Legal & Regulatory Compliance Flashcards

The 'entire contract' provision commonly found in life insurance policies means that:

Answer: The policy and attached application constitute the complete agreement between the parties

The entire contract provision ensures the policy document and attached application form the complete, binding agreement, preventing the insurer from incorporating external documents without the insured's knowledge.

Which regulatory framework governs how insurance companies must handle personal information of California residents specifically?

Answer: California Consumer Privacy Act (CCPA) supplemented by state insurance regulations

California residents are protected by the CCPA (and its amendment, the CPRA), which grants broad data rights; insurers must also comply with California's Insurance Information and Privacy Protection Act.

An underwriter discovers that an applicant misrepresented a material fact on the insurance application. Under most state laws, what remedy is generally available to the insurer?

Answer: The insurer may void the policy ab initio (from the beginning) if the misrepresentation was material and fraudulent or increased the risk

Material misrepresentation that induced the insurer to issue the policy or that increased the risk generally entitles the insurer to rescind coverage from the date of issuance.

Under the Employee Retirement Income Security Act (ERISA), which type of employer-sponsored benefit plan is exempt from state insurance regulation?

Answer: Self-funded (self-insured) employee benefit plans

ERISA preempts state insurance laws as applied to self-funded employer benefit plans, meaning self-insured plans are not subject to state mandated benefits or insurance regulations.

When an insurer uses a credit-based insurance score in underwriting or rating personal lines policies, which federal law governs the permissible uses of that information?

Answer: Fair Credit Reporting Act (FCRA)

The FCRA governs the collection, use, and disclosure of consumer credit information, including insurance scores derived from credit reports, and requires adverse action notices when credit data negatively affects the consumer.

Which legal principle prevents an insurer from later denying coverage based on a policy condition that the insurer previously accepted as satisfied or expressly waived?

Answer: Estoppel and waiver

Waiver and estoppel prevent an insurer from asserting a coverage defense after it has, by its conduct or statements, led the insured to believe the condition was satisfied or the defense would not be raised.

A surplus lines insurer is authorized to write coverage in a state where it is NOT licensed. What is the key compliance requirement for this transaction?

Answer: The coverage must be placed through a licensed surplus lines broker after diligent search among admitted insurers

Surplus lines placements require a licensed surplus lines broker to document that the coverage could not be obtained from admitted insurers after a diligent effort, protecting the market while allowing access to non-admitted capacity.