Property And Casualty Insurance License State Regulations and Ethics 2

Question 1

What is 'churning' in insurance?

Accepted Answer

An agent convincing a client to repeatedly replace policies to generate commissions

Answer

An insurer changing rates frequently throughout the year

Answer

Processing a high volume of small claims

Answer

Frequently changing reinsurance arrangements

Question 2

What does 'unfair claims settlement practices' law prohibit?

Accepted Answer

A range of insurer behaviors including unreasonable delays, failure to investigate, and misrepresentation of policy terms

Answer

Only outright claim denial without investigation

Answer

Only fraudulent claim submissions by insureds

Answer

Insurers from requiring proof of loss

Question 3

What is 'market conduct examination'?

Accepted Answer

A regulatory review of how an insurer treats its policyholders in areas like underwriting, rating, and claims

Answer

A review of an insurer's investment portfolio

Answer

A financial audit of an insurer's reserves

Answer

An examination of an agent's sales conduct by their employer

Question 4

What is an 'admitted' (authorized) insurer?

Accepted Answer

An insurer that has received a license from the state to sell insurance within that state

Answer

An insurer that has admitted to paying all pending claims

Answer

An insurer admitted to the NYSE

Answer

An insurer approved by the federal government

Question 5

What does it mean for an insurance policy to be a 'contract of adhesion'?

Accepted Answer

The policy is drafted by the insurer and the insured must accept it as-is with no ability to negotiate terms

Answer

Both parties negotiated and drafted the policy terms

Answer

The policy adheres to all state minimum coverage requirements

Answer

The policy cannot be cancelled by either party

Question 6

What is the primary purpose of the 'Free Look' period in insurance?

Accepted Answer

To give new policyholders a period (typically 10–30 days) to review the policy and receive a full refund if they cancel

Answer

To allow agents to review applications before submission

Answer

To provide a grace period for late premium payments

Answer

To allow the insurer to inspect covered property before binding