Colorado Casualty - Colorado Statutes, Rules and Regulations Common to All Lines

Companies must respond to an Examination Request/Comment Form or Examination Request/Memo Form within ___ from the date on the form.

10 calendar days

Of the 50 hours, at least ___ will pertain specifically to insurance industry ethics.

3 hours

The producer must retain a copy of the disclosure statement for at least ___ after the completion of the services. A copy must be made available to the Commissioner upon request.

3 years

___ by completing the forms prescribed by the Commissioner and returning the license for amendment.

A producer may delete lines of authority

___ is an illegal act which involves returning something of value to the client as an inducement to buy, such as the commission. ___ 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 rebate

What is the minimum age for producer licensing in this state? A) 18 B) 19 C) 21 D) 23

A) 18

Of the required 50 hours of prelicensing education, what is the minimum number of hours an applicant must complete on the subject of ethics? A) 3 hours B) 6 hours C) 8 hours D) 10 hours

A) 3 hours

All of the following are considered to be misuses of fiduciary funds EXCEPT A) Collecting interest on customer balances held in a producer's trust account B) Using balances in customer accounts as collateral for a loan to a producer C) Remitting a return premium to an insured 31 days after the producer received it from the insurer D) Reflecting a premium received as a business asset on the producer's financial statement

A) Collecting interest on customer balances held in a producer's trust account

How often will the Commissioner examine domestic insurers in this state? A) Every 5 years B) Biennially C) Annually D) Every 3 years

A) Every 5 years

A producer's appointment with an insurer has been terminated. Under what circumstances can the producer sue the insurer or the Commissioner for information provided during producer investigation? A) If the termination was a result of willful and malicious behavior B) In the absence of reliable information about the producer C) If no regulatory enforcement agencies are involved D) Under no circumstances

A) If the termination was a result of willful and malicious behavior

If the Commissioner believes that an unauthorized person is engaging in the business of insurance in violation of the provisions of the Insurance Code, creating an immediate danger to the public safety, the Commissioner may A) Issue an emergency cease and desist order. B) Publish a warning in an official newspaper circulated in Colorado. C) Notify the National Association of Insurance Commissioners. D) Order an immediate hearing to be conducted.

A) Issue an emergency cease and desist order.

In the state of Colorado, an unfair trade practice of defamation is considered a/an A) Misdemeanor. B) Offense. C) 1st degree violation. D) Felony.

A) Misdemeanor.

A producer's license has been suspended for noncompliance with continuing education requirements. What is the producer's duty regarding the license? A) Promptly return it to the Commissioner B) Turn it in to the insurer C) Keep it without using it until the suspension is lifted D) Destroy it

A) Promptly return it to the Commissioner

Insurers must complete claims investigations A) Promptly. B) Within 15 days. C) Within 30 days. D) Within 45 days.

A) Promptly.

All of the following are true regarding rebates EXCEPT A) Rebates are allowed if it is in the best interest of the client. B) Rebates are only allowed if specifically stated in the policy. C) Rebating can be anything of monetary value given as an inducement to purchase insurance. D) Dividends are not considered to be rebates.

A) Rebates are allowed if it is in the best interest of the client.

A producer who is licensed to transact several types of insurance wants to remove a line of authority from his license. What should the producer do? A) Submit an appropriate form to the Commissioner and return the license for amendment B) Send a letter of notification to the Department of Insurance notifying them of the intent to stop transacting insurance C) Allow the license to expire and obtain a new license for the right line of authority D) Nothing: once licensed for a line of authority, a producer cannot remove that line from his/her license.

A) Submit an appropriate form to the Commissioner and return the license for amendment

All of the following provisions must be included in an insurer's anti-fraud plan EXCEPT A) Suspension of producer's licensure. B) Education of employees about fraud detection. C) Contracting for one or more fraud investigators. D) Reporting of all suspected insurance fraud to the appropriate law enforcement entities.

A) Suspension of producer's licensure.

Producers will be deemed to be using their license primarily to write controlled business if, during any 12-month period A) The total premiums on controlled business exceed the total premiums on all other business written. B) The licensees write more than 5 policies classified as controlled business. C) The licensees write more than two policies on themselves or their property. D) The total premium on controlled business equals 15% or more of the total of all premiums on business written.

A) The total premiums on controlled business exceed the total premiums on all other business written.

Which of the following will NOT be considered unfair discrimination by insurers? A) Assigning different risk classifications to applicants based on gender identity B) Discriminating in benefits and coverages based on the insured's habits and lifestyle C) Charging applicants with similar health histories different premiums based on their ethnicity D) Cancelling individual coverage based on the insured's marital status Id

B) Discriminating in benefits and coverages based on the insured's habits and lifestyle

Two individuals are in the same risk and age class; yet, they are charged different rates for their insurance policies due to an insignificant factor. What is this called? A) Adverse selection B) Discrimination C) Law of large numbers D) Misrepresentation

B) Discrimination

All of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT A) An offer to share in commissions generated by the sale. B) Dividends from a mutual insurer. C) An offer of employment. D) Stocks, securities, or bonds.

B) Dividends from a mutual insurer.

An insurance producer is prohibited from charging separate fees for any of the following services EXCEPT A) Quoting premiums. B) Financial planning. C) Extending business hours. D) Making copies of insurance documents.

B) Financial planning.

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. The company is guilty of A) Rebating. B) Misrepresentation. C) Concealment. D) Unfair claim practice.

B) Misrepresentation.

If a company has transacted insurance in this state without a Certificate of Authority, which of the following is true of its obligations for the policies sold? A) The company cannot be sued in this state. B) The company can still be liable for its policies in any court of this state. C) The company is only liable for policies sold within the scope of the Certificate of Authority. D) The company's financial obligations will be transferred to the Guaranty Association.

B) The company can still be liable for its policies in any court of this state.

A friend helped an insurance producer sell an insurance policy. The producer can share the commission with the friend if A) The producer applies for a shared commission form for that fiscal year. B) The friend is licensed in the same line of insurance. C) The friend is also a blood relative. D) The Commissioner gives the producer verbal permission to share.

B) The friend is licensed in the same line of insurance.

Producers will be deemed to be using their license primarily to write controlled business if, during any 12-month period A) The total premium on controlled business equals 15% or more of the total of all premiums on business written. B) The total premiums on controlled business exceed the total premiums on all other business written. C) The licensees write more than 5 policies classified as controlled business. D ) The licensees write more than two policies on themselves or their property.

B) The total premiums on controlled business exceed the total premiums on all other business written.

In insurance, producers are permitted to share or split commissions, providing that A) The Insurance Department knows of the arrangement. B) There is a written agreement between the producers. C) Both are properly licensed for the line of insurance. D) The insured knows and agrees to the arrangement.

C) Both are properly licensed for the line of insurance.

Whenever the Commissioner issues a cease and desist order, how will that order be delivered to the person in violation? A) Hand delivered B) Electronically C) By certified mail D) By regular mail

C) By certified mail

Two individuals are in the same risk and age class; yet, they are charged different rates for their insurance policies due to an insignificant factor. What is this called? A) Misrepresentation B) Adverse selection C) Discrimination D) Law of large numbers

C) Discrimination

To obtain a nonresident producer's license in this state, a prospective licensee must A) Have a part-time residence in Colorado. B) Have attained the professional designation of either CLU or CPCU. C) Have a similar license in his or her home state. D) Pass the Colorado licensing examination.

C) Have a similar license in his or her home state.

If the Commissioner believes that an unauthorized person is engaging in the business of insurance in violation of the provisions of the Insurance Code, creating an immediate danger to the public safety, the Commissioner may A) Notify the National Association of Insurance Commissioners. B) Order an immediate hearing to be conducted. C) Issue an emergency cease and desist order. D) Publish a warning in an official newspaper circulated in Colorado.

C) Issue an emergency cease and desist order.

An insurer receives an Examination Request Form dated June 2 from the Division of Insurance. The insurer must respond by A) June 7. B) June 9. C) June 12. D) June 16.

C) June 12.

Which of the following is NOT considered a misrepresentation as it pertains to unfair trade practices? A) Exaggerating the benefits provided in the policy B) Stating that the competitors will arbitrarily increase their premiums each year C) Making comparisons between different policies D) Stating that the insurance policy is a share of stock

C) Making comparisons between different policies

Which of the following statements is INCORRECT with regards to Surplus Lines Insurance? A) Before coverage is placed with a surplus lines company, diligent effort must be made to place the risk with admitted insurers. B) Business placed with a surplus lines insurer is subject to a premium tax that must be collected by the broker. C) Policies written by a surplus lines insurer typically contain standard coverages and forms. D) To sell Surplus Lines Insurance, the licensee must obtain a Surplus Lines Broker's License.

C) Policies written by a surplus lines insurer typically contain standard coverages and forms.

A producer's license has been suspended for noncompliance with continuing education requirements. What is the producer's duty regarding the license? A) Keep it without using it until the suspension is lifted B) Destroy it C) Promptly return it to the Commissioner D) Turn it in to the insurer

C) Promptly return it to the Commissioner

Who is responsible for covering the expenses associated with the examination of domestic insurers? A) The Department of Insurance B) The Insurance Guaranty Association C) The examined insurer D) The Commissioner

C) The examined insurer

Believing a producer has violated provisions of the Insurance Code, the Commissioner will schedule a hearing A) To prevent the producer from further violations of the law. B) To present the producer with the charges in person. C) To allow the producer to show why penalties should not be assessed. D) To revoke the producer's license.

C) To allow the producer to show why penalties should not be assessed.

Insurers with home office in another state may conduct business in Colorado as long as the Insurance ___. They will then become a foreign insurer (one admitted to do business in Colorado, but based in another state).

Commissioner grants them a Certificate of Authority

If a producer's license has been suspended, revoked, or terminated for any reason, it must be surrendered or returned to the ___

Commissioner within 15 days.

After a client signs a disclosure statement, the producer must keep a copy of the statement for at least A) 5 years from the date the statement is signed. B) 90 days from the date the statement is signed. C) 1 year from the date of completion of the services. D) 3 years from the date of completion of the services.

D) 3 years from the date of completion of the services.

A producer is required to remit premiums from a trust account to the insurer within how many days of receipt? A) 10 days B) 15 days C) 30 days D) 45 days

D) 45 days

All insurance companies doing business in the state of Colorado must file a financial statement with the Commissioner A) Annually, on or before January 1. B) Semiannually, January 1 and July 1 each year. C) Quarterly. D) Annually, on or before March 1.

D) Annually, on or before March 1.

Whenever the Commissioner issues a cease and desist order, how will that order be delivered to the person in violation? A) By regular mail B) Hand delivered C) Electronically D) By certified mail

D) By certified mail

All of the following are considered to be misuses of fiduciary funds EXCEPT A) Using balances in customer accounts as collateral for a loan to a producer B) Remitting a return premium to an insured 31 days after the producer received it from the insurer C) Reflecting a premium received as a business asset on the producer's financial statement D) Collecting interest on customer balances held in a producer's trust account

D) Collecting interest on customer balances held in a producer's trust account

An insurance producer just sold an insurance policy to his sister. What kind of business is this? A) Illegal B) Internal C) Personal D) Controlled

D) Controlled

All of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT A) An offer of employment. B) Stocks, securities, or bonds. C) An offer to share in commissions generated by the sale. D) Dividends from a mutual insurer.

D) Dividends from a mutual insurer.

The requirement that producers must account for all insurance funds collected, and not commingle those funds with their own is known as A) Premium accountability. B) Fiscal responsibility. C) Accepted accounting principal. D) Fiduciary responsibility.

D) Fiduciary responsibility.

Noncompliance with the regulation regarding fees charged by producers may result in which of the following penalties? A) A fine up to $25,000 per violation B) Imprisonment C) Requiring the producer to complete continuing education on ethics D) Fines and license suspension or revocation

D) Fines and license suspension or revocation

Which of the following is a producer's fiduciary duty? A) Signing an application B) Selling insurance C) Making a commission D) Handling premiums

D) Handling premiums

An insurer devises an intimidation strategy in order to corner a large portion of the insurance market. Which of the following best describes this practice? A) A legal advertising strategy B) Unfair Discrimination C) Defamation D) Illegal

D) Illegal

An insurer publishes intimidating brochures that portray the insurer's competition as financially and professionally unstable. Which of the following best describes this act? A) Legal, provided that the information can be verified B) Illegal until endorsed by the Guaranty Association C) Legal, provided that the other insurers are paid royalties for the usage of their names D) Illegal under any circumstances

D) Illegal under any circumstances

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

Which of the following is a requirement for an insurance agency transacting insurance in Colorado? A) All employees must be licensed producers. B) It must be a resident agency. C) It must register all its members with the Commissioner. D) It must obtain a producer license.

D) It must obtain a producer license.

Any inducement offered to the insured in the sale of an insurance policy that is not specified in the policy is an unlawful practice known as A) Twisting. B) False advertising. C) Coercion. D) Rebating.

D) Rebating.

Which of the following scenarios would be an example of coercion on the part of a lender? A) Persuading the insured to switch policies to the insured's detriment B) Persuading the insured to replace policies for the sole purpose of making a commission C) Requiring the debtor to purchase insurance D) Requiring the debtor to acquire a policy from a specific producer

D) Requiring the debtor to acquire a policy from a specific producer

Regarding investigations of insurers, the Colorado Commissioner of Insurance may A) Investigate only individuals and companies that apply for licenses. B) Conduct investigations through the State Attorney General. C) Conduct investigations on his/her own but cannot subpoena witnesses. D) Subpoena witnesses whenever he/she deems necessary.

D) Subpoena witnesses whenever he/she deems necessary.

A man desperately wants to become an insurance agent, but cannot pass the Colorado exam. His cousin offers to take the test under the man's name and passes. Three months after the license is issue that gets discovered. What will the Commissioner's action be? A) The Commissioner must wait until the license's renewal date to suspend the license. B) The Commissioner can issue a license for the cousin. C) There is nothing the Commissioner can do. D) The Commissioner can revoke the license.

D) The Commissioner can revoke the license.

An insurer with their home office in another state may do business in Colorado if A) They are granted an exemption by the Insurance Commissioner. B) They write insurance for Colorado residents. C) They register as a domestic company in Colorado as well. D) They obtain a Certificate of Authority in Colorado.

D) They obtain a Certificate of Authority in Colorado.

A lender is requiring that a borrower purchases an insurance policy through a particular insurer, as a condition to the extension of credit. This is an example of which of the following? A) Controlled business B) Rebating C) An appropriate and allowed condition D) Unfair practice of coercion

D) Unfair practice of coercion

___ between individuals of the same class with equal life expectancies, or by reason of race, nationality, or ethnic group would be considered unfair discrimination. Insurers are also not allowed to cancel individual coverage due to a change in marital status. Discriminating in benefits based on the insured's habits and lifestyle (such as smoking or dangerous hobbies) is acceptable.

Discriminating

___ of a mutual insurer are not considered to be a rebate because the policy specifies that they might be paid.

Dividends paid to policyholders

___, an insurer, its authorized representative, a producer, the Commissioner, or an organization of which the Commissioner is a member and that compiles the information and makes it available to other Commissioners or regulatory or law enforcement agencies will not be subject to civil liability.

In the absence of willful and wanton behavior

___ to participate in any boycott, coercion, or intimidation that is intended to restrict fair trade or create a monopoly.

It is illegal

___ of policies is not illegal.

Making accurate comparisons

___ 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.

Misrepresentation

___, after proper notice and hearing, in any of the sanctions made available by Colorado statutes. These sanctions include the imposition of fines and/or suspension/revocation of the producer's license.

Noncompliance may result

___ are issued to nonresident producers wanting to do business in Colorado. That means a producer of another state with only a life and health resident license cannot be granted a nonresident property and casualty license in Colorado without first obtaining a property and casualty license in his or her home state.

Only "like licenses" (similar licenses)

___ is defined as any inducement offered to the insured in the sale of insurance products that is not specified in the policy. Both the offer and acceptance of a rebate are illegal.

Rebating

Producers who act in an agency capacity are required to maintain a separate trust account for premiums. Any interest earned in a trust account belongs to the producer. ___ or as collateral for a loan to a producer; operating expenses may not be paid out of the trust account. Producers must remit a return premium to an insured within 30 days after the producer received it from the insurer.

Trust accounts may not be used as a personal asset

Any person in violation of the provision on defamation is guilty of ___ and will be punished by a fine up to $500 or by imprisonment in the county jail up to 1 year, or by both.

a misdemeanor

Debtors cannot be told to purchase credit insurance from any particular person or entity. This is known as ___.

an unfair practice of coercion

Debtors cannot be told to purchase credit insurance from ___. This is known as an unfair practice of coercion.

any particular person or entity

An applicant for a producer license must be ___.

at least 18 years of age

Permitting individuals of the same class to be ___ for the same insurance is the unfair trade practice of discrimination.

charged a different rate

Producers who act in an agency capacity are required to maintain a separate trust account for premiums. Any interest earned in a trust account belongs to the producer. Trust accounts may not be used as a personal asset or as ___. Producers must remit a return premium to an insured within 30 days after the producer received it from the insurer.

collateral for a loan to a producer; operating expenses may not be paid out of the trust account

Claims investigations must be ___.

completed promptly

When producers sell policies on themselves, their family, or their coworkers, this is called ___. Controlled business is legal as long as premiums paid on these policies do not exceed the premiums that the producer writes for other business.

controlled business

The Commissioner may issue an ___ if he believes that an unauthorized person is engaging in the business of insurance in violation of the provisions of the insurance code and if it appears that the alleged conduct is fraudulent, creates an immediate danger to the public safety, or is causing or can be reasonably expected to cause significant, imminent, and irreparable public injury.

emergency cease and desist order

The Commissioner may conduct an examination or investigation of any company or person as often as deemed appropriate, but at least once ___.

every 5 years.

Issuing or circulating any sales material that is ___ would be considered misrepresentation and is illegal.

false or misleading

All insurance companies doing business in this state will make and file with the Commissioner a ___.

financial statement annually, on or before March 1

A fiduciary is someone whom the client has placed financial trust in. Producers have the fiduciary duty to ___ unearned refunds in a trusted manner. This money must not mingle with producers' personal funds, but instead be kept in a fiduciary capacity.

handle clients' premiums and insurers'

Insurance producers are allowed to share or split commissions only ___

if both parties are properly licensed for that line of insurance.

When a company criticizes the financial situation of another company with the intention of injuring that company, it has committed an ___.

illegal trade practice called defamation

Producers are prohibited from charging separate fees in addition to those contemplated in the rate filing. Insurance producers may charge fees for specific services which are beyond the scope of services pertaining to ___

insurance policies, including risk management services, financial planning, investment counseling, and similar.

An insurance agency or business entity acting as an insurance producer must obtain an ___.

insurance producer license

A producer is required to remit premiums from a trust account to the ___.

insurer within 45 days of receipt

The Commissioner may conduct ___

investigations and subpoena witnesses whenever he/she deems necessary.

Once the Commissioner has reasonable grounds to believe that a person has violated insurance laws, the Commissioner must conduct a hearing to allow the person to defend themselves. Upon failure of the person to redeem their actions, the Commissioner ___.

may impose fines or suspend or revoke the person's license

The failure of a company transacting insurance business in Colorado to obtain a certificate of authority will ___ of such company and shall not prevent such company from defending any action in any court of this state.

not impair the validity of any act or contract

Money collected with respect to an insurance transaction must be held in a position of trust by the ___.

producer or broker

For a producer to receive commissions from the sale of insurance, they must be ___.

properly licensed for that line of insurance.

The Commissioner may serve a cease and desist order that contains a statement of the charges, which must be delivered by ___, with return receipt requested, at the person's last known address.

registered or certified mail

The Commissioner may ___ a license if he or she discovers a person obtained or attempted to obtain a license through misrepresentation or fraud.

suspend or revoke

The state insurance statutes and regulations have the guidelines for ___.

suspension and revocation of any producer's license

If a producer's license has been suspended, revoked, or terminated for any reason, it must be surrendered or returned to ___

the Commissioner within 15 days

All reasonable expenses and charges associated with the examination must be paid directly by ___

the examinee to the examiner.

Producers will be deemed to be using their license primarily to write controlled business if, during any 12-month period, ___

the total premiums on controlled business exceed the total premiums on all other business written.

Producers will be deemed to be using their license primarily to write controlled business if, during any 12-month period, ___.

the total premiums on controlled business exceed the total premiums on all other business written.

Permitting individuals of the same class to be charged a different rate for the same insurance is the ___

unfair trade practice of discrimination.