Question 1

The famous Armstrong investigation concerned mainly practices in property-liability insurance.

Accepted Answer

A) True 
 B)False  False

Question 2

Insurance is regulated by government for all but one of the following chief reasons:

Accepted Answer

A)  it is such an important source of tax revenues, 
B)  its benefits depend on the future solvency of the insurer, 
C)  the cost of insurance is unknown at the time its price is determined, 
D)  the public does not understand the complexities of the insurance contract, 
E)  its past record of fraudulent practices. 
A)  it is such an important source of tax revenues, 
B)  its benefits depend on the future solvency of the insurer, 
C)  the cost of insurance is unknown at the time its price is determined, 
D)  the public does not understand the complexities of the insurance contract, 
E)  its past record of fraudulent practices. A

Question 3

Anticoercion laws prohibit a lender from requiring that a borrower buy insurance from the lender as a condition of obtaining a loan.

Accepted Answer

A) True 
 B)False  True

Question 4

Under the McCarran-Ferguson Act, federal regulation of insurance was eliminated.

Accepted Answer

A) True 
 B)False

Question 5

Rebating in insurance occurs when an insurer returns a dividend to its policyholders.

Accepted Answer

A) True 
 B)False

Question 6

Match the descriptions with their terms:
-If an agent makes misleading statements about the cost of insurance to a client, the agent can be penalized for _________________.

Accepted Answer

A)  anticoercion statutes 
B)  DEFRA 
C)  file and use 
D)  insolvency funds 
E)  misrepresentation
F) open competition laws
G) prior approval
H) rebating
I) Reciprocal laws
J) Retaliatory laws
K) service-of-process statute
L) SEUA case
M) twisting
N) unauthorized insurers service-of-process acts 
A)  anticoercion statutes 
B)  DEFRA 
C)  file and use 
D)  insolvency funds 
E)  misrepresentation
F) open competition laws
G) prior approval
H) rebating
I) Reciprocal laws
J) Retaliatory laws
K) service-of-process statute
L) SEUA case
M) twisting
N) unauthorized insurers service-of-process acts

Question 7

Match the descriptions with their terms:
-Under most state laws an agent is prohibited from offering to return part of the commission to a client, which is known as _____________.

Accepted Answer

A)  anticoercion statutes 
B)  DEFRA 
C)  file and use 
D)  insolvency funds 
E)  misrepresentation
F) open competition laws
G) prior approval
H) rebating
I) Reciprocal laws
J) Retaliatory laws
K) service-of-process statute
L) SEUA case
M) twisting
N) unauthorized insurers service-of-process acts 
A)  anticoercion statutes 
B)  DEFRA 
C)  file and use 
D)  insolvency funds 
E)  misrepresentation
F) open competition laws
G) prior approval
H) rebating
I) Reciprocal laws
J) Retaliatory laws
K) service-of-process statute
L) SEUA case
M) twisting
N) unauthorized insurers service-of-process acts

Question 8

Match the descriptions with their terms:
-The 1984 federal law governing how life insurers pay federal income tax is called _________________.

Accepted Answer

A)  anticoercion statutes 
B)  DEFRA 
C)  file and use 
D)  insolvency funds 
E)  misrepresentation
F) open competition laws
G) prior approval
H) rebating
I) Reciprocal laws
J) Retaliatory laws
K) service-of-process statute
L) SEUA case
M) twisting
N) unauthorized insurers service-of-process acts 
A)  anticoercion statutes 
B)  DEFRA 
C)  file and use 
D)  insolvency funds 
E)  misrepresentation
F) open competition laws
G) prior approval
H) rebating
I) Reciprocal laws
J) Retaliatory laws
K) service-of-process statute
L) SEUA case
M) twisting
N) unauthorized insurers service-of-process acts

Question 9

The Appleton Rule extends the influence of New York as a regulatory force.

Accepted Answer

A) True 
 B)False

Question 10

Match the descriptions with their terms:
-Laws prohibiting lending agencies from requiring a borrower to purchase insurance from the agency as a condition of getting a loan are termed _________________.

Accepted Answer

A)  anticoercion statutes 
B)  DEFRA 
C)  file and use 
D)  insolvency funds 
E)  misrepresentation
F) open competition laws
G) prior approval
H) rebating
I) Reciprocal laws
J) Retaliatory laws
K) service-of-process statute
L) SEUA case
M) twisting
N) unauthorized insurers service-of-process acts 
A)  anticoercion statutes 
B)  DEFRA 
C)  file and use 
D)  insolvency funds 
E)  misrepresentation
F) open competition laws
G) prior approval
H) rebating
I) Reciprocal laws
J) Retaliatory laws
K) service-of-process statute
L) SEUA case
M) twisting
N) unauthorized insurers service-of-process acts

Question 11

Some outside control over pricing in insurance is desirable for both the insured and the insurer.

Accepted Answer

A) True 
 B)False

Question 12

Perhaps the chief reason for regulation of insurance is to keep rates down.

Accepted Answer

A) True 
 B)False

Question 13

Rate regulation in life insurance is accomplished mainly through

Accepted Answer

A)  allowing open competition to operate, 
B)  letting of rates by the insurance commissioner, 
C)  reserve requirements, 
D)  investment regulation, 
E)  life insurance rates are unregulated. 
A)  allowing open competition to operate, 
B)  letting of rates by the insurance commissioner, 
C)  reserve requirements, 
D)  investment regulation, 
E)  life insurance rates are unregulated.

Question 14

Match the descriptions with their terms:
-Under _________________, it is not necessary to travel to a distant state to bring a legal action against an insurer operating in one's home state.

Accepted Answer

A)  anticoercion statutes 
B)  DEFRA 
C)  file and use 
D)  insolvency funds 
E)  misrepresentation
F) open competition laws
G) prior approval
H) rebating
I) Reciprocal laws
J) Retaliatory laws
K) service-of-process statute
L) SEUA case
M) twisting
N) unauthorized insurers service-of-process acts 
A)  anticoercion statutes 
B)  DEFRA 
C)  file and use 
D)  insolvency funds 
E)  misrepresentation
F) open competition laws
G) prior approval
H) rebating
I) Reciprocal laws
J) Retaliatory laws
K) service-of-process statute
L) SEUA case
M) twisting
N) unauthorized insurers service-of-process acts

Question 15

State guaranty funds to cover insurer insolvencies are supported by state taxation.

Accepted Answer

A) True 
 B)False

Question 16

A major advantage claimed for federal regulation of insurance is that it would result in lower rates.

Accepted Answer

A) True 
 B)False

Question 17

Most states neither require nor prohibit cooperative rate making by private insurers.

Accepted Answer

A) True 
 B)False

Question 18

A life insurance agent persuades Jones to drop an old life insurance policy and replace it with one sold by the agent's company by misrepresenting facts about Jones's present policy. This is an example of

Accepted Answer

A)  rebating, 
B)  coercion, 
C)  twisting, 
D)  concealment, 
E)  patronage. 
A)  rebating, 
B)  coercion, 
C)  twisting, 
D)  concealment, 
E)  patronage.

Question 19

All but one of the following are subjects of state regulation of insurance:

Accepted Answer

A)  rate making and expenses, 
B)  minimum standards of financial solvency, 
C)  selection of management personnel, 
D)  business acquisition practices, 
E)  contractual provisions. 
A)  rate making and expenses, 
B)  minimum standards of financial solvency, 
C)  selection of management personnel, 
D)  business acquisition practices, 
E)  contractual provisions.

Question 20

Match the descriptions with their terms:
-If an agent persuades a client to drop an existing policy through misrepresentation of facts, the agent is guilty of _________________.

Accepted Answer

A)  anticoercion statutes 
B)  DEFRA 
C)  file and use 
D)  insolvency funds 
E)  misrepresentation
F) open competition laws
G) prior approval
H) rebating
I) Reciprocal laws
J) Retaliatory laws
K) service-of-process statute
L) SEUA case
M) twisting
N) unauthorized insurers service-of-process acts 
A)  anticoercion statutes 
B)  DEFRA 
C)  file and use 
D)  insolvency funds 
E)  misrepresentation
F) open competition laws
G) prior approval
H) rebating
I) Reciprocal laws
J) Retaliatory laws
K) service-of-process statute
L) SEUA case
M) twisting
N) unauthorized insurers service-of-process acts

Exam 24: Government Regulation of Risk Management and Insurance

The famous Armstrong investigation concerned mainly practices in property-liability insurance.

Insurance is regulated by government for all but one of the following chief reasons:

Anticoercion laws prohibit a lender from requiring that a borrower buy insurance from the lender as a condition of obtaining a loan.

Under the McCarran-Ferguson Act, federal regulation of insurance was eliminated.

Rebating in insurance occurs when an insurer returns a dividend to its policyholders.

Match the descriptions with their terms: -If an agent makes misleading statements about the cost of insurance to a client, the agent can be penalized for _________________.

Match the descriptions with their terms: -Under most state laws an agent is prohibited from offering to return part of the commission to a client, which is known as _____________.

Match the descriptions with their terms: -The 1984 federal law governing how life insurers pay federal income tax is called _________________.

The Appleton Rule extends the influence of New York as a regulatory force.

Match the descriptions with their terms: -Laws prohibiting lending agencies from requiring a borrower to purchase insurance from the agency as a condition of getting a loan are termed _________________.

Some outside control over pricing in insurance is desirable for both the insured and the insurer.

Perhaps the chief reason for regulation of insurance is to keep rates down.

Rate regulation in life insurance is accomplished mainly through

Match the descriptions with their terms: -Under _________________, it is not necessary to travel to a distant state to bring a legal action against an insurer operating in one's home state.

State guaranty funds to cover insurer insolvencies are supported by state taxation.

A major advantage claimed for federal regulation of insurance is that it would result in lower rates.

Most states neither require nor prohibit cooperative rate making by private insurers.

A life insurance agent persuades Jones to drop an old life insurance policy and replace it with one sold by the agent's company by misrepresenting facts about Jones's present policy. This is an example of

All but one of the following are subjects of state regulation of insurance:

Match the descriptions with their terms: -If an agent persuades a client to drop an existing policy through misrepresentation of facts, the agent is guilty of _________________.

Introduction to Risk

Risk Identification and Evaluation

Property and Liability Loss Exposures

Life, Health, and Loss of Income Exposures

Risk Management Techniques: Noninsurance Methods

Insurance As a Risk Management Technique: Principles

Insurance As a Risk Management Technique: Policy Provisions

Selecting and Implementing Risk Management Techniques

Risk Management and Commercial Propertypart I

Risk Management and Commercial Propertypart II

Risk Management and Commercial Liability Risk

Workers Compensation and Alternative Risk Financing

Risk Management for Auto Ownerspart I

Risk Management for Auto Ownerspart II

Risk Management for Homeowners

Loss of Life

Loss of Health

Retirement Planning and Annuities

Employee Benefits: Life and Health Benefits

Employee Benefits: Retirement Plans

Financial and Estate Planning

Risk Management and the Insurance Industry

Functions and Organization of Insurers

Filters