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NC Life & Health practice questions

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Question 1Insurance Regulation, Licensing and North Carolina Insurance Law

In North Carolina, the Commissioner of Insurance is selected by:

  1. a joint vote of the General Assembly
  2. election by licensed insurers
  3. a statewide general election Correct answer.
  4. appointment by the Governor

Explanation

North Carolina is one of the states where the head of the insurance department is a constitutional officer chosen directly by the voters. The Commissioner therefore answers to the public rather than to the Governor or to the industry. The Commissioner's department administers the Insurance Law of Chapter 58.

Question 2Insurance Regulation, Licensing and North Carolina Insurance Law

Which statement best describes the Commissioner's power to examine an insurer's affairs?

  1. It may be used only when a policyholder files a written complaint
  2. It may be used at any reasonable time without the insurer's consent Correct answer.
  3. It may be used only with the insurer's written permission
  4. It may be used only against insurers domiciled in other states

Explanation

The Commissioner has broad statutory power to examine the books, records, and affairs of any insurer authorized to do business in the state in order to verify solvency and compliance. No complaint and no consent from the insurer are prerequisites. Refusing to submit to an examination is itself grounds for disciplinary action.

Question 3Insurance Regulation, Licensing and North Carolina Insurance Law

A North Carolina insurance producer license is required for a person who:

  1. explains an existing policy to a friend who asked for help
  2. refers a neighbor to an agent without payment
  3. publishes a general newspaper article about insurance costs
  4. solicits life insurance sales for a commission Correct answer.

Explanation

The licensing statutes reach anyone who for compensation solicits, negotiates, or sells insurance, or who negotiates insurance contracts on behalf of an insurer or insured. Receiving a commission for soliciting a sale is squarely within the licensed activity. Unpaid courtesies and general published information are not.

Question 4Insurance Regulation, Licensing and North Carolina Insurance Law

Before a licensed producer may act on an insurer's behalf in North Carolina, the insurer must:

  1. obtain the Commissioner's approval of the producer's character
  2. register the producer with the NAIC
  3. issue the producer a certificate of authority
  4. file a notice of appointment with the Commissioner Correct answer.

Explanation

A producer license alone does not authorize work for a particular company; the insurer must appoint the producer by notifying the Commissioner. The appointment is the mechanism that ties the licensee to a specific insurer. Acting for an insurer without an appointment is a violation.

Question 5Insurance Regulation, Licensing and North Carolina Insurance Law

When an insurer terminates a producer's appointment, it must notify the Commissioner:

  1. within 90 days, and only upon the producer's request
  2. within 30 days, stating whether it was for cause Correct answer.
  3. with the next annual statement filing
  4. only if the termination is for cause

Explanation

Terminations of appointment must be reported to the Commissioner within the statutory period, and the notice must disclose whether the termination was for cause. This alerts the department to producers whose conduct may warrant review. The producer is also entitled to notice of the action.

Question 6Insurance Regulation, Licensing and North Carolina Insurance Law

North Carolina resident producers satisfy continuing education requirements by completing:

  1. no continuing education once licensed 20 years
  2. 40 hours every two years with no subject requirements
  3. 24 hours every two years, with 3 hours of ethics Correct answer.
  4. 12 hours each year, including 1 hour of ethics

Explanation

Producers must complete a biennial block of continuing education that includes a specified ethics component. Credit must come from approved courses and be reported to the department. There is no permanent exemption based on years of experience.

Question 7Insurance Regulation, Licensing and North Carolina Insurance Law

Premium a producer collects from a policyholder is held:

  1. as earned compensation once the receipt is issued
  2. as a loan from the policyholder to the producer
  3. as property of the State until it is remitted
  4. in a fiduciary capacity for the insurer Correct answer.

Explanation

Premiums, and in many cases fiduciary funds such as claim payments, are held in trust for the insurer or the person entitled to them. The producer may not treat them as personal funds or use them for business expenses. Misappropriation is grounds for license revocation and may also be a crime.

Question 8Insurance Regulation, Licensing and North Carolina Insurance Law

The North Carolina Life and Health Insurance Guaranty Association exists primarily for:

  1. guaranteeing each member insurer an operating profit
  2. protecting policyholders of insolvent member insurers Correct answer.
  3. insuring insurers against employee dishonesty losses
  4. replacing the Commissioner's examination authority

Explanation

The guaranty association is a mechanism funded by member insurers to pay covered claims when a member company becomes insolvent. It does not protect the insurer's owners or managers and it does not regulate solvency. Its coverage is subject to statutory dollar limits and exclusions.

Question 9Insurance Regulation, Licensing and North Carolina Insurance Law

For a policyholder of an insolvent member insurer, the North Carolina Life and Health Insurance Guaranty Association generally covers a life insurance death benefit up to:

  1. $300,000 Correct answer.
  2. $100,000
  3. There is no dollar limit
  4. $500,000

Explanation

Statutory guaranty limits cap the death benefit the association will pay, with a separate and lower cap on net cash surrender value. These limits apply per insured life, and amounts above the cap are ordinary claims against the estate. Guaranty protection is therefore not unlimited.

Question 10Insurance Regulation, Licensing and North Carolina Insurance Law

An individual life insurance policy delivered in North Carolina must give the owner a free look of at least:

  1. 10 days Correct answer.
  2. 20 days
  3. 3 days
  4. 30 days

Explanation

The required right to examine the policy runs for at least ten days after delivery, during which the owner may return it for a full premium refund. The period protects buyers from purchasing on the basis of a sales presentation alone. Longer periods apply to products such as Medicare supplement and long-term care policies.

Question 11Insurance Regulation, Licensing and North Carolina Insurance Law

A Medicare supplement policy delivered in North Carolina must provide a free-look period of at least:

  1. 10 days
  2. 45 days
  3. 30 days Correct answer.
  4. 14 days

Explanation

Medicare supplement coverage carries a longer examination period than ordinary life insurance because of its complexity and its interaction with Medicare benefits. During that period the buyer may return the policy and receive a refund of premium. The period runs from delivery of the policy.

Question 12Insurance Regulation, Licensing and North Carolina Insurance Law

An individual life insurance policy issued in North Carolina must contain a grace period of at least:

  1. 30 days Correct answer.
  2. 31 days
  3. 10 days
  4. 7 days

Explanation

The grace period lets coverage continue for a stated number of days after a premium due date before the policy lapses. During the grace period the policy remains in force and any claim is paid, with the overdue premium deducted. Shorter periods may be permitted only for certain frequent-premium policies.

Question 13Insurance Regulation, Licensing and North Carolina Insurance Law

After a life policy has been in force for two years during the insured's lifetime, the insurer may still contest the policy for:

  1. an incorrect answer about medical history
  2. nonpayment of premium Correct answer.
  3. an error in the applicant's stated occupation
  4. a later change of beneficiary

Explanation

The incontestability clause bars the insurer from rescinding for misstatements in the application after the contestable period, but it never protects against failure to pay premium. Nonpayment is addressed by the grace period and lapse provisions. Certain other defenses, such as fraud, may survive in limited circumstances set by statute.

Question 14Insurance Regulation, Licensing and North Carolina Insurance Law

A producer who replaces an existing life insurance policy in North Carolina must generally:

  1. obtain the existing insurer's written permission
  2. submit the replacement for the Commissioner's approval
  3. give the applicant a replacement notice comparing the policies Correct answer.
  4. wait 60 days before delivering the new policy

Explanation

Replacement rules require disclosure so the buyer can compare the costs and benefits of the existing and proposed coverage. The producer typically must also identify the replacing insurer and may be required to leave the notice with the applicant. Nothing requires prior regulatory approval of the transaction.

Question 15Insurance Regulation, Licensing and North Carolina Insurance Law

Under North Carolina small employer health insurance rules, a small employer is generally one that employed an average of:

  1. 2 to 50 eligible employees Correct answer.
  2. 50 to 200 eligible employees
  3. 10 to 100 eligible employees
  4. 1 to 25 eligible employees

Explanation

The small employer market is defined by an employee-count range with a minimum of two and a maximum of fifty eligible employees on business days during the preceding calendar year. Employers in this market receive guaranteed issue and guaranteed renewal protections. An employer with only one employee is treated differently.

Question 16Insurance Regulation, Licensing and North Carolina Insurance Law

Which of the following is an unlawful rebate in North Carolina?

  1. a company-paid direct-mail advertisement
  2. the agent explaining how dividends are determined
  3. a payroll-deduction discount filed with the rates
  4. the agent giving part of the commission to the buyer Correct answer.

Explanation

Rebating is the offer of any inducement not stated in the policy, such as returning part of the commission to the buyer, to persuade someone to purchase. It is an unfair trade practice because it gives selected buyers an advantage not reflected in filed rates. Shared commissions paid to other licensed producers are treated differently from rebates to buyers.

Question 17Insurance Regulation, Licensing and North Carolina Insurance Law

An agent tells a client that her current insurer is about to fail financially so that she will surrender her policy and buy a replacement from him. This practice is:

  1. Twisting Correct answer.
  2. Rebating
  3. A permitted replacement
  4. Coercion

Explanation

Twisting is a misrepresentation, often about an existing insurer's condition, used to induce a policyholder to lapse or replace coverage. The falsity of the statement is what makes it unlawful, even if a replacement notice is later provided. Replacement itself is legal; deception in producing it is not.

Question 18Insurance Regulation, Licensing and North Carolina Insurance Law

An agent who misstates a policy's benefits to persuade a buyer to sign an application commits:

  1. a felony only if a claim is later denied
  2. no violation, because the policy itself controls
  3. a lawful sales practice
  4. misrepresentation, an unfair trade practice Correct answer.

Explanation

Misrepresenting the terms, benefits, or conditions of a policy is a defined unfair trade practice and can support administrative penalties as well as license action. The fact that the written contract is controlling does not excuse the deceptive sales conduct. Regulators may act on the misstatement even absent a denial of a claim.

Question 19Insurance Regulation, Licensing and North Carolina Insurance Law

A person who violates a cease and desist order issued by the Commissioner is subject to:

  1. no action, because the order is advisory only
  2. criminal prosecution only, with no administrative penalty
  3. administrative penalties and possible license suspension Correct answer.
  4. a refund payable to the complaining consumer only

Explanation

Cease and desist orders carry the force of law, and disobedience can result in monetary penalties and in suspension or revocation of the license. The Commissioner may also pursue the matter in court. The order does not depend on a consumer complaint for its effect.

Question 20Insurance Regulation, Licensing and North Carolina Insurance Law

Sharing a commission on a North Carolina insurance sale is permitted only when the person receiving the share is:

  1. the unlicensed person who made the referral
  2. licensed only in life for a health insurance sale
  3. a licensed producer appointed for that line of business Correct answer.
  4. paid under the label of a referral fee

Explanation

Commission splitting is lawful only among persons who themselves hold the required license, and normally an appointment, for the class of insurance involved. Paying an unlicensed referrer, whatever the payment is called, is an illegal inducement and unlicensed activity. A license limited to life does not cover a health sale.

Question 21Insurance Regulation, Licensing and North Carolina Insurance Law

A person who for compensation negotiates viatical settlement contracts in North Carolina must hold:

  1. a life insurance producer license only
  2. a certificate of authority as an insurer
  3. a viatical settlement broker license Correct answer.
  4. a securities registration

Explanation

Viatical settlements are regulated separately from ordinary insurance sales, and those who broker them need the specific license for that activity. A life producer license alone does not authorize brokering settlements. Providers that purchase the policies are licensed separately from brokers.

Question 22Insurance Regulation, Licensing and North Carolina Insurance Law

Knowingly making a false statement on a life insurance application in order to obtain coverage at a lower premium is:

  1. a civil matter only, between insurer and applicant
  2. excused if the misstatement involved a family member
  3. a lawful negotiation tactic
  4. a criminal offense that may be prosecuted as a felony Correct answer.

Explanation

Insurance fraud statutes make intentional misstatements submitted to obtain coverage or benefits a crime, and the state maintains a fraud division to investigate them. Separate civil and contractual consequences may also follow, but they do not displace criminal liability. Who the misstatement concerned does not create an excuse.

Question 23Insurance Regulation, Licensing and North Carolina Insurance Law

A producer licensed in another state may obtain a North Carolina nonresident license:

  1. by passing the North Carolina licensing examination
  2. without examination, under reciprocity Correct answer.
  3. by paying a fee without filing an application
  4. only after opening a North Carolina office for one year

Explanation

Reciprocity allows a producer in good standing in a home state that extends the same courtesy to North Carolina licensees to be licensed nonresident without re-testing. The applicant must still submit the required application and fee. A physical office in the state is not a condition.

Question 24Insurance Regulation, Licensing and North Carolina Insurance Law

North Carolina may issue a temporary producer license, lasting up to 180 days, to:

  1. a new resident who has not yet applied for a license
  2. the designee of a producer who dies or becomes disabled Correct answer.
  3. an insurer testing a new market
  4. an applicant who has failed the exam twice

Explanation

Temporary licensure is a narrow accommodation allowing a business to continue when a licensed producer dies or is disabled, by licensing a designee for a limited period. The licensee must still meet basic qualifications and file the required application. Temporary licenses are not a route around examination for ordinary applicants.

Question 25Insurance Regulation, Licensing and North Carolina Insurance Law

A license may be denied or revoked if it is obtained mainly to write controlled business, which means business written on:

  1. clients recruited through unlicensed telemarketers
  2. policyholders who reside in another state
  3. groups of fewer than ten employees
  4. the producer's own life, or that of family or an employer Correct answer.

Explanation

Controlled business is coverage written on the licensee's own interests or on those of close relatives or a business affiliation, where commissions from that business exceed statutory limits relative to total commissions. Licensing is intended for serving the public, not for capturing commissions on one's own insurance buying. Regulators may deny, refuse to renew, or revoke a license used primarily for that purpose.

Question 26Insurance Regulation, Licensing and North Carolina Insurance Law

The North Carolina Commissioner of Insurance is selected in which manner and for which term?

  1. Appointed by the Governor to a four-year term
  2. Appointed by the Insurance Rate Bureau to a six-year term
  3. Elected by the General Assembly to a two-year term
  4. Elected by the voters to a four-year term Correct answer.

Explanation

The Commissioner of Insurance is a statewide elected official who heads the North Carolina Department of Insurance and serves a four-year term. Because the office is elective, the Commissioner is accountable to voters rather than to the Governor or the legislature.

Question 27Insurance Regulation, Licensing and North Carolina Insurance Law

Before an insurer may transact insurance business in North Carolina, it must obtain which of the following from the Commissioner?

  1. A certificate of authority Correct answer.
  2. A certificate of incorporation
  3. A producer license
  4. A rate approval order

Explanation

An insurer must be authorized by the Commissioner, and the document evidencing that authorization is the certificate of authority. Incorporation under state corporate law does not by itself permit an insurer to write insurance.

Question 28Insurance Regulation, Licensing and North Carolina Insurance Law

An insurer organized under the laws of North Carolina is classified as:

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

Explanation

Domicile determines the classification: an insurer chartered in this state is a domestic insurer. Insurers chartered in another state are foreign, and those chartered outside the United States are alien.

Question 29Insurance Regulation, Licensing and North Carolina Insurance Law

The minimum age at which a person may be issued a North Carolina insurance producer license is:

  1. 16 years
  2. 21 years
  3. 25 years
  4. 18 years Correct answer.

Explanation

North Carolina requires a producer to be at least 18 years of age, along with the other qualifications such as prelicensing education and examination. Age 18 is the general age of majority and matches the statutory minimum.

Question 30Insurance Regulation, Licensing and North Carolina Insurance Law

A person who sells, solicits, or negotiates insurance in North Carolina without holding a valid license is:

  1. Committing a violation of the insurance laws subject to penalties Correct answer.
  2. Permitted to do so if no commission is received
  3. Allowed if supervised by a licensed producer
  4. Required only to register with the insurer being represented

Explanation

Selling, soliciting, or negotiating insurance requires a license, and unlicensed activity exposes the person to civil and criminal penalties. The absence of compensation does not excuse unlicensed activity.

Question 31Insurance Regulation, Licensing and North Carolina Insurance Law

When an insurer appoints a producer to act on its behalf in North Carolina, the insurer must notify the Commissioner within:

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

Explanation

The insurer must file notice of the appointment with the Commissioner within 30 days after the agency contract is executed or the first application is submitted. The appointment is the insurer's authorization for the producer to act for it.

Question 32Insurance Regulation, Licensing and North Carolina Insurance Law

An agreement among insurers to refuse to write coverage for a particular class of applicants is best described as:

  1. An unlawful rebate of premium
  2. An act of twisting
  3. An illegal boycott, coercion, or intimidation Correct answer.
  4. An unfair claim settlement practice

Explanation

Refusing to deal with a class of risks in concert with others is a boycott and is an unfair trade practice, as are coercion and intimidation. These practices restrain competition and limit consumer access to coverage.

Question 33Insurance Regulation, Licensing and North Carolina Insurance Law

Suspected insurance fraud in North Carolina is investigated through:

  1. The Insurance Rate Bureau
  2. A fraud division within the Department of Insurance Correct answer.
  3. The State Treasurer's office
  4. The Attorney General's consumer division

Explanation

The Department of Insurance houses a fraud division that investigates suspected insurance fraud and refers cases for prosecution. Its authority is separate from rate-making and general consumer protection functions.

Question 34Insurance Regulation, Licensing and North Carolina Insurance Law

A person aggrieved by a final order of the Commissioner may appeal by filing suit:

  1. With the Court of Appeals within 90 days
  2. With the Insurance Rate Bureau within 60 days
  3. In the district court of the person's county of residence within 10 days
  4. In the Superior Court of Wake County within 30 days Correct answer.

Explanation

Judicial review of the Commissioner's orders is obtained by filing in the Superior Court of Wake County within 30 days of the order. The Rate Bureau is not a review body, and the Court of Appeals is not the first step.

Question 35Insurance Regulation, Licensing and North Carolina Insurance Law

A licensed producer who changes her business address must notify the Commissioner:

  1. Only when the license comes up for renewal
  2. Within six months of the change
  3. Only if she also writes controlled business
  4. Within 30 days of the change Correct answer.

Explanation

Producers must keep licensing records current, which includes reporting a change of name or address within 30 days. Prompt reporting ensures that official notices and orders reach the licensee.

Question 36Insurance Regulation, Licensing and North Carolina Insurance Law

A North Carolina producer whose license is disciplined by another state must:

  1. Notify only the insurers that have appointed the producer
  2. Report the action to the Commissioner within 30 days Correct answer.
  3. Take no action, because the matter is confined to that state
  4. Surrender the North Carolina license immediately

Explanation

A producer must report administrative action taken against the producer by another jurisdiction within 30 days. The Commissioner then evaluates whether the conduct also warrants action in North Carolina.

Question 37Insurance Regulation, Licensing and North Carolina Insurance Law

Which statement correctly distinguishes a producer license from an appointment?

  1. The two terms mean the same thing and are both issued by the Commissioner
  2. An appointment is issued by the Commissioner, and a license is issued by the insurer
  3. A license is state permission to sell; an appointment ties the producer to a specific insurer Correct answer.
  4. A license lets a producer represent one named insurer, while an appointment is the state's general permission to sell

Explanation

The Commissioner issues the license, which establishes the producer's authority to transact insurance in the state. An appointment is separately filed by an insurer to authorize that producer to act on its behalf.

Question 38Insurance Regulation, Licensing and North Carolina Insurance Law

A scheduled review in which the Commissioner inspects an insurer's files, claims handling, and sales practices is known as:

  1. A market conduct examination Correct answer.
  2. A liquidation proceeding
  3. A rate hearing
  4. An appointment review

Explanation

Market conduct examinations evaluate how an insurer treats policyholders and complies with the insurance laws. They are distinct from rate proceedings and from proceedings involving an insolvent insurer.

Question 39Insurance Regulation, Licensing and North Carolina Insurance Law

Under North Carolina insurance rating law, rates charged for coverage must not be:

  1. Excessive, inadequate, or unfairly discriminatory Correct answer.
  2. Filed with the Rate Bureau before use
  3. Reviewed by the Commissioner every year
  4. Advertised to the public

Explanation

The fundamental rating standard is that rates be neither excessive nor inadequate and that they not unfairly discriminate among similar risks. Filing and review mechanics vary by line, but the standard itself is constant.

Question 40Insurance Regulation, Licensing and North Carolina Insurance Law

An insurer denies a health claim without reviewing the claim file or contacting the insured. This conduct is best characterized as:

  1. A permissible rate classification
  2. A valid underwriting decision
  3. A lawful exercise of business judgment
  4. An unfair claim settlement practice Correct answer.

Explanation

Insurers must adopt and follow reasonable standards for the prompt investigation of claims, and denying a claim without any investigation violates that duty. Such conduct is an unfair claim settlement practice subject to regulatory action.

Question 41Insurance Regulation, Licensing and North Carolina Insurance Law

An insurer charges two applicants who fall in the same actuarial risk class different premiums for identical coverage. This practice is:

  1. Rebating
  2. Coercion
  3. Unfair discrimination Correct answer.
  4. Twisting

Explanation

Charging different rates to insureds of the same class and expected mortality or morbidity is unfair discrimination. Differences in treatment must be supported by differences in risk or coverage.

Question 42Insurance Regulation, Licensing and North Carolina Insurance Law

Insurers authorized in North Carolina pay premium tax measured by:

  1. The premiums collected on policies in this state Correct answer.
  2. The value of the insurer's home office building
  3. The number of producers the insurer appoints
  4. The insurer's advertising expenditures in the state

Explanation

The premium tax is an excise tax computed on premiums received by the insurer for business done in North Carolina. It is a significant source of state revenue and is separate from licensing fees.

Question 43Insurance Regulation, Licensing and North Carolina Insurance Law

For an insurer authorized to write life and health insurance in North Carolina, membership in the North Carolina Life and Health Insurance Guaranty Association is:

  1. Mandatory as a condition of holding authority Correct answer.
  2. Optional for stock insurers
  3. Required only after another insurer is declared insolvent
  4. Limited to domestic insurers

Explanation

Membership in the Guaranty Association is a condition of an insurer's authority to transact life and health business in the state. Assessments to pay covered claims of insolvent members follow only if an insolvency occurs.

Question 44Insurance Regulation, Licensing and North Carolina Insurance Law

A business entity applying for a North Carolina insurance producer license must:

  1. Restrict its business to a single insurer
  2. Have every employee of the entity individually licensed as a producer
  3. Be owned entirely by licensed producers
  4. Designate a licensed producer accountable for compliance Correct answer.

Explanation

A business entity license requires a designated licensed producer who is responsible for the entity's compliance with insurance laws. The entity itself is licensed, so not every employee needs a license.

Question 45Insurance Regulation, Licensing and North Carolina Insurance Law

When the Commissioner determines that an authorized insurer is insolvent and cannot meet its obligations, the Commissioner may:

  1. Petition a court for rehabilitation or liquidation Correct answer.
  2. Refer the matter to the Rate Bureau for rate relief
  3. Take no action until a policyholder files suit
  4. Cancel the insurer's policies by public announcement

Explanation

The Commissioner acts as receiver by asking the court to place an insolvent insurer in rehabilitation or liquidation. Policyholder claims are then handled through that proceeding and, where covered, by the Guaranty Association.

Question 46Insurance Regulation, Licensing and North Carolina Insurance Law

Life and health insurance policy forms used in North Carolina must be:

  1. Certified by the Guaranty Association before use
  2. Reviewed by the Attorney General before use
  3. Approved by the Rate Bureau before use
  4. Filed with or approved by the Commissioner before use Correct answer.

Explanation

Policy forms are submitted to the Commissioner, who has authority to disapprove forms containing misleading or unlawful provisions. The Rate Bureau, the Attorney General, and the Guaranty Association have no approval role over policy forms.

Question 47Insurance Regulation, Licensing and North Carolina Insurance Law

When an insurer terminates a producer's appointment, the insurer must:

  1. Obtain the producer's written consent to the termination
  2. Wait until the next license renewal to notify the Commissioner
  3. Notify the producer's clients individually
  4. Notify the Commissioner within 30 days Correct answer.

Explanation

Termination of an appointment must be reported to the Commissioner within 30 days, just as new appointments must be reported. This keeps the appointment records accurate for regulators and consumers.

Question 48Insurance Regulation, Licensing and North Carolina Insurance Law

Before the Commissioner revokes a producer's license, the Commissioner generally must:

  1. Give notice and an opportunity for a hearing Correct answer.
  2. Get written approval from the producer's insurers
  3. Wait until the license expires on its own
  4. Obtain a criminal conviction against the producer

Explanation

License revocation is an administrative action that requires notice of the charges and an opportunity to be heard. A criminal conviction is not a prerequisite, and the Commissioner need not wait for license expiration.

Question 49Insurance Regulation, Licensing and North Carolina Insurance Law

The Commissioner may issue an immediate cease and desist order without a prior hearing when:

  1. Delay would cause immediate harm to the public Correct answer.
  2. The insurer's rates are higher than its competitors'
  3. The producer has already requested a hearing
  4. The Commissioner plans to refer the matter to a court later

Explanation

Emergency orders are permitted when waiting for a full hearing would allow ongoing harm to policyholders or the public. In other cases, notice and hearing precede the order.

Question 50Insurance Regulation, Licensing and North Carolina Insurance Law

An employer applies for a life insurance policy on a key employee and names itself as beneficiary. Under North Carolina law, this arrangement is:

  1. Prohibited, because an employer may never insure an employee
  2. Permitted if the employer has an insurable interest in the employee Correct answer.
  3. Prohibited unless the employer also insures every employee
  4. Permitted only if the employee's family consents

Explanation

Coverage requires an insurable interest at the time the contract is made, and an employer has such an interest in a key employee whose death would cause financial loss. Consent of the family or blanket coverage of all employees is not required.