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Colorado Life Ins. Cert. > Colorado Statutes, Rules, and Regulations Common to All Lines > Flashcards

Colorado Statutes, Rules, and Regulations Common to All Lines Flashcards

1
Q

What is the purpose of insurance guaranty associations?

A

To protect policyowners, insureds and beneficiaries from financial losses caused by insolvent insurers

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2
Q

What type of licensee represents the insured?

A

Broker

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3
Q

Who is considered a nonresident agent?

A

An agent who resides and is licensed in another state, but who is authorized to transact insurance in this state

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4
Q

If an insurer holds a Certificate of Authority, it is known as what type of insurer?

A

Authorized or admitted

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5
Q

If the Commissioner/Superintendent finds a licensee engaging in an unfair method of competition or an unfair practice, what order will be issued?

A

Cease and desist order

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6
Q

To whom may a certificate of authority be issued?

A

To an insurer authorized to transact business in this state

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7
Q

What illegal act does a producer commit when the producer represents a policy in a more favorable light than the policy really is?

A

Misrepresentation

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8
Q

On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. What is the company guilty of?

A

Misrepresentation

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9
Q

What are the most common penalties for violations of insurance statutes?

A

A cease and desist order, a fine, and license suspension or revocation

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10
Q

Who must be a member of insurance guaranty associations?

A

All insurers authorized to write insurance within a state

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11
Q

Who is responsible for the contents of insurance advertisements?

A

The insurance company

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12
Q

In general, who can be excluded from producer licensing and examination requirements?

A

Insurance company officers, directors, or any other employees who do not transact insurance and who do not receive commissions for their services (usually, their responsibilities include administrative, executive or clerical).

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13
Q

What document is required for an insurance company to transact insurance?

A

Certificate of Authority

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14
Q

In the agent/insurer relationship, who is considered the principal?

A

Insurer

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15
Q

Can insurers advertise the existence of the guaranty association during solicitation and sale of insurance policies?

A

No, advertising of the existence of the guaranty association for the purposes of solicitation and sale of insurance policies by insurers is an illegal business practice.

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16
Q

When is controlled business legal?

A

When the commissions from controlled business do not exceed the aggregate commissions on all the other business (specific limits may vary from state to state)

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17
Q

What type of licensee represents the insurance company?

A

The agent

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18
Q

Who must be notified of a producer’s change of address?

A

The Department of Insurance (Commissioner/Director/Superintendent)

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19
Q

Who can usually be granted a temporary license?

A

Producer’s spouse or designee in case the licensed producer dies or becomes disabled

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20
Q

If a producer makes maliciously critical statements about another insurer, what is this illegal practice called?

A

Defamation

21
Q

What is controlled business?

A

Insurance on the producer’s own life or property, or the lives or property of the producer’s family or business associates

22
Q

What is the purpose of a cease and desist order?

A

To prevent a producer or insurer from further violating laws for transacting insurance

23
Q

Who owns stock companies?

A

Stockholders

24
Q

When can the Commissioner or Director examine insurers?

A

Whenever deemed necessary, but at least once every few years (please check your state regulations for specific time requirement)

25
Q

Who is an insurance agent?

A

A person authorized to sell, solicit and negotiate insurance contracts

26
Q

What type of misrepresentation persuades an insured, to his or her detriment, to cancel, lapse, or switch policies from one to another?

A

Twisting

27
Q

Two individuals who are in the same risk and age class are charged different rates for their insurance policies due to an insignificant factor. What is this called?

A

Discrimination

28
Q

For what reason can a temporary license be issued?

A

For continuation of business in case the licensed producer dies or becomes disabled

29
Q

An agent offers a client free tickets to a sporting event in exchange for the purchase of an insurance policy. What is the agent guilty of?

A

Rebating

30
Q

What are producers required to do in order to renew their license?

A

Complete continuing education hours and pay a renewal fee

31
Q

Who may share in the commission from the sale of a life insurance policy?

A

Only producers properly licensed for the type of insurance transaction

32
Q

Insurers are classified according to their domicile. What are the three types of insurers?

A

Domestic, foreign, and alien

33
Q

If an insurer meets the state’s financial requirements and is approved to transact business in the state, it is considered what type of insurer?

A

uthorized or admitted

34
Q

Who is responsible for the costs associated with the examination of insurers?

A

The insurer who is being examined

35
Q 
Which of the following is NOT a penalty for violating provisions of the Insurance Code?
AMonetary fine
BLicense revocation
CPayment of a contractual obligation
DImprisonment
A

DImprisonment

In addition to suspension of an insurance producer license, any person who violates any provision of the Insurance Code may be subject to a civil penalty (monetary fine), or an order to pay for contractual obligations (for example, when the violation caused the failure to pay the claim).

36
Q

A man desperately wants to become an insurance agent, but cannot pass the Colorado exam. His cousin offers to take the test under the man’s name and passes. Three months after the license is issue that gets discovered. What will the Commissioner’s action be?
AThe Commissioner can issue a license for the cousin.
BThere is nothing the Commissioner can do.
CThe Commissioner can revoke the license.
DThe Commissioner must wait until the license’s renewal date to suspend the license.

A

CThe Commissioner can revoke the license.

The Commissioner may suspend or revoke a license if he or she discovers a person obtained or attempted to obtain a license through misrepresentation or fraud.

37
Q 
How often will the Commissioner examine domestic insurers in this state?
AEvery 5 years
BBiennially
CAnnually
DEvery 3 years
A

AEvery 5 years

The Commissioner may conduct an examination or investigation of any company or person as often as deemed appropriate, but at least once every 5 years.

38
Q

In order to get a nonresident license in this state, a producer must
APass the nonresident state exam and satisfy their continuing education requirements.
BRepresent an agency located in this state.
CSurrender their license in their state of residence.
DApply and pay a fee to a nonresident state that reciprocates.

A

DApply and pay a fee to a nonresident state that reciprocates.

A producer may apply for a nonresident license by showing that they are in good standing as a producer in their home state and by paying a fee, if the two states reciprocate.

39
Q 
An insurance producer is prohibited from charging separate fees for any of the following services EXCEPT
AExtending business hours.
BMaking copies of insurance documents.
CQuoting premiums.
DFinancial planning.
A

DFinancial planning.

Producers are prohibited from charging separate fees in addition to those contemplated in the rate filing. Insurance producers may charge fees for specific services which are beyond the scope of services pertaining to insurance policies, including risk management services, financial planning, investment counseling, and similar.

40
Q 
When twin brothers applied for life insurance from Company A, the company found that while neither of them smoked and both had a very similar lifestyle, one of the twins was in a much stronger financial position than the other. Because of this, the company charged him a higher rate for his insurance. This practice is considered
AControlled business.
BAdverse selection.
CDiscrimination.
DTwisting.
A

CDiscrimination.

Permitting individuals of the same class to be charged a different rate for the same insurance is the unfair trade practice of discrimination.

41
Q 
On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. The company is guilty of
AConcealment.
BUnfair claim practice.
CRebating.
DMisrepresentation.
A

DMisrepresentation

Issuing or circulating any sales material that is false or misleading would be considered misrepresentation and is illegal.

42
Q

If a governmental agency in this state files an administrative action against an insurance licensee, the report of the action to the Commissioner must include all of the following EXCEPT
AOther relevant documents of the complaint or hearing.
BThe producer’s production records for the prior year.
CA copy of the initial complaint.
DThe order resulting from the hearing.

A

BThe producer’s production records for the prior year.

The report to the Commissioner must include a copy of the initial complaint, the order resulting from the hearing, and any other relevant documents.

43
Q

All of the following are considered to be misuses of fiduciary funds EXCEPT
ACollecting interest on customer balances held in a producer’s trust account
BUsing balances in customer accounts as collateral for a loan to a producer
CRemitting a return premium to an insured 31 days after the producer received it from the insurer
DReflecting a premium received as a business asset on the producer’s financial statement

A

A. Collecting interest on customer balances held in a producer’s trust account

Producers who act in an agency capacity are required to maintain a separate trust account for premiums. Any interest earned in a trust account belongs to the producer. Trust accounts may not be used as a personal asset or as collateral for a loan to a producer; operating expenses may not be paid out of the trust account. Producers must remit a return premium to an insured within 30 days after the producer received it from the insurer.

44
Q

All insurance companies doing business in the state of Colorado must file a financial statement with the Commissioner
AQuarterly.
BAnnually, on or before March 1.
CAnnually, on or before January 1.
DSemiannually, January 1 and July 1 each year.

A

BAnnually, on or before March 1.

All insurance companies doing business in this state will make and file with the Commissioner a financial statement annually, on or before March 1.

45
Q 
An insurer who frequently misses deadlines to respond to inquiries from the Division of Insurance may be fined, for each violation, as much as
A$500.
B$800.
C$1,000.
D$5,000.
A

D$5,000.

An insurer who fails to respond to a Division of Insurance inquiry by the deadline faces a $500 civil penalty for the initial violation. Fines may reach up to $5,000 for subsequent violations.

46
Q 
An insurer receives an Examination Request Form dated June 2 from the Division of Insurance. The insurer must respond by
AJune 7.
BJune 9.
CJune 12.
DJune 16.
A

CJune 12.

Companies must respond to an Examination Request/Comment Form or Examination Request/Memo Form within 10 calendar days from the date on the form.

47
Q

How often must the Commissioner examine all insurers to guard against insurance company insolvency?
AAt least once every 5 years
BAt least once every 3 years
CEvery time the Certificate of Authority is renewed
DAnnually

A

AAt least once every 5 years

The Commissioner may conduct an examination or investigation of any company or person as often as deemed appropriate, but at least once every 5 years.

48
Q

In insurance, producers are permitted to share or split commissions, providing that
AThere is a written agreement between the producers.
BBoth are properly licensed for the line of insurance.
CThe insured knows and agrees to the arrangement.
DThe Insurance Department knows of the arrangement.

A

BBoth are properly licensed for the line of insurance.

For a producer to receive commissions from the sale of insurance, they must be properly licensed for that line of insurance.

49
Q

All of the following statements are true regarding producer appointments EXCEPT
AA producer may only hold an appointment with one insurer.
BCompanies may appoint either individual producers or agencies.
CA producer must hold at least one appointment.
DThe producer must be appointed at the time business is placed with an insurer.

A

AA producer may only hold an appointment with one insurer.

A producer may hold just one appointment and be known as a captive agent or can represent multiple insurers, therefore holding multiple appointments. A producer must hold at minimum one appointment, but may hold as many as he or she would like.

Colorado Life Ins. Cert. (4 decks)

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