Financial - Insurance Regulation 28%
How old to apply for license?
18 years
When handling premium funds in the conduct of their business, insurance producers act in a(n) A - Special capacity. B - Fiduciary capacity. C - Accounting capacity. D - Financial capacity.
B - Fiduciary capacity. Because premiums belong to the insurer, the producer is acting in a position of trust when handling those funds.
A producer's license may be renewed every A - Year. B - 2 years. C - 3 years. D - 5 years.
B - 2 years. A producer's license may be renewed every 2 years. In order to renew, proper renewal forms must be submitted, accompanied by payment of the required fees and proof that the continuing education requirements have been met.
The Federal Fair Credit Reporting Act A - Regulates telemarketing. B - Prevents money laundering. C - Regulates consumer reports. D - Protects customer privacy.
C - Regulates consumer reports. The Federal Fair Credit Reporting Act regulates consumer reports, also known as consumer investigative reports, or credit reports.
Which of the following would NOT be considered an unfair and deceptive practice? A - Rebating B - Defamation C - Misrepresentation D - Controlled business
D - Controlled business All are unfair and deceptive practices except for controlled business.
A licensee is conducting business under an assumed name. What action must she take? A - Pay a fine B - Legally change her name C - Notify any applicants D - Notify the Commissioner
D - Notify the Commissioner Any licensee doing business under a name other than their legal name must notify the Commissioner.
The Gramm-Leach-Bliley Act was passed to A - Protect private customer information filed with a financial institution. B - Define insurance as interstate commerce. C - Allow consumers access to credit and private consumer reports. D - Allow insurance companies access to medical information for underwriting purposes.
A - Protect private customer information filed with a financial institution. The Gramm-Leach-Bliley Act was passed to protect private customer information that is filed with a financial institution. Customers must be given two disclosure notices (one at the onset of business and one before information is disclosed), as well as a yearly updated disclosure notice.
A producer's license lapsed. How soon after this lapse can his license be reinstated? A - 5 years B - 3 months C - 1 month D - 1 year
D - 1 year In this case, the producer's license may be reinstated within 1 year.
The National Do Not Call Registry was created to regulate A - Field underwriters. B - Insurers. C - Insurance solicitors. D - Telemarketers.
D - Telemarketers. The National Do Not Call Registry was created to allow consumers the choice to not be contacted by telemarketers.
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 - Rebating. B - Misrepresentation. C - Concealment. D - Unfair claim practice.
B - Misrepresentation. Issuing or circulating any sales material that is false or misleading would be considered misrepresentation and is illegal.
Any licensed person whose activities affect interstate commerce and who knowingly makes false material statements related to the business of insurance may be imprisoned for up to A - 3 years. B - 5 years. C - 10 years. D - 12 years.
C - 10 years. Anyone engaged in the business of insurance whose activities affect interstate commerce, and who knowingly makes false material statements may be fined, imprisoned for up to 10 years or both. If the activity jeopardized the security of the accompanied insurer, the punishment can be up to 15 years.
A producer committed a violated the insurance code. The act she committed was so uncommon that no specific penalty is attached to it. In this case, what is the maximum fine that could be leveled? A - $3,000 B - $5,000 C - $10,000 D - $25,000
B - $5,000
Commisioner Duties
Imposing penalties, including fines, suspensions, and revocations. All insurance forms (riders, policies, applications, endorsements, and contracts) must be filed and approved by the Commissioner.
All of the following are unfair claims settlement practices EXCEPT A - Failing to acknowledge pertinent communication pertaining to a claim. B - Suggesting negotiations in settling the claim. C - Refusing to pay claims without conducting a reasonable investigation. D - Failing to adopt and implement reasonable standards for settling claims.
B - Suggesting negotiations in settling the claim. When settling claims, negotiation can come into play.
Giving a client an inducement to a sale not stated in the policy is an unlawful practice known as A - Unlawful distribution of dividends. B - Coercion. C - Rebating. D - Twisting.
C - 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.
How many days is the approval period for policy rates
30 days
How long can you backdate a policy?
6 months
Variable Policies
A level premium and Variable death benefit.
An out-of-state producer wants to start selling insurance in this state. What type of license should the producer obtain? A - Nonresident B - Temporary C - Broker D - Limited lines
A - Nonresident A nonresident producer is a producer who is domiciled and licensed as a resident producer in another state.
Which of the following would NOT be a violation of state insurance regulations? A - Producer D collects premiums due on policies and deposits the funds in his own personal account. B - Producer A uses her license to write only insurance for herself and her immediate family. C - Producer B charges his clients, in addition to the premium, a consulting fee. D - Producer C uses her license exclusively to write business other than controlled.
D - Producer C uses her license exclusively to write business other than controlled. The purpose of a license is to primarily write non-controlled business.
Who assumes control over an insurance company's funds and management if it becomes insolvent? A - National Association of Insurance Commissioners B - Department of Insurance C - The policyholders or stock owners of the company D - State attorney general
B - Department of Insurance In the event of an insurance company's insolvency, the Department of Insurance will take over the management of the insurer in an effort to rehabilitate the company. If rehabilitation is not possible, the assets of the company will be liquidated.
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
B - Discrimination Permitting individuals of the same class to be charged a different rate for the same insurance is the unfair trade practice of discrimination.
According to the telemarketing sales rules, what are the permissible calling hours for telemarketing calls? A - 7am until 7pm B - 7am until 9pm C - 8am until 9pm D - 10am until 10pm
C - 8am until 9pm
Which of the following authorities is responsible for determining whether an insurer is financially stable enough to safely conduct business? A - Guaranty Association B - Commissioner C - Department of Insurance D - B & C
D - B & C The Commissioner and the Department of Insurance are charged with monitoring the financial strength and integrity of insurers authorized to conduct business in Utah, in order to determine whether the continued operation of any insurer might be financially hazardous to policyholders, creditors, or to the public in general.
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 False advertising is the illegal practice of advertising or circulating materials that are untrue, deceptive, or misleading.
Premium Mode
Simply the frequency with which a policy premium will be paid.
Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained? A - 3 days B - 5 days C - 10 days D - 14 days
A - 3 days Investigative consumer reports cannot be made unless the consumer is advised in writing about the report within 3 days of the date the report was requested.
Which of the following would NOT be considered an exception to the National Do Not Call List? A - Calls based from outside of the United States B - Calls for which the consumer has given prior written permission C - Calls which are not commercial or do not include unsolicited advertisements D - Calls by or on behalf of tax-exempt nonprofit organizations
A - Calls based from outside of the United States Calls from outside the United States are not an exception to the National Do Not Call List.
Which of the following would NOT be considered rebating or illegal inducement? A - Giving an applicant a $100 gift certificate during the insurance application process B - Sending a $150 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 - Giving an applicant a $100 gift certificate during the insurance application process Rebates and illegal inducements include money, sharing of commissions, promises, and personal services. Articles of merchandise with conspicuously stamped or printed advertisement of the insurer, or small gifts that do not exceed $100 in value are not considered inducement.
For how many years must an insurance producer be licensed prior to adding surplus lines to their repertoire? A - 1 year B - 3 years C - 4 years D - 2 years
B - 3 years In this case, a producer must be licensed for 3 years, during the 4 immediately preceding the date of application.
Which of the following includes information regarding a person's credit, character, reputation, and habits? A - Agent's report B - Consumer report C - Consumer history D - Insurability report
B - Consumer report Consumer reports include written and/or oral information regarding a consumer's credit, character, reputation, and habits collected by a reporting agency from employment records, credit reports, and other public sources.
Which of the following reports will provide the underwriter with the information about an insurance applicant's credit? A - Any federal report B - Consumer report C - Inspection report D - Agent's report
B - Consumer report Consumer reports include written and/or oral information regarding a consumer's credit, character, reputation, or habits collected by a reporting agency from employment records, credit reports, and other public sources.
The primary purpose of licensing is to A - Satisfy a federal requirement that all persons involved in insurance be licensed. B - Ensure high standards to the insuring public. C - Protect the policyowners against insolvent insurers. D - Generate income for the insurance department.
B - Ensure high standards to the insuring public. The primary purpose of licensing is to establish standards for competency and character of those persons engaged in the business of insurance.
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 - Illegal It is illegal to participate in any boycott, coercion, or intimidation that is intended to restrict fair trade or create a monopoly.
What was created to keep telemarketers from calling consumers who do not wish contacted? A - Call Control Registry B - National Do Not Call Registry C - Confidential No Call Act D - Freedom of Information Act
B - National Do Not Call Registry The National Do Not Call Registry was created to allow consumers the choice to not be contacted by telemarketers.
Under the Fair Credit Reporting Act, if the consumer challenges the accuracy of the information contained in his or her report, the reporting agency must A - Send an actual certified copy of the entire report to the consumer. B - Respond to the consumer's complaint. C - Defend the report if the agency feels it is accurate. D - Change the report.
B - Respond to the consumer's complaint. The consumer has the right to request the information on the report, the reasons for turn down and any adverse underwriting decisions. The reporting agency is required to respond to the consumer's complaint, and, if necessary, to reinvestigate the report.
If an insurer wants to raise its premium rates, the new rates must be submitted to the Commissioner for the review and will take how many days to go into effect? A - 10 B - 20 C - 30 D - 60
C - 30 To assure the public that an insurer's premium rates are neither excessive nor inadequate to meet future obligations, the Utah insurance code requires insurers to file their premium rates with the Commissioner. All rate filings are subject to a 30-day waiting period before the new rates become effective.
Which of the following would be considered an illegal inducement to purchase life insurance? A - Listing the insurance companies the agency represents in a letter B - Inviting prospective clients to the grand opening of the producer's new office C - Confirming future dividends in a life insurance proposal D - Mailing an agency brochure to a prospective client
C - Confirming future dividends in a life insurance proposal It is illegal to make, permit, or offer to make any contract of insurance or life annuity or agreement concerning such a contract with terms other than those stated in the contract. A participating life insurance policy may pay a portion of its net earnings to a policyholder, but dividends cannot be guaranteed.
The Commissioner is suspected of being involved in fraudulent activities. Which of the following authorities could remove the Commissioner from office? A - General election of the Utah Insurance Board B - Federal Association of Insurers C - Governor D - Guaranty Association
C - Governor The Governor has the authority to remove the Commissioner from office.
Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report A - Must be advised that a copy of the report is available to anyone who requests it. B - May sue the reporting agency in order to get inaccurate data corrected. C - Must be informed of the source of the report. D - Are entitled to obtain a copy of the report from the party who ordered it.
C - Must be informed of the source of the report. Under the Fair Credit Reporting Act, if an insurance policy is declined or modified because of information contained in a consumer report, the consumer must be advised and provided with the name and address of the reporting agency.
Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information? A - The Guaranty Association B - Consumer Privacy Act C - The Fair Credit Reporting Act D - Unfair Trade Practices Law
C - The Fair Credit Reporting Act The purpose of the Fair Credit Reporting Act is to protect consumers against the circulation of inaccurate or obsolete information and to ensure that consumer reporting agencies are fair and equitable in their treatment of consumers.
In comparison to consumer reports, which of the following describes a unique characteristic of investigative consumer reports? A - They provide information about a customer's character and reputation. B - The customer has no knowledge of this action. C - The customer's associates, friends, and neighbors provide the report's data. D - They provide additional information from an outside source about a particular risk.
C - The customer's associates, friends, and neighbors provide the report's data. Both consumer reports and investigative consumer reports provide additional information from an outside source about a customer's character and reputation, and both types of reports are used under the Fair Credit Reporting Act. The main difference is that the information for investigative consumer reports is obtained through an investigation and interviews with associates, friends and neighbors of the consumer.
How many hours of continuing education per licensing period must all licensees complete in order to renew their licenses? A - 8 hours B - 10 hours C - 12 hours D - 24 hours
D - 24 hours All licensees must complete 24 hours of continuing education in order to renew their licenses every 2 years. Any additional hours cannot be applied to any other licensing period.
If a consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply? A - 7 days B - 10 days C - 3 days D - 5 days
D - 5 days Consumers must be advised that they have a right to request additional information concerning investigative consumer reports, and the insurer or reporting agency has 5 days to provide the consumer with the additional information.
A resident agent licensed in another state may obtain a nonresident license in Utah without taking the examination provided that A - The agent is currently licensed in the state of domicile. B - The agent has obtained that license by passing a test suitable to the Utah Department. C - The state where the agent lives affords the same privilege to residents of Utah. D - All of these requirements are met.
D - All of these requirements are met. Utah law provides for licensing nonresidents provided that the state of the applicant's residence affords the same privilege to residents of Utah.
Applicants for producer, broker, or consultant licenses must show the Commissioner they satisfy all of the following requirements EXCEPT A - Are competent and trustworthy. B - Are 18 years of age or older. C - Intend, in good faith, to engage in the type of business permitted by the license. D - Are a citizen of the United States of America.
D - Are a citizen of the United States of America. There is no requirement in the Utah law that applicants be citizens of the United States.
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 - Coercion. B - Twisting. C - Controlled business. D - Rebating.
D - Rebating When producers give or promise anything of value that is not specified in the policy, they are guilty of rebating.
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's 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 purchased the insurance policy today
D - Telling a client that his first premium will be waived if he purchased 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.
An insurance company assures its new policyholders that their premium costs will not increase for a period of at least five years. However, due to increasing financial strain, they plan to raise premium costs for all insureds by 10% over the next two years. What term best describes this act? A - Fraud B - Defamation C - Unfair discrimination D - Errors and omissions
A - Fraud According to Title 18, Sections 1033 & 1034 of the US Code, any oral or written statements by any person engaged in the business of insurance that are false or any omissions of material fact are considered unlawful insurance fraud. This includes statements made on an application for insurance, renewal of a policy, claims for payment or benefits, premiums paid, and financial condition of an insurer.
Which of the following entities established the Do-Not-Call Registry? A - The Federal Trade Commission B - The Better Business Bureau C - The NAIC D - The Consumer Protection Agency
A - The Federal Trade Commission The FTC established the do-not-call list in order to protect consumers against unwanted solicitations.
Which of the following statements does NOT accurately describe an insurance broker? A - A broker is not a direct representative of an insurer. B - A broker cannot bind coverage. C - Brokers must have a written agreement with an insured when they receive any fees or compensation for services. D - None of the above. All are true.
D - None of the above. All are true. Unlike a producer, a broker represents his/her clients (policyholders) and is not a direct representative of any insurance company. Instead, a broker works for his/her clients and will place risks with companies. Brokers must have a written agreement with an insured when they receive any fees or compensation for services. Brokers cannot bind coverage.
If an insurance company wishes to order a consumer report on an applicant to assist in the underwriting process, and if a notice of insurance information practices has been provided, the report may contain all of the following information EXCEPT the applicant's A - Ancestry. B - Credit history. C - Habits. D - Prior insurance.
A - Ancestry. The Fair Credit Reporting Act regulates what information may be collected and how the information may be used. Consumer Reports include written and/or oral information regarding a consumer's credit, character, reputation, and habits collected by a reporting agency from employment records, credit reports, and other public sources. Ancestry is not a relevant factor assessed in these reports.
McCarran Ferguson Act
The fed govt had the right to regulate the business of insurance but only to the extent that such business is not regulated by state law (which most are) They did this with the intent of not having to regulate them against the provisions of the fed antitrust laws.
Federal law makes it illegal for any individual convicted of a crime involving dishonesty or breach of trust to work in the business of insurance affecting interstate commerce A - Under any circumstances. B - Unless they have served an appropriate prison sentence. C - Without receiving written consent from a Federal Judge. D - Without receiving written consent from an insurance regulatory authority.
D - Without receiving written consent from an insurance regulatory authority. Title 18, US Code, sections 1033-1034 makes it illegal for any individual convicted of a crime involving dishonesty or breach of trust to work in the business of insurance affecting interstate commerce without receiving written consent from an insurance regulatory authority.
A license may be denied, suspended, or revoked if the licensee A - Engages in fraud. B - Was convicted of a felony. C - Intentionally misrepresents an insurance policy. D - All of the above.
D - All of the above. The Commissioner may suspend, revoke, limit, or refuse to continue a license or certificate for the following reasons (among other items): using fraudulent, coercive, or dishonest practices, or demonstrated incompetence, untrustworthiness, or financial irresponsibility in the conduct of business in this state or elsewhere; having been convicted of a felony; and intentionally misrepresenting the terms of an actual or proposed contract of or application for insurance.
What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act? A - $100 per violation B - Revocation of license C - $2,500 D - $1,000
C - $2,500 An individual who willfully violates this Act enough to constitute a general pattern or business practice will be subject to a penalty of up to $2,500.
In a circumstance that would warrant license suspension, the Commissioner may instead decide to put the license on probation. What is the maximum number of months that the probation could last? A - 6 B - 12 C - 18 D - 24
D - 24 In any circumstances that would justify a suspension, the Commissioner may instead, after a formal adjudicative proceeding, put the licensee on probation for a specified period no longer than 24 months.
During a sales presentation a producer intentionally makes a statement which may mislead the insurance applicant. This describes A - Twisting. B - Coercion. C - Misrepresentation. D - Defamation.
C - Misrepresentation. Making false or misleading statements with the intent to defraud another is misrepresentation.
All of the following are true regarding rebates EXCEPT A - Rebates are only allowed if specifically stated in the policy. B - Rebating can be anything of economic value, given as an inducement to buy. C - Dividends are not considered to be rebates. D - Rebates are allowed if it's in the best interest of the client.
D - 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.
In life insurance, producers are permitted to share or split commissions providing A - The insurance department knows of the arrangement. B - There is a written agreement between the producers. C - Both are properly licensed for the line of insurance. D - The insured knows and agrees to the arrangement.
C - Both are properly licensed for the line of insurance. For a producer to receive commissions from the sale of insurance, they must be properly licensed for that line of insurance.
Which of the following is NOT correct regarding false statements by a person engaged in the business of insurance? A - Only written statements can be considered fraud. B - Omissions of material fact on insurance application are fraud. C - False statements about financial condition of an insurer are unlawful. D - Statements made with the intent to deceive are unlawful.
A - Only written statements can be considered fraud. According to Title 18, Sections 1033 & 1034 of the US Code, any oral or written statements by any person engaged in the business of insurance that are false or any omissions of material fact are considered unlawful insurance fraud.
According to the Fair Credit Reporting Act, all of the following would be considered negative information about a consumer EXCEPT A - Failure to pay off a loan. B - Disputes regarding consumer report information. C - Tax delinquencies. D - Late payments.
B - Disputes regarding consumer report information. As defined by the Act, negative information includes information regarding a customer's delinquencies, late payments, insolvency or any other form of default. Customer disputes are not considered negative information, and, in fact, must be included in consumer reports.
Producers must complete 24 continuing education hours prior to license renewal every A - 5 years. B - Year. C - 2 years. D - 3 years.
C - 2 years. All insurance producers and brokers must successfully complete a minimum of 24 continuing education course credit hours every 2 years, prior to license renewal.
Rebating is an unfair trade practice and is regulated by law. All of the following would be considered to be rebating EXCEPT A - An agent offers the use of his lake house to person as an inducement to buy. 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.
D - An agent misrepresents policy benefits to convince a policyowner to replace policies. Using misrepresentation to convince a person to cancel an existing policy and buy a new one is called "twisting."
An applicant is denied insurance because of information found on a consumer report. Which of the following requires that the insurance company supply the applicant with the name and address of the consumer reporting company? A - Consumer Privacy Act B - Conditional receipt C - Disclosure rule D - Fair Credit Reporting Act
D - Fair Credit Reporting Act The Fair Credit Reporting Act governs what information can be collected and how the information can be used.
What are the fines for violations? By producer By other person
$2500 for producer $5000 for other person
An insurance company must notify the Commissioner whenever it terminates an agent's appointment within how many days of the termination? A - 30 days B - 90 days C - 10 days D - 15 days
A - 30 days An insurer that terminates the appointment, employment, contract or other insurance business relationship with a producer for any reason must notify the Commissioner within 30 days of the effective date of the termination.
