Massachusetts Health & Accident Insurance Practice Exam

What can lead to the refusal of policy renewal by an insurer?

1. Policyholder's change of address

2. Fraud or material misrepresentation

3. Policyholder's age at renewal

4. Changes in state regulations

The correct answer is: Fraud or material misrepresentation

Refusal of policy renewal by an insurer can often stem from fraud or material misrepresentation. This occurs when a policyholder provides false information or omits necessary details during the application process or throughout the coverage period. If an insurer discovers that important information was misrepresented, it undermines the basis of the contract and exposes the insurer to unanticipated risks. As a result, the insurer may decide to not renew the policy to protect themselves from future claims that could arise from this deceitful behavior. In contrast, changes in a policyholder's address typically do not affect renewal as long as the new location is within the same coverage area, and age usually has set guidelines that insurers follow for renewals, thereby not being an automatic cause for refusal. Additionally, while changes in state regulations can impact insurance practices, they do not directly lead to the refusal of an individual policy's renewal unless those changes specifically apply to the terms of coverage outlined in the existing policy.