General Insurance
Which of the following is not a requirement to obtain a resident producer's license? -complete at least 24 hours of preexamination education -submit an application -appointment by at least two insurers -successful completion of the licensing examination
complete at least 24 hours of preexamination education
A cause of loss is called a(n): -hazard -exposure -peril -risk
peril
A producer who improperly converts money or property received while transacting insurance is guilty of -illegal inducement -boycott -misappropriation of funds -misrepresentation of funds
misappropriation of funds
Though she lives in a high crime area, Hilda rarely locks the door to her apartment when she goes out, figuring that whatever she owns of value is insured and can be easily replaced if stolen. What type of hazard does this represent? -moral hazard -morale hazard -physical hazard -emotional hazard
morale hazard
Mr. Grogan's insurance policy was issued by an insurance company that's owned by its policyowners and also pays policy dividends to its policyowners. What type of insurance company issued Mr. Grogan's policy? -stock -mutual -reciprocal -fraternal
mutual
Genevieve wants to renew her Pennsylvania insurance producer's license. Which of the following is not a condition for renewal? -submission of a renewal form -fulfillment of continuing education -payment of the renewal fee -report of insurance sales made in last two years
report of insurance sales made in last two years
Which penalty may be imposed if a person commits insurance fraud? -fine of up to $25,000 for a first offense -fine of up to $50,000 for a second offense -probation for up to 10 years -restitution
restitution
Larry, Brian, Susan, and Jennifer work for AllPro Insurance Company in Pennsylvania. Based on their job descriptions below, which of them is not acting as a producer? -Larry, who receives insurance applications from the public -Brian, who is a vice president in AllPro's human resources -department and does not receive commissions -Susan, who collects insurance premiums for AllPro -Jennifer, who advertises insurance policies for AllPro
Brian, who is a vice president in AllPro's human resources -department and does not receive commissions
Seth, an agent, decides he must protect himself from potential claims from policyholders, both legitimate and illegitimate. What are some methods by which he can protect himself in the event of such a claim? -Hire a lawyer to be on the agency staff. -Document conversations with policyholders about insurance transactions and consider errors and omissions coverage. -Buy errors and omissions coverage because it will cover all claims. -Deal only with trustworthy clients.
Buy errors and omissions coverage because it will cover all claims.
A consumer who wants objective information about the financial reliability of an insurance company from which he is considering the purchase of insurance would be best advised to: -consult with an insurance producer appointed by that company -ask friends if they have had experience with the company -research the company on the Internet -check the company's financial rating from an established rating organization
check the company's financial rating from an established rating organization
Acme Insurance Company wants to employ Anthony as a producer. To do so, Acme must -file a notice of appointment with the Department -verify that Anthony is eligible for appointment -have Anthony sign a non-compete and exclusive agency agreement -submit a notice of appointment to the NAIC's national database
file a notice of appointment with the Department
The Pennsylvania Commissioner of Insurance must examine the books and records of an insurer at least once every -year -two years -three years -five years
five years
Mr. Murphy's insurance producer represents half a dozen insurance companies and is able to shop around for the best policy terms and pricing. What type of producer does Mr. Murphy use? -captive agent -independent agent -direct writer -general agent
independent agent
The CEO of Edison Manufacturing Corp. wants to buy insurance for the company through an independent contractor who will represent Edison. His best choice would be to obtain insurance that is marketed through a(n): -exclusive agent -direct response marketer -independent insurance broker -captive agent
independent insurance broker
All of the following are considered an unfair claims settlement practice EXCEPT? -failing to acknowledge a request for claims forms -requiring the insured to submit a formal proof of loss form when filing a claim -settling claims based on an application that the agent altered without informing the insured -making claims settlements without stating the coverage under which payments are made
requiring the insured to submit a formal proof of loss form when filing a claim
Mr. Davidson does not own car insurance. If his car sustains a loss, he will pay for the damages and injuries himself. What method of handling risk has he chosen? -retention -avoidance -prevention -reduction
retention
Brad purchased an auto insurance policy to insure his new car. An insurer might consider Brad, his car, or both to be a: -risk -liability -hazard -peril
risk
A business setting up a self-insurance program is an example of which method of risk management? -risk retention -risk avoidance -risk transfer -risky control
risk retention
Julia and her family own a large manufacturing business. She convinced her family to set aside funds for a self-insurance program instead of buying a commercial insurance policy. This would be considered what form of risk management? -risk retention -risk control -risk transfer -risk reduction
risk retention
Main Street Corp. owns a shopping center. It buys liability and property insurance to cover losses stemming from its business. This is an example of which method of handling risk? -risk retention -risk avoidance -risk transfer -risk reduction
risk transfer
Which of the following is NOT a duty of the Pennsylvania Insurance Commissioner? -enforcing the insurance laws -soliciting insurance contracts -licensing producers -examining insurers
soliciting insurance contracts
Bonnie works for an insurance company where she assesses insurance policy applications to determine whether they should be accepted or rejected, a process known as: -adverse selection -risk transfer -risk management -underwriting
underwriting
Shoveling snow and ice off an icy sidewalk is an example of what type of risk management technique? -reduction -prevention -transfer -avoidance
prevention
In the relationship between an insurance company and a producer that sells its products, what role does the insurer play? -principal -agent -broker -guardian
principal
Which of the following is NOT a power granted to the Pennsylvania Commissioner of Insurance? -licensing producers and companies -enforcing insurance laws -issuing regulations to administer insurance laws -prosecuting individuals for violating the insurance laws
prosecuting individuals for violating the insurance laws
The Fair Credit Reporting Act requires an insurer that requests a consumer report on an insurance applicant to do all of the following EXCEPT: -notify the applicant that a report has been requested -notify the applicant of his or her right to ask about the scope of the investigation -provide the applicant with a summary of the report as soon as the insurer receives it -provide the applicant with a summary of the report if the applicant requests one
provide the applicant with a summary of the report as soon as the insurer receives it
An insurance company that wants to transfer some of its risks to another insurance company can do so through: -reinsurance -commercial insurance -casualty insurance -risk insurance
reinsurance
What is the maximum fine that may be imposed upon a producer for violating two of the Commissioner's orders? -$10,000 -$15,000 -$20,000 -$30,000
$20,000
An insurer must notify its current customers of its privacy policies or practices at least once every -6 months -12 months -18 months -24 months
12 months
How many hours of approved preexamination courses must an insurance producer complete before taking the insurance producer licensing examination? -12 -24 -30 -36
24
ABC Insurers filed premium rates for its new line of property and casualty products on January 15. Within how many days must the Commissioner approve or disapprove the rates? -25 -30 -45 -60
30
How do a hazard and a peril differ? -The terms "hazard" and "peril" are -synonymous. -A peril is a condition that increases the frequency of a loss while a hazard is anything that increases the severity of a loss. -A hazard is a condition that increases the frequency and severity of loss while a peril is a cause of loss. -A hazard is a cause of loss while a peril is a condition that increases the frequency of loss.
A hazard is a condition that increases the frequency and severity of loss while a peril is a cause of loss.
Paul sold a basic property insurance policy to Anna and charged her a service fee for completing her insurance application. Which statement is correct about this practice? -A producer routinely charges an additional fee for this service. -Although it is unusual to charge an additional fee, it is not a prohibited practice. -A producer may not charge a fee for completing an insurance application. -The fee for this service should be paid to the producer by the insurer.
A producer may not charge a fee for completing an insurance application.
Which of the following would be considered an indirect loss? -A home is damaged by fire and smoke. -Additional living expenses are incurred while a person whose house was damaged lives in a hotel while the home is repaired. -Torrential rains cause flooding in a basement. -A motorist loses control and crashes into a garage.
Additional living expenses are incurred while a person whose house was damaged lives in a hotel while the home is repaired.
A producer convicted of a criminal felony involving dishonesty may engage in interstate insurance business with the written permission of the Pennsylvania -Department of Insurance -Department of Corrections -Board of Probation and Parole -Attorney General
Department of Insurance
Federal law requires that businesses fairly and accurately report consumer information through the -Telemarketing Sales Rule -CAN-SPAM Act -Fraud and False Statements section -Fair Credit Reporting Act
Fair Credit Reporting Act
Who is the head of the Pennsylvania Insurance Department? -Governor of Pennsylvania -Lieutenant Governor of Pennsylvania -Insurance Commissioner -Attorney General
Insurance Commissioner
Magnificent Insurance Company is incorporated in Indiana but does business in Kansas. How would you categorize this company with respect to each state? -Magnificent is a domestic company in Indiana, but a foreign company in Kansas. -Magnificent is a domestic company in Indiana, but an alien company in Kansas. -Magnificent is neither a domestic nor a foreign company in these states, but is an admitted company in both states. -Magnificent is an admitted company in Indiana, but an alien company in Kansas.
Magnificent is a domestic company in Indiana, but a foreign company in Kansas.
The Allen Agency of Chicago, Illinois, represents an insurance company that is headquartered in Baltimore, Maryland, and which has agencies in 30 states. To an agent in the Allen Agency, where is her insurer domiciled? -Illinois -Maryland -every state where the insurer has an agency -the state that has the insurer's largest agency
Maryland
Bill failed to satisfy the continuing education requirements to keep his producer's license active in Pennsylvania. Two years later, he decides to renew his license. Can he do so? -Yes, if he pays the renewal fee. -Yes, if he fulfills the continuing education requirement. -No, he must wait one more year. -No, he must apply for a new license.
No, he must apply for a new license.
Which of the following statements regarding the concept of insurable risk is true? -Every risk is insurable, if there is a -dollar value associated with it. -All pure risks are insurable, but only some speculative risks are insurable. -All pure risks are insurable, but speculative risks are never insurable. -Only pure (not speculative) risks are insurable, but not all pure risks are insurable.
Only pure (not speculative) risks are insurable, but not all pure risks are insurable.
Acts and practices that are considered unfair trade practices and unfair methods of competition in Pennsylvania are defined in the -Pennsylvania Workers' Compensation Laws -Pennsylvania Property and Casualty Insurance Guaranty Association Act -Pennsylvania Insurance Code -Insurance Fraud Regulation in Pennsylvania
Pennsylvania Insurance Code
What is the basic principle underlying the law of large numbers? -Prediction becomes more accurate as the number of exposure units decreases. -Prediction becomes less accurate as the number of exposure units increases. -Prediction becomes more accurate as the number of exposure units increases. -Prediction is most accurate when the number of exposure units stabilizes.
Prediction becomes more accurate as the number of exposure units increases.
Which law, act, or regulation governs how insurers and their producers treat personal financial information from individuals? -Fair Credit Reporting Act -Privacy of Consumer Financial Information Regulation -Insurance Fraud Regulation -Insurance Code of Pennsylvania
Privacy of Consumer Financial Information Regulation
Agents or producers have an obligation to act in the best interests of applicants or insureds. Which of the following is not a duty an agent owes to an applicant or insured? -Accurately state the terms or conditions of a policy. -Disclose all pertinent information about a proposed policy. -Recommend only policies that suit the customer's needs. -Retain legal counsel to advise the insured or applicant who buys complex coverage.
Retain legal counsel to advise the insured or applicant who buys complex coverage.
Abby lives in Ohio, where she is licensed as an insurance producer. She wants to apply for a nonresident license in Pennsylvania. Which of the following conditions must she satisfy? -She must move to Pennsylvania. -She must surrender her Ohio license. -She must be sponsored by a producer licensed in Pennsylvania. -She must show her Ohio license is in good standing.
She must show her Ohio license is in good standing.
When taking his examination for an insurance producer license, Tad used unauthorized material to assist him. He justified this on the basis that the materials would be available to him in a real life situation if he needed them, and he needed them now. Which statement is true? -Tad is correct. This is an acceptable practice. -Tad committed an unfair method of competition. -Tad committed a prohibited act. -Tad committed a felony.
Tad committed a prohibited act.
How do large companies that self-insure handle certain risks? -They avoid certain risks. -They retain certain risks. -They transfer certain risks. -They control certain risks.
They retain certain risks.
What is the maximum number of agents an insurer can appoint to transact insurance business on its behalf? -60 -30 -15 -Unlimited
Unlimited
Alex sold an insurance policy before his license lapsed and earned a commission on the sale. Is he entitled to a commission if the policy is renewed? -No, because only one commission can be paid on a policy sale. -No, because he is no longer licensed. -Yes, because he was licensed when the policy was sold. -Yes, because his license was not revoked or suspended.
Yes, because he was licensed when the policy was sold.
Bill received a letter from the Department of Insurance asking him to verify completion of the continuing education requirements for the previous licensing period. Three weeks later, the Department sent another letter. Which penalty may the Department impose if Bill still has not responded to its request one month later? -a fine of up to $100 per day per violation -a fine of up to $10,000 total -termination of her agent's appointment -up to six months' imprisonment
a fine of up to $100 per day per violation
What kind of contract involves the exchange of possibly unequal amounts? -contract of adhesion -aleatory contract -bilateral contract -personal contract
aleatory contract
Suitability standards for making insurance policy recommendations apply to: -life insurance policies only -property and casualty policies only -annuities only -all insurance policies
all insurance policies
The primary insurance regulatory activities of state insurance departments include all of the following EXCEPT: -insurer and producer licensing -investigating insurer solvency -arresting unethical producers -market conduct investigations
arresting unethical producers
What unfair trade practice occurs when a producer refuses to do business with another person unless that person purchases an insurance policy from the producer? -coercion -intimidation -boycott -unfair discrimination
boycott
The federal Fair Credit Reporting Act protects the rights of: -creditors -consumers -insurers -the Department of Insurance
consumers
When meeting with a prospect to discuss insurance, Tyler makes disparaging comments about the financial stability and reputation of a competitor to dissuade the prospect from purchasing its policies. Which unfair trade practice has Tyler committed? -defamation -rebating -unfair discrimination -coercion
defamation
Mary Beth is employed by the JKL Insurance Company in its home office to market its insurance policies directly to consumers through the use of mass media and social media promotions. She is employed by what type of marketing system or arrangement? -exclusive agency system -direct marketing system -independent agency system -independent contractor arrangement
direct marketing system
Tim, an insurance producer, tells you his is concerned about liability that may arise if he fails to fulfill his duties to his insurers or customers. What kind of insurance would you suggest he buy to protect him from this liability? -legal insurance -professional responsibility insurance -malpractice insurance -errors and omissions insurance
errors and omissions insurance
Which of the following is not an unfair claims settlement practice if committed by an insurance company in Pennsylvania? -failing to promptly acknowledge communications about claims -failing to promptly settle a claim for which liability is uncertain -appealing from an arbitration award in favor of an insured to compel the insured to accept a lower settlement -failing to affirm or deny coverage within a reasonable time after completing a claim investigation
failing to promptly settle a claim for which liability is uncertain
Embezzling money from an individual who is involved in interstate insurance business is prohibited by -state law -federal law -the Pennsylvania insurance code -the Fair Credit Reporting Act
federal law
When holding insurance premiums and other funds for their principals, agents act in a -trustee capacity -fiduciary capacity -agency capacity -trustor capacity
fiduciary capacity
Needing the money, Ted burns down his house to collect the insurance proceeds. On what grounds might the insurance company deny coverage if it can show that Ted intentionally burned the house down? -misrepresentation -fraud -concealment -impaired risk
fraud
Which of the following is an example of risk reduction? -setting up a self-insurance program -not owning a car to avoid losses related to automobile ownership -a homeowner who chooses not to buy flood insurance -having fire extinguishers in place to limit the extent of a fire loss
having fire extinguishers in place to limit the extent of a fire loss
Which of the following is not a remedy available to the Pennsylvania Commissioner of Insurance when addressing an unfair method of competition? -imprisonment -cease and desist order -suspension of license -revocation of license
imprisonment
What term is used when a loss victim is financially restored up to the amount of his or her loss? -risk transfer -pooling -indemnify -risk return
indemnify
Jonah offers potential clients courtside tickets to a professional basketball game in exchange for buying an insurance policy. Which prohibited sales practice has he committed? -rebating -controlled business -misrepresentation -coercion
rebating
An insurance policy is a unilateral contract. Once the policy premium is paid and the policy is issued, which party must keep its promises? -the insured -the insurance company -the policyowner -the agent
the insurance company
An insurance policy involves legally enforceable promises by which party or parties? -the policyowner only -the insurer only -both the policyowner and the insurer -neither the policyowner nor the insurer
the insurer only
To be able to predict the number of future losses occurring among their insureds, insurers rely on which of the following? -the law of large numbers -risk transfer -adverse selection -market surveys
the law of large numbers
When comparing her insurance company's policies to those of Zenith Insurance, Melanie makes a misleading statement to convince an insurance prospect to terminate a policy with Zenith and buy one from Melanie's company. Melanie has engaged in -twisting -rebating -unfair discrimination -defamation
twisting
Acme Insurance and Apogee Insurance agree to offer different premium rates for persons of equal risk within a particular class. They also agree to limit benefits paid to insureds within this class if the insureds live in certain counties of Pennsylvania. Acme and Apogee are engaging in -acceptable marketing and underwriting practices -unfair and prohibited business practices -insurance fraud -false advertising
unfair and prohibited business practices
If the Commissioner finds that a producer practiced unfair methods of competition and knew that he or she was violating the law in doing so, the producer may be fined -up to $1,000 for each violation -up to $2,500 for each violation -up to $3,000 for each violation -up to $5,000 for each violation
up to $5,000 for each violation
For how many years can a person be imprisoned if his or her illegal conduct significantly contributed to an insurer being placed in conservation, rehabilitation, or liquidation? -up to 5 years -up to 10 years -up to 15 years -up to 20 years
up to 15 years
For how long is a temporary insurance producer's license valid? -up to 30 days -up to 60 days -up to 120 days -up to 180 days
up to 180 days
Trudy received a letter from the Department of Insurance asking her to provide proof of completing the continuing education requirements. Within how many days must she respond to the Department's inquiry? -10 -20 -30 -45
30
Jeff is a licensed insurance producer in both New York and Pennsylvania. He is charged with embezzlement in New York, and his first pretrial hearing is set for March 1. He must notify the Pennsylvania Commissioner of Insurance of this charge within how many days of the hearing? -7 days -10 days -14 days -30 days
30 days
An agent sold a homeowners policy to Mrs. Tannenbaum, who suffers from Alzheimer's disease. When Mrs. Tannenbaum's son learned of the insurance sale, he claimed the policy was not a legal contract, requested cancellation of the policy, and obtained a full refund for which of the following reasons? -The insurance agent didn't have a life insurance license. -Mrs. Tannenbaum was not a competent party. -The insurance company was an admitted insurer. -Mrs. Tannenbaum was over 65 years old.
Mrs. Tannenbaum was not a competent party.
Sam purchased a fire insurance policy on an old building with the intention of setting fire to the building and collecting the insurance. For what reason did the insurance company decline to pay Sam's claim, citing the policy was not a legal contract? -The insurance company didn't promise to pay any claims. -Sam didn't pay the entire policy premium before the fire. -The insurance company isn't a legally competent party. -Sam entered into the contract for an illegal purpose.
Sam entered into the contract for an illegal purpose.
Abstract Chemical Corp. cannot find an insurer in its home state that will provide a certain type of liability insurance that it needs. What is the best option for Abstract Chemical? -Dissolve the business since it cannot continue without sufficient liability insurance. -Seek coverage through a nonadmitted insurer that can provide excess and surplus lines insurance. -Prepare to file for bankruptcy when a liability claim is made for which there is no coverage. -Seek coverage through a government-sponsored insurance program.
Seek coverage through a nonadmitted insurer that can provide excess and surplus lines insurance.
An insurance agent mistakenly tells policyholder Jerry that his boat is covered under a policy the agent recently sold him. Jerry's boat is damaged in a storm and he learns his boat is not covered when he files a claim. Will the insurer pay this claim? -No, it was a mistake on the part of the agent. -No, but the agent should pay to repair the boat. -Yes, because the agent legally represents the insurer. -Maybe, the insurer will determine whether it pays the claim.
Yes, because the agent legally represents the insurer.
Mary Jones adopted an assumed name, Insurance Advocates, for the purpose of marketing her insurance business. Later, she decides to adopt a more suitable name. Can she change the assumed name? -No. Once chosen, an assumed name may not be changed. -No. Although assumed names are allowed, the Commissioner -discourages their use. -Yes. She must notify the Commissioner before using the assumed name. -Yes. She must notify the Secretary of State before using the assumed name.
Yes. She must notify the Commissioner before using the assumed name.
Mary Jones adopted an assumed name, Insurance Advocates, for the purpose of marketing her insurance business. Later, she decides to adopt a more suitable name. Can she change the assumed name? -No. Once chosen, an assumed name may not be changed. -No. Although assumed names are allowed, the Commissioner discourages their use. -Yes. She must notify the Commissioner before using the assumed name. -Yes. She must notify the Secretary of State before using the assumed name.
Yes. She must notify the Commissioner before using the assumed name.
Persons who are convicted of lying, giving false reports, or overvaluing land, property or securities during an examination by the Pennsylvania Department of Insurance are subject to -a fine of up to $75,000 -imprisonment for up to 15 years -a fine of up to $50,000 or imprisonment for up to 15 years -a fine of up to $50,000 and imprisonment for up to 10 years
a fine of up to $50,000 and imprisonment for up to 10 years
In an auto insurance policy, the insurance company's promise to pay benefits in the event of a covered loss is legally known as: -an offer -acceptance -consideration -legal purpose
consideration
Which of the following terms refers to the things given by both parties to a contract that make for a legal contract? -offer -legal purpose -consideration -acceptance
consideration
When an applicant meets with you to buy a homeowners policy, she attempts to negotiate the terms of the contract. You tell her the terms are not negotiable and she must either purchase the policy and comply with its terms or decline to purchase the policy. You are explaining what type of contract to this applicant? -contract of adhesion -aleatory contract -unilateral contract -personal contract
contract of adhesion
All of the following are elements of a legal contract EXCEPT: -offer -acceptance -consideration -counteroffer
counteroffer
Rebecca tells a potential customer that an insurer he is considering disputes all claims from its policyholders, though she knows this is not true. What do her actions constitute? -false advertising -defamation -unfair discrimination -twisting
defamation
Reginald, an eager new insurance salesman, persuades Tom to switch his auto policy to a company Reginald represents because Tom can save several hundred dollars. However, Reginald does not tell Tom the recommended policy provides substantially less coverage. Reginald has failed to meet his duty to: -disclose all pertinent information concerning the proposed policy -place coverage with a solvent insurer -act with express authority -accurately represent the terms and conditions of a proposed policy
disclose all pertinent information concerning the proposed policy
Which of the following is an example of a risk avoidance technique for someone who wants to avoid the risk of being sued because her dog bit someone? -own a Golden Retriever -do not own a dog -send the dog to obedience school -muzzle the dog
do not own a dog
Which of the following would not be considered misrepresentation of an insurance policy? -misstating the terms of the policy -exaggerating the benefits or advantages of an insurance policy -misstating the nature or title of an insurance policy -enthusiastically promoting an insurance product
enthusiastically promoting an insurance product
What must an insurance company do to appoint a producer as its agent? -file a notice of appointment with the National Association of Insurance Commissioners to determine the producer's eligibility for appointment -file a notice of appointment with the Department and pay the required fee -notify other authorized insurers before appointing a producer -determine from the state's licensing database whether the producer is already appointed by another insurer
file a notice of appointment with the Department and pay the required fee
Which of the following is a peril? -a poorly lit neighborhood -an icy sidewalk -fire -unsafe driving
fire
Helen submitted an insurance application and premium deposit to TLS Insurance Company. In doing so, she has: -offered consideration -made a counteroffer -invited the insurer to make an offer -made an offer to the insurer
made an offer to the insurer
Making a false statement in an insurance policy application to obtain a benefit from the insurer is known as -coercion -misrepresentation -inducement -unfair discrimination
misrepresentation
In the course of doing their job, insurance producers are required to do all of the following EXCEPT: -determine whether a policy recommended to an applicant appears to suit the needs of that applicant -collect relevant information for making specific recommendations regarding an insurance transaction -keep a record of the information that was gathered and the processes used in gathering it -submit a signed affidavit to the applicant that the proposed policy is the most suitable
submit a signed affidavit to the applicant that the proposed policy is the most suitable
During the sale of an insurance policy, all the following are duties of an insurance producer EXCEPT: -to place the insurance with a solvent insurer -to arrange for financing of the policy if the applicant is unable to do so -to disclose all pertinent information concerning a proposed policy -to only make recommendations that suit the customer's needs and situation
to arrange for financing of the policy if the applicant is unable to do so
How long is a Pennsylvania insurance producer's license valid? -one year -two years -three years -five years
two years
