6-D Unlawful and Unfair Practices

Martin works as an accountant for Smith Manufacturing. Smith Manufacturing has tasked Martin with finding an insurance provider to meet the company's needs, so Martin interviews several insurers. At the end of one interview with PRO Insurance, the insurance representative hands Martin an envelope containing $5,000 in cash, on the condition that Smith Manufacturing selects PRO Insurance as its insurance provider. What would we call the $5,000 in cash? - A commission - A moral hazard - A premium - A kickback

A kickback

What is it called when an insurer makes a habit of delaying payment on legitimate claims?

An Unfair Claims Settlement Practice

Which of the following BEST describes a "kickback"? - Any compensation given as a reward for favorable treatment in an insurance transaction or interaction - Intentional trickery aimed at convincing a policyholder to cancel one policy and purchase another - False, maliciously critical, or derogatory statements about a competitor - Something of value that is given to someone to convince him to purchase an insurance policy

Any compensation given as a reward for favorable treatment in an insurance transaction or interaction

John works for ABC Insurance. He is paid on a commission basis and needs to meet certain sales goals in order to draw a reasonable salary. To help in this endeavor, John regularly tells potential clients that XYZ Insurance and Integritas Insurance often fail to pay claims, and that they charge unreasonably high premiums. In speaking falsely of his competition, John has indulged in which unethical practice? - Kickbacks - Defamation - Boycott Twisting

Defamation

RWW Insurance creates a radio promotion where they advertise that they will insure any car for $200 a year. They don't actually offer such a plan, but they figure they will be able to sell hundreds of policies to people who show up looking for the bargain. What type of unfair insurance trade practice does this behavior exemplify? - Unfair discrimination - False information and advertising - Misrepresentations - Illegal kickbacks

False information and advertising

Which unfair claims settlement practice involves an adjuster making false statements about policy coverage in order to reduce the settlement? - Misrepresentation - Interference - Defamation - Coercion

Misrepresentation

What must an insurer do if unable to affirm or deny a claim within a reasonable time frame?

Notify the claimant of the delay and explain why extra time is needed to come to a decision.

Who is ultimately responsible for ensuring that proper procedures are in place for claims investigation and settlement? - The arbitrator - The insurance company - The repair shop - The adjuster

The insurance company

Greg, an agent for ABC Insurance Brokers, is trying to sell a new policy to Sally. Sally, however, is perfectly happy with her current policy and has no intention of cancelling it. Greg tells Sally that upcoming legislation is set to increase the minimum requirements for insurance, and that her current policy will not be available once the bill passes. He fails to tell her that if her policy is already in effect, this legislation won't affect her insurance. Which unlawful or unfair practice is Greg guilty of? - Baiting - Twisting - Libel - Defamation

Twisting

John and Lucy both apply for policies with Acme Insurance at the same time. They are exposed to similar hazards and would present essentially the same amount of risk to Acme Insurance. Acme Insurance offers Lucy a premium policy at excellent rates, but restricts John to a very limited policy with high premiums. Acme Insurance may be guilty of: - Boycotting. - Unfair discrimination. - Coercion. - Misrepresentation.

Unfair discrimination.

Once a claim is submitted to an insurance company, who is most likely to respond to the claimant? - The agent who sold the policy will respond to the claim. - Usually an insurance adjuster is responsible for a prompt response to the claim. - The insurance company must send a registered response on company letterhead. - The executive assistant at the local insurance brokerage will usually be in charge of communication.

Usually an insurance adjuster is responsible for a prompt response to the claim.

Under which circumstance would it be legal for an insurer to charge one insured more than another insured for the same coverage? - When the insurer is running a narrow profit margin - Never, under any circumstances - When the insured is in the statistical minority - When the insured is statistically more likely to experience a loss

When the insured is statistically more likely to experience a loss

Joe filed an auto damage claim with his insurer, XYZ Insurance, who committed several unfair claims settlement practices while handling Joe's claim. Which of the following is NOT one of these unfair practices? - XYZ Insurance paid Joe's claim, but they didn't specify under which coverage they paid his claim. - While investigating Joe's claim, XYZ Insurance realized that Joe was over-insured, so they made a change to Joe's initial insurance application to reduce his coverage, without telling Joe about the change. - After receiving all relevant information, XYZ Insurance took 40 days to get back to Joe with a decision on his claim. - XYZ Insurance took 11 days to acknowledge Joe's claim and send him all the necessary paperwork.

XYZ Insurance took 11 days to acknowledge Joe's claim and send him all the necessary paperwork.

An insurer in Alabama sends a partial payment to a claimant and states that payment is final, even though the policy limit has not been met and no compromise has been reached with the claimant. This act is:

illegal.

In this state, an insurer may not:

make claim payments without indicating under which coverage the payment is being made.