Exam Simulation 2 Ethics

26. What term best describes the act of withholding material information that would be crucial to an underwriting decision? (Choose from the following options) 1. Concealment 2. Withholding 3. Leading 4. Breach of Warranty

1. Concealment

28. An insured intentionally did not disclose a material fact on an application for insurance. This would be considered (Choose from the following options) 1. Concealment. 2. Coercion. 3. Avoidance. 4. Misrepresentation.

1. Concealment.

2. How many long term care policies can be sold to an insured within a 12-month period before the number of policies is considered to be unnecessary? (Choose from the following options) 1. 1 2. 2 3. 3 4. 4

2. 2

18. If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered to be (Choose from the following options) 1. Approved. 2. Authorized. 3. Certified. 4. Qualified.

2. Authorized.

25. 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? (Choose from the following options) 1. Nonadmitted 2. Foreign 3. Domestic 4. Alien

2. Foreign

29. Fraudulent activities in health care are estimated in billions of dollars annually. This results in (Choose from the following options) 1. Stricter underwriting requirements. 2. Increase in health care costs for everyone. 3. More people going to jail. 4. Fewer insurance policies being written.

2. Increase in health care costs for everyone.

6. All of the following information must be communicated in an insurance contract EXCEPT (Choose from the following options) 1. Information that is material to the contract. 2. Information that is material even though it cannot be proven. 3. Information not requested by an agent and company, even if it's considered relevant. 4. Information the other party already knows.

4. Information the other party already knows.

5. A contract which one party undertakes to indemnify another against loss is called (Choose from the following options) 1. Preparation. 2. Insurance. 3. Adverse Selection. 4. Risk.

2. Insurance.

9. Factual statements about the insured or the risk in an insurance policy are considered (Choose from the following options) 1. Representations. 2. Implied warranty. 3. Material representations. 4. Express warranty.

4. Express warranty.

15. The type of insurance that guarantees the behavior of persons and the performance of contracts other than insurance policies is known as (Choose from the following options) 1. Contract insurance. 2. Performance Guaranteed insurance. 3. Behavioral Contract insurance. 4. Surety insurance.

4. Surety insurance.

7. A risk retention group must include which of the following words in its name? (Choose from the following options) 1. Authorized association 2. Underwriters 3. Risk retention group 4. Limited association

3. Risk retention group

12. What is the term for a sales campaign conducted through the mail? (Choose from the following options) 1. Direct-response 2. Direct-mail 3. Mass marketing 4. Advertising

2. Direct-mail Right Answer 1. Direct-response Solicitation conducted through the mail is one method of direct-response marketing

22. On all printed documents placed before the public, what size print should be used for the agent's license number? (Choose from the following options) 1. There are no size specifications on printing license number on documents 2. The same size print as the name of the company the agent is employed with 3. The same size print as the agent's address or telephone number 4. At least size 10 font

4. At least size 10 font Right Answer 3. The same size print as the agent's address or telephone number To assure that the number is not minimized or missed by a prospective insurance purchaser, the license purchaser, the license number must be printed at least as large as the smallest address or telephone number on the same document.

19. What certification must an insurer receive before it can transact insurance in California? (Choose from the following options) 1. Solvency Clearance 2. Guarantee Association Clearance 3. NAIC Charter Certificate 4. Certificate of Authority

4. Certificate of Authority

16. In which distribution system must the potential client take the initiative and respond to an advertisement through a telephone or mail contact with the insurer? (Choose from the following options) 1. Direct response system 2. Managing general agent system 3. Home service system 4. Direct agency system

1. Direct response system

3. Which type of insurance includes the assumption of a contractual obligation to reimburse the insured against all or a portion of his fees, costs, and expenses related to or arising out of services performed by or under the supervision of an attorney who is an active member of the bar of any jurisdiction or jurisdictions of the United States? (Choose from the following options) 1. Legal insurance 2. Errors and Omission insurance 3. Professional Liability insurance 4. Contract insurance

1. Legal insurance

1. What method do insurers use to protect themselves against catastrophic losses? (Choose from the following options) 1. Reinsurance 2. Indemnity 3. Pro rata liability 4. Risk-management

1. Reinsurance

23. What does the Commissioner use to decide if a rate for an insurance policy is adequate and fair? (Choose from the following options) 1. The amount charged by competing companies 2. Whether at least 60 percent of clients can afford it 3. If the rate charged would be able to pay off a claim on the policy within at least 2 years 4. The rate and how it compares to an insurance company's investment income

1. The amount charged by competing companies Right Answer 4. The rate and how it compares to an insurance company's investment income The commissioner must consider whether the rate reflects the insurance company's investment income when deciding if a rate is excessive, inadequate or unfairly discriminatory.

11. In 2000, a law firm purchased a buy-sell agreement policy on each of its partners. In 2005, one partner left to start a new practice; however, the firm continued to pay the premiums on the policy. In 2007, the former partner died. The partners of the firm filed a claim on the policy to collect the death benefit despite the fact that the deceased was NOT part of the firm or its leadership. The insurer (Choose from the following options) 1. Will pay the death claim to the beneficiary for this policy as written since insurable interest existed at the time of application. 2. Can legally sue the firm for insurance fraud and WILL NOT pay a claim due since the insurable interest no longer exists. 3. Will pay the death claim to the beneficiary since the premiums were current although according to contract law, insurable interest MUST exist at the time of claim. 4. Will refund "unearned" premiums and WILL NOT pay the claim since the insurable interest no longer exists.

1. Will pay the death claim to the beneficiary for this policy as written since insurable interest existed at the time of application.

30. What is the purpose of California's State Compensation Insurance Fund (SCIF)? (Choose from the following options) 1. To pay claims on behalf of insurers that are unable to pay claims due to insolvency 2. To provide insurance to people who would be financially unable to obtain it otherwise 3. To make workers compensation insurance available, especially to smaller companies with more limited payrolls 4. To provide income replacement for California residents who are temporarily or permanently disabled

3. To make workers compensation insurance available, especially to smaller companies with more limited payrolls

24. Concerning AIDS and HIV risks, all of the following acts may subject an insurer to liability claims or fines EXCEPT (Choose from the following options) 1. Declining applicant for a positive HIV test result. 2. Not providing counseling contacts and educational information about HIV and AIDS. 3. Disclosing test results to third party without applicant's consent. 4. Requiring applicant to pay for HIV test in order to be underwritten.

2. Not providing counseling contacts and educational information about HIV and AIDS. Right Answer 1. Declining applicant for a positive HIV test result. companies pay for their medical testing and underwriting. At the time of application, information on HIV and AIDS and counseling options must be given to the clients. Applicants can be declined for HIV/AIDS ( true health risk) . Disclosing Health results to an unauthorized party is a violation.

10. California's Compulsory Financial Responsibility Law requires every driver and every owner of a motor vehicle to maintain financial responsibility (liability coverage) at all times. If you don't have acceptable financial responsibility and have an accident, you may lose your driver's license for up to (Choose from the following options) 1. Four years. 2. One year. 3. Two years. 4. Three years.

2. One year. Right Answer 1. Four years. If you don't have acceptable financial responsibility and have an accident, you may lose your driver's license for up to 4 years,

4. Which of the following is true regarding the regulation of providers? (Choose from the following options) 1. Only health care service plan providers fall under the jurisdiction of the DOI. 2. Providers must be under the jurisdiction of either the Department of Insurance or other governmental agencies. 3. Only the Department of Insurance can be the regulator for insurance providers. 4. There are no specifications on regulation of providers.

2. Providers must be under the jurisdiction of either the Department of Insurance or other governmental agencies.

13. An agent is a legal person who acts on behalf of (Choose from the following options) 1. Himself/herself. 2. The principal. 3. The applicant. 4. The beneficiary.

2. The principal.

21. Even though the Standard Fire Policy is a named peril contract, under which of the following circumstances would the policy provide "all risk of loss" coverage on insured property? (Choose from the following options) 1. When the loss is caused by an "act of God" 2. When the loss is to insured property that has be removed because of endangerment by a peril insured against under the policy 3. Always 4. Never

2. When the loss is to insured property that has be removed because of endangerment by a peril insured against under the policy

27. An insurer, by filing a notice of appointment on behalf of an applicant, shall be deemed to have declared that the applicant has had experience or instruction in insurance or that the necessary instruction will be given within (Choose from the following options) 1. 60 days after issuance of license. 2. 30 days after issuance of license. 3. 20 days after issuance of license. 4. 10 days after issuance of license.

3. 20 days after issuance of license. Right Answer 2. 30 days after issuance of license. An insurer must provide instruction in insurance with 30 days after the filing a notice of appointment.

20. Which of the following actions would NOT be considered a form of "adverse underwriting decisions" for a policy involving individually underwritten coverage? (Choose from the following options) 1. Termination of existing coverage of an insured risk 2. Failure of an agent to apply for coverage that an applicant requests 3. An insurer giving an insured a "preferred" rating due to health and lifestyle conditions 4. A declination to cover an applicant

3. An insurer giving an insured a "preferred" rating due to health and lifestyle conditions

17. The failure to disclose known facts is known as (Choose from the following options) 1. Fraud. 2. Warranty. 3. Misstatement. 4. Concealment.

4. Concealment.

14. Every expressed warranty made at or before the execution of a policy must be (Choose from the following options) 1. Considered implied by the insurer and covered in the policy. 2. Considered accepted by the insured upon delivery of the policy. 3. Binding and specific for the initial policy period. 4. Contained in and referred to in the policy or other document and signed by the insured.

4. Contained in and referred to in the policy or other document and signed by the insured.

8. In property and casualty insurance, insurable interest is defined as the right of a person or entity to property in that such a loss to that property would cause a direct monetary loss to the person or entity. Which of the following statements is TRUE regarding insurable interest in property and casualty insurance? (Choose from the following options) 1. The insurable interest must exist only at the time of application of insurance. 2. Only the owner of the property has insurable interest. 3. Insurable interest also includes indirect monetary loss to the person or entity. 4. If the insured has no insurable interest, the contract is void.

4. If the insured has no insurable interest, the contract is void.