Questions and Answers
What is the main purpose of the Fair Credit and Reporting Act?
Protect consumers with guidelines regarding credit reporting and distribution.
What is a plan in which an employer pays insurance benefits from a fund derived from the employer's current revenues called?
A self-funded plan.
What kind of life insurance policy issued by a mutual insurer provides a return of divisible surplus?
Participating life insurance policy.
Why are dividends from a mutual insurer not subject to taxation?
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Under the Fair Credit Reporting Act, what is the maximum penalty that may be imposed on Ken for obtaining consumer information reports under false pretenses?
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What is the minimum penalty for Karen, who attained personal information about a client without a legitimate reason under the McCarran-Ferguson Act?
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A fraternal benefit society has each of the following characteristics EXCEPT:
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Who regulates an insurer's claim settlement practices?
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What type of insurer is owned by its policy owners?
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Study Notes
Fair Credit and Reporting Act
- Main purpose is to protect consumers through guidelines on credit reporting and distribution.
- Ensures accurate information is reported and gives consumers rights to dispute inaccuracies.
Self-Funded Plan
- An insurance plan where the employer pays benefits from its own revenue rather than through insurance premiums.
- Allows for more control over funds and potentially lower costs for the employer.
Participating Life Insurance Policy
- Life insurance offered by a mutual insurer that provides a return of divisible surplus to policyholders.
- Policyholders may receive dividends based on the insurer's profits.
Tax Treatment of Dividends
- Dividends from mutual insurers are not taxed as they are considered a return of premium, not income.
- This treatment provides a financial benefit to policyholders.
Penalties for False Information
- Maximum penalty under the Fair Credit Reporting Act for obtaining consumer reports under false pretenses is $5,000 and up to one year in prison.
- Stricter regulations aim to deter fraudulent practices in the handling of consumer information.
Penalties under McCarran-Ferguson Act
- Minimum penalty for obtaining personal information without legitimate reason is $10,000 or up to one year in jail.
- Protects consumer privacy and imposes severe consequences for violations.
Characteristics of Fraternal Benefit Societies
- Do not exist for profit; aim to provide benefits to members.
- Incorporated and organized without capital stock, emphasizing member benefits over profits.
Regulation of Insurer's Claim Practices
- Claim settlement practices are regulated by state insurance departments.
- Ensures fair treatment of claimants and compliance with state laws.
Mutual Insurer Definition
- A mutual insurer is owned by its policyowners, who are also its insured.
- Allows policyowners to have a say in management and receive dividends, aligning interests between the company and its members.
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Description
Test your knowledge with these flashcards based on Chapter 1 of Xcel. Cover key concepts like credit reporting guidelines and self-funded insurance plans. Perfect for reviewing essential terms and definitions.
