Government Regulation Of Insurance

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Question 1
Free
Multiple Choice

Reasons for regulation of insurance include which of the following?
I)Maintaining insurer solvency
II)Ensuring reasonable rates

Choose correct answer/s
A

I only

B

II only

C

both I and II

D

neither I nor II

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Question 2
Free
Multiple Choice

The right of the states to regulate the business of insurance was first established by

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A

the South-Eastern Underwriters Association case.

B

the case of Paul v. Virginia.

C

the Financial Modernization Act.

D

the Sherman Act.

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Question 3
Free
Multiple Choice

The basis for current state regulation of insurance is

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A

the McCarran-Ferguson Act.

B

Paul v. Virginia.

C

the South-Eastern Underwriters Association case.

D

the National Association of Insurance Commissioners.

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Question 4
Free
Multiple Choice

All of the following statements about the methods of regulating insurance are true EXCEPT

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A

All states have insurance laws that regulate the operations of insurers.

B

Insurers are totally exempt from regulation by federal agencies and laws.

C

The courts regulate insurance in many ways, including the interpretation of policy clauses and provisions.

D

State insurance commissioners, through administrative rulings, have considerable power over insurers doing business in their states.

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Question 5
Free
Multiple Choice

Which of the following statements about the licensing of insurance companies is (are) true?
I)A new capital stock insurer must meet minimum capital and surplus requirements, which vary by state and line of insurance.
II)The licensing requirements for insurance companies are less stringent than those imposed on most other types of firms.

Choose correct answer/s
A

I only

B

II only

C

both I and II

D

neither I nor II

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Question 6
Multiple Choice

An insurance company incorporated in another state has been licensed to operate in your state. In your state, the insurer would be considered a(n)

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A
nonadmitted insurer.
B
foreign insurer.
C
alien insurer.
D
reciprocal insurer.
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Question 7
Multiple Choice

An insurance company chartered in another country has been licensed to operate in your state. In your state, the insurer would be considered a(n)

Choose correct answer/s
A
nonadmitted insurer.
B
foreign insurer.
C
alien insurer.
D
reciprocal insurer.
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Question 8
Multiple Choice

Which of the following is considered a nonadmitted asset for an insurer?

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A
cash
B
preferred stocks
C
real estate
D
office furniture
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Question 9
Multiple Choice

The policyholders' surplus of an insurer is defined as the difference between its

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A
assets and its liabilities.
B
premium income and its expenses.
C
reserves and its liabilities.
D
assets and its nonadmitted assets.
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Question 10
Multiple Choice

Which of the following statements about the use of risk-based capital requirements is (are) true?
I)Insurers must have a certain amount of capital depending on the riskiness of their investments and insurance operations.
II)Insurers may be required to take certain actions depending on how much capital they have relative to their risk-based capital requirements.

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A
I only
B
II only
C
both I and II
D
neither I nor II
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Question 11
Multiple Choice

Which of the following statements about the regulation of insurance company investments is (are) true?
I)The purpose of regulating insurance company investments is to prevent insurers from making unsound investments which could threaten their solvency.
II)Life insurers can invest an unlimited amount of their assets in common stocks.

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A
I only
B
II only
C
both I and II
D
neither I nor II
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Question 12
Multiple Choice

Which of the following statements about the regulation of life insurance companies is (are) true?
I)The percentage of assets a life insurance company may invest in a specific type of asset (e.g., stocks or bonds) is generally limited by law.
II)The purpose of limiting the accumulation of surplus is to prevent an insurer from increasing its surplus at the expense of policyowner dividends.

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A
I only
B
II only
C
both I and II
D
neither I nor II
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Question 13
Multiple Choice

Which of the following statements about state insurance guaranty funds is (are) true?
I)They limit the amount that policyholders can collect if an insurer becomes insolvent.
II)They are usually funded by general revenues of the states.

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A
I only
B
II only
C
both I and II
D
neither I nor II
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Question 14
Multiple Choice

Under one type of rate regulation, insurers do not have to register their rates with state regulatory authorities. However, insurers may be required to furnish rate schedules and supporting data to state officials. A fundamental assumption underlying this type of rating law is that market forces will determine the price and availability of insurance, rather than discretionary acts of regulators. This type of rate regulation is called

Choose correct answer/s
A
a flex-rating law.
B
a prior-approval law.
C
a file-and-use law.
D
no filing required.
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Question 15
Multiple Choice

Under what type of rate regulation are insurers required to obtain approval of rates before using them if the rate change exceeds a specified predetermined range?

Choose correct answer/s
A
flex-rating law
B
prior-approval law
C
file-and-use law
D
use-and-file law
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Question 16
Multiple Choice

By misrepresenting the true facts, Gretchen was able to convince someone to replace an existing life insurance policy with another company and to purchase a new policy from the company that Gretchen represents. Gretchen has engaged in an illegal sales practice called

Choose correct answer/s
A
bait and switch.
B
rebating.
C
retaliating.
D
twisting.
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Question 17
Multiple Choice

Which of the following statements about premium taxes is (are) true?
I)They are levied by the federal government as a result of the McCarran-Ferguson Act.
II)Their primary purpose is to provide funds for insurance regulation.

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A
I only
B
II only
C
both I and II
D
neither I nor II
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Question 18
Multiple Choice

Which of the following is an advantage of federal regulation of insurance over state regulation of insurance?

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A
greater opportunity for innovation
B
more effective treatment of systemic risk
C
greater responsiveness to local needs
D
more competent regulators
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Question 19
Multiple Choice

Which of the following is an advantage of state regulation of insurance over federal regulation of insurance?

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A
uniformity of laws
B
greater efficiency
C
more effective in negotiating international agreements pertaining to insurance
D
quicker response to local insurance problems
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Question 20
Multiple Choice

A shortcoming of state regulation of insurance according to Congressional committees and the General Accounting Office is that state regulation

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A
leads to decentralized governmental power.
B
provides opportunities for innovation.
C
provides inadequate consumer protection.
D
is more responsive to local needs.
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