Secton 2

Rhonda is a personal lines insurance producer. Under the terms of her agency contracts, the insurers forward policies promptly to Rhonda's customers and send a premium invoice with the policy. Insureds are instructed to remit premium payments to their insurer. The insurers calculate Rhonda's commissions and forward those commission payments to her monthly. Rhonda is operating under which one of the following payment procedures?

Direct bill basis

Insurance Company D (ICD) has traditionally used regional brokers to market and produce its insurance products. The management team at ICD has decided it wants to launch a new specialized product. The marketing plan includes ICD's desire to control the targeted number of monthly applications as well as the methods that will be used to advertise and campaign to achieve the desired results. Which one of the following distribution systems will best allow ICD the desired control?

Direct writer

T. Roy Insurance Company is selecting a distribution system and channel for its products. Which one of the following best describes the type of consideration that T. Roy should give to its operations?

Does it have the necessary financial resources?

When a firm is selecting a distribution channel, which one of the following is an important consideration with regard to its operations?

Does the selected channel capitalize on its core capabilities?

The authority that the principal specifically grants the agent is called

Express authority.

Because the agent represents the insurer, the law presumes that

Knowledge acquired by the agent is knowledge acquired by the insurer.

Which one of the following statements is correct regarding consulting services?

Many producers offer consulting services for which they are paid on a fee basis.

The most difficult time for an insurer to change distribution systems is when

Renewing an existing book of business.

Donna is an insurance producer. She makes an appointment with a potential policyholder to review the prospect's loss exposures. She asks the prospect to complete a questionnaire to assist her in this effort. Donna is conducting a

Risk management review.

Which one of the following statements about insurance distribution systems and channels is true?

Surplus lines brokers can place coverage that is not available through standard market insurers.

Which one of the following statements is correct with respect to selecting a distribution channel?

The types of insurance products and services to be delivered by the insurer must fit the marketing channel selected.

In an insurance agency relationship, the agent's fundamental responsibility is to act for the benefit of the

insurer

A business manufactures a product that is harmful to the public if used improperly. More than three licensed insurance companies have refused to provide commercial general liability coverage for the business. The producer should contact which one of the following to attempt to arrange coverage?

A surplus lines broker

An agency in New Jersey has decided to market personal insurance to accountants. It is offering a 10 percent discount to all Certified Public Accountants in the state. This is an example of which one of the following types of group marketing?

Affinity marketing

In terms of their legal relationships, which one of the following statements accurately describes insurance agents and insurance brokers?

An insurance agent represents the insurer while a broker represents the customer.

An independent business owner or firm that sells insurance by representing customers rather than insurers is which one of the following?

An insurance broker

Northtown Agency has an agency contract with Withers Insurance Company for personal lines coverages only. Anita, one of Northtown's existing personal lines customers is starting a floral delivery business that will require commercial insurance. Horace, one of the agents, accepted Anita's application, bound coverage and said he would pass the paperwork on to Withers, as Withers had handled all her other needs. As soon as he remembered the agency contract with Withers, he planned to send the request to a different insurance company that could accept the new business. Before he could do this, Anita submitted a claim. The claim would be covered because the coverage is bound based on the concept of

Apparent authority.

Which one of the following statements is correct?

In the exclusive agent and direct writer marketing systems, insurers might assist producers with prospecting.

Which one of the following is the primary duty that a principal legally owes to an agent?

Paying the agent for services performed

The functions that insurance producers perform vary widely from one marketing system to another. Which one of the following functions do all producers perform?

Prospecting