CU Regulatory and Ethical Frameworks 2

Question 1

Under the McCarran-Ferguson Act, which entity has primary regulatory authority over insurance?

Accepted Answer

State governments

Answer

Federal government

Answer

The NAIC

Answer

The Federal Reserve

Question 2

An underwriter who accepts a gift from a broker in exchange for favorable policy terms is most likely violating which ethical principle?

Accepted Answer

Conflict of interest

Answer

Confidentiality

Answer

Duty of care

Answer

Utmost good faith

Question 3

Which of the following best describes a 'file-and-use' rate regulation system?

Accepted Answer

Rates are filed with regulators and can be used immediately

Answer

Rates must be approved before use

Answer

Rates require no regulatory filing

Answer

Rates are set by the NAIC

Question 4

The principle of 'utmost good faith' (uberrimae fidei) in insurance requires that:

Accepted Answer

Both parties disclose all material facts fully and honestly

Answer

The insurer pay all claims promptly

Answer

The insured must accept all policy terms without negotiation

Answer

Underwriters guarantee coverage in all circumstances

Question 5

Which regulatory document outlines an insurer's obligations regarding the fair treatment of policyholders in claims handling?

Accepted Answer

Unfair Trade Practices Act

Answer

Insurance Holding Company Act

Answer

Risk-Based Capital guidelines

Answer

Lloyd's Franchise Board rules

Question 6

When an underwriter applies different premium rates to similar risks based solely on the applicant's race, this is an example of:

Accepted Answer

Unfair discrimination

Answer

Adverse selection

Answer

Risk classification

Answer

Redlining mitigation

Question 7

Which term describes the practice where insurers refuse to write coverage in specific geographic areas regardless of individual risk quality?

Accepted Answer

Redlining

Answer

Adverse selection

Answer

Declination

Answer

Ceding