Insurance Regulations and Practices Flashcard

Front

Which law regulates how an insurer can use a credit report when offering a policy?

Back

How insurers use credit reports

Answer explanation

The Fair Credit Reporting Act (FCRA) specifically regulates how insurers use credit reports in their decision-making processes, ensuring consumer protection and accuracy in credit reporting.

Front

Under the FCRA, what must Daniel be notified of if his loan application is denied based on his credit report?

Back

Adverse action taken based on credit

Answer explanation

Under the FCRA, consumers must be notified of adverse actions taken based on their credit. This ensures transparency and allows consumers to understand how their credit information affects decisions made by lenders.

Front

Liam, an insurance agent, is being investigated for violating federal law. Which of the following actions would be prohibited under 18 USC 1033/1034?

Back

Insurance fraud

Answer explanation

18 USC 1033/1034 specifically prohibits insurance fraud, which includes various deceptive practices in the insurance industry. This makes 'Insurance fraud' the correct answer.

Front

What must insurance rates in Wisconsin comply with?

Back

Rates must be adequate, not excessive, and not unfairly discriminatory

Answer explanation

In Wisconsin, insurance rates must be adequate to cover claims, not excessive to burden consumers, and not unfairly discriminatory to ensure fairness among policyholders.

Front

What is a prohibited classification of risks for auto insurance in Wisconsin?

Back

Race

Answer explanation

In Wisconsin, race is a prohibited classification of risks, meaning it cannot be used to determine insurance rates or eligibility. This is to prevent discrimination and ensure fairness in insurance practices.

Front

Nora owns a small business and is seeking insurance coverage for a unique risk. After checking with several admitted insurers, she finds that none of them can provide the coverage she needs. What type of insurance would Nora likely need to obtain?

Back

Insurance placed with non-admitted insurers when coverage is unavailable from admitted carriers

Answer explanation

Surplus lines insurance refers to coverage obtained from non-admitted insurers when admitted carriers cannot provide the necessary coverage. This option is essential for unique or high-risk insurance needs.

Front

What must Lily, a surplus lines agent, ensure before placing coverage for a client?

Back

The risk was declined by 3 admitted insurers

Answer explanation

Surplus lines agents must ensure that the risk was declined by 3 admitted insurers before placing coverage. This requirement helps confirm that the risk cannot be covered by standard insurers.

Front

What is true about oral insurance contracts in Wisconsin when an agent offers immediate coverage through an oral agreement?

Back

They are only valid for binders providing temporary coverage

Answer explanation

In Wisconsin, oral insurance contracts are only valid for binders that provide temporary coverage. This means they cannot be used for permanent policies or require written consent from the insurer.

Front

What is the minimum bodily injury liability coverage per person required for auto insurance in Wisconsin?

Back

$25,000

Answer explanation

In Wisconsin, the minimum liability limit for bodily injury per person is $25,000. This means that if you are at fault in an accident, your insurance must cover at least this amount for injuries to one person.

Front

James is purchasing automobile liability insurance in Wisconsin. Which coverage must he include as required by law?

Back

Uninsured Motorist (UM)

Answer explanation

In Wisconsin, Uninsured Motorist (UM) coverage is mandatory for automobile liability insurance. It protects drivers from losses caused by uninsured drivers, making it essential for financial security on the road.