Basic Principles of Insurance

Question 1

What is the name of the law that requires insurers to disclose gathering practices and where the information was obtained?

Answer 1

Fair Credit Reporting Act

~ A federal law requiring an individual to be informed if that individual is being investigated by an inspection company

Question 2

The stated amount or percent of liquid assets that an insurer must have on hand that will satisfy future obligations to its policy holders is called:

Answer 2

Reserves

Question 3

What type of reinsurance contract involves two companies automatically sharing their risk exposure?

Answer 3

Treaty

~Under treaty reinsurance, each party automatically accepts specific percentages of the insurer’s business

Question 4

What year was the McCarran-Ferguson Act enacted?

Answer 4

1945
~M-F Act was enacted in 1945 and made it clear that continued regulation of insurance by the states in the public’s best interest

Question 5

A group-owned insurance company that is formed to assume and spread the liability risks of its members is known as a:

Answer 5

Risk retention group