P&C Insurance Regulation and Ethics 3

Question 1

What is the primary role of a state insurance guaranty fund?

Accepted Answer

To pay covered claims of insolvent insurers up to statutory limits, protecting policyholders

Answer

To regulate insurance premium rates

Answer

To provide reinsurance for catastrophic losses

Answer

To license and discipline insurance producers

Question 2

Under insurance ethics, 'twisting' refers to:

Accepted Answer

Inducing a policyholder to drop an existing policy through misrepresentation and replace it with a policy from a different company

Answer

Charging excessive premiums to high-risk clients

Answer

Issuing a policy to an ineligible applicant

Answer

Sharing confidential client information with third parties

Question 3

The NAIC (National Association of Insurance Commissioners) primarily:

Accepted Answer

Serves as a coordination and standard-setting body for state insurance regulators, developing model laws and data-sharing systems

Answer

Licenses producers and companies nationwide

Answer

Provides federal reinsurance for catastrophic losses

Answer

Sets binding federal premium rates for all lines of insurance

Question 4

An agent who tells a prospective client that a competitor's insurer is about to become insolvent (without factual basis) is engaging in:

Accepted Answer

Defamation and an unfair trade practice

Answer

Rebating

Answer

Twisting

Answer

Redlining

Question 5

'Redlining' in insurance is:

Accepted Answer

The illegal practice of denying or restricting insurance in certain geographic areas based on race or national origin

Answer

Highlighting exclusions in red ink so they are clearly visible

Answer

A standard underwriting practice for high-crime areas

Answer

The process of canceling policies in catastrophe zones

Question 6

The 'free-look period' in insurance refers to:

Accepted Answer

The right of the insured to cancel a new policy within a specified number of days for a full premium refund

Answer

A period during which the insurer can inspect the property before binding coverage

Answer

A grace period for late premium payments

Answer

The time an insurer has to issue a formal policy after a binder