General California Insurance Law
A life agent may use the name of corporation or association on any stationery or advertisement to identify the relationship in all of the following ways EXCEPT A "A stockholder of ____________" B "Placing business through _________" C "Representing ____________" D "Contracted by _______________"
"Contracted by _______________"
The Commissioner may, without hearing, suspend an agent's license for all of the following reasons EXCEPT A Denial of a previous application for another professional license. B Revocation of another professional license. C Failure to properly identify the insured true risk. D Committing a felony.
Failure to properly identify the insured true risk.
An insurance company has published a brochure that inaccurately portrays the advantages of a particular insurance policy. What is this an example of? A Unfair claims B Twisting C Defamation D False advertising
False advertising
What will happen if an agent submits an application to an insurance company to which he is not appointed? A The application will not have to be approved by an underwriter. B The insurer will not accept the policy. C The agent will be found guilty of a misdemeanor. D If the insurer accepts the policy, it must appoint the agent.
If the insurer accepts the policy, it must appoint the agent.
What happens to a corporation's license if the corporation is dissolved? A It expires after 2 years. B It terminates. C It remains in force for 60 days. D It becomes inactive.
It terminates.
When is an insurance license considered inactive? A When it's a temporary license B When no company appointment is in effect for the license C When the agent is not conducting business with the general public D When renewal fees are not paid
When no company appointment is in effect for the license
An insured files a fraudulent claim for $100,000. The maximum fine that the insured could be ordered to pay if convicted of insurance fraud is A $50,000. B $100,000. C $150,000. D $200,000.
$200,000.
The Commissioner has the authority to issue a cease and desist order against any person acting as an insurance agent or broker without being licensed. The Commissioner may also impose a penalty for each day the order is violated in what amount? A $5,000 B $2,000 C $2,000 and 6-month jail term D $5,000 and 6-month jail term
$5,000
An insurance agent is planning to give out his business cards to prospective clients to solicit some insurance business. On the business card, the agent's name appears in font size 16, the phone number is in font size 14, and the business address is in font size 10. What font size should be used for the agent's license number? A 10 B 12 C 14 D 16
10
How many names (real or fictitious) may insurers have? A 1 B 2 C 3 D Unlimited number
2
Of the following, which is NOT considered a general duty or power of State Insurance Commissioners? A Conduct investigations and examinations of companies and individuals who conduct the business of insurance. B Issue, suspend, and revoke insurance licenses and certificates of authority. C Develop and implement laws to regulate the business of insurance. D Oversee the Department of Insurance.
Develop and implement laws to regulate the business of insurance.
In which distribution system must the potential client take the initiative and respond to an advertisement through a telephone or mail contact with the insurer? A Managing general agent system B Home service system C Direct agency system D Direct response system
Direct response system
All of the following may recommend life insurance contracts for their prospects, clients, and proposed insureds EXCEPT A Brokers. B Life solicitors. C Life and Disability Analyst. D Life agents.
Life solicitors.
Who might receive dividends from a mutual insurer? A Stockholders B Agents C Policyholders D Subscribers
Policyholders
Who is responsible for notifying the Commissioner of a licensee's change of address? A The licensee's managing general agent B The appointing insurer C The licensee D The agency for which the licensee works
The licensee
What is the minimum fine for acting as an agent for a nonadmitted insurer in the transaction of insurance business? A $100 B $500 C $1,000 D $5,000
$500
How many hours of continuing education in ethics must agents complete each licensing term? A 3 B 5 C 10 D 12
3
Which of the following would NOT be considered a form of direct response marketing? A An ad in a newspaper B A circular mailed to a city's residents C An insurance company's TV commercial D A sign in an insurer's office
A sign in an insurer's office
According to the Agency Name/Use of Name provision of the California Insurance Code, which of the following names for an insurance producer may be approved for use? A ABC Insurance Services B ABC Insurance Company C ABC Insurer D ABC Underwriter
ABC Insurance Services
All of the following would be considered rebating EXCEPT A An agent offers the use of his lake house to a client as an inducement to buy an insurance policy from him. B An agent offers to share his commission with a policyholder. C An agent offers tickets to a baseball game as an inducement to buy insurance. D An agent misrepresents policy benefits to convince a policyowner to replace policies.
An agent misrepresents policy benefits to convince a policyowner to replace policies.
What is reinsurance? A An agreement between a ceding insurer an assuming insurer B An agreement between an originating insurer and a ceding insurer C An agreement between a domestic insurer and a foreign insurer D An agreement between an insurer and an insured
An agreement between a ceding insurer an assuming insurer
An insurance agent explains to his client the difference between two disability income insurance policies and then offers to fill out an application with the client's personal information and history. Upon completion of the application, the agent informs his client that he will "shop around" to find the company with the most favorable rates. If the agent presents the client's application to an insurer, he will be acting in which of the following capacities? A An insurance agent B An insurance broker C A life agent D An insurance solicitor
An insurance broker
Which of the following actions would NOT be considered a form of "adverse underwriting decisions" for a policy involving individually underwritten coverage? A An insurer giving an insured a "preferred" rating due to health and lifestyle conditions B A declination to cover an applicant C Termination of existing coverage of an insured risk D Failure of an agent to apply for coverage that an applicant requests
An insurer giving an insured a "preferred" rating due to health and lifestyle conditions
The Commissioner MAY deny an application for license for any applicant who A Has been convicted of a felony. B Is not qualified to accomplish the duties to be performed. C Does not have a good business reputation. D Any of these
Any of these
For the purpose of a contract, which of the following could be considered a "person"? A An association B A business trust C A limited liability corporation D Any of these would qualify as a person
Any of these would qualify as a person
Records required to be maintained or to be made available by an insurer include all of the following EXCEPT A Any printed materials generally used by the insurer, either directly or indirectly by its agents. B The original application for each policy sold. C A copy of a written comparison of benefits, limitation, exclusions and costs. D A copy of the outline of coverage or disclosure statement as required by law.
Any printed materials generally used by the insurer, either directly or indirectly by its agents.
What certification must an insurer receive before it can transact insurance in California? A Solvency Clearance B Guarantee Association Clearance C NAIC Charter Certificate D Certificate of Authority
Certificate of Authority
What document must an insurer receive in order to transact insurance in this state? A Admitted insurer license B Guarantee Association clearance C Certificate of authority D Commissioner's certificate
Certificate of authority
Intentionally misrepresenting or concealing a material fact to induce an insurance company to make a contract is known as A Concealment. B Fraud. C Avoidance. D Misrepresentation.
Concealment.
Which of the following terms describes making false statements about the financial condition of any insurer that are intended to injure any person engaged in the business of insurance? A Undercutting B Twisting C Slandering D Defamation
Defamation
All of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT A An offer of employment. B Stocks, securities, or bonds. C An offer to share in commissions generated by the sale. D Dividends from a mutual insurer.
Dividends from a mutual insurer.
Martha claims to have injured her back at work. She tells the doctor that she cannot bend, lift, or even sit comfortably without great pain. Based on Martha's statements, the doctor certifies her disability and she begins to receive disability benefits from the insurer. If it can be shown that Martha did not suffer the injury she has claimed or that she is not suffering the effects she is claiming, she will be charged with A Financial abuse of an insurer. B Unfair claims practices. C Insurance fraud. D Medical misrepresentation.
Insurance fraud.
The continuing education requirement for the California Partnership for Long-Term Care policies A Does not apply to agents who hold a life license. B Only needs to be completed if an actual sale occurs during that licensing period. C Must be completed in addition to an agent's regular continuing education requirements. D Is part of an agent's regular continuing education requirements.
Is part of an agent's regular continuing education requirements.
What are the consequences of a failure to comply with the Commissioner's office while it is executing a seizure order? A It is a misdemeanor punishable by a fine of $1,000, one-year imprisonment, or both. B It may become grounds for license revocation and termination of all agency contracts. C It is a felony and is punishable by a 5-year imprisonment and restitution to victims commensurate with damages claimed. D It would be considered as obstruction of justice, and is subject to a fine of $5,000 per day.
It is a misdemeanor punishable by a fine of $1,000, one-year imprisonment, or both.
In which of the following situations is it legal to limit coverage based on marital status? A Legal separation during the application process B Divorce within the last six months of applying for insurance C It is never legal to limit coverage based on marital status. D Excessive number of divorces, as defined by the Insurance Code
It is never legal to limit coverage based on marital status.
Which of the following is NOT a license in the state of California? A Insurance agent B Life broker C Life-only agent D Solicitor
Life broker
An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy? A Mutual B Reciprocal C Nonprofit service organization D Stock
Mutual
ABC Insurance Company wishes to begin transacting business in Louisiana. Before it can do so, it must do which of the following? A Receive a letter of clearance from ABC's home state B Obtain approval of each of its corporate officers and executives C Obtain a certificate of authority D Receive permission from the Governor of California
Obtain a certificate of authority
An agent decides that he no longer wishes to be licensed in this state. What should the agent do with his license? A Discard it B Return it to the Commissioner C Return it to the insurer when the agent's appointment is terminated D Keep the license in case the agent decides to renew it later
Return it to the Commissioner
The California Insurance Code is A Statutes established by the State Legislature. B Rules established by the Department of Insurance. C A code of ethics. D Regulations established by the Insurance Commissioner.
Statutes established by the State Legislature.
Which of the following is an example of a producer being involved in an unfair trade practice of rebating? A Telling a client that his first premium will be waived if he purchases the insurance policy today B Inducing the insured to drop a policy in favor of another one when it is not in the insured's best interest C Charging a client a higher premium for the same policy as another client in the same insuring class D Making deceptive statements about a competitor
Telling a client that his first premium will be waived if he purchases the insurance policy today
Under the prior approval plan, insurers file proposed policy rate information with A The Department of Insurance. B Their clients. C The Governor. D Their underwriters.
The Department of Insurance.
All of the following statements are true regarding an application by an insurer for a rate change EXCEPT A The application will be deemed approved 60 days after public notice unless the proposed adjustment exceeds 10% for personal lines or 25% for commercial lines. B The Commissioner will notify the public of any application by an insurer for a rate change. C The application will be deemed approved 60 days after public notice unless a consumer requests a hearing and the Commissioner grants the hearing. D The application will be deemed approved 60 days after public notice unless the Commissioner on his or her own motion determines to hold a hearing.
The application will be deemed approved 60 days after public notice unless the proposed adjustment exceeds 10% for personal lines or 25% for commercial lines.
Which of the following is NOT required to be present on a licensed insurance broker's website? A The broker's principal place of business. B The broker's residential address. C The broker's name. D The broker's license number.
The broker's residential address.
If any individual submits a written request to an insurance company requesting access to his/her own recorded personal information, all of the following requirements are true EXCEPT A The company will provide the individual with a summary of the procedures by which the information may be corrected, amended or deleted. B The company will forward all necessary correspondence within 60 business days from the date a request is received. C The company will disclose to the individual of all those persons to whom the information had been disclosed. D The company will permit the individual to see copy of such recorded personal information.
The company will forward all necessary correspondence within 60 business days from the date a request is received.
An agent is a legal person who acts on behalf of A The applicant. B The beneficiary. C Himself/herself. D The principal.
The principal.
What does the Commissioner use to decide if a rate for an insurance policy is adequate and fair? A If the rate charged would be able to pay off a claim on the policy within at least 2 years B The rate and how it compares to an insurance company's investment income C The amount charged by competing companies D Whether at least 60 percent of clients can afford it
The rate and how it compares to an insurance company's investment income
On all printed documents placed before the public, what size print should be used for the agent's license number? A There are no size specifications on printing license number on documents B The same size print as the name of the company the agent is employed with C The same size print as the agent's address or telephone number D At least size 10 font
The same size print as the agent's address or telephone number
An organization ceases to exist as an entity eligible to hold a license for all of the following reasons EXCEPT A Upon the termination of an association. B Upon dissolution of a corporation. C Upon continuance of only one person from the previous co-partnership to the new co-partnership. D Upon dissolution of a co-partnership or upon any change in membership of a co-partnership.
Upon continuance of only one person from the previous co-partnership to the new co-partnership.
An insurance agent who diverts premiums held in a trust capacity for his or her own use A Must report the premium as additional income to the insurer. B Will be fined $250 and required to attend a 3-hour ethics review course. C Must enter the transaction on a separate ledger and report such transactions. D Will be considered guilty of theft and be punished to the extent of the law.
Will be considered guilty of theft and be punished to the extent of the law.
The Code defines the term "transact" as all of the following EXCEPT A Solicitation of insurance. B Negotiations prior to a contract of insurance. C Executing a contract of insurance. D Analyzing a contract of insurance.
Analyzing a contract of insurance.
Forcing a client to buy insurance from a particular lender as a condition of granting a loan is defined as A Defamation. B Coercion. C Rebating. D Misleading advertising.
Coercion.
An insurer devises an intimidation strategy in order to corner a large portion of the insurance market. Which of the following best describes this practice? A Defamation B Illegal C A legal advertising strategy D Unfair Discrimination
Illegal
When an agent does not hold any active appointments with insurers, what happens to the agent's license? A It becomes inactive. B It must be returned to the Department of Insurance. C It must be renewed with a new appointment. D It expires.
It becomes inactive.
According to California Insurance Code, all licensees must prominently display their individual license numbers on all of the following EXCEPT A Printed advertisements. B Business cards. C Motor club advertisements. D Marketing materials.
Motor club advertisements.
In a conservation or liquidation effort, what powers does the Commissioner have? A The Commissioner has the power to sue the company's officers. B The Commissioner has the power to sell the company's assets until all of its creditors are paid. C The Commissioner has all of these powers. D The Commissioner has complete control over the assets of the insolvent company.
The Commissioner has all of these powers.
The type of insurance that guarantees the behavior of persons and the performance of contracts other than insurance policies is known as A Behavioral Contract insurance. B Surety insurance. C Contract insurance. D Performance Guaranteed insurance.
Surety insurance.
An insured who signs a fraudulent claim form may be guilty of A Misrepresentation. B Rebating. C Perjury. D Misdemeanor.
Perjury.
According to the California Law, if an insurer includes a fraudulent claim clause in the contract regarding the legal ramifications of a false claim, the clause must be preceded by which of the following statements? A "For your protection, California Law requires the following to appear on this form." B "The legal ramifications only apply to insurance professionals." C "State law requires that insurance fraud be reported to county, state and federal authorities for the maximum prosecution allowed by law." D "WARNING! The following conditions are in accordance with California Law."
"For your protection, California Law requires the following to appear on this form."
An individual wants to transact business as a life agent in this state. In addition to obtaining a life agent license, what else must the applicant have? A Insurable interest B A letter of recommendation from the Commissioner C Appointment D Certificate of Insurance
Appointment
An insurer that holds a Certificate of Authority in the state in which it transacts business is considered a/an A Certified insurer. B Self-insurer. C Authorized insurer. D Local insurer.
Authorized insurer.
Which of the following terms is associated with a mutual insurer becoming a stock insurer? A Reinsurance B Interpolation C Retrocession D De-mutualization
De-mutualization
Which type of life insurance is usually written for small amounts and requires frequent premiums that are collected by the agent? A Credit life insurance B Group life insurance C Key executive life insurance D Industrial life insurance
Industrial life insurance
An insurance agent may NOT transact A Auto insurance. B Workers compensation insurance. C Property and casualty insurance. D Life insurance.
Life insurance.
Acting as an agent for a nonadmitted insurer (unless a surplus line broker) is considered a/an A Unfair trade practice. B Misdemeanor. C Felony. D Class A violation.
Misdemeanor.
A person applying for an insurance license in California was previously found guilty in a trial in which he entered a plea of "nolo contedere." What does "nolo contendere" mean? A Without reason B No contest C Guilty, but with justification D Not guilty by reason of circumstances
No contest
Which of the following statements is the most accurate concerning the Commissioner's term of office? A Serves one year terms, with no limits B Serves 4 year terms, limited to not more than two C Serves 4 year terms with no limits D Serves until removed by the Governor
Serves 4 year terms, limited to not more than two
An insurance agent, who has been in a sales slump for the last 6 months, has decided that she will offer complimentary health insurance for the first year on every life insurance policy she sells for the next 12 months. This practice is an example of A Free insurance as an inducement to purchase real property and is prohibited by the Code. B An option in a purchase contract and, therefore, is permitted. C A violation of the Code. D Free insurance as an inducement to purchase real property and is permitted by the Code.
A violation of the Code.
The agent's authority to transact insurance business for an insurer is effective A After the mandatory 60-day waiting period for all new agency contracts has expired. B Once the Commissioner has given approval and the agency receives notice of such approval. C As of the date that the notice of appointment is signed. D Upon the initial hiring date of the agent.
As of the date that the notice of appointment is signed.
Which of the following best describes an insurance company that has been formed under the laws of this state? A Sovereign B Alien C Foreign D Domestic
Domestic
An insurance policy that protects an insurance agent from financial losses that might be incurred if an insured files a lawsuit as a result of that agent either giving incorrect advice or not informing the client of important information is called A Fiduciary Responsibility Coverage. B Errors & Omissions Coverage. C Commercial General Liabilities Coverage. D Contractual Liability Coverage.
Errors & Omissions Coverage.
Which of the following provisions requires an insurer to document all correspondence with an insured? A Entire contract B Errors and omissions C Unfair trade practices D Claims settlement
Errors and omissions
Which of the following is NOT considered personally identifiable information? A Government records B Loan history C Financial information collected through web servers D Consumer reports
Government records
Fraudulent activities in health care are estimated in billions of dollars annually. This results in A More people going to jail. B Fewer insurance policies being written. C Stricter underwriting requirements. D Increase in health care costs for everyone.
Increase in health care costs for everyone.
Home Service insurance is a variation of which type of life policies? A Homeowners insurance B Industrial Life insurance C Credit insurance D Whole Life insurance
Industrial Life insurance
In California, a person applying for an insurance license is considered to have been convicted of a misdemeanor or felony if the person entered all of the following pleas EXCEPT A Guilty. B Nolo contendere. C No contest. D Innocent.
Innocent.
Any person or governmental entity that provides information about an individual to an agent, insurance company, or insurance-support organization is known as a(n) A Affiliate. B Underwriting source. C Investigative source. D Institutional source.
Institutional source.
Under California law, an insurance solicitor is a natural person employed to aid a(n): A Insurance adjuster. B Life agent. C Insurance administrator. D Insurance agent or broker.
Insurance agent or broker.
Which type of insurance includes the assumption of a contractual obligation to reimburse the insured against all or a portion of his fees, costs, and expenses related to or arising out of services performed by or under the supervision of an attorney who is an active member of the bar of any jurisdiction or jurisdictions of the United States? A Errors and Omission insurance B Professional Liability insurance C Contract insurance D Legal insurance
Legal insurance
Which of the following terms means a result of calculation based on the average number of months the insured is projected to live due to medical history and mortality factors? A Morbidity B Life expectancy C Mortality rate D Risk exposure
Life expectancy
After a cease and desist order is final, if the Commissioner finds that the person has continued to willfully violate the insurance code, what penalty may be applicable in addition to initial penalties? A Minimum $25,000 B Maximum $55,000 C Minimum $10,000 D Maximum $5,000
Maximum $55,000
Any person who knowingly and willfully obtains information about an individual from an insurance company, agent or organization supporting insurance under false pretenses shall be fined A Not more than $20,000, imprisonment not to exceed one year or both. B Not more than $10,000, imprisonment not to exceed two years or both. C Not more than $20,000, imprisonment not to exceed two years or both. D Not more than $10,000, imprisonment not to exceed one year or both.
Not more than $10,000, imprisonment not to exceed one year or both.
The rating method which allows insurers to compete with one another by quickly changing rates without review by the state regulators is known as A Prior Approval. B Open Competition. C Use and File. D File and Use.
Open Competition.
Which of the following is NOT correct regarding false statements by a person engaged in the business of insurance? A Oral statements cannot be considered fraud. B Omissions of material fact on insurance application are fraud. C False statements about financial condition of an insurer are unlawful. D Statements made with the intent to deceive are unlawful.
Oral statements cannot be considered fraud.
A participating insurance policy may do which of the following? A Require 80% participation B Pay dividends to the policyowner C Provide group coverage D Pay dividends to the stockholder
Pay dividends to the policyowner
Within 30 business days from the date of receipt of a written request from an individual to correct, amend or delete any recorded personal information, the agent or company must meet all of the following requirements EXCEPT A Provide the corrected information to any person who in the last 5 years received such information B Notify the individual of its refusal to make such correction, amendments or deletions C State the reasons for the refusal D Correct, amend or delete the portion of the recorded personal information in dispute
Provide the corrected information to any person who in the last 5 years received such information
If a licensee would like to terminate his license and has it in his possession, what would he have to do? A Send the license to the Commissioner for termination B Write the Commissioner and request a hearing for license termination C Request that his employer terminate his appointment and notify the Commissioner D Wait until the license expiration date and allow his license to expire
Send the license to the Commissioner for termination
It would be considered unfair discrimination to ask an insurance applicant about which of the following and then use that information as a rating factor to determine insurability? A Age B Gender C Address D Sexual orientation
Sexual orientation
Which of the following insurers are owned by stockholders? A Stock B Mutual C Reciprocal D Fraternal
Stock
Under the file-and-use law, an insurer A Begins marketing a plan before submitting the rate plan to the Commissioner. B Markets a plan without submitting a rate plan. C Submits a rate plan to the Commissioner and immediately begins marketing the plan. D Waits for the Commissioner's approval on a submitted rate plan before marketing a plan.
Submits a rate plan to the Commissioner and immediately begins marketing the plan.
If an insured intentionally failed to communicate information related to an implied warranty, which of the following may occur? A The insurer will cancel the policy and retain the premiums paid. B The insurer may rescind the contract. C The insured will be fined. D The insurer may increase premiums at anniversary date.
The insurer may rescind the contract.
In a life settlement contract, whom does the life settlement broker represent? A The insurer B The beneficiary C The life settlement intermediary D The owner
The owner
What is the main role of a solicitor of insurance? A To serve as the agency administrator B To aid insurance agents in transacting insurance C To legally represent the insurance company D To manage general agents
To aid insurance agents in transacting insurance
According to the California Insurance Code, all of the following are general powers and duties of the Commissioner of insurance EXCEPT A To establish a program to investigate consumer complaints against insurers. B To make public service announcements to inform consumers of toll free access to make inquiries. C To prepare a written report detailing consumer complaints regarding insurers. D To delegate the power to approve a settlement.
To delegate the power to approve a settlement.
Obtaining information under false pretenses is a violation. What would be the maximum fine for any agent found guilty? A $10,000 B $5,000 C $30,000 D $20,000
$10,000
According to Insurance Code, it is an unfair or deceptive act in the business of insurance for an insurer to advertise insurance that it does not market. Such action is a violation of the code and will result in a fine up to A $15,000. B $5,000. C $7,000 D $10,000.
$10,000.
Anyone convicted of committing an insurance fraud may be fined up to the greater amount of double the value of the fraud or A $50,000. B $75,000. C $100,000. D $150,000.
$150,000.
If an insurer violates the California Financial Information Privacy Act by releasing an insured's financial records without consent, the insurer may be penalized with a fine up to A $600. B $1,600. C $2,500. D $4,800.
$2,500.
Within how many days after the application was submitted must an insurer file a notice of agent appointment with the Commissioner if the insurer issues a policy written by the agent who is not specifically appointed by that insurer? A 10 days B 14 days C 15 days D 30 days
14 days
How many days do insurers have to accept or deny an insurance claim? A 15 days B 30 days C 40 days D 90 days
40 days
The Commissioner may suspend an applicant's license without a hearing if the applicant has had another professional license suspended or revoked within what time period? A 6 months B 12 months C 5 years D 7 years
5 years
All records relating to insurance application and delivery must be maintained by the insurer for a period of A 5 years after policy delivery or initial application if no policy was issued. B 3 years after policy delivery or 3 years after initial application if no policy was issued. C 4 years after policy delivery or initial application if no policy was issued. D 2 years after policy delivery or 3 years after initial application if no policy was issued.
5 years after policy delivery or initial application if no policy was issued.
An agent whose license is due to expire may submit an application for renewal and pay applicable fees and continue operating under the expired license for a period of A 10 days. B 60 days. C 14 days. D 30 days.
60 days.
For senior agents, the requirement for continuing education for California Partnership for long-term care policies is A 4 hours each year. B 8 hours each reporting period. C 8 hours each year. D 4 hours each reporting period.
8 hours each reporting period.
In order for Wild Life of Havana to do business in this state, it must apply for and obtain A Four corporate character references. B A certificate of authority. C A state proclamation. D A local waiver.
A certificate of authority.
All of the following would be considered insolvent insurers EXCEPT A A company with an impairment of minimum paid-in capital. B A company that reinsurers outstanding risks. C A company that paid out all of its liabilities but doesn't have additional assets equal to the aggregate paid-in capital. D A company with insufficient policy reserves to meet its financial obligations.
A company that reinsurers outstanding risks.
Which of the following would be considered a managing general agent? A An attorney-in-fact acting on behalf of the subscribers of a reciprocal insurer B A corporation that negotiates ceding reinsurance contracts on behalf of an insurer C A manager of the U.S. branch of an alien insurer D An employee of an insurer who generates at least 50% of gross premiums
A corporation that negotiates ceding reinsurance contracts on behalf of an insurer
De-mutualization happens when A A mutual insurer becomes a stock company. B A reinsurer ends a contract with a primary insurer. C A stock insurer becomes a mutual company. D A primary insurer ends a contract with a reinsurer.
A mutual insurer becomes a stock company.
Which of the following statements is NOT true regarding an insurance solicitor in California? A A solicitor aids in transacting insurance other than life. B A solicitor must be a natural person. C A solicitor may act as an insurance agent at the same time. D A solicitor cannot act as a broker at the same time.
A solicitor may act as an insurance agent at the same time.
When the California Insurance Code needs to be changed, the legislature must design and pass a bill. Once the bill is passed, it is presented to the Governor and becomes law if not returned to the legislature within what time frame? A A period of 30 days or when the legislature reconvenes from a recess B A period of 90 days from the date of enactment C A specified period of 12-30 days D A period of 14 days from submission to Governor's office
A specified period of 12-30 days
Records required to be maintained or to be made available by an insurer include all of the following EXCEPT A A copy of a written comparison of benefits, limitation, exclusions and costs. B A copy of the outline of coverage or disclosure statement as required by law. C Any printed materials generally used by the insurer, either directly or indirectly by its agents. D The original application for each policy sold.
Any printed materials generally used by the insurer, either directly or indirectly by its agents.
The Commissioner has the right and responsibility to investigate all applications for licensure to assure that A Applicants have a valid driver's license in the state. B Applicants have attended a formal course of sales skills instruction. C Applicants meet all prerequisites for their selected license. D Applicants are eligible to start the insurer's training program.
Applicants meet all prerequisites for their selected license.
An insured noticed that his policy stated that he "shall" keep all flammable liquids at least ten feet from an ignition source and "may" consider storing flammable liquids in another location. Based on the policy language, where must the insured keep flammable liquids in relation to ignition sources? A Anywhere within 10 feet B There is no specified area. C At least 10 feet away D In another location entirely
At least 10 feet away
If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered to be A Qualified. B Approved. C Authorized. D Certified.
Authorized.
The set of regulations issued by the California Insurance Commissioner that identifies the standards for the insurance code and how it is to be administered is A California Advisory Administrative Code. B California Advisory Code. C California Administrative Code of Regulations. D California Regulatory Code of Conduct.
California Administrative Code of Regulations.
Which of the following was designed to provide more extensive privacy protection than the federal Gramm-Leach-Bliley Act? A California Financial Information Privacy Act B NAIC Privacy Protection Model Act C California Consumer Protection Act D Privacy Act of 1974
California Financial Information Privacy Act
A France-based insurer would like to do business in California. What document must it first receive? A International Certificate of Incorporation B Certificate of Authority C Transcontinental Commerce Clearance D Alien Insurer License
Certificate of Authority
Forcing a client to buy insurance from a particular lender as a condition of granting a loan is defined as A Rebating. B Misleading advertising. C Defamation. D Coercion.
Coercion.
What is the major difference between a stock company and a mutual company? A Amount of death benefit B Number of producers C Types of whole life policies D Ownership
Ownership
When a producer was reviewing a potential customer's coverage written by another company, the producer made several remarks that were maliciously critical of that other insurer. The producer could be found guilty of A Discrimination. B Nothing, unless the remarks were in writing C Defamation. D Misrepresentation.
Defamation.
What is the term for a sales campaign conducted through the mail? A Direct-response B Direct-mail C Mass marketing D Advertising
Direct-response
Which of the following will NOT be considered unfair discrimination by insurers? A Discriminating in benefits and coverages based on the insured's habits and lifestyle B Charging applicants with similar health histories different premiums based on their ethnicity C Cancelling individual coverage based on the insured's marital status D Assigning different risk classifications to applicants based on gender identity
Discriminating in benefits and coverages based on the insured's habits and lifestyle
Two individuals are in the same risk and age class; yet, they are charged different rates for their insurance policies due to an insignificant factor. What is this called? A Adverse selection B Discrimination C Law of large numbers D Misrepresentation
Discrimination
The Commissioner performs all of the duties dictated by the CIC and A May be appointed with only ONE insurer during his/her term to avoid conflicts of interest. B Makes any changes to the Code that he/she deems necessary from time to time. C Acts as the executor for all fraudulent claims filed in this state. D Enforces the execution of all provisions and laws.
Enforces the execution of all provisions and laws.
All of the following actions can be described as twisting EXCEPT A Misrepresenting the terms and conditions of the existing policy to make the new one more attractive B Embellishing the terms of the proposed policy in order to convince the insured to switch C Making an incomplete comparison between the existing and proposed policies D Explaining to client the advantages of permanent insurance over term and suggesting changing policies
Explaining to client the advantages of permanent insurance over term and suggesting changing policies
Circulating deceptive sales material to the public is what type of Unfair Trade Practice? A False advertising B Defamation C Coercion D Misrepresentation
False advertising
To make sure that an agent's license stays active, the agent of an insurer must see that all of the following are done EXCEPT A File a surety bond with the Commissioner. B Be legally appointed with the insurer. C An appointment notice has been executed by the insurer. D A notice of appointment is filed for the agent by the insurer with the Commissioner's office.
File a surety bond with the Commissioner.
An insurer submits a rate plan to the Commissioner's office on the first of the month and immediately implements this new rate plan the next day prior to receiving the Commissioner's approval. This type of rate plan is known as A Prior Approval. B Use and File. C File and Use. D Open Competition.
File and Use.
An agent may continue operating under an expired license for a period of 60 days provided that the agent has A Notified the insurer of his plans to renew the license. B Filed an application for renewal and paid the renewal fee on or before the expiration date. C Notified the Commissioner of his plans to renew the license. D Received a written permission from the Commissioner.
Filed an application for renewal and paid the renewal fee on or before the expiration date.
The insurance solicitor is only found in which field of insurance? A Disability B Fire and Casualty C Mortgage Guaranty D Life & Health
Fire and Casualty
Which of the following entities is not an insurer but an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization? A Stock company B Reciprocal association C Fraternal benefit society D Mutual company
Fraternal benefit society
Al tells a client that she is guaranteed to be approved for LTC insurance if she pays the full year's premium at the time of application. The client applies for LTC insurance and writes a check for the annual premium to Al's agency. Al issues a Binder of Insurance but does not send the application to the insurer, and intentionally uses the premium for personal expenses instead. Al is guilty of A Misrepresentation. B Twisting. C Fraud. D Negligence.
Fraud.
An exclusive agent A Offers insurance from a variety of sources. B Must be an insured's sole source for coverage. C Has a contract with one company. D Must limit the number of clients.
Has a contract with one company.
Under the Privacy Rule for HIPAA, protected information includes all individually identifiable health information A Held in a computer format. B Held or transmitted in paper form. C Held or transmitted in any form. D Transmitted electronically only.
Held or transmitted in any form.
An insurer publishes intimidating brochures that portray the insurer's competition as financially and professionally unstable. Which of the following best describes this act? A Legal, provided that the information can be verified B Illegal until endorsed by the Guaranty Association C Legal, provided that the other insurers are paid royalties for the usage of their names D Illegal under any circumstances
Illegal under any circumstances
According to the California Insurance Code, every applicant must notify the Commissioner in writing of any change of address A Immediately. B Within 60 days. C Within 10 days. D Within 30 days.
Immediately.
When would the insurer be allowed to use the information obtained through a pretext interview? A In the investigation of a claim suspected as fraudulent B Any time the policy is being replaced C Under no circumstances D If it was obtained during underwriting
In the investigation of a claim suspected as fraudulent
Which of the following best describes a misrepresentation? A Making a deceptive or untrue statement about a person engaged in the insurance business B Making a maliciously critical statement that is intended to injure another person C Discriminating among individuals of the same insuring class D Issuing sales material with exaggerated statements about policy benefits
Issuing sales material with exaggerated statements about policy benefits
Which of the following is true regarding free insurance issued in this state? A It is allowed as a rider. B It is illegal. C It is illegal with the exception of health insurance. D It is allowed if issued by a government insurer.
It is illegal.
Which of the following is NOT considered a misrepresentation as it pertains to unfair trade practices? A Exaggerating the benefits provided in the policy B Stating that the competitors will arbitrarily increase their premiums each year C Making comparisons between different policies D Stating that the insurance policy is a share of stock
Making comparisons between different policies
Which of the following is NOT considered a misrepresentation as it pertains to unfair trade practices? A Making comparisons between different policies B Stating that the insurance policy is a share of stock C Exaggerating the benefits provided in the policy D Stating that the competitors will arbitrarily increase their premiums each year
Making comparisons between different policies
Which of the following best describes the unfair trade practice of defamation? A Refusing to deal with other insurers B Making derogatory oral statements about another insurer's financial condition C Assuming the name and identity of another person D Issuing false advertising material
Making derogatory oral statements about another insurer's financial condition
According to California Insurance Code, the term "shall" describes what kind of actions? A Implied B Directive C Mandatory D Permissive
Mandatory
Any person who transacts insurance without a license A May be guilty of a misdemeanor. B May do so as long as he/she does not get a commission. C Is called a Life Solicitor. D Is guilty of twisting, a misrepresentation.
May be guilty of a misdemeanor.
On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. The company is guilty of A Rebating. B Misrepresentation. C Concealment. D Unfair claim practice.
Misrepresentation.
An insurance company that is NOT authorized to do business in the State of California is known as a(n) A Nonadmitted company. B Surplus company. C Foreign company. D Alien company.
Nonadmitted company.
On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are A Guaranteed. B Not taxable since the IRS treats them as a return of a portion of the premium paid. C Paid at a fixed rate every year. D Taxable as ordinary income.
Not taxable since the IRS treats them as a return of a portion of the premium paid.
According to California Insurance Code, the duties and requirements of solicitor, agent and broker are all distinct from one another. Which of the following is TRUE? A A person acting as a solicitor in the same transaction can act as both the solicitor and the broker. B One or more fire and casualty broker-agent cannot employ a solicitor simultaneously. C One or more fire and casualty broker-agents can employ a solicitor simultaneously. D A person acting as a solicitor in the same transaction can act as both the solicitor and the agent.
One or more fire and casualty broker-agents can employ a solicitor simultaneously.
An example of "adverse underwriting decisions" in a policy involving individually underwritten coverage would be A Declination of coverage solely because coverage is not available on a class or statewide basis. B Termination of an individual policy form on an insured class statewide. C The rescission of a policy type company-wide. D Placing coverage with a residual marketing mechanism such as an unauthorized insurer that offers other than preferred and standard rates.
Placing coverage with a residual marketing mechanism such as an unauthorized insurer that offers other than preferred and standard rates.
Which of the following is NOT a typical characteristic of an ERRORS & OMISSIONS policy? A Coverage can be written on a "limit per claim" basis or a "limit for all claims during the policy period" basis. B Policies have numerous exclusions to limit or avoid fraudulent claims. C Coverage is provided only for negligence, errors, and omissions. D Policies typically have high deductibles ($100 or $500).
Policies have numerous exclusions to limit or avoid fraudulent claims.
In California, which system is used to approve or disapprove rate filings? A Prior B Open C Mandatory D File and Use
Prior
What is the purpose of errors and omissions insurance? A Protect insureds against misrepresentation in declarations B Protect insureds against a claim loss C Protect agents against charges that they didn't properly serve a client D Protect agents against human resources errors made by their respective agencies.
Protect agents against charges that they didn't properly serve a client
The Gramm-Leach-Bliley Act was passed to A Allow insurance companies access to medical information for underwriting purposes. B Protect private customer information filed with a financial institution. C Define insurance as interstate commerce. D Allow consumers access to credit and private consumer reports.
Protect private customer information filed with a financial institution.
All of the following are true regarding rebates EXCEPT A Rebates are allowed if it's in the best interest of the client. B Rebates are only allowed if specifically stated in the policy. C Rebating can be anything of economic value, given as an inducement to buy. D Dividends are not considered to be rebates.
Rebates are allowed if it's in the best interest of the client.
An agent offers his client free tickets to a sporting event in exchange for the purchase of an insurance policy. The agent is guilty of A Rebating. B Coercion. C Twisting. D Controlled business.
Rebating.
What method do insurers use to protect themselves against catastrophic losses? A Reinsurance B Indemnity C Pro rata liability D Risk management
Reinsurance
All of the following are considered unfair trade practices in the business of insurance EXCEPT A Defamation. B Sharing commissions. C Boycott. D Rebating.
Sharing commissions.
If a licensee wants to terminate her agent's license but it is in the possession of her employer, which of the following is true? A She must request her employer to send her license to the Commissioner. B She will not be able to terminate the license until she has it in her possession. C She can terminate the license by sending the Commissioner a written notice. D She must first ask for her appointment to be terminated. As soon as the employer returns her license, she can send it to the Commissioner.
She can terminate the license by sending the Commissioner a written notice.
What is the purpose of the California laws regulating production agencies? A They are mainly concerned with standardizing policies. B To provide protection for the clients by requiring producers to maintain professional standards of conduct C Avoid unnecessary federal regulation D All of these
To provide protection for the clients by requiring producers to maintain professional standards of conduct
An agent's role to act in the insured's best interest, based on the good faith and trust placed on the agent by the public is known as A The fiduciary duty. B The prudent man rule. C The agency agreement. D The insurer agreement.
The fiduciary duty.
Which of the following best defines the owner in a life settlement contract? A The insured under the contract B A qualified institutional buyer C An insurance provider D The owner of the life insurance policy
The owner of the life insurance policy
An insurance partnership can continue with new partners as long as A The new partner has applied with the Department. B The new partner was named by any departing partner. C All partners making up the new partnership petition the Commissioner. D The partnership files notice with the Department within 30 days and the change is approved.
The partnership files notice with the Department within 30 days and the change is approved.
The Commissioner of Insurance supervises and regulates the insurance affairs in the State of California, and is chosen by A The State Senate. B The people. C Admitted insurers. D The Governor.
The people.
Which type of insurance guarantees or indemnifies owners of real or personal property or the holders of liens or other interested parties against loss or damage suffered to said property? A Commercial Property insurance B Surety insurance C Contract insurance D Title insurance
Title insurance
Which of the following is NOT true of life settlements? A The seller must be terminally ill. B They could be used for a key person coverage. C They could be sold for an amount greater than the current cash value. D They involve insurance policies with large face amounts.
The seller must be terminally ill.
An insurance agent collected policy premiums from his clients and before remitting the funds to the insurer, borrowed some for personal use. This act would be legally considered A Fraud. B Rebating. C Misappropriation of funds. D Theft.
Theft.
An applicant has submitted an application for a Life agent license in the state of California. Five years ago, the applicant was charged with, but not convicted of, a felony in another state. The California Commissioner could deny the license on the grounds that the applicant A There are no grounds for which license could be denied based on the information provided. B Is not properly qualified to perform the duties of a person holding the license. C Has a felony charge and is therefore excluded from licensing. D May commit another felony based on his past history.
There are no grounds for which license could be denied based on the information provided.
Which of the following is NOT true regarding fiduciary capacity of managing general agents (MGAs)? A They can have an appointment with only one admitted insurer in this state. B They can appoint and supervise local agents. C They can accept and decline risks. D They collect premium funds from individual producers.
They can have an appointment with only one admitted insurer in this state.
An agent has completed 30 hours of continuing education by the end of a license period instead of the required 24 hours. What will happen to the 6 hours in excess? A They will be carried over into the next licensing period. B They will be credited toward the agent's commissions. C The outcome will depend upon whether it is the agent's first license period or not. D They will be lost.
They will be carried over into the next licensing period.
Which type of misrepresentation persuades an insured, to his or her detriment, to cancel, lapse, or switch policies from one to another? A False advertising B Rebating C Twisting D Switching
Twisting
A man has HIV and was hospitalized for several weeks. His insurance company has delayed paying his claim for 120 days, saying that he is not covered due to a pre-existing condition exclusion in his policy. The insurance company is guilty of which of the following? A Fraud B Misrepresentation C Discrimination D Unfair claims settlement practice
Unfair claims settlement practice
An organization ceases to exist as an entity eligible to hold a license for all of the following reasons EXCEPT A Upon continuance of only one person from the previous co-partnership to the new co-partnership. B Upon dissolution of a co-partnership or upon any change in membership of a co-partnership. C Upon the termination of an association. D Upon dissolution of a corporation.
Upon continuance of only one person from the previous co-partnership to the new co-partnership.
ABC Insurance has determined that the premiums that it currently charges for its Safe Driver II plan need to be increased. ABC's underwriters have reevaluated the rate plan and sent the new rate schedule to each managing general agent for distribution to its agents. After two weeks of marketing the new plan, ABC filed the new plan with the Commissioner for approval. This method of rate plan marketing is considered A Adjust and market rate laws. B Use and file rate laws. C Develop and file rate laws. D File and use rate laws.
Use and file rate laws.
