California Life, Accident, and Health Insurance Final Exam, Exams of Insurance Economics

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California Life, Accident, and Health Insurance Final Exam

1. A moral hazard: is a dishonest person (lacking in morals)
2. A morale hazard: a careless person.
3. A peril: is a cause of loss
4. Pure risk: is insurable & includes only a chance of loss.
5. The highest premium: would be found with a substandard risk classification.
6. Agent commissions: are an insurer expense
7. "Insurance": is a contract that transfers risk from one party to another.
8. An "insurance policy": is a written contract
9. Neglect to communicate that which a party knows is "concealment": may cause the injured party

to rescind the policy

10. "Materiality": is determined solely by the probable and reasonable influence of the facts upon the part to whom the communication is due
11. The "materiality of concealment": is the rule used to determine the impor- tance of the misrepresentation.
12. An insurance policy: must specify the parties between whom the contract is made
13. The financial rating of an insurer: is not required to be included in the insurance policy
14. In a direct response marketing system: the mail and/or internet is used to sell policies, not agents
15. An insurance broker is a person who: for compensation and on behalf of another person, transacts insurance.
16. An insurance agent is a person who: for compensation, transacts insurance for the insurer.

19. The state may disapprove the use of any true or fictitious name except: a person's legal name 20. An insurance agent or broker hires a third party to prepare their website- : The insurance agent or broker, not the third party, is responsible for the content of the website.
20. An admitted insurer: is an insurer entitled to transact business in this state
21. A mutual insurer: is owned by the policyholders and issues participating policies
22. The Insurance Commissioner in California: is elected by the people.
23. The Insurance Commissioner may serve: up to two (2) four-year terms
24. A mutual insurer must pay out: dividends at minimum annually.
25. An insurance policy: is a legal contract.
26. A representation in an insurance contract: is an implied warranty
27. Concealment, whether intentional or unintentional, entitles the

injured party to: rescind an insurance contract.

29. Agents of insurers who utilize "direct response" marketing systems do not: conduct personal interviews with customers.
30. Any person who transacts insurance without a valid license: is guilty of a misdemeanor. 31. Transacting insurance does not include subscribing to newspapers that- : other agents advertise in
31. It is the insurer who is responsible for: filing an agent's appointment with the Commissioner
32. A solicitor: is employed by an insurance agent or broker
33. When a partnership is dissolved: it ceases to be eligible to hold a license
34. Insurance licenses may be renewed by: submitting the applicable renewal application and fee
35. Licensees must notify the Commissioner of a change in their

37. It is a misdemeanor to refuse to deliver any books or records to the Commissioner: once a seizure order has been executed in an insolvency proceeding
38. Under the California File and Record documentation rules, every li- censees' claim files: are subject to examination by the Commissioner for the current year and the preceding four years.
39. A "loss exposure": is a condition that could result in a loss.
40. Gambling: is an example of speculative risk.
41. Insurance contracts are considered to be "unilateral" since: only one party to the contract makes an enforceable promise
42. The word "may": implies permissiveness.
43. A "claimant": is a person who asserts a right of recovery under an insurance policy.
44. Insurers are not allowed to discriminate in their claim settlement prac- tices based upon a person's: race, age, gender, income, religion, language, sexual orientation, ancestry, national origin, or physical

disability

45. An insurance agent or broker must include on their website the follow- ing:: o Their name, as it appears on their license, as well as any other fictitious name approved by the Commissioner o The state of their domicile and principal place of business o Their license number
46. The Law of Large Numbers states that the more similar risks the insur- ance company combines together: the better they can guess approximately how many losses they will have in a given time period
47. A speculative risk: is a risk situation that includes a chance of loss and a potential for gain
48. Speculative risks: are not insurable.
49. An insurer organized in California and selling in California: is considered to be a domestic insurer in California.

56. If the insurer discovers the insured has violated a material warranty,: they can rescind the contract (void the policy).
57. An intentional concealment entitles the injured party: the option to rescind the contract 58. Neither party to a contract of insurance is bound to communicate, even upon inquiry, information of his own judgment upon: the matters in question. 59. Providing free insurance coverage in connection with the sale of services as an inducement for completing the transaction: is not legal.
58. The following information does not need to be communicated in a con- tract:: o known information o information that should be known o information which the other party waives o information that is not material to the risk
59. A representation in an insurance contract qualifies as: an implied warranty

62. A representation is false when the facts fail to: correspond with its asser- tions or stipulations.
63. Either intentional or unintentional concealment entitles an injured party to: rescission of a contract.
64. Each authorized insurer is required: to establish a division within the insurer to investigate fraudulent claims.
65. The Principle of Indemnity: is most closely associated with insurable interest
66. A "prohibited" person may not engage in the business of insurance: with- out the written consent of the Commissioner. 67. Under federal law, a "prohibited" person is a person whose activities affect interstate commerce and who knowingly, with the intent to deceive: makes any false material statement or financial report to any insurance regulator for the purpose of influencing their actions.
67. Under federal law, upon conviction, a "prohibited" person may be

usually issue a cease and desist order

for: a violation of more than one transaction if the violation dealt with loans on the security of real or personal property

75. The process whereby a mutual insurer becomes a stock company: is called demutualization.
76. Any situation that presents the possibility of a loss: is known as a loss exposure
77. Dividends received by policyholders of a mutual insurer: are not taxable
78. It is a misdemeanor to refuse to deliver any books, records, or assets to the Commissioner: once a seizure order has been executed in an insolvency proceeding.
79. If an insured signs a fraudulent claim form,: the insured may be guilty of perjury
80. Financial exposure: is not one of the three major types of loss exposures
81. If an agent issues a binder for a company they are not appointed by: the Commissioner can suspend or

86. A primary insurer: is the insurance company who transfers its loss exposure to another insurer in a reinsurance transaction
87. The CIC defines "insurance" as a contract whereby: one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event.
88. In a life insurance policy illustration "nonguaranteed elements": " means the premiums, benefits, values, credits or charges under a policy of life insurance that are not guaranteed or not determined at issue.
89. Life Insurance policy illustration regulations: were not created to eliminate disclosure
90. A representation may be: altered or withdrawn before the insurance is effect- ed, but not afterwards
91. In life insurance, insurable interest must: exist when a policy is first issued.
92. In life insurance, the measure of liability: is the sum or sums payable as provided in the policy to the

person entitled thereto.

93. The Insurance Commissioner: shall be elected by the people in the same time, place and manner as the Governor.
94. Policies issued by Mutual insurers pay dividends to policyholders: The dividend option is selected by the policyholder on the insurance application.
95. A nonparticipating policyowner will not receive dividends.: Nonparticipat- ing policies are issued by stock insurers. Stock insurers pay dividends to stockholders, not policyholders.
96. Dividends are declared by the board of: directors and cannot be guaranteed.
97. California Insurance Code includes senior code protections.: A person age 60 or older who buys life insurance in California is required to receive a 30-day minimum free look. People under age 60 who buy life insurance are required to receive a minimum 10-day free look.

and older must include a term life insurance monetary value index, which is similar to the Life Insurance Surrender Cost Index.: In developing a term life insurance monetary value index, the Commissioner shall consider actual premiums and policy and certificate benefits and the manner in which they are affected with the passage of time. Any term life insurance monetary value index developed pursuant to this section shall assume an insured's desire to retain coverage for at least 10 years.

104. Term life insurance directed to individuals 55 years of age or older must prominently: disclose any change in premium resulting from the aging of the insured, policy duration, or any other factor. If the insurer retains any right to modify premiums in the future, that fact shall also be disclosed 105. If a senior has purchased an annuity which is invested in a mutual fund and they cancel during the free look, the CIC requires: they be refunded the value of the account.

106. The free look notice for seniors must be: printed in no less than 10-point uppercase type, on the cover page of the policy or certificate and the outline of coverage.
107. Insurance agents must keep: records regarding policies sold in this state for a minimum of five (5) years
108. In order to determine the amount of premium an insured will pay: the insurer multiplies the rate by the number of exposure units purchased.
109. Insurance agents are acting in a fiduciary capacity: when they are han- dling their customer's premiums.
110. An "Illustration" is a presentation or depiction: that includes nonguaran- teed elements of a policy of life insurance over a period of years
111. If you no longer hold any insurer appointments: your license is considered to be inactive
112. If an employer holds your license and wants to cancel it,: they are required to send written notice to the Commissioner.