Test 1

50. A policy that lists the perils against which property is covered is: a. A named peril policy. b. A standard policy. c. An all risk policy. d. None of the above.

a. A named peril policy.

30. An agency system where the producer may NOT represent other insurance companies is: a. General Agency b. Exclusive Agency c. Direct Writers d. American Agency

b. Exclusive Agency

15. The Insurance Commissioner is elected to a ______ year term of office. a. Two b. Four c. One d. Six

b. Four

16. According to federal law, the term of imprisonment for fraudulent acts may be as high as 15 years for which of the following reasons? a. Embezzlement of less than $5,000. b. Fraudulent acts jeopardizing the safety and soundness of the insurer. c. Failure to report fraudulent actions to the appropriate authorities. d. Both A and B.

b. Fraudulent acts jeopardizing the safety and soundness of the insurer.

11. Property and Casualty licenses MUST be renewed: a. Every year. b. In odd numbered years. c. In even numbered years. d. Every four years.

b. In odd numbered years.

6. Which of the following may NOT receive a temporary license? a. Joe is the executor of a deceased producer's estate. b. John failed his test by one point, but is going to retake it next month. c. Sally is the wife of a recently disabled producer. d. Secretary working in the agency.

b. John failed his test by one point, but is going to retake it next month.

32. Leaving your car keys in your car ignition is an example of a: a. Moral Hazard b. Morale Hazard c. Legal Hazard d. Physical Hazard

b. Morale Hazard

33.Insurance company owned by policyholders is: a. Stock company b. Mutual company c. Reciprocal insurance company d. Fraternal benefit society

b. Mutual company

39. Insurance that insurance companies buy on insurance they sell is: a. Surplus line b. Reinsurance c. Speculative d. Pure

b. Reinsurance

44. When the company MUST rely on the accuracy of the insured's statement and the insured MUST rely on the company's ability to fulfill its promise: a. Aleatory b. Utmost good faith c. Adhesion d. Unilateral

b. Utmost good faith

13. What is the MAXIMUM fine per act they may be imposed for a willful violation of a cease and desist order issued by the commissioner: a. $500 b. $1,000 c. $25,000 d. $5,000

c. $25,000

9. The MAXIMUM term a temporary license may be issued for is: a. 6 months b. 1 year c. 180 days d. 2 months

c. 180 days

14. A person aggrieved by any order of the commissioner on a hearing may appeal and demand a court review. He appeals to the: a. Insurance Commissioner b. Rating commission c. 19th JDC d. His sponsoring agency

c. 19th JDC

7. When an organization demands a hearing before the commissioner for a legitimate reason, the hearing MUST be held within _____ days. a. 5 b. 20 c. 30 d. 10

c. 30

8. After a hearing has concluded, in most cases the Commissioner will issue an order on the hearing within: a. 10 days b. 20 days c. 30 days d. 60 days

c. 30 days

48._________ is an intentional or voluntary relinquishment of a known right. a. An Estoppel b. Indemnity c. A Waiver d. Fraud

c. A Waiver

42. A legal agreement in which two or more parties promise a certain performance in return for a certain consideration from the other is known as: a. An offer b. A consideration c. A contract d. An acceptance

c. A contract

4. Producers holding and renewing both P&C and L&H licenses require ____ hours of continuing education. a. 24 b. 20 c. 32 d. 12

a. 24

34.An insurance company formed and doing business in Louisiana is: a. Foreign b. Domestic c. Alien d. None of the above

b. Domestic

2. An individual or firm is fined a $50 fine for NOT reporting a change of address within ____ days. a. 10 b. 30 c. 60 d. 180

a. 10

45. Principle of Indemnity means: a. A person suffering a loss should be restored to approximately the pre-loss financial condition. b. A person suffering a loss should have the use of something of equal value until such time as the loss is indemnified. c. A person suffering a loss may end up in a better financial condition than that before the loss. d. Settlement of claims has nothing to do with the pre-loss financial condition of the insured.

a. A person suffering a loss should be restored to approximately the pre-loss financial condition.

29.The process by which insurance companies try to select insured's that will have fewer losses than anticipated is: a. Adverse selection. b. Law of Large Numbers. c. Avoidance. d. Reinsurance.

a. Adverse selection.

40. When parties to a contract contribute unequal amounts of money, the contract is termed: a. Aleatory b. Conditional c. Executory d. Unilateral

a. Aleatory

28. Insurance Company allows producer to project authority he does NOT have to the public. This is: a. Apparent authority. b. Implied authority. c. Expressed authority. d. None of the above.

a. Apparent authority.

41. A court usually interprets doubtful or ambiguous wording in an insurance contract against the insurer because: a. It is a contract of adhesion, written by only one of the parties. b. The insurer may have intended to confuse the insured. c. The insured may not have had time to go over the contract thoroughly. d. The insurance code requires such action.

a. It is a contract of adhesion, written by only one of the parties.

35. The Law of Large Numbers allows insurance companies to: a. Predict future losses more accurately using previous experience. b. Predict who will die during the year. c. Aggregate enough insured's to provide increases in surplus. d. Always set premiums at adequate levels.

a. Predict future losses more accurately using previous experience.

23. Paying a portion of a premium to a prospective insurance buyer is an illegal practice known as: a. Rebating. b. Defamation. c. Illegal inducement. d. Unfair discrimination

a. Rebating.

43. A consideration is a: a. Thing of value given in return for a promised performance. b. Time period during which the insured may consider policy terms. c. Time period during which the insurer studies the policy. d. None of the above.

a. Thing of value given in return for a promised performance.

47. A material statement or stipulation contained in the policy which voids the policy if breached is: a. Warranty b. Representation c. Consideration d. Waiver

a. Warranty

1. When a person or organization demands a hearing before the commissioner for a legitimate reason, the hearing MUST be held within: a. 20 days b. 30 days c. 60 days d. A reasonable time.

b. 30 days

19. Before a domestic insurance company can transact insurance in Louisiana, it MUST apply for a _________ which the Commissioner will issue if the insurer is qualified. a. License b. Certificate of Authority c. Bond d. Contract

b. Certificate of Authority

5. Applicants for a P&C license MUST: a. Be at least 21 years old. b. Complete a 40 hour approved course. c. Must have lived in Louisiana for at least two years. d. All of the above

b. Complete a 40 hour approved course.

25. Insurance companies MUST comply with the FCRA in order to obtain: a. Certificate of Authority b. Credit reports on applicants. c. Shared commissions. d. Payment to unlicensed entities.

b. Credit reports on applicants.

22. Publishing false or maliciously critical material which is derogatory to the financial condition of an insurer is an illegal practice known as: a. Rebating. b. Defamation. c. Illegal inducement. d. Unfair discrimination

b. Defamation.

18. If the Insurance Commissioner becomes incapacitated, the Commissioner's powers will be exercised by the: a. Governor b. Deputy Commissioner c. Secretary of State d. None of the above

b. Deputy Commissioner

17. A producer may share a commission with all of the following EXCEPT: a. Non-resident producer as long as the producer retains at least 50% of the commission. b. Louisiana producer who received his license one week earlier. c. A producer whose license has just expired. d. All of the above may receive a share of the commission.

c. A producer whose license has just expired.

24. The duties and powers of the Commissioner are found in the: a. Certificate of Authority b. FCRA c. Insurance Code, "Title 22" d. Louisiana Rating Commission

c. Insurance Code, "Title 22"

37.Self-insurance could be known as: a. Risk transfer. b. Risk reduction. c. Risk retention. d. Risk avoidance.

c. Risk retention.

26. Insurance is a ___________ for spreading the chance of __________ among a large number of people. a. Social device; accidental loss b. Process; financial loss c. Social device; financial loss d. None of the above.

c. Social device; financial loss

49.An insurance policy is ________, meaning only one party has a right of legal action. a. Conditional b. Aleatory c. Unilateral d. Contractual

c. Unilateral

10. Applicants for a surplus lines broker's license MUST have held a property and casualty license for at least ____ years or have ____ years professional experience as an employee with a property and casualty insurer. a. 1; 1 b. 1; 2 c. 5; 5 d. 2; 2

d. 2; 2

38. A direct writer may be: a. A producer in the employ of a company. b. An exclusive producer of one company. c. Salaried or on commission. d. All of the above

d. All of the above

12. The following action(s) MUST be reported to the Department of Insurance: a. Moving from the state. b. Felony convictions. c. Sanctions, fines, or penalties. d. All of the above.

d. All of the above.

36. Which of the following is a method of handling risk? a. Avoidance. b. Sharing. c. Reduction. d. All of the above.

d. All of the above.

20. In addition to the MINIMUM examination requirements, the Commissioner may examine insurers as often as: a. Once every six months. b. Once every year. c. Once every two years. d. Deemed necessary

d. Deemed necessary

46. _______ prevents the denying of a fact because of company's previous actions or words to the contrary. a. Indemnity b. Warranty c. Waiver d. Estoppel

d. Estoppel

21. Every authorized insurer MUST be examined by the Commissioner at least once every: a. Year b. Two years c. Three years d. Five years

d. Five years

31. Responsibilities to the Applicant/Insured include all of the following EXCEPT: a. Update policies b. Securing all cover ages applied for. c. Explain coverage's and exclusions to applicants. d. No exceptions.

d. No exceptions.

27. A _______ is the cause of loss; a _______ is a factor that makes the chance of loss higher. a. Risk; transfer b. Transfer; risk c. Loss; peril d. Peril; hazard Correct

d. Peril; hazard Correct

3. An individual, partnership or corporation authorized to transact business, with the authority to solicit, negotiate and effect contracts of insurance on behalf of an insurer authorized to do business in Louisiana is known as: a. Nonresident b. Resident c. Solicitor d. Producer

d. Producer