Basic Principles of Life & Health Ins & Annuities

Question 1

Which of the following requires insurers to disclose when an applicant’s consumer or credit history is being investigated:

a. 1970 - Fair Credit Reporting Act b. 1959 - Intervention by SEC The Securities and Exchange Commission c. 1999 - Financial Services Modernization Ace
D. 1945 - The McCarran-Ferguson Act

Answer 1

1970 - Fair Credit Reporting Act

Fair Credit Reporting Act requires the fair and accurate reporting of information about consumers. Insurers must inform applicants about any investigations being made. If the report is used to deny coverage or charge higher rates, the insurer must provide the applicant with the name of the credit reporting agency conducting the investigation.

Question 2

An Insurance Applicant MUST be informed of an investigation regarding their reputation and character according to the:

a. State Guaranty Association
b. Fair Labor Standards Board
c. Fair Credit Reporting Act
d. National Association of Insurance Commissioners

Answer 2

Fair Credit Reporting Act

The Fair Credit Reporting Act is a Federal law requiring an individual to be informed if that individual is being investigated by an inspection company.

Question 3

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

a. arbitrage
b. facultative
c. excess
d. treaty

Answer 3

treaty reinsurance

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

Question 4

Which describes a participating insurance policy?

a. policy owners are entitled to receive dividends
b. policy owners pay assessments for company losses
c. stock companies allow their policy owners to share in any company earnings
d. policy owners are not entitled to vote for members of the board of directors

Answer 4

policy owners are entitled to receive dividends

A participation life policy is one in which the policy-owner receives dividends deriving from the company’s divisible surplus.

Question 5

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

a. treaty insurer
b. risk retention group
c. risk assumption group
d. captive insurer

Answer 5

risk retention group

A group owned insurer whose primary activity consists of assuming and spreading the liability risks of its members is called a risk retention group.