Ch.6 Questions

A producer's license was revoked as a result of the Insurance Code violation. Which of the following is true?

! Repeat The producer will have to wait 5 years before applying for license reinstatement.

What is not considered to be rebating?

"An agent misrepresents policy benefits to convince a policy owner to replace policies" is considered to be rebating.

The max. the Insurance Guaranty Association will pay to an individual for life insurance death benefits is ...

$500,000

What are the penalties for the 1st, 2nd, and any subsequent violation of the NJ Fraud Prevention act, respectively?

$5k -> $10k -> $15k

What would be considered as an insurance transaction?

1. Advising a policyholder regarding a claim 2. Negotiating coverage 3. Soliciting a policy

What is considered to be rebating?

1. An agent offers the use of his lake house to person as inducement to buy. 2. An agent offers to share his commission with a policyholder. 3. An agent offers tickets to a baseball game as an inducement to buy insurance. ! Rebating = Unfair trade practice under law

If an applicant's license has lapsed within the past year, the applicant may apply for late renewal of the license within the max. of how many months of expiration?

12 months

Which of the following is the legal name of a corporation or partnership under which a licensee conducts insurance business?

A business name is the legal name of a corporation or partnership or any trade of fictitious name under which a licensee conducts insurance business.

Licensees must notify the Department within how many days of any change of address?

All licensees must provide the Department with a current mailing address. They must notify the Department within 30 days of any change of address.

A producer received a group master policy and certificates for delivery to the insured. Within how many days must the policy and certificates be delivered?

All policies, certificates, or other evidence of insurance that are received by an insurance producer must be delivered or mailed to the insured within 10 calendar days of the receipt by the producer.

How many days does a producer have to remit the collected premiums to the insurer?

All premiums must be remitted 5 days after receipt of funds Remit = Cancel

What is a branch office?

Branch office = Office in NJ other than a principal office where a resident licensee conducts insurance business

What professional designations are recognized by the Department as acceptable substitutes for education and education requirements.

Chartered Financial Consultant (ChFC) Chartered Life Underwriter (CLU) Chartered Property/Casualty Underwriter (CPCU) X Professional Insurance Agent (PIA)

Who appoints and removes officers and other personnel employed within the Department?

Commissioner appoints and removes officers and other personnel employed within the Department, as well as upholding the insurance laws of the state.

Which of the following types of insurance would be written by a limited lines agent?

Credit insurance

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?

Defamation

Two individual are in the same risk and age class; yet, they are charged different rate for their insurance policies due to an insignificant factor. What is this called?

Discrimination

An insurance producer refused to comply with a subpoena. What would be the producer's penalty for this violation?

Failing to or refusing to comply with a subpoena will result in a fine up to $5,000 for the 1st offense, and u to $10,000 for each subsequent offense. $5,000 for the 1st offense & up to $10,000 for each subsequent offense.

An insurance company has published a brochure that inaccurately portrays the advantages of a particular insurance policy. What is this an example of?

False advertising = Illegal practice of advertising or circulating materials that are false, deceptive, or misleading X Twisting

A producer must do what to become licensed as a nonresident producer in the state.

He/She needs to prove that he/she holds a resident license in good standing is the producer's home state.

In accordance with the Administrative Procedure act, what entity has the authority to make and enforce rules and regulations to implement and carry out the purposes of the insurance laws of NJ?

In accordance with the Administrative Procedure act, the Commissioner has the authority to make and enforce rules and regulations to implement and carry out the purposes of the Insurance laws of NJ.

What represents a misrepresentation?

Issuing sales material with exaggerated statements about policy benefits Misrepresentation = Issuing, Publishing, or Circulating any false illustration or material to mislead/deceive the policy benefits, payment of dividends, etc. ! includes oral statements

What provides funding for the NJ Life & Health Guaranty Association?

Member insurers

What method do insurers use to protect themselves against catastrophic losses?

Reinsurance X Pro rata liability Reinsurance indemnifies the ceding insurer for part or all of the losses it sustains related to a policy issued before.

To cancel an insurance producer license, the producer must ...

Send the license to the Insurance Department and request cancellation

What's included in the term "insurance-related conduct"?

Transmitting funds between producers and the insurance company "Insurance-related conduct" includes acts related to insurance transaction (selling, soliciting, negotiating, and binding insurance policies; processing claims; or transmitting funds between the insured, producers, premium finance companies, and insurance companies).

An insurance producer is acting as a broker when he or she negotiates for an insurance contract on behalf of ...

When an insurance producer negotiates for an insurance contract on behalf of a client, the producer is acting as a broker.

What is not one of the Commissioner's broad powers?

the Commissioner may not have ownership, or interest in, or any transactions with any financial institution or insurance company licensed or regulated by the Department (except in the strict performance of Commissioner's duties)

The Supreme Court stated that insurance is interstate commerce and is therefore subject to regulation by the federal government in the decision of what case?

the U.S. vs. the South-Eastern Underwriters Association

A contract between a producer and an insurance company ...

Must be in writing and signed by both parties

Who may issue a cease & desist order if a violation of the NJ insurance code were to occur, a cease and desist order and/or penalty may be issued?

Commissioner issues the cease 7 desist order in NJ. An administrative penalty is a sanction imposed by the Commissioner on an insurance producer or insurance company.

What type of insurance company has been formed under the laws of the state?

Domestic insurance company is formed under the laws of the state.

Who does an insurance agent represent?

The insurance agent represents the insurer by soliciting, negotiating, or selling insurance contracts, or collecting premiums for the insurer.

If an insurer cancels an agency contract, it must notify the Commissioner in writing within how many days?

15 days ! Failure to do so will imply that an agency contract still exists

In cases where a producer's license has been revoked, the producer must wait for how long before applying for reinstatement?

A producer must wait 5 years before applying for reinstatement

Presenting any written or oral statement in support of or in opposition to a claim payment, while knowing that the statement contains false or misleading information material to the claim, would be best considered?

A violation of the NJ Insurance Fraud Prevention act $5,000 for 1st $10,000 for 2nd $15,000 for 3rd and beyond

In order to become a producer in NJ, after submitting a licensing application, candidates must pass a licensing examination within ...

In order to become a producer in NJ, after submitting a licensing exam. The candidate must them apply for a license within 1 year

Which of the following situations is legal to limit coverage based on martial status?

It is never legal to limit coverage based on martial status.

What significance did U.S. vs. South-Eastern Underwriters have on the insurance industry?

It reversed the decision of Paul vs. Virginia, determining that insurance is interstate commerce and should be regulated federally.

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?

Mutual

What's true about a nonresident licensed producer decides to conduct business under an assumed name?

Nonresident producers may not conduct business under any name besides legal names

What is false about rebates?

Rebates are allowed if it's in the best interest of the client

What's an example of a producer being involved in an unfair trade practice of rebating?

Telling a client that his 1st premium will be waived if he purchased the insurance policy today Rebating is defined as offering any inducement in the sale of insurance products that is not specified in the policy, including money, reductions in commissions, promises, and personal services. Both the offer and acceptance of a rebate are illegal.

The Commissioner believes that an insurance rule or regulation has been violated, and decided to call a disciplinary hearing. How many days before a hearing must the Commissioner issue a notice to the person charged with a violation?

The Commissioner must notify the accused 10 days prior to the hearing.

If the issuance of a license is denied and a hearing is requested, which entity will determine whether or not the license should be issued?

The Department of Insurance It reviews the application & additional info. to determine whether the license may be issued.

What does an insurer need to legally transact insurance?

The insurer needs a Certificate of Authority is required in order to transact insurance.

On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are ...

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.

What is a foreign insurer?

= An insurer with a home office in another state

Who would most likely be issued a nonresident producer's license (among 4 people)?

A Massachusetts resident who sells insurance full-time in Boston but wants to expand his customer base by becoming licensed in NJ. ! In order to get a nonresident license in the state, prospective licensees must be actively licensed producers in their own state.

An insurance company is domiciled in Montana and transacts insurance in Wyoming. Which term best describes the insurer's classification in Wyoming?

A foreign insurer is domiciled in one state and transacts insurance in another state.

Which authority has the power to deny someone an insurance producer's license?

Commissioner has the power to deny the issuance or renewal of a license to anyone, based on info. in the person's application, attached documents, and department records.

What is not considered an insurance transaction?

Obtaining an insurance license

What insurers are owned by stockholders who have the usual rights of ownership, including the right of voting?

Stock Stock insurance companies are owned & controlled by stockholders.

The Paul vs. Virginia case was decided in 1869. To what extent does the Supreme Court's decision still apply to insurance today?

The decision has changed. Insurance is considered to be interstate commerce, and is subject to regulation by the federal government.

What are true about rebates?

1. Dividends are not considered to be rebates. 2. Rebates are only allowed if specifically stated in the policy. 3. Rebating can be anything of economic value, given as an inducement to buy.

What are among the Commissioner's broad powers?

1. Formulate and adopt rules and regulations of companies & licensees 2. Appoint and remove officers employed within the Department 3. Report to the Governor about the Department's operations