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
What is the primary role of a state insurance guaranty fund?
Answer: To pay covered claims of insolvent insurers up to statutory limits, protecting policyholders
State guaranty funds protect policyholders and claimants when a licensed property/casualty insurer becomes insolvent by paying covered claims up to statutory limits (usually $300,000–$500,000 per claim).
Under insurance ethics, 'twisting' refers to:
Answer: Inducing a policyholder to drop an existing policy through misrepresentation and replace it with a policy from a different company
Twisting is the use of misrepresentations or incomplete comparisons to convince an insured to drop one company's policy and replace it with another company's policy, to the detriment of the insured.
The NAIC (National Association of Insurance Commissioners) primarily:
Answer: Serves as a coordination and standard-setting body for state insurance regulators, developing model laws and data-sharing systems
The NAIC is a voluntary organization of state insurance regulators that develops model laws, regulatory standards, and data-sharing systems to promote uniformity in state regulation; it has no direct regulatory authority.
An agent who tells a prospective client that a competitor's insurer is about to become insolvent (without factual basis) is engaging in:
Answer: Defamation and an unfair trade practice
Making false statements about a competitor insurer's financial condition to induce prospects to switch carriers is defamation and a prohibited unfair trade practice under state insurance laws.
'Redlining' in insurance is:
Answer: The illegal practice of denying or restricting insurance in certain geographic areas based on race or national origin
Redlining is the discriminatory practice of refusing to write or limiting insurance in certain neighborhoods based on the racial or ethnic composition of the area rather than legitimate underwriting criteria.
The 'free-look period' in insurance refers to:
Answer: The right of the insured to cancel a new policy within a specified number of days for a full premium refund
The free-look period (typically 10–30 days) gives a new policyholder the right to review their policy and cancel it for a full refund of premium if they are not satisfied.