Health Insurance Test #2

If a broker diverts funds belonging to an insurer to his or her own use, he or she has committed the illegal act of: A) theft. B) fraud. C) embezzlement. D) commingling.

Answer: A A broker or other producer who receives a premium holds it in a fiduciary capacity. The producer is placed in a position of trust by the insured who paid the premium and the insurer to whom the premium is owed. Therefore, a producer who diverts such funds for personal use has stolen them.

Dan participates in his employer's group health insurance plan. The plan stipulates that, in the event he is eligible for benefits under another policy, his group plan will serve as the primary plan. This provision is for: A) coordination of benefits. B) excess coverage. C) double indemnity. D) other insurance with this insurer.

Answer: A A coordination of benefits (COB) provision specifies which plan is the primary plan when the insured is covered by another health insurance plan.

All of the following statements regarding when a person may purchase a credit report on another are correct EXCEPT: A) it is not necessary to inform an applicant that a report on him has been ordered. B) the applicant is first informed in writing that a consumer report may be requested. C) the applicant is given the name and address of the consumer reporting agency that will furnish the report. D) reports are allowed for the purposes of checking an applicant's credit or rental of a residence.

Answer: A A person may buy another's consumer report in connection with an application for credit, employment, insurance, or rental of a residence only if the applicant is first informed in writing that a consumer report may be requested, the applicant is informed that a consumer report was requested, and if the name and address of the agency furnishing the report are given to the applicant.

Assured Insurance Company issues a health insurance policy it describes as noncancellable. This means that: A) the insured can continue the policy by paying premiums until at least age 65. B) the insured is entitled to renew the policy indefinitely, though the insurer can change policy provisions. C) the company cannot cancel the policy for any reason. D) the company cannot cancel the policy after the insured becomes eligible for Medicare.

Answer: A A policy that is noncancellable or guaranteed renewable gives the insured the right to continue it in force by the timely payment of premiums at least until age 65 or until the insured becomes eligible for Medicare. The insurer cannot unilaterally change any provision while the policy is in force.

Life and Health agents' licenses are issued for a term of: A) two years. B) one year. C) three years. D) four years.

Answer: A Agents' licenses in the state of New York are issued for a term of two years, with the renewal coinciding with the agent's birthdate. If the agent was born in an even numbered year, the agent's license renews in an even numbered year. If the agent is born in an odd numbered year, the agent's license renews in an odd numbered year.

Workers' compensation covers income loss resulting from: A) work-related disabilities. B) job terminations. C) job layoffs. D) plant and office closings.

Answer: A All states have workers' compensation laws, which were enacted to provide mandatory benefits to employees for work-related injuries, illness, or death.

An insurance producer in a position of financial trust to both the client and the insurer best describes a: A) fiduciary. B) trustee. C) broker. D) solicitor.

Answer: A An insurance producer acts in a fiduciary capacity when holding premiums or money collected from a policyholder that is to be paid to an insurance company. Producers are prohibited from misappropriating or converting such funds to their own use or illegally withholding them. Producers who convert or misappropriate these funds are guilty of theft and can be punished as provided by law.

Those who choose not to enroll in Part B when first applying for Medicare may do so: A) during an annual open enrollment period. B) between July and September of each year. C) on the anniversary of his Part A enrollment date. D) at any time after enrolling in Part A.

Answer: A Applicants can choose to enroll in Part B of Medicare during the open enrollment period each year from January 1 through March 31. Coverage then begins the following July 1.

Mary is covered by two group health policies: one provided by her employer and the other provided by her husband's employer. The coverage provided by her husband's policy is called the: A) secondary coverage. B) surplus coverage. C) related coverage. D) primary coverage.

Answer: A Group health policies often include a coordination of benefits (COB) provision that avoids duplicate coverage. Under a COB provision, when a person is covered by more than one group health policy, the insurer who covers the person as an employee or member is considered the primary insurer. The insurer that covers the person as a dependent is the secondary insurer. The primary insurer pays claims first. The secondary insurer pays the amount of the claim remaining, up to 100%.

Most dental insurance plans control costs by all of the following EXCEPT: A) eliminating all coverage for specified time periods. B) limiting the type of services that the plan will cover. C) limiting the number of services that the plan will cover. D) limiting the dollar limit on the benefits an insured can receive in 1 year.

Answer: A Most dental insurance plans control costs by limiting the dollar limit on the amount of benefits an insured can receive in 1 year or limiting the number or type of services that the plan will cover.

Alice has a major medical policy with a $500 deductible and an 80%/20% coinsurance provision. If she receives a hospital bill for $7,500 of covered expenses, how much of that bill will she have to pay? A) $1,900.00 B) $1,400.00 C) $2,000.00 D) $2,400.00

Answer: A Of the $7,500 total expenses, Alice pays a $500 deductible. The basis for the insurer's payment is therefore $7,000. The insurer pays 80% of that amount, or $5,600. The coinsurance amount Alice pays is $1,400 plus the $500 deductible. Alice pays a total of $1,900.

The insurance industry in the United States is primarily regulated by what part of government? A) States. B) Congress. C) U.S. Supreme Court. D) President.

Answer: A Throughout the history of insurance in the United States, the industry has been regulated primarily by the states rather than by the federal government. The McCarran-Ferguson Act recognized that state regulation of insurance was in the public's best interest and exempted the insurance industry from the federal regulation required for most interstate commerce industries. However, it gave the federal government the right to apply antitrust laws to the extent that the insurance business is not regulated by the states. To avoid federal intervention, each state has revised its insurance laws to conform to these requirements.

Which of the following statements about maternity benefits in employer-sponsored group health insurance plans is CORRECT? A) They are included. B) They are generally excluded but can be added through supplemental riders paid by the employee. C) They are excluded. D) They are generally excluded but can be added through supplemental riders paid by the employer.

Answer: A Under the 1979 amendment to the Civil Rights Act, plans covering 15 or more people must provide maternity benefits. This is done as part of the coverage and not through supplemental riders.

Which of the following people must sign the Notice Regarding Replacement? A) Applicant and producer. B) Existing insurer and replacing insurer. C) Producer and replacing insurer. D) Applicant and existing insurer.

Answer: A When replacement is involved, the producer must present a Notice Regarding Replacement, signed by the applicant and the producer, by the time the application is taken. The replacing insurer must require a copy of the replacement notice provided to the applicant.

As a cost-containment method in medical plans, all of the following are examples of case management provisions EXCEPT: A) reduction provision. B) concurrent review. C) precertification provision. D) second surgical opinion.

Answer: A While one of the other health insurance provisions, the reduction provision is not included as one of the provisions that falls under the category of case management provisions. All of the other answer choices are examples of case management provisions.

Who does an insurance broker represent in an insurance transaction? A) Insurer. B) Insured. C) Commissioner's office. D) Agent.

Answer: B A broker represents the insured or the beneficiaries and not the insurer. Conversely, an agent represents the insurer and not the insured or his or her beneficiaries.

What is the definition of "preexisting condition" in a long-term care policy? A) A condition for which advice or treatment was received within three months before the effective date of coverage. B) A condition for which advice or treatment was received within six months before the effective date of coverage. C) Any health condition that existed before coverage was in force. D) A condition for which advice or treatment was received within one year before the effective date of coverage.

Answer: B A condition is considered to be preexisting if advice or treatment was received from a health care provider within six months before the effective date of coverage.

Which accident and health insurance renewability clause means the insurer cannot unilaterally change any provision while the policy is in force but can change premium rates by classes? A) Provisional. B) Guaranteed renewable. C) Noncancellable. D) Transitional.

Answer: B A guaranteed renewable health insurance policy cannot be changed unilaterally by the insurer. Nevertheless, the insurer can change premium rates for the policy by class.

Which of the following terms relates directly to the consideration clause? A) Exclusion. B) Premium. C) Beneficiary. D) Endorsement.

Answer: B The consideration clause describes the amount and frequency of the premium payments.

Thomas, an insured, submits a claim and proof of loss for medical expenses covered by his major medical policy. According to the time of payment of claims provision, how soon must the company pay the claim? A) Within 30 days. B) Immediately. C) Within 90 days. D) Within 150 days.

Answer: B According to the time payment of claims provision of a major medical policy, the company must pay the claim immediately.

Which of the following statements about long-term care insurance is CORRECT? A) Insurers may cancel or refuse to renew long-term care policies solely because of the insured's age or health. B) All long-term care policies must be guaranteed renewable. C) A long-term care policy may require prior hospitalization before the policyowner qualifies for benefits. D) A long-term care policy's benefits will be triggered only if the policyowner receives a diagnosis of a terminal illness.

Answer: B All long-term care policies sold today must be guaranteed renewable. This means that the insurer cannot cancel the policy and must renew coverage each year, as long as premiums are paid.

Steve has an individual disability income policy that pays $600 a month if he becomes disabled. After he became disabled, he received a lump-sum payment of $10,000 in addition to his base benefit. Which of the following disabilities would result in this additional benefit? A) His disability was caused by diabetes, and the additional benefit was paid under his medical insurance plan to cover the cost of special treatments. B) His disability, which resulted in blindness, occurred in a car accident and is covered under the accidental death and dismemberment rider attached to his disability policy. C) His disability resulted from a fall at home and is covered by his homeowners' insurance. D) His disability involved a back injury that occurred while he was at work, and the additional benefit is paid under workers' compensation.

Answer: B An AD&D rider can be added to some individual disability income policies. Because Steve was disabled in an accident that resulted in blindness, he is entitled to the capital sum, which in this case is paid in a lump sum of $10,000. This benefit will not be paid for a disability resulting from illness, nor would workers' compensation generally pay a lump-sum benefit.

A contract designed primarily to supplement reimbursement under Medicare for the hospital, medical or surgical expenses is known as a(n): A) home health care plan. B) Medicare supplement plan. C) alternative health care plan. D) alternative benefits plan.

Answer: B Because of the significant gaps in coverage provided by Medicare, many insurers offer Medicare supplement policies that supplement Medicare, paying much of what Medicare does not. To protect consumers, the law narrowly defines what must be included in a Medicare supplement policy. These minimum standards apply to both individual and group policies.

All of the following are eligible to establish a health savings account (HSA) EXCEPT: A) an individual family. B) a group of unassociated individuals. C) a small employer. D) a large employer.

Answer: B Employers and individuals and their families can establish an HSA. Random groups of individuals, however, are not eligible.

The authority that an insurer gives to its agents by means of the agent's contract is known as: A) fiduciary responsibility. B) express authority. C) general authority. D) implied authority.

Answer: B Express authority is what the insurer intends to, and in fact does, give to its agent through means of the agency agreement. This authority explicitly appoints the agent to act on behalf of the insurer.

All of the following are duties of the agent regarding replacement EXCEPT: A) presenting to the applicant a Notice Regarding Replacement. B) advising the existing insurer of the replacement. C) obtaining a list of all existing life insurance. D) signing the Notice Regarding Replacement and submitting it to the insurer.

Answer: B It is the insurer's responsibility, not the agent's or the applicant's, to inform the existing insurer that its policy is being replaced.

Agnes purchases a round-trip travel accident policy at the airport before leaving on a business trip. Her policy would be which type of insurance? A) Business overhead expense. B) Limited risk. C) Industrial health. D) Credit accident and health.

Answer: B Limited risk policies are a type of AD&D coverage that provide protection against accidental death or dismemberment only in the event of certain specified accidents, such as a death or injury resulting from an aviation accident during a specified trip.

Medicare Plans K and L are characterized by which of the following features? A) No annual deductible. B) Higher coinsurance contributions. C) Lower co-payments. D) No annual limit on annual out-of-pocket expenditures.

Answer: B Medicare supplement Plans K and L require a higher co-payment and coinsurance contribution from Medicare beneficiaries. They also have a limit on annual out-of-pocket expenditures incurred by the policyholders. However, once the out-of-pocket limit on annual expenditures is reached, the policy covers 100% of all cost-sharing under Medicare Parts A and B for the balance of the calendar year.

Medicare supplement (Medigap) policies do NOT: A) Pay for some health care services not covered by Medicare. B) Pay for extended nursing home care. C) Supplement Medicare benefits. D) Pay for most or all Medicare deductibles and copayments.

Answer: B Medicare supplement or Medigap policies supplement Medicare's benefits by paying most deductibles and copayments as well as some health care services that Medicare does not cover. They do not cover the cost of extended nursing home care.

The amount of money an insurer sets away to pay future claims is called the: A) dividend. B) reserve. C) accumulated interest. D) premium.

Answer: B Reserves can be defined as the amounts that are set aside to fulfill the insurance company's obligation to pay future claims.

For situations where no initial premium was paid when the application was taken, when delivering that policy the agent is generally required to do all of the following EXCEPT: A) explain the policy, its provisions, and any riders, exclusions, or ratings involved. B) present the insured with a conditional receipt. C) obtain a Statement of Good Health from the insured. D) collect any premium due.

Answer: B Since the insured has already been underwritten and a policy issued, a conditional receipt is no longer applicable to these type situations. Keep in mind, however, that whether the policy will go into effect or not is dependent upon the insured's health status at the time of delivery and full payment of any premiums due. If the insured has experienced any negative health changes that could effect their insurability since the time of the application, the agent cannot deliver the policy and coverage does not go into effect.

An employer installs a noncontributory health insurance plan. Which of the following statements regarding open enrollments for members is CORRECT? A) Employees can elect to participate at any time. B) There are no open enrollment periods. C) Employees must elect to enroll when the plan is established or when they join the company. D) Employees can elect to enroll only during the annual open enrollment period.

Answer: B There is no open enrollment period because, under a noncontributory plan in which the employer pays all premiums, all eligible members of the group must be included automatically.

Which one of the following primarily regulates the insurance industry in the United States? A) President. B) States. C) U.S. Supreme Court. D) Congress.

Answer: B Throughout the history of insurance in the United States, the industry has been regulated primarily by the states rather than by the federal government. The McCarran-Ferguson Act recognized that state regulation of insurance was in the public's best interest and exempted the insurance industry from the federal regulation required for most interstate commerce industries. However, it gave the federal government the right to apply antitrust laws to the extent that the insurance business is not regulated by the states. To avoid federal intervention, each state has revised its insurance laws to conform to these requirements.

Tom is talking to his client about replacing an existing health insurance policy. Which of the following statements about the planned replacement is NOT correct? A) The new insurer's underwriting requirements should not be greater than those for the existing policy. B) The new policy should put the insured in a position of financial gain. C) Tom's commissions on the replacement policy will be no higher than the renewal commissions on the policy being replaced. D) Tom and his client should carefully review provisions on benefits, limitations, and exclusions.

Answer: B Under the no gain/no loss statutes, the new policy must not put the insured in a position of profit in the event of a loss. It is important to review all key policy provisions before the replacement. There are limits on compensation requiring that commissions for the replacement policy not exceed the renewal commissions paid on the policy being replaced.

Gina Williams submitted an application for a $250,000 life insurance policy with ABC Insurance Company along with the first month's premium. However, ABC Insurance did not issue the policy as applied for but informed Gina that it would issue another policy at a different premium rate. In this case, ABC Insurance Company's action is considered: A) an offer. B) an acceptance. C) a counteroffer. D) a nonacceptance.

Answer: C A life insurance contract is formed when one party makes a definite offer and the other party accepts the offer. If the other party alters the terms of the offer, it effectively rejects the initial offer and proposes a counteroffer. Gina made an offer when she submitted her application. ABC Insurance Company did not, however, accept the offer as received. By offering to issue another policy with a different premium, the company made a counteroffer. Gina may now accept or reject the counteroffer as made, or she can even propose another counteroffer. A contract is not formed until both parties agree to the terms.

Which of the following terms correctly describes a life insurance company that is organized outside the United States or its possessions? A) Remote. B) Distant. C) Alien. D) Foreign.

Answer: C An alien insurance company is one that is incorporated or organized under the laws of a foreign nation, province, or territory.

How does an insurer treat benefits that are payable for expenses incurred when the company accepted the risk without being notified of other existing coverage for the same risk? A) It deducts them. B) It estimates them. C) It prorates them. D) It eliminates them.

Answer: C Benefits payable for expenses incurred are prorated in cases where the company accepted the risk without being notified of other existing coverage. This limits overinsurance and is known as the "insurance with other insurers" provision.

All of the following are duties of insurance licensees EXCEPT: A) include the license number on all printed documents and advertisements used by the licensee. B) notify the commissioner of a change of address immediately. C) file with the commissioner the list of appointments. D) file with the commissioner any fictitious name the licensee uses for business purposes.

Answer: C It is the responsibility of the insurer, not the licensee, to file lists of appointments with the commissioner.

In which of the following situations would premium payments be tax deductible? A) Randy is the owner and premium payer of a life insurance policy covering his wife, Ellen. B) Janet is the owner and premium payer of a mortgage policy that covers the outstanding mortgage on her home. C) The ABC Company provides $25,000 of life insurance coverage to each of its 15 employees and pays the full premium. D) The ABC Company is the owner and premium payer of a $250,000 key executive policy covering the life of its president.

Answer: C Premiums paid by a company for group term life insurance are deductible as a business expense, assuming the group plan and its provisions meet the necessary requirements. Premiums paid for personal life insurance are not tax deductible, including key person insurance.

How many days must pass after the onset of a disability before employees covered under the New York Disability Benefits Law can expect their first benefit payment? A) 30 days. B) 10 days. C) 14 days. D) 21 days.

Answer: C The first disability payment is due on the 14th day of disability and must be paid directly to the disabled employee within the next four days. Benefits are then paid biweekly, although this payment schedule can be adjusted to conform to the employee's regular pay schedule.

Fees for all of the following items typically are covered under a medical expense policy's miscellaneous expense benefit EXCEPT: A) use of the operating room. B) laboratory fees. C) surgeon's fees. D) x-rays.

Answer: C The miscellaneous expense benefit covers hospital "extras," such as x-rays, laboratory fees, and use of the operating room. It does not cover a surgeon's fees, which would be covered under a surgical expense policy.

Which of the following is the practice of using misrepresentation to induce a policyholder to replace a policy? A) Defamation. B) Rebating. C) Twisting. D) Unfair discrimination.

Answer: C Twisting is defined as misrepresentation to induce a policyholder to lapse, forfeit, exchange, convert, or surrender an existing policy.

A long-term care insurance policy may limit or exclude coverage for all of the following reasons EXCEPT: A) treatment in a government facility when coverage is available through Medicare. B) alcoholism. C) drug addiction. D) Alzheimer's disease.

Answer: D A long-term insurance policy may limit or exclude coverage for alcoholism, drug addiction and treatment provided in a government facility when coverage is available through other sources such as Medicare. A policy also may limit coverage for mental or nervous disorders, except for Alzheimer's disease.

When agents act on behalf of insurers, they are acting under which legal principle? A) Utmost good faith. B) Reasonable expectations. C) Estoppel. D) Agency.

Answer: D By legal definition, an agent is a person who works for another person or entity (known as the principal), with regard to contractual arrangements with third parties. An authorized agent has the power to bind the principal to contracts, and to the rights and responsibilities of those contracts.

Claire's employer is self-insured and establishes an exclusive provider organization (EPO) in town. When Claire goes to the doctor, which of the following is most likely to happen? A) Her care will be provided through a nationwide network of HMOs. B) All her outpatient expenses will be covered, but hospital costs will be covered on a per diem basis. C) All of her expenses will be covered if she uses a physician who is approved under the plan. D) She will have a deductible and will need to pay coinsurance.

Answer: D EPOs require insureds to use only approved providers, who offer care at a discount. The insured is likely to have to meet deductibles and pay coinsurance amounts.

For group health insurance, employees may be classified in all of the following ways EXCEPT by: A) length of service. B) duties. C) type of payroll. D) age.

Answer: D Group health insurance participants may be classified by type of payroll, duties and length of service, but not by age.

A group of employers from a similar industry assembled to qualify for group health insurance is a(n): A) contributory trust. B) modified group plan. C) insured union. D) multiple employer trust.

Answer: D Group insurance policies can be issued to the trustees of a fund established by two or more employers in the same industry. This type of arrangement commonly is called a multiple employer trust (MET) and permits small employers who could not otherwise qualify for group insurance to do so. Multiple employer trusts can be associations of employers or unions.

With regard to life insurance, all of the following statements are correct EXCEPT: A) spouses have insurable interests in each other. B) individuals are considered to have insurable interests in themselves. C) a partnership has an insurable interest in a partner. D) an insurable interest must exist at the time of the claim.

Answer: D In a valid insurance contract, the applicant must have an insurable interest in the insured, which means that the applicant must be subject to loss if the insured dies. Many relationships such as husband and wife and partner and partnership provide the basis for an insurable interest. An insurable interest is required only when a contract is issued; it does not have to be maintained throughout the life of the contract, nor is it necessary at the time of claim.

Medicare supplement (Medigap) policies are designed to pay: A) benefits provided under Medicare Part A. B) benefits to those who cannot afford Medicare Part B coverage. C) medical costs associated with extended custodial (nursing home) care. D) most or all of Medicare's deductibles.

Answer: D Medicare supplement insurance or Medigap policies are designed to pick up coverage where Medicare leaves off. The purpose of these policies is to supplement Medicare's benefits by paying most, if not all, coinsurance amounts and deductibles and paying for some health care services not covered by Medicare, such as outpatient prescription drugs. They do not cover the cost of extended nursing home care.

Which of the following statements about Medicare supplement (Medigap) policies is NOT correct? A) Medigap policies pay for some health care services not covered by Medicare. B) Medigap policies supplement Medicare benefits. C) Medigap policies pay most, if not all, Medicare deductibles and copayments. D) Medigap policies cover the cost of extended nursing home care.

Answer: D Medigap policies do not cover the cost of extended nursing home care.

Which of the following statements about using the state's guaranty association is CORRECT? A) Producers may refer to the state guaranty association when they solicit insurance. B) The guaranty associations produce their own advertisements to inform consumers which policies are covered by the associations and which are not. C) Insurers, and not producers, may use the existence of a state guaranty association when selling insurance. D) It is a violation of any state's insurance code to use the association's existence as an endorsement for a particular policy.

Answer: D No person, including an insurer or producer, may make any statement, written or oral, that uses the existence of the state's life and health insurance guaranty association to sell or induce the purchase of any form of insurance covered by the association.

A group plan that permit insureds to receive dental care from any dentist is called a(n): A) closed panel. B) MSA. C) nonprofit entity. D) open panel.

Answer: D Open panel plans permit insureds to receive dental care from any dentist. Dentists may accept or refuse to treat insureds enrolled in the plan.

Mailing a newly issued policy to an agent, who in turn will deliver it to the policyowner, is known as A) binding receipt. B) interim coverage. C) backdating. D) constructive delivery.

Answer: D Policy delivery may be accomplished without physically delivering the policy into the policyowner's possession. Constructive delivery, which satisfies the legal interpretation of delivery, is accomplished if the insurance company intentionally relinquishes all control over the policy and turns it over to someone acting for the policyowner, including the company's own agent. Mailing the policy to the agent for unconditional delivery to the policyowner also constitutes constructive delivery.

The Age Discrimination in Employment Act prohibits employers from discriminating against employees who are at least how old? A) 45 years old. B) 50 years old. C) 55 years old. D) 40 years old.

Answer: D The Age Discrimination in Employment Act prohibits employers from discriminating against or giving preference to employees who are 40 years old or older. For instance, an employer may not reject a job applicant solely on the basis of age if the applicant is at least 40 years old.

As a result of the Health Insurance Portability and Accountability Act (HIPAA), which of the following is NOT guaranteed medical coverage? A) Individuals who have exhausted their extension of benefits under COBRA. B) Individuals who have at least 18 months of aggregate creditable coverage. C) Individuals who have are not eligible for coverage under Medicare or Medicaid. D) Individuals who have had their coverage cancelled for nonpayment of premiums.

Answer: D The primary purpose of HIPAA was to expand health insurance protection for individuals. Coverage cannot be denied for a number of reasons, including health condition and insurability. Coverage can be denied, however, for individuals who have had their most recent coverage cancelled for nonpayment of premiums or fraud.

The purpose of Medicare supplement insurance is to provide: A) an alternative insurance plan for people who do not want to use Medicare. B) coverage to elderly people who are not covered under a corporate plan for retired employees. C) coverage for certain medical expenses before the insured becomes eligible for Medicare. D) coverage for certain expenses not fully covered by Medicare.

Answer: D The primary purpose of Medicare supplement insurance is to augment Medicare by paying hospital, medical, or surgical expenses that Medicare does not cover because of the deductibles, coinsurance amounts, or other limitations. Medicare supplement policies cannot contain benefits that duplicate those provided by Medicare.

An example of unfair discrimination is BEST demonstrated by which of the following situations? A) An insurer refuses to issue a policy to an applicant whose credit history suggests an inability to financially support the policy being applied for. B) An insurer assigns a premium rating to an applicant who weighs 30 pounds more than a typical person of that age and sex. C) An insurer refuses to issue a policy to an applicant who has been treated for drug dependency on two separate occasions in the previous five years. D) An insurer assigns a premium rating to an applicant because of studies that suggest members of the applicant's race have a shorter-than-average life expectancy.

Answer: D Unfair discrimination occurs when an insurer charges two people of equal risk different rates or provides disparate services or benefits based solely on differences in race, religion, physical ability, national origin, or location of residence.