AINS Chapter 4
All of the following insurance distribution channels use personal contact as a sales method, EXCEPT: Select one: A. Direct writing B. Exclusive agency C. Direct response D. Independent agency
C
An agent may at times act on behalf of the principal in ways that the principal did not intend, and a third party reasonably believes that the agent has sufficient authority. This authority is known as Select one: A. Implied authority. B. Express authority C. Apparent authority. D. Contractual authority.
C
An independent business owner or firm that sells insurance by representing customers rather than insurers is Select one: A. A direct writer. B. A managing general agency. C. An insurance broker. D. An exclusive agent.
C
Which one of the following would be a critical strength required for a personal lines insurer planning to expand geographically through web-based distribution? Select one: A. Financial resources B. Coverage expertise C. Producer force D. Service capabilities
A
When an insurer appoints an agent to act on its behalf, the agent's scope of authority is spelled out in the Select one: A. Insurance contract. B. Agency contract. C. Broker of record letter. D. Letter of intent.
B
All of the following are true about the insurance distribution system, EXCEPT: Select one: A. Managing general agencies appoint and supervise independent agents for insurers that operate in the system. B. An agency expiration list is the record of policies that have lapsed or been canceled due to overdue premiums. C. Insurance brokers are independent business owners or firms that place insurance by representing the customers, not insurers. D. The direct response system advertises to encourage potential customers to contact the insurer to purchase insurance.
B
An agency in New Jersey has decided to market personal insurance to accountants. It is offering a 10 percent discount to all Certified Public Accountants in the state. This is an example of which one of the following types of group marketing? Select one: A. Worksite marketing B. Affinity marketing C. Franchise marketing D. Sponsorship marketing
B
An independent agency Select one: A. Typically only handles commercial insurance accounts. B. Has the right to switch a customer's coverage to another insurer. C. Generally represents only one insurer. D. Represents customers rather than insurers and shops insurers to find the best coverage and value for its customers.
B
Because the agent represents the insurer, the law presumes that Select one: A. Knowledge acquired by the insurer is knowledge acquired by the agent. B. Knowledge acquired by the agent is knowledge acquired by the insurer. C. All communications between the agent and the insurer will be in writing. D. Agents are employees of the insurer.
B
Binding authority is a form of Select one: A. Apparent authority. B. Express authority. C. Absolute authority. D. Implied authority.
B
Which one of the following types of agent is usually paid the same commission rate for new business and renewals? Select one: A. Managing agent B. Independent agent C. Direct writer sales agent D. Exclusive agent
B
A producer is usually paid a fee for performing which one of the following functions? Select one: A. Policy issuance B. Prospecting C. Consulting D. Premium collection
C
Which one of the following is true concerning the direct response distribution channel to market insurance? Select one: A. There is less contact between the insurer and the customer with its use. B. It relies heavily on producer interaction. C. It relies heavily on advertising. D. Commission costs are generally increased.
C
Which one of the following statements is true regarding the agency contract? Select one: A. The agent is the principal in the agency contract relationship. B. An agency contract is also known as an agency endowment. C. The agency contract states the scope of the agency's authority to conduct business for the insurer. D. Insurance agency contracts usually have a fixed expiration date, at which time the parties negotiate the renewal.
C
Among other things, a binder provides Select one: A. Operations of the insured. B. Insured's financial profile. C. Policy conditions and exclusions. D. Applicable coverages and limits.
D
If a consumer or policyholder had a preference for dealing with sales representatives who are employees of the insurer, which one of the following marketing systems would they choose? Select one: A. Exclusive agent B. Insurance broker C. Managing general agency D. Direct writer
D
If a third party sues the agent in connection with activities performed on behalf of the principal, the principal must Select one: A. Reimburse the agent for any liability incurred, whether or not the agent was at fault. B. Provide legal defense for the agent. C. Bring a countersuit against the third party. D. Reimburse the agent for any liability incurred, if the agent was not at fault.
D
In an insurance agency relationship, the agent's fundamental responsibility is to act for the benefit of the Select one: A. Broker. B. Insured. C. Policyholder. D. Insurer.
D
Omicron Manufacturing has approached Delta Insurance Brokerage to develop and implement a voluntary insurance program for life, health, and disability insurance for Omicron's employees. Delta puts together a program in which employees receive the coverage at discounted rates, and premiums are deducted from the employees' paychecks. Omicron and Delta are using which one of the following types of group marketing to offer this program? Select one: A. Affinity marketing B. Mass marketing C. Direct response marketing D. Work site marketing
D
Principals often authorize another party to act on their behalf. This relationship is called Select one: A. Attorney in fact. B. Broker. C. Fiduciary. D. Agency.
D
Which one of the following statements is correct? Select one: A. Cold calling, or cold canvas, is generally not used by insurance producers because it is an ineffective method of prospecting. B. Insurance producers are prohibited from accepting referrals from strategic partners, such as banks or real estate brokers. C. All insurance producers perform the same functions, which are specified in state insurance regulations. D. In the exclusive agent and direct writer marketing systems, insurers might assist producers with prospecting.
D
A producer will generally review a company's loss run report while performing which one of the following functions? Select one: A. Risk management review B. Sales C. Customer service D. Claims handling
A
After investing significant resources to develop a Web-based system, a personal lines insurer has decided to expand its territory by assuming the role of a direct writer and using the Internet as a distribution channel. What is the insurer's greatest concern with the existing book which used independent agents as the distribution system? Select one: A. The agents own the expirations for the existing book B. Clear communication with existing customers C. The service needs of the existing book D. The quality of the existing book compared to the new book
A
All of the following are similarities between agents and brokers, EXCEPT: Select one: A. Both are legal representatives of insurers. B. Both collect premiums from insureds and remit to insurers. C. Both sell insurance appropriate to customers' insurance needs. D. Both are intermediaries between insurers and insurance buyers.
A
Bill is an insurance producer for ABC Insurance Company (ABC). He represents only ABC when marketing insurance products. ABC compensates Bill primarily through salary, and he has no ownership rights to policy expirations. Bill is a producer in the Select one: A. Direct writer marketing system. B. Exclusive agency marketing system. C. Captive agency marketing system. D. Independent agency marketing system.
A
Donna is an insurance producer. She makes an appointment with a potential policyholder to review the prospect's loss exposures. She asks the prospect to complete a questionnaire to assist her in this effort. Donna is conducting a Select one: A. Risk management review. B. Sales closing call. C. Customer service analysis. D. Cold canvas review.
A
In which one of the following types of insurance marketing systems does the agency or agent usually own the expiration lists? Select one: A. Independent agency system B. Direct writing system C. Alternative distribution system D. Exclusive agency system
A
Insurers using direct response marketing Select one: A. Often advertise heavily, which can be costly. B. Use a select group of agents. C. Use personal contact rather than the Internet for sales. D. Do not target market.
A
One of the main distinguishing features between independent agency systems and other marketing systems is the ownership of Select one: A. The agency expiration list. B. The sales prospecting list. C. The insurer expiration list. D. Insurance company stock.
A
The primary duty of a principal to its agent is to Select one: A. Pay the agent for services performed. B. Generate sales leads for the agent. C. Hire and train sales people. D. Be obedient.
A
When an independent agency is bought or sold, the agency's most valuable asset is its Select one: A. Expiration lists. B. Written premiums. C. Accounts receivables. D. Building and personal property.
A
Which one of the following best describes the elements of authority and control in an agency relationship? Select one: A. The agent has authority to act for the principal; the principal has control over the agent's actions on the principal's behalf. B. The principal has authority to act for the agent; the agent has control over the principal's actions on the agent's behalf. C. The agent and principal both have authority and control over each other's actions. D. Neither the agent nor the principal have authority or control over each other's actions.
A
Which one of the following functions is performed by virtually all insurance producers? Select one: A. Prospecting B. Policy issuance C. Fee basis consulting D. Underwriting
A
Which one of the following is generally paid a negotiated fee, rather than a fixed commission rate? Select one: A. National broker B. Independent agent C. Direct writer sales representative D. Exclusive agent
A
Which one of the following methods of premium collection is generally used for personal insurance policies and small commercial accounts? Select one: A. Direct bill B. Item basis bill C. Agency bill D. Account current basis bill
A
Which one of the following premium collection methods is used in the majority of personal insurance sales? Select one: A. Direct bill process B. Statement basis C. Item basis D. Account current basis
A
Which one of the following statements is correct regarding considerations involved in the selection of insurance marketing systems and distribution channels? Select one: A. An insurer can exercise the greatest control over producers in the direct writer system. B. The direct writer system dominates the medium-to large-sized commercial insurance business. C. Small-business customers have not shown an interest in exploring various distribution channels. D. Personal insurance customers require the most direct involvement from the producer.
A
Which one of the following statements is correct with respect to insurance distribution systems? Select one: A. The expertise of current staff and producers must be sufficient to manage the selected system. B. All insurance distribution systems are equally effective in accomplishing both sales and service activities. C. Multiple distribution systems cannot be used simultaneously because they do not generally complement each other. D. Insurers specializing in large commercial accounts should select a direct response distribution system.
A
Which one of the following statements is true with regard to Internet distribution channels for selling insurance? Select one: A. The objective of insurance portals is to deliver leads to the firms whose products they offer through their sites. B. The objective of group marketing is to sell insurance products and services over the Internet. C. "Franchise marketing" is also known as affinity marketing. D. Mass marketing plans offer insurers' policies to a small number of targeted individuals based upon their demographic characteristics.
A
Which one of the following statements is correct with respect to insurers' use of the Internet and insurance portals? Select one: A. The primary goal of the use of insurance portals is to reduce staffing costs. B. The Internet provides lead-generation and cross-selling opportunities for all products. C. Maintaining an Internet presence increases an insurer's underwriting and claim processing costs. D. The use of insurance portals eliminates insurers' need to screen and fully underwrite the leads generated.
B
Which one of the following statements is correct? Select one: A. Producers are restricted to only providing services to their current insureds. B. Many producers offer consulting services for which they are paid on a fee basis. C. It is illegal for producers to reduce their consulting fees in recognition of commissions received. D. When consulting services are provided, insurance premiums, commissions, and fees are billed together.
B
In terms of their legal relationships, which one of the following statements accurately describes insurance agents and insurance brokers? Select one: A. Both insurance agents and insurance brokers represent the customer. B. An insurance agent represents the insurer while a broker represents the customer. C. An insurance agent represents the customer while a broker represents the insurer. D. Both insurance agents and insurance brokers represent the insurer.
B
In the legal relationship known as agency, which one of the following is the principal? Select one: A. Agent B. Insurer C. Insured D. Third party
B
Independent agent networks are known as Select one: A. Exclusive agents. B. Agent clusters. C. Direct writers. D. Agent forces.
B
Leah decides to purchase her personal automobile insurance through a program offered by her employer. Leah's employer offers her a discounted premium which is deducted from her paycheck. Leah's employer is using which type of distribution channel? Select one: A. Direct response marketing B. Work site marketing C. Mass marketing D. Affinity marketing
B
Managing general agencies Select one: A. Typically use the exclusive agency system. B. Commonly represent several insurers. C. Do not represent more than one insurer. D. Typically use the direct response system.
B
Rhonda is a personal lines insurance producer. Under the terms of her agency contracts, the insurers forward policies promptly to Rhonda's customers and send a premium invoice with the policy. Insureds are instructed to remit premium payments to their insurer. The insurers calculate Rhonda's commissions and forward those commission payments to her monthly. Rhonda is operating under which one of the following payment procedures? Select one: A. Item basis B. Direct bill basis C. Account current basis D. Statement basis
B
The Miller Agency has an agency agreement with Big Insurance Company. The agency collects premiums from Big Insurance insureds even though the agency agreement lacks a clause specifically granting authority to do so. Miller's agents collect premiums upon Select one: A. Absolute authority. B. Implied authority. C. Apparent authority. D. Express authority.
B
The authority that the principal specifically grants the agent is called Select one: A. Implied authority. B. Express authority. C. Conditional authority D. Apparent authority.
B
The scope of an agent's authority can go beyond the terms of the agency contract and may include authority to perform other tasks customary to the agency relationship. This authority is referred to as Select one: A. Apparent authority. B. Implied authority. C. Contractual authority. D. Express authority
B
The terms of the agency contract define the agent's Select one: A. Apparent authority. B. Express authority. C. Implied authority. D. Exclusive authority.
B
When an agency relationship is created between a principal and the agent, it requires a high degree of Select one: A. Creativity. B. Trust. C. Oversight. D. Patience.
B
Which one of the following insurance distribution channels usually cuts compensation costs greatly but has higher advertising costs? Select one: A. Independent agency B. Direct response C. Direct writing D. Exclusive agency
B
Which one of the following premium collection methods is used in the majority of personal insurance sales? Select one: A. Account current basis B. Direct bill process C. Item basis D. Statement basis
B
Which one of the following sells insurance by representing customers rather than insurers? Select one: A. An independent agent B. A regional broker C. An exclusive agent D. A direct writer sales representative
B
All of the following are examples of insurance distribution channels, EXCEPT: Select one: A. Direct response B. Call centers C. Exclusive agency D. Group marketing
C
All of the following are true about the insurance agency relationship, EXCEPT: Select one: A. The agency agreement is a written agreement between the insurer and an agent. B. The agency agreement gives the agent the right to represent the insurer and sell insurance on the insurer's behalf. C. The principal is the party the agent authorizes to bind coverage. D. The agent is the party authorized by the principal to act on the principal's behalf.
C
Northtown Agency has an agency contract with Withers Insurance Company for personal lines coverages only. Anita, one of Northtown's existing personal lines customers is starting a floral delivery business that will require commercial insurance. Horace, one of the agents, accepted Anita's application, bound coverage and said he would pass the paperwork on to Withers, as Withers had handled all her other needs. As soon as he remembered the agency contract with Withers, he planned to send the request to a different insurance company that could accept the new business. Before he could do this, Anita submitted a claim. The claim would be covered because the coverage is bound based on the concept of Select one: A. Express agency. B. Independent agency. C. Apparent authority. D. Implied authority.
C
The authority that the principal specifically grants to the agent is contained in the agency contract. This authority is known as Select one: A. Apparent authority. B. Implied authority. C. Express authority. D. Contractual authority.
C
The functions that insurance producers perform vary widely from one marketing system to another. Which one of the following functions do all producers perform? Select one: A. Consulting B. Risk management review C. Prospecting D. Premium collection
C
The laws of agency impose all of the following specific duties on all agents, EXCEPT: Select one: A. Obedience B. Accounting C. Profitability D. Loyalty
C
The laws of agency impose all of the following specific duties on all agents, EXCEPT: Select one: A. Loyalty B. Accounting C. Apparent authority D. Relaying information
C
The laws of agency impose all of the following specific duties on all agents, EXCEPT: Select one: A. Loyalty B. Accounting C. Knowledge D. Relaying information
C
The principal method of determining a prospect's insurance needs is through Select one: A. Reviewing the prospect's current insurance policies. B. Asking the prospect what coverage they would like to purchase. C. Completing a risk management review for the prospect. D. Determining how much the prospect is willing to pay for insurance coverage.
C
Which one of the following statements about insurance distribution systems and channels is true? Select one: A. Direct writer marketing systems use sales persons who are independent contractors. B. Managing general agents (MGAs) serve as employees of direct writer companies. C. Surplus lines brokers can place coverage that is not available through standard market insurers. D. Exclusive agents are usually free to represent as many or as few insurers as they want.
C
Which one of the following statements is correct regarding consulting services? Select one: A. It is illegal for producers to reduce their consulting fees in recognition of commissions received. B. Producers are restricted to only providing consulting services to their current insureds. C. Many producers offer consulting services for which they are paid on a fee basis. D. When consulting services are provided, insurance premiums, commissions, and fees are billed together.
C
Which one of the following statements is correct with respect to selecting a distribution channel? Select one: A. Customers are prepared to spend a reasonable amount of time and effort interacting with a distribution channel if that channel saves them money. B. The primary consideration is what approach will allow the insurer to operate efficiently. C. The types of insurance products and services to be delivered by the insurer must fit the marketing channel selected. D. The majority of customers prefer to speak with a producer or service representative rather than access their account information online.
C
Which one of the following statements is true concerning the use of alternative distribution channels to sell insurance? Select one: A. Most distribution channels are not yet available for customer service. B. Most distribution channels do not allow insurers to contact customers directly. C. Distribution channels act as a conduit for establishing communication with current customers. D. The introduction of new distribution channels has resulted in the elimination of traditional marketing systems
C
A business manufactures a product that is harmful to the public if used improperly. More than three licensed insurance companies have refused to provide commercial general liability coverage for the business. The producer should contact which one of the following to attempt to arrange coverage? Select one: A. A managing general agent B. An independent agent C. A direct writer D. A surplus lines broker
D
Erin has recently graduated from college and relocated to Chicago. She has purchased a car and rented an apartment and now needs to purchase insurance. Erin is looking for minimum coverages and the lowest price available. Which one of the following is likely the best distribution system to meet Erin's needs? Select one: A. Financial institution B. Regional broker C. Independent agent D. Direct writer Internet search
D
Fictitious Consultants Inc. (FCI) has been hired by a local insurance company located in Claremont, CA to introduce The Omnichannel Marketing System (OMS) as a sales tool. Knowing that Claremont is a college town with five undergraduate colleges alone, FCI believes that targeting the young demographic in the city will pay dividends in sales traffic for the insurance company. Given the young demographic, what three channels of the OMS would FCI expect to bring in the most hits for the insurance company? Select one: A. Social Media, Online, In-store B. Catalog, Mobile App, Call Center C. Mobile App, In-store, Call Center D. Online, Mobile App, Social Media
D
From an insured's point of view, relative to the concept of agency, little distinction exists between the Select one: A. Insurance agent and the insurance department. B. Broker and the claimant. C. Insurer and the insurance department. D. Insurance agent and the insurer.
D
Given the complexity of commercial insurance, which one of the following is best suited for its distribution? Select one: A. Internet B. Direct response C. Group marketing D. Independent agencies
D
Insurance Company D (ICD) has traditionally used regional brokers to market and produce its insurance products. The management team at ICD has decided it wants to launch a new specialized product. The marketing plan includes ICD's desire to control the targeted number of monthly applications as well as the methods that will be used to advertise and campaign to achieve the desired results. Which one of the following distribution systems will best allow ICD the desired control? Select one: A. Exclusive agency B. Independent agency C. Regional brokerage D. Direct writer
D
T. Roy Insurance Company is selecting a distribution system and channel for its products. Which one of the following best describes the type of consideration that T. Roy should give to its operations? Select one: A. Can customers navigate easily within the channel? B. What are customer's expectations regarding accessibility? C. Will customers be willing to pay a premium for services? D. Does it have the necessary financial resources?
D
The Wellborn agency represents only Coastal Insurance Company. Wellborn is an independent contractor but its contract with Coastal specifies that all insurance it sells will be placed with Coastal. Wellborn is operating under which one of the following marketing systems? Select one: A. The direct writer system B. The managing general agency system C. The independent agency system D. The exclusive agency system
D
When an insurance company appoints an insurance agent to serve as its representative, what specifies the scope of authority given to the agent in this relationship? Select one: A. A unilateral contract B. Implied authority C. Binding authority D. An agency contract
D
When selecting a distribution channel, which one of the following is an important consideration with regard to customers' needs and characteristics? Select one: A. The compatibility of the channel with established channels B. The expertise of current staff C. The target market D. The ease of accessibility within the channel
D
Which one of the following methods of prospecting is more likely to be used by an experienced producer than a new insurance producer? Select one: A. Interactive web sites B. Cold canvass C. Direct mail D. Referrals from present clients
D