Other Than Life (OTL) Practice Exam

What function does the Federal Department of Insurance perform regarding federally licensed insurance companies?

1. Controls the types of policies issued

2. Regulates the financial stability of the company

3. Stipulates the types of agents who may represent the company

4. Only supervises life insurance companies

The correct answer is: Regulates the financial stability of the company

The Federal Department of Insurance primarily focuses on regulating the financial stability of federally licensed insurance companies. This involves monitoring the financial practices and solvency of these companies to ensure that they are capable of meeting their obligations to policyholders. By ensuring that these insurance companies maintain a solid financial foundation, the department protects consumers and enhances the overall stability of the insurance market. This regulation is crucial because it helps to prevent company failures that could leave policyholders without the coverage they have paid for. The other options reflect functions that are not typically under the purview of the Federal Department of Insurance. For example, while the department may have influence in the overall regulation of the insurance industry, the control of specific types of policies issued and the stipulation of which agents may represent a company generally falls under state jurisdictions rather than federal. Additionally, the supervision of life insurance companies is a narrower focus that does not encompass the full range of insurance types that the Federal Department oversees.