Ch 5: NJ laws, rules, regulations

The Commissioner believes that an insurance rule or regulation has been violated, and decides to call a disciplinary hearing. How many days before a hearing must the Commissioner issue a notice to the person charged with a violation?

10 days The Commissioner must notify the accused 10 days prior to the hearing.

If an insurer cancels an agency contract, it must notify the commissioner in writing within how many days?

15

What is the minimum age that an insurance producer can be licensed in NJ?

18

Who is an insurance agent?

A person authorized to sell, solicit and negotiate insurance contracts

What type of licensee represents the insurer?

Agent

Who is considered a nonresident agent?

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

Who must be a member of insurance guaranty associations?

Any authorized insurer within a state

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

Authorized or admitted

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

Certificate of Authority

All of the following are among the commissioner's broad powers except

Have interest in insurance companies regulated by the department

What significance did Paul vs. Virginia have on the insurance industry?

It was decided that insurance was not interstate commerce and could not be regulated by the federal government

Who might receive dividends from a mutual insurer?

Policyholders

Who can usually be granted a temporary license?

Producer's spouse or designee in case the licensed producer dies or becomes disabled

Which of the following is required for a surplus lines producer?

Property & casualty

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?

Rebating

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

The Department of Insurance (Commissioner/Director/Superintendent)

If the issuance of a license is denied and a hearing is requested, which entity will be making determination whether or not the license should be issued?

The dept of insurance

An insurer goes bankrupt and is unable to pay on any of its insured's claims. Which of the following will happen?

The insureds' claims will be paid by a state life and health guaranty association

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

The insurer who is being examined

To whom may a certificate of authority be issued?

To an insurer authorized to transact business in this state

When is controlled business legal?

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

When can the Commissioner or Director examine insurers?

Whenever deemed necessary, but at least once every few years (please check your state regulations for specific time requirement)

What type of licensee represents the insured?

broker

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

defamation

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?

discrimination

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

domestic, foreign, alien

Who is responsible for the contents of insurance advertisements?

insurance company

What is the maximum allowed value of a gift that an agent can give to an insured without violating the regulation on rebating?

$100

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

Cease and desist order

Which of the following insurers are owned by stockholders?

Stock

In the agent/insurer relationship, who is considered the principal?

insurer

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?

misrepresentation

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

misrepresentation

What is the major difference between a stock company and a mutual company

ownership

Who owns stock companies?

stockholders

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

twisting

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

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

An insurance producer is acting as a broker when he or she negotiates for an insurance contract on behalf of

A client

An insurance producer refused to comply with a subpoena. What would be the producer's penalty for this violation?

A fine up to $5000

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?

Authorized or admitted

Which authority has the power to deny someone an insurance producer's license?

Commissioner

Who may issue a cease and desist order?

Commissioner

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

Complete continuing education hours and pay a renewal fee

Which of the following is an insurance professional who offers advice regarding benefits or advantages of an insurance policy to clients for a fee?

Consultant

If an insurer and insured have a dispute about whether a particular loss is covered under a policy, which authority will settle the dispute?

Court system

Which of the following types of insurance would be written by a limited lines agent?

Credit insurance Limited lines agent can write the following types of insurance: bail bonds, car rental insurance, credit insurance, ticket insurance, travel insurance, group mortgage cancellation, legal insurance, self-storage personal property insurance, and special nonresident limited lines

For what reason can a temporary license be issued?

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

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

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)

What is controlled business?

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

The department can run a report on a specific producer that lists his or her license information, current license status, and the types of insurance that he or she can transact. What is the name of this report?

License

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

No, advertising of the existence of the guaranty association for the purposes of solicitation and sale of insurance policies by insurers is an illegal business practice.

All of the following would be considered an insurance transaction except:

Obtaining an insurance license

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

Only producers properly licensed for the type of insurance transaction

The mccrran act stated that the federal government would not regulate insurance as long as an adequate job of regulating the industry was done by the

States

What is the purpose of a cease and desist order?

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

What is the purpose of insurance guaranty associations?

To protect policyowners, insureds and beneficiaries from financial losses caused by insolvent insurers