Chapter 15: Texas Supplement - Life and Health

Question 1

The Commissioner’s term is _____ years, which concludes on February 1st of odd-numbered years. The Commissioner must have at least ____ years of prior experience in business or government, or have been a practicing attorney or certified public accountant.

Answer 1

2
5

Question 2

The ____ has the power to regulate the business of insurance in Texas, ensure compliance with the rules and laws regarding insurance and insurance companies, and administer the Texas Workers’ Compensation system.

Answer 2

Commissioner

Question 3

The _____ of _____ may request any information reasonably relating to an insurer’s or agent’s business condition and insurance transactions. This includes books, records, documents, computer records and testimony of office employees. The request must be answered within ____ days of receiving the request. Failure to respond or act could result in the revocation or modification of the certificate of authority.

Answer 3

Department of Insurance
10

Question 4

The Department’s examiners must visit the _____ office of each insurer as often as necessary and no fewer than once every ____ years. The examiners must have free access to all records related to the insurer’s business and affairs, as well as the testimony of any officer, agent, or employee.

Answer 4

Principal
5

Question 5

If the Department of Insurance finds that a licensee has violated any insurance laws, the Department may notify the _______ and recommend an administrative penalty. Within ___ ____ of notifying the Commissioner of the licensee’s violation, the Department must give written notice to the licensee that summarizes the alleged violation, states the amount of the recommended penalty, and informs the licensee of their right to a hearing

Answer 5

commissioner
14 days

Question 6

The Commissioner may also suspend the license for up to ____ ____, issue a cease and desist order, assess a penalty, and order restitution. The Commissioner may also informally dispose of a matter by consent order, agreed settlement, stipulation, or default.

Answer 6

one year

Question 7

If an individual has been served a cease and desist order by the Commissioner, he or she may contest the order by requesting a hearing before the Commissioner within _____ days after receiving the order. The hearing must be held within _____ days after the Commissioner received the request for a hearing. The order will continue to take effect while the hearing is pending.

Answer 7

30
10

Question 8

The Commissioner may assess a monetary penalty up to _____ for each violation and direct restitution to the state or other individuals or entity harmed by the violation. Penalties must be based on the severity of the violation, the harm produced, and the individual’s prior history of and current efforts to reduce violations.

Answer 8

$25,000

Question 9

The Department of Insurance must issue a notice of the violation to the individual within ___ ____ of the date the penalty report is issued. The individual must pay the penalty or appeal the Commissioner’s order in Travis County court no later than ____ ____ from the date of the order.

Answer 9

14 days
20 days

Question 10

The individual must pay the penalty or file judicial review within ___ ___ of the Commissioner’s final order.

Answer 10

30 days

Question 11

A ____ of _____ issued to an insurer authorizes the insurer to engage in the business of insurance in Texas. The certificate of authority states the specific kinds of insurance authorized, and remains in effect and valid until suspended, revoked or surrendered. If the Commissioner refuses to issue a certificate of authority to an insurer, the insurer may request a hearing within ___ to ____days.

Answer 11

certificate of authority
10 to 20

Question 12

_____ _____ includes the sale, solicitation, and negotiation of insurance policies and contracts

Answer 12

Transacting Insurance

Question 13

TF: Domestic Insurer
An insurer that is authorized to transact insurance in Texas and is incorporated in Texas is a domestic insurer.

Foreign Insurer
A foreign insurer is an insurer authorized to transact insurance in Texas, but is incorporated in another state.

Alien Insurer
An alien insurer is an insurer authorized to transact insurance in Texas, but is incorporated in another country.

Answer 13

True

Question 14

Stock insurers, also referred to as ____ ____ insurers, are incorporated companies owned by their stockholders.

Answer 14

Capital Stock

Question 15

The Commissioner can order an insurer to remedy an impairment of the insurer’s surplus by restoring it to an acceptable level, or to cease doing business in Texas, if the Commissioner finds that the required surplus is impaired by more than _____, or less than the required minimum level.

Answer 15

50%

Question 16

____ insurers are commercial companies owned by their policyholders.

Answer 16

Mutual

Question 17

After all operating expenses and claims have been paid on Mutual insurers, dividends are paid out to policyholders as a non-taxable return of _____ ______

Answer 17

Overcharged Premium

Question 18

Since mutual insurers issue dividends to their policyholders, they are referred to as ______ insurers.

Answer 18

participating

Question 19

TF: Transformation of a stock insurer into a mutual insurer is termed mutualization. The reverse, a mutual insurer transforming into a stock insurer, is termed demutualization.

Answer 19

true

Question 20

_____ are individuals who sell, solicit, or negotiate insurance contracts. They examine risk, collect and transmit premiums to insurers, and are paid through commissions based on a portion of premiums collected on policies. They cannot waive any term or condition of an insurance contract, or make any change to the contract.

Answer 20

Agents

Question 21

TF: Nonresident applicants must:

Have passed a licensing exam in their home state;
Hold a valid insurance license in their home state; and
Have a place of business in Texas.

Answer 21

True

Question 22

A temporary license is valid for ____ ____ after the date issued and may not be issued or renewed more than once in a six-month period. Individuals eligible for a temporary license include those who are applying for licensure as a full-time agent, and agents selling industrial life insurance.

Answer 22

90 Days

Question 23

Individuals must obtain a license as a life agent to write life insurance coverage, including endowment benefits and fixed or variable annuities. Individuals licensed to engage in other insurance, including funeral prearrangement coverage, life insurance coverage not exceeding ______, or other specialty licenses, who act as agents only within the scope of that license, are not required to be licensed as life agents.

Answer 23

$15,000

Question 24

Individuals acting as life and health insurance ______ must be licensed by the state. A life and health counselor is any individual who examines life, accident, or health insurance policies or benefit plans, including annuity and endowment contracts, to give advice regarding accepting, rejecting, or otherwise changing the policy, plan, or contract.

Answer 24

Counselors

Question 25

In order to obtain a life and health insurance counselor license, an individual must pass five parts of an examination:

Life and health insurance fundamentals;
Group life insurance, pension and health insurance;
Law, trusts, and taxation;
Finance and economics; and
Business insurance and estate planning.

Answer 25

True

Question 26

Life insurance counselors must have been licensed as a life agent for over ____ years.

Answer 26

three

Question 27

TF: The following individuals do not require licensure as life insurance counselors:

Agents;
Attorneys licensed in Texas;
Public accountants licensed in Texas;
Administrators of employee benefit plans; and
Bank or trust employees/officers.

Answer 27

True

Question 28

All of the following are considered a limited line EXCEPT:

A. Credit insurance
B. Ambulance expense
C. Prepaid legal
D. Counselor

Answer 28

D

Question 29

TF: A limited lines agent license may be obtained for the following types of insurance:

Lump-sum benefit for accidental death or dismemberment;
Credit insurance;
Ambulance expenses;
Prepaid legal services;
Life insurance and annuities for funding funeral costs;
Life insurance not to exceed a benefit of $25,000; and
Health insurance sold by a designated premium insurance company.

Answer 29

true

Question 30

TF: An individual who holds a Chartered Life Underwriter (CLU) designation does not have to take the state licensing examination. In addition, nonresident licenses of reciprocal states do not have to take the licensing exam.

Answer 30

True

Question 31

TF: A person who obtains a license may not act as an agent unless the person has been appointed to act as an agent by at least one insurer or another agent.

Answer 31

True

Question 32

Producers are required to complete ____ ____ of continuing education during the ____-year license period. At least ____ credit hours must be devoted to consumer protection or ethics.

Answer 32

24 hours
Two
Two

Question 33

Continuing education hours must be completed before the license expiration date, and at least ____ of all hours must be completed in a classroom or equivalent setting. Up to ____ hours of continuing education may be granted for membership in a state or national insurance association.

Answer 33

50%
4

Question 34

TF: Licensees shall not count any education course credit they receive before the date the permanent license is issued by the Department. Licensees must complete all continuing education hours during the 2-year reporting period

Answer 34

True

Question 35

TF: Exemptions from continuing education:

Individuals who have continuously held a license for at least 20 years;
Retired licenses receiving renewal or residual commissions;
Nonresident agents completing their home state continuing education requirements; and
Licensees who need a waiver due to illness, active military service, or disability.

Answer 35

True

Question 36

Each licensee shall maintain evidence of each course completed for a period of ____ years from the date of completion of the course for the purpose of investigation or audit.

Answer 36

4

Question 37

An agent selling long-term care partnership policies must complete an ____-hour long-term care partnership certification course, and at least ____ hours of continuing education covering long-term care partnership policies during each reporting period.

Answer 37

8
4

Question 38

An agent selling Medicare products must complete an ____-hour Medicare-related product certification course, and at least ___hours of continuing education covering Medicare-related products during each reporting period.

Answer 38

8
4

Question 39

An agent selling small employer health benefit plans must complete an initial ____-hour certification course, and at least ___ hours of continuing education covering small employer health benefit plans during each reporting period.

Answer 39

8
5

Question 40

TF: An agent selling annuities must complete a one-time 4-hour training course on annuities, and at least 4 hours of continuing education during each reporting period. The course may be completed by classroom or self-study methods. Insurers must verify that an agent has completed the annuity training requirement by obtaining a certificate of completion, using a vendor sponsored by the department, or using a reasonably reliable commercial vendor that has a reporting arrangement with approved insurance education providers. The course must include information on all of the following subjects:
Types and classifications of annuities;
Parties of an annuity transaction;
How consumers are affected by fixed, variable, and indexed annuities;
Qualified vs. nonqualified annuities;
Primary uses of annuities; and
Sales practices, replacement provisions, and disclosure requirements.

Answer 40

True

Question 41

Insurance licenses expire on the _____ anniversary of the date the license is issued. Thereafter, licenses must be renewed every ____ years to remain active.

Answer 41

second
two

Question 42

Individuals with a license expired for ___ days or less may renew the license by submitting the renewal application and fee and an additional late fee. Individuals with a license expired for more than ___ days, but less than one year may not renew the license, but may obtain a new license without taking the applicable examination by submitting the license application and fee and an additional late fee. Individuals with a license expired for more than ____ ____ must take the licensing examination and apply for a new license.

Answer 42

90
90
One Year

Question 43

TF: The Commissioner may deny, suspend, revoke, terminate, or deny renewal of a license or impose a fine for failure to maintain the qualifications required for a license or any one or more of the following causes:

Willful violation of insurance laws of Texas;
Intentional misrepresentation on the license application;
Obtaining a license through fraud or misrepresentation;
Improper misappropriation or withholding of money or property belonging to an insurer, HMO, insured, or beneficiary;
Fraudulent or dishonest acts or practices;
Misrepresentation of the terms and conditions of a policy or contract;
Conviction of a felony;
Violation of rules relating to insurance premium or commission rebates; and/or
Using the license principally to procure insurance for the licensee, relatives, personal business, or employees (controlled business).

Answer 43

True

Question 44

An individual whose license application has been denied or revoked may not apply for another license until the ____ anniversary of the effective date of denial or revocation.

Answer 44

Fifth

Question 45

Two types of Unfair Practices: Unfair ____ Practices and Unfair _____ _____ Practices

Answer 45

Trade
Claim Settlement

Question 46

TF: Unfair Claims Settlement Practices include:

Misrepresenting a material fact or policy’s coverage provision to a claimant;
Failing to offer a prompt, fair, and equitable settlement in good faith; and
Failing to promptly communicate with claimants and settle claims.

Answer 46

True

Question 47

Insurers must keep a record of all complaints received for up to _____ years or the date of the last examination by the Department.

Answer 47

Three

Question 48

TF: An agent or insurer may not:

Misrepresent the terms, benefits, limitations, or exclusions of an insurance policy;
Make untrue or misleading statements of fact or law; or
Fail to state a material fact or any other disclosure required by law.
Statements are deemed to be misrepresentations if, when taken in the context of the whole presentation, they may tend to mislead or deceive a person.

Answer 48

True

Question 49

_____: Agents and insurers may not make statements regarding other insurers that are false or calculated to injure a person engaged in the business of insurance.

Answer 49

Defamation

Question 50

An agent or insurer may not offer, pay, give, or allow premium ______ or other inducements other than those stated in the contract. Agents and insurers may not offer or issue company stock, other securities, or promise of other contracts as inducements to enter into an insurance contract.

Answer 50

Rebates

Question 51

It is not considered rebating if a producer gives a small gift under _____ such as a pen with the companies logo or a small stuffed animal.

Answer 51

$25.00

Question 52

_____ is the intentional misrepresentation or concealment of a material fact to induce the sale or transaction of insurance.

Answer 52

Fraud

Question 53

______ and ______ are more general and may employ a variety of means. Coercion generally manipulates through the prospect of something desirable. An agent’s subtly suggested offer to recommend the prospective client for membership in a selective club if the person purchases a particular policy is coercive, for instance. Intimidation manipulates through the threat of a negative result – the loss of business or the denial of coverage, for instance. A _____ is a form of intimidation in which an individual or group refuses to do business with a company or individual, either to drive them out of business or to force them to act in certain way.

Answer 53

Coercion
Intimidation
Boycott

Question 54

What is a key difference between a stock insurer and a mutual insurer?
Select one:
a. Stock insurers can operate in more than one state; mutual insurers can only operate in one state.
b. Stock insurers can only issue life insurance; mutual insurers can issue both life and health insurance.
c. Stock insurers are owned by investors; mutual insurers are owned by policyholders.
d. Stock insurers are regulated by the SEC; mutual insurers are regulated by the Texas Insurance Department.

Answer 54

C

Question 55

How often is the Commissioner allowed to conduct an examination of an insurance company?
Select one:
a. As often as he deems necessary
b. No more than once a month
c. No more than once every 6 months
d. No more than once a year

Answer 55

A

Question 56

A local insurance company has worked closely with an area real estate firm in writing mortgage insurance as well as other insurances such as health and accident policies to newcomers in a small university town. Recently one of the town’s oldest and most reliable banks has become cautious about making mortgage loans, and both the realtors and the insurance company have lost business as a result. They agree to change their own accounts to a newer bank with a more liberal lending policy and to encourage their clients to follow their course. Since it is a small town with a sizable number of newcomers who visit the real estate firm for rentals or home purchases, their combined action is likely to affect the older, more conservative lender. The practice in which they are engaging is:
Select one:
a. Unfair Discrimination
b. Defamation
c. Boycott
d. Derogation

Answer 56

C

Question 57

A counselor must have been licensed as a life agent for over how many years?
Select one:
a. 1
b. 2
c. 3
d. 4

Answer 57

C

Question 58

What are the additional continuing education requirements for selling long-term care (LTC) partnership policies or Medicare products?
Select one:
a. For LTC, a life, accident and health license is required, as well as an 8-hour LTC partnership certification course.
b. For LTC, 4 hours of LTC education on LTC partnership policies during each reporting period
c. For Medicare, an 8-hour Medicare related product certification course and 4 hours of continuing education during each reporting period thereafter
d. All of the above

Answer 58

D

Question 59

Individuals with a license expired for a maximum of how much time may renew the license by submitting the renewal application and fee and an additional late fee?
Select one:
a. 30 days
b. 90 days
c. 1 year
d. 18 months

Answer 59

B

Question 60

Which of the following is true about the powers of the Commissioner?
Select one:
a. The Commissioner can regulate the business of insurance in the state.
b. The Commissioner can administer Texas Workers’ Compensation system.
c. The Commissioner can deny, suspend or revoke insurance licenses.
d. All of the above

Answer 60

D

Question 61

Transacting insurance does NOT include which of the following?
Select one:
a. Adjudication
b. Negotiation
c. Solicitation
d. Sale

Answer 61

A

Question 62

Controlled business is usually written on all the following, EXCEPT:
Select one:
a. Employees
b. The licensee
c. Friends
d. Relatives

Answer 62

C

Question 63

Which of the following is not required for John to sell small employer health benefit plans?
Select one:
a. He must have a life and accident and health license.
b. He must have completed an initial 8-hour certification course.
c. He must be a member of the small business insurance association.
d. He must complete 5 hours of continuing education for small employer health benefits every 2 years.

Answer 63

C

Question 64

What is the improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim?
Select one:
a. Illegal conversion of funds
b. False use of statistics
c. Unfair claims settlement
d. All of the above

Answer 64

C

Question 65

Defamation occurs when:
Select one:
a. An individual or entity refuses to insure or limit the amount of coverage only because another insurer has cancelled an existing policy on that person
b. An individual or entity acts to create a general action that in any way to intimidate an insurer in order to gain a monopoly in business
c. An individual or entity makes false, derogatory statements about an insurer’s financial condition that are calculated to injure the insurer’s business
d. An individual or entity takes legal action against an insurer or producer

Answer 65

C

Question 66

A person licensed to give advice regarding insurance policies in exchange for a fee is a(an):
Select one:
a. Dealer
b. Counselor
c. Agent
d. Broker

Answer 66

B

Question 67

What type of insurer is formed under the laws of anyplace outside the United States?
Select one:
a. Foreign
b. Domestic
c. Unincorporated
d. Alien

Answer 67

D

Question 68

Adam was found to have used his license to procure insurance for relatives and it was also discovered that he was issuing rebates to insureds. What will probably happen to him?
Select one:
a. His license(s) will be suspended or revoked.
b. He will go to prison.
c. He will pay fines of up to $250,000.
d. All of the above

Answer 68

A

Question 69

What is an insurer or producer required to provide to the Insurance Commissioner during an examination?
Select one:
a. Timely and convenient access to books and records
b. Access to documents and computer records
c. Access to testimony of office employees
d. All of the above

Answer 69

D

Question 70

All of the following are considered to be acts of the agent, EXCEPT:
Select one:
a. Solicitation of business on behalf of the insurer
b. Receives and transmit the application and the insurance policy to and from the insurer
c. Waives terms of the contract when necessary
d. Examines or inspects a risk

Answer 70

C

Question 71

In Texas, who usually is responsible for appointing a person to head the state Insurance Department?
Select one:
a. Head of the Department of Commerce
b. Senate
c. House
d. The Governor

Answer 71

D

Question 72

During a hearing, the Commissioner has powers that include:
Select one:
a. Subpoena witnesses
b. Administer oaths
c. Receive documentary evidence
d. All of the above

Answer 72

D

Question 73

It is illegal to do all of the following, EXCEPT:
Select one:
a. To require as a condition to granting a mortgage that the borrower purchase insurance to cover the property through a specific insurance producer or company
b. To entice business by offering to rebate premiums or offer special favors, dividend advantages, or any other benefits not specified in the contract to induce people to purchase life insurance or annuities
c. To readjust premium rates, made retroactive for the policy year, for group insurance policies based on loss or expense
d. To reject a client solely because another insurer has refused to write a policy on that person

Answer 73

C