Flashcards

One of the four elements required to have a legal contract. Acceptance is often made by the underwriter after reviewing the applicant’s application. The underwriter may make a counter-offer, in which case acceptance is made by the applicant.

Insurance policies are contracts of adhesion. This means that if there is a lawsuit related to ambiguity in the contract it will always be decided in the interest of the insured, the insurer must stick to that interpretation. If they had wanted it interpreted otherwise they should have been more clear.

An admitted insurer can legally do business in a state. The insurance company must meet the state’s legal and financial requirements to be an authorized insurer.

Adverse selection occurs when only bad risks sign up for life insurance. Group policies have participation percentages to prevent adverse selection.

An insurance company representative licensed by the state who solicits and negotiates contracts of insurance, and provides service to the policyholder for the insurer. An agent can be an independent agent who represents at least two insurance companies or a direct writer who represents and sells policies for one company only. Agents are also referred to as insurance producers.

Insurance contracts are aleatory, the outcome depends upon chance.

An alien insurer is one whose home office is in another country, but that is doing business in this state.

Apparent authority is the appearance of power on behalf of the insurer through the actions or use of identifying materials by the agent (producer), such as company advertising material. This type of authority occurs when a principal permits an agent to act on its behalf without either expressed or implied authority.

A statement of information made by a person applying for life insurance. It helps the life insurance company assess the acceptability of risk. Statements made on the application are used to decide on an applicant’s underwriting classification and premium rates.

The authorization for an agent (producer) to act for or represent an insurance company. An agent must have a minimum of one appointment but may have as many as they wish.

An authorized insurer can legally do business in this state.

Avoidance is a risk management tactic whereby the risk of loss is prevented in its entirety by not engaging in activities that present the risk.

A boycott is a concerted refusal to deal or a group action designed to pressure another party into doing something by withholding or enlisting others to withhold patronage or services from the target. It can be a method of shutting a competitor out of a market or preventing entry of a new firm into a market. Boycott is an unfair method of competition that is prohibited under state law.

Coercion is an unfair trade practice that occurs when a producer applies physical or mental force or threat of force to persuade another to buy insurance.

The head of the state’s Department of Insurance. The Commissioner may also be referred to as the Director or Superintendent depending upon the state. The Commissioner’s job is to supervise the insurance business in a state and administer that state’s insurance laws.

To be legally valid a contract must be entered into by competent parties. This means that the parties understand the contract that they are agreeing to.

Concealment is failure to disclose a material fact.

Consideration is an exchange of value. Consideration for the insured is the premiums paid plus the answers to the questions on the application. Consideration for the insurer is the insurer’s promise to pay. Consideration does not have to be equal.

The consideration clause is the part of the insurance contract that sets forth the initial premium payment and renewal premiums as well as the frequency of the premiums due.

In most cases, an insurance policy. A policy is considered to be a contract between the insurance company and the policyholder.

Life insurance is a contract of adhesion, where one party (the insurer) states the provisions of the contract while the other party (the insured) is not involved in its drafting, but whose participation is in either agreeing with it or declining it.

Defamation is being false or maliciously critical of an insurer’s financial condition.

Insurance sold directly to the insured by an insurance company through its own employees by mail or over the counter

A domestic insurer is one whose home office is in this state. The domestic insurer is doing business in this state.

The date on which an insurance policy becomes effective.

There are four elements required to have a legal contract: C – O – A – L. Consideration, offer, acceptance, and legal purpose and capacity.

Not all risks are insurable. Pure risk involves no chance of gain. Pure risk is insurable. Speculative risk, like gambling, involves a chance of gain or chance of loss. Speculative risk is not insurable.

The entire contract is admissible in court. The entire contract includes the policy and anything else attached at issue, such as the application and any riders. The entire contract clause protects both the insurer and the insured. No changes may be made to the policy after issuance unless both parties agree to the change.

A type of professional liability insurance that protects an insurance producer from claims arising from services provided (or those not provided). E&O does not cover criminal acts.

An exclusion is an event (peril, accident, occupation, avocation) that an insurance policy will not cover.

Your policy’s share of the company’s operating costs; fees for medical examinations and inspection reports, underwriting, printing costs, commissions, advertising, agency expenses, premium taxes, salaries, rent, etc. Such costs are important in determining dividends and premium rates.

In insurance, exposure is a measure of the potential risk faced by an insurance company as a result of their normal business operations—namely, selling insurance policies. When an insurer sells a policy, they must cover insured losses that fall within the terms and conditions of coverage.

Express authority in insurance refers to the explicit powers and permissions granted to an agent (producer) through a written agreement. It outlines the agent’s scope of authority and activities they are authorized to undertake on behalf of the insurer.

The Act (Title VI of the Consumer Credit Protection Act) protects information collected by consumer reporting agencies such as credit bureaus, medical information companies, and tenant screening services. Information in a consumer report cannot be provided to anyone who does not have a purpose specified in the Act.

Misstating an insurance company’s financial position is an unfair trade practice.

False or deceptive advertising is an unfair trade practice.

A foreign insurer is one whose home office is in another state. The foreign insurer is doing business in this state.

Insurance fraud occurs when an insurance company, agent, adjuster, or consumer commits a deliberate deception in order to obtain an illegitimate gain. It can occur during the process of buying, using, selling, or underwriting insurance.

A certain amount of time provided (usually between 10-30 days) to an insured in order to examine the insurance policy and if not satisfied, to return it to the company for a full refund.

The time during which a policy remains in force after the premium is due but not paid. The policy lapses as of the day the premium was originally due unless the premium is paid before the end of the grace period or the insured dies.

The Gramm-Leach-Bliley Act seeks to protect consumer financial privacy. Its provisions limit when a financial institution may disclose a consumer’s nonpublic personal information to nonaffiliated third parties.

Established at the state level to support insurers and protect consumers in the event of insurer insolvency. Guaranty Associations are funded through assessments charged to admitted insurers.

A hazard is something that increases the risk. Hazards may be physical, moral, or morale hazards.

Implied authority refers to the actions of an agent (producer) that may extend beyond the rights and powers explicitly provided in the agency contract.

Indemnity is the process by which loss responsibility is explicitly transferred within a contractual relationship. Without this, there’s no way for an insurance policy to establish that accountability – meaning there would be no way to enforce its provided protections.

Insurance is a legal agreement between two parties – the insurer and the insured, also known as insurance coverage or insurance policy. The insurer provides financial coverage for the losses of the insured that s/he may bear under certain circumstances.

The laws that govern the business of insurance in a state.

The person or organization covered by an insurance policy.

The insurance company.

The insuring clause is found on the first page of the policy, the face of the policy. It is the insurer’s legally enforceable promise to pay. The insuring clause includes the parties to the contract, the policy effective date, and the coverage.