Lesson 2

Question 1

Name 3 marketing distribution systems.

Answer 1

Home Service System
Direct Response System
Agency System

Question 2

The ______ marketing distribution system is the oldest and considered the original system for marketing insurance products.

Answer 2

Home Service

Question 3

Utilizing the ______ approach, a representative of the insurer meets initially with the insured to deliver the policy and collect the initial premium. Typically on a weekly (or monthly) basis, the representative continues to visit the insured to collect ongoing premiums at the insured’s home, as opposed to receiving a monthly bank draft from the insured.

Answer 3

Home Service System

Question 4

The ______ marketing distribution system is more common in today’s marketplace. Insurers market products directly to consumers through mass marketing as well as through their own sales force, including company sales employees and ‘captive agents’ (agents who market only one insurer’s products).

Answer 4

Direct Response

Question 5

The ______ marketing distribution system incorporates agents, either exclusive to the insurer, or who are considered ‘independent agents,’ meaning that they market several insurers products to consumers with the goal of matching the correct insurance policy based on the needs of the consumer.

Answer 5

Agency

Question 6

Life and health insurance is commonly transacted through ______, or individuals licensed by their home state to solicit insurance, collect premium and deliver policies to newly insured individuals. In comparison to direct marketing practices, ______ are given the authority to solicit insurance to the general public and are paid a commission on insurance sales.

Answer 6

insurance Producers

producers

Question 7

Although each state defines an individual’s ability to solicit insurance products, producers are generally categorized as ______. While each type of producer may solicit insurance sales, they cannot bind coverage.

Answer 7

agents, brokers or solicitors.

Question 8

An insurance ______ is authorized by an insurance company to solicit and negotiate insurance products on the company’s behalf. All states provide for the licensing of ______ agents.

Answer 8

Agent

life, annuity, health, accident, disability and sickness

Question 9

The insurance company is often referred to as the ______. Agents often represent several insurers in order to ______.

Answer 9

Principal or Insurer.

help consumers shop for the policy that fits their needs

Question 10

An insurance ______ works on behalf of a consumer to negotiate and transact insurance with one or more insurers. A ______ represents the insurer, while a ______ represents the consumer.

Answer 10

Broker
agent
broker

Question 11

Both agents and brokers solicit insurance, collect premium and deliver policies; however, an agent is paid a commission by the ______ he or she represents, while a broker is paid a fee by the ______ he or she represents. In an effort to increase revenue, some states allow agents and brokers to ______. Known as a Solicitor, this type of producer performs many of the same tasks as an agent or broker.

Answer 11

insurer
consumer
hire individuals to help with the sales process.

Question 12

A ______ sells insurance on behalf of a single insurance company, either as an employee or as a commission-based agent. This type of agent represents only one insurance company and promotes only its products to the general public.

Answer 12

Captive Agent

Question 13

A benefit of being a captive agent is ______. In the health and life insurance industry, captive career agents account for the majority of insurance sales.

Answer 13

the amount of agent support provided, including company training and promotional materials given to the career agent

Question 14

A ______, also known as a ______, sells insurance on behalf of multiple insurance companies and is paid commission from each insurer in which he or she is appointed.

Answer 14

Non-Captive Career Agent

Independent Agent

Question 15

A benefit of being an independent agent is that he or she can ______.

Answer 15

provide many options to help find the correct plan based on the needs of the applicant

Question 16

After working in the industry and gaining enough experience, an insurance producer may hire and train additional agents to work under him or her, and in turn, the producer will receive an override commission on each sub-agent’s sales in addition to his or her own commissions. At this point, the producer is considered to be a ______, which is essentially an agent who manages additional agents to perform the same sales duties, thus helping the insurance company achieve additional sales.

Answer 16

Managing General Agent (MGA)

Question 17

A ______ is a legal contract between an insurance company and a licensed agent by which the insurance company gives an agent the contractual permission, or ‘express authority,’ to conduct insurance business on behalf of the insurer in exchange for compensation, referred to as ______.

Answer 17

Appointment

Commission

Question 18

An agent’s ______ is clearly defined in words through the company’s contract, or appointment, with the agent.

Answer 18

express authority

Question 19

______ is defined as the general business practices that an agent could perform that is not necessarily part of the agent’s contract, but could be acceptable by the insurer.

For instance, while an agent’s contract does not include collection of premium beyond the initial payment, if an agent collects and remits ongoing premium payments to an insurer on behalf of a client and the insurer accepts the premium, it is then implied that the agent has the authority to collect ongoing premium.

Answer 19

Implied Authority

Question 20

______ is considered to be a vague and somewhat misleading authority, based solely on the actions of the agent and the ‘apparent’ acceptable response of the insurer. This type of authority refers to the possibility of a situation where an applicant is under the impression that the agent has the authority to act on behalf of the insurer, even though no expressed authority actually exists.

Answer 20

Apparent Authority

Question 21

The concept of ______ is the presumption from a potential customer’s point-of-view that an agent is conducting business on behalf of an insurer, given the materials he or she presents to the potential customer or the clothing he or she wears bearing the company’s name or logo.

Answer 21

Presumption of Agency

Question 22

What are some terms that might be included in the agency contract?

Answer 22

advertising and solicitation guidelines for the company

medical underwriting guidelines to help ensure correct application submission from the field

commission structure for the agent

any other specific regulations of the company, as well as the rights of the agent, under the contract.

Question 23

Just as an agent sells life or health insurance to clients, ______ protects the agent from claims resulting from the failure to adequately provide professional service to a client.

Answer 23

Errors and Omission (E&O) insurance

Question 24

Insurance agents purchase ______, also known as ______insurance to protect against claims relating to negligent ______, or mistakes that were made on behalf of the agent, as well as any claims of ______, or vital policy information that was excluded by the agent.

Answer 24

E&O insurance

‘professional liability’

Errors

Omissions

Question 25

E&O insurance pays both the ______, as well as any ______.

Answer 25

legal costs of defending the agent in court

compensation to the plaintiff involved in the lawsuit against the agent

Question 26

As is the case with any insurance policy, ______ are not insurable under an E&O policy.

Answer 26

illegal activity and prohibited practices

Question 27

A ______ provides an agent with liability coverage against any current or future claims that result from negligent errors or omissions that occur during the period of time in which the E&O policy is in force.

Answer 27

Occurrence E&O policy

Question 28

Under a ______, an agent continues to be covered for incidents that occurred while the policy was in force that are claimed after the policy has terminated.

Answer 28

occurrence policy

Question 29

Under a ______ policy, the agent is permanently covered for his or her actions during which time he or she was covered under the occurrence policy, without regard to when a lawsuit is filed against the agent.

Answer 29

occurrence

Question 30

Occurrence policy claims pay claims based on ______.

Answer 30

the amount of liability protection the agent maintained during the policy’s coverage period in which the incident occurred.

Question 31

A ______ provides an agent with liability coverage against claims that are filed while the agent is insured under the ______.

Answer 31

Claims-Made E&O policy

claims-made policy

Question 32

Instead of providing protection against future claims, a ______ insures against any claims of current or prior incidents that occurred, as long as the agent is insured under the ______.

Answer 32

claims-made policy

claims-made policy

Question 33

Of the two types of E & O policies, which is more expensive?

Answer 33

Occurrence

Question 34

______ policies can leave ‘gaps’ in an agent’s liability protection if he or she does not maintain E&O coverage, leaving him or her uninsured against any claims that occur during the period of time when he or she is not covered by an E&O policy.

Answer 34

Claims-made

Question 35

Due to the possible delayed reporting of a claim of negligence against the agent at a later date while the agent is not covered under a claims-made E&O policy, ______, or ‘tail’ coverage can be purchased as an add-on to a claims-made E&O policy to protect against claims made after the agent cancels his or her E&O coverage and is sued while not currently covered under a claims-made policy.

Answer 35

Extended Reporting

Question 36

Although optional ‘extended reporting’ coverage protects the agent against delayed claims, many E&O policies include a ______, or ‘nose,’ provision which retroactively dates the agent’s new E&O policy to an earlier date, usually to the beginning of his or her prior E&O coverage.

Answer 36

Prior Acts

Question 37

A prior acts policy’s effective date of liability coverage begins on a specific date, known as a ______, and provides coverage against incidents that occurred as far back as the retroactive date listed in the E&O policy.

Answer 37

Retroactive Date

Question 38

______ coverage further protects the agent by covering ANY incidents prior to the current policy, instead of limiting coverage to a specific retroactive date, as is required by a typical prior acts policy.

Answer 38

‘Full’ Prior Acts

Question 39

Retroactively dating a ______ policy’s effective date provides the agent with continuous liability coverage, preventing an agent from creating gaps in coverage, or the need to purchase extended reporting coverage from the prior E&O insurer.

Answer 39

claims-made

Question 40

What is the purpose of an insurance agent?

Answer 40

to help individuals, families, and businesses select insurance policies that provide the best protection for their lives, health, and property.

Question 41

In short, the insurance agent is the key person between the ______ and ______, with whom he or she represents.

Answer 41

applicant

insurer

Question 42

______ determines the outcome of the insurer’s relationship with the client, as well as the general public.

Answer 42

The quality of communication maintained while the agent interacts with the potential client

the depth and professionalism of the presentation

the accuracy in collecting health information and filing a complete application

Question 43

Acting as a ______, the agent plays a vital role in the success of the insurance company.

Answer 43

fiduciary

Question 44

An individual who maintains a certain trust and/or confidence is known as a ______.

Answer 44

Fiduciary

Question 45

Insurance agents not only act as a fiduciary to their clients, but to the ______.

Answer 45

companies they represent

Question 46

A few basic aspects involved when acting as a fiduciary are ______.

Answer 46

Being honest and trustworthy

Having a good business reputation

Being qualified to perform insurance sales functions

Having the knowledge of, and abide by, state laws and regulations

Using good moral judgment and acting in good faith

Question 47

An insurance agent has the authority by the insurance company it represents to collect ______ and submit it with the application for insurance.

Answer 47

an applicant’s initial premium

Question 48

Collecting the initial premium can be done in person; however, many insurance companies now provide for online submission of the application, initial medical review, and the initial premium of the applicant, often called ______.

Answer 48

‘consideration’ for insurance.

Question 49

Upon collecting the application and initial premium, the agent submits it to the insurance carrier to be ______, or reviewed for eligibility.

Answer 49

underwritten

Question 50

The ______ is the only entity that can approve, issue, or renew an insurance policy.

Answer 50

insurance company

Question 51

The agent’s authority is to ______.

Answer 51

market, sell, and submit the application and initial premium to the insurer.

Question 52

Some general responsibilities of the agent are ______.

Answer 52

Based on the contract with the insurer, the agent works in accordance with and for the benefit of the company.

The agent must follow the ‘prudent person’ rule, acting in a professional manner and protecting both the insurer and insured.

The agent is responsible for submitting the initial premium from the applicant to the insurer.

It is the agent’s fiduciary responsibility to disclose to the insurer all applicant information, as well as any potential adverse risks that the applicant may disclose to the agent.

Once a policy is issued, the agent is responsible for the delivery and explanation of the policy to the newly insured, as well as the collection any initial premium due, if not already collected.

Question 53

Some general responsibilities of the insurance company are ______.

Answer 53

Must follow the agent/insurer appointment and all associated provisions of the contract

Compensate agent according to the contract

Reimburse the agent for any allowed expenditures

Review and issue, or decline, an application in a timely manner

Abide by all state and federal laws regarding health regulations

Question 54

Based on the contract with the insurer, the agent works ______.

Answer 54

in accordance with and for the benefit of the company.

Question 55

The agent must follow the ‘prudent person’ rule, acting in a professional manner and ______.

Answer 55

protecting both the insurer and insured.

Question 56

The agent is responsible for submitting ______.

Answer 56

the initial premium from the applicant to the insurer.

Question 57

It is the agent’s fiduciary responsibility to disclose to the insurer all applicant information, as well as any ______.

Answer 57

potential adverse risks that the applicant may disclose to the agent.

Question 58

Enacted in 2003, the ______ was created to provide consumers with the opportunity to restrict telemarketers’ access to telephone numbers by adding them to the National Do-Not-Call Registry and reduce the amount of unwanted telemarketing communication on both an intra- and interstate basis.

Answer 58

Do-Not-Call Implementation Act

Question 59

Under the original Implementation Act, phone numbers added to the registry were protected for a period of ______, at which time each phone number would need to be renewed for an additional ______. This renewal was later replaced by a permanent status, allowing consumers to register only once and remain permanently within the national registry.

Answer 59

5 years

5 years

Question 60

The National Do-Not-Call Registry is managed by the ______ and is enforced by both the FTC and the Federal Communications Commission (FCC), as well as by each state’s government. As is the case with insurance laws, in addition to federal legislation, each state’s government has the authority to provide even more stringent consumer privacy laws.

Answer 60

Federal Trade Commission (FTC)

Question 61

Once a consumer registers his or her phone number with the FTC, the phone number is added to the registry the next day and can no longer ______.

Answer 61

be used for telemarketing purposes.

Question 62

Initially, the registry’s process includes a ______ to allow for proper removal of such phone numbers from consumer databases and company calling lists before being able to enforce any penalty against a soliciting business or commercial entity. After this ______, a consumer can file a complaint with the FTC through the National Do-Not-Call Registry website or ______.

Answer 62

31 day ‘removal period’

31-day period

toll-free by phone.

Question 63

The national registry is applicable to ______throughout the country and is subject to some exceptions.

Answer 63

all telemarketing solicitation

Question 64

Penalties for soliciting to any number listed on the registry include being subject to up to a ______ fine to the telemarketing company in violation of the law, as well as other civil and/or criminal penalties.

Answer 64

$16,000