Podcast
Questions and Answers
When must the insurance company inform Jones of his rights under the Fair Credit Reporting Act?
When must the insurance company inform Jones of his rights under the Fair Credit Reporting Act?
when he completes the application
When must agents inform applicants that a credit report may be performed?
When must agents inform applicants that a credit report may be performed?
upon application
When must the two disclosures pertaining to the Gramm-Leach-Bliley Act be made?
When must the two disclosures pertaining to the Gramm-Leach-Bliley Act be made?
When the consumer relationship is established; and after disclosure of protected information
Who is subject to the provisions of the Fraud and False Statements Act? (Select all that apply)
Who is subject to the provisions of the Fraud and False Statements Act? (Select all that apply)
Signup and view all the answers
According to the Fair Credit Reporting Act, consumer reports can have which of the following information?
According to the Fair Credit Reporting Act, consumer reports can have which of the following information?
Signup and view all the answers
Which of the following correctly identifies the two types of reports insurance underwriters use to obtain credit information about an applicant? (Select all that apply)
Which of the following correctly identifies the two types of reports insurance underwriters use to obtain credit information about an applicant? (Select all that apply)
Signup and view all the answers
In the underwriting of insurance policies, some amount of discrimination is present in many cases, because of differing levels of risk.
In the underwriting of insurance policies, some amount of discrimination is present in many cases, because of differing levels of risk.
Signup and view all the answers
Making a misleading statement to induce a person to lapse, surrender, or convert an insurance policy is known as?
Making a misleading statement to induce a person to lapse, surrender, or convert an insurance policy is known as?
Signup and view all the answers
The practice of using misrepresentation to induce a policyholder to replace a policy is called?
The practice of using misrepresentation to induce a policyholder to replace a policy is called?
Signup and view all the answers
Defamation occurs when?
Defamation occurs when?
Signup and view all the answers
In the scenario where Don, an insurance agent, offers favorable rates to a church member, which of the following statements is FALSE? (Select all that apply)
In the scenario where Don, an insurance agent, offers favorable rates to a church member, which of the following statements is FALSE? (Select all that apply)
Signup and view all the answers
In life and health insurance, a person's greatest asset is?
In life and health insurance, a person's greatest asset is?
Signup and view all the answers
What term means the insured's demand for payment of benefits?
What term means the insured's demand for payment of benefits?
Signup and view all the answers
Another term which means the same as insurance policy is?
Another term which means the same as insurance policy is?
Signup and view all the answers
Which of the following correctly identifies the most important principle(s) of insurance?
Which of the following correctly identifies the most important principle(s) of insurance?
Signup and view all the answers
Mathematicians who analyze statistical risk information for insurance companies are called?
Mathematicians who analyze statistical risk information for insurance companies are called?
Signup and view all the answers
Insurance is?
Insurance is?
Signup and view all the answers
All of the following correctly describe risk pooling?
All of the following correctly describe risk pooling?
Signup and view all the answers
Which of the following correctly describes the law of large numbers?
Which of the following correctly describes the law of large numbers?
Signup and view all the answers
The law of large numbers and spreading the uncertainty of loss over a large number of people is?
The law of large numbers and spreading the uncertainty of loss over a large number of people is?
Signup and view all the answers
Risk pooling is best described by which of the following?
Risk pooling is best described by which of the following?
Signup and view all the answers
Actuaries do all of these things?
Actuaries do all of these things?
Signup and view all the answers
Another term for insurance company is?
Another term for insurance company is?
Signup and view all the answers
Which of the following best describes loss?
Which of the following best describes loss?
Signup and view all the answers
Which of the following terms means risk is spread by sharing the possibility of loss over a large number of people?
Which of the following terms means risk is spread by sharing the possibility of loss over a large number of people?
Signup and view all the answers
Risk pooling is characterized by?
Risk pooling is characterized by?
Signup and view all the answers
The _________ is a small amount of money the insured pays to keep an insurance policy in force.
The _________ is a small amount of money the insured pays to keep an insurance policy in force.
Signup and view all the answers
Transferring uncertainty of loss to the insurance company is the definition of?
Transferring uncertainty of loss to the insurance company is the definition of?
Signup and view all the answers
Compensates the beneficiaries of the policy for their actual economic losses up to the limiting amount of the insurance policy 'to make whole'. For health insurance the policy agrees to indemnify the insured for accidents, illness or disability.
Compensates the beneficiaries of the policy for their actual economic losses up to the limiting amount of the insurance policy 'to make whole'. For health insurance the policy agrees to indemnify the insured for accidents, illness or disability.
Signup and view all the answers
A limit of liability is?
A limit of liability is?
Signup and view all the answers
Policies may also contain sub-limits, termed inside limits, which?
Policies may also contain sub-limits, termed inside limits, which?
Signup and view all the answers
Is the tendency for poorer than average risks to seek out insurance. Insurers must seek to minimize adverse selection.
Is the tendency for poorer than average risks to seek out insurance. Insurers must seek to minimize adverse selection.
Signup and view all the answers
Is defined as spreading risk from one insurer to one or more other insurers.
Is defined as spreading risk from one insurer to one or more other insurers.
Signup and view all the answers
The insurer that accepts the additional risk is termed the?
The insurer that accepts the additional risk is termed the?
Signup and view all the answers
The insurer that gives the risk to the reinsurer is termed the?
The insurer that gives the risk to the reinsurer is termed the?
Signup and view all the answers
Life insurance is designed to?
Life insurance is designed to?
Signup and view all the answers
Health insurance is designed to?
Health insurance is designed to?
Signup and view all the answers
Annuities protect against the risk of?
Annuities protect against the risk of?
Signup and view all the answers
Property insurance protects against the risk of?
Property insurance protects against the risk of?
Signup and view all the answers
Casualty insurance protects against the risk of?
Casualty insurance protects against the risk of?
Signup and view all the answers
Credit insurance protects against the risk that?
Credit insurance protects against the risk that?
Signup and view all the answers
Variable insurance is comprised of?
Variable insurance is comprised of?
Signup and view all the answers
Variable insurance products invest premium dollars in securities, which carry?
Variable insurance products invest premium dollars in securities, which carry?
Signup and view all the answers
Requirements of selling variable products are?
Requirements of selling variable products are?
Signup and view all the answers
Judith's health insurance will pay a maximum of $3 million for all of her claims. Which of the following terms best describes this policy feature?
Judith's health insurance will pay a maximum of $3 million for all of her claims. Which of the following terms best describes this policy feature?
Signup and view all the answers
Which of the following is the consideration an insured pays for insurance coverage?
Which of the following is the consideration an insured pays for insurance coverage?
Signup and view all the answers
Adverse selection is characterized by?
Adverse selection is characterized by?
Signup and view all the answers
Judith is injured in a car accident. She incurs a covered loss of $50,000. She is required to pay $3,000 before the insurer will cover 80% of the covered loss. Which of the following terms best describes the $3,000 Judith must pay?
Judith is injured in a car accident. She incurs a covered loss of $50,000. She is required to pay $3,000 before the insurer will cover 80% of the covered loss. Which of the following terms best describes the $3,000 Judith must pay?
Signup and view all the answers
Reinsurance is defined as?
Reinsurance is defined as?
Signup and view all the answers
JKL Insurer transfers risk to PQR Insurer. JKL Insurer transfers some other risks to GHI Insurer. When JKL Insurer has a loss on risks transferred to both PQR and GHI Insurers, which insurer(s) pays the claims?
JKL Insurer transfers risk to PQR Insurer. JKL Insurer transfers some other risks to GHI Insurer. When JKL Insurer has a loss on risks transferred to both PQR and GHI Insurers, which insurer(s) pays the claims?
Signup and view all the answers
The total amount an insurer will pay for an insured risk is the definition of?
The total amount an insurer will pay for an insured risk is the definition of?
Signup and view all the answers
The term describing the insured's notification to the insurer requesting payment for a covered loss is?
The term describing the insured's notification to the insurer requesting payment for a covered loss is?
Signup and view all the answers
ABC Insurer transfers risk to DEF Insurer. ABC Insurer decides to transfer some other risks to LMO Insurer. When ABC Insurer needs to submit a claim on risks that were reinsured to DEF Insurer, which insurer(s) pays the claims?
ABC Insurer transfers risk to DEF Insurer. ABC Insurer decides to transfer some other risks to LMO Insurer. When ABC Insurer needs to submit a claim on risks that were reinsured to DEF Insurer, which insurer(s) pays the claims?
Signup and view all the answers
The consideration Walter pays for his insurance coverage is called the?
The consideration Walter pays for his insurance coverage is called the?
Signup and view all the answers
Stock insurers, also referred to as capital stock insurers, are?
Stock insurers, also referred to as capital stock insurers, are?
Signup and view all the answers
Mutual insurers are?
Mutual insurers are?
Signup and view all the answers
Mutual insurers are distinct from stock insurers in two primary ways:
Mutual insurers are distinct from stock insurers in two primary ways:
Signup and view all the answers
Transformation of a stock insurer into a mutual insurer is termed?
Transformation of a stock insurer into a mutual insurer is termed?
Signup and view all the answers
Transformation of a mutual insurer into a stock insurer is termed?
Transformation of a mutual insurer into a stock insurer is termed?
Signup and view all the answers
Dividends paid out from mutual insurers are considered?
Dividends paid out from mutual insurers are considered?
Signup and view all the answers
Dividends paid out from stock insurers are simply?
Dividends paid out from stock insurers are simply?
Signup and view all the answers
Service providers, or noncommercial organizations, are not technically 'insurers' and do not sell insurance. They are better described as?
Service providers, or noncommercial organizations, are not technically 'insurers' and do not sell insurance. They are better described as?
Signup and view all the answers
HMOs provide the?
HMOs provide the?
Signup and view all the answers
PPOs provide?
PPOs provide?
Signup and view all the answers
Fraternal benefit societies, also known as fraternal insurers or simply fraternals, are?
Fraternal benefit societies, also known as fraternal insurers or simply fraternals, are?
Signup and view all the answers
The purpose of social insurance is to?
The purpose of social insurance is to?
Signup and view all the answers
Social Security, also known as OSADI (Old Age, Survivors' and Disability Insurance), provide?
Social Security, also known as OSADI (Old Age, Survivors' and Disability Insurance), provide?
Signup and view all the answers
Medicare is part of the Social Security program, and provides?
Medicare is part of the Social Security program, and provides?
Signup and view all the answers
Medicaid provides health care?
Medicaid provides health care?
Signup and view all the answers
Authorized insurers, also referred to as admitted or licensed insurers, are insurers who have?
Authorized insurers, also referred to as admitted or licensed insurers, are insurers who have?
Signup and view all the answers
An insurer that conducts business in the state it was incorporated is a?
An insurer that conducts business in the state it was incorporated is a?
Signup and view all the answers
An insurer that conducts business in a state or district in which it wasn't incorporated is a?
An insurer that conducts business in a state or district in which it wasn't incorporated is a?
Signup and view all the answers
An insurer that conducts business in a country in which it wasn't incorporated is?
An insurer that conducts business in a country in which it wasn't incorporated is?
Signup and view all the answers
BlueShield pays?
BlueShield pays?
Signup and view all the answers
Which type of insurer/organization is in the business of insurance to make a profit?
Which type of insurer/organization is in the business of insurance to make a profit?
Signup and view all the answers
What are the two distinct characteristics that distinguish mutual insurers from stock insurers?
What are the two distinct characteristics that distinguish mutual insurers from stock insurers?
Signup and view all the answers
Mutual companies pay dividends to which of the following in order to return overcharged premiums?
Mutual companies pay dividends to which of the following in order to return overcharged premiums?
Signup and view all the answers
Fraternal benefit societies are described by all of the following?
Fraternal benefit societies are described by all of the following?
Signup and view all the answers
PQR only sells accident and health insurance policies, covering hospital, medical and surgical costs. PQR operates on a not-for-profit basis. Based on the information provided, PQR Insurer CANNOT be a?
PQR only sells accident and health insurance policies, covering hospital, medical and surgical costs. PQR operates on a not-for-profit basis. Based on the information provided, PQR Insurer CANNOT be a?
Signup and view all the answers
All of the following are providers of government insurance?
All of the following are providers of government insurance?
Signup and view all the answers
Which of the following statements best describes the taxation of insurance issued by fraternals?
Which of the following statements best describes the taxation of insurance issued by fraternals?
Signup and view all the answers
Which of the following insurers pays dividends?
Which of the following insurers pays dividends?
Signup and view all the answers
Service providers provide prepaid health care plans and?
Service providers provide prepaid health care plans and?
Signup and view all the answers
A nonparticipating insurer is?
A nonparticipating insurer is?
Signup and view all the answers
Noncommercial organizations offer strictly?
Noncommercial organizations offer strictly?
Signup and view all the answers
A person who is guilty of a fraudulent act may be subject to the following penalties?
A person who is guilty of a fraudulent act may be subject to the following penalties?
Signup and view all the answers
All of the following may not be included in a consumer report, unless the consumer credit report is requested for a life insurance policy with a face amount of $150,000 or more, EXCEPT?
All of the following may not be included in a consumer report, unless the consumer credit report is requested for a life insurance policy with a face amount of $150,000 or more, EXCEPT?
Signup and view all the answers
What is the purpose of the Fair Credit Reporting Act?
What is the purpose of the Fair Credit Reporting Act?
Signup and view all the answers
The Fair Credit Reporting Act states that generally, consumer reports cannot contain the following information, EXCEPT?
The Fair Credit Reporting Act states that generally, consumer reports cannot contain the following information, EXCEPT?
Signup and view all the answers
With regard to an investigative consumer report, consumers must be informed that they have the right to request additional information about the report; such information must be provided to consumers within ____ day(s) if requested.
With regard to an investigative consumer report, consumers must be informed that they have the right to request additional information about the report; such information must be provided to consumers within ____ day(s) if requested.
Signup and view all the answers
With respect to life and health insurance guaranty associations, what are agents prohibited from doing?
With respect to life and health insurance guaranty associations, what are agents prohibited from doing?
Signup and view all the answers
An agent is guilty of committing fraud. What must the person obtain in order to transact insurance?
An agent is guilty of committing fraud. What must the person obtain in order to transact insurance?
Signup and view all the answers
The purpose of the Gramm-Leach-Bliley Act is to?
The purpose of the Gramm-Leach-Bliley Act is to?
Signup and view all the answers
When an insurer requests an investigative consumer report on an applicant, which of the following is true?
When an insurer requests an investigative consumer report on an applicant, which of the following is true?
Signup and view all the answers
All of the following policies and contracts are typically covered by state insurance guaranty associations, EXCEPT?
All of the following policies and contracts are typically covered by state insurance guaranty associations, EXCEPT?
Signup and view all the answers
What governmental agency operates the Fair Credit Reporting Act?
What governmental agency operates the Fair Credit Reporting Act?
Signup and view all the answers
The information on a person's credit report is cleared after how many years?
The information on a person's credit report is cleared after how many years?
Signup and view all the answers
Investigative consumer reports cannot be performed unless the consumer has been notified in writing of the report within ______ day(s) of when the report was initially requested.
Investigative consumer reports cannot be performed unless the consumer has been notified in writing of the report within ______ day(s) of when the report was initially requested.
Signup and view all the answers
Bob has a second mortgage with XYZ bank, and Shirley has one checking and two savings accounts with ABC bank. Shirley decides to cash one of her paychecks at XYZ bank because she doesn't have time to stop at her bank. Which of the following is true under the Gramm-Leach-Bliley Act?
Bob has a second mortgage with XYZ bank, and Shirley has one checking and two savings accounts with ABC bank. Shirley decides to cash one of her paychecks at XYZ bank because she doesn't have time to stop at her bank. Which of the following is true under the Gramm-Leach-Bliley Act?
Signup and view all the answers
An insurer requests an investigative consumer report on an applicant. All of the following are true, EXCEPT?
An insurer requests an investigative consumer report on an applicant. All of the following are true, EXCEPT?
Signup and view all the answers
Study Notes
Earning Power in Insurance
- A person's greatest asset in life and health insurance is their earning power.
Claims and Policies
- A claim refers to the insured's formal request for payment of benefits.
- An insurance contract is another term for an insurance policy.
Key Principles of Insurance
- Important principles include:
- Law of large numbers: Predicts future losses as group size increases.
- Risk pooling: Individual risks are combined to share losses among a group.
- Insurable interest: The insured must have a legitimate interest in the insured risk.
Role of Actuaries
- Actuaries are mathematicians who evaluate statistical risk data for insurance companies.
Definition of Insurance
- Insurance is characterized as a transfer of uncertainty of loss from the insured to the insurer.
Understanding Risk Pooling
- Risk pooling involves the sharing of losses among group members, allowing for mass insurance coverage at a low cost.
- It helps in predicting losses and maintaining steady average losses within the group.
Loss and Liability
- Loss is defined as an unintentional decrease in the value of an asset.
- A limit of liability is the maximum amount payable by the insurer for a covered risk, applicable in property, casualty, and health insurance.
Types of Insurance
- Indemnity insurance compensates beneficiaries for actual economic losses up to the policy limit.
- Life insurance protects against risks related to premature death, covering various final expenses.
- Health insurance protects against financial loss due to illness or disability, covering medical expenses.
- Annuities provide guaranteed income in the event of living longer than expected.
- Property insurance protects against damage and destruction of property.
- Casualty insurance addresses liability for harms to others or their property.
- Credit insurance safeguards against repayment risks due to reasons like death or disability.
Insurance Company Types
- Stock insurers are owned by shareholders and have a capital fund.
- Mutual insurers are owned by policyholders and do not have stockholders; profits can be distributed among members.
- Fraternal benefit societies are nonprofit organizations providing insurance to members, often based on religious or ethnic affiliations.
Government Insurance
- Administered programs such as Social Security, Medicare, and Medicaid provide essential health and financial protections to specific populations.
- The purpose of social insurance is to offer protection against fundamental risks through income redistribution.
Regulatory Framework
- The Gramm-Leach-Bliley Act enables financial institution mergers to enhance competitiveness.
- The Fair Credit Reporting Act governs the collection and usage of credit information.
- Adverse Selection refers to the tendency of high-risk individuals to seek insurance, which insurers attempt to mitigate.
Insurance Practices
- Agents must inform applicants of potential credit checks and their rights under relevant acts during the application process.
- Consumer reports must exclude certain outdated negative information unless related to significant insurance policies.
Penalties and Enforcement
- Fraudulent acts in insurance can lead to heavy civil fines and criminal imprisonment.
- Insurance actuaries must comply with various regulations, including the provisions of the Fraud and False Statements Act.
Summary of Policies and Reinsurance
- Reinsurance involves spreading risk between insurers to manage their risk exposure effectively.
- Deductibles are amounts policyholders must pay before coverage begins, impacting their out-of-pocket costs.### Investigative Consumer Reports and Consumer Reports
- Investigative consumer reports involve detailed assessments of an individual's background, including credit history, character, and reputation.
- Consumer reports provide a summary of an individual's credit history and are typically used by lenders and insurers to evaluate risk.
Underwriting of Insurance Policies
- Discrimination exists in insurance underwriting due to varying risk levels among individuals.
- Differing levels of risk affect policy rates, leading to potential unfair treatment of certain applicants.
Twisting
- Twisting refers to making misleading statements to persuade individuals to surrender, lapse, or convert their insurance policies.
- This unethical practice is intended to benefit the agent or insurer at the expense of the policyholder.
Churning
- Churning involves using misrepresentations to convince a policyholder to replace their existing policy with a new one from the same insurer.
- This practice is often detrimental to the policyholder, who may incur unnecessary costs or lose benefits.
Defamation in Insurance
- Defamation occurs when false and derogatory statements about an insurer's financial status are made, harming the insurer's business.
- Such statements must be intentional and aimed at damaging the insurer's reputation to qualify as defamation.
Case Study: Don the Insurance Agent
- Don offered a favorable insurance rate to a community member based on personal connections rather than her financial situation.
- While Don acted with compassion, he engaged in unfair discrimination and broke legal regulations.
- The assertion that Don was involved in twisting in this scenario is false.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
This quiz covers essential principles of insurance, including earning power, claims, and the role of actuaries. Learn about risk pooling, the law of large numbers, and the definition of insurance. Test your understanding of these critical concepts in the insurance industry.