Arizona Health Insurance Practice Exam

In which circumstance is prior approval by the Arizona department of insurance NOT required when a Medicare supplement is cancelled by the insurer?

1. Nonpayment of premium

2. Fraudulent claims

3. Misrepresentation of information

4. Failure to provide required disclosures

The correct answer is: Nonpayment of premium

The correct choice indicates that prior approval by the Arizona Department of Insurance is not required when a Medicare supplement policy is cancelled due to nonpayment of premium. This reflects standard practice in insurance where nonpayment of premium represents a fundamental obligation of the policyholder. When a policyholder fails to pay the premiums as outlined in their policy terms, the insurer generally has the contractual right to cancel the coverage without needing to seek prior approval from regulatory authorities. This procedure is designed to safeguard the insurer's financial stability and ensure that policyholders adhere to their obligations, creating a clear expectation regarding payments. In contrast, the other circumstances listed typically involve more complex issues that may require oversight and review to protect consumers. For instance, fraudulent claims and misrepresentation of information could indicate improper conduct that might necessitate scrutiny from the department to ensure fair treatment. Failure to provide required disclosures is also a serious issue, as it impacts the informed consent of policyholders and ensures that consumers are aware of their rights and responsibilities under the policy. Therefore, these situations generally require regulatory oversight to ensure compliance with insurance laws and protect the interests of the policyholders.