ND Life - Insurance Regulation

Important Dollar Amounts: Fine (per act) for unintentional violations of unfair trade practices

$1,000

Important Dollar Amounts: Fine for violation of a cease and desist order

$10,000

Important Dollar Amounts: Maximum fine for violation of the Insurance Code

$10,000

Important Dollar Amounts: License Renewal Fee

$25

Important Dollar Amounts: Fine (per act) for intentional violations of unfair trade practices

$5,000

Important Dollar Amounts: Maximum aggregate retail value per person per year of a gift, prize, meal, or promotional item given to an applicant or insured

$50

Department of Insurance Regulations: to request a hearing

30 days

Licensing and Appointment Requirements: For insurer to file notice of appointment

30 days

Licensing and Appointment Requirements: For insurer to notify the Commissioner of the termination of an appointment

30 days

Miscellaneous Producer Regulations: To report administrative action against a producer

30 days

Miscellaneous Producer Regulations: To report change of address

30 days

Miscellaneous Producer Regulations: Maximum allowed commissions from controlled business per year

35%

Miscellaneous Producer Regulations: Time period to report suspected fraudulent acts to the Commissioner

60 days

Who is an insurance agent?

A person authorized to sell, solicit and negotiate insurance contracts

What document is required for an insurance company to transact insurance?

Certificate of Authority

Who assumes control over an insurance company's funds and management if they become insolvent?

Department of Insurance

For what reason can a temporary license be issued?

For continuation of business in case the licensed producer dies or becomes disabled

What is controlled business?

Insurance on the producer's own life or property, or the lives or property of the producer's family or business associates

Licensing and Appointment Requirements: Annual appointment renewal date

May 1

The regulation of the insurance industry primarily rests with

The state. Each state is responsible for the conduct of insurance within that state

To whom may a certificate of authority be issued?

To an insurer authorized to transact business in this state

When an insurer terminates a producer's appointment, the insurer must notify the Commissioner within a. 15 days b. 30 days c. 45 days d. 7 days

b. 30 days When an insurer terminates the appointment, employment, contract, or other business relationship with a producer, it must notify the Commissioner within 30 days following the effective date of the termination.

What type of licensee represents the insured?

broker

What is the maximum allowed retail value of a gift or promotional item a producer may give to an applicant or an insured not to be considered rebating? a. $15 b. $25 c. $50 d. $100

c. $50 The rebating does not apply to the insurer's advertising or promotional programs in which insureds or prospective insureds are given prizes, goods, meals, entertainment, or merchandise not exceeding the aggregate retail value of $50 per person per year.

Most violations of the regulations pertaining to insurance fraud are considered a. misconducts b. civil offenses c. felonies d. misdemeanors

c. felonies

If the Commissioner/Superintendent finds a licensee engaging in an unfair method of competition or an unfair practice, what order will be issued?

cease and desist order

Two individuals who are in the same risk and age class are charged different rates for their insurance policies due to an insignificant factor. What is this called?

discrimination

Insurers are classified according to their domicile. What are the three types of insurers?

domestic, foreign, and alien

Department of Insurance Regulations: Commissioner examines insurers

every 5 years

In general, who can be excluded from producer licensing and examination requirements?

insurance company officers, directors, or any other employees who do not transact insurance and who do not receive commissions for their services (usually, their responsibilities include administrative, executive, or clerical)

In the agent/insurer relationship, who is considered the principal?

insurer

On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. What is the company guilty of?

misrepresentation

What illegal act does a producer commit when the producer represents a policy in a more favorable light than the policy really is?

misrepresentation

Can insurers advertise the existence of the guaranty association during solicitation and sale of insurance policies?

no, advertising of the existence of the guaranty association for the purposes of solicitation and sale of insurance policies by insurers is an illegal business practice

Who may share in the commission from the sale of a life insurance policy?

only producers properly licensed for the type of insurance transaction

What is the purpose of insurance guaranty associations?

to protect policyowners, insureds and beneficiaries from financial losses caused by insolvent insurers

What type of misrepresentation persuades an insured, to his or her detriment, to cancel, lapse, or switch policies from one to another?

twisting

Department of Insurance Regulations: Time a hearing must be held following an application

10 days

Licensing and Appointment Requirements: Age to apply for a license

18

Licensing and Appointment Requirements: Temporary license's duration

180 days

Licensing and Appointment Requirements: License continuation period

2 years

Miscellaneous Producer Regulations: CE (continuing education) compliance period (license renewal every __ years?)

2 years

Miscellaneous Producer Regulations: CE required per compliance period (12 hours per year)

24 hours

The Commissioner must examine all authorized insurers at least once every how many years?

At least once every 5 years

Who can usually be granted a temporary license?

Producer's spouse or designee in case the licensed producer dies or becomes disabled

What authority is responsible for examining the operations of insurance companies in this state?

The Commissioner. The Commissioner is responsible for examining the activities, operations, and financial condition of all persons transacting insurance in this state.

What is the purpose of a cease and desist order?

To prevent a producer or insurer from further violating laws for transacting insurance

When is controlled business legal?

When the commissions from controlled business do not exceed the aggregate commissions on all the other business (specific limits may vary from state to state)

What are the most common penalties for violations of insurance statutes?

a cease and desist order, a fine, and license suspension or revocation

All of the following are unfair claims settlement practices EXCEPT a. Failing to adopt and implement reasonable standards for settling claims b. Failing to acknowledge pertinent communication pertaining to a claim c. Suggesting negotiations in settling the claim d. Refusing to pay claims without conducting a reasonable investigation

c. Suggesting negotiations in settling the claim when settling claims, negotiation can come into play

Who owns stock companies?

stockholders

Who is responsible for the contents of insurance advertisements?

the insurance company

What are producers required to do in order to renew their license?

complete continuing education hours and pay a renewal fee

Who is responsible for the costs associated with the examination of insurers?

the insurer who is being examined

If an insurer holds a Certificate of Authority, it is known as what type of insurer?

authorized or admitted

If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered what type of insurer?

authorized or admitted

Who must be notified of a producer's change of address?

The Department of Insurance (Commissioner/Director/Superintendent)

What entity established the Do-Not-Call Registry to protect consumers against unwanted solicitations?

The Federal Trade Commission (FTC)

What type of licensee represents the insurance company?

The agent

Which of the following best describes a misrepresentation? a. Making a deceptive or untrue statement about a person engaged in the insurance business b. Making a maliciously critical statement that is intended to injure another person c. Discriminating among individuals of the same insuring class d. Issuing sales material with exaggerated statements about policy benefits

d. Issuing sales material with exaggerated statements about policy benefits Misrepresentation is issuing, publishing, or circulating any illustration or sales material that is false, misleading, or deceptive as to policy benefits or terms, the payment of dividends, etc. This includes oral statements.

If a producer makes maliciously critical statements about another insurer, what is this illegal practice called?

defamation

When can the Commissioner or Director examine insurers?

whenever deemed necessary, but at least once every few years (please check your state regulations for specific time requirement)

Intentionally misrepresenting or concealing a material fact to induce an insurance company to make a contract is known as a. Avoidance b. Misrepresentation c. Concealment d. Fraud

d. Fraud Fraud is the intentional misrepresentation or intentional concealment of a material fact used to induce another party to make or refrain from making a contract, or to deceive or cheat a party

Which of the following would NOT be considered an unfair and deceptive practice? a. Controlled business b. Rebating c. Defamation d. Misrepresentation

a. Controlled business All are unfair and deceptive practices except for controlled business

Who must be a member of insurance guaranty associations?

all insurers authorized to write insurance within a state

The Commissioner may examine an insurer as often as he/she deems necessary, but domestic insurers must be examined at least once every a. Year b. 2 years c. 3 years d. 5 years

d. 5 years

When an insurance agency published an advertising brochure, it emphasized the company's financial stability and sound business practices. In reality, its financial health is terrible, and the company will soon have to file for bankruptcy. Which of the following terms best describes the advertisement? a. Defamation b. Twisting c. Rebating d. False financial statement

d. False financial statement

An agent offers a client free tickets to a sporting event in exchange for the purchase of an insurance policy. What is the agent guilty of?

rebating

An insurance company assures its new policyholders that their premium costs will not increase for a period of at least five years. However, due to increasing financial strain, they plan to raise premium costs for all insureds by 10% over the next two years. What term best describes this act? a. Unfair discrimination b. Fraud c. Errors and omissions d. Defamation

b. Fraud According to Title 18, Sections 1033 & 1034 of the US Code, any oral or written statements by any person engaged in the business of insurance that are false or any omissions of material fact are considered unlawful insurance fraud. This includes statements made on an application for insurance, renewal of a policy, claims for payment or benefits, premiums paid, and financial condition of an insurer.

Which of the following is issued by the state Department of Insurance to show that the insurer has power to write insurance contracts in that state? a. Certificate of Insurance b. Binder c. License d. Certificate of Authority

d. Certificate of Authority

Applicants for insurance licensed must be at least a. 16 1/2 years old b. 18 years old c. 21 years old d. 24 years old

b. 18 years old

How many hours of continuing education must all producers complete in ethics each licensing period? a. 1 hour b. 3 hours c. 10 hours d. 12 hours

b. 3 hours Three of the CE credit hours must be completed in courses related to ethics

Miscellaneous Producer Regulations: CE required in ethics

3 hours

Who is considered a nonresident agent?

An agent who resides and is licensed in another state, but who is authorized to transact insurance in this state

An applicant was refused an insurance license, and requested a hearing regarding this action. How many days written notice must the Commissioner provide, prior to this hearing? a. 20 b. 30 c. 60 d. 10

d. 10 In this case, the Commissioner is only required to provide 10 days written notice