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INS 21 Quiz 4: session ins 21 chapter 4

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Question 25 incorrect 0 1
Score: (48%) 12 25

1. An independent business owner or firm that sells insurance by representing customers

rather than insurance companies is which one of the following?

• An independent adjuster (your response)

• An underwriter
 • An insurance broker (correct answer)
• An insurance carrier

2.

Points earned: 0 out of 1

2. The authority that the principal specifically grants the agent is called

• Implied authority
• Express authority. (correct answer, your response)
• Apparent authority.
• Conditional authority.

3.

Points earned: 1 out of 1

3. Advertising by independent agencies promotes

• Brand recognition of the companies represented.

• The agency rather than the insurers it represents. (correct answer, your response)
• Symbols used to increase recognition of the insurers represented.
• Attention to the prices of the policies offered.

4.

Points earned: 1 out of 1

4. The laws of agency impose all of the following specific duties on agents, EXCEPT:

• Profitability (correct answer)

• Obedience
• Loyalty
• Accounting (your response)

5.

Points earned: 0 out of 1

5. Producers are not allowed to pay a portion of the premiums for a policy or give any

commission to a policyholder. Actions of this type are called

• Tie-in sales
 • Contingent commissions
• Misrepresentation of dividends
• Rebating (correct answer, your response)

6.

Points earned: 1 out of 1

6. Which one of the following individuals represents the insurance purchaser?

• An agent
• A solicitor
• A customer service agent (your response)
• A Broker (correct answer)

7.

Points earned: 0 out of 1

7. The president of an insurance company that markets through independent agents is

concerned that agents in one geographic area are not motivated to seek profitable

business. Other agents in this geographic area have a better reputation for producing

profitable business.

Within the insurance company, whose job is it to fix this problem?

• The production underwriter's

• The staff underwriter's
• The producer's
• The marketing representative's (correct answer, your response)

8.

Points earned: 1 out of 1

8. An independent agent received his monthly commissions for the new policies he has sold.

Even though he wrote twenty new policies that month, his commission was low. Which one

of the following explains why this could occur?

 Commissions are not fully earned at the time of a sale. Other policies written by the
• agent might have been cancelled with the unearned portion of the commission returned
to the insurance company. (correct answer)
The agent failed to provide the level of service required by the insurance company. The
•
insurance commission was reduced as an incentive for better performance.
The agent did not meet the premium volume and profitability levels that were specified
•
in his contract; therefore, his commission was reduced. (your response)
The agent is a salaried employee of the insurance company and receives only
•
contingent commissions.

9.

Points earned: 0 out of 1

9. For an independent agency or an exclusive agency, the percentage of the premium that

goes to the agency or to the producer for new policies sold or existing policies renewed is

the

• Contingent commission
• Profit sharing
• Salary
• Sales commission (correct answer, your response)

10.

Points earned: 1 out of 1

10. Insurance companies attempt to motivate producers to sell the types of business the

companies want to acquire. Which one of the following would motivate producers to sell

the desired type of business?

• Reduce commissions if sales goals are not achieved.

• Hold sales contests to encourage the type of sales activity. (correct answer)
• Provide additional staff to help with the processing. (your response)
• Offer subscriptions to educational services for the producers.

11.

Points earned: 0 out of 1

11. The laws of agency impose all of the following specific duties on all agents, EXCEPT:

• Prudence (correct answer)

 • Accounting (your response)
• Loyalty
• Relaying information

12.

Points earned: 0 out of 1

12. Insurers using direct response marketing attract new customers through all of the

following methods, EXCEPT:

• Recognition of local agents (correct answer)

• Extensive advertisement
• Established customer bases
• Word-of-mouth advertising (your response)

13.

Points earned: 0 out of 1

13. Which one of the following is the principal's primary duty to the agent?

• To pay the agent for services performed (correct answer, your response)
• To act as the agent's legal representative
• To educate and train the agent
• To act on behalf of the agent in court proceedings

14.

Points earned: 1 out of 1

14. The managers of an independent agency are hoping to earn contingent commissions from

several insurers at the end of the year. What should the agency managers attempt to do to

earn contingent commissions?

Reduce the number of homeowners policies written for houses in urban areas
•
compared to the homeowners policies written for houses in rural areas.
Reduce the number of employees required to acquire and service the policies in the
•
agency.
Increase the premium volume and profitability level of the agency's business with those
•
insurers. (correct answer, your response)
• Increase the level of customer service provided to policyholders and claimants.
15.

Points earned: 1 out of 1

15. Claire is a producer who is self-employed and represents a group of related insurers called

the United Insurance Group. She has no right of ownership of the expiration list of

insureds. In what distribution system does she operate?

• Exclusive agency (correct answer)

• Independent agency (your response)
• Direct writing
• Direct response

16.

Points earned: 0 out of 1

16. When an insurance company appoints an insurance agent to serve as its representative,

what specifies the scope of authority given to the agent in this relationship?

• Implied authority (your response)

• Binding authority
• A unilateral contract
• An agency contract (correct answer)

17.

Points earned: 0 out of 1

17. Which one of the following statements is true regarding the agency contract?

• The agent is the principal in the agency contract relationship (your response)
• An agency contract is also known as an agency endowment
• Insurance agency contracts usually have a fixed expiration date.
The agency contract states the scope of the agency's authority to conduct business for
•
the insurer. (correct answer)

18.

Points earned: 0 out of 1

18. To obtain a state agent's license, a person must meet several requirements that include

which one of the following?

• Spend a specified amount of time as a customer service representative.

• Obtain an agency contract offered by an insurance company.
• Acquire a bond identifying the state as the principal.
Pass an examination and meet other qualifications of the state insurance department.
•
(correct answer, your response)

19.

Points earned: 1 out of 1

19. All of the following are true about the insurance distribution system, EXCEPT:

Managing general agencies appoint and supervise independent agents for insurers that
•
operate in the system
Insurance brokers are independent business owners or firms that place insurance by
•
representing the customers, not insurers
An agency expiration list is the record of policies that have lapsed or been canceled due
•
to overdue premiums (correct answer)
The direct response system advertises to encourage the potential customers to contact
•
the insurer to purchase insurance (your response)

20.

Points earned: 0 out of 1

20. All of the following are true about the insurance agency relationship, EXCEPT:

• The agency agreement is a written agreement between the insurer and an agent
The agency agreement gives the agent the right to represent the insurer and sell
•
insurance on the insurer's behalf
The principal is the party the agent authorizes to bind coverage (correct answer, your
•
response)
• The agent is the party authorized by the principal to act on the principal's behalf

21.

Points earned: 1 out of 1

21. Peter is a salaried producer who is an employee of ABC Insurance Company. In what

distribution system does he operate?

 • Exclusive agency
• Independent agency
• Direct writing (correct answer, your response)
• Direct response

22.

Points earned: 1 out of 1

22. In what specific type of marketing system do insurance companies advertise directly by

mail, radio, television, Internet, or with the communications of an association, a credit

card company, or a bank?

• A direct writing system (your response)

• A direct approach system
• A direct brokerage system
• A direct response system (correct answer)

23.

Points earned: 0 out of 1

23. An insurance agent wrote insurance policies for a number of military service veterans who

were satisfied with the coverage they received and the price they paid for the coverage.

Subsequently, the agent ran an ad in a local newspaper stating that the insurance policies

offered by his agency are "Veteran Approved Insurance."

Why would this be considered misrepresentation or false advertising?

The statement misrepresents the benefits, conditions, or terms of the insurance

•
policies.
The statement uses a name or title for the insurance policies that misrepresents the
•
true nature of the policies. (correct answer, your response)
• The statement indicates that sales are ties to other benefits.
• The statement makes an illegal reference to a government entity in an insurance sale.

24.

Points earned: 1 out of 1

24. RipTide Insurance Company has formed an alliance with Local Bank and U-Betcha Used

Car Sales. When U-Betcha sells a car, the sales person directs the customer to Local Bank

for the loan and RipTide for insurance. If the customer transacts business with all three

organizations, the customer will receive reduced auto rates.

Would this be considered to be an unfair trade practice by RipTide?

Yes, it is an unfair trade practice to tie the purchase of insurance to some other sale or
•
financial arrangement. (correct answer, your response)
• Yes, offering a preferred rate to a customer as described is considered to be rebating.
• No, businesses interact in this way as a regular practice.
• No, this is not deceptive or unfair to the applicants or insureds.

25.

Points earned: 1 out of 1

25. Love, Stack, and Jones Insurance sells insurance coverage for small businesses. This office

of insurance producers represents only one insurer, and the producers work on

commission with bonuses. Love, Stack, and Jones Insurance does not own the expiration

list for the policies it sells and services.

What type of marketing (or distribution) system does Love, Stack, and Jones represent?

• Independent agency system (your response)

• Exclusive agency system (correct answer)
• Direct writing system
• Direct response system

26.

Points earned: 0 out of 1