Exam 8: Government Regulation of Insurance

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

The number of title insurance companies operating in State Z is relatively low. Recently, the largest of these companies (50 percent market share) acquired the second largest company (30 percent market share). Immediately after the acquisition, the insurer raised premiums by 75 percent. This scenario demonstrates which of the following rationales for the regulation of insurance?

The purpose of the Financial Analysis Solvency Tracking (FAST) system employed by the NAIC is to

All of the following statements about insurance regulation are true EXCEPT

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

Grace is a life insurance agent. She is attempting to sell a large life insurance policy, but the prospective purchaser is having second thoughts. To persuade the prospective purchaser, Grace said, "I will earn a $1,000 commission if you buy this policy. I'll give you $500 of my commission if you buy the policy." In most states, what illegal sales practice will Grace be guilty of if she splits her commission with the purchaser?

Which of the following statements concerning the proposed optional federal charter for life insurers is (are) true? I.Large insurers operating in many states would more likely prefer a state charter while smaller, regional, insurers would more likely choose a federal charter. II.Proponents of the federal charter argue that it would speed the development and approval of new products.

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

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.

ABC Insurance Company would like to purchase a bank. For many years, ABC was not permitted under federal law to enter into banking operations. Which of the following legislative acts eliminated the prohibition that prevented banks, insurers, and investment firms from entering into one another's markets?

Liability items on an insurer's balance sheet that reflect obligations that must be met in the future are called

The regulation of insurers in areas that affect consumers, which include claims handling, underwriting, complaints, advertising, sales practices, and other trade practices is called

To correct abuses in the financial services industry, Congress passed an Act in 2010 that included numerous provisions to reform the financial services industry. This Act was the

One provision of the Dodd-Frank Act was creation of the Financial Stability Oversight Council. This council is charged with identifying nonbank financial companies that could increase the risk of collapse of the entire financial system. This risk is called

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

A systemic risk is a risk that

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.

Which of the following is a method used to help ensure the solvency of insurers?

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)

A score derived from an individual's credit history and other factors that is used by many auto and homeowners insurers for underwriting and rating purposes is called a(n)