State Regulations and Ethics Flashcards
6 cards from real Property And Casualty Insurance License practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 State Regulations and Ethics flashcards as text
What is 'churning' in insurance?
Answer: An agent convincing a client to repeatedly replace policies to generate commissions
Churning involves replacing an existing policy with a new policy from the same insurer primarily to generate new commissions for the agent, often to the detriment of the policyholder.
What does 'unfair claims settlement practices' law prohibit?
Answer: A range of insurer behaviors including unreasonable delays, failure to investigate, and misrepresentation of policy terms
Unfair claims settlement practices laws (based on the NAIC model) prohibit insurers from engaging in specified improper claim handling behaviors, including low-ball offers, delays, and misrepresentation.
What is 'market conduct examination'?
Answer: A regulatory review of how an insurer treats its policyholders in areas like underwriting, rating, and claims
Market conduct exams are conducted by state insurance departments to ensure that insurers are complying with laws and regulations in their day-to-day interactions with policyholders.
What is an 'admitted' (authorized) insurer?
Answer: An insurer that has received a license from the state to sell insurance within that state
An admitted insurer is licensed by the state insurance department, must file rates and forms for approval, and is subject to the state guaranty fund.
What does it mean for an insurance policy to be a 'contract of adhesion'?
Answer: The policy is drafted by the insurer and the insured must accept it as-is with no ability to negotiate terms
Insurance policies are contracts of adhesion because the insurer prepares standardized terms that the insured must accept or reject without negotiation.
What is the primary purpose of the 'Free Look' period in insurance?
Answer: To give new policyholders a period (typically 10–30 days) to review the policy and receive a full refund if they cancel
The free look period gives new policyholders time to review the policy and cancel for a full premium refund if unsatisfied, protecting consumers from high-pressure sales tactics.