EXAMFX Regulation and Ethics 2 — Questions and Answers
Question 1: An insurance producer who knowingly submits a false claim on behalf of a client is guilty of:
- Misrepresentation
- Insurance fraud (Correct answer)
- Churning
- Rebating
Correct answer: Insurance fraud
Submitting a false claim is insurance fraud, a criminal offense that can result in license revocation and prosecution.
Question 2: Which of the following best describes the concept of 'twisting' in insurance?
- Selling a policy to replace a competitor's policy using misrepresentation (Correct answer)
- Recommending the same carrier to multiple clients
- Charging a higher premium than the filed rate
- Replacing an outdated policy with a newer, better policy
Correct answer: Selling a policy to replace a competitor's policy using misrepresentation
Twisting is inducing a policyholder to replace existing coverage through misrepresentation or incomplete comparisons.
Question 3: A producer's license can be suspended without a prior hearing in cases involving:
- A single consumer complaint
- Immediate public harm or a court order (Correct answer)
- Failure to meet continuing education requirements
- A minor administrative violation
Correct answer: Immediate public harm or a court order
Regulators may suspend a license summarily without a hearing when there is an immediate threat to public safety or a court order requires it.
Question 4: Which regulatory body sets minimum standards for insurance policy provisions at the national level by drafting model laws?
- Federal Insurance Office (FIO)
- National Association of Insurance Commissioners (NAIC) (Correct answer)
- Securities and Exchange Commission (SEC)
- Department of Labor (DOL)
Correct answer: National Association of Insurance Commissioners (NAIC)
The NAIC drafts model laws and regulations that states may adopt to create uniformity across the insurance industry.
Question 5: An applicant gives a producer a cash premium payment. The producer is required to:
- Deposit the funds into a personal account temporarily
- Issue a written receipt and remit funds to the insurer promptly (Correct answer)
- Hold the funds until the policy is approved
- Return the cash and require a check or card payment
Correct answer: Issue a written receipt and remit funds to the insurer promptly
Producers must provide a receipt for cash premiums and remit them to the insurer in a timely manner as required by fiduciary duty.
Question 6: Which of the following situations constitutes a conflict of interest for an insurance producer?
- Representing multiple insurers in different product lines
- Recommending a policy that pays a higher commission over one that better fits the client's needs (Correct answer)
- Disclosing compensation arrangements to a client
- Completing annual continuing education requirements
Correct answer: Recommending a policy that pays a higher commission over one that better fits the client's needs
Placing personal financial gain above a client's best interest is a conflict of interest and an ethical violation.
Question 7: Under most state insurance laws, how long does an insurer typically have to investigate and respond to a claim after receiving proof of loss?
- 10 business days
- 30 days (Correct answer)
- 60 days
- 90 days
Correct answer: 30 days
Most states require insurers to acknowledge, investigate, and respond to claims within 30 days of receiving proof of loss, though specifics vary.
EXAMFX Regulation and Ethics 2
An insurance producer who knowingly submits a false claim on behalf of a client is guilty of: