Texas Life Agent Practice Exam

What must an insurer do before denying coverage based on a consumer report?

1. Notify the applicant of the denial

2. Consult the producer for approval

3. Provide a copy of the report to the applicant

4. Wait for the applicant to respond to the report

The correct answer is: Provide a copy of the report to the applicant

When an insurer intends to deny coverage based on a consumer report, it is required to provide a copy of that report to the applicant. This requirement is rooted in the Fair Credit Reporting Act (FCRA), which is designed to ensure transparency and fairness in the use of personal information for underwriting decisions. By providing the applicant with a copy of the report, the insurer allows the individual to understand the basis for the coverage denial and gives them an opportunity to dispute any inaccuracies that may be present in the consumer report. This step is crucial in maintaining consumer rights and ensuring that individuals have access to the information that may affect their insurance applications.