Chapter 14 Exam
B discovered an insurer that had been soliciting to B was actually unlicensed in the state of Arkansas. According to the rules regarding fraud, B was required to report the insurer: A If B had any reason to believe the insurer to be unlicensed B If B inadvertently placed a policy through them C Only if B received the complaint from one of B's clients D Only if the company sold health insurance through the federal PPACA exchange
A. If B had any reason to believe the insurer to be unlicensed A producer has a duty to report any insurer who is believed to be unlicensed. A producer who knows or has reason to know that a health plan is not licensed in accordance with the Arkansas Insurance Code must immediately report the health plan to the Insurance Department.
In Arkansas, a licensed insurance adjuster: A Investigates and negotiates the settlement of claims on behalf of the insurer. B Must obtain an insurance agent license C Solicits, negotiates, effects, or binds insurance contracts D Advises consumers about their insurance needs for a fee
A. Investigates and negotiates the settlement of claims on behalf of the insurer. Unlike a producer who facilitates insurance transactions, or a consultant who offers advice for a fee, adjusters address the value of a claim, not the need for or the purchase of insurance.
Which of the following statements describing the fiduciary and contractual relationships between producers, clients, and insurers is correct? A A licensed agent may not act as a broker and a licensed broker may not act as an agent B All funds received by licensee must be held in a trust, and any personal use is considered theft C A licensee appointed as an agent by one insurer is considered an agent by all insurers D All funds received by a licensee must be held in a trust, but the licensee may use the funds to help out an insolvent insurer
B All funds received by licensee must be held in a trust, and any personal use is considered theft The fiduciary duty of the producer specifically refers to the funds that they handle for their clients and insurers, which are held in a trust and may not be diverted for their own use. Agents may act as brokers when dealing with firms with which they have no appointment. The reverse is equally true for brokers.
In Arkansas, a life insurer must maintain records for all replacement policies for how many years? A 5 years B 2 years C 1 year D 10 years
B. 2 years
Which of the following statements describing the fiduciary and contractual relationships between producers, clients, and insurers is correct? A All funds received by a licensee must be held in a trust, but the licensee may use the funds to help out an insolvent insurer B All funds received by licensee must be held in a trust, and any personal use is considered theft C A licensee appointed as an agent by one insurer is considered an agent by all insurers D A licensed agent may not act as a broker and a licensed broker may not act as an agent
B. All funds received by licensee must be held in a trust, and any personal use is considered theft
In Arkansas, the grace period of an individual life insurance policy must be: A At least 10 days B At least 30 days C The same as the reinstatement period D No more than 60 days
B. At least 30 days The grace period is at least 30 days. The free look period is no less than 10 days. The reinstatement period is 3 years, which begins after the grace period ends and the policy lapses.
Which of the following statements regarding group life insurance in Arkansas is correct? A If no beneficiary survives the insured, any death benefits must be paid to the insured's estate B Disabled employees must be allowed to continue their coverage for up to 6 months while remaining disabled C All covered employees are entitled to convert their coverage to individual insurance within 60 days of termination D Trustee groups may not purchase group life insurance in Arkansas
B. Disabled employees must be allowed to continue their coverage for up to 6 months while remaining disabled
If a Medicare Supplement policy is being replaced, an agent: A Must receive compensation in an equal amount to the renewal commission payable by the replacing issuer B Must receive compensation greater than the renewal commission payable by the replacing issuer C May not receive compensation greater than the renewal commission payable by the replacing issuer D Will not receive compensation, and the renewal commission will be paid to the original issuer
C May not receive compensation greater than the renewal commission payable by the replacing issuer When a Medicare Supplement policy is being replaced, an agent may not receive compensation greater than the renewal commission payable by the replacing issuer. The original issuer cannot receive more money than the replacing issuer.
The Arkansas Life and Health Insurance Guaranty Association will assume the contractual obligations of an insolvent life insurer up to what amount? A $200,000 B $500,000 C $300,000 D $400,000
C. $300,000
Which of the following statements apply to maintaining an insurance license in the state of Arkansas? A Every 2 years, an agent must complete 24 hours of continuing education courses and 3 more hours in ethics B For good cause, the Commissioner may grant a licensee an extension of up to 12 months to complete continuing education C Membership in a professional insurance organization or association is not considered a form of continuing education D The age of a person does not matter when determining whether an individual needs to complete continuing education requirements
B. For good cause, the Commissioner may grant a licensee an extension of up to 12 months to complete continuing education
All of the following are prohibited marketing practices in Arkansas, except: A Cold lead advertising B Replacement C High-pressure tactics D Misrepresentation
B. Replacement Replacement is legal when it is in the best interest of the consumer; otherwise, it becomes twisting, which is illegal. Cold lead advertising is a prohibited marketing practice, and it is using any marketing method that fails to disclose that insurance is being solicited.
In Arkansas, charging different rates to insureds of the same actuarial class or hazard category is considered which of the following unfair trade practices? A Rebating B Unfair discrimination C Twisting D False advertising
B. Unfair discrimination
In Arkansas, the term of a credit life policy may not exceed: A 20 years B 5 years C 10 years D 40 years
C. 10 years
n Arkansas, a temporary license issued to a representative of a licensed producer who dies or becomes disabled is valid for up to how many days? A 120 days B 240 days C 180 days D 360 days
C. 180 days In certain cases, the Commissioner may issue a temporary agent's license without requiring the applicant to pass a written examination. Temporary licenses are issued for a period not to exceed 180 days.
In Arkansas, a life insurer must maintain records for all replacement policies for how many years? A 1 year B 5 years C 2 years D 10 years
C. 2 years
In Arkansas, a life insurer must maintain records for all replacement policies for how many years? A 5 years B 10 years C 2 years D 1 year
C. 2 years A copy of the memorandum must be furnished to the existing insurer, and to the company represented by the agent, which must retain the copy for 5 years.
All the following statements regarding the regulation of Medicare Supplement policies sold in the state of Arkansas are correct, except: A Policyholders may suspend coverage for up to 24 months if they become eligible for Medicaid B Termination of a Medicare Supplement policy must be without prejudice to any continuous loss which commenced while the policy was in force C A Medicare Supplement policy must be noncancellable D The free look period for Medicare Supplement policies is 30 days
C. A Medicare Supplement policy must be noncancellable
In Arkansas, which of the following statements regarding the rules governing health insurance advertising is correct? A HMOs may advertise enrolling during their open enrollment periods as a special, limited time offer B Hospitality Confinement Indemnity Plans may describe their benefits as extra, tax-free cash C A policy covering only accidents must carry the statement, "THIS IS A LIMITED POLICY" D Regulations governing advertisements of health insurance is to protect insurers
C. A policy covering only accidents must carry the statement, "THIS IS A LIMITED POLICY"
In Arkansas, all of the following are requirements of testimonials in advertisements, except: A A testimonial must be reproduced accurately B A testimonial must be genuine C A testimonial must not be exchanged for compensation D A testimonial must be applicable to the policy advertised
C. A testimonial must not be exchanged for compensation
In Arkansas, whenever the purchase of insurance results in existing policy being replaced, all of the following requirements apply, except: A The replacing agent must provide a memorandum comparing the existing and replacement policies B The memorandum comparing the existing and replacement policies must be signed by both the agent and the insured In Arkansas, whenever the purchase of insurance results in existing policy being replaced, all of the following requirements apply, except: C The memorandum must include a signature from the agent, the insured, and the Commissioner D The replacing insurer must receive and maintain a copy of the memorandum for at least 5 years
C. The memorandum must include a signature from the agent, the insured, and the Commissioner
Which of the following statements regarding a temporary insurance license in Arkansas is correct? A Temporary licenses are only granted to individuals who transacted limited lines insurance B Temporary licenses are granted for a term of up to 90 days C Temporary licenses are granted without requiring an exam D A temporary license is only granted when an agent dies or is disabled
CTemporary licenses are granted without requiring an exam
In Arkansas, the inflation protection provision under an LTC policy will increase coverage by at least what percentage? A 5% B 3% C 2% D 25%
A. 5% Unless rejected in writing by the insured, inflation protection must be included in the policy, with increases in benefit levels compounded annually at no less than 5%. Small employers with similar case characteristics for similar coverage will not differ by more than 25%.
When L's company initiated a plan refusing to insure buildings over 50 years old on the basis that all the buildings were by definition high risk, dissatisfied consumers brought a complaint accusing them of: A Unfair discrimination B Geographical redlining C Defamation D Boycott and coercion
AUnfair discrimination
If a person violates an order from the Insurance Commissioner concerning credit insurance after it has become final, they may be fine up to: A $1,500 if the violation was willful B $250 C $500 D $2,000 if the violation was willful
B. $250 If a person violates an order from the Insurance Commissioner concerning credit insurance after it has become final, they may be fined up to $250 and up to $1,000 if the violation was willful.
In Arkansas, when an insured's group health insurance coverage is terminated, the insured: A Is entitled to a replacement policy that matches the coverage of the terminated policy B Is entitled to an additional 120 days of group coverage if they have been covered for at least 3 months C Must choose between accepting 120 days of group coverage and applying for a conversion policy D Must apply within 60 days, if they want the available conversion policy
B. Is entitled to an additional 120 days of group coverage if they have been covered for at least 3 months
What will the Arkansas Life and Health Guaranty Association do if a member insurer becomes insolvent? A Ask for a loan from a local bank to continue coverage for every single person insured through the insolvent insurer B Make an assessment against the other members of the Association to pay the claims of the insolvent insurer C Notify every single person insured through the insolvent insurer that their policy will be cancelled D Ask for an equal amount of money from each insurer licensed in both life and health
B. Make an assessment against the other members of the Association to pay the claims of the insolvent insurer If a member insurer becomes impaired or insolvent, an assessment will be made against the other members to pay the claims of the insolvent insurer.
All of the following are powers of the Insurance Commissioner, except: A Conduct insurer and agency audits B Writing the insurance laws C Issuing licenses D Regulating premium rates
B. Writing the insurance laws
Which of the following penalties may be applied to any person who violates a provision of the Arkansas Insurance Code? A A $10,000 fine per violation B Restitution of actual losses to anyone affected by the violation C Revocation of one's license forever D Banned from transacting insurance in the U.S.
B.Restitution of actual losses to anyone affected by the violation
Which of the following statements describing the fiduciary and contractual relationships between producers, clients, and insurers is correct? A A licensee appointed as an agent by one insurer is considered an agent by all insurers B All funds received by a licensee must be held in a trust, but the licensee may use the funds to help out an insolvent insurer C All funds received by licensee must be held in a trust, and any personal use is considered theft D A licensed agent may not act as a broker and a licensed broker may not act as an agent
C. All funds received by licensee must be held in a trust, and any personal use is considered theft The fiduciary duty of the producer specifically refers to the funds that they handle for their clients and insurers, which are held in a trust and may not be diverted for their own use. Agents may act as brokers when dealing with firms with which they have no appointment. The reverse is equally true for brokers.
Which of the following actions is not considered to be misrepresentation under law? A Describing a mutual life insurance policy as equivalent to a share of stock B Using a product name that hides the fact that it is an insurance policy C Making a false statement about a competitor's financial condition D Making false statements about dividends previously paid by a policy
C. Making a false statement about a competitor's financial condition Making a false or maliciously critical statement regarding the financial condition of a competitor describes a different violation of the law known as defamation. Misrepresentation is making, issuing, or circulating any statement that misrepresents the benefits, advantages, conditions, or terms of any insurance policy.
All of the following are considered to be methods of unfair competition, except: A Unfair discrimination B Twisting C Replacement D Churning of business
C. Replacement
In Arkansas, which of the following individuals is required to pass an insurance licensing exam in order to reinstate their license due to a failure to meet CE requirements? A A nonresident producer B An individual licensed to sell credit property insurance C A producer reinstating their license after 6 months D An insurance adjuster
D. An insurance adjuster Insurance adjusters are not required to pass a licensing exam in order to reinstate their license, but are required to pass an exam to become an adjuster. Reinstatement without an exam is allowed for 12 months for resident producers. As for nonresident producers and insurance consultants, they are specifically exempted. Credit property licensees are exempt because they are not required to pass a licensing exam.
All of the following are unfair claims settlement practices, except: A Making claim payments without conducting an investigation B Attempting to settle a claim based on an application that was altered by the agent or company without notice to, or consent of, the insured C Compelling an insured to file suit by offering substantially less than what a lawsuit would award D Making claim payments that are not accompanied by statements indicating the coverage under which payments are being made
A. Making claim payments without conducting an investigation Paying claims without an investigation permissible, and it would be an unfair practice to deny claims without conducting a reasonable investigation. Making claim payments without referencing the portion of the policy under which the claim is paid also may obstruct an insured from receiving full or proper compensation.
In Arkansas, B may have violated the Insurance Code when they: A Paid a referral fee to an unlicensed solicitor for each life insurance appointment arranged B Assigned some of their commissions to an out-of-state insurance agency not active in Arkansas C Procured insurance for their client from an insurer with whom B was not appointed D Paid a deferred commission to a formerly licensed producer who is now retired
A. Paid a referral fee to an unlicensed solicitor for each life insurance appointment arranged
Which of the following statements regarding the Commissioner's ability to hold hearings and examine insurer records is not correct? A The Commissioner may initiate a criminal prosecution against a licensee, which is based on a testimony that the licensee is compelled to provide at a hearing r B The Commissioner may subpoena witnesses, administer oaths and require the disclosure of books and records C The Commissioner must examine insurer records at least once every 5 years D The Commissioner may examine foreign and alien insurers as well as those insurers established under the laws of Arkansas
A. The Commissioner may initiate a criminal prosecution against a licensee, which is based on a testimony that the licensee is compelled to provide at a hearing The Commissioner may examine the records of any insurer, regardless of their residence and as often as needed, and may compel evidence and testimony. Individuals compelled to give testimony under oath may not be prosecuted criminally for that testimony, but their licenses may be suspended or revoked.
Which of the following statements accurately describe the penalties that may be imposed by the Commissioner? A The Commissioner may revoke the license of an individual who knowingly accepts business from an unlicensed producer B The Commissioner may order restitution for projected losses to affected persons C The Commissioner may impose a fine of up to $2,500 for violating any provision of the Insurance Code D The Commissioner can suspend an insurance license for up to 24 months
A. The Commissioner may revoke the license of an individual who knowingly accepts business from an unlicensed producer If an individual knowingly accepts business from an unlicensed producer, the Commissioner may revoke the license. The Commissioner may not revoke a license if an individual unknowingly accepts business from an unlicensed producer. The Commissioner may suspend a license for up to 36 months, impose a fine of up to $1,000 for each violation of the Insurance Code, and order restitution for actual losses to affected persons.
he Commissioner has all of the following duties and powers, except: A The Commissioner may update the insurance Code as needed B The Commissioner has the authority to make necessary rules and regulations C The Commissioner regulates premium rates D The Commissioner issues the proper insurance licenses for agents and brokers
A. The Commissioner may update the insurance Code as needed
In Arkansas, if a bank will not grant a loan unless the borrower buys insurance from a specific company, the bank and insurer are guilty of which of the following unfair trade practices? A Rebating B Twisting C Boycott, coercion and intimidation D Unfair discrimination
C. Boycott, coercion and intimidation
In order for a business entity to obtain a producer license in Arkansas, it must: A Disclose the name of the company's CEO to the general public B Appoint a consultant to handle the entity's limited lines insurance business C Designate a licensed agent as a compliance officer D Employ enough licensed producers to span across all lines of insurance
C. Designate a licensed agent as a compliance officer Business entities must identify a licensed agent as a compliance officer who will be responsible for the business entity's compliance with the insurance laws, rules and regulations of Arkansas. The business entity must ensure that each officer, director, partner, and employee of the business entity who acts as an insurance agent is licensed as an insurance agent, and disclose this information to the Department.
In regard to hearings and the examination of insurer records, the Commissioner: A May only examine domestic insurers in the state of Arkansas, not foreign or alien insurers B May not examine insurer records more often than once every 5 years C May subpoena witnesses, administer oaths, and require the disclosure of books and records D May grant a rehearing, and send the notice 30 days in advance
C. May subpoena witnesses, administer oaths, and require the disclosure of books and records
All licenses are the property of: A The licensee B The Commissioner of Insurance C The state of Arkansas D The NAIC
C. The state of Arkansas All licenses are the property of the state that issued them.
Which of the following statements regarding insurance licensing exam is not correct? A Nonresident agents are not required to pass an exam in Arkansas B Personal lines producers must pass a licensing exam C There is a four-week waiting period each time a candidate fails a licensing exam D An applicant must be tested on each insurance class they wish to transact in
C. There is a four-week waiting period each time a candidate fails a licensing exam
Which of the following actions is not considered to be misrepresentation under law? A Making false statements about dividends previously paid by a policy B Describing a mutual life insurance policy as equivalent to a share of stock C Using a product name that hides the fact that it is an insurance policy D Making a false statement about a competitor's financial condition
D Making a false statement about a competitor's financial condition Making a false or maliciously critical statement regarding the financial condition of a competitor describes a different violation of the law known as defamation. Misrepresentation is making, issuing, or circulating any statement that misrepresents the benefits, advantages, conditions, or terms of any insurance policy.
For continuing education credit hours in Arkansas, licensees must complete: A 24 credit hours of continuing education, including 2 credit hours based on association membership B 24 credit hours of continuing education every 2 years, plus 3 hours dedicated to ethics C 24 credit hours of continuing education per year D 24 credit hours of continuing education every 2 years, including 3 hours dedicated to ethics
D. 24 credit hours of continuing education every 2 years, including 3 hours dedicated to ethics
The time limit on certain defenses under individual health policies in Arkansas is: A 90 days B 5 years C 30 days D 3 years
D. 3 years
In Arkansas, the basic hospital expense coverage will cover an individual for a period of at least how many days? A 15 days B 7 days C 90 days D 31 days
D. 31 days
The Arkansas Life and Health Guaranty Association provides coverage for: A Non-guaranteed values provided for by the policy B Dividends the policyholder is entitled to receive under the policy C Reinsurance D A portion of a policy for basic hospital expense coverage
D. A portion of a policy for basic hospital expense coverage
In Arkansas, a licensed insurance consultant: A Solicits, negotiates, effects, or binds insurance contracts B May be either a resident producer or nonresident agent C Compares policies from different insurers and tells a consumer which policy to choose D Advises consumers about their insurance needs for a fee
D. Advises consumers about their insurance needs for a fee Unlike a producer who facilitates insurance transactions, a consultant offers advice for a fee. Consultants attempt to help consumers, but they will never order or tell a consumer what to do. Consultants may either be an individual or business entity.
In Arkansas, a blanket accident and health insurance policy would most likely offer: A Major medical insurance for employees B Long-Term Care insurance C Workers' Compensation insurance D Coverage for participants in a little league sporting event
D. Coverage for participants in a little league sporting event Blanket insurance covers participants in specified circumstances from the hazards related to those circumstances or exercises. Some examples include a school or camp covering students or campers, a sports team covering members, officials, and supervisors, and passengers on a common carrier. Credit insurance is a different class of coverage. Major medical is properly considered group health coverage, but not blanket insurance. As for Workers' Compensation insurance, it is a form of liability coverage, not health insurance. LTC insurance is its own coverage, which means that it would not be offered alongside a blanket accident and health insurance policy.
A producer tells an applicant for insurance that a competitor insurer is in dire financial straits, and may not be able to honor its claims obligations. Which unfair trade practice has the insurer committed? A Rebating B Unfair discrimination C Boycott, coercion and intimidation D Defamation
D. Defamation Defamation is the making of any false or maliciously critical statement regarding the financial condition of any person, with the intent to injure such person.
In Arkansas, when an insured's group health insurance coverage is terminated, the insured: A Is entitled to a replacement policy that matches the coverage of the terminated policy B Must choose between accepting 120 days of group coverage and applying for a conversion policy C Must apply within 60 days, if they want the available conversion policy D Is entitled to an additional 120 days of group coverage if they have been covered for at least 3 months
D. Is entitled to an additional 120 days of group coverage if they have been covered for at least 3 months The insured is entitled to 120 days of continued group coverage after a policy is terminated. At the end of that time they can still opt for a conversion policy. Any decision must be made within 30 days if one group coverage ends.
Under an employer's group life insurance policy, all of the following may be considered employees, except: A Retired officers B Elected officials C Sole proprietor D Labor union
D. Labor Union A group policy may define employees as a sole proprietor, retired officers, or elected officials. Although labor unions may purchase and use group life insurance, they are not considered or defined to be an employee.
The Arkansas Life and Health Insurance Guaranty Association: A Treats an impaired insurer the same way as it does an insolvent insurer B Assesses the policyowners of solvent member firms, in order to cover the cost of the benefits paid to the policyowners of insolvent firms C Is the primary payor of benefits to Arkansas residents whenever an insurer based in the United States becomes insolvent D Provides protection to resident policyowners and beneficiaries in case a domestic insurer becomes insolvent
D. Provides protection to resident policyowners and beneficiaries in case a domestic insurer becomes insolvent The Association protects Arkansas policyowners, but is not the primary payor if other associations also cover benefits from foreign insurers. Also, the Association rehabilitates impaired insurers and liquidates insolvent insurers. Any costs incurred are assessed from member companies, not policyholders.