Georgia Life, Accident, & Sickness Exam Study Guide 100% Pass

Georgia Life, Accident, & Sickness Exam Study Guide 100% Pass Insurance ✔✔A social device for spreading the chance of financial loss among a large number of people. A method of transferring risks to the insurance comp ...

Georgia Life, Accident, & Sickness Exam Study Guide 100% Pass Insurance ✔✔A social device for spreading the chance of financial loss among a large number of people. A method of transferring risks to the insurance company. Risk ✔✔Shared by all those people buying like coverage's Types of Risk? ✔✔Speculative and Pure Speculative Risk ✔✔Gambling. Insurance DOES NOT cover this. Insurance is not meant to provide the opportunity for a gain. Pure Risk ✔✔The type of loss insurance covers Valued Contract ✔✔Pays stated amount in the event of the occurrence. EX: Life Insurance Reimbursement Contract ✔✔Based on the loss you will be paid back a certain amount. EX: Health Insurance, Disability Insurance, Auto Insurance Description of Insurance ✔✔A large uncertain loss (death, disability) is exchanged for a small certain loss (premium). The agreement is between the insurer (the company) and the policy owner (may or may not be the insured) is established in a legal contract, called a policy. The contract promises to pay a claim if a loss occurs. If a loss occurs the beneficiary will file a claim. Who is involved with a Policy? ✔✔Applicant, Policy Owner, Insured, Beneficiary, Insurer, Third party contract Applicant ✔✔Person applying for insurance Policy Owner ✔✔Pays the bill. Has all ownership of rights Insured ✔✔Person whose life is covered in the policy Beneficiary ✔✔The person named to receive the proceeds upon the death of the insured. (THIS CAN BE ANYONE YOU WANT) Insurer ✔✔The company Third Party Contract ✔✔A policy that is owned by someone other than the insured. EX: a husband buys insurance on his wife or a parent buys insurance on a child. What creates risk? ✔✔Peril and Hazard Peril ✔✔Is the cause of the loss. EX: fire, flood, accident Hazard ✔✔Anything that increases the chance of loss Moral Hazard ✔✔liar, misrepresents oneself (Ends in an L for LIAR) Morale Hazard ✔✔bad attitude, careless, a risk taker (ends in an E attitude ends in an E) EX: speeding ticket, DUI, bad credit Method of Managing Risks ✔✔Transfer Buying Insurance ✔✔The risk of the loss is transferred to the insurer and it is shared by other insured's that have similar characteristics, like age, sex, occupation Two basic concepts of insurance? ✔✔Pooling Concept and Law of Large Numbers Pooling Concept ✔✔Looking at a group of people who share similar characteristics to make predictions Law of Large Numbers ✔✔the larger the group, the more accurate the prediction. The Mortality Table ✔✔In use is The Commissioners Standard Ordinary Table. Tracks life expectancy to age 120. Exposure Unit ✔✔The person or property being considered Indemnify ✔✔Returns one to the economic position enjoyed prior to the loss, but restricts one from making a profit from the loss Contestable Clause ✔✔Suicide in the first two years is not covered. The insurer will return premium only, with no interest. Incontestable ✔✔After two years the life insurance contract for suicide and for fraud is over and the claim will be paid. In Health Insurance, Fraud is ______________ ✔✔FOREVER Exclusion of Catastrophic Losses ✔✔Some losses are so large no insurer could ever cover them. War, military service, aviation, and certain hazardous hobbies or occupations (MUST BE NAMED IN POLICY) Types of Commercial Insurers? ✔✔Stock Insurance Company and Mutual Company Stock Insurance Company ✔✔Owned by the stockholders, sells NON-PARTICIPATING POLICIES, the board of directors is elected by the stockholders, profits go to the stockowners (Stock dividends), STOCK DIVIDENDS ARE TAXABLE AS INCOME Mutual Company ✔✔Owned by the policy owners, sells PARTICIPATION POLICIES, the board of directors is elected by the policy owners, profits go to the policy owners (Policy dividends), POLICY DIVIDENDS ARE NOT TAXABLE SINCE THEY ARE "RETURN OF AN OVERCHARGE" Types of Non-Commercial Insurers ✔✔Reciprocal, Fraternal Insurers, Lloyds, Assessment Insurers, Reinsurance, Self-Insurance Reciprocal ✔✔Unincorporated groups of people that "band" together to self insure their own risks. Each member is called a SUBSCRIBER. Each subscribers has his own account into which he pays premiums and earns interest. When one of the subscriber has a loss then each subscriber is charged is fair share. It is managed by an "Attorney-in-fact". SHORT-TERM AGREEMENTS. RECIPROCAL'S DO NOT TRANSACT LIFE INSURANCE. Stock insurance companies ARE NOT reciprocal. Mutual insurance companies ARE Fraternal Insurers ✔✔Like a "Fraternity". As a member you have certain privileges and responsibilities. Engage in charitable activities. Because of membership they have access to insurance. NOT FOR PROFIT Lloyds ✔✔Not an insurance company. It is a big building that houses underwriters. The underwriter represents a group of investors, called SYNDICATE. Lloyd's handles SPECIAL RISK POLICIES. Special hazards such as a dancer insuring her legs, or a race car driver insuring his life while racing. LLOYD'S DOES NOT TRANSACT LIFE INSURANCE. Reinsurance ✔✔Insurance between insurance companies. Used to protect against catastrophic loss. a) ceding company (the company that writes the contract) b) reinsurer (the company that has accepted part of the risk). Treaty agreements are automatic; each insurer takes a certain percent of whatever amount the ceding company writes Reserve ✔✔An accounting measurement of the insurer's liability to the policyholder. To be considered financially healthy or "solvent" an insurer must have 85% of their contract liabilities in a reserve. The Patriot Act ✔✔Seeks to prevent funding for terrorist acts McCarran-Ferguson Act (Public Law 15) ✔✔In 1945, over ruling the court by stating affirmatively that regulation of insurance was the job of the states. not the federal government. The law exempted insurance from federal antitrust rules if it was covered by state regulation. If there are any "holes" in state regulations, the Fed address it. This is what is in place today. ORDER OF REGULATION IS: STATE, THEN FEDERAL GOVERNMENT Who Regulates Insurance? ✔✔National Association of Insurance Commissioners (NAIC) State Insurance Commissioners National Association of Insurance Commissioners (NAIC) ✔✔Impose strong influence on regulation within the insurance industry. NAIC has done much to help insurers to standard policies. State Insurance Commissioners ✔✔the regulatory authority; they have to say "grace" over everything. Before a proposed rule or regulation can become effective it must be on file as a matter of public record for at least 10 days. The legality must be approved by the Attorney General. About the Commissioner ✔✔Elected by the voters, the people. term of office for 4 years.(T-E-RM). The Chief Deputy will post a bond in the amount of $15,000. The commissioner must hold a hearing when required by law or upon written demand. Hearings much be held in 30 days, unless postponed by mutual consent. Commissioner must give 10 day notice of hearing for general insurance matters and 15 days notice for unfair trade practices. Violation of code/rule ✔✔probation for up to 1 year and $1000 for non-willful & $5000 for willful Guilty of Insurance Fraud ✔✔If the loss is $500 or ore it is a FELONY- prison from 2-10 years and fine up to $10,000 Fraud- ✔✔an intentional act designed to deceive and induce another party to part with something or application, embezzlement, fake claims, fake policies. ALWAYS INVOLVES INTENT Cease & Desist ✔✔The commissioner may order this and "stop this immediately" occurs Fair Credit Reporting Act ✔✔A federal law which protects the consumer's right to privacy and sets up procedures for reporting agencies to follow in their reporting practices to ensure that the records are confidential, accurate and properly used. Investigative Consumer Report ✔✔A whole new fresh report. Interviews are conducted. The consumer must be given 3 DAYS NOTICE if they are going to do an investigative Report Penalty ✔✔obtaining a consumer report under false pretenses is $5000 or prison for 1 year or both Notice of Information Practices ✔✔Must be given at time of application- disclosure statement Information and Privacy Protection Act ✔✔Gives consumer the right to see information an insurer has on the and also says the company cannot give out information unless consumer signed a release form. Violation of the Privacy Act the fine is $10000 if it is frequent then the fine can be $50000. Unfair Trade Practices ✔✔Misrepresentation of Dividends, Blindness, Twisting, Rebates, Malfeasance Misrepresentation of Dividends ✔✔You can not say what they will get back, but it is OK to give dividend ESTIMATES Blindness ✔✔You are not able to discriminate someone just because the are blind Twisting ✔✔Replacement brought about by misrepresentation Rebates ✔✔Offering something of value to make a sale; kickback of commissions. EX: If you buy this policy then i will split the percentage of what i make and pay you for buying the policy. Malfeasance ✔✔The performance an act that is legally unjustified, harmful, or contrary to law; a wrong doing (used especially of an act in violation of a public trust) National Do Not Call List ✔✔Managed and enforced by the Federal Trade Commission & state officials. Calls from or on behalf of political organizations, charities, telephone surveyors are permitted, as well as calls from companies that have the express written permission of the consumer. May call between 8am and 9pm, unless someone is on no call list. Violations could be fined up to $16000 per incident Transacting Business ✔✔Inducing toward or soliciting for new business