CH7: MI Insurance Regulation
Which of the following would be considered an illegal inducement to purchase insurance? A. Confirming future dividends in a life insurance proposal B Mailing an agency brochure to a prospective client C Listing the insurance companies the agency represents in a letter D Inviting prospective clients to the grand opening of the producer's new office
A A participating life insurance policy may pay a portion of its net earnings to a policyholder, but dividends cannot be guaranteed.
Which of the following would NOT be considered rebating? A Giving an applicant a $5 pen with the insurer's logo during the insurance application process B Sending a $20 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
A Rebates include money, sharing of commissions, promises, inducements and personal services. Articles of merchandise with an invoice value of $5 or less for life insurance agents and $10 or less for property and casualty agents $10 or less are not considered rebates, and are allowed as gifts to insurance applicants or insured.
Michigan's continuing education requirement has each of the following characteristics EXCEPT A It allows for up to 15 excess credit hours to be carried forward to the next reporting period. B At least 3 hours must cover ethics. C It requires satisfactory completion of at least 24 hours of approved training every biennium. D Other than the 3 hours of ethics, licensees may take courses in any line.
A Up to 12 excess credit hours of CE may be carried over to the next review period.
In this state, what type of violation is rebating? A Misdemeanor B Criminal offense C Class C violation D Felony
A An insurer, agent, solicitor, or other person that violates the Insurance Code section on rebating is guilty of a misdemeanor.
An agent offers his client free tickets to a sporting event in exchange for the purchase of an insurance policy. The agent is guilty of A Rebating. B Coercion. C Twisting. D Controlled business.
A When producers give or promise anything of value that is not specified in the policy, they are guilty of rebating.
Which of the following would require an individual to stop participating in a specific activity if the Commissioner believes to be violating the Insurance Code? A Restriction of authority B Suspension of authority C Cease and desist order D Stop action order
A cease and desist order requires an individual to stop doing a specific activity that the Commissioner believes to be violating the Insurance Code.
If an insurer terminates a producer, the Commissioner will receive a notification. Within how many days of this notification must the producer be sent a copy? A 15 B 30 C 7 D 10
A copy of the notice to the Commissioner must be sent to the producer in question within 15 days.
Within how many days does a licensee have to inform the Commissioner of a change of address? 15 30 45 60
A licensee must inform the Commissioner of a change of legal name or address within 30 days of the change.
An out-of-state producer wants to start selling insurance in this state. What type of license should the producer obtain? A Temporary B Nonresident C Limited lines D Surplus lines
A nonresident producer is a producer who is domiciled and licensed as a resident producer in another state.
In this state, a temporary license may be issued for any of the following reasons EXCEPT A A producer's disability. B A producer's time in the military service. C A producer's retirement. D The death of a producer.
A producer's retirement. in MI, A temporary license is not available for a producer's retirement.
A temporary license in this state is valid for a maximum of 30 days. 60 days. 90 days. 180 days.
A temporary license may be issued for up to 180 days.
All of the following would be considered rebating EXCEPT A An agent offers the use of his lake house to a client as an inducement to buy an insurance policy from him. B An agent offers to share his commission with a policyholder. C An agent offers tickets to a baseball game as an inducement to buy insurance. D An agent misrepresents policy benefits to convince a policyowner to replace policies.
An agent misrepresents policy benefits to convince a policyowner to replace policies. Rebating is defined as offering any inducement in the sale of insurance products that is not specified in the policy, including money, reductions in commissions, promises, and personal services. Both the offer and acceptance of a rebate are illegal.
All of the following events will terminate a producer's certificate of appointment EXCEPT A A producer's license is suspended or revoked by the Department of Insurance. B A new Commissioner or Director is put into office. C A producer's license expires and is not renewed. D A termination issued by the appointing insurer.
B An appointment by an insurer is based upon the person maintaining a valid insurance license. Although the appointment is made by the head of the Insurance Department, that person leaving the office does not terminate existing appointments.
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 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 are penalties for submitting fraudulent claims to the insurer EXCEPT A Payment of restitution B Community service C Fine D Imprisonment
B Upon conviction, a person who has submitted a false or fraudulent claim or report to the insurer may be fined, imprisoned, or both, and required to pay restitution. An agent's license may also be suspended or revoked.
What is the minimum civil fine per violation of the Insurance Code of this state? A$500 B$1,000 C$2,000 D$5,000
B Any person found guilty of a violation of the Insurance Code of this state may be subject to a civil fine of up to $1,000 for each violation, or up to $5,000 for willful violations (not to exceed $50,000).
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
B It is illegal to participate in any boycott, coercion, or intimidation that is intended to restrict fair trade or create a monopoly.
M, who is not licensed as an insurance agent, works part-time in her father's insurance agency. M may perform all of the following duties EXCEPT A Call prospects and collect expiration dates of their existing policies for her father. B Collect premium for in-force policies and explain coverages to clients that have existing policies written by her father. C Make appointments with clients and prospective clients to meet with her father. D Assist her father in completing applications for insurance.
B - In order to collect premiums and explain coverages, a person would need to be licensed.
Which of the following could be used when a corporation, association, partnership, or limited liability partnership acts as a producer? A Natural Group B Stock Company C Mutual Company D Business Entity
Business entity means a corporation, association, partnership, limited liability company, limited liability partnership, or other legal entity.
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 Discrimination. B Nothing, unless the remarks were in writing C Defamation. D Misrepresentation.
C 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.
A license may be denied, suspended, or revoked if the licensee does any of the following EXCEPT A Deals with insurance outside the scope of the license. B Materially misrepresents an insurance policy. C Accidentally misspells the name of the insurance policy in a written communication to a customer. D Engages in fraud.
C Any type of fraud or misrepresentation is a violation that may cause a license to be denied, suspended, or revoked. Unintentional misspellings are not a misrepresentation.
Which is NOT required of an applicant for an insurance license in Michigan? A Applicant must be 18 years old B A Certificate of Completion from the required pre-licensing study course C Two letters of recommendation attesting to trustworthiness, reliability, and good reputation D The passing of a written examination
C Eligibility requirements for a license are established by the Insurance Code.
Which of the following, upon conviction, carries a fine of up to $2,000 for each violation? A Twisting B Unfair discrimination C Misrepresenting the terms of a policy D Rebating
C If any person is found guilty of misrepresenting terms of a policy or inducing a policyholder to lapse, forfeit or surrender his insurance and to take out a policy of insurance in another like insurer for future benefits or dividends, upon conviction of a misdemeanor, will be fined not more than $2,000 for each violation, or be sentenced to imprisonment.
A licensed counselor MAY NOT perform which of the following duties? A Provide opinions concerning benefits, coverage, terms, and advantages and disadvantages of a policy or annuity B Advertise & solicit business as an insurance counselor or consultant C Solicit business as an insurance producer D Audit or abstract insurance policies or annuities
C Licensed counselors may perform the following duties: audit or abstract insurance policies or annuities; provide advice, counsel, or opinions concerning benefits, coverage, terms, and advantages and disadvantages of a policy or annuity; and advertise and solicit business as an insurance counselor or consultant.
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 the 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 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.
In Michigan the state's continuing education requirement A Cannot be extended or waived under any circumstances. B Applies to life, annuity, and accident and health licensees only. C Consists of completing 24 hours of CE each biennium. D Must be completed by all licensed resident and nonresident producers.
C Michigan's continuing education requirement consists of completing 24 hours of CE each biennium, with at least 3 of those hours in Ethics.
All of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT A Stocks, securities, or bonds. B An offer to share in commissions generated by the sale. C Dividends from a mutual insurer. D An offer of employment.
C 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.
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
D A person does not require an insurance producer license if he or she only advertises without intent to solicit insurance. However, once there is solicitation, a license is required.
An applicant for a Counselor's license in Michigan must possess all of the following EXCEPT A A good business reputation and good moral character. B A reasonable understanding of the Michigan insurance code C A reasonable understanding of the provisions, terms, and conditions of the type of insurance he/she wishes to counsel. D A license to practice law.
D An applicant for a counselor's license must possess a reasonable understanding of the provisions, terms, and conditions of the type of insurance he/she wishes to counsel, as well as a reasonable understanding of the Michigan insurance code and possess a good business reputation and good moral character.
The following areas are regulated by the Insurance Department EXCEPT A Producer regulations and testing requirements. B Insurer financial requirements. C Policyowner rights and disclosures. D Producer commission schedules.
D Commissions are set by a schedule or negotiation between the producer and the insurance company. The Insurance Department regulations are to protect the insurance-buying public.
It would be considered unfair discrimination to ask an insurance applicant about which of the following and then use that information as a rating factor to determine insurability? A. Age B. Gender C. Address D. Sexual orientation
D It would be considered unfair discrimination to ask an applicant for their sexual orientation, as well as using sexual orientation as a rating factor to determine insurability.
Forcing a client to buy insurance from a particular lender as a condition of granting a loan is defined as A Rebating. B Misleading advertising. C Defamation. D Coercion.
D 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.
An insurance company has published a brochure that inaccurately portrays the advantages of a particular insurance policy. What is this an example of? A Unfair claims B Twisting C Defamation D False advertising
D False advertising is the illegal practice of advertising or circulating materials that are untrue, deceptive, or misleading.
Circulating deceptive sales material to the public is what type of Unfair Trade Practice? A Defamation B Coercion C Misrepresentation D False advertising
D This is considered to be false, deceptive or misleading advertising.
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 Defamation B Undercutting C Twisting D Slandering
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 insurance.
How much is an agent's appointment fee? A$500 B$1 C$100 D$5
Each agent must pay a $5 appointment fee to the Commissioner.
All of the following actions can be described as twisting EXCEPT A Misrepresenting the terms and conditions of the existing policy to make the new one more attractive B Embellishing the terms of the proposed policy in order to convince the insured to switch C Making an incomplete comparison between the existing and proposed policies D Explaining to client the advantages of permanent insurance over term and suggesting changing policies
Explaining to client the advantages of permanent insurance over term and suggesting changing policies. Twisting is a misrepresentation, or incomplete or fraudulent comparison of insurance policies that persuades an insured/owner, to his or her detriment, to cancel, lapse, or switch policies from one to another.
When an insurance agency published an advertising brochure, it emphasized the company's financial stability and sound business practices. In reality, its financial health is terrible, and the company will soon have to file for bankruptcy. Which of the following terms best describes the advertisement? A Defamation B Twisting C Rebating D False financial statement
False financial statements are made when insurance companies attempt to hide their financial troubles from the public and government officials.
If a licensee does not earn 24 hours of Continuing Education by the license review date, the license will be suspended for up to how many days? A 30 days B 60 days C 90 days D 120 days
If a licensee fails to earn 24 hours of CE by the required review date, the license will be suspended for up to 90 days.
The Commissioner may waive prelicensing requirements or examinations for someone who has been a licensed insurance producer A In the preceding 12 months. B In the preceding 2 years. C In the last 5 years. D Any time in the past.
If an applicant has been licensed in the past 12 months, the Commissioner may waive education and examination requirements.
What is the maximum fine for submitting a false or fraudulent claim to the insurer? A$500 B$1,000 C$1,500 D$2,000
If convicted for a false claim, an insured, agent, collector, physician or any other person could be fined up to $1,000.
Licensees who are currently licensed, and have recently become residents of the state of Michigan may not have to complete any prelicensing education. To qualify for this exemption, they must apply to become resident licensees within a few days of establishing a legal residence within how many days? A 60 days B 7 days C 90 days D 30 days
In this situation, a licensee would have to apply for a resident's license within 90 days.
If an insurer terminates a producer, the Commissioner must be notified. How many days does the insurer have to deliver this notice? A 7 days B 3 days C 30 days D 10 days
In this situation, the Commissioner must be notified within 30 days.
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.
Issuing or circulating any sales material that is false or misleading would be considered misrepresentation and is illegal.
In which of the following situations is it legal to limit coverage based on marital 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
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.
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
Permitting individuals of the same class to be charged a different rate for the same insurance is the unfair trade practice of discrimination.
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.
Permitting individuals of the same class to be charged a different rate for the same insurance is the unfair trade practice of discrimination.
All of the following are true regarding rebates EXCEPT Rebates are allowed if it's in the best interest of the client. Rebates are only allowed if specifically stated in the policy. Rebating can be anything of economic value, given as an inducement to buy. Dividends are not considered to be rebates.
Rebates are allowed if it's 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.
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 is defined as any inducement offered to the insured in the sale of insurance products that is not specified in the policy. Both the offer and acceptance of a rebate are illegal.
Which of the following is an example of a producer being involved in an unfair trade practice of rebating? A Telling a client that his first premium will be waived if he purchases the insurance policy today B Inducing the insured to drop a policy in favor of another one when it is not in the insured's best interest C Charging a client a higher premium for the same policy as another client in the same insuring class D Making deceptive statements about a competitor
Telling a client that his first premium will be waived if he purchases the insurance policy today. Rebating is defined as offering any inducement in the sale of insurance products that is not specified in the policy, including money, reductions in commissions, promises, and personal services. Both the offer and acceptance of a rebate are illegal.
Within what time period after completing prelicensing education must an applicant file a certificate of education completion with the Commissioner? A 30 days B 90 days C 12 months D 2 years
The applicant must file a certificate of completion of the prelicensing courses taken to prove that the courses were not taken more than 12 months before the Commissioner received the application.
Which of the following individuals could qualify for a temporary insurance license? A. A deceased producer's brother who is employed by the Department of Insurance B A retired producer C An employee of a deceased producer D The designee of a producer that is called to active service with the Navy
The designee of a producer that is called to active service with the Navy The Commissioner may furnish a temporary license to the designee of a producer who has been called to active service with the United States Armed Forces.
If an insurer wishes to appoint a producer, it must file a notice of appointment within how many days of the date that the contract is executed? 15 days 30 days 45 days 7 days
The insurer has 15 days to file a notice of producer appointment.
A temporary producer license could be issued without examination to all the following EXCEPT? A. the spouse or legal representative of a deceased insurance producer B. the designee of a licensed insurance producer who enters active duty in the US Armed Forces C. the employee of a disabled licensed a producer D.the spouse of a retiring insurance producer E The spouse of a deceased insurance producer.
the spouse of a retiring insurance producer there is no provision in the insurance code that allows for a temporary licensed to be issued on behalf of a producer