AL General Insurance Laws Quiz

Producer license remain in effect for ___________ unless the license is revoked.

Unless revoked, your Producer's license will remain in effect for as long as you meet the continuing education requirements and pay the required fees.

A nonresident producer is defined as:

A producer that holds an insurance license issued by a state other than his or her home state

All of the following are considered unfair trade practices EXCEPT: making false oral or written statements about the condition of an insurer. discriminating against individuals of the same class in the rates charged for insurance. (X)failing to handle claims promptly. falsifying financial information of an insurer with intent to deceive.

Failing to handle claims promptly is an unfair claims practice rather than an unfair trade practice.

Which of the following is NOT an example of an unfair claims practice? Failing to provide prompt claims investigation (X)Readjusting premium rates on the basis of loss experience Failure to promptly provide a claim form Forcing a claimant to sue because the insurer is trying to settle for less than the amount owed

Readjusting premium rates on the basis of loss experience is an accepted practice for insurers.

Associations that protect consumers in the event that an insurer becomes insolvent and/or financially unable to pay its claims up to certain monetary limitations are called:

The purpose of guaranty associations is to protect policyholders against insurer insolvency.

Of the following statements about state guaranty associations, which one is CORRECT? Each state is liable for funding its own association. (X)Guaranty associations cover unpaid claims when an insurer becomes insolvent. Guaranty associations only help insurers who are considered impaired. Guaranty associations have been established in most states.

The purpose of state guaranty associations is to protect policyholders against an insurer's financial failure.

All of the following are duties of the Insurance Commissioner/Direct/Superintendent EXCEPT: (X)write the insurance rules and laws for the state. enforce all provisions of the insurance code. apply for restraining order and injunction. examine records of insurance companies and agents.

The state legislature is responsible for writing insurance laws. The Commissioner/Direct/Superintendent is responsible for enforcing those laws.

Replacing an existing policy with a new policy for the sole purpose of generating a commission is called:

Twisting.

You have the right to submit a written demand for a hearing if you are suspected of the insurance statutes being violated by the Department of Insurance in Alabama. Upon receipt of the demand, the Commissioner must hold a hearing within:

30 days If the Alabama Department of Insurance believes you are in violation of the insurance statutes and you file a written demand for a hearing, the Commissioner has 30 days to hold the hearing.

In the state of Alabama, the prelicensing education requirement for a life & health, or a property & casualty license is:

40 hours.

The Commissioner of Insurance has the authority to do which of the following?

Examine insurance companies The Commissioner of Insurance has the authority to examine insurers when they apply for their initial certificate of authority, whenever the Commissioner feels it is necessary, and at least once every five years.

The Department may deny, suspend, revoke, or refuse to renew a producer license for all of the following EXCEPT: obtaining or attempting to obtain a license through misrepresentation or fraud. (X)having been convicted of any misdemeanor. forgery involving an insurance transaction. misappropriation of funds in an insurance transaction.

Having been convicted of a felony or of a misdemeanor involving dishonesty or a breach of trust is a possible cause for denial, suspension, revocation, or nonrewal.

Medicare supplement policies must be:

In this state, Medicare supplement policies must be issued as at least guaranteed renewable.

All of the following acts by an agent would violate state insurance laws EXCEPT: (X)offering lower life insurance premiums to a 28-year-old man than to a 50-year-old man. making defamatory comments about a competing insurance company offering dividend advantages as an inducement to buy insurance. misrepresenting the benefits of a policy.

Making defamatory comments about a competing insurance company, offering dividend advantages as an inducement to buy insurance, and misrepresenting the benefits of a policy are all unfair trade practices and are illegal.

Producers that offer half of their commission in hopes that a client will purchase a policy is guilty of:

Offering to give your client half of your commission in order to motivate him to buy from you is considered rebating.

Which of the following individuals would be required to obtain an insurance license in this state? Paula, an employee of a XYZ Insurance Company who receives no commissions Tom, an office manager at a local automobile dealership that is getting quotes for their group health plan (X)Roe, a district manager for an insurer who recruits and trains new agents. Both B and C are correct

Since Paula is an employee of the insurance company who is not involved with the direct solicitation and sale of insurance, she is not required to be licensed. Tom is only receiving quotes of insurance for his employer; therefore, he is not required to be licensed. By eliminating the first and second answers, this leaves Roe, who will likely need to be licensed to help train agents to solicit and sell insurance to prospects.

The concept of due process involves:

The concept of due process involves both a notice and a hearing.

When an aggrieved person files a written demand for a hearing, the Commissioner must hold a hearing within:

The demand for a hearing, unless postponed by mutual consent, must be held within 30 days after receipt of the demand.

By law, insurance companies cannot illegally discriminate in favor of any person in the same insurance risk classification. All of the following are ways to illegally discriminate between individuals of the same class except: charging different premium amounts. charging different rates. offering different benefits for the same type of coverage. (X)charging a higher rate based on age.

The question is asking which of the answers is not a form of illegal discrimination against individuals of the same rate class. Class rating is made up in part by the person?s age, so charging age based rates for life and health insurance products is not illegal.

In order for Georgia Casualty Insurance Company to legally conduct business in this state, it must be a(n):

admitted company. Almost always, a company has to become admitted to another state before being able to conduct business in that state.

The Insurance Commissioner must be notified of a change in your legal address within ____ days?

A change in your legal address requires that you notify the Commissioner within 30 days.

Which of the following is NOT considered an unfair trade practice? Rebating Circulating a statement claiming that another insurer is about to become insolvent. Misrepresenting the dividend amount when discussing the advantages of a policy with a prospect. (X)Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements.

Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed is an unfair claims practice.

Of the following, which is NOT a cause to suspend an insurance producer's license? Material misstatements on an application for an insurance license. Misrepresenting the terms of an insurance policy. Demonstrating a lack of insurance competency. Did not meet the company's production quota.

Meeting company production quota's is not a reason to supend a procducer license.

All of the following are requirements to obtain an insurance license except: has not committed any act that is a ground for probation, suspension, nonrenewal, revocation. successfully pass the state insurance exam for the lines of authority which the individual applied. pay the required fee. (X)spend one year as an intern in a licensed agency.

Spending one year as an intern in a licensed agency is not a requirement for licensing.

Misrepresentation is defined as:

an oral or written false statement. A misrepresentation is defined as an oral or written false statement. Misrepresenting policy terms and benefits is an unfair trade practice.

In this state, the Commissioner of Insurance is:

appointed by the governor.

As an insurance producer, if you publish a written statement that is false and derogatory concerning the financial condition of any insurance company to damage the company's reputation, you would be guilty of:

defamation.

If Georgia Casualty Insurance Company is doing business in this state, it would be considered a:

foreign company. In the United States, a company that does business in a state other than its home state is considered a foreign company.

Enticing a customer with something of value not stated in the contract to induce the purchase of insurance is:

rebating. No one can pay an inducement to purchase insurance unless it is specified in the policy.

In order to make a sale, a producer misrepresents the benefits of a new policy in order to induce the customer to cancel an existing policy with another insurer. This practice is known as:

twisting. Producers may not make any statement that misrepresents or makes an incomplete comparison regarding the terms, conditions, or benefits of a policy for the purpose of inducing a policyholder to terminate, surrender, exchange or convert any insurance policy.

The Department of Insurance (DOI) allows ______hours of continuing education to be carried over from one year to the next?

12 hours of continuing education may be carried over from one year to the next.

To obtain an Alabama Producer's license you must be at least:

18 years old.

A producer must keep, at the producer's place of business, complete records pertaining to insurance transactions for at least:

3 years A producer must keep, at the producer's place of business, complete records pertaining to transactions under the producer's license for at least three years.

How long does a temporary producer license stay in effect?

6 months

The Commissioner has the authority, in extenuating circumstances, to extend your deadline for continuing education completion requirements for:

90 days. For just cause, the Commissioner can extend the time you have to complete your continuing education requirements by 90 days.

All of the following applicants are exempt from taking the insurance exam except: applicants that are currently licensed. applicants for a property license who hold the Chartered Property Underwriter (CPCU) designation. (X)temporary license holder. applicants for a life license who hold the Chartered Life Underwriter (CLU) designation.

A person that has been issued a temporary producer license must pass the state examination for the lines of insurance authority to be licensed for before the temporary license expires.

After being issued, an insurance producer license will remain in effect for how long, unless revoked or suspended?

A producer's license will remain in effect, unless suspended or revoked, as long as the license renewal fee is paid and the continuing education requirements are met.

All of the following are reasons why the department of insurance may issue a temporary insurance license EXCEPT: any time the Commissioner finds that the public interest will be best served. to the designee of a licensed producer upon entering active military service. (X)a person wants to try selling insurance for a few months before taking the state insurance exam. to the widow or spouse of a producer in case of the death or disability of the producer.

A temporary license may not be issued to a person that wants to try selling insurance for a few months before taking the state insurance exam.

Statements made by an applicant in an application for insurance are generally considered to be:

All statements in any insurance application or in the policy are considered representations and not warranties.

The concept of due process involves which of the following elements?

Both notice and hearing

All of the following are considered unfair trade practices EXCEPT: making false oral or written statements about the condition of an insurer. discriminating against individuals of the same class in the rates charged for insurance. (X)failing to handle claims promptly. falsifying financial information of an insurer with intent to deceive

Failing to handle claims promptly is an unfair claims practice rather than an unfair trade practice.

Of the following, which is NOT an unfair claims settlement practice? Refusing to pay claims Induce an insured to accept less than the claim amount due Coerce the insured to hire attorneys to receive the amount due (X)Replacing one insurance policy with another policy

Replacing one insurance policy with another policy is called replacement and is not an unfair claims practice.

How many hours of continuing education can be carried over from one reporting period to the next?

24 Up to 24 hours of credit over the minimum biennial requirement may be carried forward to the next biennial reporting period.

All of the following acts by an insurance producer are considered unfair trade practices EXCEPT: (X)telling a prospect that a policy has received a certain amount of dividends for the past several years. making comments that defame a competing insurance company. telling a prospect that the insurer has a higher rating than it actually has. inducing a prospect to purchase insurance by offering the prospect shares of stock.

As long as the statements are true, informing a prospect that a policy has received a certain amount of dividends for the past several years is not an unfair trade practice.

What is it called when a producer uses misrepresentation or deceit to convince a person to lapse an existing life insurance policy and buy another policy that is substantially the same kind?

Twisting is when a producer uses misrepresentation or deceit to convince a person to lapse (terminate) an existing life insurance policy and buy another policy that is substantially the same kind. The primary motivation for the act by the producer is usually to generate a commission on the sale of the new policy.

All of the following are requirements for a nonresident producer license to be issued in this state EXCEPT: the person is currently licensed as a resident and in good standing in the person's home state. (X)the person completed an application on a form prescribed by the National Association of Automobile Commissioners. the person has submitted the proper request and paid the applicable fees. the person's home state issues nonresident producer licenses to residents of this state on the same basis.

A nonresident producer license may be issued if the person is currently licensed as a resident and in good standing in the person's home state, the person has submitted the proper request and paid the applicable fees, and the person's home state issues nonresident producer licenses to residents of this state on the same basis.

Your license may be suspended if you are found guilty of any of the following EXCEPT: Obtained a license by fraud or misrepresentation (X)Honest insurance practices A felony conviction Willfully violated any provision of the insurance laws

Being found guilty of honest practices is not a reason for license suspension.

Canada Life operating as an authorized company in this state for the benefit of company shareholders would be considered: A Foreign/Admitted/Stock Company. A Domestic/Admitted/Mutual Company. An Alien/Admitted/Mutual Company. (X)An Alien/Admitted/Stock Company.

Canada Life would be considered an Alien/Admitted/Stock Company.

The DOI grants approval to an insurer to do business in this state by issuing a:

certificate of authority.