A company charges members a flat monthly fee and promises to pay a fixed benefit whenever a member submits proof that he or she visited any physician, regardless of illness or injury. Under CIC §22, this arrangement is NOT insurance because:
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Why A is correct
CIC §22 defines insurance as a contract whereby one party agrees to indemnify another against loss, damage, or liability arising from a contingent or unknown event. The essential element is fortuity: the event triggering payment must be contingent or unknown at the time the contract is made. Here the payment is triggered entirely by the member's own voluntary choice to visit a physician, so the 'event' is certain and within the member's control; there is no uncertain financial risk being transferred. The arrangement therefore fails the statutory definition of insurance, regardless of the fee amount, examinations, or the company's licensing status.
Why the other options are wrong
- B) Section 22 contains no minimum premium threshold; the size of the fee is irrelevant to whether the arrangement is insurance.
- C) A medical examination is an underwriting practice used by insurers, not a defining element of insurance under Section 22.
- D) Whether the company holds a California certificate of authority affects regulation of the plan, but it is not why the arrangement fails the Section 22 definition; the absence of a contingent event is.
Memory hook
No contingency, no insurance. A benefit the member can trigger at will is a scheduled perk, not a transferred risk.