Texas Life & Health Exam Questions Flashcards
All of the following are true regarding rebates EXCEPT:
A. Rebates are allowed if it’s in the best interest of the client.
B. Rebates are only allowed if specifically stated in the policy.
C. Rebating can be anything of economic value, given as an inducement to buy.
D. Dividends are not considered to be rebates.
A. Rebates are allowed if it’s in the best interest of the client.
A rebate is an illegal act which involves returning something of value to the client as an inducement to buy, such as the commission. Rebates are only allowed if specially stated in the policy. Insurance dividends are not considered rebates as the IRS considers it as a return of overpaid premium.
Which of the following best describes the unfair trade practice of defamation?
A. Issuing false advertising material.
B. Refusing to deal with other insurers.
C. Making derogatory oral statements about another insurer’s financial condition.
D. Assuming the name and identity of another person.
C. Making derogatory oral statements about another insurer’s financial condition.
Making oral or written statements directly or indirectly which are derogatory or maliciously critical of another insurer would be an example of the unfair trade practice of defamation.
Who might receive dividends from a mutual insurer?
A. Policyholders
B. Subscribers
C. Stockholders
D. Agents
A. Policyholders
A mutual insurer has no stock, and is owned by the policyholders. Since they may receive a dividend (not guaranteed), such policies are known as participating policies. Dividends received by policyholders of a mutual insurer are not taxable.
An insurer advertises a health policy that is covered by the Life and Health Insurance Guaranty Association. The advertisement includes a short list of benefits and approximate rates. The end of the advertisement includes statement that protection is provided by the Guaranty Association. Which of the following is true?
A. The advertisement must also include the contact information of the association.
B. The advertisement must also include the contact information of the Commissioner of Insurance.
C. Mentioning the Guaranty Association is mandatory when advertising insurance in the state of Texas.
D. Mentioning the Guaranty association in advertisements is considered to be unfair trade practice.
D. Mentioning the Guaranty association in advertisements is considered to be unfair trade practice.
It is considered an unfair trade practice to advertise protection by the Insurance Guaranty Association when selling any product that is covered by the association.
In Texas, how is the Commissioner of Insurance placed in office?
A. Appointed by the Senate for a term of 2 years.
B. By election, at the same election when other state officials are chosen.
C. Appointed by the Governor for a term of 2 years.
D. Appointed by the Governor for a term of 4 years.
C. Appointed by the Governor for a term of 2 years.
As established by the Insurance Code, the Commissioner is appointed by the Governor for a term of 2 years.
The Commissioner has full power and authority to do all of the following EXCEPT:
A. Enforce the Insurance Code.
B. Issue cease and desist orders.
C. Draft insurance laws.
D. Issue Certificates of Authority.
C. Draft insurance laws.
The Commissioner enforces the Insurance Code, but does not write insurance laws.
An agent receives an Emergency Cease and Desist Order for chronically misrepresenting his insurance policies. The agent knows that he did not commit the violations stated in the Emergency Cease and Desist Order. He wants to contest the charges in a court hearing. Which of the following is true?
A. The hearing must be held within 10 days of receiving a request, unless both parties agree to a later date.
B. The judge will determine when the hearing will be held.
C. The hearing date can be set for any time within the next year, unless both parties agree to a later date.
D. The hearing must be set for exactly 10 days after the request is made.
A. The hearing must be held within 10 days of receiving a request, unless both parties agree to a later date.
The hearing to show cause why the cease and desist order should not be affirmed or modified shall be held not later than the 10th day after the date of Commissioner receives the request for a hearing unless the parties mutually agree to a later date. (The cease and desist order remains in effect until the hearing is held.)
On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are:
A. Not taxable since the IRS treats them as a return of a portion of the premium paid.
B. Paid at a fixed rate every year.
C. Taxable as ordinary income.
D. Guaranteed.
A. Not taxable since the IRS treats them as a return of a portion of the premium paid.
With participating policies, policyowners are entitled to dividends, which, in the case of mutual companies, are nontaxable because they are considered a return of excess premiums.
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:
A. Unfair claim practice.
B. Rebating.
C. Misrepresentation.
D. Concealment
C. Misrepresentation.
Issuing or circulating any sales material that is false or misleading would be considered misrepresentation and is illegal.
Anyone who violates the Insurance Code of Texas may be fined up to:
A. $5,000
B. $10,000
C. $20,000
D. $25,000
D. $25,000
Anyone who violates the Insurance Code may be fined up to $25,000 and/or directed to make complete restitution to Texas residents or entities injured by the original violation.
The Commissioner of Insurance issues a Cease and Desist Order and immediately receives a request for the charges to be reviewed in a hearing. Within what number of days must the hearing be held?
A. 10
B. 14
C. 30
D. 60
A. 10
If the Recipient of a Cease and Desist Order wants to contest or review the charges in court, the request must be made within 30 days of the order. After the Commissioner receives the request, a hearing must occur within 10 days.
When doing business in this state, an insurance company that is formed under the laws of another state is known as which type of insurer?
A. Alien
B. Nonadmitted
C. Foreign
D. Domestic
C. Foreign
A foreign insurer is one that is formed under the laws of another state. A nonadmitted or unauthorized insurer is an insurance company that has not applied for, or has applied and been denied a Certificate of Authority and may not transact insurance.
Which of the following is NOT a possible penalty for a violation of the Insurance Code?
A. An administrative penalty
B. Payment of restitution
C. A cease and desist order
D. A fine up to $100,000
D. A fine up to $100,000
In addition to the suspension or revocation of a license, the Commissioner may impose any of all of the following penalties: issue a cease and desist order, order the payment of an administrative penalty, and order the licensee to make restitution. The penalty for a violation may not exceed $25,000.
The Commissioner of Insurance issues a Cease and Desist Order to an agent. If the agent wishes to contest the charges in court, how many days after the order was issued does the agent have to make the request?
A. 10 days
B. 30 days
C. 60 days
D. 90 days
B. 30 days
If the recipient of a Cease and Desist Order wants to contest or review the charges in court, the request must be made within 30 days of the order.
Which of the following is NOT true regarding a Certificate of Authority?
A. It may be necessary for transacting business in a specific state.
B. It is equivalent to an insurance license.
C. It is issued by the state department of insurance.
D. It is issued to group insurance participants.
D. It is issued to group insurance participants.
Before insurers may transact business in a specific state, they must apply for a license of Certificate of Authority from the state department of insurance and meet any financial (capital and surplus) requirements set down by the state.
In Texas, the Commissioner of Insurance is:
A. Appointed by the Governor.
B. Appointed by the Insurance and Industry Committee of the state legislature.
C. Elected by the state legislature’s Banking and Insurance Committee.
D. Elected by Texas voters.
A. Appointed by the Governor.
The Commissioner is appointed to office by the Governor, with the advice and consent of the Senate, for a 2-year period. The Commissioner’s appointment ends on February 1 of each odd numbered year.
What is a foreign insurer?
A. An insurer with licensed agents who are citizens in more than one country.
B. An insurer with a home office in another state.
C. An insurer with a home office in another country.
D. An insurer with licensed agents doing business in other countries.
B. An insurer with a home office in another state.
A domestic insurer’s home office is in this state, a foreign insurer’s is in another state, and an alien insurer’s is in another country.
All of the following are considered unfair trade practices in the business of insurance EXCEPT:
A. Sharing commissions.
B. Boycott.
C. Rebating.
D. Defamation.
A. Sharing commissions.
Sharing commissions is allowed as long as both producers are properly licensed. All other choices are unfair trade practices.
An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy?
A. Nonprofit service organization
B. Stock
C. Mutual
D. Reciprocal
C. Mutual
Funds not paid out after paying claims and other operating costs are returned to the policyowners in the form of a dividend. If all funds are paid out, no dividends are paid.
Which of the following must an insurer obtain in order to transact insurance within a given state?
A. Certificate of authority
B. Producer’s certificate
C. Business entity license
D. Insurer’s license
A. Certificate of authority
All insurers (domestic, foreign, or alien) must obtain a certificate of authority before transacting insurance within a given state.
It would be considered unfair discrimination to ask an insurance applicant about which of the following and then use that information as a rating factor to determine insurability?
A. Address
B. Sexual orientation
C. Age
D. Gender
B. Sexual orientation
It would be considered unfair discrimination to ask an applicant for their sexual orientation, as well as using sexual orientation as a rating factor to determine insurability.
Within how many years must an agent renew an insurance license?
A. 1
B. 2
C. 3
D. 4
B. 2
An agent’s license must be renewed every 2 years on their birthday in either even or odd numbered years depending on when the license was issued. As long as the renewal requirements are met, the license will continue in effect until refused, revoked, or suspended by the Commissioner.
Which of the following is NOT considered a misrepresentation as it pertains to unfair trade practices?
A. Exaggerating the benefits provided in the policy
B. Stating that the competitors will arbitrarily increase their premiums each year
C. Making comparisons between different policies
D. Stating that the insurance policy is a share of stock
C. Making comparisons between different policies
Making accurate comparisons of policies is not illegal.
Which of the following occupations would NOT directly help to qualify someone for the office of Commissioner of Insurance?
A. Practicing attorney
B. Insurance agent
C. Certified public account
D. Executive in business administration
B. Insurance agent
The Commissioner must have at least 5 years of experience in one of the following occupations: an executive in the administration of business or government, a practicing attorney, or a certified public accountant.
An applicant properly notifies her insurer of a straightforward claim, but the insurer waits an exceedingly long time to process it. Which of the below terms best describes the behavior of the insurer?
A. Unfair claims settlement practice
B. There is nothing wrong with this incident; there is not a specified deadline for insurers to process a claim.
C. Misrepresentation
D. Fraud
A. Unfair claims settlement practice
If an insurer knowingly or frequently commits an act that neglects or deceives an insured, its behavior falls under the category of unfair claim settlement practice. In this instance, there is no reason why the insurer was warranted in waiting to process the claim.
A participating insurance policy may do which of the following?
A. Pay dividends to the policyowner
B. Provide group coverage
C. Pay dividends to the stockholder
D. Require 80% participation
A. Pay dividends to the policyowner
A participating insurance policy will pay dividends to the owner based upon actual mortality cost, interest earned, and costs.
Which of the following terms describes making false statements about the financial condition of any insurer that are intended to injure any person engaged in the business of insurance?
A. Defamation
B. Undercutting
C. Twisting
D. Slandering
A. Defamation
Defamation is making statements that are false as to the financial condition of any insurer and which are calculated to injure any person engaged in the business of insurance.
Which of the following is the closest term to an authorized insurer?
A. Legal
B. Admitted
C. Certified
D. Licensed
B. Admitted
Insurers who meet the state’s financial requirements and are approved to transact business in the state are considered authorized or admitted into the state as a legal insurer.
If an insurer meets the state’s financial requirements and is approved to transact business in the state, it is considered to be:
A. Approved.
B. Authorized.
C. Certified.
D. Qualified.
B. Authorized.
Insurers who meet the state’s financial requirements and are approved to transact business in the state are considered authorized or admitted into the state as a legal insurer.
What is the major difference between a stock company and a mutual company?
A. Types of whole life policies
B. Ownership
C. Amount of death benefit
D. Number of producers
B. Ownership
Mutual companies are owned by policyholders, while stock companies are owned by stockholders.
A temporary license holder can receive a commission from a sale made to all of the following EXCEPT:
A. An accountant at a rival insurance company.
B. The license holder’s family doctor.
C. The license holder’s sister-in-law.
D. The license holder’s spouse’s best friend.
C. The license holder’s sister-in-law.
A temporary license holder sale to a family member or an individual the temporary license holder has an employment or business relationship with will not pay commission.
Which of the following best describes an insurance company that has been formed under the laws of this state?
A. Domestic
B. Soverign
C. Alien
D. Foreign
A. Domestic
A company is domestic when doing business within the state in which it is incorporated.
When a producer was reviewing a potential customer’s coverage written by another company, the producer made several remarks that were maliciously critical of that other insurer. The producer could be found guilty of:
A. Discrimination.
B. Nothing, unless the remarks were in writing.
C. Defamation.
D. Misrepresentation.
C. Defamation.
A producer or broker who makes oral or written statements intended to injure another producer or insurer is guilty of the unfair trade practice of defamation.
The Insurance Commissioner may examine the affairs of an any insurer as often as necessary, but not less frequently once every:
A. Year.
B. 2 years.
C. 3 years.
D. 5 years.
D. 5 years.
The Insurance Commissioner must examine each insured at least once every 5 years.
All of the following would be considered an insurance transaction EXCEPT:
A. Advising a policyholder regarding a claim.
B. Negotiating coverage.
C. Obtaining an insurance license.
D. Soliciting a policy.
C. Obtaining an insurance license.
An insurance transaction means the carrying on of business in insurance, which could include the solicitation of a policy, advising, negotiation, or inducement related to coverage or claims. Obtaining an insurance license is a prerequisite to transacting insurance.
What is the maximum allowed value of a gift that an agent can give to an insured without violating the regulation on rebating?
A. $10
B. $15
C. $25
D. $100
C. $25
In this state, promotional materials, articles of merchandise, or gifts that have a redeemable value of $25 or less are not considered “valuable consideration,” and therefore, are allowed.
An insurer devises an intimidation strategy in order to corner a large portion of the insurance market. Which of the following best describes this practice?
A. Unfair Discrimination
B. Defamation
C. Illegal
D. A legal advertising strategy
C. Illegal
It is illegal to participate in any boycott, coercion, or intimidation that is intended to restrict fair trade or create a monopoly.
In which of the following situations is it legal to limit coverage based on marital status?
A. Legal separation during the application process
B. Divorce within the last six months of applying for insurance
C. It is never legal to limit coverage based on marital status
D. Excessive number of divorces, as defined by the Insurance Code
C. It is never legal to limit coverage based on marital status
Availability of insurance benefits or coverage may not be denied based on sex or marital status. Marital status may be considered for the purpose of defining persons eligible for dependent benefits.
All of the following are unfair claims settlement practices EXCEPT:
A. Failing to adopt and implement reasonable standards for settling claims.
B. Failing to acknowledge pertinent communication pertaining to a claim.
C. Suggesting negotiations in settling the claim.
D. Refusing to pay claims without conducting a reasonable investigation.
C. Suggesting negotiations in settling the claim.
When settling claims, negotiations can come into play.
All of the following are requirements for an individual to be licensed EXCEPT:
A. Pass the licensing examination.
B. Pay the appropriate fees.
C. Provide a financial statement.
D. Be at least 18 years of age.
C. Provide a financial statement.
An applicant for a license must be at least 18 years old, pas the state exam (within the last 12 months), pay the appropriate fees and provide an application before a license can be issued. A financial statement of the individual is not a requirement to be licensed.
Which of the following insurers are owned by stockholders?
A. Reciprocal
B. Fraternal
C. Stock
D. Mutual
C. Stock
Only stock insurance companies are owned and controlled by stockholders.
An insurer that holds a Certificate of Authority in the state in which it transacts business is considered a/an:
A. Local insurer.
B. Certified insurer.
C. Self-insurer.
D. Authorized insurer.
D. Authorized insurer.
Insurers who meet the state’s financial requirements and hold a Certificate of Authority to transact business in the state are considered authorized or admitted.
All of the following must be true of an individual before a license can be issued EXCEPT that the:
A. Candidate has paid the required fees to the department.
B. Applicant submitted his or her most recent tax return to the department.
C. Individual is at least 18 years old.
D. Applicant passed the required licensing examination in the last 12 months.
B. Applicant submitted his or her most recent tax return to the department.
A license cannot be issued to an individual who has not passed the requiring licensing examination in the last 12 months, not paid the required fees to the department, or is under the age of 18. Tax information of the applicant is not a requirement for licensing.
The owner of a small restaurant submits a claim to his insurer after a loss due to fire. The insurer’s investigation finds a police report that shows that a fire may have been of suspicious origin. The insurer can do which of the following?
A. Delay an acceptance or rejection decision
B. Reduce the claim amount
C. Disregard the claim
D. Deny the claim immediately
A. Delay an acceptance or rejection decision
Insurers can delay an acceptance or rejection decision for 30 days if arson is suspected.
Which of the following entities is not an insurer but an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization?
A. Fraternal benefit society
B. Mutual company
C. Stock company
D. Reciprocal association
A. Fraternal benefit society
Fraternal insurers operate on the basis of a lodge of charitable organization, but they may also sell formal insurance plans for the benefit of their members. Reciprocal insurers are also associations that provide insurance for their members, but they are formed only for the purpose of providing insurance.
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:
A. Controlled business.
B. Adverse selection.
C. Discrimination.
D. Twisting.
C. Discrimination.
Permitting individuals of the same class to be charged a different rate for the same insurance is the unfair trade practice of discrimination.
Circulating deceptive sales material to the public is what type of Unfair Trade Practice?
A. Coercion
B. Misrepresentation
C. False advertising
D. Defamation
C. False advertising
This is considered to be false, deceptive, or misleading advertising.
To become a Texas insurance agent, an individual must:
A. File a personal financial statement with the Commissioner for the previous 3 years.
B. Have resided in Texas for at least 1 year.
C. Post a $25,000 bond.
D. Have passed a licensing exam within the 12 months before applying.
D. Have passed a licensing exam within the 12 months before applying.
Applicants for an insurance producer license must pass a state exam, apply for a license and pay the required nonrefundable fees. Note that passing the exam does not constitute a license. Applicants cannot transact insurance until their license is issued.
An individual applies for a life policy. Two years ago he suffered a head injury from an accident, so he cannot remember parts of his past, but is otherwise competent. He has also been hospitalized for drug abuse, but does not remember this when applying for insurance. The insurer issues the policy and learns of his history one year later. What will probably happen?
A. Because the insured is currently not a drug user, his policy will not be affected.
B. The policy will not be affected.
C. The policy will be voided.
D. The insurer will sue the insured for committing fraud.
B. The policy will not be affected.
In insurance, fraud is the intentional misrepresentation of material information that is crucial when deciding whether or not to write a contract for an applicant. If an insurer finds that an applicant has committed fraud, it can void the contract, provided that the discovery occurs within the first two years of the effective policy date. In this particular instance the applicant did not commit intentional fraud.
The following are all causes for the Insurance Commissioner to suspend or impose conditions upon the continuance of an agent’s license EXCEPT:
A. Misappropriation or illegal withholding of the policyholder’s money.
B. Obtaining a license through fraud.
C. Conviction of a felony involving mortal turpitude.
D. The applicant has been shown to be a proof personal credit risk.
D. The applicant has been shown to be a proof personal credit risk.
Being a poor personal credit risk is not a cause for suspension or revocation of a license.
No one whose license has been revoked can receive another license in Texas for:
A. 6 months.
B. 1 year.
C. 2 years.
D. 5 years.
D. 5 years.
No one whose license has been revoked can receive another license in Texas for 5 years.
Which of the following would NOT be considered rebating?
A. Giving a client a $25 pen with the insurer’s logo during the insurance application process.
B. Sending a $50 gift certificate to the insured’s employee after the insurance has been effected as a thank you for the referral.
C. Sharing commission with the insured.
D. Collecting a lower premium than what’s specified in a policy as a token of client appreciation.
A. Giving a client a $25 pen with the insurer’s logo during the insurance application process.
In this state, promotional materials, articles of merchandise, or gifts that have a redeemable value of 25 or less are not considered “valuable consideration,” and therefore, are allowed.
An insurer must acknowledge receipt of a Notice of Claim within how many days?
A. 5
B. 15
C. 20
D. 30
B. 15
Under state Claims Methods and Practices laws, every insurer, upon receiving a notification of a claim must acknowledge its receipt and begin an investigation within 15 working days.
All of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT:
A. An offer to share in commissions generated by the sale.
B. Dividends from a mutual insurer.
C. An offer of employment.
D. Stocks, securities, or bonds.
B. Dividends from a mutual insurer.
Dividends paid to policyholders of a mutual insurer are not considered to be a rebate because the policy specifies that they might be paid.
An agent completed a CE course in 2019. Until what year must the agent keep the records of completion?
A. 2020
B. 2023
C. 2024
D. 2029
B. 2023
Producers must maintain records of completion of continuing education courses for 4 years from the date of the course completion.
An agent explains the details of a life insurance policy to a client. The agent does not realize, however, that the state has recently rewritten two of the provisions. As a result, the agent inadvertently misrepresents the policy, making it more attractive than it really is. What best describes this situation?
A. There is no misconduct
B. Fraud
C. Misrepresentation
D. Deceptive claim settlement practice
A. There is no misconduct
Although the agent misrepresented the insurance policy, in order to be charged with conducting a deceptive claim settlement, the agent would have had to misrepresent knowingly and/or chronically.
A banker is ready to close on a customer’s loan. The bank is prepared to offer the loan but only if the customer purchases a life insurance policy from the bank in the amount of the loan. This is an example of:
A. Defamation.
B. Twisting.
C. Coercion.
D. Loading.
C. Coercion.
This is an example of the illegal practice of coercion.
All of the following statements apply to temporary licenses EXCEPT:
A. They may be renewed.
B. They require 40 hours of license training.
C. They may be issued without a written examination.
D. They are valid up to 90 days.
A. They may be renewed.
Temporary licenses may be granted up to 90 days without examination to applicants who complete a 40 hour training course before applying for the license or within 14 days after applying for the license. A temporary license cannot be renewed.
To legally transact insurance in this state, an insurer must obtain which of the following?
A. Certificate of Authority
B. Power of Attorney
C. Business entity license
D. Certificate of Insurance
A. Certificate of Authority
A Certificate of Authority is required in order to transact insurance.
After filing a claim, an insured tells the insurer that there is more than one insurance policy in force. That insurer sets aside the claim until it hears what the other company will pay. The insurer’s action will be classified as:
A. Proactive.
B. Unfair.
C. Prudent.
D. Coordinated.
B. Unfair.
Unfair settlement practices include refusing or delaying a settlement solely because there is other insurance available to partially or entirely satisfy the claim loss. The claimant who has a right to recover from more than one insurer has the right to choose the coverage from which to recover and the order in which payment is to be made.
All of the following statements about the continuing education requirement in this state are true EXCEPT:
A. All licensed agents must comply by January 1 of even-numbered years.
B. It does not allow excess credit hours to be carried forward to the next reporting period.
C. Hours may be completed using independent self-study courses or classroom study.
D. It requires satisfactory completion of 24 hours of approved training every 2 years.
A. All licensed agents must comply by January 1 of even-numbered years.
Continuing education reporting period coincides with the license renewal date every 2 years.
If a licensed agent in Texas receives a criminal conviction, that information must be reported to:
A. Department of Insurance.
B. Insurance Fraud Division.
C. NAIC.
D. Agent’s clients.
A. Department of Insurance.
All criminal convictions must be reported to the Texas Department of Insurance.
An insurer publishes intimidating brochures that portray the insurer’s competition as financially and professionally unstable. Which of the following best describes this act?
A. Illegal until endorsed by the Guaranty Association
B. Legal, provided that the other insurers are paid royalties for the usage of their names
C. Illegal under any circumstances
D. Legal, provided that the information can be verified
C. Illegal under any circumstances
When a company criticizes the financial situation of another company with the intention of injuring that company, it has committed an illegal trade practice called defamation.
Which of the following best describes misrepresentation?
A. Discriminating among individuals of the same insuring class B. Issuing sales material with exaggerated statements about policy benefits C. Making a deceptive or untrue statement about a personal engaged in the insurance business D. Making a maliciously critical statement that is intended to injure another person
B. Issuing sales material with exaggerated statements about policy benefits
Misrepresentation is issuing, publishing, or circulating any illustration or sales material that is false, misleading, or deceptive as to policy benefits or terms, the payment of dividends, etc. This includes oral statements.
When transacting business in this state an insurer formed under the laws of another country is known as a/an:
A. Alien insurer.
B. Domestic insurer.
C. Foreign insurer.
D. Admitted insurer.
A. Alien insurer.
Alien insurer is defined as an insurer formed under the laws of another country.
An insurance company is domiciled in Montana and transacts insurance in Wyoming. Which term best describes the insurer’s classification in Wyoming?
A. Alien
B. Domestic
C. Unauthorized
D. Foreign
D. Foreign
A foreign insurer is domiciled in one state and transacts insurance in another. A domestic insurer transacts insurance in the domicile state (in this case, Montana). An alien insurer is domiciled in one country and transacts insurance in another.
All of the following would be considered rebating EXCEPT:
A. An agent offers tickets to a baseball game as an inducement to buy insurance.
B. An agent misrepresents policy benefits to convince a policyowner to replace policies.
C. An agent offers the use of his lake house to a client as an inducement to buy an insurance policy from him.
D. An agent offers to share his commission with a policyholder.
B. An agent misrepresents policy benefits to convince a policyowner to replace policies.
Rebating occurs when an insured is offered something of value in order to induce the sale of an insurance product. Both the offer and acceptance of a rebate are illegal.
An insurance company has published a brochure that inaccurately portrays the advantages of a particular insurance policy. What is this an example of?
A. Twisting
B. Defamation
C. False advertising
D. Unfair claims
C. False advertising
False advertising is the illegal practice of advertising or circulating materials that are untrue, deceptive, or misleading.
Which of the following will NOT be considered unfair discrimination by insurers?
A. Assigning different risk classification to applicants based on gender identity
B. Discriminating in benefits and coverages based on the insured’s habits and lifestyle
C. Charging applicants with similar health histories different premiums based on their ethnicity
D. Cancelling individual coverage based on the insured’s martial status
B. Discriminating in benefits and coverages based on the insured’s habits and lifestyle
Discriminating between individuals of the same class with equal life expectancies, or by reason of race, nationality, or ethnic group would be considered unfair discrimination. Insurers are also not allowed to cancel individual coverage due to a change in marital status. Discriminating in benefits based on the insured’s habits and lifestyle (such as smoking or dangerous hobbies) is acceptable.
If an agent suspects that insurance fraud is being committed, within how many days must the agent notify the Insurance Fraud Unit of the Department of Insurance?
A. 10 days
B. 15 days
C. 30 days
D. 90 days
C. 30 days
If a person suspects that a fraudulent insurance act has been or is about to be committed in this state, the person must report the information in writing to the Insurance Fraud Unit of the Department within 30 days.
All of the following are considered unfair or deceptive acts in connection with the sale of insurance EXCEPT:
A. Lacking standards for the investigation of an insured’s claims.
B. Attempting to settle a claim in which liability is clear.
C. Stating facts or provisions in a way that misrepresents the true nature of the policy.
D. Delaying a settlement because there is other insurance that will satisfy any portion of the loss.
B. Attempting to settle a claim in which liability is clear.
Misrepresenting the nature of a policy, delaying a settlement solely because there is another policy that may pay part of the loss, and lacking standards for the investigation of an insured’s claim are considered unfair or deceptive acts.
Any inducement offered to the insured in the sale of an insurance policy that is not specified in the policy is an unlawful practice known as:
A. Twisting.
B. False advertising.
C. Coercion.
D. Rebating.
D. Rebating.
Rebating is defined as any inducement offered to the insured in the sale of insurance products that is not specified in the policy. Both the offer and acceptance of a rebate are illegal.
Which of the following actions is NOT in violation of the Unfair Claims Settlement Practices Act?
A. Delaying a settlement because there is an additional insurance policy on a loss
B. Denying an unsubstantiated claim
C. Refusing to pay claims without conducting a reasonable investigation
D. Failure to respond promptly on claims communications
B. Denying an unsubstantiated claim
Insurers do not have to pay unsubstantiated claims, which means that the claimant failed to submit the required proof of loss.
An agent offers his client free tickets to a sporting event in exchange for the purchase of an insurance policy. The agent is guilty of:
A. Rebating.
B. Coercion.
C. Twisting.
D. Controlled business.
A. Rebating.
When producers give or promise anything of value that is not specified in the policy, they are guilty of rebating.
Two individuals are in the same risk and age class; yet, they are charged different rates for their insurance policies due to an insignificant factor. What is this called?
A. Adverse selection
B. Discrimination
C. Law of large numbers
D. Misrepresentation
B. Discrimination
Permitting individuals of the same class to be charged a different rate for the same insurance is the unfair trade practice of discrimination.
How many hours of continuing education can be carried over from one licensing period to the next?
A. Any excess hours
B. 0
C. 2
D. 5
B. 0
All CE hours must be completed during the reporting period; licenses are not allowed to carry over excess hours to the next reporting period.
