The California Life and Health Insurance Guarantee Association (CLHIGA) exists to:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
The California Life and Health Insurance Guarantee Association (CLHIGA) is a guaranty association that protects policyholders when an authorized life or health insurer becomes insolvent. Member insurers fund the association through assessments, and it pays covered claims and benefits up to the statutory limits established by law. The guaranty system provides a financial safety net so that policyholders of an insolvent insurer are not left without the benefits they were promised. Guaranty associations do not regulate premium rates, do not license producers, and do not investigate complaints against individual agents; those are functions of the Insurance Commissioner and the Department of Insurance. CLHIGA's role is limited to paying covered obligations of failed insurers.
Why the other options are wrong
- B) Rate approval is a regulatory function of the Department of Insurance, not a guaranty association function. The Department reviews and approves rates, while CLHIGA exists to pay covered claims when an insurer becomes insolvent.
- C) Licensing insurance agents and brokers is performed by the Department of Insurance, not by CLHIGA. The guaranty association's only role is to protect policyholders against insurer insolvency by paying covered claims.
- D) Investigating producer conduct is an enforcement matter for the Department of Insurance. CLHIGA does not handle producer complaints; it pays covered claims of failed insurers, while the Department polices producer behavior.
Memory hook
Insurer fails? CLHIGA pays the covered claims, within statutory limits.