Untitled Quiz

Questions and Answers

What is the obligation to tell the truth to the best of one's knowledge?

Fiduciary duty (correct)

Obligation to inform

Trust of the client

Disclosure requirement

Which of the following occupations would NOT directly help to qualify someone for the office of Commissioner of Insurance?

Certified public accountant

Insurance agent (correct)

Executive in business administration

Practicing attorney

All of the following are true regarding rebates EXCEPT:

Dividends are not considered to be rebates.

Rebating can be anything of monetary value given as an inducement to purchase insurance.

Rebates are allowed if it is in the best interest of the client. (correct)

Rebates are only allowed if specifically stated in the policy.

The Commissioner has full power and authority to do all of the following EXCEPT:

Draft insurance laws. Signup and view all the answers

No one whose license has been revoked can receive another license in Texas for:

5 years. Signup and view all the answers

An applicant properly notifies her insurer of a straightforward claim, but the insurer waits an exceedingly long time to process it. Which of the below terms best describes the behavior of the insurer?

Unfair claims settlement practice Signup and view all the answers

If the agent wishes to contest the charges in court after a Cease and Desist Order is issued, how many days does the agent have to make the request?

30 days Signup and view all the answers

A participating insurance policy may do which of the following?

Pay dividends to the policyowner Signup and view all the answers

In which of the following situations is it legal to limit coverage based on marital status?

It is never legal to limit coverage based on marital status. Signup and view all the answers

An insurance company is domiciled in Montana and transacts insurance in Wyoming. Which term best describes the insurer's classification in Wyoming?

Foreign Signup and view all the answers

What percentage of continuing education hours must be in a classroom setting?

50% Signup and view all the answers

To become a Texas insurance agent, an individual must:

Have passed a licensing exam within the 12 months before applying. Signup and view all the answers

Which of the following best describes a misrepresentation?

Issuing sales material with exaggerated statements about policy benefits Signup and view all the answers

For which of the following actions can an agent's license be suspended or revoked?

Rebates of premiums Signup and view all the answers

In insurance transactions, fiduciary responsibility means

Handling insurer funds in a trust capacity Signup and view all the answers

Which of the following is another term for an authorized insurer?

Admitted Signup and view all the answers

All of the following would be considered rebating EXCEPT

An agent misrepresents policy benefits to convince a policyholder to replace policies Signup and view all the answers

When an individual obtains an insurance license for the primary purpose of writing insurance on him- or herself, or for members of his or her immediate family, this is called

Controlled business Signup and view all the answers

The Commissioner of Insurance issues a Cease and Desist Order and immediately receives a request for the charges to be reviewed in a hearing. Within what number of days must the hearing be held?

10 Signup and view all the answers

All of the following would be considered an insurance transaction EXCEPT

Obtaining an insurance license Signup and view all the answers

Which of the following insurers are owned by stockholders?

Stock Signup and view all the answers

On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are

Not taxable since the IRS treats them as a return of a portion of the premium paid Signup and view all the answers

What is a foreign insurer?

An insurer with a home office in another state Signup and view all the answers

What is the minimum percentage of a licensee's total volume of premiums in a calendar year that must come from business other than controlled business?

25% Signup and view all the answers

How many hours of continuing education can be carried over from one licensing period to the next?

0 Signup and view all the answers

In Texas, the Commissioner of Insurance is

Appointed by the Governor Signup and view all the answers

An agent receives an Emergency Cease and Desist Order for chronically misrepresenting his insurance policies. The agent knows that he did not commit the violations stated in the Emergency Cease and Desist Order. He wants to contest the charges in a court hearing. Which of the following is true?

The hearing must be held within 10 days of receiving a request, unless both parties agree to a later date Signup and view all the answers

The Insurance Commissioner may examine the affairs of any insurer as often as necessary, but not less frequently than once every

5 years Signup and view all the answers

What is the major difference between a stock company and a mutual company?

Ownership Signup and view all the answers

Which of the following must an insurer obtain in order to transact insurance within a given state?

Certificate of authority Signup and view all the answers

All of the following are considered unfair or deceptive acts in connection with the sale of insurance EXCEPT

Attempting to settle a claim in which liability is clear Signup and view all the answers

An applicant for a license in Texas must include a statement with his application that provides information about all the following EXCEPT

Intending to apply for another license Signup and view all the answers

All of the following are requirements for an individual to be licensed EXCEPT

Provide a financial statement Signup and view all the answers

An insurance agent wants for a client to replace her current annuities plan with another one. He presents the new one in an incomplete and dishonest way, which makes the new contract seem far more appealing than the original one. The policyowner ends up surrendering her original contract and replacing it with the new one. Which term best describes what the agent did?

Twisting Signup and view all the answers

An agent discovers his newest client was the result of a referral. To show his thanks to the referring customer, the agent could

Thank the customer Signup and view all the answers

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?

Mutual Signup and view all the answers

An individual applies for a life policy. Two years ago he suffered a head injury from an accident, so he cannot remember parts of his past, but is otherwise competent. He has also been hospitalized for drug abuse, but does not remember this when applying for insurance. The insurer issues the policy and learns of his history one year later. What will probably happen?

The policy will not be affected Signup and view all the answers

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?

Illegal Signup and view all the answers

A temporary license holder can receive a commission from a sale made to all of the following EXCEPT

The license holder's sister-in-law Signup and view all the answers

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 Signup and view all the answers

Which of the following is NOT true regarding a Certificate of Authority?

It is issued to group insurance participants Signup and view all the answers

An agent explains the details of a life insurance policy to a client. The agent does not realize, however, that the state has recently rewritten two of the provisions. As a result, the agent inadvertently misrepresents the policy, making it more attractive than it really is. What best describes this situation?

There is no misconduct Signup and view all the answers

After filing a claim, an insured tells the insurer that there is more than one insurance policy in force. That insurer sets aside the claim until it hears what the other company will pay. The insurer's action will be classified as

Unfair Signup and view all the answers

Study Notes

License Suspension and Revocation

An agent's license can be suspended or revoked for willful violations of state insurance laws, intentional misstatements on applications, and offering rebates of premiums.

Fiduciary Responsibility

In insurance, fiduciary responsibility involves handling insurer funds in a trust capacity, ensuring ethical financial management.

Authorized Insurers

Insurers authorized to transact business within a state are referred to as "admitted" insurers; they meet state financial requirements.

Rebating in Insurance

Rebating is offering something of value as an inducement to buy insurance; however, misrepresenting policy benefits is not classified as rebating.

Controlled Business Definition

Controlled business involves obtaining insurance primarily for oneself or immediate family, with a minimum of 25% of premiums needing to come from other sources.

Cease and Desist Orders

Upon receiving a Cease and Desist Order, a hearing request must result in a hearing within 10 days if contested.

Insurance Transactions

Activities considered insurance transactions include soliciting policies, advising on claims, and negotiating coverage; obtaining a license is a prerequisite.

Ownership of Insurers

Stock insurance companies are owned by stockholders, while mutual companies are owned by policyholders.

Dividends for Mutual Insurance Policies

Dividends paid on participating policies from mutual companies are not taxable as they are viewed as a return of excess premiums.

Types of Insurers

A foreign insurer operates in a different state from its home office, whereas an alien insurer operates in another country.

Continuing Education Requirements

Licensees cannot carry over continuing education hours; all hours must be completed within the designated period.

Commissioner of Insurance

The Commissioner of Insurance in Texas is appointed by the Governor and serves a 2-year term with a renewal process every odd year.

Contesting Cease and Desist Orders

An agent contesting an Emergency Cease and Desist Order will have a hearing scheduled within 10 days, barring mutual agreement for a later date.

Examination Frequency

The Insurance Commissioner must examine each insurer at least once every five years.

Ownership Difference

Mutual insurance companies are owned by policyholders, whereas stock insurance companies are owned by shareholders.

Certificate of Authority

Insurers must obtain a Certificate of Authority to legally transact insurance in a state, which is akin to a license.

Unfair Discrimination in Insurance

Insurers cannot engage in unfair discrimination based on marital status, gender identity, or ethnicity, but can discriminate based on lifestyle habits.

Submission Requirements

Applicants for a license must disclose information on past refusals or revocations but do not need to state plans to apply for other licenses.

Licensing Requirements

A financial statement is not required to obtain a license; applicants must be at least 18 years old, pass the exam, and pay fees.

Twisting Definition

Twisting refers to the illegal act of misrepresenting an insurance policy's terms in order to persuade an insured to replace an existing policy.

Referral Thank You Policies

Agents can thank clients for referrals but cannot provide monetary compensation unless the referrer is also an agent.

Non-Taxable Dividends

Dividends received from mutual insurance policies are not taxable and reflect returned premiums after operational costs.

Intentional Misrepresentation

If the agent unknowingly misrepresents policy terms without fraud intent, it may not be categorized as misconduct.

Fair Claims Practices

Insurers are required to process claims fairly and cannot delay settlements solely due to the existence of other insurance coverage.

Adjuster's License Exemptions

Renewing an adjuster's license does not require retaking the state examination if the license has been expired for less than a year.

Producer's Fiduciary Duty

Fiduciary duty encapsulates the trust a producer must uphold regarding the handling of premium funds and client finances.

Commissioner Qualifications

A candidate for Commissioner of Insurance must have substantial experience in fields like business administration, law, or accounting, excluding insurance agent experience.

Rebates and Regulations

Rebates are illegal unless explicitly stated in insurance policies, and dividends are not classified as rebates for tax purposes.

Commissioner’s Powers

The Commissioner cannot draft insurance laws but has the authority to issue cease and desist orders, Certificates of Authority, and enforce the Insurance Code.### Insurance Regulations and Behaviors
The Commissioner enforces the Insurance Code but does not create insurance laws.
A license revocation in Texas prohibits obtaining another license for a duration of 5 years.

Claims Processing

If an insurer delays processing a straightforward claim without justification, it falls under "unfair claims settlement practice."

Legal Orders

An agent receiving a Cease and Desist Order must contest the charges within 30 days to request a court review.

Participating Insurance Policies

A participating insurance policy can pay dividends to the policyowner based on mortality cost, interest, and expenses.

Coverage Limitations

Limiting insurance coverage based on marital status is never legal, though marital status may influence the definition of eligible dependents.

Insurer Classifications

An insurance company based in Montana but operating in Wyoming is classified as a foreign insurer.

Continuing Education Requirements

A minimum of 50% of continuing education hours must be completed in a classroom environment or a department-approved equivalent.

Requirements for Texas Insurance Agents

Prospective Texas insurance agents must pass a state licensing exam within the 12 months before application; passing the exam alone does not grant a license.

Misrepresentation in Insurance

Misrepresentation includes distributing sales material with misleading or exaggerated claims about policy benefits and terms, which may also encompass verbal representations.

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