CA Code & Ethics Exam #2 Flashcards
1
Q
Which type of insurer is owned by its policyholders?
a. A fraternal society.
b. A reciprocal exchange.
c. A mutual insurer.
d. A capital stock insurer.
A
A mutual insurer
2
Q
- The required contents of a policy include all of the
following EXCEPT
a. Risks insured against.
b. Parties to the contract.
c. The probability of loss.
d. The period during which the insurance is to continue.
A
The probability of loss
3
Q
- Section 1729.2 of the California Insurance Code requires
insurance producer applications and licensees to notify the
Insurance Commissioner in writing, within
days of changes in background information
after an application has been submitted or license has been
issued.
a. 15
b. 20
c. 30
d. 45
A
30
4
Q
- What rule is used to determine the importance of a
representation?
a. The law of adhesion.
b. That of aleatory contracts.
c. The materiality of concealment.
d. The insurable interest standard.
A
The materiality of concealment.
5
Q
- How often MUST an insurer file the National Association
of Insurance Commissioners (NAIC) financial statement?
a. Monthly.
b. Quarterly.
c. Annually.
d. Every three years.
A
Annually
6
Q
- Which of the following is a hazard?
a. A peril.
b. A speculative risk.
c. A large number of similar exposure units.
d. A condition that may increase the likelihood of loss
occurring.
A
A condition that may increase the likelihood of loss
occurring.
7
Q
- Upon notification of claim, a claimant must be given access
to the California Fair Claims Settlement Practices
Regulations by all of the following means EXCEPT
a. On-line at the department of insurance internet site.
b. By interview appointment with the agent of record.
c. A copy free of charge from the insurer.
d. Written notification from the insurer.
A
By interview appointment with the agent of record.
8
Q
- The direct response distribution of insurance utilizes all of
the following to promote the sale of insurance EXCEPT
a. Internet advertising.
b. Television commercials.
c. Telephone call from an agent.
d. Brochures mailed to prospective clients.
A
Telephone call from an agent
9
Q
- A person authorized by and on behalf of an insurer who
transacts life, disability or life and accident and health
insurance is defined as a
a. Broker.
b. Solicitor.
c. Life agent.
d. Life and disability analyst.
A
Life agent
10
Q
- A contract that restores an injured party to the condition
that was present before the loss is
a. A futures contract.
b. A personal contract.
c. An indemnity agreement.
d. A hold-harmless agreement.
A
An indemnity agreement.
11
Q
- Which of the following would an agent be guilty for
misrepresenting the amount of dividends a policy will pay?
a. A felony
b. A misdemeanor.
c. An aleatoric breach.
d. A fiduciary infraction.
A
A misdemeanor.
12
Q
- If you have been convicted of a misdemeanor and that misdemeanor conviction is later expunged pursuant to California Penal Code Section 1203.4, which of the following is true?
a. Even though your misdemeanor conviction was expunged, you must still disclose your misdemeanor
conviction on your individual application for an insurance license.
b. Since your misdemeanor conviction was expunged, you do not need to disclose your misdemeanor conviction on your individual application for and insurance license.
c. The California department of insurance only requires an
applicant to disclose felony convictions.
d. None of the above.
A
Even though your misdemeanor conviction was
expunged, you must still disclose your misdemeanor
conviction on your individual application for an
insurance license.
13
Q
- Policies covered under the California Life and Health
Insurance Guarantee Association include all of the
following EXCEPT
a. Disability income.
b. Individual health.
c. Deferred annuities.
d. Self-funded group life.
A
Self-funded group life.
14
Q
- According to the California Insurance Code, if an
insurer’s certificate of authority is revoked, the
Commissioner can proceed with any of the following
actions EXCEPT
a. Taking possession of transaction records.
b. Using Guarantee Funds to pay salaries.
c. Confiscating the office premises
d. Liquidating the business.
A
Using Guarantee Funds to pay salaries.
15
Q
- If an insurer must have its rates accepted by the Insurance
Department prior to using them, the insurer would be
operating in which of the following types of jurisdictions?
a. File and use.
b. Use and file.
c. Prior approval
d. State mandated.
A
Prior approval
16
Q
- The California Code of Regulations governing claim
settlement practices prohibits all of the following acts of
unfair discrimination EXCEPT denial of claim based on
a. Gender
b. Income.
c. Reckless behavior.
d. A physical handicap.
A
Reckless behavior.
17
Q
- An insurance solicitor is a person authorized to
a. Sell life insurance.
b. Charge a service fee.
c. Act as a broker on behalf of an insurer.
d. Assist a broker or agent in selling insurance.
A
Assist a broker or agent in selling insurance.
18
Q
- When a person charges an insured a fee to review the
insured’s existing life policy, what type of license does that
person need?
a. A life agent.
b. A personal lines agent.
c. A life and disability analyst.
d. A life or disability adjuster.
A
A life and disability analyst.
19
Q
- It is considered an unfair method of competition for an
agent to advertise that the insurer the agent is appointed
with is
a. Highly rated by A.M. Best Company.
b. An admitted insurer in the state of California.
c. A member of the insurance Guarantee Association.
d. Fully authorized by certification to sell insurance.
A
A member of the insurance Guarantee Association.
20
Q
- The increase in the probability of a loss resulting from a
insured’s dishonest tendencies is known as
a. Physical hazard.
b. Morale hazard.
c. Moral hazard.
d. Legal hazard.
A
Moral hazard
21
Q
- All of the following are requirements of a contract
EXCEPT
a. The contract must have a legal purpose
b. There must be equal consideration between the parties.
c. The parties to the contract must be legally competent.
d. There must be an offer and acceptance of the contract
terms.
A
There must be equal consideration between the parties
22
Q
- According to the California Insurance Code, the
Commissioner can disapprove a licensee’s request to use a
fictitious name for any of the following reasons EXCEPT
that the
a. Name is the licensee’s actual name.
b. Use of the name would be misleading.
c. Name is too similar to a name already filed.
d. Name implies that the licensee is an underwriter.
A
Name is the licensee’s actual name
23
Q
- Risk can be defined as all of the following EXCEPT
a. Uncertainty
b. The cause of loss.
c. The chance of loss.
d. The probability of an unexpected outcome.
A
The cause of loss
24
Q
- According to the California Insurance Code, an “insurance
broker” is
a. Authorized by an insurer to transact insurance.
b. Employed to assist an insurance agent in transacting
insurance.
c. Hired by an insured to give advice about insurance
transactions.
d. Compensated for transacting insurance on behalf of
another person with an insurer.
A
Compensated for transacting insurance on behalf of
another person with an insurer.
25
Q
- Failure to report background changes within 30 days as
required under section 1729.2 of the California Insurance
Code could subject a licensee or applicant to
a. Suspension.
b. Denial.
c. Revocation of the license.
d. All of the above.
A
All of the above
26
Q
- Insurer expenses include all of the following EXCEPT
a. Taxes.
b. Policy premiums.
c. Agent commissions.
d. Home office operations.
A
Policy premiums
27
Q
- The PRIMARY objectives of insurance regulation include
all of the following EXCEPT
a. Rate regulation.
b. Consumer protection.
c. Solvency surveillance.
d. Interpret policy provisions.
A
Interpret policy provisions
28
Q
- What is it called when an insurer uses higher rates for an
individual solely based on religion, race, or ethnic group?
a. Redlining.
b. Categorizing.
c. Social injustice.
d. Unfair discrimination.
A
Unfair discrimination
29
Q
- All of the following qualify as Background Information as
defined in Section 1729.2 of the California Insurance Code,
EXCEPT
a. A misdemeanor or felony conviction or a filing of felony
criminal charges in state or federal court.
b. Misdemeanor charges.
c. An administrative action regarding a professional or
occupational license.
d. Any admission, or judicial finding or determination, or
fraud, misappropriation or conversion of funds,
misrepresentation, or breach of fiduciary duty.
A
Misdemeanor charges
30
Q
- Which is an agreement in which an insurer contracts with
a third party to insure itself against losses from insurance
policies it issues?
a. Adhesion.
b. Avoidance.
c. Indemnity.
d. Reinsurance.
A
Reinsurance
31
Q
- Loss retention is an effective risk management technique
when all of the following conditions exist EXCEPT the
a. Losses are highly predictable.
b. Probability of loss is unknown.
c. Worst possible loss is not serious.
d. Insured chooses to assume the losses involved.
A
Probability of loss is unknown
32
Q
- When are parties to a contract REQUIRED to
communicate information solely based on personal
judgment for a matter in question?
a. Only when the policy terms require it.
b. Only when relevant.
c. Only when asked.
d. Never.
A
Never
33
Q
- When used in the California insurance code the word
“may” is intended be
a. Final.
b. Mandatory.
c. Optional.
d. Permissive.
A
Permissive
34
Q
- It is a federal offense for an insurance agent to do all of
the following EXCEPT
a. Falsify financial records.
b. Embezzle premium payments.
c. Misrepresent facts on an insurance application.
d. Willfully engage in the business of insurance with a felony conviction and without the consent of the
commissioner.
A
Misrepresent facts on an insurance application.
35
Q
- All of the following statements about aleatory contracts
are true EXCEPT
a. They may be interpreted as a form of gambling.
b. There are cases where the insurer pays nothing.
c. The insured and insurer contribute equally to the contract.
d. If a loss occurs, the insured’s premium is small in
relation to amount the insurer pays.
A
The insured and insurer contribute equally to the
contract.
36
Q
- A contract in which one party promises to indemnify
another against another against loss that arises from an
unknown event is
a. An insurance policy.
b. A restoration policy.
c. A retrocession agreement.
d. A hold-harmless agreement.
A
An insurance policy
37
Q
- A person who acts, offers to act, or assumes to act in a capacity where a license is REQUIRED without having a valid license, is guilty of a
a. Felony
b. Fraud
c. Misdemeanor
d. Misrepresentation.
A
Misdemeanor
38
Q
- As defined in the California Insurance Code, “insurance”
is a
a. Contract.
b. Gamble.
c. Peril.
d. Risk.
A
Contract
39
Q
- Who are the members of the Medical Information Bureau?
a. Hospitals.
b. Physicians.
c. Medical Bill Reviewers.
d. Life and Health insurers.
A
Life and Health insurers
40
Q
- The purchase of an insurance policy may accomplish all of the following for the insured EXCEPT
a. Reduction of uncertainty.
b. The elimination of the risk
c. A replacement of a large possible loss by a “smaller certain loss”
d. A reduction in worry/greater peace of mind.
A
The elimination of the risk
41
Q
- Which of following statements regarding risk is TRUE?
a. Only pure risks are insurable
b. Only speculative risks are insurable
c. Both pure and speculative risks are insurable.
d. Neither pure nor speculative risks are insurable.
A
Only speculative risks are insurable
42
Q
- The insurer’s department with PRIMARY responsibility
for the risk selection process is called:
a. Actuarial.
b. Claims.
c. Marketing.
d. Underwriting.
A
Underwriting
43
Q
- The more times an event is repeated, the more predictable
the outcome becomes. This is an example of
a. The law of large numbers.
b. Standard deviation.
c. Average dispersion.
d. Normal variance.
A
The law of large numbers
44
Q
- What recourse does an insurer have if violation of a
material warranty on the part of the insured is discovered?
a. Hearing by the insurance Commissioner to determine the
severity of the misrepresentation and to determine appropriate courses of action.
b. Hearing by a court of law to determine the appropriate course of action the insurer may take.
c. None, if discovered after the policy has been in force for 12 months.
d. Rescission of the policy.
A
Rescission of the policy
45
Q
- An insurer entitled to transact business by complying with
the California Insurance Code is known as an
a. Alien carrier.
b. Approved carrier.
c. Admitted carrier.
d. Accepted carrier.
A
Admitted carrier
46
Q
- Which of the following is an express power given to the agent in an agency agreement?
a. The authority to advertise.
b. The authority to collect premiums.
c. The authority to represent the insurer.
d. The authority to bind the insurer any risk at any time.
A
The authority to represent the insurer
