PROPERTY AND CASUALTY ANSWERS AND
QUESTIONS SET A+
✔✔The National Association of Insurance Commissioners (NAIC) - ✔✔This commission
is made up of commissioners from each state.
Much of the nation's insurance laws are created through the Commissions
recommendations.
✔✔Admitted or Authorized Insurer. - ✔✔An insurance company who meets the
department's standards and is authorized to do business in the state.
✔✔Non-admitted or Unauthorized Insurer. - ✔✔An insurance company who is not
authorized to do business in the state.
✔✔Domestic Company - ✔✔A company operating in its home state.
✔✔Foreign Company - ✔✔A company conducting business in other states other than
their home state.
✔✔Alien Company - ✔✔A company that is incorporated in a country other than the
United States but is doing business in the states
✔✔Fiduciary - ✔✔A person who stands in a special relationship of trust to another
person.
✔✔Misrepresentation by an Agent - ✔✔when an agent falsely advertises the terms of
benefits of a policy or the financial condition of the company.
-NOT ALLOWED
✔✔Twisting - ✔✔a form of misrepresentation in which the agent convinces the client to
cancel already-existing insurance and buy another policy from the agent.
,-THIS IS ILLEGAL
✔✔Rebating - ✔✔giving or offering some benefit other than those specified in the
policy, such as cash, gifts or securities, to induce a customer to buy insurance.
-This is illegal in all states except two.
✔✔Prior Approval Forms - ✔✔This is when insurance companies must obtain official
approval BEFORE using new forms and rates.
✔✔File and Use Form - ✔✔This is when an insurance company can begin using forms
and rates as soon as they have been filed.
✔✔Open Competition Forms - ✔✔This allows the companies to compete openly with
the forms and rates they select, subject only to requirements of adequacy and
nondiscrimination.
✔✔Insurance Guaranty Associations - ✔✔The public is also protected by this
association which provides funds for payment of unpaid claims when an insurer
becomes insolvent.
✔✔Prohibited Persons in Insurance- Federal Violent Crime Control and Law
Enforcement Act (18 USC Sect 1033, 1034) - ✔✔This act prohibits anyone who has
been convicted of a state or federal felony involving dishonesty or breach of trust from
being involved in the insurance business without a waiver from the Commissioner
✔✔USA Patriot Act - ✔✔This act gives the federal government broad power to curtail
attempts to launder money and finance terrorist activities.
✔✔Central Service Bureaus - ✔✔These bureaus have been established to help
insurance companies collect statistics which they use the statistics to create loss costs.
-the Insurance Services Office (ISO) is one of the largest examples of this.
✔✔Loss costs - ✔✔represent the key component of an insurance rate- how much an
insurance company needs to collect to cover the losses.
✔✔Adverse Selection - ✔✔This is the tendency for people with a greater than average
exposure to loss to purchase insurance.
✔✔Class 1- Frame: - ✔✔frame structures have outside support walls, roof, and floors
constructed of wood or other combustible materials. The exterior walls may be covered
with stucco or brick veneer, and the interior walls are typically lath and plaster.
, ✔✔Class 2- Joisted Masonry: - ✔✔These structures have outside support walls made of
noncombustible masonry materials (such as concrete, brick, stone or tile) and a roof
and floor made of combustible materials (such as wood)
✔✔Class 3- Noncombustible: - ✔✔These structure has exterior walls, floors and roof
are constructed of and supported by non-combustible materials such as metal, asbestos
or gypsum.
✔✔Class 4- Masonry Noncombustible: - ✔✔These structures in the construction class
have exterior walls constructed of masonry materials and a roof and floor made of metal
or other non-combustible materials.
✔✔Class 5- Modified Fire Restrictive: - ✔✔These structures have exterior walls, floors,
and roof constructed of masonry or fire restrictive material with a fire restrictive rating of
2 hours or less.
✔✔Class 6- Fire Restrictive - ✔✔These structures are constructed of masonry or fire
restrictive material with a fire resistance rating of 2 hours or more.
✔✔Misrepresentation by Applicant - ✔✔a written or verbal misstatement of a material
fact involved in the contract on which the insurer relies.
This can be intentional or unintentional.
✔✔Material fact - ✔✔a fact that would cause an insurer to decline a risk, charge a
different premium or change the provisions of the policy that was issued.
✔✔Concealment - ✔✔is similar to misrepresentation but it involves withholding
information rather than misstating a material fact.
✔✔Fraud - ✔✔is a deliberate misrepresentation that causes harm. It is ALWAYS
intentional.
✔✔Four elements of Fraud: - ✔✔1. Someone deliberately lies
2. The intent of the lie is for someone else to rely on that lie
3. Another person relies on that lie
4, The other person suffers harm as a result of relying on that lie
✔✔Representations - ✔✔statements that the applicant believes are true.
A policy cannot be voided because of this.
QUESTIONS SET A+
✔✔The National Association of Insurance Commissioners (NAIC) - ✔✔This commission
is made up of commissioners from each state.
Much of the nation's insurance laws are created through the Commissions
recommendations.
✔✔Admitted or Authorized Insurer. - ✔✔An insurance company who meets the
department's standards and is authorized to do business in the state.
✔✔Non-admitted or Unauthorized Insurer. - ✔✔An insurance company who is not
authorized to do business in the state.
✔✔Domestic Company - ✔✔A company operating in its home state.
✔✔Foreign Company - ✔✔A company conducting business in other states other than
their home state.
✔✔Alien Company - ✔✔A company that is incorporated in a country other than the
United States but is doing business in the states
✔✔Fiduciary - ✔✔A person who stands in a special relationship of trust to another
person.
✔✔Misrepresentation by an Agent - ✔✔when an agent falsely advertises the terms of
benefits of a policy or the financial condition of the company.
-NOT ALLOWED
✔✔Twisting - ✔✔a form of misrepresentation in which the agent convinces the client to
cancel already-existing insurance and buy another policy from the agent.
,-THIS IS ILLEGAL
✔✔Rebating - ✔✔giving or offering some benefit other than those specified in the
policy, such as cash, gifts or securities, to induce a customer to buy insurance.
-This is illegal in all states except two.
✔✔Prior Approval Forms - ✔✔This is when insurance companies must obtain official
approval BEFORE using new forms and rates.
✔✔File and Use Form - ✔✔This is when an insurance company can begin using forms
and rates as soon as they have been filed.
✔✔Open Competition Forms - ✔✔This allows the companies to compete openly with
the forms and rates they select, subject only to requirements of adequacy and
nondiscrimination.
✔✔Insurance Guaranty Associations - ✔✔The public is also protected by this
association which provides funds for payment of unpaid claims when an insurer
becomes insolvent.
✔✔Prohibited Persons in Insurance- Federal Violent Crime Control and Law
Enforcement Act (18 USC Sect 1033, 1034) - ✔✔This act prohibits anyone who has
been convicted of a state or federal felony involving dishonesty or breach of trust from
being involved in the insurance business without a waiver from the Commissioner
✔✔USA Patriot Act - ✔✔This act gives the federal government broad power to curtail
attempts to launder money and finance terrorist activities.
✔✔Central Service Bureaus - ✔✔These bureaus have been established to help
insurance companies collect statistics which they use the statistics to create loss costs.
-the Insurance Services Office (ISO) is one of the largest examples of this.
✔✔Loss costs - ✔✔represent the key component of an insurance rate- how much an
insurance company needs to collect to cover the losses.
✔✔Adverse Selection - ✔✔This is the tendency for people with a greater than average
exposure to loss to purchase insurance.
✔✔Class 1- Frame: - ✔✔frame structures have outside support walls, roof, and floors
constructed of wood or other combustible materials. The exterior walls may be covered
with stucco or brick veneer, and the interior walls are typically lath and plaster.
, ✔✔Class 2- Joisted Masonry: - ✔✔These structures have outside support walls made of
noncombustible masonry materials (such as concrete, brick, stone or tile) and a roof
and floor made of combustible materials (such as wood)
✔✔Class 3- Noncombustible: - ✔✔These structure has exterior walls, floors and roof
are constructed of and supported by non-combustible materials such as metal, asbestos
or gypsum.
✔✔Class 4- Masonry Noncombustible: - ✔✔These structures in the construction class
have exterior walls constructed of masonry materials and a roof and floor made of metal
or other non-combustible materials.
✔✔Class 5- Modified Fire Restrictive: - ✔✔These structures have exterior walls, floors,
and roof constructed of masonry or fire restrictive material with a fire restrictive rating of
2 hours or less.
✔✔Class 6- Fire Restrictive - ✔✔These structures are constructed of masonry or fire
restrictive material with a fire resistance rating of 2 hours or more.
✔✔Misrepresentation by Applicant - ✔✔a written or verbal misstatement of a material
fact involved in the contract on which the insurer relies.
This can be intentional or unintentional.
✔✔Material fact - ✔✔a fact that would cause an insurer to decline a risk, charge a
different premium or change the provisions of the policy that was issued.
✔✔Concealment - ✔✔is similar to misrepresentation but it involves withholding
information rather than misstating a material fact.
✔✔Fraud - ✔✔is a deliberate misrepresentation that causes harm. It is ALWAYS
intentional.
✔✔Four elements of Fraud: - ✔✔1. Someone deliberately lies
2. The intent of the lie is for someone else to rely on that lie
3. Another person relies on that lie
4, The other person suffers harm as a result of relying on that lie
✔✔Representations - ✔✔statements that the applicant believes are true.
A policy cannot be voided because of this.
