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