DC Ethics and Unfair Practices in Insurance 1

Question 1

What is 'rebating' in DC insurance law?

Accepted Answer

Offering a prospect something of value not specified in the policy as an inducement to purchase insurance

Answer

Rebating involves offering or giving anything of value (cash, gifts, services) not specified in the policy as an inducement to purchase insurance.

Question 2

Which of the following best describes 'unfair discrimination' in DC insurance?

Accepted Answer

Charging different premiums to insureds with identical risk profiles based on non-actuarial factors such as race or religion

Answer

Unfair discrimination means treating insureds differently based on prohibited characteristics (race, religion, national origin, sex in some lines) rather than actuarial risk factors.

Question 3

Under DC insurance regulations, which of the following is an example of a 'material misrepresentation' on an insurance application?

Accepted Answer

Failing to disclose a prior DUI conviction when applying for auto insurance

Answer

Failing to disclose a DUI conviction on an auto application is a material misrepresentation because it directly affects the underwriting decision and premium.

Question 4

What is the purpose of DC's insurance guaranty association?

Accepted Answer

To protect DC policyholders when a licensed insurer becomes insolvent

Answer

The DC Life and Health Insurance Guaranty Association and the DC Insurance Guaranty Association protect policyholders from losses due to an insolvent insurer.

Question 5

Which prohibited practice involves an agent convincing a client to replace a suitable existing policy with a new one primarily to generate commissions?

Accepted Answer

Churning

Answer

Churning involves repeatedly replacing or modifying an insured's existing coverage for the purpose of generating new commissions, not to benefit the client.

DC - District of Columbia Insurance Practice Test

DC - District of Columbia Insurance Practice Test

DC Ethics and Unfair Practices in Insurance 1