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Indiana Surplus Lines study materials
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Indiana Surplus Lines practice questions

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Question 1Indiana surplus lines statutes, rules, and regulatory framework

Under Indiana law, surplus lines insurance is best described as coverage that is:

  1. written by an authorized insurer under a specialty filing
  2. written only for exempt commercial purchasers
  3. procured from an eligible nonadmitted insurer after coverage cannot be obtained from authorized insurers Correct answer.
  4. issued through the Indiana residual market mechanism

Explanation

Surplus lines insurance is coverage placed with a nonadmitted insurer that is eligible in Indiana after the producer cannot procure the coverage from authorized insurers. It is not a residual market product and is not limited to exempt commercial purchasers.

Question 2Indiana surplus lines statutes, rules, and regulatory framework

Who is authorized to negotiate and place surplus lines insurance in Indiana?

  1. Any insurance consultant registered with the commissioner
  2. A person holding a surplus lines producer license issued by the commissioner Correct answer.
  3. Any nonresident producer who has filed a notice with the commissioner
  4. Any person holding a general lines producer license

Explanation

Indiana requires a separate surplus lines producer license; a general producer license alone does not authorize surplus lines placements. The license is issued by the commissioner.

Question 3Indiana surplus lines statutes, rules, and regulatory framework

Before an individual can be licensed as an Indiana surplus lines producer, the individual must hold which license?

  1. An Indiana life and health producer license
  2. An Indiana title insurance license
  3. An Indiana public adjuster license
  4. An Indiana property and casualty producer license Correct answer.

Explanation

The surplus lines producer license builds on a property and casualty producer license. Life and health, public adjuster, and title licenses do not qualify as the underlying license.

Question 4Indiana surplus lines statutes, rules, and regulatory framework

Which statement about the Indiana insurance guaranty association and surplus lines policies is correct?

  1. The guaranty association covers surplus lines policies in the same manner as authorized insurers.
  2. Surplus lines policies placed with nonadmitted insurers are generally not covered by the guaranty association. Correct answer.
  3. The guaranty association covers surplus lines policies only after the commissioner approves the insurer.
  4. The guaranty association covers surplus lines policies only if the insured is an individual.

Explanation

The Indiana guaranty association protects policyholders of authorized insurers that become insolvent. Surplus lines policies written by nonadmitted insurers are generally excluded from that protection.

Question 5Indiana surplus lines statutes, rules, and regulatory framework

Which entity maintains the list of nonadmitted insurers eligible to write surplus lines insurance in Indiana?

  1. The Indiana guaranty association
  2. The National Association of Insurance Commissioners
  3. The Indiana Surplus Lines Association
  4. The Indiana insurance commissioner Correct answer.

Explanation

The commissioner is responsible for determining which nonadmitted insurers are eligible to write surplus lines in Indiana. The department, not a private association or the NAIC, maintains the list.

Question 6Indiana surplus lines statutes, rules, and regulatory framework

Indiana imposes a surplus lines premium tax at what rate on gross premiums?

  1. 3% Correct answer.
  2. 4%
  3. 1%
  4. 2%

Explanation

Indiana taxes surplus lines gross premiums at 3%. The tax is collected from the producer and remitted to the department.

Question 7Indiana surplus lines statutes, rules, and regulatory framework

By what date must an Indiana surplus lines producer file the annual surplus lines statement and pay premium tax for the preceding calendar year?

  1. June 30
  2. December 31
  3. March 1 Correct answer.
  4. April 15

Explanation

The annual surplus lines statement and premium tax payment are due March 1 for the prior calendar year. The other dates are not the Indiana deadline.

Question 8Indiana surplus lines statutes, rules, and regulatory framework

Before placing coverage with a nonadmitted insurer, what must the surplus lines producer disclose to the insured?

  1. That the insurer is not authorized in Indiana and is not protected by the guaranty association Correct answer.
  2. The commissioner's approval of the specific policy form
  3. The name of the authorized insurer that declined the risk
  4. The amount of the guaranty association assessment

Explanation

Indiana requires the producer to warn the insured that the insurer is not admitted and that the guaranty association will not respond to the insurer's insolvency. The disclosure is a key consumer protection in surplus lines.

Question 9Indiana surplus lines statutes, rules, and regulatory framework

Indiana's diligent search requirement means the surplus lines producer must:

  1. receive the commissioner's prior written approval for each placement
  2. use at least one Indiana domestic insurer as a co-insurer
  3. document efforts to place the coverage with authorized insurers before using a nonadmitted insurer Correct answer.
  4. obtain a written quote from every authorized insurer in Indiana

Explanation

The diligent search duty requires documented efforts to obtain coverage from authorized insurers before going to the surplus lines market. It does not require quotes from every insurer or prior commissioner approval.

Question 10Indiana surplus lines statutes, rules, and regulatory framework

For a coverage that appears on the commissioner's export list, the surplus lines producer may:

  1. bind coverage only after a hearing before the commissioner
  2. place the coverage without completing the usual diligent search documentation Correct answer.
  3. ignore the premium tax on that policy
  4. place the risk with any insurer, including an unauthorized insurer not on the eligible list

Explanation

The commissioner may place coverages on an export list, allowing them to be placed without the usual diligent search documentation. The insurer must still be eligible and the premium tax still applies.

Question 11Indiana surplus lines statutes, rules, and regulatory framework

An Indiana surplus lines producer may place a risk with a nonadmitted insurer only if the insurer:

  1. is rated A or better by a rating agency
  2. has a certificate of authority in any state
  3. has appointed the producer as its agent
  4. is on the commissioner's eligible surplus lines insurer list Correct answer.

Explanation

Indiana limits surplus lines placements to insurers on the commissioner's eligibility list. A certificate of authority elsewhere, a rating, or an appointment does not substitute for Indiana eligibility.

Question 12Indiana surplus lines statutes, rules, and regulatory framework

The annual surplus lines statement filed with the Indiana Department of Insurance must include:

  1. the surplus lines premiums written and the tax due Correct answer.
  2. the commissioner's approval letter for each policy
  3. only the names of the insureds
  4. only the producer's commission income

Explanation

The annual statement reports surplus lines premiums written and the premium tax due. It is not limited to insured names or commission income and does not require approval letters for each policy.

Question 13Indiana surplus lines statutes, rules, and regulatory framework

How long must an Indiana surplus lines producer keep records of surplus lines transactions available for examination by the commissioner?

  1. Twenty years
  2. Five years Correct answer.
  3. Ten years
  4. One year

Explanation

Indiana requires surplus lines producers to retain transaction records for five years for examination. Shorter periods do not satisfy the rule, and longer periods are not the statutory minimum.

Question 14Indiana surplus lines statutes, rules, and regulatory framework

The Indiana commissioner's examination authority over a surplus lines producer includes the power to:

  1. examine only the producer's resident-state records
  2. examine records only after a consumer complaint
  3. inspect the producer's books and records concerning surplus lines transactions Correct answer.
  4. delegate examinations exclusively to the guaranty association

Explanation

The commissioner has broad authority to examine surplus lines books and records. The authority is not limited to resident-state records or triggered only by complaints.

Question 15Indiana surplus lines statutes, rules, and regulatory framework

A nonresident producer who wants to place surplus lines insurance in Indiana must:

  1. maintain a physical office in Indiana
  2. be a resident of a state that has no surplus lines law
  3. post a surety bond with the Indiana treasurer
  4. hold an Indiana surplus lines producer license Correct answer.

Explanation

A nonresident must obtain an Indiana surplus lines producer license to place surplus lines in Indiana. A physical office, a bond, or residence in a particular state is not the requirement.

Question 16Indiana surplus lines statutes, rules, and regulatory framework

When an Indiana surplus lines producer charges a fee in addition to premium, the fee must be:

  1. disclosed to the insured in writing Correct answer.
  2. paid directly to the commissioner
  3. approved in advance by the insurer
  4. included in the premium tax base

Explanation

Any separate fee charged by the surplus lines producer must be disclosed in writing to the insured. It is not paid to the commissioner or automatically included in the premium tax base.

Question 17Indiana surplus lines statutes, rules, and regulatory framework

If a surplus lines policy is cancelled and premium is returned, the surplus lines premium tax is:

  1. payable only by the insured
  2. increased by a cancellation penalty
  3. adjusted to reflect the returned premium Correct answer.
  4. never refundable

Explanation

Premium tax follows the premium actually earned, so returned premium reduces the taxable premium. The tax is adjusted rather than being nonrefundable or increased.

Question 18Indiana surplus lines statutes, rules, and regulatory framework

Which insurer is a 'nonadmitted insurer' for Indiana surplus lines purposes?

  1. An insurer not authorized to transact insurance in Indiana Correct answer.
  2. An insurer that is a member of the Indiana guaranty association
  3. An insurer authorized in Indiana to write the same line
  4. An insurer that is domiciled in Indiana

Explanation

A nonadmitted insurer is one not authorized to transact insurance in Indiana. Being domiciled in Indiana or authorized for a line does not make an insurer nonadmitted.

Question 19Indiana surplus lines statutes, rules, and regulatory framework

Acting as a surplus lines producer in Indiana without the required license may result in:

  1. automatic issuance of a surplus lines license
  2. disciplinary action, including fines or license revocation Correct answer.
  3. coverage by the guaranty association for the insured
  4. no consequence if the insurer is eligible

Explanation

Unlicensed surplus lines activity is subject to the commissioner's disciplinary powers, including fines and revocation. It does not self-cure or become lawful because the insurer is eligible.

Question 20Indiana surplus lines statutes, rules, and regulatory framework

Which document is the surplus lines producer required to provide to the insured at placement?

  1. A copy of the insurer's certificate of authority
  2. A guaranty association certificate
  3. The commissioner's eligibility order
  4. A written disclosure that the insurer is nonadmitted and not guaranty-fund protected Correct answer.

Explanation

The producer must give the insured a written disclosure that the insurer is nonadmitted and not covered by the guaranty association. Certificates of authority and eligibility orders are not the required insured disclosure.

Question 21Indiana surplus lines statutes, rules, and regulatory framework

An Indiana surplus lines producer places a multistate risk for an insured whose home state is Indiana. Under the Nonadmitted and Reinsurance Reform Act, the surplus lines premium tax is:

  1. paid to the state where the insurer is domiciled
  2. allocated to each state based on the location of the risk
  3. waived because the risk is multistate
  4. paid only to Indiana on the entire risk Correct answer.

Explanation

Under the NRRA, the insured's home state generally has exclusive authority to tax and regulate the surplus lines placement. If Indiana is the home state, Indiana receives the tax on the entire risk.

Question 22Indiana surplus lines statutes, rules, and regulatory framework

To be placed on Indiana's eligible surplus lines insurer list, a nonadmitted insurer generally must:

  1. meet minimum capital and surplus requirements and be authorized in its domicile Correct answer.
  2. join the Indiana guaranty association
  3. be authorized in every state
  4. write at least 10% of its premiums in Indiana

Explanation

Eligibility requires the insurer to be authorized in its domicile and to meet Indiana's financial standards, including minimum capital and surplus. It need not be authorized in every state or join the guaranty association.

Question 23Indiana surplus lines statutes, rules, and regulatory framework

An Indiana surplus lines producer may place coverage with an eligible nonadmitted insurer that is not authorized in Indiana even though:

  1. the insured has not signed a disclosure
  2. the coverage is available from an authorized insurer at a higher price
  3. the insurer is not protected by the Indiana guaranty association Correct answer.
  4. the insurer has no surplus lines license in any state

Explanation

Surplus lines coverage may be placed with an eligible nonadmitted insurer despite the lack of guaranty fund protection, provided the disclosure and diligent search requirements are met. Coverage available from an authorized insurer would generally preclude a surplus lines placement.

Question 24Indiana surplus lines statutes, rules, and regulatory framework

The Indiana commissioner may remove an insurer from the eligible surplus lines insurer list if the insurer:

  1. charges a rate higher than an authorized insurer
  2. uses a surplus lines producer licensed in Indiana
  3. fails to maintain the financial or other requirements for eligibility Correct answer.
  4. writes a policy for an exempt commercial purchaser

Explanation

The commissioner may remove an insurer that no longer meets eligibility standards. Writing for an exempt purchaser or using a licensed producer is not a ground for removal.

Question 25Indiana surplus lines statutes, rules, and regulatory framework

An Indiana surplus lines producer's file for a placement should contain which of the following to support the diligent search?

  1. The insured's credit report
  2. The producer's personal resume
  3. Declination or no-quote evidence from authorized insurers Correct answer.
  4. The insurer's NAIC annual statement

Explanation

Diligent search documentation typically includes evidence that authorized insurers declined or did not quote the risk. Credit reports, annual statements, and resumes do not demonstrate the search.

Question 26Indiana surplus lines statutes, rules, and regulatory framework

Which Indiana agency administers the surplus lines insurance laws and maintains regulatory oversight of surplus lines producers?

  1. Indiana Department of Insurance Correct answer.
  2. Indiana Attorney General
  3. Indiana Department of Revenue
  4. Indiana Secretary of State

Explanation

The Indiana Department of Insurance, through the commissioner, administers the surplus lines law and oversees licensing, eligibility, and reporting. The other agencies do not regulate insurance placement in this manner.

Question 27Indiana surplus lines statutes, rules, and regulatory framework

To place surplus lines insurance in Indiana, a producer must hold which license issued by the Indiana commissioner?

  1. A life insurance producer license
  2. A surplus lines producer license Correct answer.
  3. A title insurance producer license
  4. A public adjuster license

Explanation

Indiana requires a separate surplus lines producer license before a producer may place business with nonadmitted insurers. Holding an ordinary producer or adjuster license does not authorize surplus lines placements.

Question 28Indiana surplus lines statutes, rules, and regulatory framework

Who maintains the list of eligible surplus lines insurers that may be used for Indiana surplus lines placements?

  1. The insured
  2. The surplus lines producer
  3. The insurer's domiciliary regulator
  4. The Indiana commissioner Correct answer.

Explanation

The Indiana commissioner maintains the eligible surplus lines insurer list. A producer must verify the insurer's status on that list before placing a risk.

Question 29Indiana surplus lines statutes, rules, and regulatory framework

Which type of coverage is generally excluded from placement as surplus lines insurance in Indiana?

  1. Commercial general liability
  2. Commercial property
  3. Professional liability
  4. Life insurance Correct answer.

Explanation

Surplus lines laws generally apply to property and casualty risks, not life insurance. Life insurance must be placed with an authorized insurer.

Question 30Indiana surplus lines statutes, rules, and regulatory framework

When an eligible nonadmitted insurer writes surplus lines coverage in Indiana, whom must it appoint as its agent for service of process?

  1. The Indiana commissioner Correct answer.
  2. The Indiana Secretary of State
  3. The surplus lines producer
  4. The insured's registered agent

Explanation

A nonadmitted insurer must appoint the Indiana commissioner as its agent for service of process as a condition of doing surplus lines business. This ensures legal process can be served on the insurer.

Question 31Indiana surplus lines statutes, rules, and regulatory framework

Which requirement must an insurer generally satisfy to be eligible for Indiana's surplus lines insurer list?

  1. It must be authorized where it is domiciled Correct answer.
  2. It must hold an Indiana certificate of authority
  3. It must be a member of Lloyd's of London
  4. It must be a domestic Indiana insurer

Explanation

An eligible surplus lines insurer must be authorized in its domiciliary jurisdiction and meet Indiana's financial and listing standards. It is not authorized in Indiana, which is why surplus lines placement is used.

Question 32Indiana surplus lines statutes, rules, and regulatory framework

How are claims under an Indiana surplus lines policy treated by the Indiana insurance guaranty association?

  1. They are covered only for property claims by the association
  2. They are covered up to $300,000 by the association
  3. They are covered in full by the association
  4. They are not covered by the Indiana guaranty association Correct answer.

Explanation

The Indiana insurance guaranty association protects policyholders of admitted insurers that become insolvent. Surplus lines policies issued by nonadmitted insurers are not covered by that guaranty association.

Question 33Indiana surplus lines statutes, rules, and regulatory framework

Which financial standard applies to an insurer on Indiana's eligible surplus lines insurer list?

  1. It must meet minimum capital and surplus standards set by Indiana Correct answer.
  2. It must be a domestic insurer organized in Indiana
  3. It must have a surplus of exactly $1 million
  4. It must hold a certificate of authority issued by Indiana

Explanation

Indiana sets minimum capital and surplus requirements for eligible surplus lines insurers to protect insureds. An insurer must satisfy those standards to remain on the commissioner's list.

Question 34Indiana surplus lines statutes, rules, and regulatory framework

A surplus lines policy issued by an eligible nonadmitted insurer and placed by a licensed Indiana surplus lines producer is:

  1. Enforceable only if the insured is a commercial entity
  2. Enforceable only after the commissioner approves the policy
  3. Void because the insurer is not authorized in Indiana
  4. Valid and enforceable when placed through a licensed surplus lines producer Correct answer.

Explanation

Indiana law permits licensed surplus lines producers to place coverage with eligible nonadmitted insurers. A policy placed in compliance with the surplus lines law is valid and enforceable.

Question 35Indiana surplus lines statutes, rules, and regulatory framework

Which authority does the Indiana commissioner have under the surplus lines law?

  1. Adopt rules to implement and administer the surplus lines law Correct answer.
  2. Set premium tax rates without regard to the statute
  3. Delegate all surplus lines authority to the National Association of Insurance Commissioners
  4. Approve each surplus lines policy before it is issued

Explanation

The commissioner administers the surplus lines law and may adopt rules to carry out its requirements. Policy-by-policy approval and unilateral tax setting are not part of that authority.

Question 36Indiana surplus lines statutes, rules, and regulatory framework

How must an Indiana surplus lines producer handle premiums collected from an insured for a nonadmitted insurer?

  1. Hold the premiums in a fiduciary capacity and remit them promptly Correct answer.
  2. Retain the premiums as commission without any written agreement
  3. Commingle the premiums with the producer's personal funds
  4. Use the premiums for operating expenses before remitting them

Explanation

Premiums collected for an insurer are held in a fiduciary capacity and must be accounted for and remitted according to the placement terms. A producer may not treat those funds as personal or general operating money.

Question 37Indiana surplus lines statutes, rules, and regulatory framework

At what point must a nonadmitted insurer be eligible on Indiana's list for a surplus lines placement?

  1. Only when the policy is renewed
  2. At any time during the preceding calendar year
  3. When the policy is placed Correct answer.
  4. When the producer files the annual statement

Explanation

The insurer must be eligible at the time the surplus lines policy is placed. Later or earlier listing status does not cure an improper placement.

Question 38Indiana surplus lines statutes, rules, and regulatory framework

If a surplus lines producer violates Indiana's surplus lines law, what disciplinary action may the commissioner take?

  1. Take no action because surplus lines is unregulated
  2. Suspend or revoke the producer's surplus lines license Correct answer.
  3. Only impose a fine on the insured
  4. Only issue a warning letter with no further action

Explanation

The commissioner may suspend or revoke a surplus lines producer's license for violations of the surplus lines law. Licensing discipline is separate from any premium tax or penalty assessment.

Question 39Indiana surplus lines statutes, rules, and regulatory framework

What is surplus lines insurance in Indiana?

  1. Insurance procured from an insurer authorized in Indiana
  2. Insurance procured from a domestic Indiana insurer
  3. Insurance procured through the Indiana guaranty association
  4. Insurance procured from a nonadmitted insurer Correct answer.

Explanation

Surplus lines insurance is coverage procured from a nonadmitted insurer when authorized insurers cannot provide it. It is not coverage from an admitted or domestic insurer.

Question 40Indiana surplus lines statutes, rules, and regulatory framework

What is an eligible surplus lines insurer in Indiana?

  1. Any alien insurer regardless of listing
  2. Any insurer with an A rating from a rating agency
  3. Any insurer authorized in Indiana
  4. A listed nonadmitted insurer that meets Indiana standards Correct answer.

Explanation

An eligible surplus lines insurer is a nonadmitted insurer that satisfies Indiana's standards and appears on the commissioner's list. An A rating alone does not create eligibility.

Question 41Diligent search and placement with unauthorized (non-admitted) insurers

In Indiana, the diligent search requirement that precedes a surplus lines placement exists primarily to:

  1. increase the amount of premium tax collected by the state
  2. guarantee the insured the lowest premium available in the market
  3. give authorized insurers the first opportunity to write the coverage Correct answer.
  4. require the producer to use an admitted insurer in every situation

Explanation

Surplus lines is a residual market: before using a nonadmitted insurer, the producer must establish that the full amount of coverage cannot be procured from authorized insurers. The test is availability of coverage, not price or convenience. This protects the admitted market while preserving access to coverage that would otherwise be unavailable.

Question 42Diligent search and placement with unauthorized (non-admitted) insurers

Which statement best describes an unauthorized (nonadmitted) insurer in Indiana?

  1. An insurer that writes coverage only through surplus lines producers
  2. An insurer that is not authorized to transact insurance business in Indiana Correct answer.
  3. An insurer that has never held a license in any state or country
  4. An insurer whose Indiana certificate of authority has been revoked

Explanation

An unauthorized or nonadmitted insurer is one that does not hold a certificate of authority from the Indiana commissioner, even if it is licensed in its home state and appears on the eligible surplus lines list. Surplus lines insurers are lawful to use for eligible risks precisely because they are not admitted in Indiana.

Question 43Diligent search and placement with unauthorized (non-admitted) insurers

Before placing a policy with a nonadmitted insurer, the Indiana producer must disclose to the insured that:

  1. the insurer is not authorized in Indiana and the policy is not protected by the Indiana guaranty association Correct answer.
  2. the policy is protected by the Indiana insurance guaranty association
  3. surplus lines premiums are refundable if an admitted insurer later offers coverage
  4. the policy will be administered by the Indiana Department of Insurance

Explanation

Indiana requires a written notice, given before placement, that the insurer is not authorized to transact business in the state and that the policy is not covered by the Indiana insurance guaranty association. The disclosure lets the insured make an informed decision about the added credit risk.

Question 44Diligent search and placement with unauthorized (non-admitted) insurers

Indiana producers may place surplus lines coverage only with:

  1. an insurer that appears on the commissioner's list of eligible surplus lines insurers Correct answer.
  2. any insurer that holds a license in at least one state
  3. any syndicate operating at Lloyd's of London
  4. an insurer the insured approves in writing before binding

Explanation

Placement is permitted only with an insurer that appears on the commissioner's list of eligible surplus lines insurers at the time of placement. The producer must verify eligibility rather than rely on the insurer's reputation or its license elsewhere.

Question 45Diligent search and placement with unauthorized (non-admitted) insurers

An insured asks a producer to place coverage with a nonadmitted insurer because the premium is 20 percent lower than a quote from an authorized insurer that is willing to write the full risk. The producer should:

  1. split the coverage between the two insurers to reduce the cost
  2. place the coverage with the authorized insurer, because lower price does not justify a surplus lines placement Correct answer.
  3. place with the nonadmitted insurer and refund the savings to the insured
  4. place the coverage with the nonadmitted insurer because the insured requested it

Explanation

A price advantage is not a lawful basis for using the surplus lines market. If an authorized insurer is willing to write the full coverage, the risk belongs in the admitted market, regardless of the insured's preference.

Question 46Diligent search and placement with unauthorized (non-admitted) insurers

A producer who places surplus lines business in Indiana must hold:

  1. a property and casualty producer license Correct answer.
  2. only a life and health producer license
  3. a public adjuster license
  4. a title insurance agent license

Explanation

Surplus lines placements involve property, casualty, and related lines, so the producer must be licensed for those lines. The producer is the regulated party responsible for the search, the eligibility check, the disclosure, and the transaction records.

Question 47Diligent search and placement with unauthorized (non-admitted) insurers

A producer must keep records of each surplus lines search and transaction because:

  1. the commissioner may examine them to verify compliance Correct answer.
  2. the insured's attorney may need them during litigation
  3. they must be attached to the policy when it is delivered
  4. the nonadmitted insurer needs them to support its rate filings

Explanation

Surplus lines records are regulatory evidence: the commissioner has examination authority and the producer must be able to demonstrate that the search, eligibility check, and disclosure were performed. Records are retained for the department's review, not for the insurer's rate filings.

Question 48Diligent search and placement with unauthorized (non-admitted) insurers

The diligent search for a surplus lines placement must be completed:

  1. before the coverage is bound or placed Correct answer.
  2. only when the policy comes up for renewal
  3. within 30 days after the policy is issued
  4. at the close of each calendar year

Explanation

The decision to use a nonadmitted insurer depends on the results of the search, so the search must precede binding. Documentation created after the fact cannot convert an improper placement into a compliant one.

Question 49Diligent search and placement with unauthorized (non-admitted) insurers

A producer's file contains written refusals from three authorized insurers that write the same class of business, each stating the risk falls outside its underwriting guidelines. This documentation is evidence of:

  1. a diligent search for the coverage Correct answer.
  2. a reinsurance transaction rather than a primary placement
  3. an improper attempt to avoid the admitted market
  4. an unauthorized placement that must be reported to the guaranty association

Explanation

The diligent search is proven by showing that authorized insurers writing the class of business were asked and declined for stated underwriting reasons. The refusals must be contemporaneous with the placement and retained in the file.

Question 50Diligent search and placement with unauthorized (non-admitted) insurers

A surplus lines policy is up for renewal and the same nonadmitted insurer offers to renew on identical terms. The producer must:

  1. notify only the nonadmitted insurer of the renewal
  2. perform a diligent search again before the renewal is placed Correct answer.
  3. obtain a signed waiver of the search from the insured
  4. renew automatically because the original search remains valid

Explanation

Each placement, including a renewal, stands on its own search, because admitted-market appetite and the availability of coverage can change from one term to the next. The original search speaks only to the conditions at the time of the original placement.