Agency contract
contract that is held between insurer and an agent/producer, containing the expressed authority given to the agent/producer, and the duties and responsibilities to the principal
Agent/Producer
person who acts for another person or entity with regard to contractual arrangements with third parties; a legal representative of an insurance company.
An agent who is in violation of the agency contract may be held ___________________ to the insurer
personally liable
Insurer is the __________________
principle
What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act?
$2500
A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will ___________________.
Pay the policy proceeds only if it would have issued the policy.
The conditional receipt states ___________________
coverage will be effective either on the date of application or the date of the medical exam, whichever occurs last, as long as the applicant is found to be insurable as a standard risk, and policy is issued exactly as applied for.
What is the purpose of the buyers guide?
To allow the consumer to compare the costs of different policies.
The policy summary provides __________________
specific information about the issued policy, as well as the insurer's information.
A situation in which a person can only lose or have no change represents ________________.
Pure Risk
Speculative or pure risk is the only type insurance companies are willing to accept
Pure
What is the primary source of information used for insurance underwriting?
Application; must be complete and accurate!
An insurer receives a report regarding a potential insured that includes the insured's financial status, hobbies, and habits. What type of a report is that?
Inspection report
Inspection reports cover ___________________
moral and financial information regarding a potential insured.
Who supplies the inspection reports to the insurer?
Private investigators and credit agencies.
Companies using inspection reports are subject to the rule outlined in the _____________________________________
Fair Credit Reporting Act
An applicant is denied insurance because of information found on a consumer report. Which requires that the insurance company supply the applicant with the name and address of the consumer reporting company?
Fair Credit Reporting Act
Who governs what information can be collected and how the information can be used?
Fair Credit Reporting Act
Why should the producer personally deliver the policy when the first premium has already been paid?
To help the insured understand all aspects of the contract; It is their responsibility to make sure the insured have no questions and the delivery receipt is signed.
What is a material misrepresentation?
A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company
What is the main difference between consumer reports and investigative consumer reports?
The investigative consumer reports are obtained through investigation and interviews with associates, friends and neighbors of the consumer.
When is the earliest a policy may go into effect?
When the application is signed and a check is given to the agent
What is the appropriate action by the insurer if a prospective insured submitted an incomplete application?
Return the application to the applicant for completion.
The National Do Not Call Registry was created to regulate
Telemarketers
The term "illustration" in a life insurance policy refers to
A presentation of non guaranteed elements of a policy of individual or group life insurance over a period of years.
Under the Fair Credit Reporting Act, if the consumer challenges the correctness of the information contained in his/her report, the reporting agency must ______________________________
respond to the consumer's complaint.
The reporting agency is required to respond to the consumer's complaint, and if necessary to _____________________
reinvestigate the report
Risk classification used by underwriters for Life insurance include ___________________
Standard, substandard and preferred.
If an applicant for a life insurance policy is found to be a substandard risk, the insurance company is most likely to
charge a higher premium
An individual applied for an insurance policy and paid the initial premium. The insurer issued a conditional receipt. Five days later the applicant had to submit to a medical exam. If the policy is issued, what would be the policy's effective date?
The date of medical exam; if the company acknowledges receipt of the premium with a conditional receipt, the policy is in effect on the date of the application or the date of medical exam (whichever is later)
A producer agent must do what things when delivering a new policy to the insured
1) must explain policy provisions, exclusions, and riders at time of delivery
2)Explain rating procedures especially if the policy is rated differently than applied for
3) Collect any due premium and have the insured sign the statement of continued good h
A policy summary includes what information?
Information about premium accounts, cash values, surrender values, and death benefits for specific policy years
What do individuals use to transfer their risk of loss to a larger group?
Insurance
If an agent fails to obtain an applicant's signature on the application, the agent must
return the application to the applicant for signature
A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will _____________________
pay the policy proceeds only if it would have issued the policy.
An agent and an applicant for a life insurance policy fill out and sign the application. However, the applicant does not wish to give the agent the initial premium, and no conditional receipt is issued. When will coverage begin?
When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health
When an agent collects the initial premium from the applicant, the agent should issue the applicant a
Premium receipt
Which entity established the Do-Not-Call Registry?
The Federal Trade Commission (FTC)
What is the MIB?
Non profit trade organization which receives adverse medical information from insurance companies and maintains confidential medical impairment information on individuals
What is a statement guaranteed to be true and if untrue may breach an insurance contract?
Warranty
What is the opposite of a warranty when a person makes a general statement to the best of their knowledge?
Representations
An applicant signs an application for a $25,000 life insurance policy, pays the initial premium, and receives a conditional receipt. If the applicant is killed in an automobile accident the next day what would happen?
The beneficiary would receive $25,000 if it was determined that the insured qualified for the policy applied for
What is a generic consumer publication that explains life insurance in general terms in order to assist the applicant in the decision-making process?
Buyer's Guide
What is the purpose of a disclosure statement in life insurance policies?
To explain features and benefits of a proposed policy to the consumer
In classifying a risk, what does the Home Office underwriting department look at?
1) Past medical history
2) Present physical condition
3) Occupation
4) Habits & morals
What are the three recognized areas in which insurable interest exists?
1) Policy owner insuring his/her own life
2) Life of a family member (relative or spouse)
3) Life of business partner or key employee
4) Financial obligation to someone
*A debtor DOES NOT have insurable interest in the creditor
What is included in a policy summary?
1) Producers name and address
2) Insurance companies home office dress
3) Generic name of policy issued
4) Premium
5) Cash Value and surrender values and death benefit figures for specific policy years
A misrepresentation is
a statement that if discovered would alter the underwriting decision of the insurance company
The application consists of what two parts
General Information
Medical Information
A disclosure statement does what?
Provides the applicant basic information about the cost and coverage of the insurance being solicited
To ensure proper obtaining and handling of test results the insurer must do what two things
Must disclose the use of testing to the application and obtain written consent from the applicant on the approved form.
Must establish written policies and procedures for the internal dissemination of test results among its producers and employees to ensu
Underwriting refers to
risk selection and classification process; company decides whether or not applicant is insurable and what premium to charge.
The agent is commonly referred to as the _______________
field underwriter
Insurable interest refers to
the possibility of losing money or something of value in the event of the loss.
What are examples of insurable interest?
1) Policy owner's own life
2) Life of family member
3) Life of business parter, key employee or someone who has a financial obligation to policy owner
Insurable interest is not required of _________________.
beneficiaries
Difference between consumer reports and investigative consumer reports
Consumer reports use information regarding the person's credit, character reputation or habits from employment records, credit reports, and other public sources while the Investigative consumer reports use friends, associates and interviews to uncover inf
Investigative reports cannot be done unless the person is notified within how many days?
3
The insurer must release information obtained through investigative reports to persons within how many days?
5
What two reports can be requested if the insurance policy is a higher amount of coverage in regards to medical examinations?
1) Paramedical report
2) Attending Physician's Statement
Risk is ______________________
uncertainty or chance of loss occurring
Standard risks are ________
Average risk; entitled to insurance protection with extra rating or special restrictions
Substandard (High Exposure risks) are
not acceptable at standard rates due to physical condition, history of disease, occupation or dangerous habits;
Have higher premium
Preferred risks are
Meet the certain requirements and have lower premiums because of it
Declined risks are
rejected applicants;
Have no insurable interest, are medically unacceptable, potential of loss is so great it doesn't benefit the insurer, and insurance is prohibited by public policy or is illegal
A buyers guide provides what?
Basic, generic info about life insurance.
A policy summary provides what?
Written statement describing features and elements of the policy being issued.
What must the policy summary contain?
1) Name and address of agent
2) Full name of home office and address of insurer
3) Generic name of policy with riders
4) Premium, cash value, dividend, surrender value and death benefit
What is the illustration?
Presentation or depiction that includes NON-guaranteed elements of a policy or group life insurance
If premium is paid with application when does coverage begin with policy?
Date of application
Peril
cause of loss insured against
hazards are
conditions/situations that increase probability of loss
Loss is defined as
due to chance
definite
measurable
Statistically predictable (mortality tables)
Exposure must be large
Loss cannot be catastrophic
The most effective way to control risk
Risk transfer- this is where insurance comes into play
Consideration is
the binding force in any contract; value each party brings
Consideration on part of insured is payment of premium
Consideration on part of insurer is promise to pay in event of loss
Characteristics of Consideration
Aleatory- An unequal exchange; premium paid by insured is considerably lower than the amount insurer pays in event of loss
Adhesion- If insured accepts terms as written by insurer, adhering on "TAKE IT or LEAVE IT" basis. All disputes are resolved in favo