EXAMFX - Exam FX Insurance Insurance Regulation and Ethics Questions and Answers

Question 1

An insurance producer tells a prospective client that the dividends on a life insurance policy are guaranteed, even though the policy document states they are not.
This act is an example of which unfair and prohibited trade practice?

Accepted Answer

Misrepresentation

Answer

Rebating

Answer

Twisting

Answer

Coercion

Question 2

Under the Fair Credit Reporting Act (FCRA), what is a primary requirement for an insurer before it can obtain a consumer report for underwriting purposes?

Accepted Answer

The insurer must have a permissible purpose, such as the underwriting of insurance involving the consumer.

Answer

The insurer must pay a fee directly to the applicant for access to their information.

Answer

The insurer must guarantee that the applicant will be issued a policy.

Answer

The insurer must be a member of the National Association of Insurance Commissioners (NAIC).

Question 3

Which of the following scenarios best illustrates the illegal trade practice of 'twisting'?

Accepted Answer

An agent uses incomplete and misleading comparisons to persuade a policyholder to cancel their current policy and buy a new one from a different insurer.

Answer

An agent offers a potential client a portion of their commission as an incentive to buy a policy.

Answer

An agent circulates a false article criticizing the financial stability of a competing insurance company.

Answer

An insurer delays the settlement of a valid claim for an unreasonable amount of time.

Question 4

A producer collects the initial premium from a new policyholder. According to the producer's ethical obligations, these funds must be handled in a specific manner. What is this responsibility called?

Accepted Answer

Fiduciary Duty

Answer

Duty of Proliferation

Answer

Reciprocal Duty

Answer

Contractual Obligation

Question 5

Which of the following is a primary duty of a state's Insurance Commissioner?

Accepted Answer

Enforcing state insurance laws and regulations to protect the public.

Answer

Writing federal laws that govern the insurance industry.

Answer

Representing insurance companies in private lawsuits.

Answer

Setting the commission schedules for all licensed producers in the state.

Question 6

Failing to promptly acknowledge communications regarding a claim, or refusing to pay a claim without conducting a reasonable investigation, are examples of what prohibited activity?

Accepted Answer

Unfair Claims Settlement Practices

Answer

Adverse selection

Answer

Underwriting malpractice

Answer

Premium auditing errors

An insurance producer tells a prospective client that the dividends on a life insurance policy are guaranteed, even though the policy document states they are not.This act is an example of which unfair and prohibited trade practice?

An insurance producer tells a prospective client that the dividends on a life insurance policy are guaranteed, even though the policy document states they are not.
This act is an example of which unfair and prohibited trade practice?