Ch. 5 Texas Statutes and Ruled Common to Life and Health Insurance

If an agent suspects that insurance fraud is being committed, within how many days must the agent notify the Insurance Fraud Unit of the Department of Insurance? A)10 days B)15 days C)30 days D)90 days

30 days

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? A. 10 days B. 30 days C. 60 days D. 90 days

30 days

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

$25

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

$25,000.

All of the following statements about the continuing education requirement in this state are true EXCEPT A. It does not allow excess credit hours to be carried forward to the next reporting period. B. Hours may be completed using independent self-study courses or classroom study. C. It requires satisfactory completion of 24 hours of approved training every 2 years. D. All licensed agents must comply by January 1 of even-numbered years.

All licensed agents must comply by January 1 of even-numbered years.

Who is considered a nonresident agent? A An agent who does not earn commission in Texas. B An agent who resides in another state, but is licensed to write insurance in Texas. C An agent who is not a U.S. citizen. D An agent whose license has been revoked.

An agent who resides in another state, but is licensed to write insurance in Texas.

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

Discrimination

Who might receive dividends from a mutual insurer? A. Stockholders B. Agents C. Policyholders D. Subscribers

Policyholders

Which of the following insurers are owned by stockholders? A Stock B Mutual C Reciprocal D Fraternal

Stock

An agent holds an insurance license in the state of Kansas and would like to transact insurance in Texas. The agent became licensed before written examinations were required. Therefore, the agent has not actually passed any kind of examination. Which of the following is true? A. The written examination requirement will be waived. B. The agent will need to take either the Kansas or Texas written examination. C. The agent must take a special transition class and pass a short examination administered at the end. D. If the agent has practiced for more than 30 years, the written requirement is waived.

The written examination requirement will be waived

No one whose license has been revoked can receive another license in Texas for a) 1 year b) 2 years c) 5 years d) 6 months

5 years

An insurer must acknowledge receipt of a Notice of Claim within how many days? A 5 B 15 C 20 D 30

15

Within how many years must an agent renew an insurance license? A 1 B 2 C 3 D 4

2

Which of the following is NOT a possible penalty for a violation of the Insurance Code? A. An administrative penalty B. Payment of restitution C. A cease and desist order D. A fine up to $100,000

A fine up to $100,000

Which of the following persons is required to hold a producer license? A A person who takes messages related to claims B A person who creates insurance advertisements C A person who administers employee benefits D A person who negotiates insurance contracts

A person who negotiates insurance contracts

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

Admitted

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.

An agent misrepresents policy benefits to convince a policyowner to replace policies

All of the following must be true of an individual before a license can be issued EXCEPT that the A. Candidate has paid the required fees to the department. B. Applicant submitted his or her most recent tax return to the department. C. Individual is at least 18 years old. D. Applicant passed the required licensing examination in the last 12 months.

Applicant submitted his or her most recent tax return to the department

In Texas, the Commissioner of Insurance is A. Appointed by the Governor. B. Appointed by the Insurance and Industry Committee of the state legislature. C. Elected by the state legislature's Banking and Insurance Committee. D. Elected by Texas voters.

Appointed by the Governor

Two individuals are in the same risk and age class; yet, they are charged different rates for their insurance policies due to an insignificant factor. What is this called? A Adverse selection B Discrimination C Law of large numbers D Misrepresentation

Discrimination

To legally transact insurance in this state, an insurer must obtain which of the following? A. Business entity license B. Certificate of Insurance C. Certificate of Authority D. Power of Attorney

Certificate of Authority

An insurance professional advises a client regarding the benefits of her life insurance policy, in exchange for a fee. Which of the following terms best describes this type of insurance professional? A Producer B Advisor C Counselor D Agent

Counselor

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

Defamation

Which of the following best describes an insurance company that has been formed under the laws of this state? A. Domestic B. Sovereign C. Alien D. Foreign

Domestic

An insurance company has published a brochure that inaccurately portrays the advantages of a particular insurance policy. What is this an example of? A False advertising B Unfair claims C Twisting D Defamation

False advertising

To become a Texas insurance agent, an individual must A Have resided in Texas for at least 1 year. B Post a $25,000 bond. C Have passed a licensing exam within the 12 months before applying. D File a personal financial statement with the Commissioner for the previous 3 years.

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

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? A. Defamation B. Illegal C. A legal advertising strategy D. Unfair Discrimination

Illegal

Which of the following occupations would NOT directly help to qualify someone for the office of Commissioner of Insurance? A. Executive in business administration B. Practicing attorney C. Insurance agent D. Certified public account

Insurance agent

An applicant for a license in Texas must include a statement with his application that provides information about all the following EXCEPT A. Having held a license before. B. Having had a license revoked. C. Intending to apply for another license. D. Being refused a license.

Intending to apply for another license

Which of the following is NOT true regarding a Certificate of Authority? A. It is issued to group insurance participants. B. It may be necessary for transacting business in a specific state. C. It is equivalent to an insurance license. D. It is issued by the state department of insurance.

It is issued to group insurance participants.

Which of the following is NOT considered a misrepresentation as it pertains to unfair trade practices? A Stating that the insurance policy is a share of stock B Exaggerating the benefits provided in the policy C Stating that the competitors will arbitrarily increase their premiums each year D Making comparisons between different policies

Making comparisons between different policies

A participating insurance policy may do which of the following? A. Require 80% participation B. Pay dividends to the policyowner C. Provide group coverage D. Pay dividends to the stockholder

Pay dividends to the policyowner

For which of the following actions can an agent's license be suspended or revoked? A Misstatements on the application B Rebates of premiums C Misdemeanors D Unintentional violations of state laws

Rebates of premiums

Any inducement offered to the insured in the sale of an insurance policy that is not specified in the policy is an unlawful practice known as A Twisting. B False advertising. C Coercion. D Rebating.

Rebating

An individual applies for a life policy. Two years ago he suffered a head injury from an accident, so he cannot remember parts of his past, but is otherwise competent. He has also been hospitalized for drug abuse, but does not remember this when applying for insurance. The insurer issues the policy and learns of his history one year later. What will probably happen? A Because the insured is currently not a drug user, his policy will not be affected. B The policy will not be affected. C The policy will be voided. D The insurer will sue the insured for committing fraud.

The policy will not be affected

All of the following statements apply to temporary licenses EXCEPT A They require 40 hours of license training. B They may be issued without a written examination. C They are valid up to 90 days. D They may be renewed.

They may be renewed.

An agent's license will terminate within how many days from the due date of obligatory fees and continuing education requirements? A 60 B 30 C 180 D 90

90

The Insurance Commissioner may examine the affairs of any insurer as often as necessary, but not less frequently than once every A. Year. B. 2 years. C. 3 years. D. 5 years.

5 years

After filing a claim, an insured tells the insurer that there is more than one insurance policy in force. That insurer sets aside the claim until it hears what the other company will pay. The insurer's action will be classified as A. Coordinated. B. Proactive. C. Unfair. D. Prudent.

Unfair

All of the following are considered unfair or deceptive acts in connection with the sale of insurance EXCEPT A Lacking standards for the investigation of an insured's claims. B Attempting to settle a claim in which liability is clear. C Stating facts or provisions in a way that misrepresents the true nature of the policy. D Delaying a settlement because there is other insurance that will satisfy any portion of the loss.

Attempting to settle a claim in which liability is clear.

What is the minimum percentage of a licensee's total volume of premiums in a calendar year that must come from business other than controlled business?

25%

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

Alien insurer.

The owner of a small restaurant submits a claim to his insurer after a loss due to fire. The insurer's investigation finds a police report that shows that a fire may have been of suspicious origin. The insurer can do which of the following? A. Delay an acceptance or rejection decision B. Reduce the claim amount C. Disregard the claim D. Deny the claim immediately

Delay an acceptance or rejection decision

How many hours of continuing education can be carried over from one licensing period to the next? a)5 b) any excess hours c) 0 d) 2

0

What percentage of continuing education hours must be in a classroom setting? A 25% B 50% C 75% D 100%

50%

An agent explains the details of a life insurance policy to a client. The agent does not realize, however, that the state has recently rewritten two of the provisions. As a result, the agent inadvertently misrepresents the policy, making it more attractive than it really is. What best describes this situation? A. There is no misconduct B. Fraud C. Misrepresentation D. Deceptive claim settlement practice

There is no misconduct

Which of the following would NOT be considered rebating? A. Giving a client a $25 pen with the insurer's logo during the insurance application process B. Sending a $50 gift certificate to the insured's employee after the insurance has been effected as a thank you for the referral C. Sharing commission with the insured D. Collecting a lower premium than what's specified in a policy as a token of client appreciation

Giving a client a $25 pen with the insurer's logo during the insurance application process

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

Making derogatory oral statements about another insurer's financial condition

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. The company is guilty of A Concealment. B Unfair claim practice. C Rebating. D Misrepresentation.

Misrepresentation

If a licensed agent in Texas receives a criminal conviction, that information must be reported to A. Department of Insurance. B. Insurance Fraud Division. C. NAIC. D. Agent's clients.

Department of Insurance

If an agent has completed 35 hours of continuing education in one renewal period, how many CE hours will the agent have to complete in the next renewal period? A. 11 B. 24 C. 35 D. 0

24

Which members of a corporation or partnership are required to obtain an individual insurance agent's license in order for the association to be licensed? A. None of the partners are required to have a license if the partnership is associated with a licensed insurance agent. B. At least one officer or partner and any other person acting as an agent C. Only members who plan on transacting insurance D. Officers or partners only

At least one officer or partner and any other person acting as an agent

All of the following are true regarding rebates EXCEPT A Dividends are not considered to be rebates. B Rebates are allowed if it's 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.

Rebates are allowed if it's in the best interest of the client.

An insurer that holds a Certificate of Authority in the state in which it transacts business is considered a/an A. Certified insurer. B. Self-insurer. C. Authorized insurer. D. Local insurer.

Authorized insurer

Which of the following will NOT be considered unfair discrimination by insurers? A Cancelling individual coverage based on the insured's marital status B Assigning different risk classifications to applicants based on gender identity C Discriminating in benefits and coverages based on the insured's habits and lifestyle D Charging applicants with similar health histories different premiums based on their ethnicity

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

An applicant properly notifies her insurer of a straightforward claim, but the insurer waits an exceedingly long time to process it. Which of the below terms best describes the behavior of the insurer? A Misrepresentation B Fraud C Unfair claims settlement practice D There is nothing wrong with this incident; there is not a specified deadline for insurers to process a claim.

Unfair claims settlement practice

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 what number of days must the hearing be held? A 10 B 14 C 30 D 60

10

An individual licensed as an agent must notify the Texas Department of Insurance, on a monthly basis, of all of the following EXCEPT A Any felony conviction. B Any administrative action taken against the license holder by an insurance regulator of Texas, any other state, or the federal government. C Any change in business name. D Any change of the mailing address.

Any change in business name.

If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered to be A. Qualified. B. Approved. C. Authorized. D. Certified.

Authorized

Which of the following must an insurer obtain in order to transact insurance within a given state? A. Business entity license B. Insurer's license C. Certificate of authority D. Producer's certificate

Certificate of authority

A banker is ready to close on a customer's loan. The bank is prepared to offer the loan but only if the customer purchases a life insurance policy from the bank in the amount of the loan. This is an example of A. Coercion. B. Loading. C. Defamation. D. Twisting.

Coercion

Which of the following actions is NOT in violation of the Unfair Claims Settlement Practices Act? A)Denying an unsubstantiated claim B)Refusing to pay claims without conducting a reasonable investigation C)Failure to respond promptly on claims communications D)Delaying a settlement because there is an additional insurance policy on a loss

Denying an unsubstantiated claim

All of the following are unfair claims settlement practices EXCEPT A. Suggesting negotiations in settling the claim. B. Refusing to pay claims without conducting a reasonable investigation. C. Failing to adopt and implement reasonable standards for settling claims. D. Failing to acknowledge pertinent communication pertaining to a claim.

Suggesting negotiations in settling the claim.

An agent discovers his newest client was the result of a referral. To show his thanks to the referring customer, the agent could

Thank the customer

All insurers that provide life or accident and health insurance coverage in Texas must be members of what association? A. The Life and Health Insurance Guaranty Association B. Texas Insurers Guild C. Federal Association of Insurers D. NAIC

The Life and Health Insurance Guaranty Association

The following are all causes for the Insurance Commissioner to suspend or impose conditions upon the continuance of an agent's license EXCEPT A Misappropriation or illegal withholding of the policyholder's money. B Obtaining a license through fraud. C Conviction of a felony involving moral turpitude. D The applicant has been shown to be a poor personal credit risk.

The applicant has been shown to be a poor personal credit risk

Who do agents represent? ATheir clients BThe insured CThe DOI DThe insurance company

The insurance company

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. Stock company B. Reciprocal association C. Fraternal benefit society D. Mutual company

Fraternal benefit society

An agent receives an Emergency Cease and Desist Order for chronically misrepresenting his insurance policies. The agent knows that he did not commit the violations stated in the Emergency Cease and Desist Order. He wants to contest the charges in a court hearing. Which of the following is true? A. The hearing must be set for exactly 10 days after the request is made. B. The hearing must be held within 10 days of receiving a request, unless both parties agree to a later date. C. The judge will determine when the hearing will be held. D. The hearing date can be set for any time within the next year, unless both parties agree to a later date.

The hearing must be held within 10 days of receiving a request, unless both parties agree to a later date

An agent completed a CE course in 2019. Until what year must the agent keep the records of completion? A 2020 B 2023 C 2024 D 2029

2023

How long must producer maintain records of continuing education course completion? A 1 year B 3 years C 4 years D 5 years

4 years

Which of the following individuals could legally receive commissions from the sale of a life insurance policy? A A life and health insurance counselor B A licensed life insurance agent C A licensed insurance consultant D An employee for a life insurance company who is not licensed

A licensed life insurance agent

Which of the following would be required to be licensed as an insurance producer? A A person whose activities are limited to producing insurance advertisements B A salaried full-time employee who furnishes information for group insurance C An insurance company director who performs executive, administrative and managerial duties D A salaried employee who advertises and solicits insurance

A salaried employee who advertises and solicits insurance

Which entity has the authority to grant a temporary life insurance agent's license? A. A licensed agent B. Commissioner of Insurance only C. Federal Board of Insurance Licensing D. Both the Commissioner and the Federal Board of Insurance Licensing

Commissioner of Insurance only

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.

Defamation

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 Stocks, securities, or bonds.

Dividends from a mutual insurer.

The Commissioner has full power and authority to do all of the following EXCEPT A Issue Certificates of Authority. B Enforce the Insurance Code. C Issue cease and desist orders. D Draft insurance laws.

Draft insurance laws

Temporary licenses issued in Texas A. Expire in 90 days. B. Expire in 1 year. C. Are renewable for a like period. D. Are issued to licensees for the sale of replacement policies.

Expire in 90 days

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

False advertising

When doing business in this state, an insurance company that is formed under the laws of another state is known as which type of insurer? A. Alien B. Nonadmitted C. Foreign D. Domestic

Foreign

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 Legal, provided that the other insurers are paid royalties for the usage of their names B Illegal under any circumstances C Legal, provided that the information can be verified D Illegal until endorsed by the Guaranty Association

Illegal under any circumstances

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

Issuing sales material with exaggerated statements about policy benefits

Which of the following is a TRUE statement about a temporary license issued in this state? A It requires a written examination. B It can be renewed after the first term. C It can only be issued once in any 6-month period. D It allows the producer to sell replacement policies.

It can only be issued once in any 6-month period

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

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

An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy? A. Reciprocal B. Nonprofit service organization C. Stock D. Mutual

Mutual

On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are A Paid at a fixed rate every year. B Taxable as ordinary income. C Guaranteed. D Not taxable since the IRS treats them as a return of a portion of the premium paid.

Not taxable since the IRS treats them as a return of a portion of the premium paid.

All of the following would be considered an insurance transaction EXCEPT A. Advising a policyholder regarding a claim. B. Negotiating coverage. C. Obtaining an insurance license. D. Soliciting a policy.

Obtaining an insurance license

What is the major difference between a stock company and a mutual company? A Amount of death benefit B Number of producers C Types of whole life policies D Ownership

Ownership

Which of the following is an example of a producer being involved in an unfair trade practice of rebating? A Inducing the insured to drop a policy in favor of another one when it is not in the insured's best interest B Charging a client a higher premium for the same policy as another client in the same insuring class C Making deceptive statements about a competitor D Telling a client that his first premium will be waived if he purchases the insurance policy today

Telling a client that his first premium will be waived if he purchases the insurance policy today

An agent licensed in Texas is moving to Kansas. Which of the following applies? A. The agent has 30 days to notify the Department of Insurance of the new address. B. The agent must inform all clients of the move and recommend a new agent. C. Any of the agent's policies written in the 3 months leading up to the move will be reviewed by the Commissioner. D. The agent must refrain from writing insurance policies until after the move.

The agent has 30 days to notify the Department of Insurance of the new address.

Which of the following is NOT a licensing requirement for a corporation in the state of Texas? A. The business must demonstrate financial responsibility to provide coverage for an error or omission. B. The business must be a Texas corporation, with its principal place of business in Texas. C. At least one officer of the corporation must be individually licensed as an agent. D. The business must be able to pay up to $50,000 in the event that it is proven to be negligent.

The business must be able to pay up to $50,000 in the event that it is proven to be negligent.

A temporary license holder can receive a commission from a sale made to all of the following EXCEPT A. The license holder's spouse's best friend. B. An accountant at a rival insurance company. C. The license holder's family doctor. D. The license holder's sister-in-law.

The license holder's sister-in-law

What is the purpose of the Life Insurance Guaranty Association? A To protect the reputation of the Insurance Department if they issue a Certificate of Authority to a company that becomes insolvent B To help protect policyowners and beneficiaries against financial loss caused by the insolvency of an insurance company C To encourage life insurers to write substandard business D To allow agents to continue to solicit insurance, even if the company they represent is financially impaired

To help protect policyowners and beneficiaries against financial loss caused by the insolvency of an insurance company

An insurance agent wants for a client to replace her current annuities plan with another one. He presents the new one in an incomplete and dishonest way, which makes the new contract seem far more appealing than the original one. The policyowner ends up surrendering her original contract and replacing it with the new one. Which term best describes what the agent did? A Twisting B False advertising C Fraud D Rebating

Twisting

An insurer advertises a health policy that is covered by the Life and Health Insurance Guaranty Association. The advertisement includes a short list of benefits and approximate rates. The end of the advertisement includes statement that protection is provided by the Guaranty Association. Which of the following is true? A The advertisement must also include the contact information of the Commissioner of Insurance. B Mentioning the Guaranty Association is mandatory when advertising insurance in the state of Texas. C Mentioning the Guaranty Association in advertisements is considered to be unfair trade practice. D The advertisement must also include the contact information of the association.

Mentioning the Guaranty Association in advertisements is considered to be unfair trade practice.