Tennessee Insurance Practice Exam

From which authority must an insurance application disclose the possibility of obtaining an investigative consumer report?

1. Consumer Protection Bureau

2. Fair Credit Reporting Act

3. Insurance Regulatory Authority

4. State Department of Insurance

The correct answer is: Fair Credit Reporting Act

The correct answer is the Fair Credit Reporting Act. This federal law mandates that when an insurance company, or any other entity, uses a consumer report to assess an individual's eligibility for insurance or other services, they must inform the applicant of the possibility of obtaining an investigative consumer report. This requirement is in place to ensure transparency and protect consumers' rights regarding their personal credit information. The Fair Credit Reporting Act establishes guidelines for reporting agencies and those who access consumer information, ensuring that consumers are aware of their rights and the procedures surrounding the collection and use of their data. Therefore, when an individual applies for insurance, the insurer must disclose that their information may be obtained from an investigative consumer report in compliance with this act. Understanding this requirement is essential for both consumers and those in the insurance industry, as it promotes informed decisions and upholds the standards of consumer protection.