GENERAL INSURANCE PRINCIPLES class3 INSURANCE PRODUCERS

The contract between the producer and insurer, setting forth certain acts and duties the producer is specifically authorized to perform, describes the producer's:

?express authority

All of the following are part of a producer's responsibilities to an applicant EXCEPT:

?research other insurance companies' insurance products if requested by the applicant

Though not specifically cited in the producer's contract, the producer is expected to telephone prospects on the insurer's behalf to arrange sales appointments. This is an example of what kind of producer authority?

implied authority Because, Though accepted by insurers as a practical aspect of business, implied authority is not specified in contracts or related agreements.

The purpose for the Policy Summary, which must be given to every insurance applicant before an application is signed, is to:

provide buyers with details of the specific insurance contract they are considering for purchase Because To help make sure customers understand what they are buying, most states require that applicants be given a policy summary that provides detailed information about the specific policy that is being purchased.

A producer owes a fiduciary duty to:

both the insurer and the customer Because, Producers have a fiduciary duty to their customers as well as their insurance company, and must act in good faith and with integrity in their dealings with both.

In addition to the fiduciary responsibility they have with all customer premiums and assets, producers are expected to do all the following EXCEPT:

seek opportunities to replace existing policies with newer products Because While criticizing other insurance company products is considered bad form, it is not necessary that producers research other companies' products for an applicant.

Which of the following best describes an agent's responsibilities

An agent has to act in the best interests of insureds, applicants, and insurers Because In addition to the duties an agent owes to the insurer, the agent also must act only in the best interests of the applicant or insured.

An insurance producer tells a life insurance applicant that he has the authority to waive the medical exam that is normally required by the insurer with every application. The insurer may be required to accept the application without a medical exam due to the producer's:

apparent authority Because, Though accepted by insurers as a practical aspect of business, implied authority is not specified in contracts or related agreements.

The purpose for the Buyer's Guide, which must be given to every insurance prospect in the first meeting with a producer, is to:

explain the general features, benefits, and conditions of the type of insurance being considered Because Provided to a prospective buyer when he or she is first solicited, the Buyer's Guide explains the general features, benefits, and conditions of the type of insurance being considered.

When first meeting prospective insurance applicants, a producer must give them a document that explains the general features, benefits, and conditions of the type of insurance being considered, which is called a

buyer's guide Because Correct. Most states require that a buyer's guide be provided to a prospective buyer in the first meeting with the producer.

All the following statements regarding apparent authority are correct EXCEPT:

The insurer is not liable for an agent's acts when he or she is acting under apparent authority. Because In addition to the duties an agent owes to the insurer, the agent also must act only in the best interests of the applicant or insured.

Example Consider Joe, a life insurance producer, and his exercise of the three levels of agent's authority:

1- Express authority—As expressly written in his producer contract with the insurer, Joe executed the sale of a life insurance policy by meeting with a prospective client, reviewing her financial needs, recommending a life insurance product, and assisting her in completing and signing an application. 2-Implied authority—Prior to meeting with the prospect, Joe had mailed her some insurer-approved promotional material and called her to request and schedule a meeting. Though these actions are not expressly listed in his contract, the authority to do them is implied as a normal part of a producer's job. 3-Apparent authority—Six months after the policy was issued, the client misses a premium payment by the end of the premium grace period. Although the insurer has strict rules about not accepting late premiums, Joe accepts her late payment and tells her the policy will not lapse. He mails the check to the insurer, who processes it several days later instead of lapsing the policy. What happens if the client dies while the insurer is processing the late payment? By not lapsing the policy the insurer must pay the death benefit since it supported Joe's apparent authority to accept the late premium payment.

All the following statements regarding apparent authority are correct EXCEPT:

The insurer is not liable for an agent's acts when he or she is acting under apparent authority. Because Apparent authority is authority that the contract does not create and the insurer does not intend. It appears to belong to the agent based on the agent's reasonable statements and the actions (or inactions) of the insurer. Because apparent authority seems to the customer to belong to the agent, the insurance company may be liable for the agent's acts, even though the insurer did not allow those acts either expressly or by implication.

In its fiduciary responsibility to its principal, a producer is required to do all the following EXCEPT:

solicit business that is certain to be profitable to the insurer Because While producers are expected to use care not to present unsuitable applicants to insurers, it is understood that some business will lapse early or incur unexpected claims and thus not be profitable.

The main purpose for errors and omissions insurance (E&O) is to:

cover damages that arise due to services a producer non-willfully failed to render Because E&O insurance covers injuries and damages that occur due to professional services a producer rendered or failed to render without the willful intent to injure the customer.

An insurance producer's responsibilities to insurance applicants include all the following EXCEPT:

offer the same rebate to every applicant Because, Every state prohibits rebating, which is refunding or offering to refund a portion of the premium or anything of value in return for the applicant's purchase of a policy.

With respect to the field of insurance, who are the two parties bound by the law of agency?

the insurance company and the producer Because Insurers and their producers are bound by the law of agency.