INS. EXAM: TEXAS STATUTES AND RULES COMMON TO

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INS. EXAM: TEXAS STATUTES AND RULES COMMON TO

LIFE AND HEALTH INSURANCE

Actual Qs and Ans - Expert-Verified Explanation -Guaranteed passing score -68 Questions and Answers

-Format: Multiple-choice / Flashcard

Question 1: Commission

Answer:

payment to the agent by the insurance company for placing insurance, usually percentage of the policy premium

Question 2: Mutual companies

Answer:

owned by the policy owners and issue participating policies; policy owners are entitled to dividends, which, in the case of mutual companies, are a return of excess premiums and are therefore nontaxable; dividends are generated when the premiums and the earnings combined exceed the actual costs of providing coverage, creating a surplus; dividends are not guaranteed

Question 3: Foreign insurer

Answer:

an insurance company that is incorporated in another state or territorial possession (such as Puerto Rico, Guam or American Samoa); for example, a company chartered in California would be a foreign company within the state of New York

Question 4: All of the following could be considered rebates if offered to an insured in the sale

of insurance EXCEPT:

Answer:

• An offer to share in commissions generated by the sale

• Dividends from a mutual insurer

• An offer of employment

• Stocks, securities, or bonds

Answer: B;

Dividends paid to policy holders of a mutual insurer are not considered to be a rebate because the policy specifies that they might be paid

Question 5: Unfair/Prohibited Trade Practices (Marketing Practices)

Answer:

insurers and insurance producers may not engage in any trade practice that is defined as, or determined to be, an unfair method of competition or an unfair or deceptive act of practice in the business of insurance; knowingly commit an unfair method of competition or to engage in such actions with enough frequency that the commission of unfair marketing practices indicates a general business practice

Question 6: Location of incorporation

Answer:

Insurance companies are classified according to this (domicile); regardless of where an insurance company is incorporated, it must obtain a Certificate of Authority before transacting insurance within the state

Question 7: General Powers and Duties of Commissioner of Insurance

Answer:

chief executive and administrative officer of the state Department of Insurance; must be a citizen of the state of Texas, be well informed and qualified in the field of insurance and insurance regulation, and have at least 5 years of experience in the administration of business or government or as a practicing attorney or certified public accountant; appointed by the Governor for a 2-year term ending on February

1 of each odd-numbered year; has the following broad powers and duties:

• Regulate the internal affairs of the Department of Insurance

• Prescribe forms and procedures to be followed in proceedings before the Department

• Aid in the interpretation of any state insurance law

• Issue insurance licenses and certificates of authority

• Enforce penalties, fines, denials, suspensions or revocations of licensees and certificates of authority

Question 8: Transacting Insurance

Answer:

includes any of the following (by mail or any other means):

• Solicitation
• Negotiations
• Sale (effectuation of the contract of insurance)
• Advising an individual concerning coverage or claims

Question 9: Important Dollar Amounts

Answer:

-$50: Maximum agent licensing fee

-$25,000: Maximum fine for violating the Insurance Code

-$2,500: Fine for willful violation of the Fair Credit Reporting act

Question 10: 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?

Answer:

Unfair claims settlement practice; If an insurer knowingly or frequently commits an act that neglects or deceives an insured, its behavior falls under the category of unfair claim settlement practice. In this instance, there is no reason why the insurer was warranted in waiting to process the claim

Question 11: Boycott, Coercion, and Intimidation

Answer:

illegal to be involved in any activities of these that is intended to restrict fair trade or to create a monopoly; would include unfair behavior that influences not only clients, but competing agents and brokers Coercion is to require, as a condition to a loan, that the applicant purchase insurance from a specific insurer

Question 12: Commissioner

Answer:

the head of the State Department of Insurance

Question 13: Restitution

Answer:

restoration to the original condition or repayment

Question 14: Hearings

Answer:

if the commissioner suspects that an insurer or its agent has committed a violation or is engaged in an unfair trade practice, the commissioner may issue a statement of charges and hold a hearing for any purpose deemed necessary

Question 15: Coercion

Answer:

forceful act or threat aimed to influence a person to act against his or her will; an unfair trade practice in which an agent uses physical or mental force with the intent of inducing an applicant to purchase insurance

Question 16: Rebating

Answer:

any inducement offered to the insured in the sale of insurance products that is not specified in the policy; both the offer and acceptance of a rebate are illegal; may include, but are not limited to: -Rebates of premiums payable on the policy -Special favors or services -Advantages in the dividends or other benefits -Stocks, bonds, securities, and their dividends or profits

Question 17: Misrepresentation

Answer:

committing the illegal act of issuing, publishing, or circulating any illustration or sales material that is false, misleading, or deceptive as to policy benefits or terms, the payment of dividends, etc.; also refers to oral statements