Code & Ethics

A person who is in a position of financial trust

A fiduciary

Who would be considered an insured under a personal auto policy? A. A neighbors son joy riding in the insureds auto without permission B. A neighbor driving insureds auto without permission C. A 14 year old son of the named insured D. A friend driving an auto with the insureds permission

A friend driving an auto with the insureds permission

Which of the following persons cannot be insured? 1. An organization 2. A public enemy 3. An individual person 4. A corporation

A public enemy

What is a public insurance adjuster?

A public insurance adjuster is a licensed individual who, for compensation, works on behalf of an insured in settling a claim for loss or damage under a policy covering real or personal property..

Can a licensed insurer refuse to accept an application, issue, or cancel insurance or charge a higher premium because of a person's race, color, religion, national origin, ancestry, or sexual orientation

No

15/30/5

$15,000 per person for BI $30,000 for all BI per accident $5,000 for all PD per accident

An applicant for an insurance license must submit:

(1) the Department of Insurance application form, (2) fees, and (3) certificates showing completion of the necessary course material..

The main parts to the privacy requirements of the Gramm-Leach-Bliley Act are:

(1) the Financial Privacy Rule, (2) Safeguard Rule, and (3) pretexting provisions..

Insurance Industry Code of Ethics

1) Place the customer's interest first. 2) Know your job—and continue to increase your level of competence 3) Identify customer needs and recommend products/services that meet those needs 4) Accurately and truthfully, represent products and services 5) Use simple language—talk "laypersons" language - when possible 6) Stay in touch with customers, and conduct periodic coverage reviews 7) Protect your confidential relationship with your client 8) Keep informed of, and obey, all insurance laws and regulations 9) Provide exemplary service to your clients. 10) Avoid unfair or inaccurate remarks about the competition.

When does a license terminate? 1. A licensee voluntarily surrenders his license. 2. A licensee dies. 3. A co-partnership is dissolved. 4. A licensee surrenders his appointments.

1, 2, and 3

If a licensee violates any provision relating to twisting, concealment, or misrepresentation, he may be imprisoned for up to how many months

12

A person who makes a fraudulent claim or assists in making a fraudulent claim is guilty of a criminal act and may be imprisoned for how many years?

2, 3, or 5 years.

A Property and Casualty licensee is subject to how much continuing education requirement?

24 hours per license term including 3 hours of Ethics and 3 hours of Homeowner Valuation

The commissioner may deny a license if the applicant has had a previous application denied or had a previous license suspended or revoked for cause within how long before the filing of the application.

5 Years

An applicant for an insurance license is required to pass the state licensing exam and achieve a score of:

60% correct

when insureds select only those coverages that are most likely to have losses

Adverse selection

Unless the insurance will be issued by another insurer under the same management and control, an insurance company cannot refuse to accept an application, issue a policy, or cancel a policy because of a person's: 1. marital status 2. sex 3. religion 4. All of the choices are correct.

All of the choices are correct.

Under what circumstances would a license terminate? 1. The death of the licensee. 2. The licensee surrenders the license for cancellation. 3. A co-partnership is dissolved. 4. All of the choices.

All of the choices.

Which of the following describes a pretext interview? 1. A person attempts to gather information by misrepresenting the purpose of the interview. 2. A person attempts to gather information by pretending to represent someone he does not represent. 3. A person attempts to gather information by pretending to be someone he is not. 4. All of the choices.

All of the choices.

Which of the following is a true statement? 1. Non-renewal refers to the giving of notice by the insurer to the policyholder that the insurer is unwilling to renew a policy. 2. Cancellation is the termination of coverage by an insurer during a policy period. It does not mean the termination of the contract at the request of the policyholder. 3. Lapse refers to policy termination due to non-payment of the premium by the policyholder. A policy will lapse at the end of the grace period, which is a period of time after the premium due date, during which the policy remains in force without penalty. 4. All of the statements are true.

All of the statements are true.

Insurance licensees must put their license numbers on which of the following? 1. Printed advertisements 2. Written quotations for insurance products 3. Business cards 4. All the choices

All the choices

If an insurer is approved to transact insurance in the state of California, it is considered to be: 1. An admitted insurer 2. A non-admitted insurer 3. A foreign insurer 4. A domestic insurer

An admitted insurer

The authority of an agent that is created when the agent oversteps actual authority

Apparent authority

A legal defense that is used when a person willfully places themselves in a potentially dangerous situation and assumes the risk of injury

Assumption of Risk

notice by the insurer to the named insured that the insurer is unwilling to renew a policy

Nonrenewal

temporary insurance pending issuance of the insuring contract

Binders

Which of the following may a licensee do with return premium on a cancelled policy? 1. Hold in a fiduciary account. 2. Remit it to the policyholder immediately.

Both 1 & 2

termination of coverage by an insurer (other than termination at the request of the insured) during a policy period

Cancellation

Primarily concerned with the legal liability for losses caused by injury to persons or damage to the property of others

Casualty Insurance

A demand made by the insured or the insured's beneficiary, for payment of the benefits provided by the contract

Claim

Neglect to communicate that which a person knows and ought to communicate is: 1. A false warranty 2. Twisting 3. A false representation 4. Concealment

Concealment

The exchange of values on which a contract is based

Consideration

termination of coverage by reason of the policy having reached the end of the term for which it was issued or the end of the period for which a premium has been paid

Expiration

The state of being subject to loss because of some hazard or contingency. Also used as a measure of the rating units or the premium base of a risk.

Exposure

True or False: An agent may advertise that his insurance company is a member of a Guarantee Association.

False

Designed to make health coverage more portable for individuals who change jobs or health plans by limiting the coverage exclusions that can be imposed when such a change occurs

HIPAA(Health Insurance Portability and Accountability Act)

Things that increase the likelihood of a loss or the seriousness of a loss

Hazards

To restore the victim of a loss to the same position as before the loss occurred

Indemnify

Which of the following is not an unfair trade practice? 1. Discriminating between persons of the same class. 2. Informing a client of the statute of limitations. 3. Conspiring to commit an act of boycott. 4. Filing a false financial statement of an insurers financial condition.

Informing a client of the statute of limitations.

Any contingent or unknown event, whether past or future, which may indemnify a person having an insurable interest, or create a liability against him, may be insured against, subject to the provisions of the code

Insurable Events

Any interest a person has in a possible subject of insurance, such as a car or home, of such a nature that if that property is damaged or lost, that person will suffer a real financial loss

Insurable interest

A formal social device for reducing risk by transferring the risks of several individual entities to an insurer. The insurer agrees, for a consideration, to assume, to a specified extent, the losses suffered by the insured

Insurance

A person who, for compensation and on behalf of another person, transacts insurance other than life, disability, or health insurance with, but not on behalf of, an insurer

Insurance broker

A natural person employed by an agent/broker to aid in transacting insurance other than life insurance is an: 1. Insurance broker 2. Insurance agent 3. None of the choices 4. Insurance solicitor

Insurance solicitor

The person, organization or business covered by the insurance policy is referred to as: A. Corporation B. Insured C. Insurer D. Applicant

Insured

That portion of an insurance contract which states the perils insured against, the persons and/or property covered, their locations and the period of the contract

Insuring Agreement

Can a licensed insurer refuse to accept an application because of a person's sexual orientation?

No

Generally refers to (1) the amount of reduction in the value of an insured's property caused by an insured peril, (2) the amount sought through an insured's claim or (3) the amount paid on behalf of an insured under an insurance contract

Loss

Ideally, insurable risk must meet certain criteria

Losses to be insured must be definable Losses must be accidental Losses must be large enough to cause a hardship to the insured There must be a homogeneous group of risks large enough to make losses predictable (Law of large numbers) Losses must not be catastrophic to many members of the group at the same time The insurance company must be able to determine a reasonable cost for the insurance The insurance company must be able to calculate the chance of loss

An insurer who issues individual or group life, annuity, or disability policies to a physically or mentally impaired person: 1. May not refuse to insure, continue to insure, limit the amount or kind of coverage available, or charge a higher premium except where the refusal, limitation, or rate differential is based on sound actuarial principles or is related to actual and reasonably anticipated experience. 2. Physically or mentally impaired persons are not covered under the California insurance Code 3. May not refuse to insure, continue to insure, limit the amount or kind of coverage available, or charge a higher premium at any time 4. May refuse to insure, continue to insure, limit the amount or kind of coverage available, and charge a higher premium

May not refuse to insure, continue to insure, limit the amount or kind of coverage available, or charge a higher premium except where the refusal, limitation, or rate differential is based on sound actuarial principles or is related to actual and reasonably anticipated experience.

Which of the following best describes an insurance agent?

One who is appointed by an insurer, transacts other than life or accident & health insurance, receives commissions, and transacts on behalf of the insurer.

Actual cause of a possible loss (fire, theft, rain, etc.)

Peril

Lines of Insurance that require rates to be filed and approved by the state before they can be used would be

Prior Approval

Indemnifies a person with an interest in physical property for its loss or the loss of its income producing abilities

Property Insurance

The effective cause of loss or damage. It is an unbroken chain of cause and effect between the occurrence of an insured peril or a negligent act and resulting injury or damage

Proximate Cause

An unbroken chain of cause and effect between an occurrence of an insured peril and resulting injury

Proximate cause

No chance of gain or profit, and ONLY chance of loss

Pure Risk

An uncertainty or chance of loss

Risk

S.T.A.R.R.

Sharing - pooling the risk with a variety of other people who share the same risk Transfer - such as buying insurance Avoidance - removing the possible cause of a loss Retention - keeping all or part of the financial risk of loss Reduction - reducing the chance of loss with safety techniques

Transacting insurance includes:

Solicitation, Negotiation, and Execution of a contract of insurance

A chance of BOTH a gain or a loss

Speculative Risk

Balancing poorer risks with preferred risks so the losses then fall within an acceptable/normal range

Spread of risk

This law recognized that state regulation of insurance was in the public's best interest and thus exempted the insurance industry from the federal regulation required for most interstate commerce industries

The McCarren-Ferguson Act (1945)

Which of the following is NOT considered by the commissioner in determining whether or not a settlement offer is unreasonably low: 1. The amount of money the insurer may lose paying a higher settlement 2. The extent to which the insurer considered legal authority or evidence made known to it or reasonably available 3. The procedures used by the insurer in determining the dollar amount of property damage. 4. The extent to which the insurer considered evidence submitted by the claimant to support the value of the claim.

The amount of money the insurer may lose paying a higher settlement.

The commissioner may deny an application for a license without conducting a hearing for which of the following reasons: 1. The applicant has been convicted of a felony. 2. Any of the choices 3. The applicant is not of good business reputation 4. The applicant has been convicted of a misdemeanor.

The applicant has been convicted of a felony

The commissioner may deny an application for a license without conducting a hearing for which of the following reasons? A. The applicant has been convicted of a felony. B. The applicant is not of good business reputation C. The applicant lacks integrity. D. Granting the license would not be in the public interest.

The applicant has been convicted of a felony.

What is true about insurance records kept by an agent or broker? 1. The commissioner may inspect certain records at any time. 2. The commissioner may inspect any records after sending a 30-day prior notice 3. The commissioner may inspect any record at any time 4. The commissioner may inspect certain records after sending a 30-day prior notice.

The commissioner may inspect any record at any time

True or False: The purpose of the Insurance Information and Privacy Protection Act (IPPA) is to establish standards for the collection, use, and disclosure of information gathered in connection with insurance transactions.

True

A licensee misrepresents the financial condition of an insurer. This is an example of: 1. Unfair trade practice 2. Twisting 3. Concealment 4. None of the choices

Unfair trade practice

A licensee misrepresents the financial condition of an insurer. This is an example of:

Unfair trade practices.

Insurance represents which way of dealing with risk

Transfer

True of False: Liquidation means the commissioner feels it would be futile to proceed as conservator of the insurer and applies to the court for an order to liquidate and wind up the business of the insurer

True

True or False: Every licensee must immediately notify the commissioner in writing of any change in his residence address, business address, or mailing address.

True

True or False: Speculative risks are NOT insurable

True

True or False: The commissioner may deny a license, without a hearing, if the applicant has been convicted of a misdemeanor denounced by the insurance code.

True

Concealment entitles the injured party to rescind the contract under which conditions? 1. When the concealed facts are material and unintentional. 2. Concealment is not grounds for rescinding a contract. 3. When the concealed facts are material and intentional. 4. When the concealed facts are material whether intentional or unintentional.

When the concealed facts are material whether intentional or unintentional.

An insurer formed under the laws of the state in which an insurance policy is written is called

a domestic insurer

Under what grounds may the commissioner disapprove the use of any agency name? 1. The name is too similar to a name already filed. 2. All of the answers are correct 3. The name implies that the licensee is an insurer 4. Using the name may mislead the public.

all of the answers are correct

A warranty is: 1. all of the choices 2. either express or implied 3. a guaranteed truth 4. a representation in an insurance contract

all of the choices

For property and casualty insurance, insurable interest must exist

at the time of loss

In order for an insurance company to be able to accept premiums and pool money to pay for particular types of losses, the insurance company has to have a large enough number of similar risks. This law makes it possible to statistically predict the probability of loss within the group, and therefore how much premium to charge.

law of large numbers.

Failure to use the degree of care of a reasonable person

negligence

When the interviewer does not reveal his true identity, pretends to be someone who he is not, or misrepresents the true purpose of the interview

pretext interview

What is the purpose of the California Insurance Guarantee Association ?

to protect the interests of policyholders and beneficiaries against loss because an insolvent insurer is unable to pay its contractual obligations under property and casualty insurance policies.