Chapter 10 - Insurance Law
After passing the state test, a candidate must apply for a license within: 2 years 6 months 60 days 1 year
1 year
When the Commissioner suspects a producer is engaged in Unfair Methods of Competition or deceptive practices, a hearing may be held after giving the person advance notice of at least how many days? 10 days 30 days 20 days 60 days
10 days Hearings are held 10 days after a notice of hearing notification.
The Penalty for failure to pay a claim in a timely manner is which of the following? 10% 60% 15% 50%
10%
When credit life or health is written, evidence of coverage (a policy or certificate of insurance) must be delivered to the debtor when the debt is incurred or within how many days? 20 days 60 days 10 days 30 days
30 days
A notice of hearing by the Commissioner will include all of the following EXCEPT: Information about the nature of the hearing A list of the persons to attend the meeting The place where the hearing to be held The time & date of the hearing
A list of the persons to attend the meeting
An effort by an existing insurer to prevent replacement and continue existing Life Insurance in force is known as which of the following? Reinstatement Conversion Conservation Direct-response
Conservation
EFFECTUATING
Effectuating is actually putting insurance related products into effect.
A person whose producer license is revoked shall not be entitled to apply for another insurance license for at least: Ten years Two years One year Five years
Five years
The purpose of an insurance guaranty association is to protect: the privacy rights of insurance buyers resident agents from competition by nonresident agents claimants and policyowners when an insurer becomes insolvent the general public from unfair trade practices
claimants and policyowners when an insurer becomes insolvent A guaranty association is a mechanism used to pay covered claims, when an insurer becomes insolvent. It also protects policy owners and claimants by assisting in the detection and prevention of insolvencies.
If credit life insurance is terminated before the scheduled maturity date of the debt, any unearned premium held by the insurer will be? Debited to an account for "bad debts" Refunded only if the amount is greater than $10.00 Added to the insurer's surplus funds Refunded to the debtor, unless the amount is less than $1.00
refunded to the debtor, unless less than $10.00
In Life Insurance, replacing companies must keep records of all replacement materials on file for how long? 5 years 3 years 5 years or until next regular examination by the Commissioner. 3 years or next regular examination
5 years or until next regular examination by the Commissioner
Publishing or circulating information, which is false and maliciously critical to an insurer and is intended to cause injury, is a prohibited practice known as which of the following? Unfair discrimination Defamation Boycott Coercion
Defamation
The Commissioner of Banking and Insurance is appointed by which of the following? The Legislature The Senate The Governor The Secretary of State
The Governor
When an insurance producer is convicted of any crime , the Producer must report the conviction to the Commissioner of Banking and Insurance within how many days after the conviction? 20 days 30 days 10 days 5 days
30 days
The Commissioner may revoke a producer's license if it is found that the commissions earned on "Controlled Business" during any 12 month period exceeded what percentage of the producer's aggregate commissions on all business written? 65% 30% 50% 25%
50%
After passing the state examination, the Producer is issued a Temporary Certificate. How many days is the Temporary license issued for? 60 days 10 days 6 months 30 days
60
Which one is not considered unfair discrimination? Medical Conditions Creed Ancestry Genetic Information
Medical conditions
The provisions of the National Do Not Call List apply to each of the following except: Electronic communications Auto dialing systems Prerecorded messages Established business relationships
Established business relationships
Which of the following is not true regarding Branch Offices: The office is accessible to the public during normal business hours. At least one licensed insurance producer is assigned to that office. The office must be open 9am - 5pm At least one licensed insurance producer is present during business hours except when engaged in branch activities elsewher
The office must be open 9am - 5pm
The insurer must give the Department of Insurance how many days notice of the termination of an agent appointment: 20 60 15 30
15
CERTIFICATE OF AUTHORITY
A Certificate of Authority is the term for the document an insurer receives after being approved by a state to do insurance business. When an insurer receives a Certificate of Authority is then known as an Authorized or an Admitted Insurer.
When and Insurer requires AIDS testing during the Underwriting process, which of the following is true? If the applicant does not supply the insurer with the results within 30 days the company will cease it's underwriting and not issue coverage The agent must get written permission from the applicant in advance. All of the above The Applicant must be given the option to receive results directly from the testing company
All of the above
INSURANCE CONSULTANT
An Insurance Consultant is a licensed producer who gives insurance advice for a fee, and can represent anyone in any insurance transaction, both insurer & insured, (as long as disclosure is given).
BOYCOTT
An unfair trade practice in which one person refuses to do business with another until he or she agrees to certain conditions.
Life Insurance solicitation requirements in New Jersey apply to all of the following EXCEPT: Single Premium contracts Annuities Term Policies Endowment policies
Annuities
Participation of the NJ Guaranty Associations is? Mandatory for any Authorized Insurer Required by Law for the policyholder to participate Optional to the Insured if they elect to pay the premium Required and the policyholder contributes to the fund annually
Mandatory for any Authorized Insurer
MISREPRESENTATION
Misrepresentation involves making false statements to anyone about anything or anyone in the business of insurance. This includes making false statements about an existing policy in order to induce the person to cancel an existing policy.
The administrative powers of the Insurance Commissioner are derived from: Statutes which create the office Court action Regulations he/she adopts Political positioning
Statutes which create the office The Administrative Procedures Act dictates the duties and responsibilities of the Commissioner of Insurance in this state.
Which of the following sells reinsurance? The surplus lines insurer The ceding insurer The assumptive insurer The assuming insurer
The assuming insurer
TWISTING
This is similar to Misrepresentation but one step further. Twisting is making false statements to a person in order to encourage them to cancel an existing policy (just like Misrepresentation) and then purchase a new policy in its place.
An advertisement made by a paid celebrity for Life Insurance must? Be their current opinion Represent their honest and true opinion State that the celebrity is a paid spokesperson All of the choices
All of the choices
Each of the following is False EXCEPT? The Association's liability is generally limited to that of the impaired insurance company. The Life & Health Guaranty Association is comprised of representatives from the DOIs of every state. It is illegal for an insurer to advertise that policies are covered by the Life & Health Guaranty Association. State Life & Health Guaranty Association was created to protect policyowners financially if their insurers become insolvent.
It is illegal for an insurer to advertise that policies are covered by the Life & Health Guaranty Association. Any company selling life and/or Health insurance must belong to the Guarantee Association. It is illegal for insurers to advertise that their policies are guaranteed by the existence of Life & Health Guaranty Association.
REBATING
Rebating is offering a client something other than what is stated in the policy in return for purchasing a policy (for example offering $50 in return for a prospect's agreement to purchase the contract). This is the equivalent of paying a commission to an unlicensed person and it is illegal. Some jurisdictions allow a fee to be paid to an unlicensed individual for a referral however. This is known as a referral fee, and it is not considered rebating.
SOLICITING
Soliciting is any effort to influence a person to purchase an insurance product from you.
DEFAMATION
Defamation is making False and Maliciously Critical or Derogatory statements about any person in the business of insurance.
UNFAIR DISCRIMINATION
It is unlawful to refuse to take an application from anyone based on race, color, creed, gender, marital status, physical impairments, or any reason contrary to federal or state law. Refusals must be based on legally permissible written underwriting guidelines. Underwriting Guidelines which are legal might include the Commissioners' approval based on facts and statistics and the courts (judicial branch) finds that it is not in violation of any current law. In addition, you may not discriminate in underwriting due to genetic predisposition to disease.
When replacement of individual Life Insurance is involved, an agent must furnish a Notice Regarding Replacement of Life Insurance to which of the following? The replacing insurer only The existing insurer only The applicant and replacing insurer The applicant only
The applicant only
The standard term for a New Jersey insurance producer license is: 4 years 1 year 2 years 3 years
2 years
As of January 1, 2007, a producer's license expires? January 1, every two years Every two years on the last day of the producer's birth month Producer's license never expires Every two years on its anniversary
Every two years on the last day of the producer's birth month
INSURANCE ACTIVITIES
Insurance activities are performed by Agents, Brokers and/or Consultants and must be licensed by the Department of Insurance.
All of the following would be listed on a producer status, EXCEPT: Names and reference number of licensed organizations for which the producer serves as a licensed officer or partner Petitions or discharges in bankruptcy Date of birth License authority and date of first issue
Petitions or discharges in bankruptcy
In the advertising of Individual Life Insurance policies, an "introductory" or "special enrollment" may not be made available until any previous enrollment period for the same policy has been closed for at least how long? Two months Three months Five months One month
Three Months
The inducement of an insured to lapse, forfeit, or surrender an insurance policy by misrepresentation or misleading comparisons, in order to write a new policy, is known as: Churning Twisting Commingling Rebating
Twisting
Which of the following would be considered the fine for a first offense of any insurance law? Up to $1,000 Up to $10,000 Up to $250 Up to $5,000
Up to 5,000
How old must an individual be to obtain a producer's license? 21 15 18 20
18
Once a hearing determination dissolves a practice as not violating any rules, any Intervener in the proceedings may institute an action in the Superior Court to restrain the practice within ____ days after the determination is made. 30 10 5 60
30
THE AGENT
The Agent represents the insurer (insurance company) in the insurance transaction, and has been contracted by the company to solicit insurance products on its behalf.
THE BROKER
The Broker is a licensed producer who places insurance through a company without an agency contract. Brokers represent the Insured (customers) in the insurance transaction.
An insurer is required to maintain records of all complaints received: since it was last examined by the Department for at least five years for at least two years for at least one year
since it was last examined by the Department All other records must be kept for 5 years. There is no 5 year requirement for Records of Complaints. Complaint records must be kept until the next examination by the Commissioner. Since Insurers are examined by the DOBI , records of complaints are very important to the examiner, even if the complaint had been equitably resolved.
The death benefit of Credit Life and Health Insurance is paid to which of the following? The Creditor The account of the debtor The policyholders beneficiary The Creditor's Beneficiary
The creditor
Which of the following is the number of days required in a notice of hearing? 30 days 90 days 15 days 20 days
20 If you studied this correctly you should be looking for 10 days. Since 10 days is not offered, the next best answer is 20 days. If 10 and 20 days are offered in a similar question take 10!
In many states, it is illegal for an agent to offer anything other than the policy, as an inducement to buy insurance. This practice is known as: twisting defamation rebating coercion
Rebating
Upon the death or disability of a licensee, the surviving spouse, next of kin, administrator or executor of the estate, or legal guardian may apply to the Commissioner of Insurance for a Temporary License to continue the effected producers business for a period no longer than how many days? 30 days 60 days 12 months 180 days
180 days the Temporary License allows the person to renew, service and maintain existing business. the Temporary Licensee may not sell new business. This rule also applies to a Producer who may have been called into active Military Duty and has appointed a Power of Attorney to someone in his or her absence.
A licensed producer is required to file notice of any change of address in writing within: 30 days 10 days 60 days 20 days
30 days
In advertisements of Life Insurance and Annuities, all of the following are true EXCEPT: The advertisement must be actually true in fact The company's name must be used in the ad The advertisement cannot be misleading or deceptive Advertisements include training materials provided to the producer
Advertisements include training materials provided to the producer
A document providing basic information about Life Insurance policies which contains and is limited to language approved by the Commissioner is known as a? Policy Summary Buyers Guide Notice of Coverage Form Comparison Form
Buyers Guide
In the Paul Vs. Virginia case of 1868, it was determined that: Insurance is commerce subject to federal regulation. State insurance codes have to be ratified by the National Association of Insurance Commissioners (NAIC) . Insurance is not a transaction of commerce.In many states, it is illegal for an agent to offer anything other than the policy, as an inducement to buy insurance. This practice is known as: twisting defamation rebating coercion Regulating insurance rests with individual states, but the federal government could ultimately regulate.
Insurance is not a transaction of commerce.
A producer who has a license revoked by the Commissioner of Insurance may: Not receive commissions on the renewal of policies Cancel all existing policies on a pro-rata basis A) Receive commissions on renewal policies pursuant to the previous agency contract Receive commissions on the renewal of policies limited to 3 %
Not receive commissions on the renewal of policies Revocation severs all business relationships with anyone else in the insurance business. Once a Producer's license is revoked a company may not pay a renewal commission to that person.
A written statement describing the elements of a policy referred to as which of the following? Buyer's Guide Policy Summary Insured's right to renew All of the choices
Policy Summary
A license may terminate a current producer by doing which of the following? Achieving a CPCU designation None of the choices listed Losing their company appointment Returning the license to the Department for cancellation any time before the expiration date
Returning the license to the Department for cancellation any time before the expiration date
A Certificate of Authority is issued to which of the following? The insurer The agent The producer The insured
The insurer A Certificate of Authority is the document a company receives after receiving approval to do business in NJ. A certificate of authority means an Insurer is now an Authorized or an Admitted Insurer. The Producer get a License.
Each of the following about Branch offices is true, EXCEPT: At least one license producer is permanently assigned to that office The office is accessible to the general public during reasonable business hours The office must be open 9-5, 5 days a week The assigned producer is present or accessible during business hours, except when engaged in branch activities elsewher
The office must be open 9-5, 5 days a week
Hearings conducted at the NJ Department of Insurance require that any person suspected of an unfair of deceptive act regarding the hearing be given _____ days notice that he/she is to appear for same 5 45 10 30
10 A ten day notice is required prior to a Hearing. conducted by the DOBI. If a Producer requests a hearing the producer must give the DOBI a 20 day notice. Sometimes questions are not a clear as they need to be .If you get a question on Notice of Hearing and 10 days does not appear but 20 days does, choose 20 days
NEGOTIATING
Negotiating is communicating with a prospective client with regard to need for or efficacy of different types of insurance related products.
How may a Producer's license by renewed? By retesting every two years By submitting an online renewal application By calling the DOBI requesting renewal By writing a letter to the DOBI requesting renewal
By submitting an online renewal application
Each of the following is False EXCEPT? It is illegal for an insurer to advertise that policies are covered by the Life & Health Guaranty Association. The Association's liability is generally limited to that of the impaired insurance company. State Life & Health Guaranty Association was created to protect policyowners financially if their insurers become insolvent. The Life & Health Guaranty Association is comprised of representatives from the DOIs of every state.
It is illegal for an insurer to advertise that policies are covered by the Life & Health Guaranty Association. Any company selling life and/or Health insurance must belong to the Guarantee Association. It is illegal for insurers to advertise that their policies are guaranteed by the existence of Life & Health Guaranty Association.
A nonresident licensee in New Jersey has a: Resident & business address in a state other than New Jersey Resident address in New Jersey & a business address in another state Bona fide New Jersey branch office with both resident & business address in a state other than New Jersey Business address in New Jersey & a resident address in a state other than New Jersey
Resident & business address in a state other than New Jersey
A producer is suspected of violating insurance rules. A 10 day notice of hearing is issued and after the hearing is conducted, the producer is found guilty. The commissioner may do which of the following, in addition to imposing monetary penalties? Revoke the license of the licensee No additional action is allowed Bar future appeals from the licensee Have the licensee arrested for a 3rd degree crime
Revoke the license of the licensee
Who pays the expenses of the NJ Guaranty Association? The participating insured The participating reinsurers The Member Insurers of the Association The Commissioner of Insurance
The Member Insurers of the Association
Which of the following is true concerning the proceeds of a Life Insurance policy if there is no assignment against the policy? There is protection of proceeds against the beneficiary's creditors There is protections of proceeds against the insured's creditors There is protection of proceeds against the insured's and the beneficiary's creditors There is never protection of proceeds
There is protection of proceeds against the insured's and the beneficiary's creditors
The Commissioner may refuse to issue, or renew, or may to revoke or suspend a license upon finding that the producer did all of the following, EXCEPT: Committed a fraudulent act Depositing commissions into his own checking account Obtained or attempted of obtain a license by fraud or misrepresentation Intentionally withheld material information from an application for a license
Depositing commissions into his own checking account
Public Law 15, also known as the McCarran-Ferguson Act, established the regulation of the insurance business by: Allowing state regulation of insurance transactions Prohibiting state regulation of insurance transactions Abolishing the provisions of the Sherman Act, Clayton Act, and Federal Trade Commission Act Establishing the National Association of Insurance Commissioners
Allowing state regulation of insurance transactions Mc Carran/Ferguson (Public Law 15) allows states to regulate the insurance business, under the "watchful eye" of the Federal Government.
A Producer takes an application for Accident and Health Insurance and realizes later that the box should have been checked "Yes" was checked "No". In this case the Producer should do which of the following? Circle the box that was incorrect, check the correct box, and get the client to initial it Submit the application and do not mention the error Tell the client that he'll inform the company Ignore the mistake as the information seemed unimportant
Circle the box that was incorrect, check the correct box, and get the client to initial it
During the solicitation of a Life policy, when must an insurer must furnish a prospective buyer with a Buyer's Guide and a Policy Summary? Seven days before the initial premium is accepted At the time the initial premium is accepted Within 10 days after the initial premium is accepted Five days before the initial premium is accepted
Seven days before the initial premium is accepted This only applies if the policy does not contain "Free Look" Provision as required by law. Since all Life Insurance Policies contain a Free Look Provision by law, this is a mute point. This was a regulation made before the free look requirement was imposed but the questions may still appear on the test.
When a nonresident insurance producer is issued a license it is deemed that ________ will be appointed as agent to receive service of original legal process in this state in any cause of action or legal proceeding arising within this state, out of transactions under this license The home state Commissioner of Insurance The New Jersey Commissioner of Insurance The New Jersey Attorney General The home state Attorney General
The New Jersey Commissioner of Insurance The NJ Commissioner is the Non-Resident Producer's ""Agent"" designated to receive suit papers in the event a N/R Producer is sued for actions regarding insurance business generated in NJ.
Accounts receivable, for insurance accounting purposes, may not include premiums owed to the licensee for more than what period of time after the last day of the month in which the insurance was effective: 120 days 60 days 90 days 180 days
120 days
MANAGING GENERAL AGENT
A Managing General Agent has the authority to hire new agents and manage agents on behalf of an insurer.
All of the following are true regarding an organization licensed as a producer EXCEPT: Anyone acting as a producer must be individually licensed At least one partner or officer must be a licensed producer All partners or officers who are licensed must sign the application Each employee must be licensed
Each employee must be licensed
The Commissioner may demand that an insurance company pay a former agent commissions on renewal business written while under contract: As long as the former agent has been replaced as the broker of record At a lower commission rate Only for business written outside the state of New Jersey In accordance with the previous agency contract
In accordance with the previous agency contract
A Producers License may be revoked if The Commissioner finds that commissions earned on ""controlled business"" during any 12 month period exceed what percentage of the producer's aggregate commissions on all business written? 50% 25 % 10% 60%
50%
When all qualifications have been satisfied, the Commissioner may issue a temporary certificate which will permit an applicant to begin working as a producer, pending receipt of the license. A temporary certificate may be effective for a period of up to: 120 days 60 days 45 days 30 days
60
When new Life Insurance is to be purchased, the solicitation will be considered a replacement transaction if, in conjunction with the sale, existing Life Insurance will be subject to borrowing for amounts exceeding which of the following? 10% of the policy's loan value 75% of the policy's loan value 25% of the policy's loan value 50% of the policy's loan value
25% of the policy's loan value If a client keeps an existing policy but borrows more than 25% of it's cash value in order to use that money for a new policy, Replace has occurred.
After a hearing, if the Commissioner determines that a person has engaged in an Unfair Trade Practice, the Commissioner may impose a fine of which of the following? $10,000 for each violation $20,000 for each violation $5,000 for each violation $15,000 for each violation
$5,000 for each violation
A policy summary includes all of the following, EXCEPT: The name and address of the insurance agent The cash dividends payable at the end of each year up to the 20th year (followed by a statement that the Dividends are not guaranteed. The full name and home office or administrative office address of the company in which the insurance is to be written The annual percentage rate of the agents compensation
The annual percentage rate of the agents compensation
FALSE FINANCIAL STATEMENTS
This occurs when an individual or group is making false statements as to the financial condition of a competitor.
FALSE INFORMATION AND ADVERTISING
This states that one cannot use false advertisements or publish false information about insurer, or any person, in the business of insurance.
Insurers are required to keep copies of Policy Summaries and Buyer's Guides on file for at least: Five years after the documents are used Seven years after the documents are used Two years after the documents are used Three years after the documents are used
Three years after the documents are used
If an Insurer decides to waive its right to certain information, which of the following prevents the insurer from reasserting its right at a later time? The Doctrine of Reasonable Recourse The Monroe Doctrine A Doctrine of Adhesion The Doctrine of Estoppel
The Doctrine of Estoppel Once a right to information is waived, the law states that the party who waived that right is "estopped" or prevented from later reasserting the right.
A producer was found guilty of violating the rebating law on three occasions. What is the maximum fine the commissioner may impose?
25,000
When the insurer enters into an agency contract with a licensed producer, it must file a Notice of Agency Contract with the Department within how many days? 15 days 30 days 10 days 20 days
15 days The state must be notified of agency agreements and terminations. If the agency agreement is terminated the state must be notified within 15 days of termination as well. Fifteen days in.......Fifteen days out for Notice of Agency Contract.
When the replacement of Life Insurance is involved, the replacing insurer must delay issuing its policy for how many days? 20 days 60 days 10 days 30 days
30 days
The licensee shall advise the Department of Banking and Insurance of the closing of a branch office within how many days? 20 days 20 days in writing 30 days 30 days in writing
30 days in writing
Users of The National Do Not call list must review and update their list every? 90 days 31 days 180 days 120 days
31 days
After a hearing on rules & regulations, a proposed regulation or modification may not take effect until it has been on file with the Office of Secretary of State for at least how many days? 20 days 30 days 5 days 10 days
5 days The Secretary of State's office is charged with the responsibility to oversee the creation of the regulation to determine it's legality.
CAPTIVE AGENTS VS. INDEPENDENT AGENTS
Captive Agents represent one specific company while Independent Agents can represent many different companies.
It is the responsibility of the producer at the time of application to establish if replacement is involved in the transaction. If it is a replacement transaction, the producer is required to: do which of the following? Read the Notice Regarding Replacement out loud to the applicant (unless the applicant rejects that right in writing) and leave a copy with the client. Advise the prospective insured to take a policy loan on the cash value Advise the insured to cancel their existing policy immediately Not ask the prospective insured such a personal question
Read the Notice Regarding Replacement out loud to the applicant (unless the applicant rejects that right in writing) and leave a copy with the client.
Who pays the expenses of the NJ Guaranty Association? The participating insured The Member Insurers of the Association The Commissioner of Insurance The participating reinsurers
he Member Insurers of the Association