AIIM Certified Insurance Compliance Manager
CICM Exam
**Question 1.** Which of the following is the primary purpose of insurance regulation?
A) To maximize insurer profits
B) To ensure solvency, consumer protection, and market conduct
C) To limit competition among insurers
D) To standardize all policy forms nationwide
Answer: B
Explanation: Regulation is designed to protect policyholders by ensuring insurers remain
solvent, conduct business fairly, and adhere to consumer‑protection standards.
**Question 2.** In the “Three Lines of Defense” model, the compliance function belongs to
which line?
A) First line – operational management
B) Second line – risk and compliance functions
C) Third line – internal audit
D) Fourth line – external auditors
Answer: B
Explanation: The second line provides oversight, including risk management and compliance,
supporting but independent of first‑line operations.
**Question 3.** Which entity issues model laws that states often adopt for insurance
regulation?
A) Federal Reserve
B) National Association of Insurance Commissioners (NAIC)
C) Securities and Exchange Commission (SEC)
D) Department of Labor
Answer: B
, AIIM Certified Insurance Compliance Manager
CICM Exam
Explanation: The NAIC develops model statutes and regulations that many states incorporate
into their own insurance codes.
**Question 4.** A surplus lines insurer is required to obtain a license in which jurisdiction?
A) Only the state where the policy is delivered
B) The state where the insured resides, regardless of where the insurer is domiciled
C) Federal jurisdiction only
D) No license is required for surplus lines
Answer: B
Explanation: Surplus lines must be licensed (or authorized) in the state where the risk is located,
even if the insurer is domiciled elsewhere.
**Question 5.** Which accounting framework focuses on economic substance rather than legal
form?
A) GAAP
B) Statutory accounting principles (SAP)
C) IFRS
D) Cash‑basis accounting
Answer: B
Explanation: Statutory accounting (SAP) emphasizes conservatism and solvency, often differing
from GAAP’s focus on economic substance.
**Question 6.** Under a “File and Use” system, insurers may:
A) Use a policy form only after obtaining prior state approval.
B) File a form with the regulator and begin using it immediately, subject to later review.
C) Never file forms; they rely on federal pre‑approval.
, AIIM Certified Insurance Compliance Manager
CICM Exam
D) File only after a consumer complaint is received.
Answer: B
Explanation: “File and Use” allows immediate implementation after filing, with regulators
reviewing for compliance later.
**Question 7.** Which of the following is considered an unfair trade practice under most state
market‑conduct statutes?
A) Offering a discount for bundling policies
B) Misrepresenting policy benefits to a consumer
C) Using a standard underwriting questionnaire
D) Providing a free quote online
Answer: B
Explanation: Misrepresentation of coverage terms is a classic unfair trade practice that
regulators prohibit.
**Question 8.** The Gramm‑Leach‑Bliley Act (GLBA) primarily addresses:
A) Anti‑money‑laundering reporting
B) Privacy and security of nonpublic personal information held by financial institutions
C) Fair claims settlement practices
D) Licensing of insurance agents
Answer: B
Explanation: GLBA requires financial institutions, including insurers, to protect customers’
nonpublic personal information.
**Question 9.** Which law specifically governs the privacy of health‑related insurance
information?
A) GLBA
, AIIM Certified Insurance Compliance Manager
CICM Exam
B) HIPAA
C) CCPA
D) Fair Credit Reporting Act
Answer: B
Explanation: HIPAA sets standards for protecting individually identifiable health information
held by covered entities.
**Question 10.** The California Consumer Privacy Act (CCPA) is an example of:
A) Federal data‑privacy legislation
B. State‑level comprehensive privacy law
C. Industry self‑regulation guideline
D. International data‑transfer framework
Answer: B
Explanation: CCPA is a state law that gives California residents rights over their personal data
and imposes obligations on businesses.
**Question 11.** The Fair Claims Settlement Practices Act requires insurers to:
A) Set premiums based solely on age
B) Pay claims within a reasonable time after proof of loss
C. Deny claims if the policyholder files a complaint
D. Require a lawyer for all claim submissions
Answer: B
Explanation: The Act mandates prompt, fair claims handling and timely payment once the
insurer has proof of loss.
CICM Exam
**Question 1.** Which of the following is the primary purpose of insurance regulation?
A) To maximize insurer profits
B) To ensure solvency, consumer protection, and market conduct
C) To limit competition among insurers
D) To standardize all policy forms nationwide
Answer: B
Explanation: Regulation is designed to protect policyholders by ensuring insurers remain
solvent, conduct business fairly, and adhere to consumer‑protection standards.
**Question 2.** In the “Three Lines of Defense” model, the compliance function belongs to
which line?
A) First line – operational management
B) Second line – risk and compliance functions
C) Third line – internal audit
D) Fourth line – external auditors
Answer: B
Explanation: The second line provides oversight, including risk management and compliance,
supporting but independent of first‑line operations.
**Question 3.** Which entity issues model laws that states often adopt for insurance
regulation?
A) Federal Reserve
B) National Association of Insurance Commissioners (NAIC)
C) Securities and Exchange Commission (SEC)
D) Department of Labor
Answer: B
, AIIM Certified Insurance Compliance Manager
CICM Exam
Explanation: The NAIC develops model statutes and regulations that many states incorporate
into their own insurance codes.
**Question 4.** A surplus lines insurer is required to obtain a license in which jurisdiction?
A) Only the state where the policy is delivered
B) The state where the insured resides, regardless of where the insurer is domiciled
C) Federal jurisdiction only
D) No license is required for surplus lines
Answer: B
Explanation: Surplus lines must be licensed (or authorized) in the state where the risk is located,
even if the insurer is domiciled elsewhere.
**Question 5.** Which accounting framework focuses on economic substance rather than legal
form?
A) GAAP
B) Statutory accounting principles (SAP)
C) IFRS
D) Cash‑basis accounting
Answer: B
Explanation: Statutory accounting (SAP) emphasizes conservatism and solvency, often differing
from GAAP’s focus on economic substance.
**Question 6.** Under a “File and Use” system, insurers may:
A) Use a policy form only after obtaining prior state approval.
B) File a form with the regulator and begin using it immediately, subject to later review.
C) Never file forms; they rely on federal pre‑approval.
, AIIM Certified Insurance Compliance Manager
CICM Exam
D) File only after a consumer complaint is received.
Answer: B
Explanation: “File and Use” allows immediate implementation after filing, with regulators
reviewing for compliance later.
**Question 7.** Which of the following is considered an unfair trade practice under most state
market‑conduct statutes?
A) Offering a discount for bundling policies
B) Misrepresenting policy benefits to a consumer
C) Using a standard underwriting questionnaire
D) Providing a free quote online
Answer: B
Explanation: Misrepresentation of coverage terms is a classic unfair trade practice that
regulators prohibit.
**Question 8.** The Gramm‑Leach‑Bliley Act (GLBA) primarily addresses:
A) Anti‑money‑laundering reporting
B) Privacy and security of nonpublic personal information held by financial institutions
C) Fair claims settlement practices
D) Licensing of insurance agents
Answer: B
Explanation: GLBA requires financial institutions, including insurers, to protect customers’
nonpublic personal information.
**Question 9.** Which law specifically governs the privacy of health‑related insurance
information?
A) GLBA
, AIIM Certified Insurance Compliance Manager
CICM Exam
B) HIPAA
C) CCPA
D) Fair Credit Reporting Act
Answer: B
Explanation: HIPAA sets standards for protecting individually identifiable health information
held by covered entities.
**Question 10.** The California Consumer Privacy Act (CCPA) is an example of:
A) Federal data‑privacy legislation
B. State‑level comprehensive privacy law
C. Industry self‑regulation guideline
D. International data‑transfer framework
Answer: B
Explanation: CCPA is a state law that gives California residents rights over their personal data
and imposes obligations on businesses.
**Question 11.** The Fair Claims Settlement Practices Act requires insurers to:
A) Set premiums based solely on age
B) Pay claims within a reasonable time after proof of loss
C. Deny claims if the policyholder files a complaint
D. Require a lawyer for all claim submissions
Answer: B
Explanation: The Act mandates prompt, fair claims handling and timely payment once the
insurer has proof of loss.
