Statutes, Rules, and Regulations Common to all Lines
Which of the following is another term for an authorized insurer? ALicensed BLegal CAdmitted DCertified
Admitted Insurers who meet the state's financial requirements and are approved to transact business in the state are considered authorized or admitted into the state as a legal insurer.
What is the maximum amount that an insurer may be assessed for the Insurance Fraud Prevention Unit Fund? A$200 B$250 C$1,000 D$5,000
$250 An insurer may be assessed up to $250 for the Insurance Fraud Prevention Unit Fund.
What is the minimum time period for which producers must keep records of insurance transactions under their license? A2 years B3 years C5 years D6 years
5 years Insurance producers must keep records pertaining to transactions under their license, at the insurance producer's place of business, for a period of at least 5 years after completion of each transaction.
What is the maximum percentage of continuing education hours a licensee may receive from 1 insurance company's courses? A75% B25% C30% D50%
50% Only 1/2 of the required continuing educations hours can be received from courses sponsored by any one insurance company.
If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered to be AQualified. BApproved. CAuthorized. DCertified.
Authorized. Insurers who meet the state's financial requirements and are approved to transact business in the state are considered authorized or admitted into the state as a legal insurer.
Which type of misrepresentation persuades an insured, to their detriment, to cancel, lapse, or switch policies from one to another? AFalse advertising BRebating CTwisting DSwitching
Twisting "Twisting" is a misrepresentation that persuades an insured/owner, to their detriment, to cancel, lapse, or switch policies from one to another.
In order to comply with continuing education regulations in South Dakota, licensees must fulfill specific requirements every AYear. B2 years. C3 years. DYear for the first five years and then every 2 years thereafter.
2 years. During every two-year compliance period, producers transacting life or health insurance or variable contracts must satisfactorily complete at least 10 hours of approved continuing education in courses that are appropriate for the lines of insurance they transact. Producers holding two or more licenses must complete at least 20 hours of continuing education.
What is a foreign insurer? AAn insurer with licensed agents doing business in other countries BAn insurer with licensed agents who are citizens in more than one country CAn insurer with a home office in another state DAn insurer with a home office in another country
An insurer with a home office in another state A domestic insurer's home office is in this state, a foreign insurer's is in another state, and an alien insurer's is in another country.
What is the major difference between a stock company and a mutual company? ATypes of policies issued BOwnership CAmount of benefits DNumber of producers
Ownership Mutual companies are owned by policyholders, while stock companies are owned by stockholders.
A producer in another state wants to become a producer in South Dakota. The other state gives the same privileges to South Dakota producers wanting to be licensed in that state as it does its own producers. South Dakota therefore extends the privileges of its producers to the prospective producer of the other state. What is this called? AFair exchange BEquanimity CEqual privilege DReciprocity
Reciprocity "Reciprocity" occurs when the state in which the person resides accords the same privilege to residents of South Dakota.
Who might receive dividends from a mutual insurer? ASubscribers BStockholders CAgents DPolicyholders
Policyholders A mutual insurer has no stock, and is owned by the policyholders. Since they may receive a dividend (not guaranteed), such policies are known as participating policies. Dividends received by policyholders of a mutual insurer are not taxable.
The Director of Insurance may issue a temporary insurance producer license without requiring an examination for a period ANot to exceed 90 days. BNot less than 60 days or more than 120 days. CNot less than 30 days or more than 90 days. DNot to exceed 180 days.
Not to exceed 180 days. The Director may issue a temporary insurance producer license for a period not to exceed 180 days without requiring an examination if the Director determines that the temporary license is necessary for the servicing of an insurance business in the interest of the insured public.
If an insurance license is terminated, what must the ex-producer do with the license? AThe producer must return the license to the Director BThe producer must surrender the license to his/her employer CThe producer can keep the license DThe producer must destroy the license
The producer must return the license to the Director Upon termination of a license, the producer or someone on the producer's behalf must deliver the license to the Director by personal delivery or mail.
Insurance producer licenses are the property of AThe Director. BThe Governor. CThe producer. DThe state.
The state. Although issued and delivered to the producer, insurance licenses are the property of the state of South Dakota.
A South Dakota producer wants to obtain a producer's license in another state. This state waives the written examination requirement, assuming that the producer has passed an examination in South Dakota. If a producer from that state has passed that state's exam and wants to apply for a nonresident license in South Dakota, what will most likely happen? AThe written examination requirement will be waived. BIf South Dakota requires nonresident producers to take the written examination, then this person will have to take the exam. CThe producer will have to complete the CE requirements in both states before becoming a non-resident. DThe written examination will be required, regardless of the other state's requirements, since it is required of South Dakota producer candidates.
The written examination requirement will be waived. South Dakota is reciprocal in its licensing of nonresident producers. This means that South Dakota offers producers licensed in another state the same privileges that the other state offers South Dakota producers requesting nonresident licenses.
When a producer is making the mandatory report for any administrative action taken against an insurance license by any governmental agency, the report must include AA copy of the court order stating the charges levied against the producer's license. BA formal apology to the Director of Insurance for bringing such actions against the insurance industry of this State. CA formal affidavit detailing the actions taken and any fines or penalties levied. DA copy of the order, consent to order, or other relevant legal documents.
A copy of the order, consent to order, or other relevant legal documents. When a producer is making the mandatory report for any administrative action taken against an insurance license by any governmental agency, the report must include a copy of the order, consent to order, or other relevant legal documents.
If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered AAn unfair trade practice. BA misrepresentation. CA required disclosure. DA legal representation of the Association.
An unfair trade practice. It is an unfair trade practice to make any statement that an insurer's policies are guaranteed by the existence of the Insurance Guaranty Association. Though it is illegal to advertise, the statement is still true and would not be considered a misrepresentation.
Which of the following is NOT true regarding a Certificate of Authority? AIt is equivalent to an insurance license. BIt is issued by the state department of insurance. CIt is issued to group insurance participants. DIt may be necessary for transacting business in a specific state.
It is issued to group insurance participants. Before insurers may transact business in a specific state, they must apply for a license or Certificate of Authority from the state department of insurance and meet any financial (capital and surplus) requirements set down by the state.
Which of the following is NOT considered a misrepresentation as it pertains to unfair trade practices? AStating that the insurance policy is a share of stock BExaggerating the benefits provided in the policy CStating that the competitors will arbitrarily increase their premiums each year DMaking comparisons between different policies
Making comparisons between different policies Making accurate comparisons of policies is not illegal.
A participating insurance policy may do which of the following? AProvide group coverage BPay dividends to the stockholder CRequire 80% participation DPay dividends to the policyowner
Pay dividends to the policyowner A participating insurance policy will pay dividends to the owner based upon actual mortality cost, interest earned and costs.
Producer licenses must be renewed every 2 years, on or before AThe producer's birthday. BThe license's anniversary date. CThe first of the year. DThe last day of the producer's birth month.
The last day of the producer's birth month. Producer licenses must be renewed every 2 years, on or before the last day of the licensee's birth month.
Which of the following would NOT be a violation of state insurance regulations? AAgent A uses her license to write only insurance for herself and her immediate family. BAgent B charges his clients a consulting fee, in addition to the premium for placing a policy. CAgent C uses her license to write only business other than controlled. DAgent D collects premiums due on policies and deposits the funds in his own personal account.
Agent C uses her license to write only business other than controlled. The purpose of a license is to primarily write business other than controlled business.
What type of crime constitutes issuing insurance policies without a license? AFelony BLarceny CIssuing insurance without a license is not a crime. DMisdemeanor
Misdemeanor Individuals selling, producing, or issuing insurance policies without a license are subject to a Class 2 misdemeanor.
On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are AGuaranteed. BNot taxable since the IRS treats them as a return of a portion of the premium paid. CPaid at a fixed rate every year. DTaxable as ordinary income.
Not taxable since the IRS treats them as a return of a portion of the premium paid. With participating policies, policyowners are entitled to dividends, which, in the case of mutual companies, are nontaxable because they are considered a return of excess premiums.
The Director of Insurance may issue a temporary insurance producer license without requiring an examination for a period ANot less than 30 days or more than 90 days. BNot to exceed 180 days. CNot to exceed 90 days. DNot less than 60 days or more than 120 days.
Not to exceed 180 days. The Director may issue a temporary insurance producer license for a period not to exceed 180 days without requiring an examination if the Director determines that the temporary license is necessary for the servicing of an insurance business in the interest of the insured public.
If a producer has administrative action taken against his license, he must report such action AWithin 30 days of the final disposition on such action. BWithin 10 days of the pretrial hearing on such action. CWithin 10 days of the final disposition on such action. DWithin 30 days of the pretrial hearing on such action.
Within 30 days of the final disposition on such action. A producer must report to the Director of Insurance any administrative action taken against such producer in another jurisdiction or by another governmental agency in the commonwealth within 30 days of the final disposition of the matter.
Once the Director issues a Cease and Desist order, a hearing must occur no later than how many days after the date of the order? A10 B15 C20 D30
20 The Director can issue an order requiring anyone to stop an action that violates insurance laws. This is called a Cease and Desist Order. The order must set the time and place for a hearing, which must occur between 10 and 20 days after the date of the order.
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? AA legal advertising strategy BUnfair Discrimination CDefamation DIllegal
Illegal It is illegal to participate in any boycott, coercion, or intimidation that is intended to restrict fair trade or create a monopoly.
Which of the following must an insurer obtain in order to transact insurance within a given state? ACertificate of authority BProducer's certificate CBusiness entity license DInsurer's license
Certificate of authority All insurers (domestic, foreign, or alien) must obtain a certificate of authority before transacting insurance within a given state.
circulating deceptive sales material to the public is what type of Unfair Trade Practice? ADefamation BCoercion CMisrepresentation DFalse advertising
False advertising This is considered to be false, deceptive or misleading advertising.
How long does a licensee have to pay renewal fees and reinstate a license without having to retake and pass the written examination? A30 days B6 months C12 months D24 months
12 months Upon license expiration, a licensee must pay a renewal fee within 12 months to reinstate their license. If the renewal fee is not paid during this time period, the licensee must retake and pass the written examination.
State law specifically prohibits using illegal inducements in the marketing of insurance. All of the following would be considered illegal inducements EXCEPT AOffering benefit certificates or securities in return for purchasing insurance. BInviting prospective clients to the grand opening of the company's new office. CIssuing or delivering insurance company stock in return for purchasing insurance. DPromising returns and profits from the purchase of insurance.
Inviting prospective clients to the grand opening of the company's new office. Inducement is an illegal practice. It involves offering anything of value to a prospective client that is not specified in the policy as an incentive to buy insurance. Stock, bonds, benefit certificates, dividends or profits could be used as inducement.
If a person is suspected of violating insurance laws, what can the Director issue that would order the person to stop violating the violations? AStop-Action Order BSuspension of Authority CLimitation of Power Statement DCease and Desist Order
Cease and Desist Order The Director can issue an order requiring anyone to stop an action that violates insurance laws. This is called a Cease and Desist Order. The order must set the time and place for a hearing, which must occur between 10 and 20 days after the date of the order.
Which of the following would be considered an illegal inducement to purchase insurance? AMailing an agency brochure to a prospective client BListing the insurance companies the agency represents in a letter CInviting prospective clients to the grand opening of the producer's new office DConfirming future dividends in a life insurance proposal
Confirming future dividends in a life insurance proposal A participating life insurance policy may pay a portion of its net earnings to a policyholder, but dividends cannot be guaranteed.
When a producer was reviewing a potential customer's coverage written by another company, the producer made several remarks that were maliciously critical of that other insurer. The producer could be found guilty of ADiscrimination. BNothing, unless the remarks were in writing CDefamation. DMisrepresentation.
Defamation. A producer or broker who makes oral or written statements intended to injure another producer or insurer is guilty of the unfair trade practice of defamation.
It is suspected that a producer is consistently violating insurance laws. Which of the following entities is responsible for making sure that the producer stops committing these violations? ASouth Dakota's Insurance Board BDirector CNAIC DFederal Insurance Regulation Bureau
Director The Director can issue an order requiring anyone to stop an action that violates insurance laws. This is called a Cease and Desist Order. The order must set the time and place for a hearing, which must occur between 10 and 20 days after the date of the order.
Which of the following best describes the unfair trade practice of defamation? AIssuing false advertising material BRefusing to deal with other insurers CMaking derogatory oral statements about another insurer's financial condition DAssuming the name and identity of another person
Making derogatory oral statements about another insurer's financial condition Making oral or written statements directly or indirectly which are derogatory or maliciously critical of another insurer would be an example of the unfair trade practice of defamation.
ll of the following would be considered an insurance transaction EXCEPT AObtaining an insurance license. BSoliciting a policy. CAdvising a policyholder regarding a claim. DNegotiating coverage.
Obtaining an insurance license. An insurance transaction means the carrying on of business in insurance, which could include the solicitation of a policy, advising, negotiation, or inducement related to coverage or claims. Obtaining an insurance license is a prerequisite to transacting insurance.
To avoid participating in unfair or deceptive insurance practice, a producer must reply to an inquiry from the Division of Insurance within how many days? A3 days B10 days C15 days D20 days
20 days It is considered an unfair or deceptive insurance practice on the part of a producer to fail to respond to an inquiry from the Division of Insurance within 20 days of receipt of the inquiry.
An insurer that holds a Certificate of Authority in the state in which it transacts business is considered a/an ALocal insurer. BCertified insurer. CSelf-insurer. DAuthorized insurer.
Authorized insurer. Insurers who meet the state's financial requirements and hold a Certificate of Authority to transact business in the state are considered authorized or admitted.
Once a person applies, the Director determines if the person is eligible to be an insurance producer. Which of the following is NOT something the Director verifies? AThe applicant's age BThat the applicant has not committed any act that is grounds for license denial CThat the applicant has paid the appropriate fees DThe applicant's educational background
The applicant's educational background In the process, the Director also verifies that the applicant has successfully passed the examination.
In lieu of refusal, revocation, or suspension of a license for an individual producer, after a hearing, the Director may impose a fine of up to A$1,000 B$5,000 C$10,000 D$25,000
$5,000 In lieu of license refusal, revocation, or suspension, after a hearing, the Director may impose a fine up to $5,000 for an individual insurance producer or up to $25,000 for an insurer.
Which type of misrepresentation persuades an insured, to their detriment, to cancel, lapse, or switch policies from one to another? ASwitching BFalse advertising CRebating DTwisting
Twisting "Twisting" is a misrepresentation that persuades an insured/owner, to their detriment, to cancel, lapse, or switch policies from one to another.
Insurance producer licenses are the property of AThe Governor. BThe producer. CThe state. DThe Director.
The state. Although issued and delivered to the producer, insurance licenses are the property of the state of South Dakota.
Forcing a client to buy insurance from a particular lender as a condition of granting a loan is defined as ARebating. BMisleading advertising. CDefamation. DCoercion.
Coercion. These are all considered to be Unfair Trade Practices, which are major violations that can lead to heavy penalties. Coercion, for example, is when the bank won't give you an auto loan unless you agree to buy auto insurance from them.
All criminal convictions of producers must be reported to which of the following? AFederal Insurance Regulation Board BState Insurance Board CDirector DNAIC
Director All criminal convictions, including crimes of moral turpitude of producers, are to be reported to the Director.
When doing business in this state, an insurance company that is formed under the laws of another state is known as which type of insurer? ADomestic BAlien CNonadmitted DForeign
Foreign A foreign insurer is one that is formed under the laws of another state. A nonadmitted or unauthorized insurer is an insurance company that has not applied for, or has applied and been denied a Certificate of Authority and may not transact insurance.
Which of the following is an example of an agent's fiduciary responsibilities? AForwarding premiums to the insurer BHelping clients to file claims CPerforming a review of clients' coverage DOffering additional coverage to a client
Forwarding premiums to the insurer Fiduciary refers to a position of trust. When an agent is handling the premiums that belong to an insurance company, they are acting in a fiduciary capacity.
Which of the following entities is not an insurer but an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization? AStock company BReciprocal association CFraternal benefit society DMutual company
Fraternal benefit society Fraternal insurers operate on the basis of a lodge or charitable organization, but they may also sell formal insurance plans for the benefit of their members. Reciprocal insurers are also associations that provide insurance for their members, but they are formed only for the purpose of providing insurance.
An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy? AReciprocal BNonprofit service organization CStock DMutual
Mutual Funds not paid out after paying claims and other operating costs are returned to the policyowners in the form of a dividend. If all funds are paid out, no dividends are paid.
ow many continuing education hours carry over from 1 compliance period to the next? A3 hours B2 hours CUnlimited DNone
None Continuing education hours cannot be carried over from 1 compliance period to another.
If a person is suspected of violating insurance laws, what can the Director issue that would order the person to stop violating the violations? ASuspension of Authority BLimitation of Power Statement CCease and Desist Order DStop-Action Order
Cease and Desist Order The Director can issue an order requiring anyone to stop an action that violates insurance laws. This is called a Cease and Desist Order. The order must set the time and place for a hearing, which must occur between 10 and 20 days after the date of the order.
To legally transact insurance in this state, an insurer must obtain which of the following? ABusiness entity license BCertificate of Insurance CCertificate of Authority DPower of Attorney
Certificate of Authority A Certificate of Authority is required in order to transact insurance.
All criminal convictions of producers must be reported to which of the following? ADirector BNAIC CFederal Insurance Regulation Board DState Insurance Board
Director All criminal convictions, including crimes of moral turpitude of producers, are to be reported to the Director.
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? AAdverse selection BDiscrimination CLaw of large numbers DMisrepresentation
Discrimination Permitting individuals of the same class to be charged a different rate for the same insurance is the unfair trade practice of discrimination.
Which of the following best describes an insurance company that has been formed under the laws of this state? ADomestic BSovereign CAlien DForeign
Domestic A company is domestic when doing business within the state in which it is incorporated.
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? AUnfair Discrimination BDefamation CIllegal DA legal advertising strategy
Illegal It is illegal to participate in any boycott, coercion, or intimidation that is intended to restrict fair trade or create a monopoly.
How many hours of continuing education requirements must producers with one license complete every 2 years? A10 B15 C20 D25
10 During every 2 year compliance period, most producers transacting a single line of insurance are required to satisfactorily complete 10 hours of approved continuing education (in courses appropriate for the insurance transacted). Most producers holding more than 2 licenses must complete 20 hours of continuing education.
Which of the following would be required to be licensed as an insurance producer? AA person whose activities are limited to producing insurance advertisements BA salaried full-time employee who furnishes information for group insurance CAn insurance company director who performs executive, administrative and managerial duties DA salaried employee who advertises and solicits insurance
A salaried employee who advertises and solicits insurance A person does not require an insurance producer license if they only advertise without intent to solicit insurance. However, once there is solicitation, a license is required.
All of the following are reason that the Director of Insurance may issue a temporary insurance producer license EXCEPT ATo the designee of a licensed insurance producer entering reserved status in the armed forces of the United States. BIn any other circumstance where the Director deems that the public interest will best be served by the issuance of this license. CTo the surviving spouse of a licensed insurance producer who becomes disabled. DTo a member of a business entity licensed as an insurance producer, upon the death of an individual designated in the business entity application.
ATo the designee of a licensed insurance producer entering reserved status in the armed forces of the United States.
a producer has administrative action taken against his license, he must report such action AWithin 30 days of the final disposition on such action. BWithin 10 days of the pretrial hearing on such action. CWithin 10 days of the final disposition on such action. DWithin 30 days of the pretrial hearing on such action.
AWithin 30 days of the final disposition on such action. A producer must report to the Director of Insurance any administrative action taken against such producer in another jurisdiction or by another governmental agency in the commonwealth within 30 days of the final disposition of the matter.
In which of the following situations is it legal to limit coverage based on marital status? AIt is never legal to limit coverage based on marital status. BExcessive number of divorces, as defined by the Insurance Code CLegal separation during the application process DDivorce within the last six months of applying for insurance
It is never legal to limit coverage based on marital status. Availability of insurance benefits or coverage may not be denied based on sex or marital status. Marital status may be considered for the purpose of defining persons eligible for dependent benefits.
Which of the following insurers are owned by stockholders? AReciprocal BFraternal CStock DMutual
Stock Only stock insurance companies are owned and controlled by stockholders.
One of the officers of an insurance corporation is convicted of violating a state insurance law, and his license is revoked. What is the worst possible effect that this could have on the corporation? AA fine of $20,000 BThe corporation's license could be revoked. CThe corporation must be liquidated. DThe officer will no longer be allowed to work for this corporation.
The corporation's license could be revoked. A firm or corporation license can be refused, suspended or revoked if one of its licensees, officers or directors commits any of the activities for individual suspension.
In lieu of refusal, revocation, or suspension of a Certificate of Authority for an insurer, after a hearing, the Director may impose a fine of up to A$5,000 B$10,000 C$25,000 D$50,000
$25,000 In lieu of license refusal, revocation, or suspension, after a hearing, the Director may impose a fine up to $5,000 for an individual insurance producer or up to $25,000 for an insurer.
An insurer has terminated an agent's appointment. How soon must the insurer inform the Director? A30 days B15 days C10 days D5 days
30 days The Director must be notified within 30 days of appointment termination.
Which of the following persons is required to hold a producer license? AA person who administers employee benefits BA person who negotiates insurance contracts CA person who creates insurance advertisements DA person who takes messages related to claims
A person who negotiates insurance contracts Persons who perform clerical tasks that are not related to soliciting or negotiating insurance contracts are not required to be licensed.
An insurance company is domiciled in Montana and transacts insurance in Wyoming. Which term best describes the insurer's classification in Wyoming? AUnauthorized BForeign CAlien DDomestic
Foreign A foreign insurer is domiciled in one state and transacts insurance in another. A domestic insurer transacts insurance in the domicile state (in this case, Montana). An alien insurer is domiciled in one country and transacts insurance in another.
A producer may obtain a loan from a client AIf there is a written contract that includes terms for repaying the loan. BIf the producer would be unable to pay a claim by the client without the loan. CUnder any circumstances. DOnce the client's contracts are transferred to another producer.
If there is a written contract that includes terms for repaying the loan. A producer can get a loan from a client, but only if there is a written contract the spells out how the loan will be repaid.
The Director of Insurance may issue a temporary insurance producer license without requiring an examination for a period ANot less than 60 days or more than 120 days. BNot less than 30 days or more than 90 days. CNot to exceed 180 days. DNot to exceed 90 days.
Not to exceed 180 days. The Director may issue a temporary insurance producer license for a period not to exceed 180 days without requiring an examination if the Director determines that the temporary license is necessary for the servicing of an insurance business in the interest of the insured public.
