Chapter 1 Quiz

What is the maximum penalty for willful noncompliance with the Fair Credit Reporting Act?

$2,500

A consumer receives spam mail from an insurance company. He requests to be removed from the company's list. Within what time period must the company comply with the consumer's request?

10 days

Any licensed person whose activities affect interstate commerce and who knowingly makes false material statements related to the business of insurance may be imprisoned for up to

10 years

Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained?

3 days

Because an agent is using stationary with the logo of an insurance company, applicants for insurance assume that the agent is authorized to transact on behalf of that insurer. What type of agent of authority does this describe?

Apparent Authority

A state issued document empowering a company to become an admitted insurer is called a

Certificate of Authority

Considered a morale hazard

Driving Recklessly

Authorities an agent can hold include

Express and Implied

authority that is NOT stated in an agent's contract but is required for the agent to conduct business

Implied

What law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated?

Law of large numbers

Insurance is a contract by which one seeks to protect another from

Loss

NOT an example of retention

Premiums

Gramm-Leach-Bliley Act was passed to

Protect private customer information filed with a financial institution

The risk of loss may be classifed as

Pure Risk and Speculative Risk

Installing deadbolts is an example of what method of handling risk?

Reduction

The Fair Credit Reporting Act

Regulates consumer reports

Adverse selection is a concept best described as

Risks with higher probability of loss seeking insurance more often than other risks

Hazard is best defined as

Something that increases the risk of loss

The National Do Not Call Registry was created to regulate

Telemarketers

NOT the consideration of a policy

The application given to a prospective insured

An individual applies for a life policy. Two years ago he suffered an head injury from an accident, so he cannot remember parts of his past, but is otherwise competent. He has also been hospitalized for drug abuse, but does not remember this when applying for insurance. The insurer issues the policy and learns of his history a year later. What will probably happen?

The policy will not be affected.

A tornado that destroys a property would be an example of what

a peril

Because an insurance policy is a legal contract, it must conform to state laws governing contracts- which DON'T require

conditions

NOT considered negative information about a consumer according to the Fair Credit Reporting Act

disputes regarding consumer report information

Events or conditions that increase the chances of an insured loss occurring are referred to as

hazards

Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report

must be informed of the source of the report.

NOT correct regarding false statements by a person engaged in the business of insurance

only written statements can be considered fraud

The CAN-SPAM Act

protects consumers from receiving unwanted solicitations from companies

For the purpose of insurance, Risk is defined as

the uncertainty or chance of loss