Life & Health Insurance Insurance Regulation and Ethics Questions and Answers

Question 1

An agent persuades a policyholder to surrender their existing whole life policy from Company A and purchase a new policy from Company B by falsely claiming the new policy has significantly better cash value accumulation.
This illegal practice is known as:

Accepted Answer

Twisting

Answer

Rebating

Answer

Coercion

Answer

Defamation

Question 2

Which federal law affirmed the right of states to regulate the business of insurance, establishing that continued state regulation is in the public interest?

Accepted Answer

The McCarran-Ferguson Act

Answer

The Gramm-Leach-Bliley Act

Answer

The Fair Credit Reporting Act (FCRA)

Answer

The USA PATRIOT Act

Question 3

An insurer denies a life insurance application based in part on information from a consumer reporting agency. Under the Fair Credit Reporting Act (FCRA), what is the insurer required to do?

Accepted Answer

Notify the applicant of the adverse action and provide the name and contact information of the consumer reporting agency.

Answer

Provide the applicant with a complete copy of the consumer report.

Answer

Inform the applicant that the consumer reporting agency made the final decision.

Answer

Obtain the applicant's written consent before sending the adverse action notice.

Question 4

An agent offers a prospective client a cash payment from their commission as an incentive to purchase a life insurance policy. This is an illegal and unethical practice known as:

Accepted Answer

Rebating

Answer

Churning

Answer

Twisting

Answer

Misrepresentation

Question 5

What is the primary function of the National Association of Insurance Commissioners (NAIC)?

Accepted Answer

To serve as a standard-setting and regulatory support organization for state insurance regulators.

Answer

To directly regulate and license insurance companies on a federal level.

Answer

To lobby Congress on behalf of the insurance industry to create favorable laws.

Answer

To underwrite and issue insurance policies for high-risk individuals.

Question 6

An insurance agent has a legal and ethical obligation to act in the best interests of their client, putting the client's needs above their own financial gain. This obligation is known as a(n):

Accepted Answer

Fiduciary duty

Answer

Underwriting authority

Answer

Contractual obligation

Answer

Implied warranty