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
A producer offers a potential client a $100 gift card to purchase an auto insurance policy. This is an illegal practice known as:
Answer: Rebating
Rebating is an unfair trade practice that involves offering a prospective client something of value not specified in the policy to induce them to purchase insurance. This includes cash, gifts, or services.
What is the primary function of a state's Property and Casualty Insurance Guaranty Association?
Answer: To pay the covered claims of insolvent member insurers.
State Guaranty Associations are established to protect policyholders from the financial failure of an insurer. When an insurer is declared insolvent, the association steps in to pay covered claims up to certain limits defined by state law. It is funded by assessments on the other member insurers.
Which of the following would be considered an Unfair Claims Settlement Practice?
Answer: Failing to promptly acknowledge and act upon communications regarding a claim.
According to the NAIC's Unfair Claims Settlement Practices Act, failing to acknowledge and act reasonably promptly upon communications with respect to claims is an unfair practice. The other options describe standard and acceptable claims handling procedures.
The Gramm-Leach-Bliley Act (GLBA) requires financial institutions, including insurers, to take what primary action regarding customer information?
Answer: Explain their information-sharing practices to their customers and safeguard sensitive data.
The Gramm-Leach-Bliley Act (GLBA) mandates that financial institutions, which include insurance companies, must explain their privacy and information-sharing policies to customers and implement a comprehensive security program to protect that data.
An insurance producer has a fiduciary responsibility to act in the best interests of the:
Answer: Insurer and the client
A producer has a fiduciary duty to both the insurer they represent and the clients they serve. This means they must act with a high degree of care, loyalty, and good faith, putting the interests of the insurer and client ahead of their own and handling funds in a trust capacity.
A producer makes a false statement during a sales presentation, claiming that a competitor's policies have hidden exclusions that do not actually exist. This is an example of:
Answer: Defamation
Defamation is the act of making false or malicious statements about an insurer or its products with the intent to cause injury. It is an illegal and unethical trade practice.