Insurance Regulation and Licensing 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 Licensing flashcards as text
An insurance company that is 'admitted' in a state means it has:
Answer: Received a Certificate of Authority from the state insurance department to transact insurance business in that state
An admitted (or authorized) insurer has received a Certificate of Authority from the state's insurance commissioner authorizing it to transact the specified lines of insurance in that state.
'Rebating' in insurance is defined as:
Answer: Offering a prospect something of value not specified in the policy (such as a portion of the commission) as an inducement to purchase
Rebating is the illegal practice of offering or giving a portion of the commission, a gift, or other financial benefit not provided in the policy to induce someone to purchase insurance.
A 'managing general agent' (MGA) in insurance has authority to:
Answer: Bind coverage, issue policies, and handle claims on behalf of the insurer for a defined book of business, with broader authority than a standard agent
An MGA is appointed by an insurer and has authority to underwrite, bind, issue policies, and sometimes handle claims for a specific market segment, acting with delegated insurer authority.
What is required for a policy to be validly cancelled mid-term by the insurer?
Answer: The insurer must provide written advance notice (typically 10–30 days) to the insured and, in many states, a valid legal reason
Most states require the insurer to give the insured written advance notice (typically 10 days for non-payment of premium, 30 days for other reasons) and, after the policy has been in force for a minimum period, to state a valid reason for cancellation.
Under the 'diligent search' requirement in surplus lines placement, a broker must:
Answer: Document that the coverage sought was unavailable or unaffordable in the admitted market before placing with a non-admitted insurer
Before placing a risk in the surplus lines market, the broker must conduct a diligent search of the admitted market and document that the required coverage was genuinely unavailable, protecting the integrity of the surplus lines marketplace.
What is the primary consumer protection purpose of state insurance rate regulation?
Answer: To ensure rates are not excessive, inadequate, or unfairly discriminatory
Rate regulation aims to protect consumers from rates that are too high (excessive), protect insurer solvency by preventing rates that are too low (inadequate), and ensure that similar risks are charged similar rates (not unfairly discriminatory).