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NY Adj Ex - Ch2

Insurance Regulation

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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