ACSR 4
Which one of the following statements regarding the application process is true? Select one: A. A producer's duty is to act in good faith but there is no duty to recommend specific coverages. B. The customer service representative should ask leading, not probing, questions to solicit the necessary information. C. Probing questions can generate a quicker response than leading questions can. D. If the client is unsure of an answer the customer service representative can suggest or recommend an answer.
A. A producer's duty is to act in good faith but there is no duty to recommend specific coverages.
Which one of the following is a step the CSR may take during the claims handling process? Select one: A. Advise the client on what to expect in the claims adjustment process B. Advise the client not to report the claim because it may increase his or her premium C. Tell the client whether the loss is covered or not D. Tell the client the amount that may be paid for a loss
A. Advise the client on what to expect in the claims adjustment process
An underwriter may require that an applicant for a personal umbrella purchase higher-than-average limits of liability on the client's personal auto insurance. This is an example of which one of the following customer service representative key functions? Select one: A. Advising the client of any preconditions B. Reviewing the client account C. Explaining all of the coverage options D. Preparing the actual quote or proposal
A. Advising the client of any preconditions
A producer who finds auto coverage sales leads by searching motor vehicle records may be in violation of the Select one: A. Drivers Privacy Protection Act (DPPA). B. Sarbanes-Oxley Act. C. Gramm-Leach-Bliley Act (GLB). D. CAN-SPAM Act.
A. Drivers Privacy Protection Act (DPPA).
An insurer issues a nonrenewal notice to terminate coverage effective on the Select one: A. Expiration date. B. Cancellation date. C. Nonpayment date. D. Inception date.
A. Expiration date.
Sue has just moved to State B from State A following a promotion at work. Her current auto insurer is not license in State B. Sue's existing automobile policy provides PIP coverage but State B is not a PIP state. In putting together the proposal the CSR Select one: A. Explains Medical Payments coverage and options and includes the cost information at the different limits available. B. Leaves Medical Payments off the new quote, which to some degree provides some of the medical benefits afforded under PIP in State A. C. Includes Medical Payments in the new quote and will remove it if Sue objects. D. Includes Medical Payments in the quote but only at the lowest available amount.
A. Explains Medical Payments coverage and options and includes the cost information at the different limits available.
Which one of the following statements regarding state licensing laws is true? Select one: A. Most states require individuals who sell, solicit, or negotiate insurance to be licensed. B. Licensees in most states pay annual fees and do not have to meet annual education requirements. C. Most states will allow relevant job experience to take the place of a producer's license. D. Customer service representatives do not have to be licensed because they are not producers.
A. Most states require individuals who sell, solicit, or negotiate insurance to be licensed.
Which one of the following types of policy terminations typically requires the least advance notice? Select one: A. Premium nonpayment B. Coverage lapse C. Removal of endorsement D. Policy nonrenewal
A. Premium nonpayment
State regulation over the licensing and conduct of insurance agency staff is primarily intended to fulfill two goals: to assure that insurance sales representatives are qualified to sell insurance products and to Select one: A. Protect consumers from unethical practices. B. Ensure covered claims are paid promptly. C. Encourage competition among insurers. D. Maintain low insurance premiums.
A. Protect consumers from unethical practices.
Under agency law a customer service representative owes a client the standard of care that is necessary to Select one: A. Protect the client's interest. B. Protect the agency's interest. C. Meet an average person's expectations. D. Meet a prudent person's expectations.
A. Protect the client's interest.
The Telemarketing and Consumer Fraud and Abuse Prevention Act prohibits repeated calls or prolonged conversation, limits calls to certain times of day, and requires telemarketers to Select one: A. Reveal their identities and the purpose of the call. B. Register with the federal telemarketing database. C. Avoid names on the do-not-call registry. D. Obtain the prospect's permission before calling.
A. Reveal their identities and the purpose of the call.
When meeting with clients who are placing new business with the agency for the first time, which one of the following actions is the first step a CSR should take? Select one: A. Reviewing the existing insurance to determine current coverages B. Placing the business with an insurance company C. Preparing the proposal and quote D. Delivering the policy to the clients and reviewing the new coverage
A. Reviewing the existing insurance to determine current coverages
Most unfair claims settlement practices acts regulate insurers. Agencies can also be affected by these acts because Select one: A. Some agencies have authority from the insurer to handle certain types of claims. B. Most states require an agency to acknowledge a report of a claim within a certain time frame. C. Most states do not differentiate between the acts of an insurer and the acts of an agent. D. Agencies are vicariously liable for the acts of the insurers they represent.
A. Some agencies have authority from the insurer to handle certain types of claims.
Which one of the following statements regarding coverage options and quotes is true? Select one: A. Some states' statutes require some coverage options to be offered to the client. B. A client's rejection of an agency suggestion absolves the agency of needing to review that matter with the client again. C. It is not important to document the alternatives offered to the client, only the client's final decision. D. The agency has a duty to its clients to provide them with professional advice and to ensure the clients take that advice.
A. Some states' statutes require some coverage options to be offered to the client.
A customer service representative named Stan agreed to provide insurance to a client who had several large losses. After receiving several declinations Stan found coverage with an insurer that has been trying to write new business due to severe financial distress. Stan was relieved to have found coverage although the premium was higher than the insured requested. Which one of the following pieces of information does Stan have a duty to tell the client under agency law? Select one: A. The financial health of the insurer is questionable. B. Premiums are higher than the client anticipated. C. The coverage the client requested has been provided. D. Other insurers declined to quote the insurance.
A. The financial health of the insurer is questionable.
The application for insurance is a contract between Select one: A. The insurer and the applicant. B. The underwriter and the insurer. C. The customer service representative and the insurer. D. The underwriter and the applicant.
A. The insurer and the applicant.
The U.S. Department of Transportation (DOT) does not regulate insurance but DOT regulations affect insurance because Select one: A. They specify financial responsibility limits for motor carriers. B. They require producers to report their business mileage to the DOT. C. They require each state to track individual motorists' driving records. D. They restrict the credit terms insurers may offer customers.
A. They specify financial responsibility limits for motor carriers.
Which one of the following duties do customer service representatives owe to the insurers that they represent? Select one: A. To know the limits of binding authority B. To ensure a profitable book of business C. To verify the clients' information is true D. To understand the commission schedule
A. To know the limits of binding authority
Peter is an electrical contractor who won a bid to do the wiring for a planned elementary school. The general contractor needed a certificate of insurance, and the cancellation provision must state that a cancellation notice is to be sent within ten days. Peter told this to the customer service representative (CSR) at his insurance agency and was informed that the certificate states the cancellation notice is sent in accordance with the policy provisions. If Peter cannot get the certificate change, he would lose the job. Which one of the following actions should the CSR take to control an errors and omissions exposure? Select one: A. Use the current certificate's cancellation language B. Make a manuscript certificate to change the days C. Amend the current wording in the remarks section D. Endorse the policy to add the general contractor
A. Use the current certificate's cancellation language
Which one of the following statements regarding insurer placement is true? Select one: A. When placing business with a nonadmitted carrier the customer service representative should be careful to explain that the state guaranty fund does not cover nonadmitted insurers. B. An agency is expected to practice due diligence by reviewing ratings published by rating organizations but it is not necessary to seek information on client service practices. C. Insurance should only be placed through the standard market because policy terms, conditions, and exclusions can differ in the nonstandard market. D. Coverage changes resulting from modifications to the state's insurance laws affect all insurance companies so all customers can be considered up to date on these coverage changes.
A. When placing business with a nonadmitted carrier the customer service representative should be careful to explain that the state guaranty fund does not cover nonadmitted insurers.
A customer service representative received notice of a loss from an insured and the following day reported it to the insurer. The insurer then entered the claim into its diary system that day and started to monitor the claim. If the state insurance regulators audited the claim the reporting requirements of the claim would begin Select one: A. When the agency received the notice of loss. B. When the insurer received the notice of loss. C. When the insurer began to diary the loss. D. When the insured experienced the loss.
A. When the agency received the notice of loss.
An unmodified ISO form will have Select one: A. Wording such as "Copyright Insurance Services Office Inc." B. A copyright notice, followed by a space to fill in the effective date. C. A copyright notice naming the issuing insurer. D. Wording such as "Used with permission of Insurance Services Office Inc."
A. Wording such as "Copyright Insurance Services Office Inc."
Which one of the following statements regarding brokers is true? Select one: A. A broker's agent is the insurer. B. A broker's principal is the insured. C. Brokers must obtain coverage through agents. D. Brokers do not represent individuals.
B. A broker's principal is the insured.
Which one of the following statements regarding a certificate of insurance is true? Select one: A. A certificate of insurance can change the terms or conditions of the policy. B. A certificate of insurance is intended for informational purposes. C. A certificate of insurance provides additional coverage, similar to an endorsement. D. A certificate of insurance extends policy rights to the policyholder.
B. A certificate of insurance is intended for informational purposes.
Which one of the following statements regarding adding, deleting, or reducing coverage is true? Select one: A. A client makes changes with the intent to save money and fully understands the consequences of the decision. B. A client may agree to a coverage addition and later request it be removed once the bill comes. C. It is not necessary to document coverage deletions or deductions following a face-to-face conversation. D. A third party may determine coverage needs for the policyholder.
B. A client may agree to a coverage addition and later request it be removed once the bill comes.
The only way a nonadmitted insurer that is not licensed to write insurance in a state is able to provide direct primary coverage is through Select one: A. A voluntary insurer. B. A licensed broker or agent. C. A domestic reinsurer. D. A fronting company.
B. A licensed broker or agent.
Which one of the following creates an errors and omissions exposure when a customer service representative provides an insured guidance before consulting an insurer while assisting in a claim? Select one: A. Communicating vital information to an insured B. Advising an insured about hiring a restoration firm C. Telling potential reasons for claim denial to an insured D. Directing an insured to report all claims
B. Advising an insured about hiring a restoration firm
Which one of the following statements regarding certificate of insurance forms is true? Select one: A. The ISO certificate of insurance forms are the most commonly used forms. B. An advantage of standardized certificate of insurance forms is that they have been modified as a result of numerous court cases. C. ACORD publishes ten standardized certificate of insurance forms based on the lines of business. D. Standardized certificate of insurance forms should be referred to the insurer rather than completed by the CSR.
B. An advantage of standardized certificate of insurance forms is that they have been modified as a result of numerous court cases.
Which one of the following describes an agent acting in a fiduciary capacity? Select one: A. An agency may provide loss control services to its clients. B. An agency may collect insurance premiums from clients on the insurer's behalf. C. An agency may have authority to settle and pay certain types of claims directly. D. An agency may collect inventory reports from clients and submit them to insurers.
B. An agency may collect insurance premiums from clients on the insurer's behalf.
A customer service representative would most likely report which one of the following first-party claims to a designated third-party administrator for settlement? Select one: A. Flood B. Broken windshield C. Fire D. Business income
B. Broken windshield
Policy changes Select one: A. Can only be initiated by the policyholder. B. Can be initiated by a third party. C. Are a one-time point-of-sale event. D. Are not confirmed with the policyholder.
B. Can be initiated by a third party.
Which one of the following is the fastest-growing area of E&O claims? Select one: A. Binders of insurance B. Certificates of insurance C. New business D. Existing business
B. Certificates of insurance
A carpenter had his policy cancelled due to nonpayment of premium and asked the customer service representative (CSR) to reinstate the policy because he now has the money to make the latest payment. Which one of the following actions should the CSR take before accepting the money to pay the premium? Select one: A. Collect an additional payment of premium B. Clarify that the policy can be reinstated C. Consider coverages from other insurers D. Complete a new set of policy applications
B. Clarify that the policy can be reinstated
Which one of the following statements regarding delivering the policy to the client is true? Select one: A. Mail delivery is preferable as a way to give the agency an opportunity to offer additional products, coverage options, and services. B. Deliberate changes may occur during the underwriting process. C. The applicants are not allowed to change coverage options during the processing phase. D. The CSR may reasonably assume that the policy contains the correct information, coverages, and limits that have been requested.
B. Deliberate changes may occur during the underwriting process.
A client is denied coverage as a result of an application that was not filled out properly. This is an example of which one of the following errors and omissions claims? Select one: A. Failing to explain policy terms and coverage limitations B. Failing to procure adequate coverage C. Failing to investigate an insurer's financial condition D. Failing to maintain requested insurance
B. Failing to procure adequate coverage
A homeowner suffers an uncovered flood loss and claims he was not informed about coverage options. Which one of the following types or errors and omissions claims does this best describe? Select one: A. Failing to inform the client about renewal. B. Failing to procure insurance coverage through failure to recognize an exposure C. Failing to maintain requested insurance D. Failing to investigate an insurer's financial condition
B. Failing to procure insurance coverage through failure to recognize an exposure
A client is told that a certain type of insurance coverage is not available when the coverage is actually available from a different insurer. This is most likely to lead to which one of the following common types of errors and omissions claims? Select one: A. Failing to maintain requested insurance B. Failing to procure requested insurance C. Procuring inadequate coverage D. Failing to notify client of inability to procure insurance
B. Failing to procure requested insurance
An agency's client suffered a broken windshield as a result of hitting a bird. The client reported the loss to the insurer using its toll-free claim reporting line. The CSR provides service that avoids E&O exposures to the agency by Select one: A. Informing the client that the loss is likely less than the policy deductible so he should not have submitted the claim. B. Following the claims processing procedures the agency has established to monitor the claim investigation and settlement process until it is complete. C. Advising the client that because he has reported the loss to the insurer the agency can no longer assist in the claims process. D. Calling the client and asking questions about the loss to determine if coverage applies.
B. Following the claims processing procedures the agency has established to monitor the claim investigation and settlement process until it is complete.
Clients may seek premium financing Select one: A. From a premium financing company that collects enough of a down payment to cover the unearned premium in the policy. B. From a premium financing company that is given the right to cancel the policy in the name of the client. C. Only where the insurance carrier is unwilling to accept installment payments. D. Only from an agency's own premium financing company and not through outside premium financing companies.
B. From a premium financing company that is given the right to cancel the policy in the name of the client.
In a typical errors and omissions (E&O) policy, a claim arising as a result of insurer insolvency would Select one: A. Be paid up to the policy limits. B. Not be paid because it is excluded. C. Not be paid because it is an exception. D. Be split with the insurer.
B. Not be paid because it is excluded.
The laws of agency impose five duties on all agents. The statement that "A CSR owes a duty to fully comply with the insurer's instructions" is an example of which one of the following duties? Select one: A. Loyalty B. Obedience C. Relaying information D. Accounting
B. Obedience
A certificate of insurance typically provides Select one: A. Policy endorsements. B. Policy coverages. C. Policy exclusions. D. Policy conditions.
B. Policy coverages.
Which one of the following actions is the CSR's first step in placing the business? Select one: A. Providing a binder that lists all the coverages, limits, and expiration dates B. Reviewing the agency's binding authority and insurer underwriting guidelines C. Seeking alternative sources of coverage and ensuring no coverage gaps occur D. Recording the binder information and suspense dates in the agency's system
B. Reviewing the agency's binding authority and insurer underwriting guidelines
Janet is a customer service representative and has worked with her client, Everyday Landscaping, to exclude a driver with several violations. The insurer requested that the insured complete the exclusion within two weeks. The exclusion was not completed during that time, and now the insured has received a notice of cancellation. The next action that Janet should take to assist the client with the cancellation is to Select one: A. Tell the insured the notice can be rescinded once the driver exclusion is received. B. Seek replacement coverage and discuss the impact on other in force policies. C. Acquire the driver exclusion and send it to the insurer before the cancellation date. D. Contact the insurer to request more time in order to obtain the driver exclusion.
B. Seek replacement coverage and discuss the impact on other in force policies.
The Federal Emergency Management Agency (FEMA) is responsible for preparing the nation for hazards and for managing recovery efforts after a disaster. FEMA activities affect insurance agencies because FEMA Select one: A. Pays covered disaster insurance claims following insurer insolvency. B. Sets rates, coverage limits, and eligibility requirements for flood insurance. C. Requires insurance agencies to submit emergency response plans for their customers. D. Creates and updates the standard disaster insurance policy forms.
B. Sets rates, coverage limits, and eligibility requirements for flood insurance.
Certain claims can be handled through an agency claim authority program. An example of the types of losses that would be handled within this program is Select one: A. Agency personnel losses. B. Small theft losses. C. Business income losses. D. Third-party losses.
B. Small theft losses.
Which one of the following statements regarding client review as part of the policy delivery process is true? Select one: A. At the client review the CSR obtains any remaining documents that the insurer has requested. B. The CSR explains any differences from what was originally requested and documents these in the account file. C. In the account file the CSR documents only the final choices and not the coverages that the client has rejected. D. Client review is an important part of E&O loss control and it is best accomplished over the telephone.
B. The CSR explains any differences from what was originally requested and documents these in the account file.
An insurer appoints a producer to solicit applications for life insurance policies on behalf of the insurer. The producer subsequently calls prospects to schedule sales appointments. Which one of the following statements regarding this situation is true? Select one: A. The producer only has the apparent authority to call prospects. B. The express authority of the appointment gives the producer the implied authority to prospect. C. The producer has acted outside the scope of his or her authority by calling prospects. D. Both the solicitation and the prospecting are examples of express authority.
B. The express authority of the appointment gives the producer the implied authority to prospect.
Insurance agents purchase errors and omissions (E&O) liability policies to protect Select one: A. The carrier from clients who may withhold material information. B. Themselves and their agencies from negligence claims. C. Themselves from liability if a carrier mishandles a claim. D. The carrier from claimants' fraudulent claims.
B. Themselves and their agencies from negligence claims.
An agency has an errors and omissions (E&O) policy with a limit of $100,000 per claim. An E&O claim results in a $90,000 award against the agency. Excluding any deductibles, if the insurer spent $15,000 defending the claim and defense costs are covered within the limits of liability, the carrier will pay Select one: A. $15,000. B. $90,000. C. $100,000. D. $105,000.
C. $100,000.
An agency has an errors and omissions (E&O) policy that pays defense costs in addition to the policy limits. The limits of liability are $100,000 per claim, and the deductible is $5,000. A claimant is awarded $90,000 against the agency, and the insurer spent $20,000 defending the claim. If the insurer applies the deductible to claim payments and defense costs, the insurer will pay Select one: A. $95,000. B. $100,000. C. $105,000. D. $110,000.
C. $105,000.
In order to anticipate current insurance needs, the CSR generally contacts the client Select one: A. 30 days before the renewal date. B. 60 days before the renewal date. C. 90 days before the renewal date. D. 120 days before the renewal date.
C. 90 days before the renewal date.
Which one of the following is an example of a mistake made through human error in the application process? Select one: A. An applicant chooses alternative options. B. An underwriter restricts the limits of insurance. C. A customer service representative transposes numbers when recording limits. D. An underwriter declines certain coverages.
C. A customer service representative transposes numbers when recording limits.
An insured was very upset after receiving a cancellation notice due to not completing recommendations from a recent inspection. The insured explained to a customer service representative (CSR) why the recommendations were not completed and asked for more time. To control the errors and omissions exposure, the CSR should Select one: A. Delay the cancellation by calling the insurer to describe the insured's situation and request more time. B. Avoid the cancellation by having the insured sign a form stating the recommendations are completed. C. Allow the cancellation notice to stand and assist the insured in finding replacement coverage. D. Tell the insured that coverage can be reinstated once the recommendations are completed.
C. Allow the cancellation notice to stand and assist the insured in finding replacement coverage.
Which one of the following describes an unfair trade practice? Select one: A. An insured has coverage through one agent but asks a new agent to provide competitive quotes. B. An insured pays small claims directly instead of submitting the claims to the insurer. C. An agent agrees to give part of his commission to a prospect in exchange for purchasing a policy. D. An agent provides a quote to a prospect that already has coverage through a different agency.
C. An agent agrees to give part of his commission to a prospect in exchange for purchasing a policy.
An insurer revokes a producer's contract because of lack of production. The producer continues to give out business cards and wear shirts with the insurer's logo, and continues to solicit applications for coverage using the insurer's forms and brochures. From the customer's standpoint, which one of the following types of authority does the producer have to place coverage with the insurer? Select one: A. Express B. Implied C. Apparent D. Draft
C. Apparent
Which one of the following questions is an example of a leading question? Select one: A. How many miles do you drive between work and home on an average workday? B. What level of deductible do you prefer? C. Are the minimum liability limits of $25,000 agreeable to you? D. What are the ages of the drivers in your household?
C. Are the minimum liability limits of $25,000 agreeable to you?
Which one of the following statements regarding policy audits is true? Select one: A. It is not important for CSRs to advise clients their policies are auditable because the audit provision is included in the contract. B. A policy audit is used to determine if the premium base is greater than the initial calculation and, if so, the provisional premium will be adjusted. C. Because of the time lag between initial policy issuance and audit, a client can forget that an audit may occur and additional premium may be owed for the term already expired. D. It is not necessary for the CSRs to advise policyholders who hold auditable policies of the criteria and method used by the insurance company in establishing premiums.
C. Because of the time lag between initial policy issuance and audit, a client can forget that an audit may occur and additional premium may be owed for the term already expired.
Which one of the following statements regarding delivery of the insurance policy is true? Select one: A. Coverage summaries provide clients with a concise outline of the insurance coverage in professional terms. B. Agencies that produce their own coverage summaries can pass these along to the insurers because insurers do not produce coverage summaries. C. Coverage summaries must use insurance terminology carefully because common terms in the insurance field have different meanings to non-insurance professionals. D. The transmittal documents that accompany the policy are required to include coverage summaries.
C. Coverage summaries must use insurance terminology carefully because common terms in the insurance field have different meanings to non-insurance professionals.
Amanda recently lost her job and has been taking cost-cutting measures. Her first visit was to see the customer service representative (CSR) at her insurance agency to cancel all of her automobile insurance. The CSR knew Amanda cannot be talked out of her decision but was concerned about a possible exposure for the agency. The best course of action the CSR can take to control an errors and omissions exposure is to Select one: A. Inform the client of the risk of not having coverage. B. Report the incident to the insurance department. C. Document the decision and obtain a signature. D. Call the insurer to explain the cancellation reason.
C. Document the decision and obtain a signature.
A primary reason changes to policies should be confirmed in writing is to Select one: A. Provide value-added customer service. B. Carefully develop quotes and proposals. C. Document the file in case the insured later denies requesting the change. D. Follow established agency standard operating procedures.
C. Document the file in case the insured later denies requesting the change.
Tom has contacted Independent Insurance Agency to inquire about transferring his automobile insurance coverage. One of the vehicles in his policy is a 19-year-old sports car that Tom purchased from the junkyard to restore. The sports car Tom is restoring only has liability coverage. Once it is fully restored the value of the vehicle will increase significantly. The CSR should Select one: A. Include physical damage insurance in the new quote and remove it if Tom objects. B. Leave physical damage coverage off the new quote to minimize the annual premium. C. Explain the coverage, options, and cost information of physical damage coverage. D. Leave physical damage insurance off the new quote because it is not in Tom's current automobile policy.
C. Explain the coverage, options, and cost information of physical damage coverage.
An agent is appointed by an insurer that has given the agent written instructions to bind auto coverage for customers who meet certain criteria. This is an example of Select one: A. Draft authority. B. Implied authority. C. Express authority. D. Apparent authority.
C. Express authority.
A greater number of E&O claims related to certificates of insurance stem from certificate requests on Select one: A. Personal automobile policies. B. Homeowners policies. C. General liability policies. D. Commercial property policies.
C. General liability policies.
Which one of the following statements regarding binders is true? Select one: A. Binders cannot be postdated but do have an expiration date as to when coverage terminates. B. Agencies are typically granted unlimited binding authority on behalf of the insurers they represent. C. If a claim arises between the time the binder expires and the issuance of the policy the agency could be liable. D. Binders cannot be issued without advance premium and if premium is not paid by the due date the binder may be canceled.
C. If a claim arises between the time the binder expires and the issuance of the policy the agency could be liable.
When performing their duties, customer service representatives owe a standard of care to persons with whom there is no customer or principal relationship. Which one of the following third parties is most likely owed a standard of care under agency law? Select one: A. Reinsurers B. Insurers' stockholders C. Insureds' customers D. Regulators
C. Insureds' customers
Which one of the following statements regarding errors and omissions (E&O) is true? Select one: A. There is no E&O liability if the agent did not intend to make an error. B. In E&O coverage an error is the failure to take an expected or required action. C. Most E&O claims come from errors rather than from omissions. D. Agencies do not need E&O coverage for claims made by insurers.
C. Most E&O claims come from errors rather than from omissions.
Maria is a customer service representative at a local insurance agency. Eric is a long-time insured who inquired about his third property loss in a year. After some discussion Eric insisted on not reporting the claim. Upon his decision the best course of action for Maria to take is to Select one: A. Report the loss to the state insurance fraud division. B. Inform the agency owner about withholding the loss. C. Obtain written authorization to not submit the claim. D. Put the insurer on notice that there is a potential claim.
C. Obtain written authorization to not submit the claim.
Tom has contacted Independent Insurance Agency to inquire about transferring his automobile insurance coverage. Independent Insurance Agency has personal lines binding authority with two insurers, ABC and XYZ. The rate manual shows the premium for coverage by XYZ is $200 more per year than the price shown in the ABC rate manual. However, XYZ provides a multicar discount if the policyholder insures more than one automobile with XYZ. Assuming the two insurers are equal in quality, which one of the following would be the most appropriate action for the CSR to take when providing Tom with a quote? Select one: A. Asking Tom more questions to try to determine which company he prefers B. Providing Tom with the XYZ quote because it has a multicar discount C. Providing Tom with quotes from both companies and letting him make the decision D. Quoting the lower premium because the companies are equal in quality
C. Providing Tom with quotes from both companies and letting him make the decision
For which one of the following types of policy changes should the customer service representative make every effort to obtain the client's signature? Select one: A. All changes that affect premium B. All material changes to a policy C. Reductions and deletions of coverage D. Increases and additions of coverage
C. Reductions and deletions of coverage
Which one of the following statements regarding cancellation or nonrenewal is true? Select one: A. The policyholder is notified of the cancellation before the agency is notified. B. The agency is required to contact the client regarding the notice of nonrenewal or cancellation. C. The CSR should not take any action that would interfere with the insurer's right to cancel or nonrenew coverage. D. The CSR is required to contact the policyholder to discuss any impact on other policies remaining in effect.
C. The CSR should not take any action that would interfere with the insurer's right to cancel or nonrenew coverage.
Which one of the following statements regarding agency relationships is true? Select one: A. An agent's duty is limited to the insurer and not to the client. B. The insurer, not the agent, may be held responsible if an agent acts outside the scope of authority of the agency/principal relationship. C. The duties that the agent owes to clients may be extended to other parties meant to benefit from the insurance policy. D. The legal relationship known as agency is limited to insurance.
C. The duties that the agent owes to clients may be extended to other parties meant to benefit from the insurance policy.
When an insurer initiates a cancellation due to an underwriting reason, the insurer is obligate to provide a written notice to Select one: A. The producing agency. B. Additional insureds. C. The named insured. D. Insurance regulators.
C. The named insured.
Competition or advertising methods or procedures that tend to deprive customers of information necessary to make sound insurance decisions are collectively known as Select one: A. False advertising. B. Unjust insurance selling. C. Unfair trade practices. D. Insurance fraud.
C. Unfair trade practices.
Before delivering the policy the CSR Select one: A. Documents coverages and options the client has rejected and obtains any remaining documents the client has requested. B. Offers available options that the client may wish to consider, such as alternate deductibles and/or additional coverages. C. Verifies that the coverage the insured has requested matches the coverage actually provided by the insurer. D. Explains the coverages provided in the policy as well as any differences form what was originally requested.
C. Verifies that the coverage the insured has requested matches the coverage actually provided by the insurer.
Cindy is a customer service representative who has a client named City Rentals. City Rentals pays its premium based on the date of the cancellation notice for nonpayment of premium. Cindy knows the policy for City Rentals is due to cancel the following day; however, no payment has been posted on the insurer's accounting system. Which one of the following actions should Cindy take to address this situation? Select one: A. Contact the insurer to explore the likelihood of reinstatement of coverages B. Discuss the account with the agency's owners to see if they want to retain it C. Wait until coverage expires to contact the client about coverage options D. Contact the client before coverage expires to remind the client about the payment
C. Wait until coverage expires to contact the client about coverage options
New business transactions generate which one of the following percentages of all errors and omissions claims? Select one: A. 10 percent B. 20 percent C. 30 percent D. 40 percent
D. 40 percent
Which one of the following common situations presents an increased risk of an E&O claim? Select one: A. An account review of an existing client's file is done to determine if there are any outstanding activities that have not been accomplished. B. A client requires an explanation of his or her policy and the CSR provides it in writing. C. The CSR delivers the policy in person and reviews the policy with the client. D. A client requests a policy change near the renewal of the policy, which is being moved to a different insurer.
D. A client requests a policy change near the renewal of the policy, which is being moved to a different insurer.
ACORD certificate of insurance forms are completed by Select one: A. An administrative assistant. B. A receptionist. C. An insurer's clerical staff. D. A licensed agent.
D. A licensed agent.
Which one of the following statements regarding presenting proposals and quotes to minimize agency errors and omissions is true? Select one: A. A key function that a CSR performs is preparing a proposal on a non-standardized agency form. B. The majority of errors and omissions claims arise from omissions rather than from errors. C. An account review is an important loss control technique and is advisable solely for renewal clients. D. A successful claim, whether it arises from an error or an omission, has the same effect on the agency's bottom line.
D. A successful claim, whether it arises from an error or an omission, has the same effect on the agency's bottom line.
Which one of the following situations would likely result in a successful errors and omissions (E&O) claim against the agency? Select one: A. A customer slips in a store and makes a liability claim. The insured pays the claimant and later discovers that the slip was staged. B. An insured leaves a message requesting additional coverage on an agent's voicemail. The agent does not receive the message before the insured's loss. C. A carrier changes its policy endorsements upon renewal, the agent informs the insured of the change, and the insured agrees to the policy. D. An agent replaces a policy, does not inform the insured that the new policy has lower limits, and the insured has a loss that is only partly covered.
D. An agent replaces a policy, does not inform the insured that the new policy has lower limits, and the insured has a loss that is only partly covered.
Which one of the following statements regarding insurance agents is true? Select one: A. The relationship between agent and insurer begins when the agent binds the first policy. B. An insurance agent represents the customer, and the agent's principal is the insured. C. An exclusive agent is an independent contractor and usually represents several insurers. D. An insurance agent represents, and owes a fiduciary duty to, the insurer.
D. An insurance agent represents, and owes a fiduciary duty to, the insurer.
The term "agency" is used to describe the legal relationship that exists when one party acts on behalf of another. To create an agency Select one: A. The agent must conduct at least one business transaction that benefits the principal. B. The agent must sign off on the principal's written terms and conditions. C. The principal and the agent must file a notice of intent with the insurance department. D. Both the principal and the agent must agree to the relationship.
D. Both the principal and the agent must agree to the relationship.
Producers need to be careful sending e-mail correspondence that is an obvious advertisement for a new product that has not been previously discussed with the client. If not properly prepared, the producer sending such e-mail could be in violation of the Select one: A. Telephone Consumer Protection Act (TCPA). B. Sarbanes-Oxley Act. C. Gramm-Leach-Bliley Act (GLB). D. CAN-SPAM Act.
D. CAN-SPAM Act.
Sue insures her home through ABC Insurance Agency. A huge rainstorm results in sewer backup to Sue's finished basement and she calls her agency to report the claim. Sue's agent advises that she has no coverage for the claim. Sue disagrees, insisting she called to request coverage to be added. Which one of the following situations that presents an increased risk of E&O claims does this appear to be? Select one: A. Third parties may request policy changes on behalf of the policyholder, which often leads to mistakes or misunderstandings. B. Policy changes may be requested near renewal and, if the policy is being moved to a different insurer, the requested changes may not apply to the new policy. C. Policyholders often request to reduce or eliminate coverage in an effort to save money. D. Changes are typically requested over the telephone with insufficient follow-up or documentation.
D. Changes are typically requested over the telephone with insufficient follow-up or documentation.
Which one of the following statements regarding placing the business is true? Select one: A. If the application is rejected the CSR will inform the clients, who will then have to seek alternative coverage themselves. B. Placing the business and choosing an insurer rarely leads to E&O claims. C. After reviewing the agency's binding authority and insurer's underwriting guidelines the CSR is usually able to promise to place coverage with that particular insurer. D. Even if the CSR has ensured that the application has met all the insurer's applicable guidelines the underwriter may still choose to reject the application.
D. Even if the CSR has ensured that the application has met all the insurer's applicable guidelines the underwriter may still choose to reject the application.
An agency has an errors and omissions (E&O) policy that contains a consent-to-settle clause, and the insurer proposes a settlement in an E&O claim. If the agency refuses the settlement and the claimant wins more than the settlement offer, the judgment above the settlement is generally Select one: A. Not paid by anyone. B. Split between the agency and insurer. C. Paid by the insurer. D. Paid by the agency.
D. Paid by the agency.
Which one of the following statements regarding policy terminations is true? Select one: A. Only the insurer can cancel coverage during the policy term. B. The insured may cancel coverage due to underwriting reasons. C. A policy termination refers to the period of time between a termination due to nonpayment and a subsequent policy reinstatement. D. Policies may be nonrenewed because the policyholder's agent no longer has a contract with the insurer.
D. Policies may be nonrenewed because the policyholder's agent no longer has a contract with the insurer.
Which one of the following statements regarding selection of suitable insurers is true? Select one: A. It is the insurer's duty to prove to the agent that the insurer is admitted to do business in the state, and failure to do so is the fault of the insurer. B. Transacting business with an unauthorized insurer is not allowed, and the penalty for doing so is generally a letter from the insurance department. C. Agents may not transact business with an insurer unless that insurer is licensed or admitted to do business in the agent's state. D. Policies placed with unauthorized insurers are not void, so agents can be held responsible for claims if the unauthorized insurer fails to pay.
D. Policies placed with unauthorized insurers are not void, so agents can be held responsible for claims if the unauthorized insurer fails to pay.
One day a contractor came rushing into an insurance agency to ask for a liability policy and a certificate of insurance. The contractor was on his way to bid a job and needed to prove liability coverage at the time of the bid. The customer service representative (CSR) has found coverage for many contractors in the past through a particular insurer and gave this contractor an idea of the premium. Because the contractor had to leave for his appointment, the CSR completed a certificate of insurance and the contractor promised to return to finish the policy application. What should be of greatest concern to the CSR regarding this transaction? Select one: A. A contract has not been reviewed. B. A deposit has not been collected. C. An application has not been completed. D. Preparing the certificate of insurance may be considered a "fraudulent insurance act."
D. Preparing the certificate of insurance may be considered a "fraudulent insurance act."
Which one of the following statements regarding insurance producers is true? Select one: A. Agents must be licensed to sell insurance but there is no licensing requirement for producers. B. "Producer" is a narrowly defined term for the person who makes the final insurance decision. C. Agents are considered to be producers, but brokers are considered to be consultants. D. Producers are intermediaries between insured and insurer and produce the business for the insurer.
D. Producers are intermediaries between insured and insurer and produce the business for the insurer.
Adam has just moved from State A to State B. He contacted ABC Insurance Agency about getting automobile insurance coverage because his current insurer is not licensed in State B. After the CSR reviews his existing automobile policy to determine coverages the CSR should Select one: A. Offer alternative coverages and price options. B. Place the business with an insurance company. C. Price and prepare the quote for the same coverages that he had in State A. D. Review the differences between State A and State B to identify coverage issues.
D. Review the differences between State A and State B to identify coverage issues.
A key function that a customer service representative performs to ensure complete and accurate proposals and quotes is Select one: A. Interviewing key personnel. B. Reviewing financial statements. C. Conducting physical inspections. D. Reviewing client accounts.
D. Reviewing client accounts.
Which one of the following federal regulations is intended to ensure corporate accountability by requiring accounting transparency and holding company executives responsible for wrongdoing? Select one: A. Telephone Consumer Protection Act (TCPA) B. CAN-SPAM Act C. Gramm-Leach-Bliley Act (GLB) D. Sarbanes-Oxley Act
D. Sarbanes-Oxley Act
Tom owns a plumbing company. His business is insured with ABC Insurance Agency. Tom has requested that the agency issue a certificate of insurance to a general contractor as part of his contract. He states that he is only required to show evidence of $1 million liability coverage, and he does not want the certificate to show his actual limit of $2 million. The CSR should Select one: A. Show only the $1 million liability on the certificate. B. Refuse to provide a certificate of insurance until the contract requirements can be reviewed. C. Alter the certificate to state that the coverages are in compliance with contract requirements. D. Show the actual coverages in effect as of the certificate date.
D. Show the actual coverages in effect as of the certificate date.
In reviewing an insurance policy that has just been received from the insurance underwriters the CSR notes that the limit of liability shown on the policy is $100,000 but the limit of liability on the binder is $250,000. Which one of the following actions would be the most appropriate first step in resolving the discrepancy? Select one: A. The CSR contacts the client to see if the client can live with the change or if the client wants to shop around. B. The CSR forwards the documents to the client to see if the client notices the difference in what was requested and what was provided. C. The CSR calls the underwriters and demands that they change the limit to $250,000 as was requested. D. The CSR reviews the account file to determine if the difference is intentional, such as at the request of the insured.
D. The CSR reviews the account file to determine if the difference is intentional, such as at the request of the insured.
Which one of the following statements regarding completing the certificate of insurance is true? Select one: A. Changes to certificates that may amend coverage are binding on the company. B. Certificates are subject to regulatory requirements but not legal requirements. C. The CSR can issue certificates of insurance without notifying the insurer. D. The majority of states have regulations that specifically prohibit alteration of certificate forms.
D. The majority of states have regulations that specifically prohibit alteration of certificate forms.
A client built a building to rent space to the public for storing antique automobiles. A customer service representative (CSR) received a request to provide insurance coverage for the new building and for customers' automobiles. However, the CSR did not bind the policies due to losing information about the liability limits. Consequently a fire destroyed a renter's automobile and the claim was denied because the policies were not bound. The CSR owes a duty to the renter of the space in the building because Select one: A. The client provided the information. B. The CSR knew there was a third party. C. The client made the coverage request. D. The renter has an interest in the facilities insurance.
D. The renter has an interest in the facilities insurance.
To keep from violating the Telephone Consumer Protection Act (TCPA) producers should make sure Select one: A. They avoid numbers on the do-not-call registry. B. They reveal their identities in the call. C. Their telemarketing hours are limited to 8 a.m. to 9 p.m. D. Their fax advertisements include an opt-out option.
D. Their fax advertisements include an opt-out option.
Nonstandard auto insurance is normally written for drivers Select one: A. Who are insuring an older-model vehicle. B. Who are underage. C. Who need lower limits of liability. D. Who had a lapse in prior coverage.
D. Who had a lapse in prior coverage.
