Law Quiz #2

A producer advertised a discount of premium via a clip out coupon. The advertisement was brought to the attention of the Commissioner who...

May issue a statement that the producer appears to be in violation of rebating laws, with a scheduled hearing date

A complaint was lodged against a producer. The producer began explaining whole life insurance, then swayed the client to a term policy without explaining the difference and offered the client a Walkman if she bought insurance. What could happen?

1. Commissioner may subpoena client & producer to a hearing. 2. Producer may be liable for a penalty up to $5,000 first offense and $10,000 each subsequent offense. 3. Commissioner may revoke producer's license before hearing if in public interest.

Examples of Unfair Claim Settlement Practices include...

1. Compelling insured to institute suit to recover amounts due, by offering substantially less than the amounts ultimately recovered 2. Failing to deny coverage within a reasonable time after proof of loss 3. Failing to acknowledge or act in reasonably prompt manner upon communication with respect to a claim

Under the provision of Unfair Trade Practices, false advertising of policies are a violation. However, the specific provision regarding false advertising...

1. False advertising in general 2. Untrue statements about the business of insurance 3. Untrue statements with respect to any person in the context of his/her insurance business

Regarding business names...

1. If the word insurance or equivalent is in the name, must be joined with words such as agency or brokerage 2. No business name will be accepted if it implies affiliation with a government agency 3. A 90 day prior approval is available from the DOBI **No business name will be accepted it was ever used by a previous owner of an agency**

An insurance producer's license is required for...

1. Insurance broker 2. Insurance agent 3. Insurance consultant

The agency relationship between company and producer...

1. It must be established by a written contract executed by both parties. 2. The insurer must advise the Department by the 15th day after execution of contract by filing a Notice of Agency Contract 3. Must contain the duties, responsibilities, and limitations between both parties.

State insurance regulation is provided through...

1. Legislation 2. Administrative Action 3. Court Action

The New Jersey Commissioner has the authority to...

1. Maintain suitable headquarters for the department 2. Appoint advisory committees 3. Make an annual report to the governor

Premium Funds...

1. Must be held in trust accounts 2. Are held by the producer in a fiduciary capacity 3. Must be remitted to the insurer within 5 business days after receipt of funds

A non-resident insurance producer organization must do which of the following to secure a non-resident license

1. Provide certification from the Insurance Licensing Department of the state where it maintains a principal showing it holds a current valid license 2. Apply to the Commissioner for a non-resident license 3. Certify that all owners of the organization are of good character

Failure to submit the renewal application prior to the date of expiration is deemed to establish...

1. The license expired on the date shown 2. The license is no longer authorized to engage in any activity for which the license is required 3. The producer may not sell new insurance; but may receive renewals

In lieu of a report from any hearing in which the Commissioner has assigned a staff member to preside, which of the following may be used for determination purposes?

1. The record presented 2. Filed briefs by parties to the hearing 3. Oral arguments from the parties to the hearing

Courts may be used in each of the following ways..

1. They may be used in private actions against an Insurance Commissioner 2. They may be petitioned by an Insurance Commissioner to enforce compliance with laws 3. They may be asked to review rate increases allowed by the Comissioner

Licenses must submit renewal applications no later than ____ the license expiration date for no lapse in authority.

10 days before

No insurance producer license will be issued to an organization that is owned, operated, or controlled by a person who has had an insurance license revoked in any state within the past....

10 years (5 years producer; 10 years organization)

Each producer is responsible for the maintenance of his/her own license (address changes, additional authorities, and renewal). Licenses are issued for...

2 years

If a producer successfully proved no knowledge of a violation of a Cease and Desist Order, the fine for the violation may not exceed...

$1,000

No service fee for any one policy may exceed...

$20.00

A producer was found guilty of violating rebating law on THREE occasions. What is the maximum fine the Commissioner may impose?

$25,000 ($5,000 first offense, $10,000 for second and third)

Illegal inducements to buy insurance are considered to be any valuable consideration in the amount of...

$25.00 or more

Once the Commissioner has issued a Cease and Desist Order, to a producer concerning unfair trade practices, the producer may be fined up to _____ for repeated violations.

$5,000

After passing the state test, a candidate must apply for a license within...

1 year

New Jersey resident organization producers must:

1. Be domiciled in NJ or authorized by the Secretary of State to do business in this state 2. Show proof that partners, officers, directors, owners are of good reputation 3. Engage in the business of insurance with the general public and no principally for its own use

Insurance producers who need to add another authority...

1. Current license requesting additional authority, dated, and signed by applicant 2. If resident, certificate evidencing completion of approved prelicensing course or waiver 3. If resident, certificate passing of the state licensing exam

Once a hearing determination dissolves a practice as not violating any rules, any intervener in the proceedings may institute an action in the Superior Court to restrain the practice within how many days after the determination is made?

30 days

A non-resident insurance organization may apply for a producer license if it submits...

A certification from the licensing agency of the state where it maintains its principal office showing the organization holds a current valid license.

A business name means....

A legal name of the corporation or partnership and any trade name under which business in conducted

NOT TRUE regarding the hearing process of the Department of Insurance...

A license cannot be suspended before the outcome of the hearing

Limited Insurance Representative

A person authorized to effect contracts for a particular line (Such as Credit Life, Credit Health, etc)

The Commissioner can revoke the license of each of the following EXCEPT..

A producer who acts as a broker for a client who collects a service fee from the insured with a written memorandum signed by the client

No insurance producer's license will be renewed unless...

A renewal application is submitted online by the producer

Who can be compelled to testify at a hearing conducted by the Commissioner backed by threat of punishment for contempt of court for refusal?

Anyone

A Notice of Hearing may request the insurer to produce...

Books, records, and documents

Activities that do NOT require an insurance producer's license...

Collecting premiums at the place of business

The main objective of the examination of insurers by State Insurance Departments is to determine...

Continued solvency of the insurers

New Jersey resident organization insurance producer's license issued for the life insurance authority allows the organization to transact business in which line of insurance?

Contracts on a variable basis, life insurance and annuities

The applicant for a producer license must submit (if requested)

Copies of any petitions or complaint in bankruptcy or discharge in bankruptcy

The existence of a business relationship between two licensed producers by which each acts as an independent contractor...

Does not require filing of any notice to the Department

Prior to contracting with a license producer, the insurance company and the producer must

Execute a written contract describing the duties and responsibilities of each

New Jersey licensed producers...

Have passed an insurance examination within one year preceding the date of application

A producer worked for another producer. The employing producer returned portions of premiums to the insured. An employee was involved in ten transactions before realizing the employer was engaging in this activity. What would happen?

If the employee is directed to give testimony, he/she must do so and will not be subjected to any penalties.

The Department issue a license status on...

Individuals not currently licensed but were licensed at sometime during the past 4 years

United States vs. South Eastern Underwriters Associatio (SEUA)

Insurance IS commerce and subject to federal regulation

1868 Paul vs. Virginia

Insurance is NOT a transaction of commerce

Who must hold an insurance producer's license

Insurance representatives who collect commissions but do not solicit, negotiate or effect insurance

What does not require a public hearing?

Internal management decisions made by the Comissioner

Payment and renewal commissions to any individual who ceased to hold a license...

Is permitted only for business produced while that person was licensed

Applications for an insurance producer license may be rejected for which of the following reasons?

Lack of criminal history check form (Electronic fingerprinting required)

What is a disadvantage of individual state regulation?

Lack of uniformity with other states

Insurance consultants MUST BE

Licensed producers

A contract deeming that an insurance producer is authorized to act as an agent for an insurer...

Must contain duties, responsibilities and limitations of authority between the agent and the company

Any licensee who trades or advertises using a fictitious name...

Must file a certified copy of the fictitious name certificate issued by the Secretary of State/County Clerk

Once the Insurance Commissioner finds an insurance producer is in violation of an insurance rule, the person affected is...

Not absolved from further liability

The commissioner can voluntarily conducts a hearing before taking action, who needs to be notified?

Persons, firms, corporations and other legal entities affected

Non-resident licensees must...

Remain currently licensed in his/her home state for comparable authority as held in NJ

The New Jersey Insurance Commissioner may

Repeal rules and regulations

The administrative powers of the Insurance Commissioner are derived from

Statutes, which create the office

When the Insurance Commissioner authorizes a staff member to conduct a hearing...

Subpoenaed witnesses may be examined under administrative oaths

Temporary certificates may be utilized...

The applicant has submitted the required licensing paperwork for the issuance of an original license

Notice and hearing procedures involving official rules may be review by whom to make the determination that the Commissioner has conformed with state statutes?

The court

An initial insurance producer license is deemed effective..

The date of issuance of any temporary certificate

If a producer takes material from the insured pertaining to an existing insurance policy...

The insured must be provided with a written receipt

First offense for any insurance law...

Up to $5,000

The producer is required to register with the NASD in order to sell which of the following

Variable Life

A producer must advise the DOBI of the change of business or home address with in 30 days. How may the producer notify the department?

Write a letter to the Department of Insurance

Effectuate

the act of insuring

Applicants who are denied licenses must receive...

A written reason for denial

When a producer's organization license is canceled...

All current licensed officers or partners must consent to the request

Public Law #15 (McCarran/Ferguson Act) established the regulation of the insurance business

Allowing state regulation of insurance transactions (Regulating insurance rests with the states but the federal government may ultimately regulate)

Branch Office...

An office in NJ other than a principal office where a resident licensee conducts insurance business

Solicitation

Any activity which is designed to initiate the purchase of insurance

The Department's responsibility in notifying a part of a scheduled hearing directly affecting him/her involves

Mailing a registered or certified letter to the last known address

Defamation

False and maliciously critical statements about the financial condition of insurer causing injury

Any licensee or insurer representative who fails to comply with a subpoena issued by the Insurance Company...

May be punished by the Superior Court for contempt

Five authorities that can be held by a New Jersey Insurance producer are...

Life, Health, Property/Casualty, Surplus Lines, and Title

If an insurance producer is find by a local entity for practices regarding insurance trade...

The Insurance Commissioner may impose additional penalities

The insurance industry in New Jersey is regulated by

The Legislature, The Courts, The Executive Branch

Who is appointed as agent to receive service of original legal process in this state in any cause of action or legal proceeding arising with this state -- when a non-resident insurance producer is issued a license

The New Jersey Commissioner of Insurance

Required to sell Worker's Compensation...

The Property and Casualty Authoirty

All insurance licenses at all times belong to...

The State of New Jersey

Negotiate

The act of conferring with a prospective purchaser of insurance regarding benefits