NJ Heath Chapter 6 NJ Laws, Rules and Regulations Common to All Lines

The commissioner believes that a licensee has violated an insurance regulation and decides to conduct a hearing. How long of a notices must the Commissioner provide the licensee?

10 days

Bills license was revoked 2 years ago. How much longer will he have to wait in order to request his license to be reinstated

3 years- license are revoked for five

Who is an insurance agent?

A person authorized to sell, solicit and negotiate insurance contracts

Who must be a member of insurance guaranty associations?

All insurers authorized to write insurance within a state

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 insurer that holds a Certificate of Authority in the state in which it transacts business is considered a/an

Authorized insurer

If an insurer hold 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

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

Certificate of authority

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

Complete continuing education hours and pay a renewal fee

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?

Discrimation

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

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

Insurer

What significance did Paul vs Virginia have on the insurance industry?

It was decided that insurance was not interstate commerce and could not be regulated by the federal government

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 purpose f solicitation and sale of insurance policies by insurers is an illegal business practice

Which of the following most likely would NOT be required to complete continuing education hours in this state?

Nonresident producers- who satisfy CE requirements their hoe state are not required to complete CE requirements in NJ if their home state recognizes the satisfaction of continuing education requirements on the same basis.

Who can usually be granted a temporary license?

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

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

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

The Department pf insurance(Commissioner/Director/Superintendent)

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

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 type of licensee represents the insured?

broker

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 employees with administrative responsibilities)

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

Any inducement offered in the sale of insurance products that is not specified in the policy is an unlawful practice known as

rebating

Who owns stock companies?

stockholders

What is the purpose of a cease and desist order?

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

if a person violates a cease and desist order, the commissioner can turn the matter over to the New Jersey Superior Court for further legal action and can assess a fine for each violation of up to

$5000-

Provided that it is a first offence. what is the maximum penalty for failing to respond to a subpoena?

$5000-no more than $10,000 for each subsequent offense

If a producer has been convicted of a crime, he or she must notify the commissioner within

30 days

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 type of licensee represents the insurance company?

The agent

Who is responsible for the contents of insurance advertisements?

The insurance company

What is the purpose of insurance guaranty associations?

To protect policyowners, insured and beneficiaries from financial losses caused by insolvent insurers

Insurance broker

when an insurance producer negotiates for an insurance contract on behalf of a client, the producer is acting as a broker. -insurance broker acts as a representative of an insured or prospective insured, and help with the insurance transactions on the insured's behalf for a commission, brokerage fee or other consideration

Mutual companies

-are owned by the policyowners and issue participating policies -policyowners are entitled to dividends that are nontaxable -dividends are generated when the premiums and the earnings combined exceed the actual cost of providing coverage, creating a surplus -dividends are not guaranteed

Stock companies

-are owned by the stockholder who provide the capital necessary to establish and operate the insurance company and who share in any profits or losses -issue non participating policies, in which policyowners do not share in profits or losses -it does not pay dividends to policyowners, however taxable dividends are paid to stockholder

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

10 days

Which of the following is a person or organization that is allowed to write business in New Jersey for insurance companies that do not possess a certificate of authority in NJ, if no authorized insurers in New Jersey offer the specific type of insurance in question? A Surplus lines agent B insurance intermediary C Unauthorized broker D fiduciary agent

A Surplus lines agent- is allowed to write business in New Jersey for insurance companies that are not authorized NJ insurers. No authorized insurers in NJ can offer the specific type of insurance in question

Which of the following is the closest term to an authorized insurer? A admitted B certified C licensed D legal

A admitted

What are them most common penalties for violations of insurance statues?

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

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

A client

Which of the following types of insurance would be written by a limited lines agent? A Term life insurance B Credit Insurance C Variable life insurance D Surplus lines insurance

B Credit insurance - limited lines agent can write the following types of insurance: bail bonds, car rental insurance, credit insurance, ticket insurance, travel insurance, group mortgage cancellation, legal insurance, self-storage personal property insurance and special nonresident limited lines

A licensee violates an insurance regulation. A hearing is held, and the person is found guilty. If this is the person's first offense, the penalty is no more than A. 1500 B. 3000 C. 5000 D. 1000

C 5000- the penalty for each subsequent violation is no more than $10,000

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

Defamation

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

Domestic, foreign and Alien

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

Domestic, foreign and alien

For what reason can a temporary licensed be issued?

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

Who might receive dividends from a mutual insurer?

Policyholders

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

Reinsurance- this is a method where the reinsurer indemnifies the ceding insurer for part of all of the losses it sustains related to a policy issued previously

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

Twisting

A producers appointment lasts for how long?

Until it is terminated

When can the Commissioner or Director examine insurers?

whenever deemed necessary, but at least once every few years (check with your state)