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MT Property & Casualty practice questions

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Question 1Insurance Regulation

In Montana, the elected official who serves as Commissioner of Securities and Insurance also holds which title?

  1. State Auditor Correct answer.
  2. Superintendent of Insurance
  3. State Treasurer
  4. Attorney General

Explanation

Montana's insurance regulator is the Commissioner of Securities and Insurance, an elected statewide office held by the State Auditor, whose office enforces the insurance laws found in Title 33 of the Montana Code Annotated.

Question 2Insurance Regulation

The McCarran-Ferguson Act of 1945 provides that the regulation of insurance is primarily the responsibility of:

  1. the federal government, through the FTC
  2. the National Association of Insurance Commissioners
  3. county governments
  4. the individual states Correct answer.

Explanation

McCarran-Ferguson confirmed that continued state regulation of insurance is in the public interest and limited the application of federal antitrust law to insurers that are regulated by the states.

Question 3Insurance Regulation

Selling, soliciting, or negotiating insurance in Montana requires a person to hold:

  1. a certificate of authority issued by the NAIC
  2. an insurance producer license Correct answer.
  3. a county business license
  4. a notarized power of attorney

Explanation

A person must hold a Montana insurance producer license before selling, soliciting, or negotiating insurance; transacting insurance without a license is an unauthorized insurance transaction subject to penalty.

Question 4Insurance Regulation

Offering a prospective insured something of value that is not stated in the policy as an inducement to buy the policy is known as:

  1. defamation
  2. twisting
  3. coercion
  4. rebating Correct answer.

Explanation

Rebating is the giving or offering of anything of value not specified in the policy as an inducement to purchase insurance, and it is prohibited as an unfair trade practice.

Question 5Insurance Regulation

An insurer that is organized under the laws of Montana is classified in Montana as which type of insurer?

  1. Foreign
  2. Domestic Correct answer.
  3. Alien
  4. Surplus lines

Explanation

Insurers are classified by their place of organization: a domestic insurer is organized under the laws of the state in question, a foreign insurer under the laws of another state, and an alien insurer under the laws of another country.

Question 6Insurance Regulation

What are Montana's minimum required liability limits for a private passenger auto policy?

  1. 15/30/5
  2. 50/100/25
  3. 25/50/20 Correct answer.
  4. 30/60/25

Explanation

Montana's compulsory liability law requires at least $25,000 per person and $50,000 per accident for bodily injury, plus $20,000 for property damage. Higher limits may be purchased but are not the statutory minimum.

Question 7Insurance Regulation

The Montana Property and Casualty Insurance Guaranty Association exists primarily to:

  1. guarantee that insurers earn a profit on filed rates
  2. provide reinsurance for admitted insurers
  3. pay covered claims of insolvent insurers Correct answer.
  4. insure property owned by the state government

Explanation

Guaranty associations are statutory safety nets that pay covered claims of policyholders when an admitted insurer becomes insolvent, funded by assessments on member insurers. They do not guarantee profits, insure state property, or reinsure companies.

Question 8Insurance Regulation

A producer deposits client premium payments into a personal checking account and uses the money for personal expenses. The producer has engaged in:

  1. rebating
  2. commingling Correct answer.
  3. defamation
  4. twisting

Explanation

Premiums collected on behalf of an insurer are held in trust; mixing them with personal funds and spending them is commingling and typically misappropriation as well, both of which are grounds for license discipline.

Question 9Insurance Regulation

An insurer authorizes a licensed producer to transact business on its behalf by:

  1. listing the producer in its annual statement
  2. obtaining a surplus lines endorsement
  3. filing a notice of appointment with the Commissioner Correct answer.
  4. issuing the producer a certificate of authority

Explanation

A producer's authority to act for a particular insurer comes from an appointment, which the insurer files with the insurance department. The state-issued license alone does not authorize the producer to write business for a specific company.

Question 10Insurance Regulation

A Montana producer cannot place a difficult commercial risk with any admitted insurer. To place the coverage with a non-admitted insurer, the producer must generally:

  1. act freely, since non-admitted insurers are unregulated
  2. obtain the insured lender's written consent
  3. file the policy with the guaranty association first
  4. hold a surplus lines license and document a diligent search Correct answer.

Explanation

Business may be placed with a non-admitted insurer only through a licensed surplus lines producer, and only after a documented diligent search shows that admitted insurers will not write the coverage.

Question 11Insurance Regulation

A producer tells a client that her current policy contains benefits it does not actually contain, hoping she will surrender it and buy a replacement. This practice is best described as:

  1. twisting Correct answer.
  2. rebating
  3. coercion
  4. defamation

Explanation

Twisting is misrepresenting the terms or benefits of an existing policy to persuade the policyholder to drop it, often to sell a replacement, and it is a prohibited unfair trade practice.

Question 12Insurance Regulation

Which of the following is an unfair claim settlement practice?

  1. Denying a claim after a reasonable investigation
  2. Failing to act on claims within a reasonable time Correct answer.
  3. Paying a claim within the policy deadline
  4. Asking the claimant to submit a signed proof of loss

Explanation

Unfair claim settlement practices include failing to acknowledge and act promptly on claims communications, unreasonable delay, and failing to conduct a reasonable investigation. Requesting proof of loss, paying on time, and denying after a genuine investigation are all legitimate.

Question 13Insurance Regulation

Montana law requires that property and casualty insurance rates be:

  1. adequate, not excessive, and not unfairly discriminatory Correct answer.
  2. identical for every policyholder in the same county
  3. set annually by the Commissioner for every line of business
  4. pre-approved by a federal insurance department before use

Explanation

Rates must be adequate to support the insurer's obligations, must not be excessive, and must not be unfairly discriminatory among risks with similar characteristics; the standard is enforced through rate filing and examination.

Question 14Insurance Regulation

A bank tells a borrower that the loan will be approved only if the borrower buys homeowners insurance through the bank's affiliated agency. This conduct is:

  1. lawful because the bank bears the credit risk
  2. rebating, unless the premium is disclosed
  3. coercion, which is prohibited Correct answer.
  4. a permissible tie-in arrangement for lenders

Explanation

Coercion includes tying the availability of credit or another service to the purchase of insurance from a particular producer or insurer. Lenders may require insurance, but may not dictate the source as a condition of the loan.

Question 15Insurance Regulation

To verify compliance with Montana's insurance laws, the Commissioner may:

  1. examine records only during a declared emergency
  2. audit insurers but never producers
  3. examine insurers and producers and subpoena records Correct answer.
  4. delegate examinations to the insurer's own auditors

Explanation

The Commissioner's examination authority extends to insurers, producers, and other licensees and includes the power to subpoena witnesses and require production of records relevant to compliance.

Question 16Insurance Regulation

A licensed producer wants to pay part of her commission to an unlicensed friend who referred a client. Under Montana law this payment is:

  1. permitted if the insurer agrees in writing
  2. permitted if the client is told about it
  3. prohibited; the friend is unlicensed Correct answer.
  4. permitted if the friend lives in Montana

Explanation

Commissions for the sale of insurance may be paid only to licensed producers or as otherwise specifically allowed by statute, so splitting a commission with an unlicensed referral source is unlawful.

Question 17Insurance Regulation

With respect to nonresident producer licensing, Montana generally will:

  1. grant reciprocity to licensed nonresidents Correct answer.
  2. require nonresidents to repeat prelicensing education
  3. refuse all nonresident producer licenses
  4. require nonresidents to keep a Montana office

Explanation

Montana issues nonresident producer licenses on a reciprocal basis to individuals who are licensed and in good standing in their home state, without requiring them to repeat prelicensing education or maintain an in-state office.

Question 18Insurance Regulation

A producer collects a premium from a client but does not forward it to the insurer, instead using the money for agency payroll. The producer has:

  1. acted properly if the policy was later issued
  2. made an error with no legal consequence
  3. taken a lawful advance of commission
  4. misappropriated funds held in trust Correct answer.

Explanation

Premiums collected from insureds are held in a fiduciary capacity for the insurer or the insured; diverting them to agency expenses is misappropriation of trust funds and grounds for license discipline.

Question 19Insurance Regulation

Before an insurer shares a consumer's nonpublic personal financial information with a nonaffiliated third party, state and federal privacy rules generally require the insurer to:

  1. charge the consumer a disclosure fee
  2. give notice and an opt-out opportunity Correct answer.
  3. report the sharing to the Commissioner
  4. obtain a court order

Explanation

Privacy rules require insurers to give customers a clear notice of their information practices and, before sharing nonpublic personal financial information with nonaffiliated third parties, a reasonable opportunity to opt out.

Question 20Insurance Regulation

Charging two applicants with similar risk characteristics different rates because of their national origin is:

  1. permissible if the insurer files the rates
  2. permissible with the Commissioner's approval
  3. unfair discrimination, which is prohibited Correct answer.
  4. permissible for personal lines only

Explanation

Rating or underwriting on the basis of characteristics such as national origin, race, or religion is unfair discrimination; rates must be based on sound actuarial principles reasonably related to expected losses.

Question 21Insurance Regulation

While helping a client apply for coverage, a producer signs the client's name to the application without permission. What is the most likely regulatory consequence?

  1. no consequence, since the client meant to apply
  2. automatic criminal prosecution by the insurer
  3. license discipline for a prohibited act Correct answer.
  4. a warning only, since no claim was filed

Explanation

Signing another person's name to an application without authority is a misrepresentation and a prohibited act that subjects the producer to suspension, revocation, or fines, whether or not a claim is later filed.

Question 22Insurance Regulation

When an insurer ends a producer's appointment, the insurer is generally required to:

  1. publish the termination in a local newspaper
  2. refund commissions the producer already earned
  3. confiscate the producer's book of business
  4. report the termination to the Commissioner Correct answer.

Explanation

Insurers must notify the Commissioner of the termination of a producer's appointment within the time allowed by statute, and may be required to state the reason, so the state can track producer conduct.

Question 23Insurance Regulation

A producer places a homeowners policy with an insurer that holds no Montana certificate of authority, even though several admitted insurers write the coverage. The producer has:

  1. acted properly, since the insured chose the insurer
  2. violated the law by using an unauthorized insurer Correct answer.
  3. breached only a reporting duty, with no liability
  4. complied, because surplus lines rules do not apply

Explanation

Placing a risk with an insurer that holds no certificate of authority is an unlawful transaction unless the placement qualifies as surplus lines, which requires a diligent search and a licensed surplus lines producer. Here the admitted market was available, so the placement was improper.

Question 24Insurance Regulation

A producer refuses to let the Commissioner's examiner review the agency's premium records. This refusal is:

  1. grounds for license revocation Correct answer.
  2. acceptable, unless a complaint was filed
  3. grounds for a fine only, not license action
  4. acceptable, because agency records are private

Explanation

Licensees must make their records available for examination; refusing to permit an examination is a violation that can result in suspension or revocation of the license as well as monetary penalties.

Question 25Insurance Regulation

Three insurers agree among themselves to refuse to insure any contractor who works with a particular labor union. This agreement is:

  1. a lawful underwriting guideline
  2. boycott, coercion, or intimidation Correct answer.
  3. price fixing allowed by state law
  4. permissible if filed with the Commissioner

Explanation

A concerted refusal to deal with, or an agreement to refuse to insure, a particular class of applicants is boycott, coercion, or intimidation, a prohibited unfair trade practice that also falls outside the state-regulatory exemption from antitrust law.

Question 26Insurance Regulation

Which entity is primarily responsible for enforcing Montana's insurance laws and regulating insurance producers and insurers?

  1. The Montana Secretary of State
  2. The Montana Attorney General
  3. The Montana Department of Revenue and Taxation
  4. The Montana Commissioner of Insurance Correct answer.

Explanation

The Commissioner of Insurance administers and enforces Montana's insurance code, including producer licensing and insurer market conduct. The Attorney General, Secretary of State, and Department of Revenue have other state-law roles, not primary insurance regulation.

Question 27Insurance Regulation

An insurer formed and organized under the laws of Montana is classified as what type of insurer?

  1. A surplus lines insurer
  2. A domestic insurer Correct answer.
  3. A foreign insurer
  4. An alien insurer

Explanation

A domestic insurer is one organized under the laws of the state where it is domiciled. Because this insurer is formed under Montana law, it is domestic in Montana.

Question 28Insurance Regulation

How long is a Montana insurance producer license generally valid before it must be renewed?

  1. Four years
  2. Three years
  3. One year
  4. Two years Correct answer.

Explanation

Montana issues producer licenses for a two-year term, after which the producer must renew and meet continuing education requirements.

Question 29Insurance Regulation

A Montana producer changes her business address but continues selling insurance. Within what period must she notify the Commissioner of the address change?

  1. 30 days Correct answer.
  2. 60 days
  3. 90 days
  4. 10 days

Explanation

A licensed producer must notify the Commissioner of a change of business or residence address within 30 days. Keeping licensing records current helps ensure official notices reach the producer.

Question 30Insurance Regulation

What is the general continuing education requirement for a Montana property and casualty producer during each two-year license term?

  1. 24 hours, including 3 hours of ethics Correct answer.
  2. 16 hours, including 1 hour of ethics
  3. 40 hours, with no ethics component
  4. 12 hours, including 6 hours of ethics

Explanation

Montana requires producers to complete 24 continuing education credit hours every two years, including at least 3 hours of ethics.

Question 31Insurance Regulation

A corporation wants to obtain a Montana insurance producer license as a business entity. What is required?

  1. The entity must be owned by a Montana resident
  2. Every officer must hold an individual producer license
  3. It must designate a licensed producer for compliance Correct answer.
  4. The entity must employ at least five licensed producers

Explanation

A business entity must hold a producer license and designate a licensed individual producer who is responsible for the entity's compliance with insurance laws.

Question 32Insurance Regulation

Which statement best describes Montana's standard for insurance advertising by producers and insurers?

  1. Advertising must be truthful and not misleading Correct answer.
  2. Advertising may use any statement that is literally true, even if misleading
  3. Advertising is permitted only after the Commissioner approves each advertisement
  4. Advertising rules apply only to television and radio

Explanation

Insurance advertising must be truthful and must not mislead consumers. The Commissioner does not approve every advertisement in advance.

Question 33Insurance Regulation

By what date must an authorized insurer generally file its annual statement with the Montana Commissioner of Insurance?

  1. February 15
  2. January 1
  3. April 30
  4. March 1 Correct answer.

Explanation

Authorized insurers must file their annual financial statement with the Commissioner by March 1 each year.

Question 34Insurance Regulation

An insurer contracts with a new producer to write property and casualty business. When must the insurer file the producer's appointment with the Commissioner?

  1. Only when the producer renews her license
  2. Within 30 days after the appointment Correct answer.
  3. Before the producer may take the licensing exam
  4. Within 90 days after the first policy is issued

Explanation

Montana requires an insurer to file a producer appointment with the Commissioner within 30 days after making the appointment. The filing documents the producer's authority to act for that insurer.

Question 35Insurance Regulation

A Montana producer is charged with felony insurance fraud in another state. What must the producer do under Montana licensing rules?

  1. Notify only the insurer that appointed her
  2. Nothing, because the charge is in another state
  3. Wait until final conviction before telling the Commissioner
  4. Notify the Commissioner within 30 days Correct answer.

Explanation

Producers must notify the Commissioner within 30 days of a criminal prosecution or certain administrative actions. This duty applies even when the matter arises in another state.

Question 36Insurance Regulation

In investigating a suspected violation of Montana insurance law, what authority does the Commissioner have?

  1. The Commissioner may only request voluntary cooperation
  2. The Commissioner may act only after a court order
  3. The Commissioner may subpoena witnesses and records Correct answer.
  4. The Commissioner must obtain a criminal indictment before acting

Explanation

The Commissioner has investigative authority, including the power to subpoena witnesses and records. This authority supports examinations and enforcement of the insurance code.

Question 37Insurance Regulation

When the Montana Commissioner proposes to take disciplinary action against a producer's license, what procedural protection is generally required?

  1. Notice and an opportunity for a hearing Correct answer.
  2. A vote of the other licensed producers in the state
  3. Approval by the insurer that appointed the producer
  4. A public criminal trial before a jury

Explanation

Before disciplining a licensee, the Commissioner must provide notice of the charges and an opportunity for a hearing. This satisfies administrative due process.

Question 38Insurance Regulation

A producer is aggrieved by a final order of the Montana Commissioner. Where may the producer generally seek judicial review?

  1. In the United States Tax Court
  2. In the Montana Supreme Court as the first court
  3. In the Montana district court Correct answer.
  4. Before the Commissioner's advisory council

Explanation

A final order of the Commissioner is generally reviewed by a Montana district court on the administrative record. The Supreme Court is not the first court for such review.

Question 39Insurance Regulation

How often must the Montana Commissioner generally examine authorized domestic insurers?

  1. Only when a consumer files a complaint
  2. At least once every five years Correct answer.
  3. At least once every year
  4. At least once every ten years

Explanation

The Commissioner conducts periodic examinations of domestic insurers, generally at least once every five years. Examinations may also be called when circumstances warrant.

Question 40Insurance Regulation

How long must an insurer generally keep its insurance transaction records available for examination by the Montana Commissioner?

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

Explanation

Insurers must keep records of insurance transactions for at least five years and make them available to the Commissioner. This supports examinations and enforcement.

Question 41Insurance Regulation

What is an insurer required to maintain regarding consumer complaints under Montana insurance law?

  1. A complaint register or similar record Correct answer.
  2. A public list of every complainant's name
  3. An annual advertisement about complaints
  4. A separate bank account for complaint costs

Explanation

Insurers must maintain a complaint register or similar record showing complaints and how they were resolved. The Commissioner may review it during an examination.

Question 42Insurance Regulation

A producer wants to place coverage with a nonadmitted insurer as surplus lines. What license must the producer generally hold?

  1. A life and health producer license only
  2. A surplus lines producer license Correct answer.
  3. A claims adjuster license
  4. A real estate broker license

Explanation

A producer must hold a surplus lines producer license to place coverage with eligible nonadmitted insurers. Regular producer authority alone is not enough for surplus lines placements.

Question 43Insurance Regulation

Before a Montana surplus lines producer places coverage with a nonadmitted insurer, what must generally be true about the insurer?

  1. The insurer must be a domestic insurer
  2. The insurer must have a Montana certificate of authority
  3. It must be on the eligible surplus lines list Correct answer.
  4. The insurer must be owned by Montana residents

Explanation

Surplus lines coverage must be placed with an eligible nonadmitted insurer on the Commissioner's list. An insurer with a Montana certificate of authority would be admitted, not surplus lines.

Question 44Insurance Regulation

Which practice is prohibited as illegal rebating under Montana insurance law?

  1. Providing a policyholder with the policy contract
  2. Charging a rate that has been filed with the Commissioner
  3. Explaining policy exclusions to a client
  4. Offering an undisclosed payment as an inducement to buy Correct answer.

Explanation

Rebating occurs when a producer offers money or another valuable inducement not specified in the policy to persuade a buyer to purchase insurance. Montana prohibits this practice.

Question 45Insurance Regulation

A Montana producer license expires. Within what period may the producer generally reinstate it by paying the required fee and completing continuing education, without retaking the licensing exam?

  1. 24 months
  2. 36 months
  3. 12 months Correct answer.
  4. 6 months

Explanation

A lapsed Montana producer license may generally be reinstated within 12 months by paying the required fee and completing continuing education. After 12 months, the producer must reapply and requalify.

Question 46Insurance Regulation

An insurer allows a newly contracted producer to solicit policies but never files the appointment with the Commissioner. What is the most accurate statement?

  1. The producer's license is automatically revoked
  2. The producer may keep all commissions without any consequence
  3. The insurer violated appointment filing requirements Correct answer.
  4. The policies are automatically void

Explanation

Insurers must file appointments within the required time after appointing a producer. Failure to file is an insurer violation; it does not automatically revoke the producer's license or void policies.

Question 47Insurance Regulation

An insurance advertisement suggests that the insurer is a government agency and that its policies carry government backing. How is this treated under Montana insurance law?

  1. It is a prohibited misrepresentation Correct answer.
  2. It is allowed because advertising is not regulated
  3. It is permitted if the insurer is admitted in Montana
  4. It is permitted if the advertisement is small

Explanation

An advertisement that falsely implies government affiliation or backing is deceptive and prohibited. It is a form of misrepresentation and an unfair trade practice.

Question 48Insurance Regulation

A producer tells a client, "Buy this homeowners policy and I will personally pay your deductible." What is this conduct?

  1. An illegal rebate Correct answer.
  2. Permitted customer appreciation
  3. A required policy endorsement
  4. A lawful premium discount

Explanation

Paying a client's deductible is an inducement not stated in the policy and is treated as an illegal rebate. Discounts must be authorized by the policy or filed rates.

Question 49Insurance Regulation

A Montana producer's license lapsed 14 months ago, and she now wants to sell insurance again. What will generally be required?

  1. Only a verbal request to the Commissioner
  2. Only completion of 3 hours of ethics
  3. Reapply and pass the licensing exam Correct answer.
  4. Only payment of the current renewal fee

Explanation

A license lapsed for more than 12 months generally cannot be reinstated by simple renewal. The producer must reapply and pass the licensing examination again.

Question 50Insurance Regulation

A producer is convicted of a felony but does not notify the Montana Commissioner. What is the likely consequence?

  1. The conviction is irrelevant to the producer license
  2. The license automatically transfers to a family member
  3. The producer's license may be suspended or revoked Correct answer.
  4. The insurer must pay a fine, but the producer faces no action

Explanation

Producers must report criminal convictions to the Commissioner, and failure to do so is itself a licensing violation. The Commissioner may suspend or revoke the license.