*****CA Life & Health Chapter 16 The Insurance Marketplace Multiple Choice
For senior agents, the requirement for continuing education for California Partnership for long-term care policies is A) 4 hours each year B) 8 hours each reporting period C) 8 hours each year D) 4 hours each reporting period
B) 8 hours each reporting period
An individual wants to transact business as a life agent in this state. In addition to obtaining a life agent license, what else must the applicant have? A) Certificate of Insurance B) Insurance interest C) A letter of recommendation from the Commissioner D) Appointment
D) Appointment
An insurance company is domiciled in Montana and transacts insurance in Wyoming. Which term best describes the insurer's classification in Wyoming? A) Alien B) Domestic C) Unauthorized D) Foreign
D) Foreign
When doing business in this state, an insurance company that is formed under the laws of another state is known as which type of insurer? A) Domestic B) Alien C) Nonadmitted D) Foreign
D) Foreign
Intentionally misrepresenting or concealing a material fact to induce an insurance company to make a contract is known as A) Avoidance B) Misrepresentation C) Concealment D) Fraud
D) Fraud
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 strtegy B) Unfair discrimincation C) Defamation D) Illegal
D) Illegal
Every holder of an insurance license must notify the Commissioner, in writing, of any change of residence address, principal business address, or mailing address within which time parameter? A) 10 days B) 10 working days C) 30 days D) Immediately
D) Immediately
An insurer received a claim on May 1st. On May 31st, the claim was approved in its entirety. By what date can the claimant expect the payment? A) July 10th B) June 3rd C) June 10th D) June 30th
D) June 30th
Which of the following is NOT a license in the state of California? A) Life-only agent B) Solicitor C) Insurance agent D) Life broker
D) Life broker
According to the California Insurance Code, the term "shall" describes what kind of actions? A) Permissive B) Implied C) Directive D) Mandatory
D) Mandatory
An independent agent may have contracts with which of the following? A) The Department of Insurance B) The Commissioner C) Brokers D) More than one insurer
D) More than one insurer
What is the major difference between a stock company and a mutual company? A) Amount of death benefit B) Number of producers C) Types of whole life policies D) Ownership
D) Ownership
If a licensee would like to terminate his license and has it in his possession, what would he have to do? A) Write the Commissioner and request a hearing for license termination B) Request that his employer terminate his appointment and notify the Commissioner C) Wait until the license expiration date and allow his license to expire D) Send the license to the Commissioner for termination
D) Send the license to the Commissioner for termination
The California Insurance Code is A) Rules established by the Department of Insurance B) A code of ethics C) Regulations established by the Insurance Commissioner D) Statutes established by the State Legislature
D) Statutes established by the State Legislature
When a replacement carrier has a question regarding the prior carrier's coverage, from which of the following can they demand a clarification? A) The employer B) The servicing agent C) The Department of Insurance D) The prior carrier
D) The prior carrier
Which entity pursues liquidation of an insolvent insurer? A) The local government of the city in which the insurer is located B) The attorneys of the insolvent insurer C) The federal government D) The state government
D) The state government
Which of the following statements regarding policy dividends is true? A) They are automatically paid out to policyholders B) They are available in any life insurance policy C) They are guaranteed D) They are a refund of unearned premiums
D) They are a refund of unearned premiums
What is the main role of a solicitor of insurance? A) To legally represent the insurance company B) To manage general agents C) To serve as the agency administrator D) To aid insurance agents in transacting insurance
D) To aid insurance agents in transacting insurance
An applicant for insurance is requesting more information from her agent about a claim that is currently being settled. Within what time period must the agent respond? A) 15 days B) 21 days C) 31 days D) 90 days
A) 15 days
If a policyholder contacts an insurance company about a claim and expects a response to the inquiry, within what span of time must the agent respond? A) 15 days B) 21 days C) 31 days D) 90 days
A) 15 days
A new insurance must be treated as a replacement if a new insurer sells a policy to a group which discontinued its group medical insurance within how many days? A) 60 B) 15 C) 30 D) 90
A) 60
When transacting business in this state an insurer formed under the laws of another country is known as a/an A) Alien insurer B) Domestic insurer C) Foreign insurer D) Admitted insurer
A) Alien insurer
An agent is acting ethically in all of the following situations EXCEPT A) Always representing the insured B) Working within the conditions of his/her contract C) Representing the insurer, not the insured D) Keeping the customers' best inerests in mind
A) Always representing the insured
Within how many days after the application was submitted must an insurer file a notice of agent appointment with the Commissioner if the insurer issues a policy written by the agent who is not specifically appointed by that insurer? A) 10 days B) 14 days C) 15 days D) 30 days
B) 14 days
An insurance agent explains to his client the difference between two disability income insurance policies and then offers to fill out an application with the client's personal information and history. Upon completion of the application, the agent informs his client that he will "shop around" to find the company with the most favorable rates. If the agent presents the client's application to an insurer, he will be acting in which of the following capacities? A) An insurance broker B) A life agent C) An insurance solicitor D) An insurance agent
A) An insurance broker
An insured noticed that his policy stated that he "shall" keep flammable liquids at least ten feet from an ignition source and "may" consider storing flammable liquids in another location. Based on the policy language, where must the insured keep flammable liquids in relation to ignition sources? A) At least 10 feet away B) In another location entirely C) Anywhere within 10 feet D) There is no specified area
A) At least 10 feet away
Which of the following must an insurer obtain in order to transact insurance within a given state? A) Certificate of authority B) Producer's certificate C) Business entity license D) Insurer's license
A) Certificate of authority
Company A enters into reinsurance agreement with Company B, where Company B reinsures Company A's policies. Which of the following is true? A) Company A is the primary insurer, and Company B is the reinsurer B) Company A is the reinsurer, and Company B is the primary Insurer C) Company A is the primary insurer and Company B is the facultative insurer D) Company A is the facultative insurer, and Company B is the primary insurer
A) Company A is the primary insurer, and Company B is the reinsurer
In which distribution system must the potential client take the initiative and respond to an advertisement through a telephone or mail contact with the insurer? A) Direct response system B) Managing general agent system C) Home service system D) Direct agency system
A) Direct response system
The types of policies that are covered under the terms of the Association include? A) Direct, nongroup life, health, annuity, and supplemental policies B) Employer self-funded contracts C) Contracts involving reinsurance D) An annuity issued by a charitable organization
A) Direct, nongroup life, health, annuity, and supplemental policies
Which of the following best describes an insurance company that has been formed under the laws of this state? A) Domestic B) Sovereign C) Alien D) Foreign
A) Domestic
If an agent unwittingly gives a client incorrect information, what professional insurance would pay for losses or defend the agent against any resulting lawsuits? A) Errors and Omissions B) Nonadmitted agent insurance C) Professional liability D) Nonmedical insurance
A) Errors and Omissions
In order whether to determine to test an insurance applicant for HIV or AIDS, the insurer may do which of the following? A) Establish minimum standards for testing all applicants for insurance B) Base its decision to test on the proposed insured's sexual orientation C) Base its decision to test on the incidence of AIDS in the person's ZIP code D) Test only persons who are single and under age 30
A) Establish minimum standards for testing all applicants for insurance
In the State of California, who selects the Insurance Commissioner and for how long? A) General election, for no more than two four-year terms B) General election, for one six-year term C) The Governor, for one six-year term D) The Governor, for no more than two four-year terms
A) General election, for no more than two four-year terms
The insured provides a proof of claim to the A) Insurer B) Insured C) Commissioner D) Guarantee Association
A) Insurer
In which of the following situations is it legal to limit coverage based on marital status? A) It is never legal to limit coverage based on marital status B) Excessive number of divorces, as defined by the Insurance Code C) Legal seperation during the application D) Divorce within the last six months of applying for insurance
A) It is never legal to limit coverage based on marital status
Which operating division of an insurer is responsible for advertising, promoting, and distributing the insurer's products to the public? A) Marketing and sales B) Claims C) Actuarial D) Underwriting
A) Marketing and sales
Transacting insurance without a license is considered a/an A) Misdemeanor B) Class A violation C) Act of negligence D) Felony
A) Misdemeanor
A licensed insurance agent overhears a conversation that leads him to believe a person is committing fraud. If the agent makes a written report to a law enforcement agency and the person is investigated, but it turns out it was an erroneous accusation, what charge will the agent face? A) No charges; the insurance Code gives the agent legal immunity B) Libel, a written untruth C) A misrepresentation D) Slander
A) No charges; the insurance Code gives the agent legal immunity
Applicants for insurance who are blind may be rated substandard for life insurance A) Only on the basis of information unrelated to their blindness B) Only if they have been blind from birth C) Only if their blindness resulted from an injury D) Always, because they cannot avoid the risk of injury or death
A) Only on the basis of information unrelated to their blindness
What is the purpose of errors and omissions insurance? A) Protect agents against charges that they didn't properly serve a client B) Protect agents against human resources errors made by their respective agencies C) Protect insureds against misrepresentation D) Protect insureds against a claim loss
A) Protect agents against charges that they didn't properly serve a client
All of the following would be considered insolvent insurers EXCEPT A) A company with an impairment of minimum paid-in capital B) A company that reinsures outstanding risks C) A company that paid out all of its liabilities but doesn't have additional assets equal to the aggregate paid-in capital D) A company with insufficient policy reserves to meet its financial obligations
B) A company that reinsures outstanding risks
An insurer may discriminate against a person through underwriting if that person has A) A history of buying and canceling insurance policies B) A physical handicap that could result in an actuarially predictable loss C) Been a fare-paying passenger on a regularly scheduled airline flight D) No previous history of buying life insurance
B) A physical handicap that could result in an actuarially predictable loss
An insurance agent, who has been in a sales slump for the last 6 months, has decided that she will offer complimentary health insurance for the first year on every life insurance policy she sells for the next 12 months. This practice is an example of A) An option in a purchase contract and, therefore, is permitted B) A violation of the Code C) Free insurance as an inducement to purchase real property and is permitted by the Code D) Free insurance as an inducement to purchase real property and is prohibited by the Code
B) A violation of the Code
Which of the following is the closest term to an authorized insurer? A) Legal B) Admitted C) Certified D) Licensed
B) Admitted
Which of the following is a primary difference between a life and disability analyst and a life agent? A) An analyst works for an insurance company, and the agent works for the insured B) An analyst receive compensation from his client, and the agent receives compensation from the insurance company C) An analyst makes insurance contracts and the agent sells them D) An agent may charge a brokerage fee and the analyst cannot
B) An analyst receive compensation from his client, and the agent receives compensation from the insurance company
To legally transact insurance in this state, an insurer must obtain which of the following? A) Certificate of Insurance B) Certificate of Authority C) Power of Attorney D) Business entity license
B) Certificate of Authority
What is the term for a sales campaign conducted through the mail? A) Advertising B) Direct-response C) Direct-mail D) Mass marketing
B) Direct-response
Two individuals are in the same risk and age class; yet, they are charged with 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
The Commissioner performs all of the duties dictated by the CIC and A) Acts as the executor for all fraudulent claims filed in this state B) Enforces the execution of all provisions and laws C) May be appointed with only ONE insurer during his/her term to avoid conflicts of interest D) Makes any changes to the Code that he/she deems necessary from time to time
B) Enforces the execution of all provisions and laws
Which of the following provisions requires an insurer to document all correspondence with an insured? A) Entire contract B) Errors and omissions C) Unfair trade practices D) Claims settlement
B) Errors and omissions
An agent with an active license CANNOT act as a broker unless A) He is on the Commissioner's list of appointed brokers B) He does not have an appointment with the company that he is brokering C) He has satisfied the mandatory licensing requirements for "broker" status D) He is designated by his company as an appointed broker
B) He does not have an appointment with the company that he is brokering
No person can act as an administrator in this state unless he or she A) Has valid multi-lines broker's license and has posted a surety bond in the amount of $10,000 with the Department to cover loss liabilities B) Holds a certificate of registration issued by the Commissioner C) Has a valid agency contract with a licensed insurer in this state D) Has posted a surety bond in the amount of $10,000 with the Department to cover loss liabilities
B) Holds a certificate of registration issued by the Commissioner
Which of the following persons represents several insurance companies but owns the records of the policies sold? A) Direct writing agent B) Independent agent C) Exclusive agent D) General agent
B) Independent agent
An insurance company was able to meet its financial obligations to the policyowners; however, it does not own enough additional assets to equal at least the amount of paid-in capital. That company may be deemed A) Terminated B) Insolvent C) Unauthorized D) Delinquent
B) Insolvent
On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are A) Guaranteed B) Not taxable since the IRS treats them as a return of a portion of the premium paid C) Paid at a fixed rate every year D) Taxable as ordinary income
B) Not taxable since the IRS treats them as a return of a portion of the premium paid
A dependent who is covered under a group medical policy files multiple claims for a single loss, thereby committing fraud. To what extent can the insurer deny benefits? A) For all person in the same employee classification as the employees sponsor of the dependent B) Only for that person who committed the fraud C) For the family of the person who committed the fraud D) For all insureds under that group policy
B) Only for that person who committed the fraud
A participating insurance policy may do which of the following? A) Require 80% participation B) Pay dividends to the policyowner C) Provide group coverage D) Pay dividends to the stockholder
B) Pay dividends to the policyowner
The Claims Department would be responsible for investigating which of the following? A) Possible contradictions in an insurance contract B) Possible fraudulent claims by an insured C) Possible fraudulent claims by an insurer D) Possible violations of ethics laws
B) Possible fraudulent claims by an insured
Which of the following can an insured submit to the insurer that would provide evidence of a claim and illustrate how severe the loss is? A) Notification of loss B) Proof of claim C) Statement of claim D) Petition for remittance
B) Proof of claim
It would be considered unfair discrimination to ask an insurance applicant about which of the following and then use that information as a rating factor to determine insurability? A) Address B) Sexual orientation C) Age D) Gender
B) Sexual orientation
Which of the following insurers are owned by stockholders who have the usual rights of ownership, including the right of voting? A) Fraternal B) Stock C) Mutual D) Reciprocal
B) Stock
Which of the following entities may NOT be an insurer? A) A natural person B) The Commissioner C) A business trust D) A limited liability company
B) The Commissioner
In a conservation or liquidation effort, what powers does the Commissioner have? A) The Commissioner has the power to sell the company's assets until all of its creditors are paid B) The Commissioner has all of these powers C) The Commissioner has complete control over the assets of the insolvent company D) The Commissioner has the power to sue the company's officers
B) The Commissioner has all of these powers
The Commissioner may deny a license application without a hearing for which of the following reasons? A) The applicant conducted a previous business in an unethical manner B) The applicant had a previous license suspended for cause within the immediate 5-year period C) The applicant has been accused of a felony D) None of these
B) The applicant had a previous license suspended for cause within the immediate 5-year period
All of the following statements are true regarding policy dividends EXCEPT A) They are generated by mutual insurers B) They are guaranteed C) They are paid to the policyholders D) They are refunds of unused premiums
B) They are guaranteed
Which of the following does NOT apply to Errors and Omissions liability contracts? A) Benefits are usually limited per claim or by the policy period B) They are written for the clients of the producer covered by the policy C) They are renewable annually D) They are written with per-claim deductibles of at least $500
B) They are written for the clients of the producer covered by the policy
A man has HIV and was hospitalized for several weeks. His insurance company has delayed paying his claim for 120 days, saying that he is not covered due to a pre-existing condition exclusion in his policy. The insurance company is guilty of which of the following? A) Discrimination B) Unfair claims settlement practice C) Fraud D) Misrepresentation
B) Unfair claims settlement practice
An insurance agent who diverts premiums held in a trust capacity for his or her own use A) Must enter the transaction on a seperate ledger and report such transactions B) Will be considered guilty of theft and be punished to the extent of the law C) Must report the premium as additional income to the insurer D) Will be fined $250 and required to attend a 3-hour ethics review course
B) Will be considered guilty of theft and be punished to the extent of the law
The Commissioner has the authority to issue a cease and desist order against any person acting as an insurnace agent or broker without being licensed. The Commissioner may also impose a penalty for each day the order is violated in what amount? A) $2000 and 6-month jail term B) $5000 and 6-month jail term C) $5000 D) $2000
C) $5000
The Department of Insurance contracts an agent about a claim that was settled two months ago. Within what timeframe must the agent issue a complete response A) 10 days B) 15 days C) 21 days D) 31 days
C) 21 days
How many hours of continuing education must agents complete each licensing term? A) 12 B) 15 C) 24 D) 30
C) 24
Without obtaining dual licensing, life-only agents may transact all of the following types of insurance EXCEPT A) Accidental death B) Endowments C) 24-hour coverage D) Disability income
C) 24-hour coverage
In order for the California Insurance Code to be changed in any way, what is required? A) The governor's signature is required on the bill B) The state senators vote on any bills and if they are approved, they become law C) A bill must be approved by both houses of the California legislature D) A bill must be presented to the residents of California who decide by popular vote
C) A bill must be approved by both houses of the California legislature
What is a foreign insurer? A) An insurer with licensed agents doing business in other countries B) An insurer with licensed agents who are citizens in more than one country C) An insurer with a home office in another state D) An insurer with a home office in another country
C) An insurer with a home office in another state
The set of regulations issued by the California Insurance Commissioner that identifies the standards for the insurance code and how it is to be administered is A) California Advisory Administrative Code B) California Advisory Code C) California Administrative Code of Regulations D) California Regulatory Code of Conduct
C) California Administrative Code of Regulations
Which of the following entities or individuals evaluates requests for payments by insureds after a loss has occurred? A) Underwriter B) Insured C) Claims department D) Marketing department
C) Claims department
Which of the following would be considered refund of unearned premium? A) Nonforfeiture values B) Cash value C) Dividends D) Commissions
C) Dividends
Your client wants to buy a par policy to supplement his retirement savings program. Which of the following does your client need to understand about insurance policy dividends? A) Dividends require the purchase of additional income B) Dividends are guaranteed C) Dividends are considered a refund of unused premiums D) Dividends are written into the contract
C) Dividends are considered a refund of unused premiums
Which of the following is a TRUE statement concerning an insurer's Earned Surplus? A) Earned surplus funds allow a company to pay higher bonuses to its agents B) Earned Surplus finances a company's growth C) Earned Surplus are unassigned funds that are required to be reported on the insurer's annual statement D) It is from this money that death or medical claims are paid
C) Earned Surplus are unassigned funds that are required to be reported on the insurer's annual statement
Which of the following terms is defined by the California Insurance Code as unassigned funds that must be reported on a stock insurer's annual statement? A) Earned income B) Premiums C) Earned surplus D) Dividends
C) Earned surplus
Which of the following are the authorities that an agent can hold? A) Authorized and admitted B) Primary and secondary C) Express and implied D) Apparent and implied
C) Express and implied
To make sure that an agent's license stays active, the agent of an insurer must see that all of the following are done EXCEPT A) An appointment notice has been executed by the insurer B) A notice of appointment is filed for the agent by the insurer with the Commssioner's office C) File a surety bond with the Commissioner D) Be legally appointed with the insurer
C) File a surety bond with the Commissioner
Which of the following entities is not an insurer but an organization formed to provide insurance benefits for members of an affiliated or religious organization? A) Stock company B) Reciprocal association C) Fraternal benefit society D) Mutual company
C) Fraternal benefit society
Al tells a client that she is guaranteed to be approved for LTC insurance if she pays the full year's premium at the time of application. The client applies for LTC insurance and writes a check for the annual premium to Al's agency. Al issues a Binder of insurance but does not send the application to the insurer, and intentionally uses the premium for personal expenses instead. Al is guilty of A) Misrepresentation B) Twisting C) Fraud D) Negligence
C) Fraud
Which of the following is NOT true regarding a Certificate of Authority? A) It is equivalent to an insurance license B) It is issued by the state department of insurance C) It is issued to group insurance participants D) It may be necessary for transacting business in a specific state
C) It is issued to group insurance participants
Acting as an agent for a nonadmitted insurer (unless a surplus line broker) is considered a/an A) Class A violation B) Unfair trade practice C) Misdemeanor D) Felony
C) Misdemeanor
When a discontinued policy contained a death benefit, what term is used in the CIC to describe the length of the applicable extension of benefits? A) Insurer's discretion B) Until death or cancellation C) Reasonable D) Client's discretion
C) Reasonable
An insurance agent's responsibilities include all of the following EXCEPT A) Represent the insurer B) Perform professionally C) Represent the client D) Perform faithfully
C) Represent the client
If a licensee wants to terminate her agent's license but it is in the possession of her employer, which of the following is true? A) She must request her employer to send her license to the Commissioner B) She will not be able to terminate the license until she has it in her possession C) She can terminate the license by sending the Commissioner a written notice D) She must first ask her appointment to be terminated. As soon as the employer returns her license, she can send it to the Commissioner
C) She can terminate the license by sending the Commissioner a written notice
An insurance agent collected policy premiums from his clients and before remitting the funds to the insurer, borrowed some for personal use. This act would be considered A) Rebating B) Misappropriation of funds C) Theft D) Fraud
C) Theft
When can earned surplus be returned to the policyholder? A) Whenever requested by the policyholder B) Whenever it occurs C) Whenever it exists and is not needed for other expenses D) Whenever the funds are unassigned
C) Whenever it exists and is not needed for other expenses
Obtaining information under false pretenses is a violation. What would be the maximum fine for any agent found guilty? A) $5000 B) $30,000 C) $20,000 D) $10,000
D) $10,000
Anyone convicted of committing an insurance fraud may be fined up to the greater amount of double the value of the fraud or A) $50,000 B) $75,000 C) $100,000 D) $150,000
D) $150,000
How long must an insurer keep records of electronic transmission to customers? A) 6 years B) 1 year C) 3 years D) 5 years
D) 5 years
Every insurer is required to provide all records requested by the Commissioner within A) A period of 60 days following a written request B) 5 business days of notification by the Commissioner's office C) 10 business days of notification by the Commissioner's office D) A period of 30 days following a written request
D) A period of 30 days following a written request
Which of the following would NOT be considered a form of direct response marketing? A) An ad in a newspaper B) A circular mailed to a city's residents C) An insurance company's TV commercial D) A sign in an insurer's office
D) A sign in an insurer's office
Which of the following departments is responsible for developing mortality and morbidity tables? A) Marketing B) Underwriting C) Secretarial D) Actuarial
D) Actuarial
All of the following would be considered rebating EXCEPT A) An agent offers the use of his lake hours to a client as an inducement to buy an insurance policy from him B) An agent offers to share his commission with a policyholder C) An agent offers tickets to a baseball game as an indicument to buy insurance D) An agent misrepresents policy benefits to convince a policyowner to replace policies
D) An agent misrepresents policy benefits to convince a policyowner to replace policies
A person that DOES NOT work on behalf of the company for which he or she does business but rather represents the prospect, insured, or client is called A) An insurance solicitor B) An insurer's agent C) A fiduciary trustee D) An insurance broker
D) An insurance broker