Regulatory Compliance & Standards Flashcards
7 cards from real GAP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Regulatory Compliance & Standards flashcards as text
A state adopts a 'file-and-use' system for GAP insurance rates. What does this mean for a GAP insurer?
Answer: The insurer files the rate simultaneously with its first use and regulators may later challenge it
Under file-and-use, the insurer may begin using a new rate on the filing date while regulators review it, and may issue a disapproval order afterward.
Which compliance standard requires GAP administrators to maintain clear records of premium remittances, claims paid, and cancellation refunds for regulatory examination purposes?
Answer: State insurance code recordkeeping requirements
State insurance codes require that GAP administrators and insurers maintain detailed records of all financial transactions related to GAP products for regulatory examination.
Under CFPB supervisory authority, which type of auto finance institution is subject to CFPB examination for GAP-related UDAAP compliance?
Answer: Large nonbank auto finance companies with more than $10 billion in assets supervised by the CFPB
The CFPB has supervisory authority over nonbank large participants in consumer auto finance, including examining their GAP product practices for UDAAP compliance.
A market conduct examination finds that a GAP insurer's actual loss ratio is significantly below its filed expected loss ratio. Regulators may order the insurer to:
Answer: Refile rates at a level that produces a more reasonable loss ratio, potentially requiring premium reductions
Regulators use loss ratio benchmarks to assess rate adequacy; if actual results show excessive profits, they can require rate re-filing to benefit consumers.
Which standard practice is required by most state regulations when a vehicle with a GAP waiver is paid off early and the GAP waiver is terminated?
Answer: A pro-rata refund of unearned fees must be credited to the loan payoff amount or returned to the consumer
Early payoff terminates the GAP waiver, and regulations require that the unearned portion of the waiver fee be refunded or credited on a pro-rata basis.
A GAP certificate contains a provision waiving the consumer's right to bring a class action lawsuit. In states that prohibit such waivers in insurance contracts, this clause is:
Answer: Void and unenforceable as against public policy under state insurance law
Where state insurance law prohibits class action waivers in insurance contracts, such provisions are void regardless of federal arbitration statutes.
The 'deductible matching' feature in some GAP products—where GAP pays the borrower's comprehensive/collision deductible—requires what additional compliance consideration?
Answer: The feature must be reflected in the approved product form and the premium must be actuarially supported for that expanded benefit
Adding deductible matching expands the benefit scope, requiring that the product form be amended, re-filed, and that the premium reflect the additional actuarial risk.