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
Which organization accredits state insurance departments and promotes uniformity in insurance regulation?
Answer: National Association of Insurance Commissioners (NAIC)
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.
What is the purpose of a state's 'guaranty fund'?
Answer: To pay claims of policyholders when their insurer becomes insolvent
State guaranty funds protect policyholders by paying covered claims up to statutory limits when a licensed (admitted) insurer becomes insolvent.
What does the 'McCarran-Ferguson Act' of 1945 establish?
Answer: That the regulation and taxation of insurance is a matter for the states, not the federal government
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.
What is a 'cease and desist' order from a state insurance department?
Answer: An official order requiring an individual or company to stop an unlawful insurance practice
A cease and desist order is an administrative enforcement tool that directs a licensee to immediately stop an illegal or unfair practice.
What is 'twisting' in insurance sales?
Answer: Inducing a policyholder to lapse, cancel, or surrender a policy through misrepresentation in order to replace it with another policy
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.
What is 'rebating' in insurance?
Answer: Returning a portion of the premium or providing other valuable consideration not listed in the policy as an inducement to purchase insurance
Rebating is the illegal practice of giving a customer something of value (such as cash, gifts, or premium discounts) not specified in the policy as an incentive to buy coverage.