Insurance Regulations

Question 1

What is the purpose of a cease and desist order?

Answer 1

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

Question 2

To whom may a certificate of authority be issued?

Answer 2

To an insurer authorized to transact business in this state.

Question 3

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

Answer 3

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).

Question 4

When is controlled business legal?

Answer 4

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

Question 5

A state-issued document empowering an insurance company to become an admitted insurer is called what?

Answer 5

Certificate of Authority

Question 6

Who is considered a nonresident agent?

Answer 6

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

Question 7

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

Answer 7

Rebating

Question 8

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

Answer 8

Only produces properly licensed for the type of insurance transaction.

Question 9

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

Answer 9

Twisting

Question 10

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

Answer 10

Defamation

Question 11

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 11

Authorized or admitted

Question 12

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

Answer 12

Authorized or admitted

Question 13

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

Answer 13

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

Question 14

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

Answer 14

Cease and desist order

Question 15

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

Answer 15

Domestic, foreign, and alien

Question 16

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

Answer 16

Misrepresentation

Question 17

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

Answer 17

The Department of Insurance

Commissioner/Director/Superintendent

Question 18

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

Answer 18

Misrepresentation

Question 19

Who is an insurance agent?

Answer 19

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

Question 20

What type of licensee represents the insurance company?

Answer 20

The agent

Question 21

When can the Commissioner or Director examine insurers?

Answer 21

Whenever deemed necessary, but at least once every few years (5 years in AZ)

Question 22

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

Answer 22

Certificate of Authority

Question 23

When would a misrepresentation on an insurance application be considered fraud?

Answer 23

When it is intentional and material.

Question 24

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

Answer 24

Fiduciary

Question 25

What type of insurer is formed under the laws of another state?

Answer 25

Foreign

Question 26

What is controlled business?

Answer 26

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

Question 27

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 27

Discrimination

Question 28

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

Answer 28

Complete continuing education hours and pay a renewal fee.

Question 29

Who owns stock companies?

Answer 29

Stockholder’s

Question 30

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

Answer 30

The insurer who is being examined.