Chapter 1 - Basic Principles

Which of the following outlines the authority given to the producer on behalf of the insurer?

a. Rebating arrangement

b. Commingling agreement

c. Controlled business clause

d. Producer contract

Which of the following accurately describes a participating insurance policy?


a. Policyowners may be entitled to receive dividends

b. Policyowners pay assessments for company losses

c. Stock companies allow their policyowners to share in any company earnings

d. Policyowners are not entitled to vote for members of the board of directors

A stock insurance company is owned by its

a. officers
b. board of directors
c. policyowners
d. shareholders

Dividends from a mutual insurance company are paid to whom?

a. Policyholders
b. Beneficiaries 
c. Preferred stockholders
d. Stockholders

Which reinsurance contract between two insurers involves an automatic sharing of the risks assumed?

a. Arbitrage reinsurance

b. Facultative reinsurance

c. Excess reinsurance

d. Treaty reinsurance

A reciprocal insurer typically has an administrator who manages the premiums collected from the group's members. The administrator is called a(n)

a. reciprocal commissioner

b. attorney general

c. attorney-in-fact

d. reciprocal director

Which of the following financial products creates an instant estate, no matter when the date of death?

a. mutual funds

b. life insurance

c. certificate of deposit

d. deferred annuity

An agent's authority to bind an insurer to an insurance contract may be granted in the

a. agent's contract and the insurance company's appointment

b. agent's license and insurance company's certificate of authority

c. buyer's guide and policy summary

d. state guaranty association

Who regulates an insurer's claim settlement practices?

a. National Association of Claim Adjusters

b. State attorney general

c. National Association of Insurance Commissioners (NAIC)

d. State insurance departments

Which of the following type of insurers limits the exposures it writes to those of its owners?

a. restricted insurer

b. limited insurer

c. confined insurer

d. captive insurer

Which of the following is a syndicate established by a group of insurers to share underwriting duties?

a. Reinsurer

b. Lloyd's organization

c. NAIC

d. Multi-line insurers

Dividends from a stock insurance company are normally sent to

a. beneficiaries

b. shareholders

c. policyowners

d. insureds

Which group is the Do Not Call Registry designed to protect against?

a. Telemarkers

b. Charities

c. Political Organizations

d. Relatives