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ND Life & Health practice questions

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Question 1North Dakota Insurance Laws, Regulations and Department Practices

How is the North Dakota Insurance Commissioner chosen?

  1. Chosen by the state Legislature each session
  2. Selected by a board of admitted insurers
  3. Appointed by the Governor with Senate approval
  4. Elected by the state's voters Correct answer.

Explanation

North Dakota elects its Commissioner of Insurance in a statewide general election, and the Commissioner heads the Insurance Department that administers the state's insurance code. The office is not filled by gubernatorial appointment, legislative vote, or industry selection.

Question 2North Dakota Insurance Laws, Regulations and Department Practices

Which agency administers and enforces North Dakota's insurance laws?

  1. The Department of Financial Institutions
  2. The Public Service Commission
  3. The Attorney General's consumer fraud division
  4. The Insurance Department Correct answer.

Explanation

The North Dakota Insurance Department, headed by the Commissioner of Insurance, licenses producers and insurers, examines financial condition and market conduct, and pursues unfair trade practice violations. Other state agencies have separate statutory mandates and do not supervise insurers.

Question 3North Dakota Insurance Laws, Regulations and Department Practices

Before a person may transact insurance in North Dakota, the person must first:

  1. join a recognized producers' association
  2. post a surety bond with the Secretary of State
  3. obtain a license from the Commissioner Correct answer.
  4. complete a year of supervised agency work

Explanation

Transacting insurance without a license from the Commissioner is unlawful in North Dakota, and the license is the basic credential required before soliciting, negotiating, or selling coverage. Association membership, experience requirements, and state bonding are not licensing prerequisites.

Question 4North Dakota Insurance Laws, Regulations and Department Practices

Premium money a North Dakota producer collects from applicants is:

  1. held in trust, apart from the producer's own funds Correct answer.
  2. payable directly to the Commissioner as a deposit
  3. held in the insurer's name from the date of solicitation
  4. the producer's property until the policy is delivered

Explanation

Premiums collected on an insurer's behalf are received in a fiduciary capacity, so they must be kept separate from the producer's personal and operating funds and accounted for promptly. Commingling or using collected premiums for personal expenses is a licensing violation.

Question 5North Dakota Insurance Laws, Regulations and Department Practices

To authorize a licensed producer to write business for it, an insurer must:

  1. file notice of the appointment with the Commissioner Correct answer.
  2. deposit a bond equal to the producer's yearly commissions
  3. publish the appointment in a newspaper of general circulation
  4. obtain the Commissioner's written approval of the contract

Explanation

An insurer authorizes a producer through an appointment, which is filed with the Insurance Department so the regulator can link the producer to the appointing company. Prior regulatory approval of the contract, newspaper publication, and company bonds are not part of the appointment process.

Question 6North Dakota Insurance Laws, Regulations and Department Practices

Giving an applicant part of the producer's commission to persuade the applicant to buy a policy is:

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

Explanation

Rebating is offering any inducement not stated in the policy, such as a share of commission, to convince a buyer to purchase. Twisting involves misrepresentation that induces a policyholder to lapse existing coverage, while coercion uses pressure or threats.

Question 7North Dakota Insurance Laws, Regulations and Department Practices

Misstating the terms of an existing policy to persuade a policyholder to drop it and buy another is:

  1. rebating
  2. unfair discrimination
  3. coercion
  4. twisting Correct answer.

Explanation

Twisting is misrepresentation or incomplete comparison used to induce a policyholder to lapse, surrender, or replace coverage. It harms consumers by producing replacements that may not serve their needs.

Question 8North Dakota Insurance Laws, Regulations and Department Practices

The North Dakota Life and Health Insurance Guaranty Association was created to:

  1. protect policyholders when a member insurer becomes insolvent Correct answer.
  2. reimburse producers for commissions on replaced policies
  3. lend capital to insurers that fall below surplus requirements
  4. pay annual dividends to holders of whole life policies

Explanation

The guaranty association responds when a member life or health insurer is declared insolvent, paying covered claims within statutory limits so insureds are not left with worthless policies. It does not subsidize dividends, lend capital to insurers, or replace commissions.

Question 9North Dakota Insurance Laws, Regulations and Department Practices

During each two-year licensing period, a North Dakota producer must complete:

  1. 30 hours, with no ethics component
  2. 24 hours, including 3 hours of ethics Correct answer.
  3. 16 hours, including 4 hours of ethics
  4. 12 hours, including 1 hour of ethics

Explanation

North Dakota requires producers to complete 24 credit hours of approved continuing education every two years, with at least 3 of those hours covering ethics. Records must be retained and produced if the Department audits compliance.

Question 10North Dakota Insurance Laws, Regulations and Department Practices

When the Commissioner conducts a financial examination of an insurer, the expense of the examination is borne by:

  1. the state's general fund
  2. all admitted insurers in proportion to premium
  3. the insurer being examined Correct answer.
  4. the producers who placed the examined business

Explanation

Insurers pay the cost of their own examinations, typically through examiner fees and expenses billed by the Department. This keeps the examination program funded by the entities being supervised rather than by taxpayers or producers.

Question 11North Dakota Insurance Laws, Regulations and Department Practices

Before the Commissioner may revoke a producer's license, the producer is entitled to:

  1. a jury trial in the producer's home county
  2. reimbursement of attorney fees if cleared
  3. a suspension of all Department proceedings for one year
  4. notice of the charges and a hearing Correct answer.

Explanation

License revocation is an administrative action that requires notice of the grounds and an opportunity to be heard, so the producer can respond to the allegations. Court review of the final order is available afterward, but the administrative hearing comes first.

Question 12North Dakota Insurance Laws, Regulations and Department Practices

On finding that a licensee is engaged in a deceptive trade practice, the Commissioner may:

  1. impose a jail sentence of up to six months
  2. refer the matter to a jury for a binding verdict
  3. issue a cease and desist order Correct answer.
  4. order the licensee's property sold at public auction

Explanation

The Commissioner's administrative toolkit includes cease and desist orders, monetary penalties, and license suspension or revocation. Incarceration and property liquidation are judicial or bankruptcy remedies, not administrative ones.

Question 13North Dakota Insurance Laws, Regulations and Department Practices

An agent tells a buyer that a policy's nonguaranteed dividends are guaranteed. The agent has committed:

  1. commingling
  2. misrepresentation Correct answer.
  3. rebating
  4. boycott

Explanation

Misrepresentation includes false or misleading statements about policy benefits, dividends, or terms that induce a purchase. Describing nonguaranteed dividends as guaranteed overstates the contract and misleads the buyer.

Question 14North Dakota Insurance Laws, Regulations and Department Practices

Circulating a false statement that an insurer is near insolvency, intended to harm its business, is:

  1. unfair discrimination
  2. twisting
  3. coercion
  4. defamation Correct answer.

Explanation

Defamation in insurance regulation is publishing a false statement that is calculated to injure an insurer's reputation or financial standing. Truth is a defense, and the statement must be more than an expression of opinion.

Question 15North Dakota Insurance Laws, Regulations and Department Practices

A bank tells a loan applicant that the mortgage will be denied unless insurance is bought through the bank's agency. This is:

  1. lawful if the premium is financed with the loan
  2. lawful because the bank holds the mortgage
  3. prohibited twisting
  4. prohibited coercion Correct answer.

Explanation

Tying credit approval to the purchase of insurance from a particular source is coercion, an unfair trade practice, even when the lender has a financial interest in the property. The applicant must be free to choose his or her own insurer or producer.

Question 16North Dakota Insurance Laws, Regulations and Department Practices

A North Dakota producer who changes her business address must notify the Commissioner within:

  1. the next license renewal period
  2. 10 days
  3. 60 days
  4. 30 days Correct answer.

Explanation

Producers must keep their licensing record current, which includes reporting a change of address to the Department within 30 days. Waiting until renewal leaves the Department with inaccurate contact information for official notices.

Question 17North Dakota Insurance Laws, Regulations and Department Practices

An insurer terminates a producer's appointment because the producer misappropriated premiums. The insurer must:

  1. file a termination notice with the Commissioner that states the reason Correct answer.
  2. withhold notice from the producer until the Commissioner rules
  3. obtain the Commissioner's consent before ending the appointment
  4. file nothing, because the appointment lapsed by its terms

Explanation

Terminations of appointment must be reported to the Department, and when the termination is for cause the insurer must state the reason. The producer is notified and may file a response, which becomes part of the record available to regulators.

Question 18North Dakota Insurance Laws, Regulations and Department Practices

An agent places a client's coverage with an insurer that holds no North Dakota certificate of authority and is not an eligible surplus lines insurer. The agent:

  1. may do so if the client signs a waiver
  2. may do so if the insurer is admitted in another state
  3. has violated the law on unauthorized insurance Correct answer.
  4. may do so if a claim has never been denied

Explanation

Placing business with a nonadmitted, noneligible insurer is aiding an unauthorized insurer and exposes both the agent and the insurer to penalties. The client's consent or the absence of a claim does not cure the violation.

Question 19North Dakota Insurance Laws, Regulations and Department Practices

Examination reports and working papers of the Insurance Department are:

  1. available only to competitors of the examined insurer
  2. open to the public after a 30-day waiting period
  3. confidential, though shareable with other regulators Correct answer.
  4. open to public inspection as soon as they are signed

Explanation

Examination materials are treated as confidential records so that candid assessment of an insurer's condition is possible, but the Commissioner may share them with other insurance regulators and law enforcement. They are not released to the general public or to competitors.

Question 20North Dakota Insurance Laws, Regulations and Department Practices

A temporary producer license issued by the Commissioner may remain in effect no longer than:

  1. 2 years
  2. 90 days
  3. 180 days Correct answer.
  4. 30 days

Explanation

Temporary licenses are limited to 180 days and are used in narrow situations such as the death or disability of a licensed producer. They are not a substitute for meeting full licensing requirements.

Question 21North Dakota Insurance Laws, Regulations and Department Practices

A producer licensed and residing in another state who wishes to write North Dakota business generally must:

  1. surrender the license held in the home state
  2. qualify for a nonresident license Correct answer.
  3. pass the North Dakota licensing examination first
  4. open a staffed office within North Dakota

Explanation

Reciprocity allows a producer in good standing elsewhere to be licensed as a nonresident without retaking an examination or opening a physical office. The home state license must remain active and unencumbered.

Question 22North Dakota Insurance Laws, Regulations and Department Practices

North Dakota treats insurance fraud as:

  1. a private matter between the insurer and the claimant
  2. a crime that can also cost a producer his license Correct answer.
  3. a matter handled solely by federal prosecutors
  4. a civil issue pursued only when losses exceed $50,000

Explanation

Insurance fraud is a criminal offense under state law, and a producer involved in it also faces administrative discipline such as suspension or revocation. Insurers report suspected fraud to the Department, whose fraud unit investigates and refers cases for prosecution.

Question 23North Dakota Insurance Laws, Regulations and Department Practices

A rate filed with the Insurance Department must be:

  1. reviewed by the attorney general before it is filed
  2. not excessive, inadequate, or unfairly discriminatory Correct answer.
  3. identical to the rate charged by the largest admitted insurer
  4. approved by a vote of the Legislature before use

Explanation

Rate regulation rests on the three-part standard: rates must be adequate to support promised benefits, not unreasonably high, and not unfairly discriminatory among similar risks. Competitors' rates, legislative votes, and attorney general review are not part of the filing standard.

Question 24North Dakota Insurance Laws, Regulations and Department Practices

A producer who replaces a client's life insurance policy with a new one must:

  1. wait 60 days after the old policy lapses before delivering the new policy
  2. refund commissions earned on the replaced policy
  3. obtain the Commissioner's prior approval of the replacement
  4. provide a replacement notice for the applicant Correct answer.

Explanation

Replacement rules require the producer to give the applicant a written notice comparing the old and new coverage and to forward it to the replacing insurer with the application. The purpose is to make sure the buyer understands what is being given up.

Question 25North Dakota Insurance Laws, Regulations and Department Practices

A producer whose license expired in March keeps submitting applications through July. The producer is:

  1. lawfully acting under a 90-day grace period
  2. lawfully acting because the insurer still appoints him
  3. guilty only of a records violation, not a licensing one
  4. transacting insurance without a license and subject to penalties Correct answer.

Explanation

A license must be in force whenever insurance is solicited or sold, and an expired license means the activity is unlicensed regardless of a continuing appointment. The Department may impose penalties and the insurer may be affected as well.

Question 26North Dakota Insurance Laws, Regulations and Department Practices

Before an insurance company may transact life or health insurance business in North Dakota, it must obtain from the Commissioner:

  1. A letter of consent from the Attorney General
  2. A certificate of authority Correct answer.
  3. A license to operate as a rate advisory organization
  4. A certificate of registration as a holding company

Explanation

An insurer must be authorized before it transacts insurance in the state, and the certificate of authority issued by the Commissioner is the evidence of that authorization. Transacting insurance without authority exposes the insurer to enforcement action and makes its contracts subject to the unauthorized-insurer laws.

Question 27North Dakota Insurance Laws, Regulations and Department Practices

For a foreign (out-of-state) insurer authorized in North Dakota, state law designates which party to receive legal process in suits arising from its North Dakota business?

  1. The Insurance Commissioner Correct answer.
  2. The clerk of the district court in Burleigh County
  3. The insurer's resident general agent in the state
  4. The Secretary of State

Explanation

As a condition of doing business in the state, a foreign insurer appoints the Commissioner as its attorney for service of process, and the Commissioner forwards the papers to the insurer. This ensures that state residents can sue an out-of-state insurer without leaving North Dakota.

Question 28North Dakota Insurance Laws, Regulations and Department Practices

North Dakota's premium tax on life and health insurance business is paid by:

  1. The insurer, based on its North Dakota premiums Correct answer.
  2. The Department, from its operating budget
  3. The producer, based on commissions earned
  4. The policyholder, as a separate line item on the premium notice

Explanation

Premium tax is imposed on insurers and measured by the premiums they receive on business written in the state. It is a tax on the company, not on the producer's commissions, and it is not itemized separately to policyholders.

Question 29North Dakota Insurance Laws, Regulations and Department Practices

A newly licensed producer signs a contract with an insurer and immediately begins submitting applications for that insurer. Before the producer may act for the insurer, the insurer must:

  1. Publish notice of the appointment in a local newspaper
  2. File a notice of appointment with the Commissioner Correct answer.
  3. Obtain the Commissioner's written approval of the contract
  4. Post a surety bond covering the producer's activity

Explanation

A producer's authority to act for a particular insurer arises from an appointment filed with the Department by that insurer. Holding a license alone does not authorize a producer to represent a specific company.

Question 30North Dakota Insurance Laws, Regulations and Department Practices

A licensed North Dakota producer wants to pay part of the commission on a life policy to a friend who helped arrange the sale but holds no insurance license. This payment is:

  1. Permitted, if the friend is a North Dakota resident
  2. Prohibited, because only licensed producers may be paid Correct answer.
  3. Permitted, if the client consents in writing
  4. Permitted, as long as the friend's share is under 25 percent

Explanation

Commission sharing with an unlicensed person is unlawful compensation for an insurance sale, and it also functions as an inducement prohibited by the rebating laws. The rule applies regardless of the size of the payment, the client's consent, or the friend's residence.

Question 31North Dakota Insurance Laws, Regulations and Department Practices

A producer collects an initial premium from a client but does not forward it to the insurer for several weeks while using the money for personal expenses. The producer has:

  1. Acted properly, because the premium becomes the producer's once collected
  2. Acted properly, because the insurer's contract allows a grace period
  3. Misappropriated premium funds held in a fiduciary capacity Correct answer.
  4. Committed only a bookkeeping error, since the premium was eventually sent

Explanation

Premiums collected from applicants are held in trust for the insurer or the insured and must be kept separate from the producer's personal funds. Using those funds for personal purposes is misappropriation and is grounds for disciplinary action.

Question 32North Dakota Insurance Laws, Regulations and Department Practices

An agency's unlicensed receptionist wants to help with life insurance business. Which task may the receptionist lawfully perform?

  1. Explaining benefit levels of two competing policies
  2. Quoting a premium for a specific applicant
  3. Advising a caller to convert a term policy
  4. Scheduling appointments and mailing out brochures Correct answer.

Explanation

Unlicensed employees may handle clerical and administrative duties, but they may not solicit, negotiate, quote, or advise on insurance. Explaining coverage, recommending a conversion, or quoting a rate all require a license.

Question 33North Dakota Insurance Laws, Regulations and Department Practices

An insurance agency organized as a North Dakota limited liability company applies for a producer license. State law requires the agency to:

  1. Restrict ownership to individuals who hold producer licenses
  2. Obtain the Commissioner's approval of its operating agreement
  3. Hold a separate license for each line of insurance it sells
  4. Designate a licensed responsible producer for the agency Correct answer.

Explanation

A business entity may hold a producer license, but it must designate an individual licensed producer who is responsible for the entity's insurance activities and compliance. Ownership by unlicensed investors is not itself prohibited.

Question 34North Dakota Insurance Laws, Regulations and Department Practices

A North Dakota producer's license is suspended by another state's insurance regulator. Under North Dakota law, the producer must notify the Commissioner:

  1. Only when the next license renewal is filed
  2. Only if the producer has written business in that state
  3. Only if the other state's action lasts more than one year
  4. Within 30 days of the final disposition of the matter Correct answer.

Explanation

Producers must report administrative actions taken against them by another jurisdiction's insurance regulator, generally within 30 days after the matter is finally resolved. North Dakota may then take its own reciprocal action based on the out-of-state discipline.

Question 35North Dakota Insurance Laws, Regulations and Department Practices

The North Dakota Life and Health Insurance Guaranty Association pays claims of policyholders of insolvent insurers using money obtained primarily from:

  1. Appropriations voted by the Legislative Assembly
  2. Assessments on member insurance companies Correct answer.
  3. Premiums collected from the policyholders it protects
  4. Penalties collected from insurers that become insolvent

Explanation

The Association is funded through assessments levied on its member insurers, which are the life and health insurers authorized to transact business in the state. It is a private association of insurers rather than a state agency supported by tax money.

Question 36North Dakota Insurance Laws, Regulations and Department Practices

Which claim is eligible for protection by the North Dakota Life and Health Insurance Guaranty Association?

  1. A death benefit under a policy from an insurer never licensed in this state
  2. Health benefits under a self-funded employer plan
  3. Benefits under an unallocated annuity contract held by a pension plan
  4. A life insurance death benefit from an insolvent North Dakota-authorized insurer Correct answer.

Explanation

The Association protects covered policyholders of member insurers that become insolvent, subject to statutory limits. Coverage does not extend to insurers that were never authorized in the state, to self-funded employer plans, or to unallocated annuity contracts.

Question 37North Dakota Insurance Laws, Regulations and Department Practices

A North Dakota senior buys a Medicare supplement policy. State and federal standards give the buyer a right to return the policy for a full refund within:

  1. 10 days of delivery
  2. 30 days of delivery Correct answer.
  3. 60 days of delivery
  4. 3 days of delivery

Explanation

Medicare supplement policies must give the buyer a 30-day free-look period running from delivery of the policy. If the policy is returned within that period, the premium must be refunded and the coverage treated as never effective.

Question 38North Dakota Insurance Laws, Regulations and Department Practices

An insurer's newspaper advertisement describes a health policy as "fully approved and endorsed by the North Dakota Insurance Department." This advertisement is:

  1. Acceptable, if the Commissioner reviews the advertisement before publication
  2. Prohibited, because insurers may not advertise health insurance in newspapers
  3. Prohibited, because it misrepresents the Department's supervision as endorsement Correct answer.
  4. Acceptable, because the policy form was filed with the Department

Explanation

Filing or approval of a policy form means only that the form met regulatory requirements; it is not a finding that the policy is superior or that the Department endorses it. Advertising that turns regulatory review into an endorsement misrepresents the Department's role and is an unfair trade practice.

Question 39North Dakota Insurance Laws, Regulations and Department Practices

The Insurance Department sends a producer a written inquiry about a client complaint. The producer should:

  1. Reply only after the client files a lawsuit
  2. Ignore it, because complaints are handled only by the insurer
  3. Respond fully and promptly, as required of licensees Correct answer.
  4. Send the client's file to the client instead of the Department

Explanation

Licensees must cooperate with the Department's investigations of complaints and answer its inquiries honestly and promptly. Failing to respond is itself a separate ground for disciplinary action.

Question 40North Dakota Insurance Laws, Regulations and Department Practices

The North Dakota Insurance Commissioner implements the details of the Insurance Code chiefly by:

  1. Issuing opinions that have the force of statutes
  2. Submitting each regulation to a vote of the Legislature
  3. Adopting administrative rules under statutory authority Correct answer.
  4. Publishing bulletins that override statutes

Explanation

The Legislature grants the Commissioner rulemaking authority, and the Commissioner adopts administrative rules that carry out the Insurance Code through the state's rulemaking process. Rules must remain consistent with the statutes they implement.

Question 41North Dakota Insurance Laws, Regulations and Department Practices

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

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

Explanation

An insurer's classification depends on where it was formed: an insurer chartered in North Dakota is domestic, one chartered in another state is foreign, and one chartered in another country is alien. Surplus lines refers to how business is placed, not to domicile.

Question 42North Dakota Insurance Laws, Regulations and Department Practices

Under North Dakota law, the Commissioner's examiners may review a producer's business records:

  1. Only for records dated within the past ninety days
  2. As part of an examination or investigation by the Department Correct answer.
  3. Only after a court has issued a search warrant for the records
  4. Only if the producer consents in writing first

Explanation

Licensees' records of insurance transactions are subject to examination and investigation by the Department as part of its supervisory authority. Refusing to make records available can itself result in discipline.

Question 43North Dakota Insurance Laws, Regulations and Department Practices

To sell fixed annuity contracts in North Dakota, a producer must hold:

  1. A life insurance producer license Correct answer.
  2. No license, if the annuity is sold to an employer
  3. A securities registration only
  4. A property and casualty license

Explanation

Annuities are life insurance products, so a life insurance producer license is required to solicit them. A variable annuity also involves a securities registration, but securities registration alone never authorizes the insurance sale.

Question 44North Dakota Insurance Laws, Regulations and Department Practices

Before the Commissioner issues an individual producer license for a line of insurance, the applicant generally must:

  1. Pass the licensing examination for that line Correct answer.
  2. Post a surety bond with the state
  3. Be sponsored by three currently licensed producers
  4. Have at least two years of experience in that line

Explanation

Applicants must pass the qualifying examination covering the line applied for, along with meeting the application, fee, and any applicable prelicensing education requirements. Prior work experience in the line is not required.

Question 45North Dakota Insurance Laws, Regulations and Department Practices

Which circumstance may lawfully support the Commissioner's denial of a producer license application?

  1. Having lived in another state five years earlier
  2. Conviction of a felony involving dishonesty or breach of trust Correct answer.
  3. Working part-time in an unrelated field
  4. Being 24 years old

Explanation

A criminal conviction involving dishonesty or breach of trust is a statutory ground on which the Commissioner may deny or revoke a license. Any applicable rehabilitation or consent provisions must still be considered before the Commissioner acts.

Question 46North Dakota Insurance Laws, Regulations and Department Practices

A producer who is aggrieved by a final order of the Commissioner after an administrative hearing may obtain judicial review by filing a petition in:

  1. A panel of insurance industry arbitrators
  2. The North Dakota Supreme Court, which hears the case first
  3. The office of the Governor
  4. The appropriate North Dakota district court Correct answer.

Explanation

Review of a final agency order is sought in district court under the state's administrative agencies practice law, and the court examines the record made at the hearing. Review by the Supreme Court would come later, on appeal from the district court.

Question 47North Dakota Insurance Laws, Regulations and Department Practices

An insurer reports a suspected insurance fraud to the Insurance Department in good faith. Under North Dakota law, the insurer is:

  1. Required to notify the suspect before the report is filed
  2. Liable for defamation unless the suspicion is later proven
  3. Protected from civil liability for making the report Correct answer.
  4. Required to reimburse the Department for investigation costs

Explanation

Insurance fraud reporting statutes grant immunity from civil liability to persons who report suspected fraud in good faith to the Department or law enforcement. The immunity encourages reporting without fear of retaliation lawsuits.

Question 48North Dakota Insurance Laws, Regulations and Department Practices

A producer helps a 70-year-old client apply for a large life policy that is funded by an investor who will receive the death benefit. Under North Dakota law, this arrangement is:

  1. Permitted, if the investor pays all premiums from the start
  2. Permitted, if the policy is issued as a term policy
  3. Prohibited, because the investor lacks an insurable interest Correct answer.
  4. Permitted, if the client is informed of the investor's identity

Explanation

Life insurance requires an insurable interest in the insured at the time of application, and a policy procured for investors who will collect the death benefit lacks that interest. Such stranger-originated arrangements are unlawful regardless of disclosure or who pays the premium.

Question 49North Dakota Insurance Laws, Regulations and Department Practices

Without the applicant's written authorization, a producer tells a neighbor that the applicant tested positive for a disease listed on a life insurance application. Under North Dakota insurance law, the producer has:

  1. Violated privacy requirements governing the disclosure of personal information Correct answer.
  2. Committed an unfair trade practice but not a privacy violation
  3. Acted properly, because the neighbor asked directly
  4. Acted properly, because the information came from the insurer's file

Explanation

Information collected in connection with an insurance transaction, including health information, may not be disclosed without the individual's written authorization except under limited statutory exceptions. Unauthorized disclosure violates the state's insurance privacy provisions and exposes the licensee to penalties.

Question 50North Dakota Insurance Laws, Regulations and Department Practices

A life insurer organized under the laws of another state wants to begin soliciting applications from North Dakota residents. Before it may transact insurance in North Dakota, the insurer must obtain which of the following from the Insurance Commissioner?

  1. A membership certificate from the state guaranty association
  2. A producer license issued to each officer who will solicit business
  3. A certificate of good standing from the Secretary of State
  4. A certificate of authority to transact insurance Correct answer.

Explanation

An insurer must hold a certificate of authority from the Insurance Commissioner before it may transact insurance in North Dakota. This requirement applies to foreign and alien insurers as well as domestic insurers, and it is separate from the licensing of individual producers. Guaranty association membership does not authorize an insurer to do business.