General Insurance Concepts - Exam

In a contributory group plan, what percentage of eligible employees must be covered?

75%

A return of premium that is paid out by mutual insurance companies at the end of the year as a result of either positive operating costs or other investment returns is also known as a:

Dividend

Types of speculative risk

Gambling Stock performance Changes in the economy

Group insurance plans that do not require employees to pay a portion of policy premiums are referred to as:

Non-contributory plans

As a provision of the Financial Services Modernization Act of 1999, attempts to obtain non-public personal information from consumers and customers under false pretenses is referred to as

Pre-texting

The act of refunding part of the commission, premium, services or anything of value to the purchaser as an inducement to buy an insurance policy is known as:

Rebating

Insurance is not intended to protect against?

Speculative risk

Which is known for the creation of the New York Insurance Code?

The Armstrong Investigation (1905) The outcome of the Armstrong Investigation led to stricter regulation of insurance companies by the state of New York, which ultimately led to other states adopting similar insurance regulation.

All of the following are true regarding the McCarran-Ferguson Act :

The McCarran-Ferguson Act ratified legislation in all states to conform to federal law; however, Congress still concluded that state regulation of insurance made the most sense from a consumer's standpoint. The McCarran-Ferguson Act was passed by Congress in 1945. Under the McCarran-Ferguson Act, the business of insurance is primarily regulated by the states, allowing the federal government to regulate in addition to, but not to supersede state insurance laws. In 1944, the Supreme Court (United States v. Southeastern Underwriters Association) placed the regulation of insurance within the authority of the federal government by defining insurance as a form of interstate commerce. A year later in 1945, the Supreme Court enacted the McCarran-Ferguson Act, which defined the business of insurance as primarily regulated by the states, allowing the federal government to regulate in addition to, but not to supersede state insurance laws.

Raymond, a licensed insurance producer, solicits insurance through more than one insurer and negotiates on behalf of his clients; therefore, he is considered to be

a broker

Overstating promises, using inaccurate or misleading information and guaranteeing insurance are types of:

misrepresentation

Referred to as a _________ application, it is common for a health or life insurance policy to be issued to an applicant based solely on the medical information gathered from the application that is submitted by the applicant to the insurer.

non-medical A non-medical application does not require a medical exam and is common when switching from one insurer to another, or when an individual is in good health when applying for insurance. In addition to health insurance, most life insurance policies applied for by younger, healthier individuals with modest face amounts (typically under $200K) are also issued based solely on the medical informationagathered from the application. Larger face amounts, however, often do require a medical exam.

A paramedical exam includes all of the following EXCEPT

reviewing the applicant's MIB file. It includes: checking the applicant's blood pressure. collecting blood for analysis. conducting a verbal questionnaire regarding the applicant's medical history and lifestyle.

In regards to group insurance, which of the following statements below is correct?

A master contract is issued by the insurer to the employer, while employees are given certificates of insurance Group insurance contracts are between the insurance company and an employer, not the employee

Which characteristic of insurance means that only one party, the insurer, defines and prepares the insurance contract, which is non-negotiable by the other party?

Adhesion The insurance policy is written by the insurer, and cannot be altered by the applicant.

All of the following have an insurable interest in another EXCEPT:

An individual's friends An individual's spouse An individual's business partners An individual's parents

Which of the following is NOT required by the Fair Credit Reporting Act of 1970?

An insurer is required to disclose medical information to an applicant in the event the applicant is rejected due to findings in the report If an applicant is rejected due to findings in a report, the applicant must be provided with the names and address of the reporting agency. An applicant has the right to know anyone questioned regarding the report. An applicant must be notified a report has been requested.

Which of the following is NOT a method of handling risk?

Analyzing risk Risk can be avoided or reduced, retained through self-insurance, shared or transferred to an insurance company.

In determining the validity of an insurance contract, when must insurable interest be present?

At the time of application In a life insurance contract, insurable interest must exist at the time of application, but is not required to still exist at the time of an insured's death. This determines who may purchase a policy, but does not affect who will benefit from the policy.

Richard has worked at J&J Printing Inc. for the past three months and wants to join the company's contributory group insurance plan. Which answer BEST describes the period is he entering and how long does he have to apply without proof of insurability?

Enrollment period; 30-31 days] In a contributory group plan, the eligibility period , also known as the 'enrollment peiod,' is the period of time (usually 30-31 days) following the probationary period in which an employee may apply for the coverage without having to submit to a medical exam for eligibility.

All of the following are considered hazards EXCEPT:

Floods A flood is an example of a peril, not a hazard.

Which of the following is NOT considered to be a 'valued' contract?

Health Insurance AD&D Insurance Disability Insurance Life Insurance

Which of the following is the rate at which death occurs within a given population, and is a factor when determining life insurance premiums?

Mortality Rate

Which of the following insurers is considered a participating company?

Mutual A mutual insurer is considered to be a participating company and is one in which insured policyowners are also the company's stockholders (owners).

In addition to being a policyowner, Allison shares in her insurer's success and receives dividends from the company's annual profits. This is because she purchased an insurance policy through a ________ insurer, also referred to as a ________ company.

Mutual/Par A mutual insurance company is a private insurance company that is established to provide insurance to policyowners who are also the company's stockholders. This type of insurer is considered to be a 'participating,' or 'par' company because it issues policies in which policyowners share int he company's ownership and receive divisible surplus of the company's profits.

Which agency has influenced the insurance industry by introducing uniform regulation models for states to follow in an attempt to standardize multiple-state insurance laws?

National Association of Insurance Commissioners (NAIC)

Tim was just hired today by MAB INC and wants to join the company's group insurance policy. What period of time is he currently in and when can he join the plan?

Probationary period, he can sign up after 90 days Most group insurance plans include an initial period of time, called a 'probationary period,' that extends 90 days after employment begins and before insurance coverage is offered to the newly hired employee.

Paula has applied for a life insurance policy and has been classified as a substandard risk for the insurer. What will most likely occur with her policy?

She will be charged an additional premium. This class of risk includes applicants with pre-existing conditions that are within the risk acceptance levels of the insurer, and can include a higher premium payment to offset the increased risk.

In the event an insurance company becomes insolvent, this type of association ensures unpaid claims will be paid for covered policyowners?

State Guaranty Association

Which of the following insurers is best defined as a non-participating company?

Stock A stock insurer is considered to be a non-participating company because the insured policyowners do not own the company nor do they receive any dividends it returns. Stock insurers do not issue participating policies.

In an insurance contract, the 'consideration' element is fulfilled at the time the applicant submits:

The application and initial premium

In regards to group insurance, which statement below is INCORRECT?

The insurance company evaluates the individuals within a group instead of the group as a whole, and then measures the individual's risks against its underwriting standards. If an individual converts his or her certificate of coverage to an individual policy, he or she cannot be denied coverage if his or her individual plan is with the same insurer. In order for a group to qualify for insurance, it must have been formed for some reason other than to obtain insurance. The insurance company evaluates the group as a whole instead of individuals within a group, and then measures the group's risk against it underwriting standards. During the underwriting process of a group policy, the insurer looks at the group as a whole, not individually at its members.

Loss Ratio is defined as:

The ratio between company losses and company revenue that determines an insurance company's revenues that must be maintained to cover annual claims by its policyowners.

What is the operating objective of a stock insurance company?

To make a profit for its stockholders

The practice of inducing a policyowner through misrepresentation to forfeit or change insurance from one company to another to gain commission for an agent or agency is called:

Twisting

When an agent persuades a client to cancel his or her current coverage for a policy from an entirely different company solely to produce another first year commission is called?

Twisting Twisting is the practice of inducing a policyowner through misrepresentation to forfeit or change insurance from one company to another in order to gain commission for an agent or agency.

Which of the following terms is known as the voluntary relinquishment of a given right or privilege?

Waiver

An aleatory contract is BEST defined as a contract that is:

dependent on chance or an uncertain outcome that the insurer may receive more value than the insured.

In reference to health insurance, which of the following is a factor when determining health insurance premiums?

morbidity rate The morbidity rate is the rate of incidence in which disability due to accident or illness occurs in a given population, and is a factor when determining health insurance premiums.

The 'parol evidence rule' states that

once an insurance contract, including its provisions and riders, is constructed and provided in written form to the insured, it cannot be modified by any oral, or verbal, statements made by either party. The parol (oral) evidence rule states that once an insurance contract, including its provisions and riders, is constructed and provided in written form to the insured, it cannot be modified by any oral, or verbal, statements made by either party.