Insurance- Ethics

Defamation occurs when: Select one: a. An individual or entity makes false, derogatory statements about an insurer's financial condition that are calculated to injure the insurer's business b. An individual or entity acts to create a general action that in any way to intimidate an insurer in order to gain a monopoly in business c. An individual or entity refuses to insure or limit the amount of coverage only because another insurer has cancelled an existing policy on that person d. An individual or entity takes legal action against an insurer or producer

a. An individual or entity makes false, derogatory statements about an insurer's financial condition that are calculated to injure the insurer's business

In the underwriting of insurance policies, some amount of discrimination is: Select one: a. Present in many cases, because of differing levels of risk b. Illegal in all cases c. Forbidden by federal statutes d. Permissible only when two people of equal risk are charged different rates

a. Present in many cases, because of differing levels of risk

All of the following, if performed frequently enough to indicate a general business practice, are unfair claims settlement practices, EXCEPT: Select one: a. Requiring submission of preliminary claim report or a formal proof of loss before paying a claim. b. Threatening a client in order to discourage their effort to recover a loss. c. Failing to acknowledge with reasonable promptness communications regarding claims. d. Knowingly misrepresenting to claimants pertinent facts relating to coverages.

a. Requiring submission of preliminary claim report or a formal proof of loss before paying a claim.

The Unfair Trade Practices Act is divided into which two parts? Select one: a. Unfair Marketing practices and Unfair Claims practices. b. Unfair agent reporting and Unfair Insurer reporting. c. Unfair underwriting and Unfair representations. d. All of the above.

a. Unfair Marketing practices and Unfair Claims practices.

Which of the following is considered an unfair claims practice? Select one: a. Splitting a commission with a prospect b. Failing to affirm or deny coverage within a reasonable time after receiving proof of loss c. Convincing a policyholder to lapse or surrender an existing policy to sell another policy d. Making any oral or written statement that is false, maliciously critical, or calculated to injure a competing producer

b. Failing to affirm or deny coverage within a reasonable time after receiving proof of loss

Leo, a producer, sat down with a prospective client to discuss a long-term care policy. He used a computer program to outline and emphasize his remarks. The visual presentation contained the principal benefits of the policy he was trying to sell. Although he mentioned that it also had, the usual, conditions, he did not include those in his visual presentation or specify what they were. The producer was engaging in: Select one: a. Twisting b. Misrepresentation c. Coercion d. Rebating

b. Misrepresentation

Presented with a completed claim form, an insurer wrote to the insured claimant requesting a preliminary claim report from the physician. Upon receipt of that report, the insurer required the subsequent submission of a proof-of-loss form. Was this insurer acting within its legal and ethical rights? Select one: a. Yes, settlement of claims can take time. b. No, the two forms provide the same information. This is a delaying action and thus illegal. c. No, these demands imply a threat on the part of the insurer. d. No, the insurer is failing to acknowledge with reasonable promptness communications regarding claims.

b. No, the two forms provide the same information. This is a delaying action and thus illegal.

All of the following acts are considered unfair trade practices, EXCEPT: Select one: a. Misrepresentation b. Replacement c. Rebating d. Coercion

b. Replacement

What consequences does an insurer's or producer's use of unfair marketing or unfair claims habits have for the company or agent? Select one: a. They can be sued in criminal court for malfeasance. b. The State Commissioner of Insurance can issue a cease and desist order. c. The insurer and the producer can be sued in a civil court of neglect of ethical duty. d. The State Insurance Commission can reprimand the company and/or producer.

b. The State Commissioner of Insurance can issue a cease and desist order.

It is illegal to do any of the following, EXCEPT: Select one: a. To entice business by offering to rebate premiums or offer special favors, dividend advantages, or any other benefits not specified in the contract to induce people to purchase life insurance or annuities b. To readjust premium rates, made retroactive for the policy year, for group insurance policies based on loss or expense c. To reject a client solely because another insurer has refused to write a policy on that person d. To require as a condition to granting a mortgage that the borrower purchase insurance to cover the property through a specific insurance producer or company

b. To readjust premium rates, made retroactive for the policy year, for group insurance policies based on loss or expense

Making a misleading statement to induce a person to lapse, surrender, or convert an insurance policy is known as: Select one: a. Coercion b. Twisting c. Conservation d. Replacement

b. Twisting

An example of an unfair claim settlement practice would include: Select one: a. Denying the payment of a claim because it does not meet the conditions of the insurance contract b. Delaying the payment of a claim while it is investigated for possible fraud c. Advising a claimant of the possibility that, should the claimant reject a settlement offer, an arbitration award might be less than the offer d. Denying the claim because it occurred after the cancellation of the policy

c. Advising a claimant of the possibility that, should the claimant reject a settlement offer, an arbitration award might be less than the offer

The practice of using misrepresentation to induce a policyholder to replace a policy issued by the insurer the producer represents is called: Select one: a. Twisting b. Misrepresentation c. Churning d. Intimidation

c. Churning

In a conversation with an older family friend, an insurance agent, Sly, inquired with what company she had a Medicare supplement policy. When she told him, the agent was silent. Concerned by his silence, the woman asked if the company was a reliable company. The producer asked, "Have you received any financial statements regarding their solvency?" This producer was: Select one: a. Acting appropriately by refusing to comment personally on the competing insurance company b. Engaging in misrepresentation c. Engaging in defamation d. Engaging in churning

c. Engaging in defamation

In discussing a potentially lucrative group policy with a business owner who had purchased a business and just moved into the community, an established producer jokingly remarked, "Well, would it sweeten the pot if I could assure you membership in the country club?"The producer added, "I'm on the membership committee and while we're not accepting new application right now, I'm sure something could be worked out." These remarks constituted: Select one: a. Nothing more than an effort to establish a warm relationship with the potential client b. Misrepresentation c. Rebating d. Intimidation

c. Rebating

Don, an insurance agent, told a member of his church who had recently experienced several personal and financial losses that he could see that she got a more favorable rate on her insurance policies than her health and general circumstances would warrant. The woman had been his kindergarten teacher and was a pillar in the community's life. He wanted to help her. Which of the following is FALSE? Select one: a. The agent is compassionate. b. The agent was engaging in unfair discrimination. c. The agent was engaging in twisting. d. The agent was breaking the law.

c. The agent was engaging in twisting.

A local insurance company has worked closely with an area real estate firm in writing mortgage insurance as well as other insurances such as health and accident policies to newcomers in a small university town. Recently one of the town's oldest and most reliable banks has become cautious about making mortgage loans, and both the realtors and the insurance company have lost business as a result. They agree to change their own accounts to a newer bank with a more liberal lending policy and to encourage their clients to follow their course. Since it is a small town with a sizable number of newcomers who visit the real estate firm for rentals or home purchases, their combined action is likely to affect the older, more conservative lender. The practice in which they are engaging is: Select one: a. Unfair discrimination b. Defamation c. Derogation d. Boycott

d. Boycott

Circulation of a maliciously critical statement about any insurer's financial condition to injure the insurer is called: Select one: a. Coercion b. Conservation c. Unfair discrimination d. Defamation

d. Defamation

Which of the following is NOT considered to be an unfair claims settlement practice? Select one: a. Refusing to pay claimants without conducting a reasonable investigation b. Knowingly misrepresenting policy provisions c. Failing to promptly acknowledge pertinent communications d. Replacing one insurance policy with another

d. Replacing one insurance policy with another