Chapter 15 - TN State Laws (Exam Questions)

A nonrenewal notice must EITHER state the reason, or state that the insured will provide the reason upon request within ___ days.

20

How many hours of Continuing Education must a licensed producer in Tennessee complete every 2 years?

24

All insurers must file all rates, rate information, policy forms and endorsements with the Commissioner at least _____ days before their intended date of use.

30

The Commissioner must provide a person subject to an investigation a copy of the complaint which initiated the investigation within ______ days of receiving the complaint.

30 (Once the Commissioner completes an investigation, he/she shall notify the person investigated or whom a complaint was filed within 30 days of the completion.)

The Commissioner must notify an insurer within _____ days of determining that a producer is ineligible for appointment.

5 days

A corporation, association, partnership, limited liability company, limited liability partnership, or other legal entity is a: A Business entity B Insurance broker C Insurance producer D Limited lines producer

A

An insurer must give an insured at least 20 days' written notice of cancellation if the policy is an initial policy that has been in effect _____ days or more. A 60 B 45 C 30 D 14

A

Charging different rates to insureds of the same class or hazard category is considered which of the following unfair trade practices? A Unfair discrimination B Defamation C Rebating D Boycotting

A

Producers must complete: A 24 hours of continuing education including 3 hours of ethics every 2 years B 24 hours of continuing education on any subject every 2 years C 24 hours of continuing education each year D 24 hours of continuing education plus 3 additional hours on ethics every 2 years

A

What are the minimum coverage amounts to prove financial responsibility for a split-limit policy? A 25/50/15 B 20/30/40 C 35/50/15 D 25/50/25

A

Which of the following statements regarding the nonrenewal of a personal fire insurance policy is correct? A The insurance company must provide a 30-day notice of nonrenewal B The insurance company must provide a 20-day notice of cancellation C The insurance company must provide notice within 15 days D The nonrenewal notice must state the reason for nonrenewal

A

An insurer licensed to write auto liability insurance in Tennessee may issue an auto liability policy only if it is noncancellable and if it is guaranteed renewable as long as: A The insurer remains licensed to write auto liability insurance B The insured auto is used for a purpose for which a rate has been submitted for approval by the Commissioner C Some of the drivers of the insured auto maintain their driver's licenses D Premiums are paid up to 30 days after the due date

A (An insurer licensed to write auto liability insurance in Tennessee may issue an auto liability policy only if it is noncancellable and if it is guaranteed renewable as long as the insurer remains licensed to write auto liability insurance.)

It is an unfair trade practice to: A Accidentally omit material facts B Keep a complete record of all complaints received since an insurer's last examination date C File a material misstatement about a person's financial condition or business D Keep incomplete records of complaints

A (An unknowing and non-deliberate omission is not an unfair trade practice.)

When Mr. A applied for personal liability insurance, he was surprised to find that his credit information was used during the underwriting process. Under the laws of Tennessee, the use of credit information in underwriting: A Must be disclosed during the application process B Requires insurers to hold producers liable for errors and omissions resulting from using credit information C Requires insurers to use standard terms like 'poor credit history', 'poor credit rating', or 'poor insurance score', when denying an application due to poor credit D To take adverse action may not be based on a credit score more than 36 months old

A (Applicants must be told if their credit is used in underwriting. If they are declined, the insurer must give specific reasons. Terms like 'poor credit history' are too vague.)

H. bought a $300,000 fire insurance policy, though his house was subsequently appraised as having a market value of $250,000. When H. suffered the total loss of his home in a fire, the insurance company: A Paid him $250,000 and refunded the excess premiums B Paid him $250,000 C Paid him $300,000 D Paid a partial amount based on the coinsurance provision

A (Coverage is limited to the lesser of the loss or the policy limit, but no insurer can keep premiums that result from overinsurance.)

All the following statements regarding sinkhole insurance are correct, except: A Coverage may not be broader than the coverage required by statute B Insurer may make sinkhole loss coverage available in a homeowner policy itself, or by endorsement C The insurer may limit its total claims payment to the actual cash value of the sinkhole loss D Land stabilization and all other repairs to the structure and contents must be completed within 12 months

A (Coverage may not be broader than the coverage required by statute)

All of the following are defined as unfair claims practices, except: A Paying claims without conducting a reasonable investigation B Maintaining a consistent policy of providing claims 15 to 30 days after they are requested C Attempting to settle claims for less than a reasonable amount based on written advertisements with or in the application D Refusing pay claims clearly covered under one section of a policy until disputed claims under other policy provisions are settled

A (Denying claims without an investigation is unfair to the claimant. Paying a claim without investigating, may or may not be appropriate, but it is not unfair to the claimant.)

A lapsed individual producer license may be reinstated: A Up to 12 months following the renewal fee's due date B Up to 30 days following the renewal fee's due date C Up to 24 months, or one license renewal period D Through March 1 of each calendar year

A (Insurance licenses renewal biennially. Only entity licenses renew on March 1. Individual licenses are keyed to individual dates -- in this case producer birthdays. Lapsed licenses may be reinstated without retaking the exam for 12 months after the lapse.)

If a bank will not grant a loan unless the borrower buys insurance from a specific company, the bank and insurer are guilty of which of the following unfair trade practices? A Boycott, coercion and intimidation B Unfair discrimination C Rebating D Defamation

A (It is prohibited to enter into action resulting in an unreasonable restraint of, or monopoly in, the business of insurance. This includes making the purchase of insurance from a particular source the condition to another business transaction, such as a loan or purchase.)

An individual that applies for an insurance license may be exempt from the licensing exam if: A A producer from another state who moves to Tennessee and applies within 90 days of dropping his previous license and moving B A person who is a Chartered Life Underwriter (CLU) C A person with a college degree in insurance D A producer reinstates a lapsed license within 24 months of the lapse

A (Tennessee recognizes the transfer as do other states. Producers only have 12 months to reinstate without an exam. CLUs and those who graduate college and major in insurance may skip the prelicensing education, but not the exam.)

An individual that applies for an insurance license may be exempt from the licensing exam if: A A producer from another state who moves to Tennessee and applies within 90 days of dropping his previous license and moving B A producer reinstates a lapsed license within 24 months of the lapse C A person with a college degree in insurance D A person who is a Chartered Life Underwriter (CLU)

A (Tennessee recognizes the transfer as do other states. Producers only have 12 months to reinstate without an exam. CLUs and those who graduate college and major in insurance may skip the prelicensing education, but not the exam.)

Which of the following statements regarding the legal process as it relates to insurance in the state of Tennessee is accurate? A An arbitrator must be agreed to by all parties involved in the arbitration process B An insurer may enter into a settlement that decreases the rights, benefits, or coverage of the insured C An arbitrator's fee is always split by the parties involved in the arbitration process D A John Doe warrant is legal system's name for an uninsured motorist coverage case

A (The person for whom the arbitrator delivers the less favorable result must pay his or her fee. A John Doe warrant is issued when the potentially uninsured motorist involved in an accident cannot be immediately identified. Entering into a settlement that decreases the insured's rights is prohibited by law.)

Which is TRUE about Tennessee Insurance Guaranty Association claim coverage? A Coverage for payable claims is subject to an upper limit of $100,000 B The Guaranty Association exists to provide coverage for risky insureds C Workers' Compensation claims are not covered D Claims must either exist before the insolvency, or arise within 60 days after it

A (This Association exists to cover claims in the event of an insurer's insolvency. Worker' Compensation claims are eligible and are not subject to the $100,000 limit. Claims must either have existed prior to insolvency, or arise within 30 days after it.)

In order to apply for a license to sell property and casualty insurance in the state of Tennessee, a Chartered Life Underwriter (CLU): A Must earn an insurance degree from a university B Must complete 40 hours of prelicensing education C Must complete 20 hours of prelicensing education D Is exempt from the state's prelicensing education requirements

B

Under the law in Tennessee, a person authorized to sell, solicit or negotiate insurance is defined as being a/an: A Authorized insurer B Insurance producer C A Limited lines producer D A fiduciary

B

Which of the following statements regarding the penalties that may be imposed relative to the termination of an agent's appointment are correct? A Person providing information to the Commissioner are liable for the impact of providing the information B In lieu of revoking a license, the Commissioner may impose a fine of up to $1,000 per violation C An insurer must notify the Commissioner within 15 days of terminating an agent appointment D Information furnished to the Commissioner of Insurance may be subpoenaed

B (Failure to report appointment termination information may result in a fine and/or the termination of an insurer's certificate of authority. Information provided to the Commissioner may NOT be subpoenaed, but it may be shared if appropriate. The insurer must provide termination information within 30 days.)

Which of the following statements apply when an insurer plans to raise commercial insurance premium rates? A An insurer that fails to provide sufficient notice must renew the policy at the previous premium rate B An insurer must provide at least 60 days notice if it raises rates more than 25% C An insurer must provide at least 30 days notice if it raises rates more than 25% D An insurer must provide at least 10 days notice

B (If the increase in premium is significant, there is a real chance the policyholder may need to switch coverage; therefore, insurers provide the dame degree of notice as when a policy is being cancelled.)

All of the following may constitute grounds for the suspension or revocation of a license, except: A Providing misinformation on a license application B Inadvertently accepting insurance business from an unlicensed person C Having a felony conviction D Failure to repay a student loan to the TSAC

B (If this were done knowingly, then that would be grounds for suspension or revocation.)

When there is an accident involving an insured motor vehicle, the primary insurance coverage is: A The vehicle driver's policy B The vehicle owner's policy if the car is driven with his or her permission C In all cases the vehicle owner's policy D The vehicle owners policy unless the car is driven with his or her permission

B (In the case of a leased vehicle, the lessee's coverage is primary. Also, permission is essential for coverage.)

All of the following statements regarding agency contracts are correct, except: A A producer must be appointed by an insurer in order act an insurer's agent B The Commissioner must verify within 15 days that a producer is eligible for appointment C An unlicensed person who illegally solicits an insurance policy is responsible for performing the duties of a producer D An insurer must file a notice of appointment with the Commissioner with 15 days of making an appointment

B (The Commissioner has 30 days to verify an appointment.)

If a producer sells insurance policies issued by an unauthorized insurer: A The insurer is responsible for any claims B The producer is personally liable for any claims C The policy is covered by the Life and Health Guaranty Association D The policies are void

B (The law in Tennessee penalizes the producer who acts improperly, not the victim of the deception. Neither does it reward the insurer.)

Which of the following statements regarding Workers' Compensation in the state of Tennessee is accurate? A The minimum weekly Workers' Compensation benefit is 15% of the employee's weekly wage B Except in cases of permanent total disability, the maximum available Workers' Compensation benefit is 400 weeks multiplied by the state's average weekly wage C The term 'mental injury' includes mental responses due to loss of employment or employment opportunities D The maximum weekly benefit equals 66 2/3% of lost wages up to the average weekly wage in the state

B (The minimum weekly benefit is 15% of the average wage, not the employee's wage. The maximum weekly benefit is 662/3% of the employee's average weekly wage, not the state average.)

Which of the following individuals must have a producer's license in the state of Tennessee? A A salaried full-time employee who counsels or advises his employer regarding the employer's insurance interests B Insurance company employees engaging in the inspection, rating, or classification of risks C A Tennessee resident who sells, solicits or negotiates commercial property and casualty risks to an insured with risks in multiple states D A fraternal benefit society employee that only provides benefits in case of death or disability, due to an accident

C

Which of the following individuals do not need a producer's license in the state of Tennessee? A The trustees of an employee trust plan compensated by the company issuing the contracts B Insurance company employees engaging in the inspection, rating or classification of risks as well as the solicitation and negotiation of contracts C Someone who is not a Tennessee resident who sells, solicits or negotiates commercial property and casualty risks to an insured with risks in multiple states D An employee of a vehicle rental company engaged in the sale, solicitation, or negotiation of vehicle rental insurance to be in effect for no more than 1 year

C (If the individual were a resident, and the property was in multiple states including Tennessee, then a Tennessee license would not be necessary. Anyone involved in the sale, solicitation or negotiation of insurance must be licensed. The time limit on policies covering rental vehicles that are placed by unlicensed individuals is 90 days.)

In order to be eligible for a producer's license, the Commissioner must determine that the applicant has all of the following characteristics, except: A He or she must pass the appropriate licensing exam B He or she must paid all required fees C He or she must be at least 21 years of age D He or she must complete any required prelicensing course

C (Minimum age is 18)

Making false or fraudulent statements or representations on a policy application is: A Lessening Competition B Unfair Utilization of Proprietary Information C Misrepresentation D False Statements and Entries

C (Misrepresentation (on an insurance application) refers to the information provided to an underwriter on an application. Unfair utilization involves misusing confidential information that is true, and Lessening competition occurs with certain stock transaction. False entries involves lying to regulators.)

Which of the following business entities would by definition be considered an 'employee'? A A sole proprietor employing one individual working in a mine B A limited liability company using the services of five individuals for pay C A sole proprietor who files written notice with the Workers' Compensation division D A general contractor on a commercial construction project

C (Most of these are employers under the law. The sole proprietor may be considered an employee if he files as such sufficiently in advance of any injury.)

All personal lines insurers must file their rates with the Commissioner: A Within 30 days after their implementation B Who must wait at least 30 days to approve them C 30 days prior to their implementation D At the time of their implementation

C (The Commissioner must have 30 days to adequately consider any filing, though he or she may request an additional 30 days.)

Which of the following statements regarding hearings and judicial review is correct? A The Commissioner may not revoke the license of a business entity due to uncorrected violations known to only one of its managers B A licensee's license may not be suspended without a hearing C If the Commissioner suspends a license on an emergency basis, the licensee must be notified and given the opportunity to request a hearing within 7 days D The Commissioner may not suspend a license without giving a licensee the opportunity to request a hearing

C (The Commissioner reserves the right to suspend a license in an emergency. A hearing is required before it becomes permanent. Also, knowledge of and failure to correct an entity's bad acts is considered to be complicity.)

Which of the following is true of Sinkhole Loss Coverage? A Insurers may not offer coverage that is broader or more extensive than the offer of coverage required by statute B The insurer cannot require an inspection of the property before issuance of sinkhole loss coverage C Sinkhole loss coverage is automatically included in any homeowner property insurance policy D A policyholder will not be required to reimburse an insurer more than $2,500 with respect to any claim

D

Which of the following statements regarding the nonrenewal or cancellation of a personal automobile insurance policy in the state of Tennessee is true? A Insurers may cancel a policy is the insured has committed a misdemeanor during the preceding 36 months B The insured had no violations within the past 36 months C Insurers must provide a 60-day notice of cancellation D Insurers must provide a 20-day notice of cancellation unless the cancellation is for nonpayment, in which case a 10-day notice is required

D

A producer must notify the Commissioner of an address change: A Within 90 days B Within 15 days C Within 180 days D Within 30 days

D

A temporary license issued to a representative of a licensed producer who dies or becomes disabled is valid for up to how many days? A 120 B 240 C 360 D 180

D

All the following would be considered a motor vehicle under the financial responsibility laws of Tennessee, except: A An automobile B A trolley C A semi trailer D A motorcycle

D

Under Tennessee law, an insurance producer is defined as an individual or entity licensed to perform which of the following functions with regard to insurance? A Having a license to underwrite insurance in the state of Tennessee B Having a license to sell limited lines of insurance C Having a license to act as a licensed fiduciary D Having a license to sell, solicit, or negotiate insurance

D

Which of the following actions would be considered an unfair trade practice? A Agent D engages in financial planning only after disclosing that she also sells insurance for which she receives a commission in addition to the her financial planning fee B Agent A advertises certain insurance products as endorsed by the local bank with whom he has signed a joint marketing agreement C Agent B describes the policy dividends of the participating whole life policy she sells as a refund of excess premiums, which cannot be guaranteed under the terms of a policy D Agent C sells his company's variable universal life policy under using name, 'My IRA Alternative Investment' and emphasizes the combination of growth potential, tax deferral and penalty-free access to funds

D

A guaranteed renewable automobile insurance policy issued in the state of Tennessee may not be cancelled as long as: A The vehicle is used for either travel or as a residence B At least one of the drivers of the insured auto maintains his or her driver's license C The policy rate was initially approved, even if the approval was later withdrawn D The insured maintains the continued membership required by their insurer

D (If membership is maintained, then so is the policy. If any driver loses his or her license, the policy may be cancelled as well as if there is a change in approval. Finally, a car used as a residence would not be covered.)

If after notice and a hearing, the Commissioner finds that a person has knowingly committed a single violation of the insurance code, the licensee may be subject to a fine of up to: A $2,500 B $100,000 C $1,000 D $25,000

D (If the person knowingly commits a violation, the penalty may be up to $25,000 per violation)

Which of the following transactions would be considered an example of someone receiving illegal compensation in the state of Tennessee? A An insurer pays an unlicensed individual $25 for referral B An insurer pays an un-licensed individual deferred compensation earned by making insurance sales when the individual was previously licensed C The insurer pays compensation to creditors D An insurer pays commission to a producer licensed in Mississippi for a transaction in Tennessee

D (The only time an unlicensed individual may receive commissions is when they are deferred compensation, and the individual was licensed at the time of the sale. Both the payor and the payee are liable if the payment is improper. As for the $25 fee, that is not considered commission since it is based on the referral, not a sale. If one has a resident license in another state, one must also have a nonresident license in Tennessee in order to do business here.)

Rate and premium reductions due to accident prevention courses apply to: A An auto for which the driver had his/her license suspended or revoked within the past 3 years B Fleet autos C An auto whose driver is required by a court to take a defensive driver training course D Drivers over 55 years of age who successfully complete an approved auto accident prevention class

D (The requirement does not apply to fleet autos; an auto whose driver is required by a court to take a defensive driver training course; or an auto for which the rate has been increased because of a claim, or for which the driver has violated an auto law of Tennessee, or had his/her license suspended or revoked, within the past 3 years.)

A producer tells an applicant for insurance that a competitor insurer is in dire financial straits, and may not be able to honor its claims obligations. Which unfair trade practice has the producer committed?

Defamation

What unfair and prohibited practice involves the offer of a special premium or favor as an incentive to purchase insurance?

Rebating