Deck 5: Insurance Occupations

Question 1

All of the following statements about the claims handling function are true except:

A)overly liberal claims settlement procedures may be as bad as stingy claims settlement procedures
B)claims settlement problems are generally more complex in property and liability insurance than in life insurance
C)independent adjusters only work for small insurance companies
D)negotiation with the claims adjuster is often the only contact the insurance buyer has with the insurer, besides the selling agent

Answer 1

C

Question 2

Which of the following is not a duty of an insurance agent?

A)duty to make a profit in the long run for the insurance agency and the insurer
B)carefully handling all money and keeping proper records
C)carefully conveying all relevant information
D)duty not to enrich himself by self dealing at the principal's expense

Answer 2

A

Question 3

Which of the following was not listed in the text as a duty of an agent?

A)loyalty to the principal
B)carefully handling all money and keeping proper records
C)carefully conveying all relevant information
D)duty to select profitable business for carriers

Answer 3

D

Question 4

The independent agent system

A)is used by direct writing companies
B)uses agents who own their own business
C)is used only in life insurance
D)requires agents to be paid a flat salary

Question 5

Jerry works as a claims adjuster. He is hired by insurance companies on a contract basis to adjust claims when they need his services. What kind of claims adjuster is Jerry?

A)Independent
B)Public
C)Private
D)Direct

Question 6

Direct writing:

A)describes the distribution system used by independent agents and brokers in the property/liability area
B)is used only by life insurers
C)is an expensive way to distribute insurance to high income people
D)describes a system of insurance company distribution using employee/agents

Question 7

Insurance brokers are:

A)compensated by a flat salary
B)legally, agents of the insurance company
C)only used in life insurance
D)legally, agents of the insurance consumer

Question 8

The primary difference between an insurance agent and an insurance broker is:

A)their compensation scheme
B)the parties they each legally represent
C)the fringe benefits their employers provide
D)there is no practical or legal difference between them, other than their titles.

Question 9

The first step in the underwriting process is:

A)the desk underwriter review
B)the agent's field appraisal
C)the general agent's confidential report
D)the inspection report from Equifax or similar investigator

Question 10

Which of the following types of claims adjusters do not represent insurance companies?

A)public adjusters
B)the insurance agent
C)the independent adjustment bureau
D)company adjusters

Question 11

Ramone works as a claims adjuster. He is hired by insureds to evaluate their claims when they need his services. What kind of claims adjuster is Ramone?

A)Independent
B)Public
C)Private
D)Reserve

Question 12

Which of the following statements about insurance brokers is (are)true?

A)They legally represent the insurance company
B)They have the legal power to bind the insurance company and can provide coverage for their insureds immediately
C)They have the right to approach a variety of insurers when searching for a particular product or coverage
D)Both a and b are true

Question 13

Which of the following is not a duty of the agent?

A)no self dealing at principal's expense
B)forwarding all premiums to the principal
C)not submitting any type of business the insurer does not want
D)to guarantee the insurance buyer that the insurer will write them a policy at an affordable rate

Question 14

Fergie is a salaried claims adjuster who works exclusively for Mutual of Kentucky Insurance. What kind of claims adjuster is Fergie?

A)Independent
B)Public
C)Private
D)Direct

Question 15

In Jasons agency contract,the insurer authorizes him to sell insurance policies. What type of authority is this?

A)actual
B)express
C)incidental
D)both a & b

Question 16

Loss adjusters perform all the following functions except:

A)investigate claims to determine if fraud is involved
B)negotiate with the insured on the amount of damage claims
C)recommend denial of claims
D)act as the company's lawyer if the case goes to court

Question 17

The independent agency system:

A)is doomed because agent's commissions are too high relative to direct writers
B)means the agent rather than the insurance company "owns" the business
C)is not a good career path for most college graduates because the system is doomed to extinction
D)is growing rapidly to the point of eliminating the direct writers

Question 18

All the following are true about underwriting except:

A)a major purpose of underwriting is to reduce adverse selection against the insurance company
B)fair rates should be charged so that each group of insureds is not subsidized by other groups
C)the underwriter should select only those insureds that are expected to have no losses
D)the underwriter makes decisions based on criteria established by the company management

Question 19

One duty of the insurance company actuary is to:

A)handle claims when they involve property exposures and losses in multiple states
B)manage all contract negotiations when the agency agreement is signed by the agent and company
C)determine premium rates and classification schemes for the underwriters to apply
D)eliminate exposures from the pool that are going to have a loss

Question 20

Which of the following is not a duty of an actuary?

A)calculate rates
B)calculate dividends
C)calculate loss reserves
D)identify individual exposures that are going to have a loss

Question 21

"Ratifying" someone's actions is essentially the same as:

A)scolding, but not punishing, the person who committed the action
B)punishing the person who committed the action
C)condoning and encouraging future actions of a similar nature
D)accepting the consequences of the person's action

Question 22

If an applicant for insurance informs his broker of all material facts regarding the risk,and the broker does not pass those facts along to the insurer,it's possible that the insurer can legally deny any subsequent claim.
.

Question 23

When an insurer @ratifies an agents actions,it:

A)disciplines the agent for misconduct
B)rewards the agent for noble service
C)approves those actions
D)terminates all contractual relations with the agent

Question 24

Peggy's insurance agent,Skip Towne,convinces her to replace her existing health insurance policy with one that he claims is better. Peggy tells him that she will be glad to replace the policy if the coverage provided under the new one is the same or better than that provided by the existing policy. Skip assures her that coverage is equal or better under the new contract,so she changes policies. Three months later,when she becomes pregnant,the insurer denies all her claims for benefits. At that time,Peggy learns that her new policy does not provide maternity benefits,although her previous policy did. Based on information contained in the text,who should Peggy hold legally responsible for her lack of coverage?

A)Skip Towne
B)Her new insurer
C)Her previous insurer
D)Bests Reports

Question 25

Quaniqua is an insurance agent who sells the products of over 20 different insurance companies. What type of agent is she?

A)exclusive
B)direct-writing
C)independent
D)soliciting

Question 26

In 2004,the attorney general of New York accused insurance brokers of:

A)poor financial condition that could lead to insolvency
B)bid rigging
C)covering up investments in illegal securities
D)all of the above

Question 27

Which of the following pieces of information would be the LEAST useful to a property insurance underwriter?

A)age of the property owner
B)age of the property
C)use of the property
D)what the surrounding properties are like

Question 28

Simpson is an employee of United of Nowhere Insurance. He is also an agent for them. Based on these facts,what type of insurance company MUST United of Nowhere be?

A)Direct writer
B)Life and health
C)Stock
D)Property and casualty

Question 29

Denny Crane was an agent for Mutual of Florida Insurance,but his agency contract was recently revoked. One of his clients,Shirley Schmidt,has not yet been informed that he no longer represents Mutual of Florida. She drops by his office to deliver a premium payment,which he accepts and deposits into his own account. When Mutual of Florida does not receive Shirley Schmidt's premium,it sends her a cancellation notice. Before receiving her cancellation notice,she suffers a loss and expects Mutual of Florida to pay her claim. What will likely happen in this scenario?

A)Mutual of Florida will likely have to pay the claim
B)Mutual of Florida will not have to pay the claim, but Denny Crane likely will
C)Neither Mutual of Florida, nor Denny Crane, will have to pay the claim
D)The claim will be paid by the court, and it will then sue Mutual of Florida

Question 30

The MIB is most helpful to which of the following professionals?

A)life insurance agent
B)life insurance underwriter
C)property insurance agent
D)secret defenders of the galaxy

Question 31

In 2004,insurance brokers in New York were accused of violating a duty to their clients (insurance buyers). What was that duty?

A)loyalty to the buyer
B)no self-dealing at the buyer's expense
C)full disclosure to the buyer about the insurer's financial condition
D)full disclosure of all the broker's investment interests in insurers

Question 32

In Austin's agency contract,the insurer authorizes him to sell insurance policies,but does not specifically authorize him to make telephone calls to prospective clients. He makes such calls anyway. Does he have the authority to make these calls,and if so,what type of authority is this?

A)No (he has no such authority)
B)Yes, and it is express authority
C)Yes, and it is incidental authority
D)Yes, and it is apparent authority

Question 33

The insurance company accountant must apply what set of accounting principles when creating insurer financial statements for the state regulators?

A)Generally Accepted Accounting Principles
B)Statutory Accounting Principles
C)Both of the above
D)International Accounting Standards Board principles

Question 34

Because of the Gramm-Leach-Bliley Act:

A)agent licensing requirements must be uniform in all states
B)agent licensing requirements will continue to be different across state lines
C)agents will no longer have to be licensed to sell insurance
D)agents selling variable annuities will no longer have to be licensed by the NASD

Question 35

Monah Lott is an agent for Mutual of Oregon Insurance. Monah has been strictly prohibited from accepting premium payments from his clients;they are instead supposed to remit payments directly to the insurer. Mutual of Oregon sends Venus Planet a renewal notice with a premium invoice,and nowhere on the invoice does it tell her that she cannot remit payment to her agent. To save herself a postage stamp,she drops the payment off at Monahs office. Monah accepts the payment,and puts it in her own account. When Mutual of Oregon does not receive Venuss premium,it sends her a cancellation notice. Before receiving her cancellation notice,she suffers a loss and expects Mutual of Oregon to pay her claim. What will likely happen in this scenario?

A)Mutual of Oregon will likely have to pay the claim
B)Mutual of Oregon will not have to pay the claim, but Monah Lott likely will
C)Neither Mutual of Oregon, nor Monah Lott, will have to pay the claim
D)The claim will be paid by the court, and it will then sue Mutual of Oregon

Question 36

Brokers generally stand in the same position as life insurance agents with respect to the legal power to bind the insurer to a life insurance contract.

Question 37

An insurance broker legally represents the insurance consumer

Question 38

Mathematicians specializing in insurance statistics are called "actuaries."

Question 39

Why is the power to bind life insurance contracts not given to agents?

A)agents are not capable of evaluating the risks they deal with
B)to minimize fraud and misunderstanding
C)because the agents represent the insurance buyers and not the insurance companies
D)all of the above

Question 40

At the present,most insurance sold over the internet is:

A)illegal
B)personal lines coverage
C)small business coverage
D)expensive

Question 41

Legally,life insurance agents are not employees of the companies they represent.

Question 42

Many insurers sometimes use loss adjusters who are not employees of the company.

Question 43

What is the difference between an agent and a broker?

Question 44

Four states do not require people who sell insurance to be licensed.

Question 45

The Medical Information Bureau maintains information on people who have taken medical examinations in connection with the purchase of life insurance.

Question 46

Brokers generally stand in the same legal position as agents with respect to the power to bind the insurer to a property insurance contract.

Question 47

Explain what a direct writer company is. Explain what the independent agency system is.

Question 48

Insurance agents must never give clients legal advice.

Question 49

What is the relationship between the underwriter and the actuary? How do they interact?

Question 50

Most states require licensed insurance agents to be at least age 18,to have good morals,and to pass an examination.

Question 51

Consumers are not allowed to inspect their personal Medical Information Bureau files.

Question 52

What are the steps in the loss adjustment process?

Question 53

What is waiver and estoppel? Why do agents and loss adjusters have to be careful because of waiver and estoppel?

Question 54

An agency contract determines the rights and duties of both the agent and the insurer.

Question 55

Due to the doctrines of waiver and estoppel,a company may have to pay claims it would otherwise deny.

Question 56

Direct writing insurance companies typically use independent agents to represent them in the sales process.

Question 57

The brokerage function does not exist in life insurance sales.