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Health & Life

PA Health & Life Insurance

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
Created by: jenpstudy
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