P&C Insurance Regulation and Ethics 2

Question 1

Which federal law requires insurers to notify consumers about their privacy practices and limits sharing of nonpublic personal information?

Accepted Answer

The Gramm-Leach-Bliley Act (GLB Act)

Answer

The Gramm-Leach-Bliley Act (GLBA) requires financial institutions, including insurers, to provide privacy notices to customers and restrict the sharing of nonpublic personal information with third parties.

Question 2

Insurance is primarily regulated at the state level because of:

Accepted Answer

The McCarran-Ferguson Act of 1945

Answer

The McCarran-Ferguson Act of 1945 confirmed that states have the primary authority to regulate insurance, providing a limited antitrust exemption for the business of insurance as long as states actively regulate it.

Question 3

An insurance producer who places a client in a policy primarily to earn a higher commission rather than to meet the client's needs is engaging in:

Accepted Answer

Churning

Answer

Churning (also called internal replacement) involves inducing a policyholder to replace an existing policy unnecessarily, primarily to generate new commissions, to the detriment of the insured.

Question 4

The concept of 'fiduciary duty' requires a producer to:

Accepted Answer

Act in the best interest of the client when handling premium funds and placing coverage

Answer

A producer has a fiduciary duty to act in the client's best interest when collecting premiums, placing coverage, and handling funds — the client's trust must not be exploited for the producer's personal gain.

Question 5

Which of the following acts is an example of 'unfair claims settlement practices'?

Accepted Answer

Failing to promptly investigate or pay undisputed claims

Answer

Failing to promptly investigate and pay clearly undisputed portions of a claim is an unfair claims settlement practice prohibited under the NAIC Model Unfair Claims Settlement Practices Act.

Property & Casualty Insurance License Test Practice Test

Property & Casualty Insurance License Test Practice Test

P&C Insurance Regulation and Ethics 2