Ethics & Insurance
Any licensed person who knowingly makes false material statements related to the business of insurance may be fined and imprisoned for up to 1 year. B 3 years. 5 years. 10 years.
10 years.
Errors and omissions coverage included in cyber security insurance protects a business from lawsuits if The office is destroyed in a lightning storm. The CEO is unable to log on to the wi-fi. The business IT department needs help installing anti-virus software on computers. A cyber event keeps it from fulfilling a contract.
A cyber event keeps it from fulfilling a contract.
Which of the following is NOT a fiduciary? A policyholder An independent agent An agent A broker
A policyholder
A young couple has coverage with CR Insurance Company, but they are unhappy with the company's service. Their broker sells for that company, but also sells Factor Insurance, which charges a higher price for the same coverage. If the broker offers the couple the Factor product, it is called Upselling for commission gain. Illegal replacement. A reasonable alternative. Unethical behavior.
A reasonable alternative.
An agent brings in a new application and the managing general agent notices that the applicant has a chronic disease. Which of the following is the managing general agent authorized to do? Keep the application until the condition improves Issue a specialized policy Decline the application Correct the application to lower the risk
Decline the application
According to the Fair Credit Reporting Act, all of the following would be considered negative information about a consumer EXCEPT Failure to pay off a loan. Disputes regarding consumer report information. Tax delinquencies. Late payments.
Disputes regarding consumer report information.
According to the Fair Credit Reporting Act, all of the following would be considered negative information about a consumer EXCEPT Failure to pay off a loan. Disputes regarding consumer report information. Tax delinquencies. Late payments.
Disputes regarding consumer report information.
A prospective insured asks a question, and the agent does not know the answer. Which of the following options is NOT a professional approach? Get back to the prospect later Consult another agent Do his best answering the question on the spot Call the insurer for an answer
Do his best answering the question on the spot
Wilson purchased his first life insurance policy on February 1. At the time of application, the agent provided a conditional receipt that stated coverage would be effective as soon as Wilson passed a medical exam. Wilson passed the medical exam on February 15. The results of the exam were received by the underwriter on February 20, and the application was accepted. The policy was issued on February 28. When did coverage become effective? February 1 February 15 February 20 February 28
February 15
A broker reviews a long-time client's file and notices that the client does not have a policy feature on his Xcellent Insurance Company policy that is offered by 1-Mark Insurance Company. The broker has sold policies for both companies. The broker suggests that the client switch policies. If the client can use this feature, the broker's action is considered to be Good customer service. Churning, because it will generate a new commission for the broker. Unethical, because the first company will lose the client's business. Twisting.
Good customer service.
Which of the following may NOT be included in an insurance company's advertisement? Their policies' limitations or exclusions The name of a specific agent An identification of a limited policy as a limited policy That its policies are covered by a state Guaranty Association
That its policies are covered by a state Guaranty Association
Which of the following is NOT something a client must expect from a professional agent? Answers to financial questions outside the agent's expertise or training Prompt policy delivery Full disclosure and timely paperwork processing Confidentiality and a high standard of service
Answers to financial questions outside the agent's expertise or training
An agent brings in a new application and the managing general agent notices that the applicant has a chronic disease. Which of the following is the managing general agent authorized to do? Decline the application Correct the application to lower the risk Keep the application until the condition improves Issue a specialized policy
Decline the application
Under the Fair Credit Reporting Act, if the consumer challenges the correctness of the information contained in his/her report, the reporting agency must Defend the report if the agency feels it is accurate. Change the report. Send an actual certified copy of the entire report to the consumer. Respond to the consumer's complaint.
Respond to the consumer's complaint.
All of the following are tenets derived from the ethical codes of major organizations within the insurance industry EXCEPT -Selling your client's contact information without their knowledge. -Placing the customer's interest first. -Recommending products and services that meet the customer's needs. -Protecting your confidential relationship with your client.
Selling your client's contact information without their knowledge.
To make sure that insurers are able to pay claims, the state insurance departments monitor the insurance companies' Agency productivity. Underwriting department. Solvency. Premium-to-claims ratio.
Solvency
Which of the following will NOT be included in the buyer's guide? Explanation on how to choose the amount and type of insurance Basic information about life insurance policies Specific information about the policy How to compare costs among policies
Specific information about the policy
The primary reason that an agent should engage in continuing education is to Maximize sales opportunities. Take advantage of tax deductions for professional education. Meet licensing requirements. Stay up-to-date on policies to continue matching prospects' needs with most appropriate solutions.
Stay up-to-date on policies to continue matching prospects' needs with most appropriate solutions.
All of the following should be considered fraud "red flags" in insurance EXCEPT The applicant offers vague information regarding medical history or information that does not align with information on the application. The applicant asks detailed hypothetical questions about what is covered, then later submits a claim similar to the hypothetical questions the applicant asked. Two years after applying for life insurance, the applicant is promoted to a more dangerous position at his construction job. The applicant for auto insurance wants to use an address other than his residence on the application.
Two years after applying for life insurance, the applicant is promoted to a more dangerous position at his construction job.
All of the following would be covered under network business interruption coverage EXCEPT Fixed expenses. Extra costs. Upgrading a computer to more capacity. Lost profits.
Upgrading a computer to more capacity.
An independent agent notices that a client is just 2 months away from their policy renewal. The agent can switch them to another insurer now and earn credit for the Island Winner's Contest ending this week, but it will cost the client an additional month's premium. If all coverages are the same, which of the following agent actions is ethical? Tell the client that the renewal date has changed and submit the new application Allow the renewal with the current company to take place as scheduled Offer to rebate the difference to the client Submit the new company application now and cancel it later
Allow the renewal with the current company to take place as scheduled
An agent has just sold a life insurance policy to an applicant, and gave him a conditional receipt in return for the initial premium. The receipt contains a clause requiring the applicant to pass a medical examination. The applicant wants to know when the policy goes into effect. The agent should tell him that the coverage is effective As soon as the applicant passes the medical examination. Immediately. On the date the policy is delivered. As soon as the insurer receives the initial premium payment.
As soon as the applicant passes the medical examination.
Which of the following demonstrates highly ethical behavior on the part of an insurance agent? Holding a free investment seminar for retired people, when the agent's actual focus will be to solicit applications for insurance Informing prospective insureds that competing insurance companies are financially unstable when that is not the case Asking his manager for clarifying information when the terms of a policy provision are unclear to him Telling a prospective insured that he will receive a $500 gift if he purchases an insurance policy
Asking his manager for clarifying information when the terms of a policy provision are unclear to him
A highly ethical individual -Sees his/her activities in terms of profit. -Uses rationalization to justify his/her desires. -Assumes personal responsibility for his/her actions. -Is obsessed with success.
Assumes personal responsibility for his/her actions.
Avery's agent has been explaining an insurance proposal to him, but Avery is confused over the meaning of the surrender cost indexes in the policy. What document is available to help Avery's agent explain this section to him? Credit report Conditional receipt Inspection report Buyer's guide
Buyer's guide
A cyber attacker stole usernames and passwords from one company and attempted to use those credentials to log in to various sites online. This is known as Trojan horse. Malware. Worm. Credential stuffing.
Credential stuffing.
An insurance producer fails to obtain automobile insurance for his client after agreeing to do so. The client is involved in an automobile accident after running a red light and is found to be at fault. The damage to the other vehicle totals $5,000. Which statement regarding the producer's errors and omissions liability policy is true? It will not provide coverage since the property damage resulted from the client's breaking the law. It will provide coverage since punitive damages have been awarded. It will provide coverage because the damage to the client resulted from the producer's negligence. It will not provide coverage; such physical damage to property is not covered.
It will provide coverage because the damage to the client resulted from the producer's negligence.
Actions that are NOT specified as illegal are -Ethical. -Unethical. -Possibly either ethical or unethical. -Ethical only if they are included in the NAIC's Code of Ethics.
Possibly either ethical or unethical.
In comparison to consumer reports, which of the following describes a unique characteristic of investigative consumer reports? The customer has no knowledge of this action. The customer's associates, friends, and neighbors provide the report's data. They provide additional information from an outside source about a particular risk. They provide information about a customer's character and reputation.
The customer's associates, friends, and neighbors provide the report's data.
An agent wants to give an illustration to a client. Which of the following best describes the conditions under which he may use the illustration? The illustration does not need to be approved by his insurance company. The agent can alter the illustration to better suit the client. The illustration can only be used for a month before it requires re-approval. The illustration must stay exactly as it is.
The illustration must stay exactly as it is.
At the minimum, how often should an agent review client needs? Annually or at renewal whichever comes first At renewal Monthly Quarterly
Annually or at renewal whichever comes first
Which of the following is an example of an agent's express authority? The insurer gives the agent a box of letterhead bearing the name of the insurer for use in customer prospecting The insurer allows the agent to hang its logo on his office wall. The agent uses the insurance company's name in advertising. An agency contract states that the agent may bind the insurer for any line of business listed on the commission schedule.Express authority is just that - something expressly stated. The agency contract contains express statements of what the agent may and may not do.
An agency contract states that the agent may bind the insurer for any line of business listed on the commission schedule.
Rebating is an unfair trade practice and is regulated by law. All of the following would be considered to be rebating EXCEPT An agent offers the use of his lake house to a person as an inducement to buy. An agent offers to share his commission with a policyholder. An agent offers tickets to a baseball game as an inducement to buy insurance. An agent uses misrepresentation to convince a person to cancel an existing policy and take a new policy from him.
An agent uses misrepresentation to convince a person to cancel an existing policy and take a new policy from him.
Rebating is an unfair trade practice and is regulated by law. All of the following would be considered to be rebating EXCEPT An agent offers the use of his lake house to a person as an inducement to buy. An agent offers to share his commission with a policyholder. An agent offers tickets to a baseball game as an inducement to buy insurance. An agent uses misrepresentation to convince a person to cancel an existing policy and take a new policy from him.
An agent uses misrepresentation to convince a person to cancel an existing policy and take a new policy from him.
If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered A required statement. A legal representation of the Association. An unfair trade practice. A misrepresentation.
An unfair trade practice.
Lassiter and Brown are two insurance agents in competition for a large account with an automobile dealership. Which of the following behaviors by either agent would be considered UNETHICAL? Brown tells the prospect that one of Lassiter's other customers suffered an uncovered loss due to Lassiter's negligence, which is true. Lassiter decides to reduce his commission in order to offer the prospect a lower price than Brown is offering. Brown starts having his automobile serviced at the dealership in the hope that the dealer will reciprocate. Lassiter promotes the fact that he has been in business longer than any other agent in town.Note that there is a difference between what is illegal and what is unethical. Neither offering to reduce commission, doing business with a prospect (unless the business is contingent on the prospect reciprocating), or promoting one's own experience is illegal or unethical. But revealing information to a prospect about a competitor solely for the purpose of demeaning the competitor in the eyes of the prospect is unethical, if not illegal.
Brown tells the prospect that one of Lassiter's other customers suffered an uncovered loss due to Lassiter's negligence, which is true.
Which of the following provides an accurate depiction of the The Golden Rule? Brad provides large rebates to his clients so that they will generate for more business. Bart only solicits insurance to those customers he feels will provide higher levels of commission. Burt treats his customers in the manner that he expects them to treat him. Bret wears lots of shiny gold jewelry to flaunt his success as an agent to potential clients.
Burt treats his customers in the manner that he expects them to treat him.
All else being equal, which of the following will NOT be considered unfair discrimination by insurers? Cancelling individual coverage based on the insured's marital status Charging applicants with similar health histories different premium rates Assigning different risk classifications to applicants based on their ethnicities Discriminating in benefits and coverages based on the insured's habits and lifestyle
Discriminating in benefits and coverages based on the insured's habits and lifestyle
All else being equal, which of the following will NOT be considered unfair discrimination by insurers? Discriminating in benefits and coverages based on the insured's habits and lifestyle Cancelling individual coverage based on the insured's marital status Charging applicants with similar health histories different premium rates Assigning different risk classifications to applicants based on their ethnicities
Discriminating in benefits and coverages based on the insured's habits and lifestyle
A long time agent in your agency has been servicing a book of clients for many years. Recently, the companies your agency represents changed many product offerings and new tax laws took effect. Which of the following continuing education course titles would you recommend to him? Industry Products, Analysis, and Trends Ethical Concerns in the 21st Century Social Media and Sales Success Customer Service and Client Retention Excellence
Industry Products, Analysis, and Trends
All advertisements are the responsibility of the Advertising agency. Department of Insurance. Entity that publishes them. Insurer.
Insurer
An agent must do all of the following actions when delivering a policy EXCEPT Point out and explain any exclusions and riders. Collect any premium due. Explain the insured's rating class. Notify the client about commissions earned from the sale of the policy.
Notify the client about commissions earned from the sale of the policy.
An auto policyholder calls the agent to report an accident. The person says there was only one occupant in the other car, but now there are 3 claims for injured passengers. What should the agent do? Notify the insurer's underwriting department Notify the insurer's special investigations unit File a suspected fraudulent claim report Notify the special investigations unit and file a suspected fraudulent claim report
Notify the special investigations unit and file a suspected fraudulent claim report
During replacement of life insurance, a replacing insurer must do which of the following? Send a copy of the Notice Regarding Replacement to the Department of Insurance Guarantee a replacement for each existing policy Obtain a list of all life insurance policies that will be replaced Designate a new producer for a replaced policy
Obtain a list of all life insurance policies that will be replaced
All of the following are ways consumers can head off potential criminal activity for home repairs after a storm EXCEPT Calling insurance companies to verify coverage. Using established local contractors. Getting written estimates from multiple contractors. Paying full repair costs in advance.
Paying full repair costs in advance.
The Gramm-Leach-Bliley Act was passed to Protect private customer information filed with a financial institution. Define insurance as interstate commerce. Allow consumers access to credit and private consumer reports. Allow insurance companies access to medical information for underwriting purposes.
Protect private customer information filed with a financial institution.
When Boyer applies for a $5 Million life policy, his agent orders an Inspection Report. The purpose of the report is to Determine if Boyer is eligible for the policy. Provide the underwriter with a picture of Boyer's general character and mode of living. Obtain medical information about Boyer's health history. Determine if Boyer has other life insurance policies
Provide the underwriter with a picture of Boyer's general character and mode of living.
When Sander heard that a competitor had said negative things about him, Sander retaliated by telling others that his competitor was a liar and a cheat. When a coworker questioned his behavior, Sander replied that he was just fighting fire with fire. Sander is guilty of Twisting. Embezzlement. Perjury. Rationalizing.
Rationalizing
A managing general agent places premiums into a separate account before he sends funds to insurers. On a tip from a friend, the agent invests the funds in a breakthrough technology company stock. Unfortunately, the stock is bogus and the agent loses the money. All of the following are true EXCEPT Insureds will have conditional coverage because they submitted premium with their applications. The agent may have violated his agreements. The agent can delay payments to insurers. The agent has violated his fiduciary duty.
The agent can delay payments to insurers.
A managing general agent places premiums into a separate account before he sends funds to insurers. On a tip from a friend, the agent invests the funds in a breakthrough technology company stock. Unfortunately, the stock is bogus and the agent loses the money. All of the following are trueEXCEPTa The agent can delay payments to insurers. The agent has violated his fiduciary duty. Insureds will have conditional coverage because they submitted premium with their applications. The agent may have violated his agreements.At all times fiduciary funds must be in a trustee bank account separate from other accounts and must be remitted as soon as practicable. Any losses resulting from such investments are the responsibility of the licensee and in no way reduces the amount of funds that he/she must transfer.Speculative stock investments are not prudent. Insureds will have conditional coverage.
The agent can delay payments to insurers.
Which one of the following statements is most accurate? The law sets minimum standards of behavior, whereas ethics sets goals for behavior. The law and ethics both set minimum standards of behavior. The law sets maximum standards of behavior, whereas ethics sets minimum standards of behavior. The law and ethics both set maximum standards of behavior.The law sets minimum standards of behavior, and if one person's behavior falls short of any of those standards, that person is subject to penalties.Ethics, on the other hand, tells us what sort of behavior we should aspire to.
The law sets minimum standards of behavior, whereas ethics sets goals for behavior.
A highly regarded insurance company conducts business nationwide and promotes ethical responsibility at all levels of the organization. Which of the following characteristics would you NOT expect to find in this organization? -It is understood that every significant decision has ethical value dimensions. -There exists a clear vision and picture of integrity throughout the company. -The reward system is aligned with the vision of integrity. -The organization turns away clients that would not provide the highest commissions.
The organization turns away clients that would not provide the highest commissions.
Which of the following represents an ethical responsibility that an independent insurance agent owes to the general public? To inform clients of the financial situation of his competitors To give the same amount of rebates to each potential insured To inform the public about insurance with the highest level of professional integrity To forward all premiums to the insurance companies upon his convenience
To inform the public about insurance with the highest level of professional integrity
A homeowner who has been unable to pay his mortgage for months files a claim for $200,000 worth of damages in response to his home and guest house burning down. Why would this situation raise a red flag with the insurer? When filing the claim, the insured acknowledged his significant financial debt. The homeowner did not have a separate policy covering his guest house. House fires typically cannot spread to guest houses. Insurance adiusters are unable to determine the initial cause of the fire.
When filing the claim, the insured acknowledged his significant financial debt.