In personal lines business, premiums are increasingly collected through the means of:

Question

Options

• Apreauthorized cash controls
• Bpreauthorized electronic debits
• Cpreauthorized electronic credits
• Dpart due receipts

• A
  8% (5)
• B
  84% (51)
• C
  3% (2)
• D
  5% (3)

Explanation

Preauthorized electronic debits (option B) are the dominant modern method for collecting personal lines premiums because insurers can automatically withdraw scheduled payments directly from a policyholder's bank account, reducing lapses and administrative overhead. Option A ("preauthorized cash controls") is not a real industry term - cash controls relate to internal accounting processes, not premium collection methods. Option C ("preauthorized electronic credits") is wrong because a credit pushes money to someone; premium collection requires pulling money from the policyholder, which is a debit. Option D ("part due receipts") refers to an older, paper-based partial payment acknowledgment system, not a collection mechanism.

Memory tip: Think of it from the insurer's perspective - they want money coming in, so they debit your account. Credits go out, debits come in. "D for Debit, D for Done automatically."

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