Regulation and Ethics Flashcards
7 cards from real EXAMFX practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Regulation and Ethics flashcards as text
When a producer submits an application with intentionally incorrect information provided by the applicant, the producer:
Answer: May be held liable for misrepresentation along with the applicant
Producers have a duty to ensure applications are accurate and complete; knowingly submitting false information makes the producer a party to misrepresentation.
Which of the following is a characteristic of a 'stock' insurance company?
Answer: It is owned by shareholders who receive profits
Stock insurance companies are owned by shareholders who invest capital and may receive dividends from company profits.
A producer who uses a client's premium funds for personal expenses has committed:
Answer: Embezzlement and breach of fiduciary duty
Using client funds for personal purposes is embezzlement and a serious breach of the producer's fiduciary duty, typically resulting in criminal charges and license revocation.
Under the McCarran-Ferguson Act, the primary regulatory authority over insurance rests with:
Answer: Individual states
The McCarran-Ferguson Act of 1945 affirmed that the regulation of the insurance industry is primarily a state function.
A producer who fails to inform a client of a significant policy exclusion before the sale has most likely violated the duty of:
Answer: Full disclosure
Producers have a duty of full disclosure, meaning they must communicate all material information — including exclusions — so the client can make an informed decision.
Which of the following would be considered 'churning' by an insurance producer?
Answer: Repeatedly replacing a client's policies with similar ones to generate new commissions
Churning is the unethical practice of unnecessarily replacing policies for the purpose of generating new commissions rather than serving the client's needs.
Under most state laws, an insurance producer's license must be renewed every:
Answer: 2 years
Most states require producers to renew their licenses on a biennial (every two years) cycle, often coinciding with continuing education completion.