Insurance MCQ

Which of the following authorities ultimately decides whether an applicant is in good enough standing to receive a license? A) Governor B) Commission C) NAIC D) Federal Assocation of Insurers Answer: B) Commission

All else being equal, which of the following will not be considered unfair discrimination by insurers? A) Cancelling individual coverage based on the insured's marital status B) Assigning different risk classifications to applicants based on ethnicity C) Discriminating in benefits and coveragees based on the insureds habits and lifestyle D) Charging applicants with similar health stories different premium rates based on their ethinicy Answer: C) Discriminating in benefits and coveragees based on the insureds habits and lifestyle

To what organization must all admitted insurers belong? A) The Virginia Insurance Department Association B) Life, Accident and Sickness Insurance Guaranty Association C) The Virginia Insurers Association D) The Commissioner's Association Answer: B) Life, Accident and Sickness Insurance Guaranty Association

Two individuals are in the same risk and age class; yet, they are charged different rates for their insurance policies due to an insignificant factor. What is this called? A) Discrimination B) Law of Large Numbers C) Misrepresentation D) Adverse selection Answer: A) Discrimination

Who is protected from financial loss by the Life, Accident and Sickness Insurance Guaranty Association? A) Policyholders B) The State C) Insurance companies D) Insurance producers Answer: A) Policyholders

Which of the following statements is incorrect with regard to information collection Privacy Protection? A) Insurance agents must provided notice of their information practices to applicants and policyholders, no later than the time the policy is delivered. B) If information is collected from a source other than the applicant or public record, notice must be given at the time the information is collected C) A notice is not required in the case of policy renewal if a notice has been provided with the prior 24 months D) Insurance institutions and agents must provide notice of their information practices to applicants and policyholders, no later than 30 days after a policy is delivered, as long as the free-look period has no lapsed. Answer: D) Insurance institutions and agents must provide notice of their information practices to applicants and policyholders, no later than 30 days after a policy is delivered, as long as the free-look period has no lapsed.

Which of the following best describe an unfair trade practice of defamation? A) Making derogatory oral statements about another insurer's financial condition B) Assuming the name and identity of another person C) Issuing false advertising material D) Refusing to deal with other insurers A) Making derogatory oral statements about another insurer's financial conditionAnswer: 

Tim and Tom are twins. When they applied for life insurance from Company A, the insurance company found that while neither of them smoked and both had a very similar lifestyle, Tim was in a much stronger financial position that Tom. Because of this, the company charged Tim a higher rate for his insurance. This practice is called A) Post underwriting B) Discrimination C) Twisting D) Interdependent Sale. Answer: B) Discrimination

An insurer publishes intimidating brochures that portray the insurer's competition as financially and professionally unstable. Which of the following best describes this act? A) Illegal under any circumstance B) Legal, provided that the information can be verified C) Illegal until endorsed by the Guaranty Association D) Legal, provided that the other insurers are paid royalties for the usage of their names Answer: A) Illegal under any circumstance

An agent offers his client free tickets to a sporting event in exchange for the purchase of an insurance policy. The agent is guilt of A) Controlled business. B) Rebating. C) Coercion D) Twisting Answer: B) Rebating.

Rebating is an unfair trade practice and is regulated by law. All of the following would be considered to be rebating EXCEPT A) An agent offers to share his commission with a policyholder B) An agent offers tickets to a baseball game as an inducement to buy insurance C) An agent uses misrepresentation to convince a person to cancel an existing policy and take a new policy from him D) An agent offers the use of his lake house to person as an inducement to buy Answer: C) An agent uses misrepresentation to convince a person to cancel an existing policy and take a new policy from him

Using misrepresentation to convince a person to cancel an existing policy and buy a new one is called "twisting" All of the following actions can be described as twisting EXCEPT A) Embellishing the terms of the proposed policy in order to convince the insured to switch B) Making an incomplete comparison between the existing and proposed policies C) Explaining to client the advantage of permanent insurance over term and suggesting changing policies D) Misrepresenting the terms and conditions of the existing policy to make the new one more attractive. Answer: C) Explaining to client the advantage of permanent insurance over term and suggesting changing policies

On its advertisement, a company claims that it has funds in its possession that are, in fact, not available for the payment of losses or claims. The company is guilt of A) Misrepresentation B) Concealment C) Unfair claim practice D) Rebating Answer: A) Misrepresentation

A licensed agent must file a report with the Insurance Commission regarding all of the following EXCEPT A) The agent files divorce proceedings B) The agent is fined by the IRS C) The agent is found guilty of assault D) The agent is convicted of driving in another state under the influence of alcohol. Answer: A) The agent files divorce proceedings

All of the following must be included in the report to the Commissioner after any felony conviction or administraive action is taken against a licensed insurance agent EXCEPT A) A copy of the agent's license B) Consent to the order C) General facts and circumstances surrounding the conviction/action D) Specific facts and circumstances surrounding the conviction/action Answer: A) A copy of the agent's license

Which of the following is NOT considered a misrepresentation as it pertains to unfair trade practices? A) Stating that the competitors will arbitrarily increase their premiums each year B) Making comparisons between different policies C) Stating that the insurance policy is a share of stock D) Exaggerating the benefits provided in the policy. Answer: B) Making comparisons between different policies

When an insurance producer is to charge an administrative fee to an insured, all of the following must be done EXCEPT A) A schedule of fees must be posted in the office B) A copy of any fee disclosure must be provided to the insured. C) The agent must disclose the fees in writing D) The insured must provide a signature on any fee disclosure. Answer: B) A copy of any fee disclosure must be provided to the insured.

Who is legally required to keep records pertaining to insurance transactions? A) All licensees B) Insureds C) Agencies and insurer only D) The Commission Answer: A) All licensees

At what time may the Insurance Commissioner inspect records pertaining to insurance transactions? A) At any business time in 3 years immediately following the relevant transaction B) At least 3 years after the transaction C) At any business time in the 5 years immediately following the relevant transaction D) At least 5 years after the transaction Answer: A) At any business time in 3 years immediately following the relevant transaction

In which instances may 3 licensees share Commissions? A) When all 3 are licensed for the same line of insurance from which the commission comes B) When at least 2 are licensed for the appropriate line of insurance from which the commission comes C) Three licensees may never share a commission D) Sharing a commissions is at the discretion of the insurer Answer: A) When all 3 are licensed for the same line of insurance from which the commission comes