AD Banker Chapter 1 UPDATED ACTUAL
Exam Questions and CORRECT Answers
Producer - CORRECT ANSWER - Which of the following is considered field
underwriter?
An admitted insurer - CORRECT ANSWER - "Admitted" only means the insurer is
authorized to do business in this state. Admittance is not the same as domicile. Admitted insurers
might have domestic, foreign, or alien domicile.
The National Association of Insurance Commissioners (NAIC): - CORRECT ANSWER -
The NAIC does not have legal authority over insurance regulation, but promotes uniformity in
the interpretation of insurance legislation and regulation.
Domicile - CORRECT ANSWER - Domicile refers to the jurisdiction either state or
country where an insurer was formed or incorporated.
Which of the following statements is not correct regarding rates and premiums? - CORRECT
ANSWER - Rates may not be excessive or unfairly discriminatory for any reason.
A producer must be ______ by an insurer in order to act as agent for that insurer. - CORRECT
ANSWER - Appointed:
An agent must have an appointment with an insurer in order to represent that insurer. Licenses
are granted by the state, not by insurance companies.
The Financial Privacy rule requires insurers to provide consumers with a privacy notice: -
CORRECT ANSWER - At the time the consumer relationship is established and annually
thereafter:
The Financial Privacy rule requires insurers, to provide each consumer with a privacy notice at
the time the consumer relationship is established and annually thereafter.
,Apparent authority is: - CORRECT ANSWER - The demonstrated general appearance that
authority exist:
Apparent authority is the demonstrated appearance that authority exists. Example: A producer
using letterhead and business cards with the insurer's company logo is demonstrating apparent
authority.
A person who negotiates insurance contracts with insurers on behalf of an applicant is known as
a(n): - CORRECT ANSWER - Broker:
Agents/producers are deemed to be representatives of the insurer, while a broker is deemed to be
a representative of the applicant/insured.
Which of the following is NOT an essential element of an insurable risk? - CORRECT
ANSWER - The loss must be intentional:
Intentional losses are excluded. The loss must be accidental.
The Fair Credit Reporting Act gives which of the following the legal right to review a consumer
report used to underwrite an applicant? - CORRECT ANSWER - The applicant:
The applicant has the right to review the report.
Which of the following terms refers to the risk management technique of assuming the
responsibility for a loss? - CORRECT ANSWER - Retention:
Risk retention involves assuming the responsibility for loss.
, It is the _________ who issues a Certificate of Authority enabling an insurer to conduct
insurance business within a particular state. - CORRECT ANSWER - State Insurance
Commissioner:
In order for an insurer to operate as an admitted or authorized insurer, the insurer must hold a
Certificate of Authority issued by the State Insurance Commissioner, Superintendent, or
Director.
All of the following are types of insurers, except: - CORRECT ANSWER - Proprietary
insurer is not a type of insurer.
What is the specific industry term for a legal and ethical relationship of trust regarding another
party's money? - CORRECT ANSWER - Fiduciary duty:
Producers have a fiduciary duty to the insurer--for example, they are responsible for submitting
collected premiums in a timely manner.
The ___________ branch writes and passes state insurance laws, or statutes, to protect the
insuring public. - CORRECT ANSWER - Legislative:
The legislative branch writes and passes state insurance laws, or statutes, to protect the insuring
public.
The difference between a misrepresentation and a material misrepresentation is: - CORRECT
ANSWER - Material misrepresentations are issues that affect policy issuance
A misrepresentation is any false or misleading statement made by the applicant on the
application. A material misrepresentation is a false or misleading statement that would have
affected whether the policy was issued at all, and may void the policy.
The Fair Credit Reporting Act guarantees which of the following? - CORRECT
ANSWER - Applicants' right to information held about them by any reporting agency
Exam Questions and CORRECT Answers
Producer - CORRECT ANSWER - Which of the following is considered field
underwriter?
An admitted insurer - CORRECT ANSWER - "Admitted" only means the insurer is
authorized to do business in this state. Admittance is not the same as domicile. Admitted insurers
might have domestic, foreign, or alien domicile.
The National Association of Insurance Commissioners (NAIC): - CORRECT ANSWER -
The NAIC does not have legal authority over insurance regulation, but promotes uniformity in
the interpretation of insurance legislation and regulation.
Domicile - CORRECT ANSWER - Domicile refers to the jurisdiction either state or
country where an insurer was formed or incorporated.
Which of the following statements is not correct regarding rates and premiums? - CORRECT
ANSWER - Rates may not be excessive or unfairly discriminatory for any reason.
A producer must be ______ by an insurer in order to act as agent for that insurer. - CORRECT
ANSWER - Appointed:
An agent must have an appointment with an insurer in order to represent that insurer. Licenses
are granted by the state, not by insurance companies.
The Financial Privacy rule requires insurers to provide consumers with a privacy notice: -
CORRECT ANSWER - At the time the consumer relationship is established and annually
thereafter:
The Financial Privacy rule requires insurers, to provide each consumer with a privacy notice at
the time the consumer relationship is established and annually thereafter.
,Apparent authority is: - CORRECT ANSWER - The demonstrated general appearance that
authority exist:
Apparent authority is the demonstrated appearance that authority exists. Example: A producer
using letterhead and business cards with the insurer's company logo is demonstrating apparent
authority.
A person who negotiates insurance contracts with insurers on behalf of an applicant is known as
a(n): - CORRECT ANSWER - Broker:
Agents/producers are deemed to be representatives of the insurer, while a broker is deemed to be
a representative of the applicant/insured.
Which of the following is NOT an essential element of an insurable risk? - CORRECT
ANSWER - The loss must be intentional:
Intentional losses are excluded. The loss must be accidental.
The Fair Credit Reporting Act gives which of the following the legal right to review a consumer
report used to underwrite an applicant? - CORRECT ANSWER - The applicant:
The applicant has the right to review the report.
Which of the following terms refers to the risk management technique of assuming the
responsibility for a loss? - CORRECT ANSWER - Retention:
Risk retention involves assuming the responsibility for loss.
, It is the _________ who issues a Certificate of Authority enabling an insurer to conduct
insurance business within a particular state. - CORRECT ANSWER - State Insurance
Commissioner:
In order for an insurer to operate as an admitted or authorized insurer, the insurer must hold a
Certificate of Authority issued by the State Insurance Commissioner, Superintendent, or
Director.
All of the following are types of insurers, except: - CORRECT ANSWER - Proprietary
insurer is not a type of insurer.
What is the specific industry term for a legal and ethical relationship of trust regarding another
party's money? - CORRECT ANSWER - Fiduciary duty:
Producers have a fiduciary duty to the insurer--for example, they are responsible for submitting
collected premiums in a timely manner.
The ___________ branch writes and passes state insurance laws, or statutes, to protect the
insuring public. - CORRECT ANSWER - Legislative:
The legislative branch writes and passes state insurance laws, or statutes, to protect the insuring
public.
The difference between a misrepresentation and a material misrepresentation is: - CORRECT
ANSWER - Material misrepresentations are issues that affect policy issuance
A misrepresentation is any false or misleading statement made by the applicant on the
application. A material misrepresentation is a false or misleading statement that would have
affected whether the policy was issued at all, and may void the policy.
The Fair Credit Reporting Act guarantees which of the following? - CORRECT
ANSWER - Applicants' right to information held about them by any reporting agency
