Insurance Law Rules and Regulations

Question 1

The requirement that agents must account for and promptly remit all insurance funds collected is known as what type of agent responsibility?

Answer 1

Fiduciary

Question 2

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

Answer 2

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

Question 3

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

Answer 3

Twisting

Question 4

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?

Answer 4

Misrepresentation

Question 5

If the commissioner finds a license engaging in an unfair method of competition or an unfair practice, what order will be issued?

Answer 5

Cease and desist order

Question 6

When is controlled business legal?

Answer 6

When commissions from the controlled business do not exceed the aggregate commissions on all other business.

Question 7

When can the commissioner or director examine insurers?

Answer 7

Whenever deemed necessary, but at least once every few years (5 years NC).

Question 8

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

Answer 8

The insurer being examined.

Question 9

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

Answer 9

Misrepresentation

Question 10

What is the purpose of insurance guaranty associations?

Answer 10

Protect the policy owners, insured’s and beneficiaries from financial losses caused by insolvent insurers.

Question 11

What is a controlled business?

Answer 11

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

Question 12

Who is an insurance agent?

Answer 12

A person authorized to sell, solicit and negotiate insurance contracts.

Question 13

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?

Answer 13

Discrimination

Question 14

What type of licensee represents the insurance company?

Answer 14

Agent

Question 15

To whom may a certificate of authority be issued?

Answer 15

To an insurer authorized to transact business in this state.

Question 16

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

Answer 16

Only producers properly licensed for the type of insurance transaction.

Question 17

For what reason can a temporary license be issued?

Answer 17

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

Question 18

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

Answer 18

CE hours and renewal fee.

Question 19

Who can usually be granted a temporary license?

Answer 19

Spouse or designee.

Question 20

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

Answer 20

Insurance company officers, directors, or any other employees who do not transact insurance and who do not receive any commissions for their services.

Question 21

Who must be a member of insurance guaranty associations?

Answer 21

Authorized insurer within the state.

Question 22

What type of license represents the insured?

Answer 22

Broker.

Question 23

Who is considered a nonresident agent?

Answer 23

Any agent who resides and is licensed in another state but who is authorized to transact insurance in the state.

Question 24

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

Answer 24

Defamation.

Question 25

What is the purpose of a cease and desist order?

Answer 25

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

Question 26

If an insurer holds a certificate of authority, it is known as what type of insurer?

Answer 26

Authorized or admitted.

Question 27

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

Answer 27

Department of insurance/The commissioner.

Question 28

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

Answer 28

No. It’s illegal.

Question 29

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?

Answer 29

Rebating.

Question 30

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?

Answer 30

Authorized or admitted.