2014 Code & Ethics Prep Course (Property & Casualty)

1. 2014 Code & Ethics Prep Course(Property & Casualty)

2. The McCarran-Ferguson Act: A. Required Ocean Marine policies to carry worker’s comp B. Gave the states the right to regulate the majority of the Insurance Industry at the state level C. Created the Good Driver Discount D. None of the above

3. Any person capable of making a contract of insurance subject to the restrictions of the insurance code is: A. An insurer B. A broker C. An agent D. A solicitor

4. According to the California Insurance Code, an insurance policy must be: A. In writing B. Approved by the state governor C. Negotiated between the agent and the insured D. Affordable to the insured

5. Who has ownership of renewals? A. An independent agent B. A captive agent C. The insurance company D. An exclusive agent

6. According to Proposition 103, the commissioner of insurance became an elected official. The commissioner may serve: A. As many terms for which he is elected B. One term only C. Two consecutive terms (8 years) D. No mention is made in the insurance code as to term limits **note: if the commissioner dies while in office, a new commissioner is appointed by the governor to finish the term

7. Rates that do not have to be filed in advance with the state are considered what type of rates? A. Prior Approval B. Competitive C. State-mandated D. Flex rating

8. When an insurer has a person that solicits, negotiates, and effects contracts on behalf of the insurer, they are considered to be a/an: A. Agent (producer) B. Solicitor C. Captive (agent) D. Independent agent

9. Which of these best describes an agent? A. One who is appointed by another agent or broker, receives commissions from the employer, transacts insurance with the insurers that the employer represents and acts on behalf of the clients B. One who is not appointed by anyone, is licensed to transact insurance with admitted insurers, receives commissions from them but acts on behalf of the clients C. One who is appointed by any number of insurers, receives commissions from them and transacts on their behalf D. One who is appointed by any number of admitted insurers, receives commissions from them, may also receive a fee from the clients, and acts on his own behalf

10. Which of the following best describes a broker? A. A licensed person who is appointed by another agent to transact insurance on behalf of the insured B. A licensed person who is licensed to transact insurance, who is appointed by any admitted insurer, but receives commissions from the insurer and may charge a client a fee C. A person who is authorized to transact insurance with both admitted and non-admitted insurers D. A person who is not appointed by any insurer, but may receive compensation for the policies he/she places through the insurer and may charge the client a fee

11. What describes an exclusive agent? A. An agent who writes insurance, or members of the right clubs B. An agent who writes insurance for wealthy individuals who are referred to him C. An agent who transacts for one insurer or a group of related insurers D. An agent who has appointments with a number of insurers

12. A person with an insurance agent/broker license is placing business with a company with whom he has an appointment. He is acting as: A. A broker B. An agent C. He may choose to act as either D. None of the above

13. According to the California Insurance Code, an Insurance Agent is defined as: A. Agent selling any line of insurance other than life insurance B. All life agents C. All disability agents D. All of the above

14. Mr. Brown is a property and casualty agent who wishes to become a life broker. What should he do? A. Reconsider. There is no such thing B. Obtain a life broker’s license C. Obtain a fire and casualty broker’s license D. Obtain a life analyst’s license

15. Which of the following describes an express authority? A. A person holding the funds or property of another person in a position of trust B. Authority of an agent that is specifically granted by the insurer C. Authority of an agent that is created when the agent oversteps actual authority D. None of the above

16. When an agent is authorized to do business on behalf of an insurer, it is considered which of the following? A. Express authority B. Implied authority C. Apparent authority D. None of the above

17. Implied Authority is: A. Authority of an agent that is specifically granted by the insurer in the agency contract. B. Authority of an agent that the public may reasonably believe the agent to have C. Authority of an agent that is created when the agent oversteps actual authority, and when inaction by the insurer does nothing to counter the public impression that such authority exists D. All of the above

18. What is an apparent authority? A. Authority of an agent that is specifically granted by the insurer in the agency contract. B. Authority of an agent that the public may reasonably believe the agent to have C. Authority of an agent that is created when the agent oversteps actual authority, and when inaction by the insurer does nothing to counter the public impression that such authority exists D. All of the above

19. An insurance solicitor is: A. A natural person employed by an agent or broker and is appointed by an insurer B. A person employed by a life agent to aid in the transacting of all lines of life insurance offered by the insurer with whom the life agent is appointed C. A person employed by an agent or broker to transact all lines of fire and casualty insurance D. A natural person employed by an agent or broker to aid in transacting insurance other than life insurance

20. If an agent/broker wishes to appoint a solicitor, the broker must: A. Be a domestic insurer B. Have a notice of appointment C. Must have a permanent license D. Have a certificate of insurance

21. What does an administrator do for an insured? A. Pay broker commissions B. Issued credit cards C. Collects policy premiums D. Administers policy coverages

22. A life analyst is: A. An insurance agent B. An insurance broker C. A natural person who solicits insurance D. A licensee, who for a fee, gives advice on life and health insurance

23. In the California Insurance Code, there is a definition that reads in short, “…a person who offers to advise for a fee, any insured having interest in life or disability insurance contracts…” This is a: A. An insurance broker paid on a fee for service B. A solicitor C. A life and disability analyst D. A claims adjuster

24. Who is allowed to charge a policy fee? A. An insurer B. An insurance agent C. An insurance broker D. All of the above

25. Which of the following best describes direct marketing? A. Selling insurance out of a vending machine at the airport B. Buying insurance from an agent who is appointed by an insurance company C. Buying insurance from a broker D. None of the above

26. Bill, a life agent, died. When would his license terminate? A. 30 days after death B. End of licensing year in which he died C. Upon closing of his business in progress D. Upon death

27. When can a partnership continue if a new partner joins? A. After the DOI is notified within 30 days and the changes are approved B. After the DOI is notified within 90 days and the changes are approved C. Immediately D. None of the above

28. A stock insurance company is: A. An insurance company incorporated in some other state, but having its executive or home office in this state B. An insurance company owned and controlled by the policy holders C. An insurance company with a stated amount of capital stock owned by stockholders who compose the company and direct it by means of officers and directors D. Any insurance company incorporated in and having its home office in this state

29. Which of the following is owned by its policy holders and was formed for their benefit? A. Stock insurer B. Lloyd’s of London C. Mutual insurer D. reciprocal/inter-insurance exchange

30. Which of the following best describes a mutual insurance company? A. A corporation owned by individuals who contribute capital through the purchase of stock B. A corporation owned by individuals who contribute capital through the purchase of policies C. An unincorporated society without capital stock which provides benefits to members D. None of the above

31. Which of these means the excess earned or saved by an insurance company over that required to pay expenses and maintain policy reserves? A. Non-forfeiture options B. Surplus C. Savings D. Reserves

32. Which of these usually issues participating policies in which the owners of the policy may share in the divisible surplus of the insurer? A. Mutual insurance company B. inter-insurance exchange C. Stock insurance company D. reciprocal

33. A non-participating policy: A. Does not have cash values B. Pays dividends C. Does not pay dividends D. Does not allow for policy loans

34. When a mutual insurance company changes to a stock insurance company, it is referred to as: A. Mutualization B. Stock split C. Stock buy out D. Demutualization (or conversion)

35. Which of these may not be incorporated? A. Mutual company B. Stock company C. Reciprocal or inter-insurance exchange D. Fraternal

36. Which of the following is true about a fraternal insurance company? A. Membership is required in the society to purchase insurance from the society B. The are a profit-seeking company C. Insurance can be purchased whether or not you are a member D. None of the above

37. What best describes the form of a reciprocal insurer? A. They hire an accountant to manage the company B. They hire an executive to manage the company C. They hire an attorney in fact to manage the company D. They hire a lawyer to manage the company

38. Lloyd’s is: A. An association which provides both physical and clerical support for its members B. A fraternal C. A group, rather than the individual, is responsible for the contracts of insurance D. None of the above

39. Which of the following is true about Lloyd’s of London? A. They all share equally in premiums B. They all share equally in losses C. Individuals are only liable for the risk they assume D. None of the above

40. Which of these is a correct statement about an admitted insurer? A. It must have an office in this state B. It must have its home office in California C. Any insurer approved to transact insurance in California is an admitted one, without regard to location. D. Only insurers located outside California need to be admitted in order to transact insurance in this state

41. Which could be an admitted insurer? A. A domestic insurer B. An insurer organized under the laws of Japan C. An insurer not organized under the laws of California D. Either a domestic, foreign, or alien insurer

42. The California Insurance Code defines a domestic insurer as an insurer organized under the laws of: A. The state of California, whether or not it is an admitted insurer B. The state of California, and must be an admitted insurer C. The state of California, only when it is not an admitted insurer D. Any state of the United States, whether or not it is an admitted insurer

43. An insurer organized under the laws of any state outside the state of California is a: A. Domestic insurer B. Foreign insurer C. non-alien insurer D. non-admitted insurer

44. A person licensed as an insurance agent, insurance broker, or an insurance solicitor may legally do which of these? A. Act as an agent for a non-admitted insurer to transact insurance in this state B. Advertise for a non-admitted insurer in this state C. Aid a non admitted insurer to transact insurance in this state D. None of the above

45. If someone were transporting dangerous animals from Africa, where might he obtain insurance? A. A foreign insurer B. An alien insurer C. A managing general agent D. A surplus lines broker

46. The purpose of the 16-point bold type disclosure on a surplus lines policy is to inform the: A. The insured that the insured’s credit rating will be obtained for underwriting purposes B. Commissioner that a search for coverage through an admitted insurer was made C. The insured that the policy is being issued through a non-admitted insurer D. None of the above

47. The retention limit is: A. The maximum risk an agent will accept on a policy B. The maximum risk that the insurance department will allow an insurer to accept C. The maximum risk a company will accept on a policy D. The minimum risk required by the DOI

48. When an insurance company works with another insurer because it has exceeded its retention limit on a risk, this would be an example of: A. Coinsurance B. Reinsurance C. Joint marketing D. Risk sharing

49. Insurers may purchase reinsurance for a variety of reasons. Which of the following is not a good example of the use of reinsurance. Insurer purchases reinsurance: A. Only on the below average business submitted to them, keeping the good business for themselves B. To avoid capacity problems by reducing the amount of unearned premium C. To more safely insure an exceptionally large account D. For protection from catastrophic exposure such as hurricanes or earthquakes

50. An insurer must have money in reserves to cover its liabilities and reinsure its outstanding risks, In addition to this the code requires a company to have: A. $1,000,000 B. No additional limits are required by the code C. Assets equivalent to paid in capital D. 20% above its reserves