Regulatory Compliance & Law Flashcards
7 cards from real ACE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Regulatory Compliance & Law flashcards as text
Which regulatory concept requires an insurer to treat all similarly situated policyholders consistently in claims handling?
Answer: Good faith and fair dealing
The duty of good faith and fair dealing requires insurers to handle all similarly situated claimants consistently and without arbitrary discrimination.
Under most state prompt payment laws, what is the typical consequence for an insurer that fails to pay a valid claim within the statutory timeframe?
Answer: Interest penalties on the delayed payment amount
State prompt payment laws typically impose interest penalties on insurers that delay payment of valid claims beyond the statutory deadline.
In the context of ACORD standards, 'version control' in XML schemas is important for regulatory compliance because:
Answer: It ensures transaction parties use compatible data structures to avoid misreported information
Version control in ACORD XML schemas ensures that trading partners use compatible versions, preventing data mismatches that could result in coverage errors or misreported regulatory data.
The NAIC's Own Risk and Solvency Assessment (ORSA) requirement applies to:
Answer: Insurers above a certain premium threshold to self-assess enterprise risk
ORSA requires insurers meeting a minimum premium threshold to conduct and document an internal assessment of their risks relative to their solvency needs.
When an insurance producer is found guilty of 'churning,' the most likely regulatory consequence is:
Answer: License suspension or revocation and possible fines
Churning—excessively replacing or modifying policies to generate commissions—is an unfair trade practice that can result in license suspension, revocation, and monetary fines.
Under the NAIC's Model Unfair Trade Practices Act, 'misrepresentation' in insurance includes:
Answer: Making false statements about policy terms or competitor policies to induce purchase
Misrepresentation under the Model Unfair Trade Practices Act includes making false or misleading statements about policies or competitors to induce purchase.
Which statement best describes the legal effect of an 'incontestability clause' in a life insurance policy?
Answer: After a specified period, the insurer cannot void the policy due to misrepresentation in the application
An incontestability clause (typically 2 years) prevents the insurer from voiding a life policy or denying claims based on application misrepresentations after the contestability period expires.