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The Commissioner of Insurance issues a Cease and Desist Order and immediately receives a request for the charges to be reviewed in a hearing. Within what number of days must the hearing be held? A10 B14 C30 D60

A

All of the following are true regarding rebates EXCEPT ARebates are allowed if it's in the best interest of the client. BRebates are only allowed if specifically stated in the policy. CRebating can be anything of economic value, given as an inducement to buy. DDividends are not considered to be rebates.

Correct! A rebate is an illegal act which involves returning something of value to the client as an inducement to buy, such as the commission. Rebates are only allowed if specifically stated in the policy. Insurance dividends are not considered rebates as the IRS considers it as a return of overpaid premium. a

An applicant for a license in Texas must include a statement with his application that provides information about all the following EXCEPT AIntending to apply for another license. BBeing refused a license. CHaving held a license before. DHaving had a license revoked.

Correct! A statement with an application must contain information as to whether the individual has ever been refused a license, held a license or has had a license revoked. The intent to apply for another license is not required. a

An insurance company has published a brochure that inaccurately portrays the advantages of a particular insurance policy. What is this an example of? ATwisting BDefamation CFalse advertising DUnfair claims

Correct! False advertising is the illegal practice of advertising or circulating materials that are untrue, deceptive, or misleading. c

What is the major difference between a stock company and a mutual company? AAmount of death benefit BNumber of producers CTypes of whole life policies DOwnership

Correct! Mutual companies are owned by policyholders, while stock companies are owned by stockholders. d

The Commissioner has full power and authority to do all of the following EXCEPT AEnforce the Insurance Code. BIssue cease and desist orders. CDraft insurance laws. DIssue Certificates of Authority.

Correct! The Commissioner enforces the Insurance Code, but does not write insurance laws. c

The Insurance Commissioner may examine the affairs of any insurer as often as necessary, but not less frequently than once every AYear. B2 years. C3 years. D5 years.

Correct! The Insurance Commissioner must examine each insurer at least once every 5 years. d

Which of the following individuals could legally receive commissions from the sale of a life insurance policy? AA life and health insurance counselor BA licensed life insurance agent CA licensed insurance consultant DAn employee for a life insurance company who is not licensed

Correct! To receive commissions, agents must be licensed in the line of insurance being sold. b

A temporary license holder can receive a commission from a sale made to all of the following EXCEPT AThe license holder's spouse's best friend. BAn accountant at a rival insurance company. CThe license holder's family doctor. DThe license holder's sister-in-law.

Correct! A temporary license holder sale to a family member or an individual the temporary license holder has an employment or business relationship with will not pay commission. d

An individual licensed as an agent must notify the Texas Department of Insurance, on a monthly basis, of all of the following EXCEPT AAny administrative action taken against the license holder by an insurance regulator of Texas, any other state, or the federal government. BAny change in business name. CAny change of the mailing address. DAny felony conviction.

Correct! Agents must notify the Department on a monthly basis of any change of the license holder's mailing address, any felony conviction of the license holder, or any administrative action taken against the license holder by a financial or insurance regulator of Texas, another state, or the United States. b

What is the purpose of the Life Insurance Guaranty Association? ATo encourage life insurers to write substandard business BTo allow agents to continue to solicit insurance, even if the company they represent is financially impaired CTo protect the reputation of the Insurance Department if they issue a Certificate of Authority to a company that becomes insolvent DTo help protect policyowners and beneficiaries against financial loss caused by the insolvency of an insurance company

Correct! All admitted insurers must be a member of the Insurance Guaranty Association as a condition of their license. The Insurance Guaranty Association is in existence to protect policyowners and beneficiaries against losses caused by the insolvency of an insurance company. d

All of the following would be considered an insurance transaction EXCEPT AObtaining an insurance license. BSoliciting a policy. CAdvising a policyholder regarding a claim. DNegotiating coverage.

Correct! An insurance transaction means the carrying on of business in insurance, which could include the solicitation of a policy, advising, negotiation, or inducement related to coverage or claims. Obtaining an insurance license is a prerequisite to transacting insurance. a

Which of the following is NOT true regarding a Certificate of Authority? AIt may be necessary for transacting business in a specific state. BIt is equivalent to an insurance license. CIt is issued by the state department of insurance. DIt is issued to group insurance participants.

Correct! Before insurers may transact business in a specific state, they must apply for a license or Certificate of Authority from the state department of insurance and meet any financial (capital and surplus) requirements set down by the state. d

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? AMutual BReciprocal CNonprofit service organization DStock

Correct! Funds not paid out after paying claims and other operating costs are returned to the policyowners in the form of a dividend. If all funds are paid out, no dividends are paid. a

What is the maximum allowed value of a gift that an agent can give to an insured without violating the regulation on rebating? A$10 B$15 C$25 D$100

Correct! In this state, promotional materials, articles of merchandise, or gifts that have a redeemable value of $25 or less are not considered "valuable consideration," and therefore, are allowed. c

An agent receives an Emergency Cease and Desist Order for chronically misrepresenting his insurance policies. The agent knows that he did not commit the violations stated in the Emergency Cease and Desist Order. He wants to contest the charges in a court hearing. Which of the following is true? AThe hearing must be held within 10 days of receiving a request, unless both parties agree to a later date. BThe judge will determine when the hearing will be held. CThe hearing date can be set for any time within the next year, unless both parties agree to a later date. DThe hearing must be set for exactly 10 days after the request is made.

Correct! The hearing to show cause why the cease and desist order should not be affirmed or modified shall be held not later than the 10th day after the date of Commissioner receives the request for a hearing unless the parties mutually agree to a later date. (The cease and desist order remains in effect until the hearing is held.) a

After filing a claim, an insured tells the insurer that there is more than one insurance policy in force. That insurer sets aside the claim until it hears what the other company will pay. The insurer's action will be classified as AUnfair. BPrudent. CCoordinated. DProactive.

Correct! Unfair settlement practices include refusing or delaying a settlement solely because there is other insurance available to partially or entirely satisfy the claim loss. The claimant who has a right to recover from more than one insurer has the right to choose the coverage from which to recover and the order in which payment is to be made. a

On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are ANot taxable since the IRS treats them as a return of a portion of the premium paid. BPaid at a fixed rate every year. CTaxable as ordinary income. DGuaranteed.

Correct! 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. a