Hs 311 Insurance, Ch 5--T/f

Front 1

T/F
The general purpose of insurance regulation is to protect the public against insolvency and unfair treatment by insurers.

Back 1

True

Front 2

T/F
At the state level, insurance is regulated by legislative, administrative, and court action.

Back 2

True

Front 3

T/F
The insurance commissioner has the power to, among other things, enforce the laws passed by the legislature and interpreted by the courts, license insurers and agents, and investigate to determine whether insurers and agents are meeting the requirements of the statutes.

Back 3

True

Front 4

T/F
Insurance regulators will reject any insurance rates that are discriminatory.

Back 4

False. Insurance regulations prohibit unfair discrimination. Many insurance rates are based on fair discrimination. Life insurance rates, for example, vary by age and reflect different mortality rates for people of different ages.

Front 5

T/F
Life insurance is subject to direct rate regulation under prior approval laws that require that rates be approved before they can be used.

Back 5

False. Life insurance is not subject to direct rate regulation. Instead, some states supervise the cost of life insurance by limiting the portion of the premium that can be used for expenses rather than claims. Also, life insurance rates are indirectly regulated through the minimum reserve requirements.

Front 6

T/F
Insurers must comply with state laws that govern the types of securities they may purchase for investment.

Back 6

True

Front 7

T/F
Although unfair trade practices are illegal in all states, most states now permit rebating and twisting.

Back 7

False. Most states prohibit rebating and twisting as unfair trade practices.

Front 8

T/F
Most premium taxes insurers pay to the states are used to pay for the cost of insurance regulation.

Back 8

False. Most premium taxes paid by insurers to the states are used for revenue purposes rather than to pay for the cost of insurance regulation.

Front 9

T/F
The key to assessing the financial strength of an insurer is the size of the insurer.

Back 9

False. Financial strength is determined by the insurer's ability to pay claims.

Front 10

T/F
In addition to financial strength, other important criteria for selecting an insurer are its willingness to pay claims, the service it provides, and the cost of its products.

Back 10

True

Front 11

T/F
The dominant factor in the selection of an agent is friendship.

Back 11

False. The criteria for evaluating an agent include knowledge and ability, willingness, integrity and character, and representation.