Question 1

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

Accepted Answer

Federal regulation of insurance does not inherently guarantee lower rates; rates are influenced by a variety of factors including competition, state regulations, and the cost of claims. Federal regulation could potentially standardize practices but does not automatically lead to lower insurance rates.

Question 2

One advantage claimed for state regulation of insurance is that it is more flexible than federal regulation.

Accepted Answer

State regulation allows for more tailored approaches to insurance oversight, adapting to the unique needs and circumstances of each state, which can be more flexible than a one-size-fits-all federal regulation.

Question 3

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

Accepted Answer

State guaranty funds are typically funded by assessments on insurance companies operating within the state, not through direct state taxation.

Question 4

State rate regulation requires that insurance rates shall not discriminate among insureds.

Accepted Answer

The answer of State rate regulation requires that insurance rates...

Question 5

An agent's license can be revoked for making misrepresentations about insurance.

Accepted Answer

An insurance agent's license can be revoked for making misrepresentations or false statements about insurance policies, as this violates ethical and legal standards in the insurance industry.

Question 6

Under a 1995 Supreme Court ruling, banks are restricted from selling annuities.

Accepted Answer

The 1995 Supreme Court ruling actually allowed banks to sell annuities, overturning lower court decisions that had restricted their ability to do so. This decision expanded the range of financial services that banks could offer to include annuities.

Question 7

Under the Gramm-Leach-Bliley Act of 1999 Congress repealed the prohibition on insurers owning and operating banks, as well as the prohibition on banks owning and operating insurers.

Accepted Answer

The Gramm-Leach-Bliley Act of 1999 repealed provisions of the Glass-Steagall Act of 1933, allowing banks, securities firms, and insurance companies to merge and offer each other's services, effectively removing the prohibition on banks and insurers owning and operating each other.

Question 8

Match the descriptions with their terms:
-The case that reversed Paul v Virginia, making insurance subject to federal regulation, was the _________________.

Accepted Answer

The SEUA case (Southeastern Underwriters Association case) reversed the decision in Paul v. Virginia, establishing that insurance transactions crossing state lines were interstate commerce and thus subject to federal regulation.

Question 9

Match the descriptions with their terms:
-State laws requiring that insurance rates be submitted before their use are called _________________ laws.

Accepted Answer

State laws requiring that insurance rates be submitted before their use are called "prior approval" laws. These laws require insurers to obtain approval from the state insurance department before using new rates.

Question 10

Match the descriptions with their terms:
-State laws allowing free competition to operate among insurers in pricing their products are called _________________.

Accepted Answer

Open competition laws are state regulations that permit insurers to set their own prices for insurance products without prior approval from the state insurance department, fostering a competitive market environment.

Question 11

Match the descriptions with their terms:
-State laws allowing insurers to submit proposed rates in advance to regulators but to charge these rates without advance approval are called _________________ laws.

Accepted Answer

File and use laws allow insurers to start using the rates they file with regulators without waiting for prior approval, fitting the description provided.

Question 12

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

Misrepresentation in insurance involves providing false or misleading information about the policy, its benefits, or its costs to the client.

Question 13

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

Rebating refers to the practice of an agent giving back part of their commission to the client. Most state laws prohibit this practice to ensure fairness and to prevent agents from offering financial incentives to influence clients' decisions.

Question 14

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

Twisting is the act of persuading a client to cancel an existing insurance policy and take a new one through misrepresentation of facts.

Question 15

Match the descriptions with their terms:
-_________________ require a state to respond to adverse legislation in another state by passing similar legislation at home.

Accepted Answer

Retaliatory laws require a state to respond to adverse legislation in another state by passing similar legislation at home.

Question 16

Match the descriptions with their terms:
-_________________ provide that if one state does something for another, that state shall do the same for the first.

Accepted Answer

Reciprocal laws provide that if one state does something for another, that state shall do the same for the first.

Question 17

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

The "unauthorized insurers service-of-process acts" allow individuals to bring legal action against insurers operating in their home state without needing to travel to a distant state.

Question 18

Match the descriptions with their terms:
-If one needs to sue an insurer, one can do so by serving a summons to the state insurance commissioner under a/an _________________.

Accepted Answer

NService-of-process statutes and unauthorized insurers service-of-process acts both allow for the serving of a summons to the state insurance commissioner when one needs to sue an insurer. These legal provisions ensure that even if an insurer is not directly present or authorized in a state, they can still be brought to court through the state's insurance regulatory framework.

Question 19

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

Anticoercion statutes are designed to prevent lending agencies from coercing borrowers into purchasing insurance from them as a condition for receiving a loan.

Question 20

Match the descriptions with their terms:
-If you discover that your insurer is bankrupt and is not paying your legitimate claim, you might be able to recover from state _________________.

Accepted Answer

State insolvency funds are designed to protect policyholders in the event that their insurance company becomes insolvent and is unable to pay claims.

Quiz 24: Government Regulation of Risk Management and Insurance

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

One advantage claimed for state regulation of insurance is that it is more flexible than federal regulation.

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

State rate regulation requires that insurance rates shall not discriminate among insureds.

An agent's license can be revoked for making misrepresentations about insurance.

Under a 1995 Supreme Court ruling, banks are restricted from selling annuities.

Under the Gramm-Leach-Bliley Act of 1999 Congress repealed the prohibition on insurers owning and operating banks, as well as the prohibition on banks owning and operating insurers.

Match the descriptions with their terms: -The case that reversed Paul v Virginia, making insurance subject to federal regulation, was the _________________.

Match the descriptions with their terms: -State laws requiring that insurance rates be submitted before their use are called _________________ laws.

Match the descriptions with their terms: -State laws allowing free competition to operate among insurers in pricing their products are called _________________.

Match the descriptions with their terms: -State laws allowing insurers to submit proposed rates in advance to regulators but to charge these rates without advance approval are called _________________ laws.

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

Match the descriptions with their terms: -_________________ require a state to respond to adverse legislation in another state by passing similar legislation at home.

Match the descriptions with their terms: -_________________ provide that if one state does something for another, that state shall do the same for the first.

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.

Match the descriptions with their terms: -If one needs to sue an insurer, one can do so by serving a summons to the state insurance commissioner under a/an _________________.

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 _________________.

Match the descriptions with their terms: -If you discover that your insurer is bankrupt and is not paying your legitimate claim, you might be able to recover from state _________________.