P&C Insurance Regulation and Licensing 3

Question 1

An insurance company that is 'admitted' in a state means it has:

Accepted Answer

Received a Certificate of Authority from the state insurance department to transact insurance business in that state

Answer

An admitted (or authorized) insurer has received a Certificate of Authority from the state's insurance commissioner authorizing it to transact the specified lines of insurance in that state.

Question 2

'Rebating' in insurance is defined as:

Accepted Answer

Offering a prospect something of value not specified in the policy (such as a portion of the commission) as an inducement to purchase

Answer

Rebating is the illegal practice of offering or giving a portion of the commission, a gift, or other financial benefit not provided in the policy to induce someone to purchase insurance.

Question 3

A 'managing general agent' (MGA) in insurance has authority to:

Accepted Answer

Bind coverage, issue policies, and handle claims on behalf of the insurer for a defined book of business, with broader authority than a standard agent

Answer

An MGA is appointed by an insurer and has authority to underwrite, bind, issue policies, and sometimes handle claims for a specific market segment, acting with delegated insurer authority.

Question 4

What is required for a policy to be validly cancelled mid-term by the insurer?

Accepted Answer

The insurer must provide written advance notice (typically 10–30 days) to the insured and, in many states, a valid legal reason

Answer

Most states require the insurer to give the insured written advance notice (typically 10 days for non-payment of premium, 30 days for other reasons) and, after the policy has been in force for a minimum period, to state a valid reason for cancellation.

Question 5

Under the 'diligent search' requirement in surplus lines placement, a broker must:

Accepted Answer

Document that the coverage sought was unavailable or unaffordable in the admitted market before placing with a non-admitted insurer

Answer

Before placing a risk in the surplus lines market, the broker must conduct a diligent search of the admitted market and document that the required coverage was genuinely unavailable, protecting the integrity of the surplus lines marketplace.

Property & Casualty Insurance License Test Practice Test

Property & Casualty Insurance License Test Practice Test

P&C Insurance Regulation and Licensing 3