Insurance Regulation and Ethics Flashcards
6 cards from real P&C practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Insurance Regulation and Ethics flashcards as text
Which federal law requires insurers to notify consumers about their privacy practices and limits sharing of nonpublic personal information?
Answer: The Gramm-Leach-Bliley Act (GLB Act)
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.
Insurance is primarily regulated at the state level because of:
Answer: The McCarran-Ferguson Act of 1945
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.
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:
Answer: Churning
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.
The concept of 'fiduciary duty' requires a producer to:
Answer: Act in the best interest of the client when handling premium funds and placing coverage
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.
Which of the following acts is an example of 'unfair claims settlement practices'?
Answer: Failing to promptly investigate or pay undisputed claims
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.
A producer who accepts a check from a client, endorses it to themselves, and uses the money for personal expenses is committing:
Answer: Misappropriation of funds (conversion)
Misappropriation (conversion) of premium funds is a serious ethical violation and criminal act — premium money collected from a client belongs to the insurer or the insured and may not be used for the producer's personal benefit.