Exam FX Iowa Laws, Rules, and Regulations Common to All Lines

A producer must complete a new set of continuing education hours every A. 2 years B. 3 years C. 4 years D. 5 years

B. 3 years

A producer earns 40 continuing education credit hours during the 3-year license renewal period. How many continuing education credit hours will the producer need to complete during the new 3-year period? A. 30 B. 33 C. 36 D. 40

C. 36 *Producers must complete 36 continuing education hours during each 3-year licensing period. Excess hours cannot be carried over to the next licensing period.

Which of the following would be considered an unfair settlement practice? A. A claims adjuster advises the insured that if the claim goes to arbitration, the insured would probably receive less than what is currently being offered B. Requesting the insured to submit a signed, proof of loss statement, after the insured has already verbally advised the insurer of the claim C. Requesting the insured swear under oath concerning the facts of the claim D. The settlement of the claim is delayed for 30 days in order for the insured to conduct an investigation

A. A claims adjuster advises the insured that if the claim goes to arbitration, the insured would probably receive less than what is currently being offered *This act is a violation as defined in the Unfair Settlement Practices

Circulating deceptive sales material to the public is what type of Unfair Trade Practice? A. False advertising B. Defamation C. Coercion D. Misrepresentation

A. False advertising *This is considered to be false, deceptive or misleading advertising.

If the Commissioner receives a certificate of noncompliance from the child support recovery unit (CSRU), the producer will have his or her license suspended for how many days A. 15 days B. 30 days C. 45 days D. 7 days

B. 30 days

How long is a Commissioner's term? A. 2 years B. 4 years C. 5 years D. 10 years

B. 4 years *The Insurance Commissioner has the statutory responsibility to regulate the insurance insurance industry in the public's interest. The governor appoints the Commissioner for a 4-year term.

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

Forcing a client to buy insurance from a particular lender as a condition of granting a loan is defined as A. Defamation B. Coercion C. Rebating D. Misleading advertising

B. Coercion *These are all considered to be Unfair Trade Practices, which are major violations that can lead to heavy penalties. Coercion, for example, is when the bank won't give you an auto loan unless you agree to buy auto insurance from them.

Which of the following best describes the unfair trade practice of defamation? A. Refusing to deal with other insurers B. Making derogatory oral statements about another insurer's financial condition C. Assuming the name and identity of another person D. Issuing false advertising material

B. 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 practice of defamation.

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? A. Rebating B. Misrepresentation C. Concealment D. Unfair claim practice

B. Misrepresentation *Issuing or circulating any sales material that is false or misleading would be considered misrepresentation and is illegal.

To send important documents to the insured through electronic mail services, all of the following must be met EXCEPT A. The insurer must let the insured know he or she may choose to not elect the delivery method B. The insured must be made aware that choosing another method may affect the validity of the document C. The insured must first consent to the delivery method D. The insurer must relay all software requirements needed to open the document

B. The insured must be made aware that choosing another method may affect the validity of the document

If an insurer believes that it has received a fraudulent claim, it must notify the bureau and request an investigation within A. 15 days B. 30 days C. 60 days D. 90 days

C. 60 days *If an insurer believes that is has received a fraudulent claim, it has 60 days to notify the bureau and request an investigation. If the bureau conducts an investigation and the investigation exposes fraud, the bureau will report the violation to the appropriate licensing agency or prosecuting authority.

Which of the following individuals engaged in the business of insurance would NOT be required to be licensed? A. A salaried employee of an insurer who does not receive commissions, but solicits applications and quotes rates for insurance B. A director of an employee trust plan who is compensated indirectly by the insurer C. A person who secures information for enrolling individual into a group insurance D. A salaried officer of an insurance agency who does not solicit insurance personally, but who shares in the commissions

C. A person who secures information for enrolling individual into a group insurance *Anyone who solicits insurance or receives commissions from the sale of insurance must be licensed.

Which of the following would be required to obtain a producer's license in this state? A. A person acting as a special agent who assists insurance producers by providing technical advice and assistance B. A person who underwrites applications for insurance for the insurer C. A trustee of an employee trust plan that is compensated indirectly by the company issuing the contract D. A clerical employee that is only indirectly involved in the sale and solicitation of insurance and who is paid a fixed salary

C. A trustee of an employee trust plan that is compensated indirectly by the company issuing the contract *Officers, directors and employees of an insurer or an insurance producer who are not directly involved in the sale and solicitation of insurance and who are not compensated directly or indirectly by commission, are exempt from insurance licensing requirements.

Which of the following is the closest term to authorized insurer? A. Licensed B. Legal C. Admitted D. Certified

C. 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.

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 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.

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? A. Twisting B. Controlled business C. Rebating D. Coercion

C. Rebating *When producers give or promise anything of value that is not specified in the policy, they are guilty of rebating

A producer in another state wants to become a producer in Iowa. The other state gives the same privileges to Iowa producers wanting to be licensed in that state as it does its own producers. Iowa therefore extends the privileges of its producers to the prospective producer of the other state. What is this called? A. Equanimity B. Equal privilege C. Reciprocity D. Fair exchange

C. Reciprocity *Reciprocity occurs when the state in which the person resides accords the same privilege to residents of Iowa.

How many continuing education credit hours must be completed during each licensing period? A. 15 B. 24 C. 25 D. 36

D. 36 *Every licensed producer must complete 36 credit hours of continuing education each term. Since a producer's license is valid for 3 years, the licensee has 3 years to complete the 36 hours. When the license is renewed after that 3-year period, the producer must complete another 36 hours within the next 3 years.

In which of the following circumstances is an active producer license NOT required? A. A salesperson sells auto polices through a car dealership B. An individual presents and sells a life insurance policy C. An individual operates an agency for a non licensed producer D. A retiree receives renewal commission for polices written when he was an active producer

D. A retiree receives renewal commission for polices written when he was an active producer *The retiree must have been a licensed producer at the time the polices were sold but can still receive renewal commissions after retiring. All of the other situations require an active producers license.

Circulating deceptive sales material to the public is what type of Unfair Trade Practice? A. False advertising B. Defamation C. Coercion D. Misrepresentation

A. False advertising *This is considered to be false, deceptive or misleading advertising.

In which of the following situations as it legal to limit coverage based on martial status? A. It is never legal to limit coverage based on marital status B. Excessive number of divorces, as defined by the Insurance Code C. Legal separation during the application process D. Divorce within the last six months of applying for insurance

A. 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.

After moving, licensees must inform the Commissioner of a change of address within A. 10 days B. 30 days C. 60 days D. 90 days

B. 30 days *Licensees must inform the Commissioner of a change of address within 30 days of the change.

If an insurer becomes insolvent, the Iowa Life and Health Guaranty Association will do all the following EXCEPT A. Assume payment of the insurer's contractual obligations B. Purchase all existing contracts issued under the insurer C. Reinsure the policies of the insolvent insurer D. Provide money to claimants

B. Purchase all existing contracts issued under the insurer *If an insurer becomes insolvent, the Association will guaranty the policies of the insurer, as well as assure payment and provide monies to policyholders in order to fulfill the insurer's contractual obligations

A nonresident Iowa producer moves to Iowa and becomes an Iowa resident, Which of the following is true? A. The producer must appeal to the Commissioner for a special dual-state license B. If the other state would allow former Iowa residents to maintain their resident after moving to the other state, then Iowa will do the same C. The producer must surrender his/her producers license from the other state D. The producer may maintain the licenses held in both states

C. The producer must surrender his/her producers license from the other state *Any Iowa-licensed nonresident insurance producer who moves to Iowa and becomes an Iowa resident must surrender the Iowa nonresident license and satisfy the requirements for an Iowa resident insurance producer.

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 that state department of insurance and meet any financial requirements set down by the state.

Paul is a producer in Kansas and wants to become a producer in Iowa. The Department will waive certain examination requirements provided that Kansas would waive these same requirements if an Iowa producer sought licensure in Kansas. What term is used to describe this phenomenon? A. Equality B. Fair exchange C. Equanimity D. Reciprocity

D. Reciprocity *Reciprocity occurs when the state in which the person resides accords the same privilege to residents of Iowa.

After a hearing, civil penalties imposed by the Commissioner for each unfair method of competition may NOT exceed A. $1,000 B. $1,500 C. $5,000 D. $500

A. $1,000 *Civil penalties for engaging in an unfair method of competition or an unfair or deceptive act or practice imposed by the Commissioner after hearing may not exceed $1,000 for each violation, up to an aggregate of $10,000

The Life and Health Guaranty Association maintains all of the following accounts EXCEPT A. An unallocated life insurance account B. A health insurance account C. An annuity account D. An unallocated annuity contract account

A. An unallocated life insurance account *For the purposes of administration and assessment, the Iowa Life and Health Guaranty Association maintains a health insurance account, a life insurance account, an annuity account, and an unallocated annuity contract account.

A temporary producer's license may be used for which of the following? A. Completing the affairs of an insurance producer B. Continuing a producer's business C. Transactions new business D. All of the above

A. Completing the affairs of an insurance producer *A temporary permit may only be used to wrap up the affairs of an insurance producer. It may not be used to contact producer's business or transact new business

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. Discrimination B. Twisting C. Controlled business D. Adverse selection

A. Discrimination *Permitting individuals of the same class to be charged a different rate for the same insurance is the unfair trade practice of discrimination.

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 or 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.

The Commissioner is conducting an examination of a domestic insurance company. Who is responsible for the cost of the examination? A. The company being examined B. The entity that requested the examination C. The Department of Insurance D. The Insurance Guaranty Association

A. The company being examined *The cost of examinations is the responsibility of the insurance company being examined.

It is suspected that a producer is consistently violating insurance laws. Which of the following entities is responsible for making sure that the producer stops committing these violations? A. The State Insurance Board B. Commissioner C. NAIC D. Federal Insurance Regulation Bureau

B. Commissioner *The Commissioner can issue an order requiring anyone to stop an action that violates insurance laws. This is called a Cease and Desist Order.

Which of the following will NOT be considered unfair discrimination by insurers? A. Assigning different risk classifications 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 marital 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.

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. Stock, 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.

All of the following are true regarding rebates EXCEPT A. Dividends are not considered to be rebates B. Rebates are allowed if its in the best interest of the client C. Rebates are only allowed if specifically stated in the policy D. Rebating can be anything of economic value, given as an inducement to buy

B. Rebates are allowed if its 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 specifically stated in the policy. Insurance dividends are not considered rebates as the IRS considers it as a return of overpaid premium.

What entity was created to protect insureds against insurer insolvency? A. The Insurer Insolvency Protection Agency B. The Iowa Insurance Division C. The Iowa Life and Health Guaranty Association D. The NAIC

C. The Iowa Life and Health Guaranty Association *The purpose of the Life and Health Guaranty Association is to protect insureds against an insurer's failure to perform contractual obligations due to impairment or insolvency.

If a person is suspected of violating insurance laws, what can the Commissioner issue that would order the person to stop violating the violations? A. Stop-Action Order B. Suspension of Authority C. Limitation Power Statement D. Cease and Desist Order

D. Cease and Desist Order *The Commissioner can issue an order requiring anyone to stop an action that violates insurance laws. This is called a Cease and Desist Order.

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. Misrepresentation B. Discrimination C. Nothing, unless the remarks were in writing D. Defamation

D. 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.

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. Undercutting B. Twisting C. Slandering D. Defamation

D. 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 the insurance.

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. Undercutting B. Twisting C. Slandering D. Defamation

D. Defamation *Defamations is making statements that are false as the financial condition of any insurer and which are calculated to injure any person engaged in the business of insurance.

Which of the following best describes a misrepresentation? A. Making a deceptive or untrue statement about a person engaged in the insurance business B. Making a maliciously critical statement that is intended to injure another person C. Discriminating among individuals of the same insuring class D. Issuing sales material with exaggerated statements about policy benefits

D. 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.

Which of the following statements is NOT accurate regarding commissions and referrals? A. Referral fees are acceptable as long as payment does not depend on the sale of a policy. B. To receive commissions on the sale of a policy, a person music be licensed in the appropriate line of insurance C. All individuals engaged in the sale, solicitation and negotiation of an insurance policy must be licensed. D. Service fees are acceptable as long as the policyholder is licensed

D. Service fees are acceptable as long as the policyholder is licensed *Service fees are acceptable as long as the producer, not the policyowner, is licensed. Referral fees and commissions are allowable as long as the person receiving them is licensed.