Consumer Protection in Sales of Insurance Flashcards
When must insurance disclosures be provided?
Before completion of the initial sale of the insurance product or annuity.
If a consumer applies for an insurance product by telephone, when must the insurance disclosures be provided?
Within 3 business days of application, excluding weekends and Federal holidays.
In addition to providing the required disclosures in writing, either electronically or in paper format, what else must be done at the time the disclosure is received or the initial purchase is made?
The consumer must acknowledge the disclosures. This must be done verbally by telephone if the app is taken by telephone.
What disclosure must be on advertisements that solicit insurance products or annuities?
Not a deposit Not FDIC-insured Not insured by any federal government agency Not guaranteed by the bank May go down in value
Which of the following is (are) NOT covered by the regulation?
a. All banks regardless of insurance sales.
b. A lender who indicates to the consumer that he or she is selling insurance on behalf of the bank
c. A person to whom the bank refers consumers and who has a contract with the bank to receive commissions on sales of insurance
d. A person who sells insurance to nonconsumers for other than personal, family, or household purposes
d. A person who sells insurance to nonconsumers for other than personal, family, or household purposes
ACME Bank has a separate page on its Web site where it describes insurance products, such as life insurance and health and disability insurance. The page invites consumers to call the bank officer in charge of selling these products. The Web site’s lending page also describes consumer loans and uses the following phrase: “Have peace of mind—credit life and disability insurance are available on all consumer loans to qualified borrowers.” Neither the insurance page nor the lending page mentions insured deposits. What does ACME need to do to make sure its Web site is in compliance?
a. Nothing. As long as the insurance products are segregated, the Web site is in compliance.
b. Place the advertising disclosures (not a deposit, not insured by the FDIC, and so on) on the insurance page.
c. Place the advertising disclosures on both the Web site’s insurance page and its lending page.
d. Create a separate Web site for all insurance products.
c. Place the advertising disclosures on both the Web site’s insurance page and its lending page.
It is the policy of First Safe Bank to offer credit life insurance and accident and disability insurance to all consumer loan customers. What procedures fulfill the disclosure requirements for the bank?
a. Place a sign on loan officers’ desks that provides the disclosures and give each customer a written disclosure at loan closing.
b. Give each customer the disclosures orally at the time of application and in writing at loan closing.
c. Only a written disclosure at closing is necessary.
d. Only give disclosures to persons who actually purchase the insurance.
b. Give each customer the disclosures orally at the time of application and in writing at loan closing.
All required disclosures must be given orally and in writing. If the bank offers the insurance it must provide the oral disclosures at the time of application. If the customer indicates that he or she wants to purchase the insurance, or if the bank solicits the customer again at loan closing, the bank must provide the written disclosures at closing.
A recent compliance review revealed that several branch officers are using obsolete loan application forms, which do not include disclosures related to credit insurance sales. Which of the following steps should be taken FIRST?
a. Determine which customers were affected and take corrective action.
b. Contact the bank’s primary regulator to determine the best course of action.
c. Instruct the branch to destroy all obsolete forms and immediately begin using the current versions.
d. Determine whether the branches use a separate document for required credit insurance sales disclosure.
d. Determine whether the branches use a separate document for required credit insurance sales disclosure.
Determine whether the branches use a separate document for required credit insurance sales disclosure.
ACME Bank would like its tellers to help sell insurance products to new and existing customers. The tellers would refer customers to personal bankers who have insurance licenses from the state. The bank would like to reward tellers by giving them a small percentage of the commission for each policy sold where the sale resulted from a referral. Which of the following statements presents ACME’s biggest concern in complying with the Consumer Protection in Sales of Insurance regulation?
a. It is difficult for many people to get an insurance license.
b. It is hard for tellers to handle so many types of products.
c. It is hard to physically separate insured deposit products from insurance products.
d. Tellers should not be rewarded only when the referral results in a sale.
d. Tellers should not be rewarded only when the referral results in a sale.
A person receiving a referral fee should receive no more than a one-time, nominal fee of a fixed dollar amount for each referral. The referral fee cannot depend on whether the referral results in a transaction.
A bank representative is selling insurance products in, or on behalf of, the bank. What may the representative NOT require the customer to do?
a. Pre-pay a portion of the initial premium
b. Complete an application for the insurance on the premises
c. Obtain a medical examination for life insurance coverage
d. Purchase the insurance from an affiliate of the institution
d. Purchase the insurance from an affiliate of the institution
Requiring the purchase from the bank or an affiliate is not permitted.
