Property And Casualty Insurance License State Regulations and Ethics

Question 1

Which organization accredits state insurance departments and promotes uniformity in insurance regulation?

Accepted Answer

National Association of Insurance Commissioners (NAIC)

Answer

The NAIC is the organization of state insurance regulators that develops model laws, regulations, and best practices to promote uniformity and consumer protection across all states.

Question 2

What is the purpose of a state's 'guaranty fund'?

Accepted Answer

To pay claims of policyholders when their insurer becomes insolvent

Answer

State guaranty funds protect policyholders by paying covered claims up to statutory limits when a licensed (admitted) insurer becomes insolvent.

Question 3

What does the 'McCarran-Ferguson Act' of 1945 establish?

Accepted Answer

That the regulation and taxation of insurance is a matter for the states, not the federal government

Answer

McCarran-Ferguson confirms that insurance regulation is primarily a state function, exempting the insurance industry from most federal antitrust laws to the extent it is regulated by state law.

Question 4

What is a 'cease and desist' order from a state insurance department?

Accepted Answer

An official order requiring an individual or company to stop an unlawful insurance practice

Answer

A cease and desist order is an administrative enforcement tool that directs a licensee to immediately stop an illegal or unfair practice.

Question 5

What is 'twisting' in insurance sales?

Accepted Answer

Inducing a policyholder to lapse, cancel, or surrender a policy through misrepresentation in order to replace it with another policy

Answer

Twisting is an illegal and unethical practice where an agent uses false or misleading comparisons to convince a client to replace an existing policy with a new one that benefits the agent more than the client.

Property And Casualty Insurance License Practice Test

Property And Casualty Insurance License Practice Test

Property And Casualty Insurance License State Regulations and Ethics