Insurance companies – Lesson 2

Question 0

What is an admitted insurer?

Answer 0

Any insurer approved to transact business in California is an admitted one, without regard to location.

Question 1

Who is an admitted insurer?

Answer 1

1. Domestic
2. Foreign
3. Alien

Question 2

Who writes the insurance code?

Answer 2

The state legislature

Question 3

What type of an insurance company issues participating policies?

Answer 3

Mutual

Question 4

What is the retention limit?

Answer 4

The maximum amount a company is willing to retain on a risk.

Question 5

What is a foreign insurer?

Answer 5

An insurer organized under the laws of any jurisdiction outside the State of California, whether or not admitted.

Question 6

An insurer admitted to do business in California may elect not to participate in a guaranty Association. True or false?

Answer 6

Falls

Question 7

An independent agent is:

Answer 7

Someone who has appointments with several insurers and represents the insurers.

Question 8

A managing general agent is a licensed insurance agent:

Answer 8

1. Has to power to appoint, supervise, or terminate the appointment of local agents in a specified territory.
2. Has management contract with one or more admitted insurers.
3. Has the power to accept or decline risk.

Question 9

When an insurance company reinsurers a risk, the ceding company relinquishes all responsibility for the payment of any potential loss. True or false?

Answer 9

False

Question 10

Agents may possess three types of authority: Express, implied, and apparent. Give an example of an apparent authority.

Answer 10

An agent uses the application forms and literature of an insurer with whom he no longer has an appointment.

Question 11

Description of a reciprocal:

Answer 11

An unincorporated association of subscribers who agree to ensure one another.

Question 12

An insurance agent has a fiduciary duty to:

Answer 12

1. The insurer
2. The applicant
3. The client

Question 13

The insurance commissioner should complete an audit of each insurer doing business in California at least:

Answer 13

Once every five years

Question 14

Who does a solicitor represent?

Answer 14

A property and casualty agent/broker.

Question 15

What are the functions of an actuary?

Answer 15

1. Prepare annual statements
2. Determine dividends
3. Determine premiums and make sure they are adequate

Question 16

When a mutual insurer becomes a stock insurer, it is referred to as:

Answer 16

Demutualization

Question 17

Who offers insurance coverage?

Answer 17

1. Federal government
2. State governments
3. Private companies

Question 18

The insurance commissioner’s position is an appointed or elected position?

Answer 18

Elected by the public

Question 19

The commissioner has a right to try to rehabilitate a financially impaired company. This right is to:

Answer 19

Protect the policyholders

Question 20

An insurance agent is:

Answer 20

Licensed to transact property/casualty insurance.

Question 21

What is an exclusive agent?

Answer 21

Is appointed by one company.

Question 22

An agency relationship can be defined as:

Answer 22

A situation where one party (agent) has the authority to act for another (the principal) in dealing with third parties.

Question 23

An agent, as a fiduciary, should:

Answer 23

1. Have a good business reputation.
2. Qualified to transact insurance business.
3. Act in good faith.

Question 24

Mutual insurers are corporations owned by whom?

Answer 24

Policy owners

Question 25

Policies issued by mutual insurers are referred to as what?

Answer 25

Participating policies

Question 26

Stock insurers are corporations organized for the purpose of making a profit for whom?

Answer 26

Stockholders

Question 27

The type of policy issued by stock companies is called what?

Answer 27

Non-participating

Question 28

Do policyholders in a stock Insurer share the companies profits?

Answer 28

No, dividends are paid to the stockholders.

Question 29

In a mutual company, any surplus is return to whom and in what form?

Answer 29

1. Policy owner | 2. In the form of dividend

Question 30

Surplus can be defined as excess earned or saved by the insurance company. Earned surplus is generated by:

Answer 30

Mortality, interest, and expenses

Question 31

Who are Reinsurer?

Answer 31

Insurance companies that assume part of a risk written by a primary carrier which is referred to as the ceding company.

Question 32

The body of law regulating the insurance industry is what?

Answer 32

Insurance code

Question 33

The interpretation of policy provisions is not a primary objective of insurance regulation. True or false?

Answer 33

True

Question 34

What is one of the major concerns of the commissioner regarding insurance company transacting business in the state of California?

Answer 34

The solvency of the insurance company.

Question 35

Records must be delivered to the commissioner within how many days following a written demand?

Answer 35

30 days

Question 36

An exclusive agent is also known as what?

Answer 36

Captive agent

Question 37

A person who is not appointed by an insurer, but rather for compensation acts on behalf of a client to transact insurance other than life and health insurance is known as what?

Answer 37

A broker

Question 38

A person who has an agency agreement with more than one insurance company is known as what?

Answer 38

Independent agent

Question 39

It normally takes how many years for the insurance company to be able to recapture the costs of issuing a policy?

Answer 39

Three years