The Insurance Marketplace, Licensing and Ethics — practice questions

9.3% of the exam ≈14 real questions 10 free questions here

Agents and brokers, licensing and appointments, fiduciary duty, CE, kinds of insurers, the Commissioner, unfair practices, the guarantee association and senior protections: about 14 of the 150 combined questions.

Where people lose points

• The California Commissioner is elected, unlike most states.
• There is no life solicitor license.
• Transacting without a license: misdemeanor, up to $50,000 and a year in jail (1633).
• Address changes must be reported immediately (1729).

Questions and answers, explained

All 3 questions above, with the correct answer and why it is correct. Everything here is on the insurance marketplace, licensing and ethics.

1. A person convicted of a felony involving dishonesty or breach of trust wants to work in the insurance business. Under 18 U.S.C. 1033, the person needs:

   • AA surety bond of $1 million
   • BA letter from the sentencing judge
   • CNothing more than a background check by the hiring agency
   • DWritten consent from an insurance regulatory officialCorrect

   Why: 18 U.S.C. 1033 prohibits a person convicted of a felony involving dishonesty or breach of trust from engaging in the business of insurance affecting interstate commerce without the written consent of an insurance regulatory official. Violations carry criminal penalties, and 18 U.S.C. 1034 adds civil penalties.

   Reference 18 U.S.C. 1033-1034 — CA objectives I.C2.5

2. Premiums a California agent receives on behalf of an insurer are:

   • ATaxable income of the insured
   • BHeld in a fiduciary capacity, not the agent's own moneyCorrect
   • CA loan from the client to the agent
   • DThe agent's personal income as soon as they are received, minus later refunds

   Why: Under sections 1733-1735 funds received as premium or return premium are held in a fiduciary capacity. A fiduciary acts in trust for others, so the agent must account for the money and may not divert it to personal use.

   Reference Cal. Ins. Code 1733-1735 — CA objectives I.C2.17

3. Under California's Fair Claims Settlement Practices Regulations, once an insurer receives proof of claim, it must accept or deny the claim within how many days?

   • A40 daysCorrect
   • B15 days
   • C90 days
   • D5 days

   Why: Under 10 CCR 2695.7(b) an insurer must accept or deny a claim, in whole or in part, within 40 days after receiving proof of claim, or explain in writing why more time is needed. 10 CCR 2695.5 requires acknowledging a claim and responding to communications within 15 days, and 2695.7(h) requires payment within 30 days of acceptance.

   Reference 10 CCR 2695.5, 2695.7 — CA objectives I.C5

Topics inside this domain

• California contract law: concealment, representations and warranties
• California licensing, appointments and continuing education
• California's protections for senior insurance buyers
• California's Commissioner, unfair practices and the guarantee association

Drill other domains

• Basic Insurance Concepts and Contract Law (17.3%)
• Life Insurance Basics, Underwriting and Claims (7.3%)
• Types of Life Policies and Group Life (8%)
• Annuities (5.3%)
• The Life Insurance Contract and Riders (9.3%)
• Replacement, Cancellation, Taxation and Social Security Disability (5.3%)

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