Lesson 5

Question 1

Insurance regulation in the U.S. has taken shape through several key U.S. Supreme Court decisions and eventual laws pertaining to who regulates insurance in the U.S. Insurance is mainly regulated on the ______ level; however, the ______ plays a specific role in regulation as well.

Answer 1

state

federal government

Question 2

Throughout the 1800s, the U.S. insurance industry was strictly regulated by ______ and was considered outside of the jurisdiction of ______.

Answer 2

the states

the federal government

Question 3

As time went on, the federal government began to view insurance as a form of ______, thus wanting to regulate it.

Answer 3

interstate commerce

Question 4

The ______ has jurisdiction over interstate commerce in the U.S.

Answer 4

federal government

Question 5

According to the Supreme Court case ______, it was one of the first attempts of the federal government to try to regulate insurance as ______.

Answer 5

Paul v. Virginia

interstate commerce

Question 6

The Supreme Court, in ______ , decided that issuing an insurance policy is not considered a transaction of commerce; therefore, it cannot be regulated by the federal government as ______. Although this ruling would later be reversed, for 75 years following this Supreme Court decision, insurance was not considered to be ______, nor was it regulated by the federal government.

Answer 6

Paul v. Virginia

interstate commerce

interstate commerce

Question 7

What event is known for creating the New York Insurance Code?

Answer 7

Armstrong Investigation (1905)

Question 8

The outcome of ______ led to stricter regulation of insurance companies by ______, which ultimately led to other states adopting similar insurance regulation.

Answer 8

The Armstrong Investigation

the state

Question 9

This Supreme Court case placed the regulation of insurance within the authority of the federal government by defining insurance as a form of interstate commerce.

Answer 9

United States v. Southeastern Underwriters Association (1944)

Question 10

Due to the conflicts that arose from the United States v Southeastern Underwriters Association decision, Congress later enacted the ______ to further define the roles of the federal and state governments.

Answer 10

‘McCarran-Ferguson Act’

Question 11

______ ratified legislation in all states to conform to federal law; however, Congress still concluded that ______ of insurance made the most sense from a consumer’s standpoint.

Answer 11

The McCarran-Ferguson Act

state regulation

Question 12

In an attempt by the FTC to regulate ______, the Supreme Court decided, due to the McCarran-Ferguson Act, that a federal agency such as the FTC had no ruling or authority over the states regarding ______.

Answer 12

insurance advertising

insurance advertising regulation

Question 13

Both ______ were questioned and concluded to be securities, instead of insurance; therefore, the Supreme Court decided that insurance companies selling ______ were to be regulated under the authority of both the Securities and Exchange Commission (SEC), and the states.

Answer 13

annuities and variable life insurance

variable life products and annuities

Question 14

The ______ states that all consumers have the right to keep personal financial information private between the collecting party and the consumer. At no time may ______ be given to a non-affiliated third party unless an Initial Privacy Notice, or a notice that accurately reflects the insurer’s privacy policies and practices, is given by the insurer to the consumer regarding disclosure of this information.

Answer 14

Fair Credit Reporting Act

private personal and financial information

Question 15

The ______ requires disclosure of any ‘financial institution’ that denies coverage to a consumer. In addition, if a consumer is denied coverage, he or she has the right to dispute this denial and provide correct information if inaccurate information is portrayed about the consumer.

Answer 15

Fair Credit Reporting Act

Question 16

A ______ is defined as any institution engaged in activities that are financial in nature or incidental to such financial activities.

Answer 16

Financial Institution

Question 17

The Fair Credit Reporting Act was created to ______ and that a consumer’s privacy is not at risk.

Answer 17

ensure that correct information is obtained regarding a consumer

Question 18

Regarding the Fair Credit Reporting Act, individuals must be notified within ______ days from the date that a credit report has been requested. In addition, the credit reporting agency must advise the individual of such report being requested as well as provide him or her with ______, if requested by the individual.

Answer 18

three (3)

a summary of the report within five (5) days

Question 19

A consumer has the right to know ______.

Answer 19

the identity of anyone who is questioned regarding a credit report

Question 20

If the consumer is rejected, due to findings in a report, information regarding the consumer reporting agency must be ______.

Answer 20

provided to the consumer

Question 21

The consumer reporting agency must disclose any information in the event an applicant requests it; however, an insurance company is ______.

Answer 21

not obligated to disclose such information to an applicant

Question 22

If an individual disagrees with the agency’s report, he or she has the right to ______.

Answer 22

file a statement to the insurer that better clarifies any negative issues presented by the insurer

Question 23

According to a study conducted by the Privacy Protection Study Commission in the early 1970s, insurance companies were among the top companies that ______. Due to the size and depth of the information collected by insurers, legislation was passed to ______ this personal consumer information. The Privacy Act set forth the standards of fair information practices that govern the ______ of personally identifiable information about individuals.

Answer 23

collected personal consumer information

regulate and safeguard

collection, maintenance, use, and dissemination

Question 24

The goals of the Privacy Act are to minimize consumer intrusiveness, be fair and impartial in collecting and reporting on consumers, and ______.

Answer 24

To build public trust regarding the safeguarding of personal information collection

Question 25

Also referred to as the Gramm-Leach-Bliley Act (GLBA) or (GLB Act), the Financial Services Modernization Act, enacted by Congress in 1999, changed the way in which financial institutions such as commercial banks, investment companies and insurance carriers conduct business by allowing these various institutions to ______, providing consumers with a larger, more centralized and more diverse selection of financial products.

Answer 25

merge together into what are commonly called financial supermarkets

Question 26

Under ______, regulation of financial institutions is based on the type of product or service marketed instead of on the ______. This means that a financial institution can become a conglomerate of banking, securities and insurance products, all marketed under the same company’s name. The GLBA reversed previous legislation that limited the financial business of banks, securities companies and insurance carriers based on the company itself, rather than the products or services it sold.

Answer 26

GLBA, or Financial Service Modernization Act

type of company selling the product

Question 27

Upon the enactment of the GLBA, financial institutions such as federal and state banks, mutual and stock insurance companies, and mortgage and securities companies began to ______. As a result of the GLBA, various financial institutions began to capture a larger customer base, and in the process, the disclosure and collection of a larger amount of private consumer information.

Answer 27

merge together and offer a wider selection of products such as life and health insurance alongside other financial products and services already provided by the bank or lending institution

Question 28

Due to the large amount of private information disclosed to these financial institutions, a major part of the GLBA is the requirement that ______.

Answer 28

all financial institutions design, implement and maintain ‘safeguards’ to protect private information obtained from consumers, and to maintain customer privacy once an ongoing relationship is established with the financial institution

Question 29

The GLBA defines a Consumer as ______. A Customer is defined as ______.

Answer 29

an individual, or the legal representative of such an individual, who obtains, from a financial institution, financial products or services which are to be used primarily for personal, family, or household purposes

a consumer who has a continuing ‘customer relationship’ with a financial institution in which it provides one or more insurance products or services to the individual that are to be used primarily for personal, family or household purposes.

Question 30

A ______ has a continuing relationship with a financial institution if he or she is a current policyholder or policyowner of an insurance product issued by or through the financial institution; or if he or she obtains financial, investment or economic advisory services relating to an insurance product or service from the financial institution for a fee.

Answer 30

customer

Question 31

In protecting both consumers and customers, the privacy requirements of the GLBA include the ______ which regulates the collection and disclosure of non-public personal information, and the ______which requires financial institutions to set up and maintain a system of protecting consumer and customer records. In addition, the GLBA regulates against attempts to obtain non-public personal information from consumers and customers under false pretenses, a method known as ______.

Answer 31

‘Financial Privacy Rule,’

‘Safeguards Rule,’

Pre-texting

Question 32

As mandated by the GLBA, a financial institution must disclose to all consumers in advance of any contractual agreement between the consumer and financial institution that it intends to ______. It requires clear disclosure by all financial institutions of their privacy policy regarding the sharing of ______.

Answer 32

collect and retain both public and private information on the consumer as part of the contractual agreement between the financial institution and consumer

non-public personal information with both affiliates and third parties

Question 33

The GLBA further clarifies that the disclosure of a financial institution’s privacy policy is required to take place at the time of ______.

Answer 33

establishing a ‘customer relationship’ with a consumer, and not less than annually during the continuation of such relationship

Question 34

The term ‘non-public personal information,’ also referred to as NPI, is defined as personally identifiable financial information provided by a consumer to a financial institution, resulting from any transaction with the consumer or any service performed for the consumer, and ______.

Answer 34

Otherwise obtained by the financial institution

Question 35

Non-public personal information includes any list, description or other grouping of consumers (and publicly available information pertaining to them) that is derived using ______.

Answer 35

any non-public personal information other than publicly available information

Question 36

‘Public personal information’ includes any list, description, or other grouping of consumers (and publicly available information pertaining to them) that is derived ______.

Answer 36

without using any non-public personal information

Question 37

Although information is collected by a financial institution at the time of establishing a customer relationship with a consumer, the GLBA requires a notice to consumers and an opportunity to ______, or allow a consumer the opportunity to prevent the sharing of certain non-public financial information with non-affiliated third parties, subject to certain exceptions.

Answer 37

Opt Out

Question 38

A financial institution may not disclose non-public personal information to a non-affiliated third party unless such financial institution clearly and conspicuously discloses to the consumer, in writing or in electronic form or other form permitted, that such information may be disclosed to such third party, the consumer is given the opportunity, before the time that such information is initially disclosed, to direct that such information not be disclosed to such third party, and ______.

Answer 38

The consumer is given an explanation of how the consumer can exercise that nondisclosure option

Question 39

A non-affiliated third party that receives (from a financial institution) non-public personal information shall not, directly or through an affiliate of such receiving third party, ______.

Answer 39

disclose such information to any other person that is a non-affiliated third party of both the financial institution and such receiving third party.

Question 40

A financial institution shall not disclose, other than to a consumer reporting agency, ______ to any non-affiliated third party for use in telemarketing, direct mail marketing or other marketing through electronic mail to the consumer.

Answer 40

an account number or similar form of access number or access code for a credit card account, deposit account, or transaction account of a consumer

Question 41

In regards to life and health insurance, consumers (insurance applicants) Opt In, or give permission to an insurer to disclose and share non-public personal information. Because an insurer often times needs to disclose and share specific applicant information with a third party such as a doctor’s office or credit agency in order to issue a policy, the insurer must first ______.

Answer 41

obtain the applicant’s permission before sharing non-public personal information with necessary third parties involved in the issuance of the policy

Question 42

Also mandated by the GLBA, appropriate standards were established to protect consumer privacy including technical, administrative, and physical safeguards to insure the security and confidentiality of customer records and information, to protect against any anticipated threats or hazards to the security or integrity of such records, and ______.

Answer 42

To protect against unauthorized access to or use of such records or information which could result in substantial harm or inconvenience to any customer

Question 43

______ are the electronic or physical methods used to access, collect, store, use, transmit, protect or dispose of non-public personal information, whether that information is maintained in paper, electronic or other form.

Answer 43

Customer Information Systems

Question 44

A ______ is defined as any person or entity that maintains, processes, or otherwise is permitted access to customer information through its provision of services directly to the licensee.

Answer 44

Service Provider

Question 45

It is a violation of the GLBA for any person to obtain or attempt to obtain, or cause to be disclosed or attempt to cause to be disclosed to any person, customer information of a financial institution relating to another person by making a false, fictitious, or fraudulent statement or representation to an officer, employee, or agent of a financial institution, by making a false, fictitious, or fraudulent statement or representation to a customer of a financial institution; or by ______.

Answer 45

providing any document to an officer, employee, or agent of a financial institution, knowing that the document is forged, counterfeit, lost, or stolen, was fraudulently obtained, or contains a false, fictitious, or fraudulent statement or representation