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2013 Code & Ethics Crash Course (Life and Health) 1.

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1 2013 Code & Ethics Crash Course (Life and Health) 1

2 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 2

3 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

4 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

5 Who is allowed to change a policy fee? A. An insurer B. An insurance agent C. An insurance broker D. All of the above 5

6 Who has ownership of renewals? A. An independent agent B. A captive agent C. The insurance company D. An exclusive agent 6

7 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 7

8 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 8

9 An agent who sells insurance for only one company as opposed to an agent who represents several companies is considered to be a: A. Broker B. Independent agent C. Captive agent D. Agent 9

10 An insurance agent with a LIFE license can transact: A. Auto insurance B. Life insurance C. Homeowners insurance D. All of the above 10

11 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 11

12 As defined in the insurance code, a life agent is: A. An insurance agent B. A broker C. A natural person appointed to help solicit insurance D. None of the above 12

13 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 13

14 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 14

15 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 15

16 Mary is a licensed insurance agent who represents ABC Insurance Company. If you were to look at the front of her office, you would see a sign that reads: ABC Insurance Company Mary’s Insurance Agency If Mary performs acts that are not specifically named in her written contract with ABC Insurance Company, she is exercising her _________ authority. A. Implied B. Express C. Principal D. All of the above 16

17 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 17

18 Travel AD&D insurance would be sold by all of the following except: A. Vending machines B. Insurance agents (P&C agents) C. Credit cards D. The insurance company 18

19 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 19

20 How is insurance marketed through direct mail companies? A. Brokers B. Solicitors C. Salaried Employees D. Surplus Lines Brokers 20

21 All of the following are examples of direct marketing except: A. Television B. Internet C. Calling Prospects D. Radio 21

22 Bill, a life agent, died. When would his insurance 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 22

23 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 23

24 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 24

25 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 25

26 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 26

27 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) 27

28 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 28

29 Which of these may not be incorporated? A. Mutual company B. Stock company C. Reciprocal or inter-insurance exchange D. Fraternal 29

30 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 30

31 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 31

32 A surplus lines broker: A. Acts as a life agent B. Acts as a property and casualty agent C. Places insurance with a non-admitted insurer when the insurance cannot be procured from admitted insurers D. Is a managing general agent for a non- admitted insurer 32

33 Which could be an admitted insurer? A. A domestic insurer B. An insurer organized under the laws of Canada C. Not organized under the laws of California D. Either a domestic, foreign, or alien insurer 33

34 A person licensed as an insurance agent, life 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 34

35 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 35

36 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 36

37 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 37

38 An insurer organized in Great Britain is: A. Lloyds of London B. Foreign C. Alien D. Domestic 38

39 What is the process called whereby insurers decide which customers to insure and what coverage to offer? A. Adverse selection B. Ratemaking C. Marketing D. Underwriting 39

40 The pricing of a disability policy is based on the financial loss of a certain group of people over a certain period of time. This is the pricing principle known as: A. Frequency B. Rapidity C. Risk D. Occurrence 40

41 Why is having a large number of similar exposure units important to insurers? A. The greater the number insured, the more premium is collected to offset fixed costs. B. The insurer increases its market share with every insured C. The greater the number of insured, the greater amount of premium collected to help cover losses D. The greater the number insureds, the more accurately the insurer can predict losses and set appropriate premiums 41

42 The mathematical rule that states that as the number of individual but similar exposure units increases, the easier it is to predict losses is which of the following? A. Insurable interest standard B. Contract law C. The law of large numbers D. Materiality 42

43 In California, a rate will not remain in effect if it is considered to be any of the following except? A. Inadequate B. Unfairly discriminatory C. Impartial D. Excessive 43

44 What is one of the main factors used by the commissioner to determine whether a rate is excessive or unfairly discriminatory? A. The degree of competition within the state B. Complaint history of the insurer by its policy holders C. Whether the rate mathematically reflects the insurance company’s investment income D. Length of time the insurer has been admitted to do business in the state 44

45 Which of the following describes an insurer who has enough financial resources only to provide for all it liabilities and reinsurance of its outstanding risks? A. Guaranteed B. Insolvent C. Solvent D. Non-participating 45

46 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 46

47 If a company has a poor rating, the agent can guarantee his client that the company will not become insolvent. A. True B. False 47

48 According to the CA insurance code, an insurance policy must specify all of the following except: A. The perils insured against B. The financial rating of the insurer C. The property or life being insured D. The policy period 48

49 The purpose of the California Life and Health Insurance Guarantee Association (CLHIGA) is: A. It helps small insurers with less capital to compete with larger insurers B. To protect life policy holders and/or insureds when any insurer becomes insolvent C. To guarantee that any promises made by any insurer’s sales or marketing units are filled D. (subject to certain limitations) to protect life and health policy holders and/or insureds when member insurers become insolvent 49

50 Which is NOT covered by CLHIGA? A. Individual life insurance B. Group term insurance C. Employer self-fund plan D. Individual annuities 50

51 The CLHIGA does not cover: A. Individual health insurance B. Stop loss group coverage C. Individual term D. None of the above 51

52 Who are members of CLHIGA? A. Non-admitted companies B. All foreign insurance companies C. Admitted companies D. None of the above 52

53 What classes of insurance are exempt from the California Insurance Guarantee Association (CIGA)? A. Worker’s comp B. Auto insurance C. Life and annuity D. Plate glass insurance 53

54 Concerning the Insurance Guaranty Fund: A. It cannot be used in agent’s advertising B. An agent cannot tell the insured that should the insurer become insolvent, the fund will guarantee the policy C. An agent cannot say that the insurance company’s assets are backed by the fund D. All of the above 54

55 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 55

56 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 56

57 A type of insurance where one insurer transfers loss exposures from policies written for its insureds to another insurer is known as? A. Coinsurance B. Reinsurance C. Captive Insurance D. Reciprocal Insurance 57

58 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 58

59 A person who acts in a capacity that requires an active license without having a valid license is guilty of a: A. Fraud B. Misdemeanor C. Felony D. Misrepresentation 59

60 An insurer’s violation of the federal law regarding in the transaction of insurance can result in fines up to: A. $100,000 B. $15,000 C. $40,000 D. $50,000 60

61 According to the CA Department of Insurance, which term is mandatory? A. Oath B. May C. Warranty D. Shall 61

62 According to the CA Department of Insurance, which term is permissive? A. Oath B. May C. Warranty D. Shall 62

63 The Commissioner may investigate the qualifications of an applicant for a license. He then: A. May deny a license after a hearing if the applicant has knowingly made a misstatement in the application for the license B. May deny a license without a hearing if the applicant is lacking integrity C. Shall deny a license without a hearing if the applicant as previously conducted any business in a dishonest manner D. Shall not deny a license if the applicant has had a license suspended or revoked for cause in the past 5 years 63

64 The Insurance Commissioner may, without a hearing, deny a license application if the applicant has: 1. Committed a felony as shown by a final judgment of conviction 2. Committed a misdemeanor specifically denounced by the insurance code 3. Had a previous license application denied for cause within the past 5 years 4. Has a previous license suspended or revoked for cause within the past 5 years A. 1 and 2 B. 2 only C. 2, 3, and 4 D. all of the above 64

65 The insurance commissioner may investigate the applicant for an insurance license and deny it if the applicant has been convicted of: 1. A felony 2. A misdemeanor denounced by the insurance code 3. Any misdemeanor 4. A public offense having as one of its elements a fraudulent act or an act of dishonesty A. 1&2 B. 1, 2 & 3 C. 1, 2 & 4 D. All of the above 65

66 An applicant for an insurance license had another professional license revoked. What would the commissioner most likely do? A. Nothing, it did not involve insurance B. Deny the application without a hearing C. Take it under advisement D. Deny after a hearing 66

67 All of the following are valid reasons for the insurance commissioner to deny the application for an insurance license except: A. Applicant does not have a good business reputation B. Applicant is not properly qualified to perform C. Applicant does not have a California business address D. Applicant lacks integrity 67

68 An applicant for an insurance licenses does not fully qualify for and receive that license before the pending application expires. If he still desires to be licensed, what must he do? A. File another application only B. Pay only the fees C. Pay all feed again and pay a penalty fee D. File another application and pay fees again 68

69 If an applicant has filed an incomplete application with the commissioner of insurance, what must he do: A. Wait and re-file after 60 days B. Submit an amended application with any amended filing fees C. Start the process over by filing a new application D. Ask for a hearing 69

70 “Transact” as applied to insurance includes: 1. Solicitation 2. Negotiations before execution of a contract of insurance 3. Execution of a contract of insurance 4. Transaction of matters after the execution of the contract and arising out of it A.2 and 4 B. 1, 2, and 3 C. 1, 3, and 4 D. All of the above 70

71 When may an applicant for a license transact insurance? A. When the insurance company appoints them B. When the license is issued and the applicant has been appointed by an insurer C. They can transact once they pass the exam D. when the exam is passed and all fees are paid 71

72 When may an agent transact for an insurance company? A. When the agent receives the action notice of appointment B. When the commissioner receives the notice of appointment C. When the appointing company signs the action notice of appointment. D. At the beginning of the fiscal year. 72

73 What must an insurer who accepts an application from an agent who is not appointed by that company do, if they subsequently will issue a policy based on that application? A. The agent must become an employee of that insurer within 30 days or re-submit the application B. Add the agent’s name on the company’s list of approved agents C. Send the agent an employment approval notice within 30 days of policy issuance D. Forward to the insurance commissioner a notice of appointment within 14 days of receipt of the application 73

74 Effective Jan 1, 2011, A new Life/Health or Property & Casualty Agent will need to take continuing education courses to renew their license. The requirement is: A. 24 hours per two-year license term B. 25 hours per year during the first four 12-month intervals C. 30 hours during the first 24-month intervals D. No continuing education is required 74

75 If you do not receive a notice of renewal for your license: A. You have a 3 month grace period B. You are excused from renewal C. It is your responsibility to renew whether or not you receive a notice D. Your license will renew automatically and you will be billed later within a certain time 75

76 When a licensed agent submits a renewal application with applicable fees on or before the expiration date: A. The agent will be able to transact if a receipt for payment is returned prior to the license expiration date B. The agent will be able to transact for up to 60 days after the specified expiration date C. The agent will be able to transact if the agent goes in person to the insurance department to receive a temporary extension of the license D. The agent will be able to continue to transact after a 30-day extension to transact without receipt is requested and approved 76

77 When is a permanent insurance agent’s license, life insurance agent’s license or a solicitor’s license inactive ? A. When it is not renewed B. When no company or employer has an appointment in force for the licensee, but renewal fees are paid C. During a time that the licensee has written only personal or controlled insurance D. Any of the above 77

78 An agent held one appointment with an insurance company. The appointment was terminated. What is correct? A. The license is active until the end of the term B. The license is inactive C. The agent must be re-appointed by the same company D. The agent is required to have another action notice of appointment filed within 30 days 78

79 An agent’s appointment to sell insurance on behalf of an insurer is subject to cancellation if: A. The agent does not renew his license B. The insurer is under investigation for fraud C. The insurer is not admitted D. The agent’s fiduciary account is closed 79

80 If a licensee wants to terminate and surrender his license, what must he do? A. Destroy the original license B. Destroy the original and notify the commissioner C. Deliver the license to the commissioner D. Nothing 80

81 If a licensee wants to terminate his license and the license is in the possession of the insurer or the licensee’s employer, what must he do? A. Tell the employer he wants to terminate the license B. Write the insurer with whom he has an appointment C. Make the surrender by written notice to the commissioner D. Nothing 81

82 If an agent moves, he should advise the commissioner of his change of address: A. Within 90 days of moving B. Within 90 days of licensing renewal C. Immediately D. It is not necessary 82

83 Every licensee must include his license number on his business card in: A. A larger type than the company name B. The same size type as the company name C. A smaller type than any telephone number, address, or fax number D. The same size type, and font, as any telephone number, address, or fax number 83

84 When advertising on the internet in CA, an agent or broker must provide all the following except: A. Name of the licensee B. Office address C. Expiration date of the license D. License number 84

85 When advertising on the internet, all of the following are required except: A. His/her name as it appears on his/her insurance license B. His/her license number C. The state of his/her domicile and principal place of business D. His/her telephone number 85

86 John Jones holds individual licenses as an insurance agent and broker. He employs two solicitors in his agency. Which of these names is acceptable for his use under the regulations adopted by the insurance commissioner? A. John Jones insurance B. John Jones and associates C. John Jones Insurance Services D. All of the above 86

87 Records of an agent or broker must be available to the commissioner: A. At all times B. Only after written notice from the commissioner C. 15 days after the license is issued D. Never Note: Not showing records to the commissioner will result in a misdemeanor 87

88 How long must an agent maintain records sold in CA? A. 10 years B. 6 years C. 5 years D. 2 years 88

89 If an agent fails to provide documentation to the insurance commissioner after already being given a warning, it would result in: A. A felony B. A misdemeanor C. Another warning D. Termination of license 89

90 Records of an agent/broker must be stored in which of the following? A. Primary/principal office B. Any location C. Storage as long as it is approved by the commissioner D. Any of the above 90

91 When working in insurance, in connection with sales or loans, violating the legal provision specified by California law is considered a: A. Felony B. Misdemeanor C. Fraud D. All of the above 91

92 According to the California Insurance Code, the penalty for failure to comply with a Notice of Seizure order is: A. No specific fine. There are just guidelines for the insurance commissioner to follow B. $1,000 flat fine C. $1,000 fine and imprisonment for up to one year D. $1,000 fine and/or imprisonment for up to one year 92

93 In insurance terms, a representation can be considered: A. An absolute fact B. An implied warranty C. An express warranty D. None of the above **note: this is an when an agent gives a statement to the insured 93

94 What is a representation that fails to correspond with its stipulations or assertions? A. Fatal B. Fraud C. Frivolous D. False 94

95 What is an express warranty? A. A fact B. A statement, provision, or promise contained in a document that is signed by the insured. 95

96 If there is an inadvertent misrepresentation of a material fact, what are the options of the injured party? A. Prove that the misrepresentation was material B. As it was inadvertent, the injured party can do nothing C. Rescind the contract D. None of the above 96

97 What can an insurer do when a fraudulent and intentional omission is committed on the part of the insured proving a warranty false? A. Have the insured imprisoned for up to 6 months B. Rescind the contract C. Force the insured to pay a fine D. Force the commissioner to fine and imprison the insured 97

98 When may a representation be withdrawn? A. At any time as long as all parties agree B. It cannot be withdrawn C. Only before the insurance is in effect D. Only after the policy is in effect 98

99 Neglecting to communicate that which a party knows, and ought to communicate, so that the other party may make a sound decision is known as: A. Concealment B. Material information C. Boycotting D. None of the above 99

100 What information can a party to a contract of insurance be allowed not to communicate according to California law? A. Information which the other party already knows B. Information not specifically asked by an agent and company, even if it’s considered relevant C. Information which is material to the contract D. Information which cannot be proven but is material 100

101 Under which circumstances does a party involved in a contract of insurance need to communicate information based solely on his judgment? A. Never B. Only when asked C. only when relevant to the matter in question D. always 101

102 What rule is used to determine the importance of a representation? A. The law of adhesion B. The law of aleatory contracts C. The materiality of concealment D. The insurable interest standard 102

103 In the California Insurance Code there is a definition that reads… “a person shall not make any representation or comparison of insurers or policies to an insured which is misleading, for the purpose of inducing him to lapse, forfeit, change or surrender his insurance on a temporary or permanent plan.” This is called A. Misrepresentation B. Twisting C. Concealment D. Opinion 103

104 Any transaction that involves purchasing a life insurance policy and terminating an existing policy is known as: A. Replacement B. Reinsurance C. Reinstatement D. Assignment 104

105 The purpose of replacement rules regarding life insurance is: A. To protect the interest of insurers against fraud B. To protect the rights of the insurance agent to collect commissions C. To protect the interests of life insurance purchasers by establishing standards of conduct to be observed in replacement transactions D. None of the above 105

106 An agent who replaces an existing life insurance contract must do all of the following except: A. Submit a copy of the replacement notice to the applicant B. Submit a copy of the replacement notice to the existing insurer C. Submit a copy of the replacement notice to the replacing insurer D. Obtain a signed statement from the applicant as to whether insurance is to be replaced 106

107 Section 770 of the California Insurance Code: A. Gave the states the right to regulate the majority of the insurance industry at the state level B. States that no one engaged in the business of financing real or personal property can make such financing agreement contingent upon the placing of insurance business with a specified agent or broker C. Required Ocean Marine policies to provide Worker’s Comp D. None of the above 107

108 In the state of California: A. Twisting is an approved practice B. Providing free insurance coverage as an inducement for completing the transaction is not legal C. Life and health premiums may not be related to the age of the insured D. A life solicitor’s license has the same licensing requirements as a life agent’s license 108

109 A developer has arranged with an insurance company to offer a free annuity to help sell his retirement homes in Sun City. This practice is: A. Illegal B. Unethical C. OK D. Not regulated 109

110 In order to sell Mr. Smith a policy, an agent splits her commission with him. This practice is known as: A. Twisting B. Rebating C. Replacement D. Misrepresentation 110

111 An act which requires a reporting agency to take action of a consumer complains about inaccurate information is: A. EPO B. Medical Information Act C. Fair Credit Act D. Cobra 111

112 One of the goals of the Information and Privacy Act is to make sure personal information collected is handled in confidence and not given to those who have no right to use it. A. True B. False 112

113 The insurance company is required to disclose to a client what information it is gathering for market research even though it is partly used for insurance purposes. A. True B. False 113

114 When an agent accepts premium from the insured and uses the money for personal gain, it is considered: A. Theft B. Fraud C. Concealment D. Misrepresentation * ”Commingling”, and “Misappropriation of funds” are theft too. 114

115 All of the following might make an agent act unethically except: A. Being mostly concerned about earnings B. Associating with unethical agents C. Being pressured as production is not up to quota D. Placing clients’ interests first 115

116 Which of the following is not a prohibited practice? A. Advising a client not to obtain the services of an attorney B. An insurance organization advising its members not to place business with an insurer offering a line of insurance directly to the public C. Advising a client of the statute of limitations D. All of the above 116

117 Which of the following would not be an unfair trade practice? A. Advising clients not to obtain the services of an attorney B. Advising clients not to place business with a company offering a line of insurance directly to the public C. Charging males and females different rates for life or annuity contracts according to the mortality table that is segregated by sex D. Advising clients that an insurer is protected from insolvency by the California Insurance Guarantee Association 117

118 All of the following are considered unfair claim practices except: A. Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed and submitted by the insured B. Misrepresenting to claimants any pertinent facts or policy provisions which relate to the coverage at issue C. Failing to acknowledge and act reasonably promptly on communications relative to policy claims D. Directly advising a claimant to obtain the services of an attorney 118

119 The code allows insurers to ask the birthplace of an applicant if it is used to identify and not discriminate against the applicant. A. True B. False 119

120 One of the major responsibilities of an agent is to help the underwriter reduce risks and select risks to insure. A. True B. False 120

121 Male and female premium rates can differ according to the mortality table and is allowed by the code. A. True B. False 121

122 An insurer may not refuse to insure, refuse to continue to insure, or limit the amount, extent or kind of coverage available, or charge a different rate for the same coverage of a physically or mentally impaired person except when based on sound actuarial principles or related to actual and reasonable anticipated experience. A. True B. False 122

123 According to the code, all insurers must maintain a department to investigate: A. Possible abuses of rating laws B. Possible arson C. Possible fraudulent claims from insureds D. Possible fraud by insurers 123

124 According to the CA Department of Insurance, committing fraud is considered: A. A misdemeanor B. A felony C. A forgiveness D. An infraction 124

125 According to the California Insurance Code, what must appear on a Notice of Claim form given to an insured? A. Telephone number of the DOI B. Information regarding the Arson Bureau C. Information regarding an Insurance Claims Analyst Bureau D. A notice stating that any person who knowingly presents a false or fraudulent claim is guilty of a crime and may be subject to fines and confinement in state prison 125

126 The code prohibits pretext interviews. An exception would be: An adjuster in trying to settle a claim does a pretext interview as there is a substantial reason to suspect fraud. A. True B. False 126

127 Any person who meets with a senior at the seniors home, is required to deliver a notice in writing to the seniors home. They must receive this notice how many hours prior to the initial meeting? A. 12 hours prior to the meeting B. 6 hours prior to the meeting C. No notice is required D. No less than 24 hours Note : The notice must be in 14-point type 127

128 A binder is: A. A temporary agreement between the injured party and the insurance company B. A temporary agreement between the insured and the agent C. A temporary agreement between the insurer and the agent D. A temporary agreement between the insured and the insurance company 128

129 A binder provides temporary coverage until a policy is issued. The amount a binder can be written for is: A. $10,000 B. $100,000 C. $500,000 D. $1,000,000 *note: binders are good for up to 90 days 129

130 According to the Code, a Binder is deemed a valid insurance policy for the purpose of providing that the insured has coverage for each of the following types of insurance except: A. Life insurance B. Marine insurance C. Auto insurance D. Fire insurance *Life has no binders 130

131 An insurance company must submit rates to the DOI to have them approved before they can use them. This is called: A. Prior approval B. Reinsurance C. underwriting D. Coinsurance 131

132 Worker’s Comp 132

133 Which of the following is true about workers compensation? A. It is regulated by the state and federal government B. It is regulated by the federal government C. It is regulated by the state government D. It is regulated by the department of corporations 133

134 In a state where employers only can by workers compensation insurance through a state run fund, it is referred to as: A. Pre-determination B. monopolistic C. Competitive D. None of the above 134

135 Generally, what is required by the workers compensation law? A. It is compulsory for employers to secure liability for worker’s compensation B. Employers are required to carry a worker’s compensation policy issued by an insurance company C. Employers of injured workers are required demonstrate that they are able to pay damages to the insured party or his estate D. A standard form workers compensation policy is required 135

136 Benefits under worker’s compensation would include: A. Rehabilitation B. Medical costs C. Loss of time D. All of the above 136

137 Worker’s compenation will not provide coverage for which of the following? A. A salesperson travelling to meet with a client B. Injuries arising from working in a factory C. A worker getting a common cold D. All of the above 137

138 A safe place to work, safe equipment, reasonably competent fellow workers, and enforement of safety laws all apply to: A. Common law obligations B. Common law defense C. Tort law D. Defense against neglegence 138

139 Under workers compensation medical payments, which is correct? A. There is a time limit for medical payments but no dollar limit B. There is a dollar limit but no time limit C. There is both a time limit and a dollar limit D. There is no time or dollar limit on medical payments 139

140 When a person is eligible to receive worker’s compensation benefits, what percentage of his salary would he receive? A. 50% B. 66 2/3% C. 75% D. 80% 140

141 Under the workers compensation laws, which of the following defines an employee? A. Any person in the service of an employer only under written contract and only when lawfully employed B. Any person in the service of any employer under any appointment, expressed, implied, oral or written, and lawfully employed C. Any person in the service of an employer under any appointment, expressed or implied, oral or written, whether lawfully or unlawfully employed D. Any volunteer, except relatives, to the second degree, under any appointment expressed, or implied, oral or written 141

142 A movie company concerned about injuries to its actors would protect them with: A. Surety B. Worker’s Compensation C. General Liability D. Group health insurance 142

143 Worker’s Compensation laws require the employer to pay benefits to a worker who is injured in the course of his employment. The employee is covered A. Only if the injury is the result of the employer’s fault or negligence B. If the injury is the fault or negligence of the employer or any other employee C. Without regard to fault of negligence of the employer or any other person. D. None of the above 143

144 An employee tripped over his shoelace at work and suffered an injury. This injury would be covered by: A. Commercial general liability B. Disability insurance C. Worker’s Compensation D. Premises and operations coverage form 144

145 Worker’s Compensation will cover: A. Illnesses that are common for people to get, such as colds or flu B. Injury while driving to work C. Worker who is hit by a car on his lunch break D. Injury or illness in the course of working 145

146 Worker’s Compensation does not cover: A. Illnesses that are common for people to get such as colds or the flu B. A work injury off the company premises C. A diseases picked up as a result of work D. An injury due to the employee’s negligence 146

147 Part 1 of Worker’s Compensation will cover: A. Retirement benefits B. All sums the insurer is legally obligated to pay under common law C. All sums the insurer is required to pay by state law D. All costs of the employee required by state fund 147

148 Worker’s Compensation Part 1 covers: A. Insurer’s promise to pay all compensation and other benefits required by state law for a work related accident B. The employer’s liability C. The insured’s obligation to inform the insurer at once and provide all necessary information D. Premiums the insured must pay and the necessary records that must be kept for premium computation 148

149 Under Worker’s Compensation, a disability that is a permanent physical impairment leaving the individual incapable of performing the previous regular occupation, but capable of performing some other type of work is a: A. Permanent total disability B. Permanent partial disability C. Temporary total disability D. Temporary partial disability 149

150 A woman has a non-occupational disability policy. While driving an auto for her employer, she is in an auto accident and had to be hospitalized. Her non-occupational policy refuses to pay as: A. non-occupational policies do not dover the individual while in an auto B. non-occupational policies will not pay benefits if the individual has to be hospitalized C. The non-occupational policy does not pay, as this situation should be covered by Worker’s Compensation D. non-occupational policies should cover this situation 150

151 Which of the following are true about the state compensation insurance fund? A. It is a public enterprise that competes with other carriers B. It regulates the rates C. It sets the standards for the insurers D. None of the above 151

152 To what does 24-hour coverage refer? A. It is medical coverage which provides around the clock protection B. It is the joint issuance of a worker’s compensation policy with a disability insurance policy or other medical coverage for non- occupational injuries and illnesses C. It refers to the fact that a person needs 24 hour nursing care D. It means that there is a waiting period of 24 hours before coverage begins 152

153 Twelve months ago a man slipped and fell down a flight of stairs at his workplace. As a result he has a paralysis from which he is not expected to recover. This 46 year old person will probably be able to collect disability income benefits from: A. Medicare B. Worker’s Compensation C. Medicaid D. Social Security 153

154 If a partially disabled worker returns to work for a new employer and sustains an injury similar to the previous injury, which of the following would be true with respect to the second injury fund? A. The previous employer would be required to pay the benefits for the second injury. B. The current and previous employers would share in the costs of the benefit C. The current employer would pay the benefits for the current injury and the second injury fund would pay for the difference between the partial and total disability benefits. D. None of the above 154


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