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IA Life & Health practice questions

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Question 1Insurance Principles and Concepts (Life and Health)

Which type of risk involves only the possibility of loss or no loss, with no possibility of gain?

  1. Pure risk Correct answer.
  2. Investment risk
  3. Speculative risk
  4. Enterprise risk

Explanation

Pure risk presents only two outcomes: loss or no change, which is the type of risk insurance is designed to handle. Speculative risk involves the chance of gain as well as loss and is generally not insurable.

Question 2Insurance Principles and Concepts (Life and Health)

For a life insurance policy, insurable interest must exist at which point?

  1. At the time the claim is submitted
  2. Only when death results from an accident
  3. Continuously throughout the life of the policy
  4. At the time the policy is applied for Correct answer.

Explanation

Life insurance requires insurable interest at the inception of coverage, meaning the applicant must have a legitimate relationship to the insured when the contract is formed. Once issued, the interest does not have to continue for the policy to pay a claim.

Question 3Insurance Principles and Concepts (Life and Health)

The law of large numbers allows an insurer to do which of the following?

  1. Charge every policyholder an identical premium
  2. Remove all risk from a group of policyholders
  3. Guarantee that actual claims will never exceed expected claims
  4. Predict losses more accurately as exposure units increase Correct answer.

Explanation

As the number of similar, independent exposure units grows, actual results tend to converge on expected results, which improves the accuracy of loss prediction. This mathematical predictability underpins rate making and underwriting.

Question 4Insurance Principles and Concepts (Life and Health)

An insurer sells a guaranteed-renewable individual health policy with no medical underwriting. Within two years, claims greatly exceed projections because unhealthy applicants enroll in large numbers. This result is best described as:

  1. Random fluctuation
  2. Moral hazard
  3. Adverse selection Correct answer.
  4. Risk retention

Explanation

Adverse selection is the tendency of applicants with higher-than-average risk to seek out and keep coverage, and it is magnified when underwriting is absent. Insurers counter it through medical questions, exams, and waiting periods.

Question 5Insurance Principles and Concepts (Life and Health)

The principle of utmost good faith requires an applicant to do which of the following?

  1. Confirm that the insurer's rates are filed with the state
  2. Pay the first premium before coverage begins
  3. Disclose all material facts needed to evaluate the risk Correct answer.
  4. Read the entire policy and return a signed copy

Explanation

Utmost good faith obligates both parties to deal honestly, and it places on the applicant a duty to reveal material facts the insurer could not otherwise discover. The insurer's corresponding duty is to disclose the terms of the contract.

Question 6Insurance Principles and Concepts (Life and Health)

An applicant states on a life application that she has never used tobacco, and the insurer incorporates that signed statement into the policy as a condition of coverage. In contractual terms, the statement is best classified as:

  1. An implied warranty
  2. An adhesion clause
  3. A promissory note
  4. A warranty Correct answer.

Explanation

A warranty is a statement that becomes part of the contract and must be literally true, so breach can void coverage. A representation is a statement believed true to the best of the applicant's knowledge and need only be substantially true and material.

Question 7Insurance Principles and Concepts (Life and Health)

A health policy reimburses the actual expenses an insured incurs, up to the policy limit, rather than paying a predetermined sum. This design reflects which principle?

  1. Indemnity Correct answer.
  2. Aleatory contract
  3. Subrogation
  4. Utmost good faith

Explanation

The principle of indemnity restores the insured to approximately the financial position held before the loss, so no profit is gained from a claim. Health and property coverages are indemnity contracts, while life insurance pays a stated sum regardless of loss.

Question 8Insurance Principles and Concepts (Life and Health)

After paying a health claim caused by a negligent driver, the insurer gains the right to pursue recovery of those costs from the driver. This right is known as:

  1. Contribution
  2. Coordination of benefits
  3. Reinsurance
  4. Subrogation Correct answer.

Explanation

Subrogation transfers the insured's right of recovery to the insurer once the claim is paid, which both prevents double recovery and places the cost on the party responsible for the loss. It applies when the loss is caused by a third party.

Question 9Insurance Principles and Concepts (Life and Health)

A life insurance contract is described as aleatory because:

  1. Both parties exchange promises of equal value
  2. Only the insurer makes a legally enforceable promise
  3. The insurer alone drafts all of the contract terms
  4. The amounts exchanged by the parties may be unequal Correct answer.

Explanation

In an aleatory contract the values exchanged depend on an uncertain event, so the benefit paid may far exceed or fall short of the premiums paid. This distinguishes it from a commutative contract, where the exchange is considered equal.

Question 10Insurance Principles and Concepts (Life and Health)

In a life insurance contract, the applicant's consideration consists of which of the following?

  1. Application statements and payment of the premium Correct answer.
  2. The insurer's promise to pay the death benefit
  3. The grace period granted by the insurer
  4. The promise to renew the policy each year

Explanation

Consideration is the value each party gives up; for the applicant it is the premium paid plus the statements made in the application, both of which must be truthful. For the insurer it is the promise to pay benefits in return.

Question 11Insurance Principles and Concepts (Life and Health)

An insurer's agent accepts a premium submitted after the grace period has expired without stating that coverage is conditioned on reinstatement. A death claim is later filed. The insurer is most likely:

  1. Entitled to enforce the lapse because no reinstatement application was made
  2. Released from liability because the grace period had already ended
  3. Barred from denying coverage under the doctrines of waiver and estoppel Correct answer.
  4. Required to refund the premium and deny the claim

Explanation

Waiver is the voluntary surrender of a known right, and estoppel prevents a party from asserting that right once another party has relied on its conduct. By accepting the late premium without reserving its position, the insurer waives the lapse and is estopped from denying coverage.

Question 12Insurance Principles and Concepts (Life and Health)

An agent has no actual power to bind a risk, but the insurer supplies business cards, company applications, and rate manuals that make the agent appear authorized. A court holds the insurer bound by the agent's act. This illustrates:

  1. Apparent authority Correct answer.
  2. Implied authority
  3. Express authority
  4. Fiduciary authority

Explanation

Apparent authority arises when the insurer's own conduct leads a third party to reasonably believe the agent has authority, even if it was never granted. The insurer bears the consequences because it created the appearance of authority.

Question 13Insurance Principles and Concepts (Life and Health)

Because the insurer drafts a life insurance policy and the applicant has no opportunity to alter its terms, the contract is best described as:

  1. A contract of adhesion Correct answer.
  2. Conditional
  3. Aleatory
  4. Unilateral

Explanation

A contract of adhesion is prepared by one party and offered to the other on a take-it-or-leave-it basis, so ambiguities are interpreted against the drafter. This rule of construction protects the party who had no part in drafting.

Question 14Insurance Principles and Concepts (Life and Health)

An applicant for life insurance deliberately omits a terminal diagnosis and dies during the contestable period. The insurer may:

  1. Delay payment until the contestable period ends
  2. Rescind the contract and refund the premiums paid Correct answer.
  3. Increase the premium retroactively and pay the claim
  4. Pay the full face amount because the policy was already delivered

Explanation

Concealment of a material fact is intentional nondisclosure, which gives the insurer grounds to rescind during the contestable period and return the premium. After that period, the incontestability clause generally bars the insurer from denying the claim.

Question 15Insurance Principles and Concepts (Life and Health)

A primary insurer transfers a portion of its risk to another insurer to increase its capacity and stabilize its results. The primary insurer in this arrangement is called:

  1. The ceding company Correct answer.
  2. The retrocessionaire
  3. The assuming company
  4. The reinsurer

Explanation

The insurer that transfers risk is the ceding company, and the insurer that accepts it is the reinsurer. Reinsurance allows a primary carrier to write larger amounts than it could retain on its own.

Question 16Insurance Principles and Concepts (Life and Health)

The producer's role in the underwriting process is best described as:

  1. Issuing the approved policy and assigning the rating class
  2. Collecting accurate information on the application Correct answer.
  3. Setting the insurer's mortality assumptions
  4. Approving or declining the application

Explanation

Field underwriting means the producer gathers complete and accurate information, reports relevant impressions about the applicant, and submits a clean application. The home office underwriter then classifies and decides the risk.

Question 17Insurance Principles and Concepts (Life and Health)

An investor group persuades an elderly person with no family or business ties to the group to apply for a large life policy, funds the premiums, and names itself beneficiary. This arrangement is most likely:

  1. Void for lack of insurable interest at inception Correct answer.
  2. Acceptable if the premiums are paid promptly each year
  3. Permissible under a group master policy
  4. Valid because the insured signed a written consent

Explanation

Insurable interest must exist when coverage begins, and an investor with no relationship to the insured has none. Such stranger-originated arrangements are widely treated as void or prohibited because they create a wagering interest in a person's life.

Question 18Insurance Principles and Concepts (Life and Health)

Which of the following is one of the primary factors used in calculating a life insurance premium?

  1. The assumed interest rate Correct answer.
  2. The insurer's choice of home office location
  3. The number of producers licensed in the state
  4. The refundable policy fee at maturity

Explanation

Life premiums are built from three main elements: mortality, interest, and expense, with lapse or persistency experience also considered. Higher assumed interest earnings allow the insurer to charge a lower premium for the same benefit.

Question 19Insurance Principles and Concepts (Life and Health)

Under a level premium whole life policy, the insured pays more than the actual cost of protection in the early years. The excess is used to:

  1. Reduce the face amount as the insured ages
  2. Fund the insurer's general operating and marketing expenses
  3. Pay dividends to the insurer's stockholders
  4. Build a reserve that helps cover later mortality costs Correct answer.

Explanation

Level premiums average the rising cost of protection over the life of the policy, so early overcharges accumulate in the reserve to fund the higher mortality cost in later years. This is the basis for the policy's growing cash value.

Question 20Insurance Principles and Concepts (Life and Health)

A whole life policy with cash value is surrendered in its fifth policy year. Which statement best describes the purpose of the nonforfeiture provision?

  1. It guarantees that a dividend will be paid every year
  2. It permits the insurer to cancel coverage after five years
  3. It guarantees a minimum value on surrender or lapse Correct answer.
  4. It automatically converts the policy to term coverage with no cost

Explanation

Nonforfeiture provisions protect the equity the policyowner has built so that a lapse or surrender cannot cause its loss. The owner may typically choose cash surrender, reduced paid-up insurance, or extended term insurance.

Question 21Insurance Principles and Concepts (Life and Health)

A policyowner borrows against the cash value of a whole life policy and dies without repaying the loan. The insurer will:

  1. Pay the full face amount and bill the estate for the loan
  2. Deny the claim because the policy lapsed when the loan was made
  3. Pay only the remaining cash value instead of the face amount
  4. Deduct the loan balance and accrued interest from the death benefit Correct answer.

Explanation

A policy loan is a debt secured by the policy's cash value, and any outstanding balance plus interest is subtracted from the proceeds at death. The policy continues in force as long as the loan plus interest does not exceed the available cash value.

Question 22Insurance Principles and Concepts (Life and Health)

Which statement about dividends paid by a mutual life insurer is correct?

  1. They are guaranteed by the insurer's contract
  2. They are taxable as ordinary income each year, whether or not received in cash
  3. They are a return of premium, not taxed until they exceed the owner's basis Correct answer.
  4. They must always be applied to reduce the premium due

Explanation

Mutual insurer dividends are treated as a nontaxable return of premium until cumulative dividends exceed the total premiums paid, at which point the excess becomes taxable. They are not guaranteed and may be taken in cash, used to reduce premium, or left to accumulate.

Question 23Insurance Principles and Concepts (Life and Health)

The Medical Information Bureau (MIB) provides member insurers with which of the following?

  1. Coded medical information reported by other member insurers Correct answer.
  2. A complete copy of the applicant's medical records
  3. The applicant's credit score and payment history
  4. A guarantee that the applicant is insurable

Explanation

The MIB is an information exchange that stores coded medical and lifestyle data submitted by member companies; it helps underwriters detect undisclosed conditions but never makes the underwriting decision itself.

Question 24Insurance Principles and Concepts (Life and Health)

When a producer collects premiums owed to the insurer and holds them in a position of trust, the producer is acting in which capacity?

  1. Underwriter
  2. Beneficiary
  3. Reinsurer
  4. Fiduciary Correct answer.

Explanation

Handling funds that belong to another party creates a fiduciary duty, which requires prompt remittance and prohibits commingling premiums with personal funds. Violating that duty can lead to license revocation and personal liability.

Question 25Insurance Principles and Concepts (Life and Health)

An insured with a long history of reckless driving buys a large health policy and becomes indifferent about his driving because he believes the insurer will pay for any resulting injury. This attitude is an example of:

  1. A morale hazard Correct answer.
  2. A speculative risk
  3. A physical hazard
  4. A moral hazard

Explanation

A morale hazard is carelessness or indifference toward loss that arises because insurance will absorb the financial consequences. It differs from a moral hazard, which involves intentional dishonest acts such as fraud.

Question 26Insurance Principles and Concepts (Life and Health)

Insurance is best described as a mechanism that:

  1. allows policyholders to earn a guaranteed return on premiums
  2. eliminates the chance that any insured will ever suffer a loss
  3. spreads the cost of losses over a large group of people Correct answer.
  4. guarantees that every claim will be paid in full without limits

Explanation

Insurance pools premiums from many exposure units so that the losses of the few are shared across the group. In exchange for a premium, the insured transfers the financial consequences of a covered loss to the insurer. The risk is financed, not eliminated.

Question 27Insurance Principles and Concepts (Life and Health)

Which type of risk is normally insurable by a private insurer?

  1. Pure risk, which involves only the possibility of loss or no loss Correct answer.
  2. Speculative risk, which offers the chance of gain as well as loss
  3. Certain risk, which is sure to produce a loss for the insured
  4. Market risk, which arises from changes in the value of investments

Explanation

Private insurers generally insure pure risks, where the only possible outcomes are loss or no loss, because the chance of loss can be estimated for a large group. Speculative risks involve the chance of gain as well as loss and are not privately insured.

Question 28Insurance Principles and Concepts (Life and Health)

In insurance terminology, the event that causes a loss is called:

  1. a hazard
  2. a peril Correct answer.
  3. a retention
  4. an exposure

Explanation

A peril is the actual cause of a loss, such as a fire, an illness, or an accident. A hazard is a condition that increases the chance or the severity of a loss, and exposure refers to the possibility of being affected by a peril.

Question 29Insurance Principles and Concepts (Life and Health)

Which of the following is an example of a physical hazard?

  1. A job that exposes the worker to toxic chemicals Correct answer.
  2. An insured who becomes careless about his health after buying coverage
  3. A producer who fails to forward a collected premium to the insurer
  4. A policyholder who deliberately exaggerates a claim to collect more

Explanation

A physical hazard is a tangible condition, such as an occupation, a medical condition, or a habit, that increases the chance or severity of a loss. Hazards that arise from carelessness are morale hazards, and hazards that arise from dishonesty are moral hazards.

Question 30Insurance Principles and Concepts (Life and Health)

The principle of utmost good faith requires that:

  1. the applicant accepts the policy exactly as written
  2. the insurer pays every claim that is submitted
  3. the producer guarantees the applicant's future health
  4. the parties disclose material facts honestly Correct answer.

Explanation

Insurance relies on both parties exchanging accurate, complete information that is material to the risk, because the insurer cannot directly inspect the applicant's health or habits. A failure to disclose material facts can give the insurer grounds to rescind.

Question 31Insurance Principles and Concepts (Life and Health)

A producer falsely tells a client that her current insurer is near insolvency so that she will buy a policy from another company. This practice is called:

  1. rebating
  2. churning
  3. twisting Correct answer.
  4. coercion

Explanation

Twisting is the use of misrepresentation or an incomplete comparison to persuade a policyholder to lapse or replace existing coverage. Rebating involves sharing commissions, and churning involves replacing a policy mainly to generate new commissions.

Question 32Insurance Principles and Concepts (Life and Health)

A producer offers a prospect a share of her commission in exchange for buying a policy. This practice is:

  1. field underwriting, which is permitted
  2. rebating, which is an illegal inducement Correct answer.
  3. coinsurance, which shares loss with the insured
  4. twisting, which is a form of misrepresentation

Explanation

Rebating is the offering of part of a commission or any other inducement not stated in the policy to persuade a person to buy. It is an unfair trade practice prohibited in most states.

Question 33Insurance Principles and Concepts (Life and Health)

The primary purpose of underwriting is to:

  1. help applicants obtain coverage they could not otherwise qualify for
  2. set the interest rate credited to a policy's cash value
  3. increase the number of policies the insurer issues each month
  4. classify applicants by risk so that each group pays a fair premium Correct answer.

Explanation

Underwriting evaluates each applicant's risk characteristics and assigns the applicant to a class so that people with similar expected losses pay similar premiums. This protects the pool from adverse selection and keeps rates equitable.

Question 34Insurance Principles and Concepts (Life and Health)

An employer adds a wellness program that lowers employees' health risks before any loss occurs. This is an example of:

  1. risk reduction Correct answer.
  2. risk transfer
  3. risk retention
  4. risk avoidance

Explanation

Risk reduction, also called loss control, takes steps that decrease the frequency or severity of losses. Avoidance eliminates the exposure entirely, retention means keeping the risk, and transfer moves the financial consequences to another party.

Question 35Insurance Principles and Concepts (Life and Health)

The law of large numbers allows an insurer to:

  1. guarantee that no single policy will ever produce a claim
  2. predict losses more accurately as exposures increase Correct answer.
  3. charge every policyholder exactly the same premium
  4. eliminate the need to hold reserves for future claims

Explanation

As the number of independent, similar exposure units grows, actual loss experience tends to approach the expected rate. This predictability lets the insurer set premiums and reserves with confidence.

Question 36Insurance Principles and Concepts (Life and Health)

For an individual life insurance policy, insurable interest must exist:

  1. throughout the entire life of the policy
  2. only when the beneficiary is a family member
  3. at the time the death claim is paid
  4. at the time the policy is issued Correct answer.

Explanation

Insurable interest in life insurance is required only at the inception of the contract, because the purpose is to prevent the purchase of insurance as a wager on someone's life. After issue the policy remains valid even if the relationship later ends, such as after a divorce.

Question 37Insurance Principles and Concepts (Life and Health)

A business buys a life policy on its key salesperson, whose death would cause measurable financial loss. The business has insurable interest because:

  1. the employee's family depends on his income
  2. the employee has worked for the business for many years
  3. the death would cause the business a financial loss Correct answer.
  4. the employee has agreed to the purchase

Explanation

An employer may insure a key employee when the death would produce a quantifiable economic loss to the business, such as lost sales or the cost of replacement. The interest must be financial and measurable at the time of application.

Question 38Insurance Principles and Concepts (Life and Health)

Life insurance is classified as a valued contract because:

  1. it promises a stated sum rather than reimbursement of a loss Correct answer.
  2. the policyowner decides how much the insured's life is worth
  3. it reimburses the insured's medical expenses exactly
  4. its cash value rises and falls with the stock market

Explanation

In a valued contract the insurer agrees in advance to pay a specified amount, so the benefit is not measured against an actual financial loss. Life insurance is valued because a human life cannot be valued in monetary terms after the fact.

Question 39Insurance Principles and Concepts (Life and Health)

A life insurance policy is a unilateral contract, meaning that:

  1. the insurer may cancel without notice
  2. the policyowner may change the terms at will
  3. both parties exchange promises of equal value
  4. only the insurer is legally bound to perform Correct answer.

Explanation

Only the insurer makes an enforceable promise to pay the benefit; the owner's premium payments are conditions of that promise, not promises enforceable by the insurer. The owner may stop paying and let the policy lapse without being sued for future premiums.

Question 40Insurance Principles and Concepts (Life and Health)

An insurance policy is a conditional contract, which means that:

  1. payment depends on the insured meeting stated conditions Correct answer.
  2. the policyowner may attach conditions to the beneficiary choice
  3. the insurer must renew the policy on the same terms annually
  4. the applicant must pass a medical exam before a policy is issued

Explanation

The insurer's promise to pay is conditioned on the policyowner and insured meeting requirements such as paying premiums, giving timely notice, and providing proof of loss. Failure to satisfy a condition can relieve the insurer of its obligation.

Question 41Insurance Principles and Concepts (Life and Health)

An insurer's written agency agreement authorizes a producer to collect the initial premium and issue a conditional receipt. This authority is:

  1. express authority Correct answer.
  2. implied authority
  3. apparent authority
  4. ratified authority

Explanation

Express authority is granted to the producer in writing by the insurer, typically through the agency agreement or the producer's contract. Apparent authority arises from the insurer's conduct, and implied authority consists of powers reasonably necessary to carry out express duties.

Question 42Insurance Principles and Concepts (Life and Health)

Underwriting protects an insurer against adverse selection, which occurs when:

  1. healthy applicants are charged more than their fair share
  2. producers submit more applications than can be reviewed
  3. high-risk applicants are the ones who seek coverage Correct answer.
  4. the insurer rejects too many applicants in a given year

Explanation

Adverse selection happens when people who expect to need benefits are more likely to buy or keep coverage than those who expect little need. If the insurer cannot identify and price for those higher risks, the claims pool becomes unbalanced.

Question 43Insurance Principles and Concepts (Life and Health)

A producer wants a hospital to release an applicant's medical records for underwriting. Under HIPAA, the producer must generally obtain:

  1. approval from the state insurance department
  2. a subpoena issued by a court
  3. a written authorization signed by the applicant Correct answer.
  4. verbal permission from the applicant's spouse

Explanation

HIPAA requires a valid written authorization, signed by the individual or a personal representative, before protected health information is released for purposes such as underwriting. A spouse's verbal consent does not satisfy that requirement.

Question 44Insurance Principles and Concepts (Life and Health)

A state life and health insurance guaranty association exists to:

  1. ensure that every insurer earns a profit each year
  2. reimburse producers for any commissions an insurer failed to pay
  3. protect policyholders of an insolvent insurer, within limits Correct answer.
  4. set premium rates for all life insurers in the state

Explanation

Guaranty associations provide a safety net that pays specified benefits, subject to statutory limits, when a member insurer becomes insolvent. They do not guarantee benefits beyond those limits.

Question 45Insurance Principles and Concepts (Life and Health)

Before submitting an application for a policy that will replace the applicant's existing life insurance, a producer must generally:

  1. give a replacement notice and identify the existing coverage Correct answer.
  2. wait until the old policy has been surrendered
  3. obtain the insurance department's prior approval of the replacement
  4. pay the difference in premium between the two policies

Explanation

Replacement rules require the producer to notify the applicant that replacing existing coverage may involve disadvantages and to identify the existing policies on the application. The insurer then furnishes a comparison, and the applicant may use a free-look right.

Question 46Insurance Principles and Concepts (Life and Health)

A policy contains an entire contract clause. The effect of this clause is that:

  1. the policy and the attached application are the whole agreement Correct answer.
  2. the policyowner may add terms to the contract at any time
  3. oral promises made by the producer bind the insurer
  4. the insurer may rely on any statement the applicant made orally

Explanation

The entire contract clause states that the policy and any attached copy of the application constitute the complete agreement and that no other document or statement is part of it. This bars reliance on side agreements and generally requires an insurer endorsement for later changes.

Question 47Insurance Principles and Concepts (Life and Health)

When a policy term is genuinely ambiguous, the rule of contra proferentem directs a court to:

  1. void the entire policy and refund the premium
  2. construe the term in favor of the insurer
  3. refer the dispute to the insurance department
  4. construe the term in favor of the insured Correct answer.

Explanation

Because the insurer drafts the policy, ambiguities in coverage language are construed against the insurer and in favor of the insured. The rule applies only when the wording remains truly ambiguous after ordinary interpretation.

Question 48Insurance Principles and Concepts (Life and Health)

An insurer learns that its producer wrote coverage beyond the authority granted in the agency agreement, and the insurer accepts the premium and issues the policy. The insurer has:

  1. ratified the producer's unauthorized act Correct answer.
  2. committed a fraudulent misrepresentation
  3. avoided the contract because the act was unauthorized
  4. revoked the producer's express authority

Explanation

Ratification occurs when a principal, with knowledge of the facts, accepts the benefits of an unauthorized act, making the act binding as if it had been authorized. Accepting the premium and issuing the policy are clear indications of acceptance.

Question 49Insurance Principles and Concepts (Life and Health)

An insurer declines an application because of information in a consumer report. Under the Fair Credit Reporting Act, the insurer must:

  1. send the consumer report itself to the applicant with the declination
  2. notify the applicant of the adverse action and the report's source Correct answer.
  3. obtain the applicant's written consent before taking adverse action
  4. report the declination to the state insurance department

Explanation

When a consumer report leads to an adverse action such as a declination or a higher rating, the FCRA requires the insurer to notify the applicant and identify the reporting agency so the applicant can learn about the information and dispute it.

Question 50Insurance Principles and Concepts (Life and Health)

A state enacts a law requiring insurers to file policy forms before use. Which principle supports the state's authority to do this?

  1. States are the primary regulators under McCarran-Ferguson Correct answer.
  2. Insurers voluntarily submit to state regulation of forms
  3. Insurance is interstate commerce regulated only by Congress
  4. The NAIC issues regulations that have the force of law

Explanation

The McCarran-Ferguson Act confirmed that the states regulate the business of insurance, so state insurance departments review forms, rates, and producer licensing. The NAIC is a voluntary association of regulators that drafts model laws but has no legal authority of its own.