UNIT 3 TEST: Organization & Regulation

Question 1

Beneficent Insurers writes homeowners, auto, and liability insurance for individuals and families…

Answer 1

Beneficent is a multi-line company that specializes in personal lines

Question 2

One of the most important risks covered by insurance policies in the casualty line is the risk that…

Answer 2

You will become liable for damage to others

Question 3

A non-exclusive agent…

Answer 3

Represents more than one company. This type of agent collects commissions on the policy sold but collects no salary from the companies the agent represents

Question 4

Solicitors may not…

Answer 4

A solicitor cannot issue or countersign policies.

A solicitor who often works with or for an agent has more limited authority then the agent. A solicitor sells insurance and may even be authorized to collect premiums.

Question 5

At DEF insurance company, agents are employees of the company who are paid a salary plus commission’s. This is an example of what type of insurance marketing system?

Answer 5

Direct writer

Question 6

A mutual insurance company…

Answer 6

Is owned by its insured. In a mutual company insured are also owners of the company. They can vote to elect the management of the company. Profits are returned to insured in the form of dividends or reductions in future premiums.

Question 7

And agent has all of the following responsibilities to applicants and insured’s except…

Answer 7

Representing the insured in the insurance transaction: under the law of agency, and insurance agent represents the insurance company. A broker represents the insured.

Question 8

The actuarial department…

A)Collects and analyzes data to determine the rates to be charged for insurance:

B)performs inspections and certifications

C)examines the financial and bookkeeping Records of insurance to determine after-the-fact premiums

Answer 8

Collects and analyzes data to determine the rates to be charged for insurance:

the loss control department performs inspections and certifications.

The audit department examines the financial and bookkeeping Records of insurance to determine after-the-fact premiums.

The marketing department determines the company’s overall marketing strategy.

Question 9

Which insurance company department is responsible for excepting and rejecting applications on the basis of company standards?

Answer 9

Underwriting is the process of selecting certain types of risks and rejecting others so the insurer will have profitable book of business

Question 10

Which insurance company department is responsible for paying insurance covered losses?

Answer 10

The claims department sees that the companies insured are adequately indemnified for their losses.

Claim adjusters determine the cause of loss whether the loss is covered by the policy, the value on the loss, and the amount of loss payable by the policy.

Question 11

An insurance company is incorporated in Idaho. In Idaho the insurance company is a domestic company. Same insurance company is also authorized to do business in Montana in Montana the insurance company is a blank company…

Answer 11

Admitted/foreign company.

An insurance company is known as a domestic company in the state in which it was formed and incorporated.

A company that is authorized by a states insurance department to do business in that state is an ADMITTED insurer

An insurance company is known as a foreign company While it is doing business in states other than the state in which it was formed and Incorporated.

Question 12

Who is responsible for licensing insurance agents?

Answer 12

State insurance department: one of their most important duties is agent licensing.

devote much of their time to working with insurance agents

Question 13

Any companies offering a free television to every applicant who agrees to buy insurance through his agency. In most states this is no legal practice known as blank…

Answer 13

Rebating: giving or offering some benefit other than those specified in the policy, such as cash, gifts, or securities, to induce a customer to buy insurance. Rebating illegal in all but two states.

Question 14

State insurance departments are responsible for approving or rejecting blank and blank…

Answer 14

Policy forms: approval or ratification of policy forms endorsements and rates

Rates: used by companies doing business in their states

Question 15

Define prior approval…

Answer 15

Insurers must obtain official approval from the state before using forms or rates

Question 16

Define file and use…

Answer 16

Insurers begin using rates and forms as soon as they are filed with the state.

Question 17

Define use and file…

Answer 17

Insurers must file rates and forms for approval within a certain period after they are first used

Question 18

Define open competition…

Answer 18

Insurers compete with one another with the forms and reads the select, subject only to requirements of adequacy and non-discrimination

Question 19

Define “mandatory”…

Answer 19

Insurers must use states unique forms or rates

Question 20

Blank industries does not have a group health insurance plan for its employees. Instead, it pays employees medical expenses out of a fun specifically created for this purpose. This is an example of blank…

Answer 20

Self insurance: part or all of the risk of loss is born without the benefit of insurance coverage to fall back on if a loss occurs

Question 21

What is the primary reason the state or federal government becomes involved in providing insurance?

Answer 21

To provide insurance that is not available from private insurers. The government sometimes steps in to provide insurance that is not available from private insurers. Flood insurance and Federal crop insurance are examples of insurance provided by the federal government. At the state level the government is involved in providing unemployment insurance that may provide worker’s Compensation benefits through state funds.

Question 22

If an insurance company’s agent makes an error, can the company be held liable? Explain your answer…

Answer 22

Yes: under the principles of agency, actions or knowledge of the agent are considered actions or knowledge of the principal.

Question 23

Which of the following statements concerning regulation of the insurance industry is correct?

Answer 23

The state insurance department is responsible for controlling insurance matters within the state.

Insurance is very closely regulated for the good of the insurance industry and general public

Question 24

Give three reasons that state insurance department regulate insurance company’s financial situations

Answer 24

To preserve solvency.
To detect financial problems.
To protect insureds if insolvency occurs.

A state insurance department monitors the financial health of all companies doing business within its boundaries. Various regulations are designed to preserve insurance company solvency, detect financial problems, and protect insurance if insolvency occurs.