CU Regulatory and Ethical Frameworks 3

Question 1

The NAIC's primary role in U.S. insurance regulation is to:

Accepted Answer

Develop model laws and coordinate state regulatory activities

Answer

The NAIC is a standard-setting and regulatory support organization that creates model laws for state adoption and promotes regulatory consistency.

Question 2

An underwriter discovers mid-term that an insured has materially misrepresented facts on the application. The insurer's most appropriate remedy is typically:

Accepted Answer

Voiding the policy ab initio

Answer

Material misrepresentation allows the insurer to void the policy from inception (ab initio) as though it never existed.

Question 3

Which of the following scenarios best illustrates the concept of 'adverse selection' in underwriting?

Accepted Answer

High-risk individuals disproportionately seeking insurance coverage

Answer

Adverse selection occurs when those with higher-than-average risk are more likely to purchase insurance, distorting the risk pool.

Question 4

Risk-Based Capital (RBC) requirements are designed primarily to ensure that insurers:

Accepted Answer

Maintain sufficient capital relative to their risk exposure

Answer

RBC requirements mandate that insurers hold capital proportional to the risks they underwrite, protecting policyholders from insolvency.

Question 5

Under professional ethics standards, an underwriter who learns of a colleague committing fraud should first:

Accepted Answer

Report it through appropriate internal compliance channels

Answer

Professional ethics require reporting suspected fraud through established internal channels such as compliance, legal, or management.

(CU) Certified Underwriter Practice Test

(CU) Certified Underwriter Practice Test

CU Regulatory and Ethical Frameworks 3