Life and Health Insurance - California Code and Ethics
Including Code and Ethics, how many hours of pre-licensing education are required in total to take the examination for a fire/casualty broker-agent license?
52 Individuals must complete 40 hours of pre-licensing education in the area of fire/casualty and an additional 12 hours of instructions on ethics and the California Insurance Code.
Which of the following is required to file a bond of $50,000 to the State of California in order to be licensed?
A SURPLUS LINES BROKER An applicant for a surplus line broker's license must post a $50,000 bond with the State of California.
All of the following statements regarding policy fees are true EXCEPT
AN AGENT OR BROKER CAN CHARGE AN ADDITIONAL POLICY FEE Agents and brokers may not charge policy fees. Only an insurer can charge a fee.
In California, any insurer organized under the laws of Canada is classified as
AN ALIEN INSURER In California, any insurer organized under the laws of Canada is classified as an alien insurer.
A person authorized by and on behalf of an insurer to transact all classes of insurance other than life insurance is
AN INSURANCE AGENT An insurance agent is authorized to transact all classes of insurance by an insurer other than life, health, or disability insurance.
All of the following statements about the California Commissioner of Insurance are correct EXCEPT
THE COMMISSIONER CAN SERVE NO MORE THAN FOUR 4-YEAR TERMS The Commissioner's term of office is four years, but an individual may not hold the position for more than two 4-year terms.
All of the following statements regarding concealment are correct EXCEPT
CONCEALMENT IS SIMILAR TO MISREPRESENTATION, EXCEPT THAT IT INVOLVES MISSTATING, RATHER THAN WITHHOLDING, A MATERIAL FACT Concealment is neglecting to communicate that which a party knows and ought to communicate.
Offering insurance or annuities as an inducement to the public to purchase property or services with a separate charge is known as
FREE INSURANCE No insurer, agent, or broker will participate in any plan to offer insurance or annuities as an inducement to the purchase or rental by the public of any real or personal property, or services, without any separate charge for the insurance. Willful violators may have their licenses suspended or revoked for up to one year.
When an agent uses misrepresentation to convince a policy owner to drop a policy solely for the purpose of selling the policy owner another policy without regard to any possible disadvantage to the policyowner, the agent is guilty of
TWISTING Twisting is an illegal high-pressure sales tactic.
How many hours of continuing education courses must be completed by a person holding a license to sell life, health or property insurance during each license term?
24 HOURS INCLUDING 3 HOURS OF ETHICS All agents, including life-only agents or accident and health agents also licensed as property and/or casualty broker-agents must complete 24 hours of continuing education each two-year license renewal period. Three of those hours must be Ethics.
Concealment is
A FAILURE TO COMMUNICATE INFORMATION Concealment is a failure to communicate information
A person who holds the funds or property of another in trust is know as
A FIDUCIARY A person who holds the funds or property of another in trust is known as a fiduciary. Any person who appropriates fiduciary funds for personal use is guilty of theft.
Anyone who makes false or fraudulent statements relating to a claim is subject to all of the following penalties EXCEPT
A FINE OF UP TO $150,000 OR DOUBLE THE VALUE OF THE FRAUD, WHICHEVER IS SMALLER For all types of insurance coverages, it is unlawful to make false or fraudulent statements related to a claim. One of the penalties is a fine of up to $150,000 or double the value of the fraud, whichever is greater.
Penalties for transacting insurance business in California without a license include all of the following EXCEPT
A FINE UP TO $100,000 The penalty for transacting insurance business without a license is a fine up to $50,000 and/or imprisonment for up to 1 year.
A person who advises insured persons on their rights under a life or disability policy is
A LIFE AND DISABILITY ANALYST A life and disability analyst is a person who advises or offers to advise insured persons or beneficiaries of a life or disability policy with respect to their rights under the policy. The major difference between a life and disability analyst and an agent is that the analyst is paid not by an insurer but by persons who seek the analyst's advice.
A document that summarizes the coverage, benefits, limitations, exclusions, and terms of an insurance policy proposed for sale is called
A POLICY SUMMARY When making a sales presentation, agents are often required by law to provide a policy summary.
The difference between an agent and a broker is
AN AGENT REPRESENTS THE INSURER AND A BROKER REPRESENTS THE INSURED Agents represent the insurance company. A broker, on the other hand, represents the insured. A broker does not have the authority to bind an insurer to an insurance contract.
Transacting insurance includes all of the following EXCEPT
APPLYING FOR A CERTIFICATE OF AUTHORITY Applying for a certificate of authority is not considered transacting insurance.
If an insurance company is in an impaired financial condition, the Commissioner may file an application for an order to take control of its affairs for the purpose of improving its condition. This action is known as
CONSERVATION When the Commissioner takes control of an impaired insurer's affairs in order to improve its financial condition, it is known as conservation.
An insurer runs advertisements that promote a long-term care policy that the insurer is licensed to sell but that is not available for sale in California. This insurer may:
CONTINUE TO ADVERTISE THE POLICY AS LONG AS THE ADVERTISEMENT MENTIONS THE UNAVAILABILITY It is an unfair and deceptive practice to advertise insurance that will not be sold in California. An insurer who does so intentionally commits a misdemeanor punishable by fine. This does not prohibit an insurer from advertising insurance products it is licensed to sell in California when the product is not available for sale, as long as the advertisement mentions the unavailability.
The Commissioner is elected to a term of
FOUR YEARS The Commissioner is elected by the people in the same time, place, and manner as the governor, not to exceed two four-year terms.
When all appointments on a license have been terminated, the license is
INACTIVE A permanent license is not canceled; it becomes inactive. An inactive license does not permit its holder to transact any insurance for which an active license is required.
All of the following are requirements for a group life insurance policy issued in California that covers an employee group EXCEPT
IT MUST BE BASED ON A PLAN TAHT ALLOWS INDIVIDUAL SELECTION Group life insurance policies issued in California must be based on a plan that precludes individual selection.
Which of the following statements regarding recordkeeping by licensees is CORRECT?
LICENSEES' RECORDS MUST INCLUDE THE AMOUTN OF PREMIUM RECEIVED FOR THE TRANSACTION Licensees must keep a record of any premium received for every insurance transaction, including an itemization of partial payment of additional premium. Life agents must keep transaction records for five years, and all other agents (all classes other than life or health) must keep all client, policy, and transaction records for a minimum of two years.
The primary purpose of the California Life and Health Insurance Guarantee Association (CLHIGA) is to protect against:
LOSS ARISING FROM INSURER INSOLVENCY The association provides insurance agains the insolvency of member insurance companies. It protects policyowners against loss if a member becomes insolvent and can no longer meet its contractual obligations. (It is not intended to protect the insurer, officers, or shareholders).
John Doe, who happens to have a CLU designation wishes to use his name and designation. What must John do?
OBTAIN APPROVAL FORM THE COMMISSIONER BEFORE USING HIS NAME AND DESIGNATION John Does must obtain approval from the California Commissioner of Insurance before using his name and designation.
Which of the following statements is CORRECT regarding insurance procured from nonadmitted insurers?
THE CALIFORNIA DEPARTMENT OF INSURANCE TAXES SURPLUS LINE BROKERS ON PREMIUMS FOR INSURANCE PLACED WITH NONADMITTED INSURERS Surplus lines brokers are regulated by the California Insurance Code and are required to pay an annual tax on premiums for insurance placed with nonadmitted insurers.
An insurer providing worker's compensation insurance must belong to:
THE CALIFORNIA INSURANCE GUARANTEE ASSOCIATION Any insurer selling various kinds of property and liability insurance, including worker's compensation, must belong to the California Insurance Guarantee Association with a maximum benefit to a policyowner of $500,000.
Claim files must be available to the Commissioner and his staff for the current year and
THE FOUR PRECEDING YEARS Claim files must be available for all open and closed files for the current year and the four preceding years.
The codes of ethics of professional insurance organizations usually address all of the following subjects EXCEPT
THE NEED FOR AGENTS TO HAVE A COLLEGE DEGREE Evidence of a college degree is not included in the code of ethics of professional insurance organizations.
Which of the following statements is CORRECT in regards to the use of policy illustrations with the sale of life insurance in the state of California?
THE POLICYOWNER MUST BE PROVIDED WTIH AN ANNUAL UPDATE TAHT INCLUDES ANN IN-FORCE POLICY ILLUSTRATION If a policy illustration is used int eh sale of life insurance in California, the policyowner must be provided with an annual update that includes an in-force policy illustration.
Which of the following acts as a liaison between the insurer and the employer in matters such as certifying eligibility, preparing reports required by the state, and processing claims?
THIRD-PARTY ADMINISTRATOR A third-party administrator is a firm that provides administrative services for employers and other associates that have group insurance policies.
Which of the following statements is CORRECT?
"SHALL" IS MANDATORY The word shall is mandatory and the word may is permissive.
Willfully obtaining insurance-related information under false pretenses carries a fine of up to
$10,000 The penalty for anyone who willfully obtains insurance-related information under false pretenses is a fine of up to $10,000, or imprisonment for up to one year, or both fine and imprisonment.
The penalty for transacting insurance business in California without a certificate of authority is a fine up to
$100,000 In addition to a fine, the guilty party may be imprisoned for up to one year.
A person who willfully engages in an unfair method of competition or an unfair or deceptive may be fined up to
$5,000 FOR EACH ACT Any person who engages in an unfair method of competition or an unfair or deceptive act or practice shall be liable for a civil penalty of up to $5,000 for each act, or if the act is willful, up to $10,000 for each act.
If a licensed life agent presents a proposal to a prospective policyholder on behalf of a life insurer for which the life agent is not specifically appointed, how many days does the insurer have to forward the agent's application for appointment to the Commissioner?
14 DAYS The insurer must submit the notice of appointment to the Commissioner not more than 14 days after the life agent submits it to the insurer.
Within how many days of an agent appointment must the notice be filed with the Commissioner?
15 The notice stating a licensee is appointed to transact insurance business on behalf of an insurer must be filed within 15 days fo the appointment.
Group policies issued in California must provide a contestability period of
2 YEARS Every group policy issued in California must provide a 2-year contestability period (except for nonpayment of premiums). Furthermore, no statement made by an insured with regard to his insurability may be used to contest the insurance after the policy has been in force for two years during the insured's lifetime, unless the statement is contained in a written application signed by the employee.
Life or disability insurers must keep transaction records for
2 YEARS Records must be kept for at least 2 years following actual policy delivery, or 2 years form the date of application if no policy was issued.
Upon receiving any written or oral inquiry from the Department of Insurance concerning a claim, licensees must respond at least within
21 DAYS Licensees must furnish a complete written response based on the facts at least within 21 days.
Within how many days must all licensees and applicants report any administrative actions or criminal convictions to the California Dept. of Insurance?
30 DAYS Any administrative actions or criminal convictions must be reported within 30 days of the final disposition of the matter.
What is the minimum number of years from policy expiration or cancellation date that account statements, deposit records, canceled checks, and withdrawal records must be maintained?
5 YEARS Records must be maintained for at least 5 years after the expiration or cancellation date of the policy.
The penalty for anyone who willfully obtains insurance-related information under false pretenses includes all fo the following EXCEPT
A FINE UP TO $50,000 The penalty for anyone who willfully obtains insurance-related information under false pretenses is a fine of up to $10,000, or imprisonment for up to 1 year, or both fine and imprisonment.
All fo the following acts are misdemeanors EXCEPT
ACTING AS A SURPLUS LINES BROKER FOR A NON ADMITTED INSURER IN THE TRANSACTION OF INSURANCE BUSINESS IN CALIFORNIA Only surplus lines brokers may act as an agent for a non admitted insurer transacting insurance business in California.
Which of the following statements does NOT allow a party to rescind a contract?
COMMUNICATING INFORMATION WHICH IS AN OPINION ON THE MATTERS IN QUESTION An intentional and fraudulent omission on the part of an insured to communicate information that would prove a warranty false entitles the insurer to rescind. Neither party is bound to communicate information of their own judgment (opinion) upon the matters in question.
All of the following of the California Commissioner of Insurance EXCEPT:
DRAFTING AND ENACTING INSURANCE LAWS The California legislature is responsible for drafting and enacting insurance laws and legislative changes to the insurance laws. The insurance code gives the commissioner the power to institute rules and regulations to administer it.
Which of the following is not a criterion in determining an unfair trade practice based on discrimination in the business of life or disability insurance?
EDUCATION Education is not a criterion in determining an unfair trade practice based on discrimination in the business of life or disability insurance.
The office of Insurance Commissioner in California is
ELECTED The office of California Commissioner of Insurance is elected
An insurer that advertises insurance that it will not sell is committing the unfair and deceptive practice known as
FALSE ADVERTISING It is an unfair and deceptive practice in the business of insurance for an insurer to advertise insurance the twill not sell. An intentional violation of this section is a misdemeanor punishable by a fine of up to $10,000.
When an agent promptly forwards the client's premium to the insurer, the agent is acting in what capacity?
FIDUCIARY When an agent promptly forwards the client's premium to the insurer, the agent is acting in his capacity as a fiduciary.
Agents must keep records of insurance transactions for
FIVE YEARS Life agents and property and casualty broker-agents must keep transaction records for five years following the expiration date of the policy.
If you change your address, the Insurance Code requires you to notify the Department of Insurance (DOI)
IMMEDIATELY IN WRITING A change of address must be reported to the Department of Insurance immediately and in writing.
In which instance is a pretext interview permitted in California?
IN THE INVESTIGATION OF A CLAIM WHERE FRAUD, CRIMINAL ACTIVITY, MATERIAL MISREPRESENTATION, OR NONDISCLOSURE IS SUSPECTED To investigate a claim where there is a reasonable suspicion of fraud, criminal activity, material misrepresentation, or material nondisclosure, a pretext interview may be used to obtain information form a person or institution that does not have a generally or statutorily recognized privileged relationship with the person to whom the information relates.
When all appointments on a license have been terminated, the license is
INACTIVE For a license to be active, the licensee must be appointed by at least one company. An inactive license may be renewed. It may also be reactivated by filing a new appointment.
Any impairment o minimum paid-in capital required in the aggregate of an insurer for the class of insurance it transacts i the definition of
INSOLVENCY The inability of the insurer to meet its financial obligations when they are due is also a definition of insolvency.
Which of the following is an example of fraud?
INTENTIONALLY TELLING A LIE TO OBTAIN COVERAGE Intentionally telling a lie to obtain coverage is fraud.
All of the following are correct regarding transacting business without a license EXCEPT
IT IS CONSIDERED A FELONY Transacting business without a license is considered a misdemeanor, not a felony.
Who enacts new insurance laws that are located within the California Insurance Code (CIC)?
LEGISLATURE The California Insurance Code (CIC) was established by the state legislature. It is a body of laws that applies to the insurance business in this state. new insurance laws may be enacted, or existing statutes may be changed, only by the legislature.
George and Donna Smith are considering whether to purchase a town house from their real estate agent, Barbara White. She also works part-time for an insurance agency, so Barbara tells the Smiths she ill pay their homeowners insurance for the first year if they agree to purchase the town house, Barbara
MAY NOT OFFER FREE INSURANCE UNDER ANY CIRCUMSTANCES Agents, brokers, or insurers may not offer insurance as an inducement to purchase or rent by the public any real or personal property or services without any separate charge for the insurance. Violators may have their license suspended or revoked for up to 1 year.
AN insurer transacting insurance in California must keep records of all of the following EXCEPT:
RECORDS OF ALL COMMISSIONS PAID TO ITS AGENTS Agents are responsible for keeping written records fo when they receive premiums, when they deposit them in trustee bank accounts, the dates the premiums are turned over to other insurer, and how the premiums were transmitted. Insurers must also maintain records of the original applications for each insurance policy or contract sold in California. Insurers are not required to keep records of all commissions paid to its agents.
Regarding replacement, which of the following statements is NOT true?
REPLACEMENT IS ILLEGAL IN THIS STATE Replacement is not illegal however it is heavily regulated. Replacement is prohibited when it is not warranted; it then becomes twisting. When replacement is involved, the agent or broker must have the applicant sign a Notice Regarding Replacement at the time of application and must submit this notice to the replacing insurer with the application. Agents and brokers need not send a copy of the replacement notice to the competing agent or broker.
Sarah is a newly licensed life and health agent who would like to be able to sell long-term care (LTC) insurance. What are the training requirements she muse complete prior to soliciting individual consumers for long-term care insurance?
SARAH MUST COMPLETE 8 HORUS OF LONG-TERM CARE INSURANCE TRAINING EVERY YEAR FOR THE FIRST 4 YEARS SHE IS LICENSED A newly licensed agent is required to complete eight hours of LTC training every year for the first 4 years they are licensed. Beginning in the fifth year, licensees are required to complete just 8 hours of LTC training every 2-year licensing term.
An organization ceases to exist as an entity eligible to hold a license upon
TERMINATION OF AN ASSOCIATION An organization ceases to exist as an entity eligible to hold a license upon termination of an association, dissolution of a co-partnership, or upon any change in membership fo a co-partnership.
The Commissioner may deny an application for a license in all of the following cases EXCEPT
THE APPLICANT HAS SHOWN COMPETENCY AND TRUSTWORTHINESS INT EH CONDUCT OF ANY BUSINESS. The applicant has shown incompetency or untrustworthiness in the conduct of any business, or has by commission of a wrongful act or practice in the course for any business exposed the public to the danger of loss.
Which of the following statements regarding claim as settlement practices is FALSE?
UPON RECEIVING PROOF OF CLAIM, INSURERS MUST ACCEPT OR DENY THE CLAIM WITHIN 30 DAYS Upon receiving proof of claim, insurers must accept or deny the claim, in whole or in part, within 40 days.
