Chapter 5: Texas Statutes and Rules Common to All Lines

When an individual obtains an insurance license for the primary purpose of writing insurance on themselves, or for members of their immediate family, or business, this is called AControlled business. BPersonal insurance. CRebating. DSelf-insurance.

Controlled business.

What is a foreign insurer? AAn insurer with a home office in another country BAn insurer with licensed agents doing business in other countries CAn insurer with licensed agents who are citizens in more than one country DAn insurer with a home office in another state

An insurer with a home office in another state

When transacting business in this state an insurer formed under the laws of another country is known as a/an _____ Insurer A. Domestic B. Foreign C. Admitted D. Alien

Alien Insurer

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? AA legal advertising strategy BUnfair Discrimination CDefamation DIllegal

Illegal

Which of the following occupations would NOT directly help to qualify someone for the office of Commissioner of Insurance? AInsurance agent BCertified public account CExecutive in business administration DPracticing attorney

Insurance agent

What is the major difference between a stock company and a mutual company? AAmount of benefits BNumber of producers CTypes of policies issued DOwnership

Ownership

Who might receive dividends from a mutual insurer? APolicyholders BSubscribers CStockholders DAgents

Policyholders

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 how many days must the hearing be held? A10 B14 C30 D60

30

Which of the following is an example of an agent's fiduciary responsibilities? AOffering additional coverage to a client BForwarding premiums to the insurer CHelping clients to file claims DPerforming a review of clients' coverage

Forwarding premiums to the insurer

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? A10 days B30 days C60 days D90 days

60 days

In which of the following situations is it legal to limit coverage based on marital status? AIt is never legal to limit coverage based on marital status. BExcessive number of divorces, as defined by the Insurance Code CLegal separation during the application process DDivorce within the last six months of applying for insurance

It is never legal to limit coverage based on marital status.

Anyone who violates the Insurance Code of Texas may be fined up to A$20,000. B$25,000. C$5,000. D$10,000.

$25,000.

If a notice of a claim is submitted to an insurer, and the insurer suspects arson is involved, how long does the insurer have to accept or reject the claim? A10 days B15 days C30 days D60 days

30 days

To become a Texas insurance agent, an individual must AHave passed a licensing exam within the 12 months before applying. BFile a personal financial statement with the Commissioner for the previous 3 years. CHave resided in Texas for at least 1 year. DPost a $25,000 bond.

Have passed a licensing exam within the 12 months before applying.

Which of the following is NOT a possible penalty for a violation of the Insurance Code? AA fine up to $100,000 BAn administrative penalty CPayment of restitution DA cease and desist order

A fine up to $100,000

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? AAge BOccupation CAddress DSexual orientation

Sexual orientation

Which of the following types of insurers is owned by stockholders? AReciprocal BFraternal CStock DMutual

Stock

An agent discovers his newest client was the result of a referral. To show his thanks to the referring customer, the agent could AOffer the customer money for every referral she brings in. BThank the customer. CReturn the customer's first premium of a new policy. DSend the customer a gift as a token of appreciation.

Thank the customer.

A temporary license holder can receive a commission from a sale made to all of the following EXCEPT AThe license holder's spouse's best friend. BAn accountant at a rival insurance company. CThe license holder's family doctor. DThe license holder's sister-in-law.

The license holder's sister-in-law.

Upon revocation of a license, a producer cannot receive another license for A6 months. B1 year. C2 years. D5 years.

5 years.

What percentage of continuing education hours must be in a classroom setting? A25% B50% C75% D100%

50%

In Texas, the Commissioner of Insurance is AAppointed by the Governor. BAppointed by the Insurance and Industry Committee of the state legislature. CElected by the state legislature's Banking and Insurance Committee. DElected by Texas voters.

Appointed by the Governor.

An insurer that holds a Certificate of Authority in the state in which it transacts business is considered a/an ACertified insurer. BSelf-insurer. CAuthorized insurer. DLocal insurer.

Authorized insurer.

Which of the following will NOT be considered unfair discrimination by insurers? ACancelling individual coverage based on the insured's marital status BAssigning different risk classifications to applicants based on gender identity CDiscriminating in benefits and coverages based on the insured's habits and lifestyle DCharging applicants with similar health histories different premiums based on their ethnicity

Discriminating in benefits and coverages based on the insured's habits and lifestyle

A participating insurance policy may do which of the following? AProvide group coverage BPay dividends to the stockholder CRequire 80% participation DPay dividends to the policyowner

Pay dividends to the policyowner

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 ARebating. BCoercion. CTwisting. DControlled business.

Rebating.

Which of the following best describes a misrepresentation? AMaking a deceptive or untrue statement about a person engaged in the insurance business BMaking a maliciously critical statement that is intended to injure another person CDiscriminating among individuals of the same insuring class DIssuing sales material with exaggerated statements about policy benefits

Issuing sales material with exaggerated statements about policy benefits

All of the following must be true of an individual before a license can be issued EXCEPT that the AApplicant passed the required licensing examination in the last 12 months. BCandidate has paid the required fees to the department. CApplicant submitted their most recent tax return to the department. DIndividual is at least 18 years old.

Applicant submitted their most recent tax return to the department.

Which of the following best describes an insurance company that has been formed under the laws of this state? ADomestic BSovereign CLocal DAdmitted

Domestic

The Commissioner has full power and authority to do all of the following EXCEPT AIssue Certificates of Authority. BEnforce the Insurance Code. CIssue cease and desist orders. DDraft insurance laws.

Draft insurance laws.

Concerning insurance, the definition of a fiduciary responsibility is AHandling insurer funds in a trust capacity. BHandling assets or money belonging to others. CBeing liable for negligence with respect to clients' applications. DMaintaining an agent's personal funds.

Handling insurer funds in a trust capacity.

The Insurance Commissioner may examine the affairs of any insurer as often as necessary, but not less frequently than once every AYear. B2 years. C3 years. D5 years.

5 years.

Which entity has the authority to grant a temporary insurance agent's license? AA licensed agent BCommissioner of Insurance CFederal Board of Insurance Licensing DThe appointing insurer

Commissioner of Insurance

In Texas, how is the Commissioner of Insurance placed in office? AAppointed by the Governor for a term of 4 years BAppointed by the Senate for a term of 2 years CBy election, at the same election when other state officials are chosen. DAppointed by the Governor for a term of 2 years

Appointed by the Governor for a term of 2 years

An insurer publishes intimidating brochures that portray the insurer's competition as financially and professionally unstable. Which of the following best describes this act? ALegal, provided that the information can be verified BIllegal until endorsed by the Guaranty Association CLegal, provided that the other insurers are paid royalties for the usage of their names DIllegal under any circumstances

Illegal under any circumstances

Which of the following is NOT true regarding a Certificate of Authority? AIt may be necessary for transacting business in a specific state. BIt is equivalent to an insurance license. CIt is issued by the state department of insurance. DIt is issued to group insurance participants.

It is issued to group insurance participants.

All of the following would be considered an insurance transaction EXCEPT AAdvising a policyholder regarding a claim. BNegotiating coverage. CObtaining an insurance license. DSoliciting a policy.

Obtaining an insurance license.