1. Introduction to Insurance
Objective Insurance Law

2. Nature of Insurance
The concept of insurance involves risk pooling or spreading losses over a greater number of people.
An insurance company collects and pools premiums from many individuals or businesses for the payment of future claims.

3. Risk Management All people take risks every day.
Risk Management is the process of managing one’s exposure to risk.
Examples
Using a seat belt
Installing smoke detectors
Driving a vehicle
Playing sports
Purchasing an insurance policy
Other examples?

4. Risk Management Options for people to manage risk include
Transfer part of risk of financial loss to an insurance company
Auto, life, health, disability, property insurances
Retain (keep) the risk of financial loss using high deductible
Abstain or choose not to participate in risky activities
Do not drive car, buy home, play sports, etc.
People make decisions about insurance based on their individual situation and risk tolerance.

5. ADHESION CONTRACT
An adhesion contract is a standard form contract that is written primarily by one party
Insurance policies are adhesion contracts
Policyholder (buyer) cannot usually change:
Policy language
Perils covered
Policyholder can change:
The dollar limit of coverage
Example- $200,000 coverage on homeowner’s structure
Specific items to be covered
Example- 1 carat diamond ring, valued at $3000
Some adhesions contracts are found by courts to be unconscionable if they take advantage of one party

6. Insurance Planned protection provided by sharing economic losses
Insurance does NOT stop the loss from happening
Insurance companies provide a risk management service to consumers
Insurance does indemnify or financially repay the insured a portion of the loss
All insurance policies have a specified limit of coverage

7. NC Department of Insurance
Insurance is a highly regulated business activity governed by the laws of each state
NC Department of Insurance (NCDOI) handles:
Consumer complaints (
Fraud investigations and prosecution
Approval of requested rate increases/decreases
Regulation of agent licensing requirements
Censuring unethical/illegal actions of agents
Head of NCDOI is the insurance commissioner
NC Dept. of Insurance
Web Research

8. Insurance – Basic Terms
Insurance policy- A contract issued by the insurance company (insurer) for coverage of the policyholder
An insurance policy should be kept in a safe place with other important documents.
Policyholder- The person who buys or owns the policy
Insured – The person whose life or property is insured, may or may not also be the policyholder
Insurer - An individual or company who undertakes, underwrites or agrees to compensate the insured for losses, liability, or damages incurred.

9. Insurable Interest
A financial interest in property or a person’s life that permits someone to buy insurance to protect against the financial loss of that property or person’s life
Examples:
You can insure cars owned or leased by you, but not a car belonging to another person
You can purchase life insurance on someone whose death would be a financial loss to you, ie spouse, business partner, parent, child

10. Premium
The amount of money the policyholder must pay for insurance coverage
An insurance underwriter determines the cost of the policy using risk factors and statistical data
An agent represents the company to the consumer
Equals consideration in the insurance contract

11. Non-Payment of Premium
If the premium is not paid, the policy may lapse or cancel, voiding the contract
If claims are made after a lapse, the claim is denied
Some policies have a grace period
Late premiums are received and
Policies are reinstated

12. Claims
The request for payment from an insurance company to cover the financial losses
Examples:
Automobile-car accident
Medical-doctor’s appointment
Life-covered person dies
Disability-out of work for health reasons
Unemployment-laid off from job

13. Deductibles
Most policies have a self-insured portion of the cost of the claim that is paid by the insured.
The insured chooses the amount of risk retained by choosing the deductible amount
Deductible
On auto coverage, the amount the insured pays before the insurer pays collision or comprehensive damage claims
On health coverage, the amount the patient pays before the insurance company pays any covered medical expenses
The higher the deductible chosen by the insured, the lower the premium for the coverage.
100% self insurance = 100% risk retention
means no insurance is purchased

14. Exclusions Limitations to policy coverage – Why? Examples:
No coverage for flood on homeowners policy
No coverage for CD player in car unless permanently attached to vehicle
No coverage for self inflicted injury filed as worker’s compensation claim

15. Insurance Fraud
False claims made to an insurance company
Federal prosecution is frequent under mail and wire fraud schemes because the USPS is involved
What are some of the most common types of fraud that are reported in North Carolina?

16. Insurance Fraud Automobile Repair Billing of Medical Services
What are some examples of auto repair fraud?
Who should you contact if you believe that an auto repair business has been fraudulent in dealing with you.
Billing of Medical Services
What type medical service incidents may be considered fraud?
Who should you contact if you believe that medical services organizations has been fraudulent in dealing with you.
Automobile Accidents
What are some examples of automobile accident fraud?
What should you do if you suspect you are a victim of this type of fraud?

17. Insurance Fraud Adjusting Property Claims Adjusting
What is “adjusting” in the insurance property insurance industry?
How does adjusting work, when the adjuster is doing a professional job and not trying to defraud a consumer?
What are some of the most common methods that fraudulent adjusters utilize to defraud a consumer
Who would you contact if you believed you were a victim of adjusting fraud.
Property Claims Adjusting
What is this type of fraud?
Why has this type of fraud been so common in North Carolina in the past several years?

18. Insurance Fraud Examples: Inflated cost of damage repairs
Staging car accidents (felony)
Arson for profit (felony)
Faked deaths for life insurance (felony)
Overstated health care billings or service not provided
Phony workers compensation filed when hurt at home not work
False statements made on an application may also create a voidable contract for the insurance company
WORKSHEET:
Insurance Matching