Ethics Final Exam
Question #94358 All are true about transacting insurance EXCEPT: A) It includes soliciting insurance B) It includes the execution of a conract of insurance C) It includes the transaction of matters subsequent to execution of the contract and arising out of it D) Transacting without a license is felony
D) Transacting without a license is felony Explanation: Any person who transacts insurance without a valid license is guilty of a misdemeanor punishable by a fine not exceed $50,000 or by imprisonment in a county jail for a period not exceeding one year, or by both that fine and imprisonment.
#94343 A person shall not solicit, negotiate, or effect contracts of insurance unless the person holds a valid license from the Commissioner authorizing them to act in that capacity. Any person who transacts insurance without a valid license to do so is guilty of a misdemeanor punishable by: A) Both a fine not exceeding $50,000 and up to 1 year in a county jail B) Imprisonment in a county jail for a period not exceeding 1 year C) A fine not exceeding $50,000 or up to 1 year in a county jail D) A fine not exceeding $50,000
A Explanation: Any person who transacts insurance without a valid license to do so is guilty of a misdemeanor punishable by a fine not exceeding $50,000 or by imprisonment in a county jail for a period not exceeding one year, or by both that fine and imprisonment.
#94345 Every licensee shall file with the Commissioner his or her true name and also all fictitious names under which he or she conducts business. The Commissioner may disapprove the use of any true or fictitious name for all of the following reasons EXCEPT: A) It is the bona fide natural name of an individual B) It is too similar to a name already on file C) It may mislead the public D) It implies that the licensee is an insurer
A Explanation: Every licensee shall file with the Commissioner his or her true name and also all fictitious names under which he or she conducts business. The Commissioner may disapprove the use of any true or fictitious name (other than the bona fide natural name of an individual) if such name is too similar to a name already on file, may mislead the public, or implies that the licensee is an insurer.
#94340 All of the following are true regarding warranties in an insurance contract EXCEPT: A) A particular form of words is necessary to create a warranty B) A representation may qualify as an implied warranty C) Breach of a material warranty on the part of either party entitles the other party to rescind D) They may relate to the past, the present or the future
A Explanation: No particular form of words is necessary to create a warranty.
#94359 Your license will be considered to be inactive when you: A) No longer have any appointments B) No longer sell insurance to the general public C) Fail to comply with continuing education requirements D) Do not renew it by your expiration date
A) Explanation: Upon the termination of all appointments, the permanent license shall not be canceled, but shall become inactive. It may be reactivated at any time prior to its expiration by the filing of a new appointment. An inactive license shall not permit its holder to transact any insurance for which a valid active license is required.
Question #94338 Transacting insurance includes all of the following activities EXCEPT: A) Compiling a list of prospects B) Execution of a contract of insurance C) SOlicitation of insurance D) Negotiating an insurance contract
A) Compiling a list of prospects Explanation: Anyone who transacts insurance comes under the jurisdiction of the California Insurance Code (CIC). According to the code, transacting insurance includes soliciting insurance, negotiations preliminary to execution of an insurance contract, execution of a contract of insurance and transaction of matters subsequent to the execution of the contract and arising out of it.
#94350 A representation that fails to correspond with its assertions or stipulations is: A) Fictitious B) False C) Fraudulent D) Deceptive
B Explanation: A representation is false when the facts fail to correspond with its assertions or stipulations.
#94342 All of the following must be specified in an insurance policy EXCEPT: A) The risks insured against B) The financial rating of the insurer C) The parties to the contract D) The policy period
B Explanation: An insurance policy must specify the parties, the property or life insured, the interest of the insured in the property covered, the risks insured against, the policy period and a statement of the premium. However, the financial rating of the insurer is not required to be specified in the policy.
#94339 The neglect to communicate that which a party knows, and ought to communicate, is concealment. Concealment entitles the injured party to rescind the insurance if it is: A) Intentional B) Intentional or unintentional C) Immaterial D) Unintentional
B Explanation: Concealment, whether intentional or unintentional, entitles the injured party to rescind (void) an insurance contract.
#94353 When must a licensee notify the Insurance Commissioner of a change of address? A) Within 60 days B) Immediately C) Within 30 days D) Within 45 days
B Explanation: Every licensee shall immediately notify the Commissioner using an electronic service approved by the Commissioner of any change in his or her email, residence, principal business, or mailing address.
#94354 Which of the following must be printed on every licensee's business cards, written price quotations and printed advertisements? A) Website address, if any B) Insurance license number C) Business address and phone number D) Sales manager's name and address
B Explanation: Every licensee shall prominently print on business cards, written price quotations for insurance products, and print advertisements distributed in this state, his or her license number in type the same size as any indicated telephone number, address, or fax number.
#94355 The Insurance Commissioner may deny an insurance license application without a hearing: A) If the applicant waives legal rights B) Is the applicant has a final conviction of a felony C) Under no circumstances D) If the applicant made a misstatement on the license application
B Explanation: The Commissioner may, without a hearing, deny a licensing application if the applicant has committed a felony as shown by a plea of guilty or nolo contendere, or by a final judgment of conviction.
#94352 When an insurer can no longer meet its financial obligations when they are due, the insurer is considered to be: A) Under-reserved B) Insolvent C) Under-capitalized D) Incapacitated
B) Explanation: Insolvency means any impairment of required minimum paid-in capital or the inability of the insurer to meet its financial obligations when they are due.
#94346 Any licensee who diverts fiduciary funds to his or her own use is guilty of : A) Larceny B) Embezzlement C) Theft D) Robbery
C Explanation: All funds received by any person acting as a licensee are received and held by that person in a fiduciary capacity. Any person who diverts those fiduciary funds to his or her own use is guilty of theft.
#94348 Under the California Insurance Code (CIC), neither party to a contract of insurance is bound to communicate any of the following EXCEPT: A) Information that the other party should know B) Information the other party waives C) Information known to be material D) Information the other party knows
C Explanation: Each party of a contract of insurance shall communicate to the other, in good faith, all facts within their knowledge which are or which they believe to be material to the contract.
#94341 All of the following are true regarding representations EXCEPT: A) A representation is false when the facts fail to correspond with its assertions B) They may be made at the time of, or before, issuance of the policy C) They must be in writing D) If a representation is false as to a material fact, the injured party is entitled to rescind the contract
C Explanation: Representations may be either oral or written.
#94357 An example of a fiduciary duty is: A)Your duty to base all transactions upon the doctrine of Utmost Good Faith B) Your obligation to state every known fact about the policy you are selling C) The trust that your client places in you in regard to handling premiums D) The obligation to tell the truth to the best of your knowledge
C) Explanation: Agents acts in a fiduciary capacity, based upon trust and confidence, when handling the financial affairs of their customers, including the handling of premiums.
Question #94349 When can a representation be altered or withdrawn? A) At any time B) Before or after the insurance is effected C) Before the insurance is effected, but no afterwards D) At no time
C) Before the insurance is effected, but not afterwards Explanation: A representation may be altered or withdrawn before the insurance is effected, but not afterwards.
Question #94347 When an insurer voids an insurance contract due to an intentionally fraudulent omission by the insured of a material fact, it is known as: A) Declination B) Estoppel C) Rescission D) Cancellation
C) Rescission Explanation: Concealment, whether intentional or unintentional, entitles the injured party to rescind insurance. To rescind means to cancel the policy flat and return all premiums paid. A rescinded policy is one that has been voided, and it is as if it never existed.
#94351 An insurer organized under the laws of another state who is legally transacting insurance in this state is known as: A) A non-admitted insurer B) A domestic insurer C) An alien insurer D) A foreign insurer
D Explanation: A domestic insurer is organized in this state, a foreign insurer is organized in another state and an alien insurer is organized in another country
#94344 Acting as an agent for a non-admitted insurer in the transaction of insurance in this state is considered to be a misdemeanor unless acting as a: A) Property or casualty broker-agent B) Insurance solicitor C) Insurance broker D) Surplus lines broker
D Explanation: Except when performed by a surplus line broker, acting as an agent for a non-admitted insurer in the transaction of insurance business in this state is a misdemeanor.
#94356 An appointment as an agent of an insurer becomes effective on the date it is: A) Received by the agent B) Received by the Commissioner C) Mailed by the insurer to the Commissioner D) Signed by the insurer
D Explanation: The authority to transact insurance given to a licensee by an insurer by appointment shall be effective as of the date the notice of appointment is signed by the insurer.