Life & Health Insurance Insurance Regulation and Ethics Flashcards
7 cards from real Life & Health Insurance Exam practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Life & Health Insurance Insurance Regulation and Ethics flashcards as text
The McCarran-Ferguson Act of 1945 established that:
Answer: States have primary authority to regulate insurance
The McCarran-Ferguson Act affirmed that the regulation of the business of insurance is the responsibility of the individual states.
When a producer makes an intentional misrepresentation on an insurance application, the insurer may:
Answer: Void the policy from its inception (ab initio)
Intentional misrepresentation makes the policy voidable, allowing the insurer to rescind the contract from its original effective date.
Which of the following is NOT a purpose of insurance regulation?
Answer: Guaranteeing every applicant is issued a policy
Insurance regulation does not guarantee issuance of policies to all applicants; insurers retain the right to underwrite and decline risks.
A life insurance producer who is also a registered investment adviser (RIA) has a duty that is:
Answer: Higher than a producer acting solely as an insurance agent
Registered investment advisers are held to a fiduciary standard, which is a higher duty of care than the suitability standard applied to insurance-only producers.
A 'free-look' period in a life insurance policy allows the policyholder to:
Answer: Review and return the policy for a full premium refund within a specified period
A free-look provision gives the new policyholder a set number of days (typically 10-30) to review the contract and return it for a full refund if not satisfied.
Which of the following describes 'churning' in the context of life insurance?
Answer: Repeatedly replacing policies within the same company to generate commissions
Churning is the practice of convincing a policyholder to use existing policy values to purchase new coverage primarily to generate additional commissions.
Under the principle of subrogation, after paying a claim, the insurer has the right to:
Answer: Pursue recovery from the responsible third party
Subrogation allows the insurer, after indemnifying the insured, to step into the insured's shoes and seek recovery from the negligent third party.