Under California Insurance Code Section 10270.65, excess dividends or premium refunds under a group disability policy must be...
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Section 10270.65 provides that if any dividend is paid or premium refunded under a group disability policy, the excess of aggregate dividends or refunds over aggregate expenditures for insurance, including administrative costs, must be applied by the policyholder for the benefit of the insured employees or members generally, or their dependents. The employer acts as a fiduciary-like conduit for the group dividend and may not divert the surplus to itself as profit. This California-specific rule is part of the group dependent and benefit rules tested in the group medical expense section of the A&H outline.
Why the other options are wrong
- B) The statute expressly requires the surplus to benefit insured employees or dependents, not the employer's profit.
- C) Dividends belong to the policyholder's insured population, not to the selling agent.
- D) The funds must be put to work for the insureds' benefit, not held indefinitely in escrow.
Memory hook
Group dividend surplus flows back to employees and dependents, not the boss's pocket.