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Alabama Life Insurance Exam, Exams of Insurance law

Information about commercial insurers, types of commercial insurers, mutual companies, fraternal benefit societies, risk retention groups, reciprocal insurers, and insurance regulations. It also covers ethical considerations for agents, types of hazards, and types of risks. useful for those studying for the Alabama Life Insurance Exam or those interested in the insurance industry.

Typology: Exams

2023/2024

Available from 02/10/2024

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Alabama Life Insurance Exam

What are commercial insurers also referred to as? - verified answer; Private Insurance Companies Commercial Insurers are in the business of selling insurance for ___ ________. - verified answer; a profit What two groups can commercial insurance be broken into? - verified answer; Stock Companies & Mutual Insurers What is a stock insurer? - verified answer; incorporated to make a profit for its stockholders. nonparticipating because the policyholders do not receive dividends unless they are stockholders. dividends are subject to taxation. Which type of commercial insurer is nonparticipating? - verified answer; stock companies Which type of commercial insurer is participating? - verified answer; mutual insurers what is a mutual insurer? - verified answer; owned by policyholders. participating policies because policyholders get to participate in receiving dividends and electing directors. dividends are not subject to taxation unless they collect interest. Are dividends subject to taxation in a NONPAR company? - verified answer; Yes Are dividends subject to taxation in a PAR company? - verified answer; No; only the interest, if collected, is taxable If a company operates as both PAR and NONPAR what is it called? - verified answer; a Mixed Insurer Are dividends guaranteed? - verified answer; Never

An insurer selling more than one type of insurance is called a? - verified answer; Multi-Line Insurer Strong Assessment Mutual Companies are classified by: - verified answer; the way that they charge premiums What type of mutual company operates on a loss-sharing basis, where each member is assessed a portion of losses? - verified answer; Pure Assessment Company What type of mutual company charges a premium at the beginning to cover losses, and returns a surplus, or levies additional amounts to meet expenses and losses? - verified answer; Advance Premium Assessment Company What are fraternal benefit societies? - verified answer; special types of mutual companies that are non- profit religious, ethnic, or charitable organizations. Who would a fraternal benefit society supply insurance to? - verified answer; Only its members What are risk retention groups? - verified answer; mutual companies formed by groups of people with the same profession or industry What are reciprocal insurers? - verified answer; unincorporated groups of people providing insurance for one another through individual indemnity agreements. Each individual who is a member of the reciprocal is known as a subscriber. what is an indemnity contract? - verified answer; It is a contract involving two parties in which the first party agrees to indemnify and reimburse the second party for covered debts or losses should they take place. Attorney-in-fact - verified answer; A person given the authority to act on behalf of another under a power of attorney.

what is Reinsurance? - verified answer; an arrangement by which the primary insurer that initially writes the insurance transfers to another insurer part or all of the potential losses associated with such insurance The company transferring the risk is called? - verified answer; ceding company The company assuming the risk is called? - verified answer; reinsurer what is a captive insurer? - verified answer; insurer owned by a parent firm for the purpose of insuring the parent firm's loss exposures Home service insurers are also called: - verified answer; industrial insurance Home Service Insurance - verified answer; sold by home service or debit life insurance companies. Face amounts are small & premiums are paid weekly What does OASDI mean? - verified answer; Old-Age, Survivors, and Disability Insurance Who does social security provide benefits for? - verified answer; the elderly (retirement) and survivors of parents who died young and those who qualify for federal disability Who does medicare provide insurance for? - verified answer; health insurance for the elderly who does medicaid provide insurance for? - verified answer; health insurance for the financially needy What are SGLI and VGLI? - verified answer; service members/veterans group life insurance Who does TRICARE cover? - verified answer; Active, retired, survivors and their families of the Armed Forces. Self-insurance - verified answer; the process of establishing a monetary fund to cover the cost of a loss

Self Insurance is NOT a method of transferring risk, they establish their ________________. - verified answer; own self-funded plans for cost of loss. A self funded plan is a plan which an _______ pays insurance benefits from a fund derived from employer's current revenues. - verified answer; employer Define Lloyd's of London - verified answer; NOT an insurance company; members of the association form syndicates to underwrite and issue insurance-like coverage. "group of investors who share in unusual risk" distribution system - verified answer; the ways insurance products are marketed and sold to the public Agents are recruited, trained and supervised by either a managing employee or General Agent who is contracted with the insurance company. - verified answer; Career Agency Systems In a career agency system, all produces under the system are __________ agents - verified answer; Captive Agents work for an independent agency selling policies from several insurance companies. The agents are NOT employees of the ins company, but work for the system. - verified answer; Personal Producing General Agency System (PPGA) Independent Agents represent a number of insurance companies through separate contractual agreements, and are paid commission based on their sales. - verified answer; Independent Agency System (American Agency System) US Supreme Court ruled that insurance transactions crossing state lines are NOT interstate commerce - verified answer; 1861 Paul v Virginia gave the authority to the states to regulate insurance. - verified answer; 1905 Armstrong Investigation Act

Ruled that insurance transactions crossing state lines ARE interstate commerce and subject to federal regulation. - verified answer; 1944 US v. South-Eastern Underwriters Association states that while the federal govt has the authority to regulate the insurance industry, it would not exercise its right if the state level adequately regulates the industry. - verified answer; 1945 McCarran- Ferguson Act The minimum penalty of a producer for obtaining personal info on a client without a legit reason is a ____________. - verified answer; fine of $10, provides individuals privacy protection and fair and accurate credit reporting, notifying them when a credit check will be performed as well - verified answer; 1970 Fair Credit Reporting Act (FCRA) this law repealed the glass-steagull act; allows banks, retail brokerages, and insurance companies to enter each other's line of business - verified answer; 1999 Gramm-Leach-Bliley Act (Financial Services Modernization Act) As it relates to the Insurance industry, is designed to detect and deter terrorists and their funding by imposing anti-money laundering requirements on brokerage firms and financial institutions. - verified answer; 2001 USA PATRIOT ACT Insurance calls are not exempt from the no call registry. - verified answer; 2003 National Do Not Call Registry what is the NAIC? - verified answer; National Association of Insurance Commissioners An organization composed of commissioners from all 50 states, the district of Columbia, and the four US territories. They are responsible for recommending appropriate laws and regulations - verified answer; The National Association of Insurance Commissioners What is the advertising code? - verified answer; The code specifies certain words and phrases that are considered misleading and are not to be used in advertising of any kind.

Gives chief financial officer the authority to investigate insurance companies and producers to impose penalties. - verified answer; Unfair Trade Practices Act What is selling to needs? - verified answer; an agent must first determine a client's needs, and then determine which policy fits their needs best. Full an Accurate Disclosure - verified answer; an ethical agent must inform consumer's of the benefits and limitations of recommend products. Documentation - verified answer; an ethical agent must document each client's meetings and transactions. Buyer's Guide - verified answer; A booklet that describes insurance policies and concepts, and provides general information to help an applicant make an informed decision. Policy Summary - verified answer; helps consumers evaluate the suitability of the recommended product Reserves - verified answer; the accountability measurement of an insurer's future obligations to its policyholders. Liquidity - verified answer; an insurer's ability to make unpredictable payouts to policyowners. Protects policy owners in the event of any insurance company going out of business, becoming insolvent, or the inability to pay claims - verified answer; State Guarantee Association A condition or situation that creates or increases a possibility of loss is a: - verified answer; hazard Types of hazards: - verified answer; moral, morale, and physical Define Moral Hazard and give an example. - verified answer; an idea that a party protected from risk in some way will act differently than if they didn't have that protection (dishonesty, drugs, alcohol abuse, etc)

Define morale hazard and give an example - verified answer; used to describe an insured person's attitude about his or her belongings. It represents the rise of indifference to loss because the items are covered. (careless attitude, recklessness) Give an Example of a physical hazard - verified answer; obesity, poor health, blind The unintentional decrease in the value of an asset due to peril. - verified answer; Loss An immediate, specific event which causes loss (ie: an earthquake) the "accident" - verified answer; A Peril The potential for loss - verified answer; Risk Presents both the chance for loss or gain, a type of risk that is not insurable - verified answer; Speculative Risk Example of speculative Risk - verified answer; gambling Presents the potential for loss only, the only type of insurable risk - verified answer; Pure Risk