Unit 1: General Insurance Terms and Related Concepts | Chapter 1-5: The Insurance Transaction Flashcards
(38 cards)
Before information about an applicant may be accessed from a source other than the applicant, the applicant must:
a) guarantee the material facts given during the application process.
b) issue a certificate of insurance.
c) be given an estimated premium charge
d) provide authorization.
Before information about an applicant may be accessed from a source other than the applicant, the applicant must:
provide authorization.
In addition to the application, the staff underwriter will have access to additional information. Before personal information may be accessed from a source other than the applicant or public records, authorization must be provided as part of the application process.
If unable to verify disputed information within __________ , a reporting agency must promptly delete that information from the file.
a) 90 days
b) 30 days
c) 2 weeks
d) 2 months
If unable to verify disputed information within __________ , a reporting agency must promptly delete that information from the file.
30 days
If the reporting agency is unable to verify disputed information within 30-days, the reporting agency must promptly remove the disputed information from the file.
A binder may be:
a) in writing only
b) written or electronically provided only
c) written or oral.
d) verbal or oral.
A binder may be:
written or oral.
A binder may be written or oral.
If an application for insurance is rejected by the insurer based on information obtained from an inspection or credit report, the insurer is required to provide the applicant with the name of the __________ .
a) reporting agency
b) insurance Director
c) department issuing the premium refund
d) underwriter agency
If an application for insurance is rejected by the insurer based on information obtained from an inspection or credit report, the insurer is required to provide the applicant with the name of the __________ .
reporting agency
If the application for insurance is rejected by the insurer, based on information obtained through an inspection or credit report, the insurer must provide the applicant with the name of the reporting agency.
An insured may cancel a policy:
a) At anytime by providing prior written notification, indicating the effective date of the cancellation.
b) At policy anniversary only.
c) Within 60-days of the effective date of the policy only.
d) At anytime by providing oral notification to the insurer.
An insured may cancel a policy:
At anytime by providing prior written notification, indicating the effective date of the cancellation.
An insured may cancel a policy at anytime by providing written notification indicating the effective date of the cancellation. It is the insurer that is limited to what it may initiate cancellation for.
Fraud is __________ in property and casualty insurance.
a) a valid peril
b) anticipated
c) expected by reporting agencies
d) forever
* Under a property or casualty insurance policy, if the insurer determines the insurance was fraudulently obtained or the insured is in the process of committing fraud relative to the insurance coverage, the insurer can deny a claim and consider the insurance to be null and void.*
Fraud is __________ in property and casualty insurance.
- a valid peril
- anticipated
- expected by reporting agencies
- forever
Under a property or casualty insurance policy, if the insurer determines the insurance was fraudulently obtained or the insured is in the process of committing fraud relative to the insurance coverage, the insurer can deny a claim and consider the insurance to be null and void.
If requested by the consumer, a reporting agency is required to disclose to the consumer the nature and substance of __________ at the time of the request. An individual may also request their credit score.
- only the contested information
- all information in their file
- the last 30 days of relevant information
- the agent who created the report
They are required to disclose *all* information in the file at the time of the request. The credit score may be excluded, however, they may request their credit score and it is common practice that it is disclosed as well.
If requested by the consumer, a reporting agency is required to disclose to the consumer the nature and substance of __________ at the time of the request. An individual may also request their credit score.
- only the contested information
- all information in their file
- the last 30 days of relevant information
- the agent who created the report
They are required to disclose *all* information in the file at the time of the request. The credit score may be excluded, however, they may request their credit score and it is common practice that it is disclosed as well.
Oregon requires that in the event of cancellation of a fire insurance policy by the insurer, the insurer provide 10 days prior written notification in the event of non-payment of premium and __________ for any other reason.
- 3 weeks
- 2 months
- 30 days
- 45 days
The insurer may cancel a fire insurance policy at any time by giving 10 days written notice of cancellation to the insured in the event of nonpayment of premium or 30 days written notice for any other reason.
Oregon requires that in the event of cancellation of a fire insurance policy by the insurer, the insurer provide 10 days prior written notification in the event of non-payment of premium and __________ for any other reason.
- 3 weeks
- 2 months
- 30 days
- 45 days
The insurer may cancel a fire insurance policy at any time by giving 10 days written notice of cancellation to the insured in the event of nonpayment of premium or 30 days written notice for any other reason.
Until a homeowners policy has been in force for __________ , the insurer may cancel for any reason consistent with its underwriting practices.
- 60 days
- 3 months
- 45 days
- 30 days
During the 59 day period, the insurer may use any other information consistent with its rating or underwriting program, including but not limited to conditions or uses of the property discovered by the insurer, as a basis for cancellation or for offering to continue coverage at an increased rate or on different terms. Once the policy has been in force for 60 days, the insurer may cancel for very specific reasons only, as stated in the policy.
Until a homeowners policy has been in force for __________ , the insurer may cancel for any reason consistent with its underwriting practices.
- 60 days
- 3 months
- 45 days
- 30 days
During the 59 day period, the insurer may use any other information consistent with its rating or underwriting program, including but not limited to conditions or uses of the property discovered by the insurer, as a basis for cancellation or for offering to continue coverage at an increased rate or on different terms. Once the policy has been in force for 60 days, the insurer may cancel for very specific reasons only, as stated in the policy.
If disputed information contained in a consumer report is not removed from the consumer’s file, the consumer has the right to submit a/an __________ with the reporting agency.
- judgement rating
- alternative consumer report
- letter of dispute
- fraud claim
If disputed information is not removed from the file, the consumer has the right to submit a letter of dispute relating to the report. The letter of dispute must then accompany any subsequent report requested.
If disputed information contained in a consumer report is not removed from the consumer’s file, the consumer has the right to submit a/an __________ with the reporting agency.
- judgement rating
- alternative consumer report
- letter of dispute
- fraud claim
If disputed information is not removed from the file, the consumer has the right to submit a letter of dispute relating to the report. The letter of dispute must then accompany any subsequent report requested.
In addition to the insurance policy, an insurer may be required to provide a _______ of insurance. For example, a lender may require proof of coverage before approving a loan on a house. In addition, proof of financial responsibility must be carried in a motor vehicle.
- Certificate
- Document
- Binder
- notary
A Certificate of Insurance may be required by a lender. Oregon is a financial responsibility state for operation of a motor vehicle and requires proof of financial responsibility be carried in the vehicle. In both cases, the insurer issues a certificate of insurance to satisfy the requirement.
In addition to the insurance policy, an insurer may be required to provide a _______ of insurance. For example, a lender may require proof of coverage before approving a loan on a house. In addition, proof of financial responsibility must be carried in a motor vehicle.
- Certificate
- Document
- Binder
- notary
A Certificate of Insurance may be required by a lender. Oregon is a financial responsibility state for operation of a motor vehicle and requires proof of financial responsibility be carried in the vehicle. In both cases, the insurer issues a certificate of insurance to satisfy the requirement.
The oldest form of premium rating is referred to as:
- Retrospective Rating
- Judgment Rating
- Manual Rating
- Merit Rating.
The oldest form and least used today is the Judgment Rating.
The oldest form of premium rating is referred to as:
- Retrospective Rating
- Judgment Rating
- Manual Rating
- Merit Rating.
The oldest form and least used today is the Judgment Rating.
Cancellation coincident with the effective date is referred to as a __________ cancellation.
- abrupt rate
- refund rate
- retroactive rate
- flat rate
If a policy is cancelled coincident with its effective date, the policy is deemed null and void (non-existent) and the insurer would refund 100% of the premium paid, referred to as a flat rate cancellation.
Cancellation coincident with the effective date is referred to as a __________ cancellation.
- abrupt rate
- refund rate
- retroactive rate
- flat rate
If a policy is cancelled coincident with its effective date, the policy is deemed null and void (non-existent) and the insurer would refund 100% of the premium paid, referred to as a flat rate cancellation.
The principle of insurable interest states that the insured must face a risk of __________ if property is damaged or stolen
- physical impairment
- policy cancellation
- a moral hazard
- financial loss
The principle of insurable interest states that the insured must face a risk of financial loss if property is damaged or stolen.
The principle of insurable interest states that the insured must face a risk of __________ if property is damaged or stolen
- physical impairment
- policy cancellation
- a moral hazard
- financial loss
The principle of insurable interest states that the insured must face a risk of financial loss if property is damaged or stolen.
If requested in writing by the consumer, the insurer is required to make a complete and accurate disclosure of the nature and scope of the investigation requested within ______ days of the request.
- 3 (three)
- 5 (five)
- 7 (seven)
- 14 (fourteen)
The insurer must respond to a request relative to the nature and scope of an investigation within 5 days of the consumer’s request. The initial disclosure relative to an investigative consumer report must be provided to the applicant within 3 days of initiating the request for the report.
If requested in writing by the consumer, the insurer is required to make a complete and accurate disclosure of the nature and scope of the investigation requested within ______ days of the request.
- 3 (three)
- 5 (five)
- 7 (seven)
- 14 (fourteen)
The insurer must respond to a request relative to the nature and scope of an investigation within 5 days of the consumer’s request. The initial disclosure relative to an investigative consumer report must be provided to the applicant within 3 days of initiating the request for the report.
A Retrospective Rate is a common rating method used with:
- Workers’ Compensation Insurance.
- Dwelling Property Insurance
- Auto Insurance
- Homeowners Insurance.
This is common on Workers’ Compensation insurance where the actual premium is a rate per $100 of payroll, and commercial liability insurance where actual premium may be based on gross receipts (the higher the gross receipts, the higher the traffic/exposure). In both examples the actual premium cannot be determined until the end of the policy period, requiring a look-back (in retrospect), referred to as a retrospective rate. The initial premium charged is based on an estimate of what the exposure will be.
A Retrospective Rate is a common rating method used with:
- Workers’ Compensation Insurance.
- Dwelling Property Insurance
- Auto Insurance
- Homeowners Insurance.
This is common on Workers’ Compensation insurance where the actual premium is a rate per $100 of payroll, and commercial liability insurance where actual premium may be based on gross receipts (the higher the gross receipts, the higher the traffic/exposure). In both examples the actual premium cannot be determined until the end of the policy period, requiring a look-back (in retrospect), referred to as a retrospective rate. The initial premium charged is based on an estimate of what the exposure will be.
If an insurer cancels a policy, each of the following might be used to identify the method of premium refund at cancellation, EXCEPT:
- Pro rata.
- Short rate.
- Pro-rate
- Proportionate share.
Pro rata, Pro-rate, and proportionate share are all saying the same thing; short rate is the exception. A short rate applies if the insured cancels.
If an insurer cancels a policy, each of the following might be used to identify the method of premium refund at cancellation, EXCEPT:
- Pro rata.
- Short rate.
- Pro-rate
- Proportionate share.
Pro rata, Pro-rate, and proportionate share are all saying the same thing; short rate is the exception. A short rate applies if the insured cancels.
What authority is granted to an appointed agent but not granted to a broker or solicitor?
- Underwriting authority
- Sales authority
- Solicitation authority
- Binding authority
- Even though an appointed agent may be referred to as a “field underwriter,” field underwriting responsibility involves full disclosure to the home office underwriting staff and is technically not underwriting authority. An appointed agent will have binding authority. This is the ability to “bind” coverage for a limited period of time, which gives the home office underwriters an opportunity to evaluate the risk.*
- Binding authority is granted to an appointed agent, but not to a broker or solicitor*.
What authority is granted to an appointed agent but not granted to a broker or solicitor?
- Underwriting authority
- Sales authority
- Solicitation authority
- Binding authority
- Even though an appointed agent may be referred to as a “field underwriter,” field underwriting responsibility involves full disclosure to the home office underwriting staff and is technically not underwriting authority. An appointed agent will have binding authority. This is the ability to “bind” coverage for a limited period of time, which gives the home office underwriters an opportunity to evaluate the risk.*
- Binding authority is granted to an appointed agent, but not to a broker or solicitor*.
The application is the applicant’s __________ based on the information provided in the application.
- business referral
- promise
- binding authority
- offer to purchase
The application is the applicant’s “offer” to purchase based on the information provided in the application. It is also the insurer’s first insight into the insurability of the applicant.
The application is the applicant’s __________ based on the information provided in the application.
- business referral
- promise
- binding authority
- offer to purchase
The application is the applicant’s “offer” to purchase based on the information provided in the application. It is also the insurer’s first insight into the insurability of the applicant.
Which of the following is NOT a subject of the insurable interest rule?
- To reduce moral hazards.
- To demonstrate insurable interest at the time of application.
- As a method of measurement.
- To prevent gambling.
Under property and casualty insurance, proof of insurable interest must be demonstrated at time of loss, not at the time of application.
Which of the following is NOT a subject of the insurable interest rule?
- To reduce moral hazards.
- To demonstrate insurable interest at the time of application.
- As a method of measurement.
- To prevent gambling.
Under property and casualty insurance, proof of insurable interest must be demonstrated at time of loss, not at the time of application.
After a policy has been in force for a period of time, __________ modifier may be imposed by the insurer based on actual experience.
- a retrospective rate
- a merit rate
- an experience rate
- an automatic rate
- After a policy has been in force for a period of time, an experience rate modifier may be imposed, either a discount or surcharge based on experience.*
- An experience rate would apply to a premium rate going forward, whereas, a retrospective rate makes a premium adjustment to the policy period just completed.*
- A merit rate could be applied from policy inception, e.g. a good student discount on car insurance, the insured has installed and maintained fire alarms and/or fire protective sprinkler systems, etc*.
After a policy has been in force for a period of time, __________ modifier may be imposed by the insurer based on actual experience.
- a retrospective rate
- a merit rate
- an experience rate
- an automatic rate
- After a policy has been in force for a period of time, an experience rate modifier may be imposed, either a discount or surcharge based on experience.*
- An experience rate would apply to a premium rate going forward, whereas, a retrospective rate makes a premium adjustment to the policy period just completed.*
- A merit rate could be applied from policy inception, e.g. a good student discount on car insurance, the insured has installed and maintained fire alarms and/or fire protective sprinkler systems, etc*.
A look-back or premium audit relating to the actual premium charged is referred to as a/an:
- Experience Rate.
- Retrospective Rate
- Merit Rate.
- Look-back Rate.
- A retrospective rate involves an initial premium deposit, which is based on an estimate of the risk exposure up front, with a final premium determination made at the end of the policy period based on a premium audit. This is a common approach where the insured does not know what the actual risk exposure will be until the end of the policy period. A retrospective rate involves a look-back to make the final premium determination.*
- A good example is Workers’ Compensation insurance, because the premium is a rate per $100 of payroll. A business owner must estimate his/her payroll in advance of paying it and a premium is determined based on that estimate, then at the end of the policy period the dollar amount of the actual payroll is submitted to the insurer and appropriate adjustment is made to the premium earned, which may be more or less than the initial estimate.*
A look-back or premium audit relating to the actual premium charged is referred to as a/an:
- Experience Rate.
- Retrospective Rate
- Merit Rate.
- Look-back Rate.
- A retrospective rate involves an initial premium deposit, which is based on an estimate of the risk exposure up front, with a final premium determination made at the end of the policy period based on a premium audit. This is a common approach where the insured does not know what the actual risk exposure will be until the end of the policy period. A retrospective rate involves a look-back to make the final premium determination.*
- A good example is Workers’ Compensation insurance, because the premium is a rate per $100 of payroll. A business owner must estimate his/her payroll in advance of paying it and a premium is determined based on that estimate, then at the end of the policy period the dollar amount of the actual payroll is submitted to the insurer and appropriate adjustment is made to the premium earned, which may be more or less than the initial estimate.*
The initial basis for establishing a premium rate and most common method of premium rating is called the:
- Manual Rate
- Experience Rate
- Retrospective Rate
- Merit Rate
The initial premium rate is based on a Manual Rate. A Merit or Experience rating may impact the initial rate and certain exposures are subject to an initial premium based on an estimate, and then ultimately a look-back or Retrospective rate.
The initial basis for establishing a premium rate and most common method of premium rating is called the:
- Manual Rate
- Experience Rate
- Retrospective Rate
- Merit Rate
The initial premium rate is based on a Manual Rate. A Merit or Experience rating may impact the initial rate and certain exposures are subject to an initial premium based on an estimate, and then ultimately a look-back or Retrospective rate.
If an insured cancels a policy prior to policy expiration, the insurer is required to refund unearned premium but may charge a handling fee, referred to as the __________ .
- manual rate
- pro rate
- flat rate
- short rate
If an insured initiates cancellation, the insurer is required to refund unearned premium, but is allowed to charge a transaction fee (administration), referred to as a short rate. Technically, a short rate is a pro-rate minus a processing fee.
If an insured cancels a policy prior to policy expiration, the insurer is required to refund unearned premium but may charge a handling fee, referred to as the __________ .
- manual rate
- pro rate
- flat rate
- short rate
If an insured initiates cancellation, the insurer is required to refund unearned premium, but is allowed to charge a transaction fee (administration), referred to as a short rate. Technically, a short rate is a pro-rate minus a processing fee.
