on Certain Defense - Limits insurers to 3 years to contest the contract |
| There are twelve mandatory policy provisions, name number 3 and 4. | 3-Grace Period - The amount of time after due date to pay premiums without penalty. 4-Reinstatement - payment of overdue premium, accidents covered immediate, sickness 7-10 days later. Policy automatically reinstated after 45 days if no contact insurer |
| There are twelve mandatory policy provisions, name number 5 and 6. | 5-Notice of Claim - Insurer or producer must be notified within 20 days of claim. 6- Claim Forms - Sent to the insured w/in 15 days or 10 working days. |
| There are twelve mandatory policy provisions, name number 7 and 8. | 7-Proof of Loss - Submitted within 90 days of loss, if legal incapacity, no time frame. 8-Time Payment of Claims - Insurer should pay immediately or within 60 days |
| There are twelve mandatory policy provisions, name number 9 and 10. | 9-Legal Actions - No legal action can be started against company sooner than 60 days, after that you have 3 years. 10-Payment of Claims- Will be paid to the beneficiary, or if no bene pay estate. |
| There are twelve mandatory policy provisions, name number 11 and 12. | 11-Physical Examination & Autopsy - Company must pay for exams, company can autopsy, but must pay and be done ASAP 12-Change of Beneficiary - The policy owner may change the beneficiary and assign the benefits |
| There are eleven OPTIONAL policy provisions, name number 1 and 2. | 1-Change of Occupation - changing to a less hazardous job, insured pay the claim and refund unearned premium. If more hazardous, will pay reduced benefits 2-Misstatement of Age/Gender - company will adjust the amount to correct age/gender |
| There are eleven optional policy provisions, names number 3 and 4. | 3-Other insurance with the insurer - if you have more than one poilcy company will void excess and have insured choose one. 4-Insurance with other insurers - you cannot make a profit off of insurace. one must be primary |
| There are eleven optional policy provisions, name number 5 and 6. | 5-Insurance with other insurers-you cannot make a profit off of insurance. must choose a primary for benefits, disability, etc. 6-Relation to Earnings-If diability income is more than if working, benefits will be reduced, but not less than $200.00 |
| There are eleven optional policy provisions, name number 7 and 8. | 7-Unpaid Premiums-Allows the company to deduct unpaid premium from claim payments. 8-Cancellation-Company must send written notice to cancel and unearned premiums must be returned. |
| There are eleven optional policy provisions, name number 9, 10 and 11. | 9-Conformity with state statues-policy must conform to state laws 10-Illegal Occupations-Liability denied if insured engages in illegal practices (not Misds) 11-Intoxicants & Narcotics- insurer will not pay if under influence |
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