Chapter 5
Under special circumstances, continuing education requirements may be extended beyond the 2-year period for a maximum period of
12 months. Excess classroom hours accumulated during any 2-year period may be carried forward to the next 2-year period. If good cause is shown, the department may grant an extension not to exceed 1 year.
An agent has been convicted of a crime punishable by a 1-year imprisonment. Within how many days must the agent notify the department of insurance?
30 days
What are the most common penalties for violations of insurance statues?
A cease and desist order, a fine, and license suspension or revocation
Who is an insurance agent?
A person authorized to sell, solicit and negotiate insurance contracts
When transacting business in this state an insurer formed under the laws of another country is known as a/an
Alien insurer- alien insurer is defined as an insurer formed under the laws of another country
All of the following would be considered rebating except
An agent misrepresents policy benefits to convince a policyowner to replace policies.
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
What is a foreign insurer?
An insurer with a home office in another state
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
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
A state-issued document empowering an insurance company to become an admitted insurer is called what?
Certificate Authority
What document is required for an insurance company to transact insurance?
Certificate Authority
What term is used for replacing insurance policies for the sole purpose of making commissions?
Churning. "Churning" is defined as replacing insurance policies for the sole purpose of making commissions.
What are producers required to do in order to renew their license?
Complete continuing education hours and pay a renewal fee
The requirement that agents must account for and promptly remit all insurance funds collected is known as what type of agent responsibility?
Fiduciary
An insurance company is domiciled in Montana and transacts insurance in Wyoming. Which term best describes the insurers classification in Wyoming?
Foreign A foreign insurer is domiciled in one state and transacts insurance in another. A domestic insurer transacts insurance in the domicile state (in this case, Montana). An alien insurer is domiciled in one country and transacts insurance in another.
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)
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
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
On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are
Not taxable since the IRS treats them as a return of a portion of the premium paid
Who may share in the commission from the sale of an insurance company policy?
Only producers properly licensed for the type of insurance transaction
Who might receive dividends from a mutual insurer?
Policyholders
In what way can an agent demonstrate a high standard of ethics?
Putting the client's best interest before their own
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
Which of the following statements is incorrect?
Replacing insurance policies for the purpose of making commissions is legal. (Churning)
Who must be notified of a producer's change of address?
The Department of Insurance (Commissioner/Director/Superintendent)
What are the two offices of the financial services commission?
The Office of Financial Regulation and the Office of Insurance Regulation
What type of licensee represents the insurance company?
The agent
When an insurer appoints an agent
The insurer is bound by the agent's acts.
Who is responsible for the costs associated with the examination of insurers?
The insurer who is being examined
To whom may a certificate of authority be issued?
To an insurer authorized to transact business 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. - The Department of Insurance will issue a cease and desist order when the Department has reason to believe that a producer or an insurer is in violation of an insurance law or regulation. The order is usually issued after a hearing.
Which type of misrepresentation persuades an insured, to his or her detriment, to cancel, lapse, or switch policies from one to another?
Twisting "Twisting" is a misrepresentation that persuades an insured/owner, to his or her detriment, to cancel, lapse, or switch policies from one to another.
Agents who persuade insureds to cancel a policy in favor of another one when it might not be in the insured's best interest are guilty of
Twisting. Twisting is a misrepresentation that persuades an insured or a policyowner, to his or her detriment, to cancel, lapse, or switch policies.
When would a misrepresentation on an insurance application be considered fraud?
When it is intentional and material
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)
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)
If a producer makes maliciously critical statements about another insurer, what is this illegal practice called?
defamation
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, alien
What type of insurer is formed under the laws of another state?
foreign
Insurance contracts are agreements between which two parties?
insurer and policyowner
Who owns stock companies?
stockholders
