State Farm Auto Insurance Practice Test

What is a characteristic of New Business transactions?

1. Policies that have recently been reinstated

2. Applications from customers with previous coverage

3. Applications for households not previously covered by State Farm

4. Policy transfers between different providers

The correct answer is: Applications for households not previously covered by State Farm

New Business transactions refer to the situations where a customer is applying for insurance coverage for the first time with a specific provider. This means that the transactions involve applicants who have not had a policy with the insurer before. In this context, the choice indicating applications for households not previously covered by State Farm accurately describes a New Business transaction, as these customers are seeking to establish new coverage. Other options represent situations that do not align with the definition of New Business. Policies that have recently been reinstated involve previously lapsed coverage, which does not constitute new business since there's an existing relationship with State Farm. Applications from customers with previous coverage indicate prior engagement with the insurer, while policy transfers between different providers reflect a continuation of coverage rather than the initiation of a new one. Thus, only applications for households not previously covered by State Farm embody the essence of New Business transactions.