Chapter 8- North Carolina General Regulations

The insured

A broker represents: A broker represents the insured.

Class 1 misdemeanor

A person found guilty of selling insurance without a license is subject to a: A person found guilty of selling insurance without a license is subject to a Class 1 misdemeanor.

An agent

An unlicensed person who solicits or negotiates insurance is considered: An unlicensed person who solicits or negotiates insurance is also an agent, meaning that the agent and the insurer he represents takes on the same liability.

No limit

In North Carolina, how many continuing education credits may be carried over from one compliance period to the next? There is no limit to the number of continuing education credits that may be carried over to the next compliance period.

A description of the rights and the manner in which such rights may be exercised

A notice of information practices must contain, among other items: A notice of information practices must contain, among other items, a description of the rights and the manner in which such rights may be exercised.

$100,000

A person who acquires items dishonestly is guilty of a Class H felony if the value of the money, goods, property, services, or other thing of value is less than: If the value of the money, goods, property, services, chose in action, or other thing of value is less than $100,000, the person committing the violation is a Class H felony.

The insurer

A person who is licensed as an agent represents: An agent represents the insurer.

Class H felony

A person who submits a statement containing false or misleading information concerning a fact or matter material to the claim is guilty of a: Any person who, with the intent to injure, defraud, or deceive an insurer or insurance claimant, presents a written or oral statement in support of a claim or other insurance policy benefit, statement contains false or misleading information concerning a fact or matter material to the claim is guilty of a Class H felony.

Was engaging in defamation

An insurance producer inquired with what company a prospective client had a Medicare Supplement policy. When she told him, the producer was silent. Concerned by his silence, the woman asked if the company was a reliable company. The producer asked, "Have you received any financial statements regarding their solvency?" This producer: The agent did not have to state literally that the company was possibly weak. He implied that within the context of the conversation.

$5,000

Any agent who signs a blank contract or policy of insurance will be fined a maximum of: Any agent who signs a blank contract or policy of insurance is guilty of a Class 3 misdemeanor and, upon conviction, will be punished by a fine of at least $1,000, but no more than $5,000.

Class 1 misdemeanor

Any officer who makes fraudulent statements regarding Fraternal Benefit Societies is guilty of a: Any person, officer, member, or examining physician of any society authorized to do business who knowingly or willfully makes any false or fraudulent statements or representations in or with reference to any application for membership, or for the purpose of obtaining money from or benefit in any society transacting business will be guilty of a Class 1 misdemeanor.

Unfair trade practices

Boycott, coercion and intimidation are all types of: Boycott, coercion and intimidation are all types of unfair trade practices that involve bullying.

$15,000

Brokers must put forth a bond of at least how much? Broker applicants must put forth a bond of at least $15,000 for the use of aggrieved parties before the broker's license will be issued.

30 days

If an applicant disagrees with the outcome of the review, how much time do they have to request a hearing with the Commissioner? If an applicant disagrees with the outcome of the review, he or she must make a written request for a hearing to the Commissioner within 30 days after service upon the applicant of notice of the outcome.

Pay money or its equivalent or do some act of value

In a contract of insurance, what is the insurer bound to do for the destruction, loss, or injury of something in which the other party has an interest? A contract of insurance is an agreement by which the insurer is bound to pay money or its equivalent or to do some act of value to the insured upon, and as an indemnity or reimbursement for the destruction, loss, or injury of something in which the other party has an interest.

Untrue, deceptive, or misleading

Insurance advertisements must not be: A person may not make, publish or circulate an advertisement, announcement, or statement containing a statement with respect to the business of insurance, which is untrue, deceptive, or misleading.

Variable life insurance

Limited line credit insurance includes all the following, EXCEPT: "Limited line credit insurance" includes any type of credit insurance, mortgage life, mortgage guaranty, mortgage disability, automobile dealer gap insurance, and any other form of insurance offered in connection with an extension of credit that is limited to partially or wholly extinguishing that credit obligation and that the Commissioner determines should be designated a form of limited line credit insurance.

Temporary license

No agent may place a policy of insurance with any insurer unless the agent has a current appointment as agent for the insurer, or: No agent may place a policy of insurance with any insurer unless the agent has a current appointment as agent for the insurer, or has a valid temporary license.

FINRA

Resident agents may sell variable annuity products if they have met what other requirements? Resident agents may sell variable annuity products if they have met the FINRA requirements for North Carolina.

1-Apr

Unless a business entity pays the renewal fee, the business entity license expires each year on: A business entity license expires on April 1 of each year unless the business entity pays the renewal fee.

$50

Violating the law regarding a licensee's change of address results in a fee of: A licensee who violates this law shall pay an administrative fee of $50 to the Commissioner.

They are not subject to civil liability.

What happens if a person reports an incidence of insurance fraud, without actual malice, and the information is proven to be false? A person who merely reports an incidence of insurance fraud, without actual malice, is not subject to civil liability for the reported action.

A contract of insurance

What is an agreement by which the insurer is bound to pay money as reimbursement for the destruction, loss, or injury of something in which the other party has an interest? A contract of insurance is an agreement by which the insurer is bound to pay money or its equivalent or to do some act of value to the insured upon, and as an indemnity or reimbursement for the destruction, loss, or injury of something in which the other party has an interest.

Coercion

What unfair trade practice manipulates through the prospect of something desirable? Coercion generally manipulates through the prospect of something desirable.

NAIC

Who created the "Uniform Business Entity Application"? "Uniform Business Entity Application" means the current version of the NAIC Uniform Business Entity Application for resident and nonresident business entities.

Class I felony

A person who intentionally misstates financial information is guilty of a: If any person in any financial or other statement intentionally misstates information, that person making oath to or subscribing the statement is guilty of a Class I felony.

Rebating

An agent who gives a prospective client a flat screen TV as an incentive to purchase an insurance policy is engaging in what unfair trade practice? Rebating is any inducement to contract that is not specifically stated in the contract.

100%

In North Carolina, what percentage of an agent's business can be controlled business? North Carolina does not have any laws preventing producers from selling controlled business.

Amends insurance statutes

The Commissioner performs all of the following duties, EXCEPT: Legislators, not the Commissioner, write and amend statutes and laws.

Privileged information

An individual's personal information includes all the following, EXCEPT: "Personal information" includes an individual's name and address and medical record information, but does not include privileged information.

180 days

The Commissioner may issue a temporary insurance producer license for a period not to exceed: The Commissioner may issue a temporary insurance producer license for a period not to exceed 180 days.

Class 1 misdemeanor

A person who refuses to exhibit their books to the Commissioner is guilty of a: Any person who will refuse, on demand, to exhibit the books, accounts, or papers to the Commissioner will be subject to suspension or revocation of his license, and will be deemed guilty of a Class 1 misdemeanor.

Misrepresentation

A producer gave a prospective client for a long-term care policy a visual presentation of the principal benefits of a policy. Although he mentioned that it had 'the usual' conditions, he did not include those in his presentation. The producer was engaging in: Statements are deemed to be misrepresentations if, when taken in the context of the whole presentation, they may tend to mislead or deceive a person. By detailing only the benefits, the producer was not giving a fair representation of the policy.

Replacement

All of the following acts are considered unfair trade practices, EXCEPT: Replacement is not, in itself, an illegal practice. It occurs when a new life insurance policy is written to take the place of an existing policy. It can rise to the level of twisting if a producer or insurer induces an insured through misrepresentation to lapse or surrender a policy in order to buy a similar policy from the selling producer or insurer.

In written or electronic form

An agent must provide to all applicants and policyholders federal privacy disclosure notices: An agent must provide to all applicants and policyholders federal privacy disclosure notices in written or electronic form.

40 hours

An applicant for a resident agent license in both life and health must complete how many hours of prelicensing education? Applicants for a resident agent license must complete 20 hours of prelicensing education per license (20 hours for life and 20 hours for health).

Class 1 misdemeanor

Any producer knowingly procuring by fraudulent representations premium will be guilty of a: Any producer knowingly procuring by fraudulent representations premium will be guilty of a Class 1 misdemeanor.

It must never be mentioned.

How is the North Carolina Life and Health Insurance Guaranty Association to be used in advertisements? The existence of the North Carolina Life and Health Insurance Guaranty Association may not be used for the purpose of sale or solicitation of or inducement to purchase insurance.

Any U.S. state, the District of Columbia or any U.S. territory

In North Carolina, "home state" means which of the following? "Home state" means any state or territory of the United States and the District of Columbia in which an insurance producer maintains their principal place of residence or principal place of business and is licensed to act as an insurance producer.

An individual, a partnership or a corporation

In North Carolina, a "person" can be: In North Carolina, "person" means an individual, partnership, firm, association, corporation, joint stock company, trust, any similar entity, or any combination of the foregoing acting in concert.

When they are sold through coin operated machines

What is the only instance when blank insurance policies can be countersigned? Transportation ticket policies of accident insurance and baggage insurance policies may be countersigned in blank for issuance only through coin operated machines.

Insurance Information and Privacy Protection Act

Which act limits the disclosure of information collected in connection with insurance transactions and enables insurance applicants and policyholders to obtain the reasons for any adverse underwriting decision? Insurance Information and Privacy Protection Act limits the disclosure of information collected in connection with insurance transactions and enables insurance applicants and policyholders to obtain the reasons for any adverse underwriting decision.

a. Negotiate b. Sell c. Solicit

Which of the following is a referral to a licensed insurance agent or broker that includes a discussion of specific insurance policy terms and conditions? "Negotiate", "sell", and "solicit" all refer to a licensed insurance agent or broker that includes a discussion of specific insurance policy terms and conditions. The correct answer is: All of the above

Offering policyholders bonuses out of surplus accumulated from nonparticipating insurance

All of the following are considered unfair trade practices, EXCEPT: It is illegal to rebate premiums or offer special favors, dividend advantages, or any other benefits not specified in the contract to induce people to purchase life insurance or annuities. However, it is not considered rebating to pay policyowners fair and equitable bonuses or to reduce their premiums out of surplus accumulated from nonparticipating insurance.

Within 15 days after the first insurance application is submitted

How soon must an insurer file an appointment notice with the Commissioner after appointing an agent? The insurer must file a notice regarding appointment of an agent within 15 days after the first insurance application is submitted.

Maurice is an agent.

If Maurice has a producer license and works on behalf of an insurer, which of the following most accurately describes his position? An agent is a producer who works on behalf of an insurer.

Classifications that result from cost experience

Insurers can set different premium rates for different individuals based on: It is illegal to make or permit unfair discrimination between individuals of the same class and substantially the same hazard for the rates charged, benefits payable, or any other conditions of a policy. It is also illegal to make or permit unfair discrimination against an applicant or insured because of sex, sexual orientation, or marital status in terms of underwriting standards and practices, eligibility requirements, or rates. However, the insurer can set rates according to classifications based on actuarial data and actual cost experience.

The Commissioner or administrator

No person shall provide, present, or instruct any continuing education course unless that person has been qualified and possesses a license from: No person shall provide, present, or instruct any continuing education course unless that person has been qualified and possesses a license from the Commissioner or administrator.

Failure to pay child support

The Commissioner may suspend, revoke or refuse to issue or renew an agent license for which of the following reasons? The Commissioner may place on probation, suspend, revoke, or refuse to renew any license for failing to comply with an administrative or court order imposing a child support obligation or failing to pay STATE income tax.

Pay an annual renewal fee

What must a broker licensee do to keep their license in force? A broker's or limited representative's license must be renewed by April 1 of each year, and renewal fees must be paid.

Within 10 days of the change

In North Carolina, if a licensee is convicted of a crime, how soon must the Commissioner be notified? In North Carolina, if a licensee is convicted in any court of competent jurisdiction for any crime or offense other than a motor vehicle infraction, the licensee is required to notify the Commissioner in writing of the conviction within 10 days after the date of the conviction.

Solicit

In North Carolina, what is attempting to sell insurance or asking or urging a person to apply for a particular kind of insurance from a particular company? "Solicit" means attempting to sell insurance or asking or urging a person to apply for a particular kind of insurance from a particular company.

Protect against failure in the performance of contractual obligations

The purpose of the North Carolina Life and Health Insurance Guaranty Association is to: The purpose of the Life and Health Insurance Guaranty Association is to protect persons against failure in the performance of contractual obligations, under life and health insurance policies and annuity contracts, because of the delinquency of the member insurer that issued the policies.

Fraternal benefit society

What is an incorporated society, order or supreme lodge, without capital stock, conducted solely for the benefit of its members and their beneficiaries and not for profit, operated on a lodge system with ritualistic form of work, having a representative form of government, and which provides benefits to its members? A fraternal benefit society is any incorporated society, order or supreme lodge, without capital stock, whether incorporated or not, conducted solely for the benefit of its members and their beneficiaries and not for profit, operated on a lodge system with ritualistic form of work, having a representative form of government, and which provides benefits to its members.

An examination or license

What is not required of any regular salaried officer, employee or member of a licensed society who devotes substantially all of their services to activities other than the solicitation of fraternal insurance contracts from the public? No examination or license will be required of any regular salaried officer, employee or member of a licensed society who devotes substantially all of his services to activities other than the solicitation of fraternal insurance contracts from the public.

Negotiate

What is the act of conferring directly with a purchaser of a particular contract of insurance concerning any of the substantive benefits, terms, or conditions of the contract? "Negotiate" means the act of conferring directly with, or offering advice directly to, a purchaser or prospective purchaser of a particular contract of insurance concerning any of the substantive benefits, terms, or conditions of the contract, only if the person engaged in that act either sells insurance or obtains insurance from insurers for purchasers.

$300,000

What is the maximum amount that the North Carolina Life and Health Guaranty Association will pay the beneficiaries of a deceased individual for annuities from an insolvent insurer? The North Carolina Life and Health Guaranty Association will pay the beneficiaries of each individual if deceased $300,000 in present value annuity benefits, including net cash surrender and net cash withdrawal values for all of their insolvent policies.

$5,000

What is the maximum penalty for willfully violating a cease and desist order of the Commissioner? Any person who willfully violates a cease and desist order of the Commissioner after it has become final, and while the order is in effect, must forfeit and pay to the Commissioner the sum of between $1,000 and $5,000 for each violation.

$1,000

What is the minimum penalty for willfully violating a cease and desist order of the Commissioner? Any person who willfully violates a cease and desist order of the Commissioner after it has become final, and while the order is in effect, must forfeit and pay to the Commissioner the sum of between $1,000 and $5,000 for each violation.

A licensed resident agent never has to countersign on behalf of a nonresident agent

What is the requirement for a licensed resident agent countersigning an application on behalf of a nonresident agent? There is no requirement that a licensed resident agent or broker must countersign an application, policy, contract, or any other form of insurance on behalf of a nonresident agent.

Pay an annual renewal fee

What must a limited representative licensee do to keep their license in force? A broker's or limited representative's license must be renewed by April 1 of each year, and renewal fees must be paid.

Intimidation

What unfair trade practice manipulates through the threat of a negative result? Intimidation manipulates through the threat of a negative result.

A lender may never require the purchase of insurance as a condition to a loan.

Which of the following is correct? No lender will require the purchase of insurance from such lender or subsidiary or affiliate of such lender as a condition to the making, renewing or refinancing of any loan or to the establishing of any of the terms or conditions of such loan.

The licensee is at least 65 years old.

Which of the following will exempt a licensee from needing to complete the continuing education courses requirement? A licensee is exempt from needing to complete the 24-hour continuing education courses requirement if the licensee is at least 65 years old and has been continuously licensed for at least 25 years.

An insurance producer license

A business entity selling, soliciting, or negotiating insurance must obtain: A business entity selling, soliciting, or negotiating insurance must obtain an insurance producer license.

Accidental sickness

Group policies must define all the following, EXCEPT: The following applies to group life, group accident, group health, and group accident and health insurance policies and group annuities. "Accident", "accidental injury", and "accidental means" must be defined to imply "result" language and will not include words that establish an accidental means test.

15 days

If an insurer terminates an appointment with a producer, how much time does it have to notify the producer? Within 15 days after making the notification, the insurer will mail a copy of the notification to the producer at the producer's last known address.

A licensed insurance producer may pay commissions to a partnership of which the person is a member or agent.

In which case can an unlicensed individual receive commission, consideration or compensation? Unlicensed employees cannot receive commissions for either the indirect sale of insurance nor solicitation of insurance.

5 years

Insurers must keep records of all complaints for at least: Each insurer or its agents will maintain an itemization register or log of every written complaint including the final disposition of the complaint. These records will be retained for at least 5 years after the final disposition of the complaint.

a. Mortgage disability insurance b. Mortgage life insurance d. Automobile dealer gap insurance

Limited line credit insurance includes all the following.

Yes

May an individual who holds a producer license in Texas qualify for a nonresident license in North Carolina? An individual may qualify for a nonresident license if he holds a similar license in another state or territory of the United States.

18

The minimum age requirement to become a licensed insurance producer in North Carolina is: An applicant for a producer's license must be at least 18 years of age.

A sole proprietorship

All of the following are business entities, EXCEPT: "Business entity" means a corporation, association, partnership, limited liability company, limited liability partnership, or other legal entity. "Business entity" does not mean a sole proprietorship.

Nonresident licensees must plan on moving to North Carolina within 6 months.

All of the following are true regarding nonresident producer licensing, EXCEPT: Nonresidents may receive a nonresident producer license in North Carolina even if they have no plans for moving.

Rebating

An agent offering to waive a prospective client's first life insurance premium is engaging in which of the following unfair practices? The agent is engaging in rebating. No producer will give, directly or indirectly, as an inducement to insurance, any rebate, discount, abatement, credit, or reduction of the premium in a policy of insurance, not specified in the policy of insurance.

4

A lender engaged in making or servicing real estate mortgage loans will accept as evidence of insurance a temporary written contract of insurance on a maximum of how many family residences? A lender engaged in making or servicing real estate mortgage or deed of trust loans on 1 to 4 family residences will accept as evidence of insurance a temporary written contract of insurance and issued by any duly licensed insurance agent, broker, or insurance company.

Board of Directors

The North Carolina Life and Health Guaranty Association exercises its powers through the: The North Carolina Life and Health Guaranty Association shall perform its functions under the Plan and shall exercise its powers through the Board of Directors.

National Association of Insurance Commissioners

The acronym NAIC stands for: The acronym NAIC stands for National Association of Insurance Commissioners.

The Governor fills the position.

What happens if a vacancy occurs during the North Carolina Insurance Commissioner's term? If a vacancy occurs during the North Carolina Commissioner's term, it will be filled by the Governor for the unexpired term.

A commission

What is an unlicensed person permitted to receive for policy referral if no specific terms were discussed? An unlicensed person is permitted to receive a commission for policy referral, as long as the unlicensed person does not discuss any specific terms relating to the insurance policy with the referred person.

a. Unfair methods of competition b. Deceptive acts laws c. Deceptive practices laws

Every society authorized to do business in North Carolina will be subject to: Every society authorized to do business in North Carolina will be subject to the unfair methods of competition and deceptive acts and practices laws in which insurance producers are subject. The correct answer is: All of the above

15 days

How much time does an insurer have to give a blank proof of loss form to an insured after the receipt of notice? When any company under any insurance policy requires a written proof of loss after notice of such loss has been given by the insured or beneficiary, the company or its representative will furnish a blank to be used for that purpose within 15 days after the receipt of notice.

Defamation

If an agent were to publish literature that is false or maliciously critical of another insurer calculated to injure a person engaged in the business of insurance, the agent would be committing: Defamation is circulating of any oral or written statement or any pamphlet, circular, article, or literature which is false or maliciously critical of or substantially misrepresents the financial condition of an insurer and which is calculated to injure any person engaged in the business of insurance.

Issue a restraining order

If the Commissioner believes a person has violated any insurance law, he may apply to a court to: Whenever it appears to the Commissioner that any person has violated any insurance law, he may apply to the superior court of any county in which the violation has occurred for a restraining order and injunction to restrain such violation. If upon application the court finds that any insurance law has been violated the court will issue an order restraining and enjoining such violations.

$2,000

If the Commissioner finds a person has intentionally misstated financial information, what is the minimum penalty? If any person in any financial or other statement intentionally misstates information, that person making oath to or subscribing the statement, the entity on whose behalf the person made the oath or subscribed the statement is subject to a fine imposed by the court of not less than $2,000, nor more than $10,000.

Arrest with warrant

If the Commissioner is of the opinion that there is evidence to charge any person with a criminal violation, the Commissioner may: If the Commissioner or any investigator appointed to conduct the investigations is of the opinion that there is evidence to charge any person or persons with a criminal violation, the Commissioner may arrest with warrant or cause the person(s) to be arrested.

30 days

If the Commissioner revokes a license, how much time does the person have to request a review? If the Commissioner suspends or revokes a license, in order for the person to be entitled to a review of the Commissioner's action, the applicant must make a written demand upon the Commissioner for a review within at least 30 days after service of the notification upon the applicant.

Temporary license

If the interest of insureds or the public are endangered, the Commissioner may revoke a: The Commissioner may by order revoke a temporary license if the interest of insureds or the public are endangered.

Agents can never retain a portion of funds received for the payment of losses.

In North Carolina, what is the rule on agents retaining any portion of funds received for the payment of losses? It shall be unlawful for any insurance carrier, or officer, agent or representative of an insurance company writing credit life and credit accident and health insurance to permit any agent or representative of such company to retain any portion of funds received for the payment of losses incurred.

Agent

In addition to a broker's license, a broker must hold what other license? An applicant for a broker's license must hold a valid agent's license upon application and throughout the duration of the broker's license.

Hobbies

Insurers may refuse to insure someone for which of the following reasons? No insurer will refuse to insure or refuse to continue to insure an individual, limit the amount, extent, or kind of coverage available to an individual, or charge an individual a different rate for the same coverage, solely because of blindness or partial blindness or deafness or partial deafness. No insurer will refuse to insure or refuse to continue to insure an individual; limit the amount, extent, or kind of coverage available to an individual; or charge an individual a different rate for the same coverage, because of the race, color, or national or ethnic origin of that individual. Insurers would not have to insure someone who participates in dangerous hobbies such as skydiving.

$5,000,000

What is the maximum amount that the North Carolina Life and Health Guaranty Association will pay for an unallocated annuity contract from an insolvent insurer? The North Carolina Life and Health Guaranty Association will pay with respect to any one contract holder covered by any unallocated annuity contract, $5,000,000 in benefits, regardless of the number of such contracts held by that contract holder.

Prior to use

When must producers notify the Commissioner of using an assumed named? Producers must notify the Commissioner prior to using an assumed name.

Asking for further information

Which of the following is NOT an unfair claim practice? Any of the following acts, if committed without just cause and performed frequently, constitute improper and unfair claim practices: knowingly misrepresenting to claimants pertinent facts, failing to affirm or deny coverage of claims, offering to settle claims for an amount less than the amount reasonably due and many others.

NAIC

Who created the "Uniform Application"? "Uniform Application" means the current version of the NAIC Uniform Application for resident and nonresident producer licensing.

Limited representative

Who is a person authorized by the Commissioner to solicit contracts for credit life, accident and health, credit, travel accident and baggage, motor club, and dental services coverages? "Limited Representative" means a person authorized by the Commissioner to solicit contracts for credit life, accident and health, credit, travel accident and baggage, motor club, and dental services coverages.

The insurer

Who pays agent appointment fees? The insurer appointing the agent pays the appointment fee.

Member companies

Who provides funding for the North Carolina Life and Health Insurance Guaranty Association? An association of insurers is created to pay benefits and to continue coverages through assessment imposed on insurers.

Foreign military sales agent

Who represents a life insurance company domiciled in North Carolina in a foreign country or territory and either on a United States military installation or with United States military personnel? An individual may be licensed by the Commissioner as a foreign military sales agent to represent a life insurance company domiciled in North Carolina, provided the agent represents the insurance company only in a foreign country or territory and either on a United States military installation or with United States military personnel. The Commissioner may issue a license with such restrictions.