Ch 1: Basic Principles

The Fair Credit and Reporting Act's main purpose is to

protect consumers with guidelines regarding credit reporting and distribution

A life insurance company has transferred some of its risk to another insurer. The insurer assuming the risk is called the

reinsurer

A nonparticipating company is sometimes called a(n)

stock insurer

An insurer's claim settlement practices are regulated by the

State insurance departments

Karen is a producer who has obtained personal information about a client without having a legitimate reason to do so. Under the McCarran-Ferguson Act, what is the minimum penalty for this?

$10,000

Ken is a producer who has obtained Consumer Information Reports under false pretenses. Under the Fair Credit Reporting Act, what is the maximum penalty that may be imposed on Ken?

$5,000

Which of the following is NOT considered advertising?

A rating from a rating service company, such as A.M. Best

A plan in which an employer pays insurance benefits from a fund derived from the employer's current revenues is called

A self-funded plan

Why are dividends from a mutual insurer not subject to taxation?

Because dividends are considered to be a return of premium

Which of the following is an insurer established by a parent company for the purpose of insuring the parent company's loss exposures?

Captive insurer

What is a participating life insurance policy?

Contract that allows the policyowner to receive a share of surplus in the form of policy dividends

What is the primary purpose of a rating service company such as A.M Best?

Determine financial strength of an insurance company

Fraternal Benefit Society has each of the following characteristics EXCEPT

Exist For profit

Which of the following is NOT a characteristic of reinsurance?

Increases the unearned premium reserve

Which of the following is a contract that involves one party which indemnifies another when a loss arises from an unknown event?

Insurance policy

Which of the following is NOT a benefit of insurance?

Losses due to fraud are eliminated

A participating company is also referred to as which type of insurer?

Mutual insurer

John owns an insurance policy that gives him the right to share in the insurer's surplus. What kind of policy is this?

Participating

What is considered to be the primary reason for buying life insurance?

Provide death benefits

An insurer enters into a contract with a third party to insure itself against losses from insurance policies it issues. What is this agreement called?

Reinsurance

Which of the following is a type of insurance where an insurer transfers loss exposures from policies written for its insureds?

Reinsurance

The Do Not Call Registry offers exemptions for calls placed from all of the following EXCEPT

insurance sales calls

An insurer's ability to make unpredictable payouts to policyowners is called

liquidity

A type of insurer that is owned by its policyowners is called

mutual

An insurer owned by its policyholders is called a

mutual insurer

A nonparticipating policy wil

not pay dividends

What kind of life insurance policy issued by a mutual insurer provides a return of divisible surplus?

participating life insurance policy