Industry Oversight and Regulation

Question 1

• 1869 Paul v. Virginia:

Answer 1

the U.S. Supreme Court ruled that insurance transactions crossing state lines are not interstate
commerce.

Question 2

1905 The Armstrong Investigation Act

Answer 2

gave the authority to the states to regulate insurance

Question 3

1944 United States v. South-Eastern Underwriters Association

Answer 3

ruled that insurance transactions crossing state lines are

interstate commerce and are subject to federal regulation.

Question 4

1945 The McCarran Ferguson Act

Answer 4

states that while the federal government has authority to regulate the insurance industry, it would not exercise its right if the insurance industry was regulated effectively and adequately on the state
level minimum penalty of a producer who has obtained personal information
about a client without having a legitimate reason to do so is a fine of $10,000

Question 5

1970 Fair Credit Reporting Act:

Answer 5

provides individuals privacy protection and fair and accurate credit reporting. Insurance
companies are required to notify applicants if a credit check will be made on them fine of
$5,000.

Question 6

1999 Gramm-Leach-Bliley Act (Financial Services Modernization Act):

Answer 6

This law repealed the Glass-Steagall Act; this

allows Banks, Retail Brokerages and Insurance companies to enter each other’s line of business.

Question 7

2001 USA PATRIOT ACT

Answer 7

(Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept
and Obstruct Terrorism Act): as it relates to the insurance industry, is designed to detect and deter terrorists and their
funding by imposing anti-money laundering requirements on brokerage firms and financial institutions

Question 8

2003 National Do Not Call Registry:

Answer 8

Insurance calls are not exempt from the no not call registry

Question 9

2010 Patient Protection and Affordable Care Act (PPACA):

Answer 9

shortened to the Affordable Care Act (ACA),

represents one of the most significant regulatory overhauls and expansions of coverage in U.S. history.

Question 10

The National Association of Insurance Commissioners (NAIC)

Answer 10

organization composed of insurance commissioners from
all 50 states, the District of Columbia and the 4 US territories. They are responsible for recommending appropriate laws and
regulations. They are responsible for the creation of the Advertising Code and the Unfair Trade Practices Act, and the
Medicare Supplement Insurance Minimum Standards Model Act

Question 11

. The NAIC has four broad objectives:

Answer 11

1. To encourage uniformity in state insurance laws and regulations
2. To assist in the administration of those laws and regulations by promoting efficiency
3. To protect the interest of policyowners and consumers
4. To preserve state regulation of the insurance business

Question 12

Advertising Code:

Answer 12

the code specifies certain words and phrases that are considered misleading and are not to be used in
advertising of any kind.

Question 13

Unfair Trade Practices Act

Answer 13

: gives chief financial officer the power to investigate insurance companies and producers to
impose penalties. In addition to that, the act gives officers the authority to seek a court injunction to restrain insurers from
using any methods believed to be unfair.

Question 14

NAIFA (National Association of Insurance and Financial Advisors)

NAHU (National Association of Health Underwriters)

Answer 14

Members of these organizations are life and health agents dedicated to supporting the industry and advancing the quality
of service provided by insurance professionals. These organizations created a Code of Ethics detailing the expectations of
agents in their duties toward clients

Question 15

To sell insurance, each state requires high level of professionalism and ethics. Some of these standards and ethics are:

Answer 15

• Selling to needs: agents must first determine the consumers’ needs then determine which policy fits their needs best.
• Suitability of recommended products: an ethical agent must be able to assess the correlation between a recommended
product and the consumer’s needs.
• Full and accurate disclosure: an ethical agent must inform consumers of the benefits and limitations of recommended
products. Recommendations must be accurate, complete and clear.
• Documentation: an ethical agent must document each client’s meeting and transaction.
• Client Services: an ethical agent must know that a sale does not mark the end of the relationship, but rather the
beginning of the relationship. Therefore, routine follow-up calls are recommended.
• Buyer’s Guide: each state requires agents to deliver a buyer’s guide to consumers that explain various types of life
insurance products and other information on the recommended policy, such as premiums, dividends, and benefit
amounts.
• Policy Summary: help consumers evaluate the suitability of the recommended product.

Question 16

Reserves:

Answer 16

accounting measurement of an insurer’s future obligations to its policyholders. They are classified as
liabilities on the insurance company’s accounting statements since they must be settled at a future date. Reserves are set aside by an insurance company and designated for the payment of future claims

Question 17

Liquidity:

Answer 17

An insurer’s ability to make unpredictable payouts to policyowners

Question 18

Guaranty Associations

Answer 18

are established by all states to support insurers and protect consumers in case an insurer becomes
insolvent. State life and health guaranty associations provide a safety net for all member life, health and annuities insurers
in a particular state. Guaranty associations protect insureds in the event of insurer insolvency, or inability to pay claims up
to a certain limit.

Question 19

Independent Rating Services

Answer 19

are credit rating agencies that rate or “grade” the financial strength and stability of insurers
based on claims, reserves, and company profits

e nationally recognized statistical rating organizations that rate insurers
are A. M. Best, Moody’s, Standard and Poor’s, and Fitch Ratings