Ethical standards and regulatory requirements for licensed insurance producers.
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- What is good faith in an insurance contract?
- An obligation of honesty in fact and fair dealing in conducting the transaction and performing under the agreement.
- Define fiduciary duty in insurance.
- The legal obligation of an agent to act in the best interest of the client rather than the insurer or themselves.
- What is the duty of fair dealing?
- The obligation to refrain from doing anything that would deprive the other party of the benefits of their insurance contract.
- Define insurable interest.
- A legitimate financial or other relationship with a person or property such that the policyholder would suffer direct loss if the insured event occurs.
- What is misrepresentation in insurance?
- Any false, misleading, or deceptive statement made with the intent or the effect of inducing the insured to purchase a policy.
- Define a material fact in insurance.
- A fact that would influence an underwriter's decision to issue a policy or the terms and conditions of coverage.
- What is rebating in insurance?
- Offering the insured anything of value not provided in the policy, such as cash, gifts, or reduced premiums, in exchange for purchasing or renewing insurance.
- Define twisting in insurance.
- Inducing a policyholder to lapse or surrender a policy to purchase a new one without a legitimate reason, often through misrepresentation.
- What is the principle of indemnity?
- The concept that insurance can only return an insured to their original financial position before a loss, not profit from the loss.
- Define subrogation rights.
- The insurer's right to pursue recovery against a third party responsible for the loss after paying a claim to the insured.
- What is a waiver in insurance?
- The voluntary relinquishment of a known right or requirement, typically when an insurer accepts a late premium payment without penalty.
- Define estoppel in insurance.
- A legal principle that prevents an insurer from denying coverage when their actions or silence led the insured to believe coverage was in place.
- What is replacement in insurance?
- Any transaction whereby an existing policy is lapsed or surrendered in favor of purchasing a new policy, requiring specific disclosures and documentation.
- What must be disclosed in a replacement transaction?
- The producer must provide a written statement identifying the existing policy, the replacement policy, and a comparison of coverages and costs.
- Define suitability in insurance sales.
- The requirement that a producer recommend coverage appropriate to the customer's needs, financial situation, and circumstances.