Florida Statutes and Rules Common to All Lines — practice questions

24% of the exam ≈20 real questions 24 free questions here

The biggest section of the 2-14 at 20 of the 85 scored questions: the CFO and DFS, licensing and appointments, continuing education, fiduciary duties, the guaranty association, and unfair trade practices. National courses cover it least, which is why it decides most results.

Where people lose points

• Twisting moves a client to a different insurer by misrepresentation; churning uses the existing policy's values, usually with the same insurer.
• Sliding adds coverage the client never asked for; rebating hands back part of the commission.
• Most unfair trade practices carry fines up to $12,500 nonwillful and $100,000 willful; twisting and churning go up to $187,500 willful (s. 626.9521, F.S.).
• Section 626.611 grounds require action; section 626.621 grounds allow it.
• Appointments renew every 24 months, in the licensee's birth month.

Questions and answers, explained

All 10 questions above, with the correct answer and why it is correct. Everything here is on florida statutes and rules common to all lines.

1. A pattern of consumer complaints alleges that an authorized Florida health insurer routinely fails to acknowledge and act promptly on claim communications. Which regulator has authority to examine the insurer and impose an administrative fine on it for this conduct?

   • AThe Department of Financial Services, because claim handling is always licensee conduct
   • BThe Office of Insurance Regulation, which regulates insurer conduct and may fine the insurer under the unfair trade practices provisionsCorrect
   • CThe Office of Financial Regulation, because the insurer holds investment assets
   • DThe Financial Services Commission, sitting as an appellate body

   Why: Unfair claim settlement practices are listed in s. 626.9541(1)(i), F.S., and when the wrongdoer is an insurer the enforcing agency is the OIR, which conducts market conduct examinations and may fine the insurer under s. 624.4211, F.S. (up to $12,500 per nonwillful and $100,000 per willful violation). The DFS — the closest distractor — has jurisdiction over licensed individuals and agencies (agents, adjusters, customer representatives), not over the insurer's corporate conduct. (Outline FL-I.C)

   Reference ss. 626.9541(1)(i), 624.4211, F.S. — Outline FL-I.C

2. Which statement correctly describes the scope of the "Florida Insurance Code"?

   • AChapters 624 through 632, plus chapters 634, 635, 636, 641, 642, 648, and 651Correct
   • BChapter 626 only, because it governs agents and insurance operations
   • CChapters 624 and 626 only
   • DAll of Title XXXVII of the Florida Statutes without exception

   Why: Section 624.01, F.S., states that chapters 624-632, 634, 635, 636, 641, 642, 648, and 651 constitute the Florida Insurance Code. Option D is the closest distractor but is too broad: Title XXXVII also contains chapters (such as ch. 633, fire prevention and control) that the statute does not include in the Code. (Outline FL-I.E)

   Reference s. 624.01, F.S. — Outline FL-I.E

3. An unincorporated aggregation of subscribers who exchange insurance contracts among themselves, operating collectively through a common attorney-in-fact, is known as a:

   • Amutual insurer
   • Breciprocal insurerCorrect
   • Cfraternal benefit society
   • Dstock insurer

   Why: Under s. 629.021, F.S., a reciprocal insurer is an unincorporated aggregation of subscribers operating individually and collectively through an attorney-in-fact to provide reciprocal insurance among themselves. A mutual insurer — the closest distractor — is an incorporated company owned by its policyholders and managed by a board of directors, not by an attorney-in-fact. (Outline FL-I.E)

   Reference s. 629.021, F.S. — Outline FL-I.E

4. An agent places a health policy with an entity that holds no Florida certificate of authority, and the agent reasonably should have known this. The entity later refuses to pay a covered $40,000 claim. Under s. 626.901, F.S., the agent is:

   • Apersonally liable to the insured for the full amount of the claim or loss not paidCorrect
   • Bliable only for the return of the premiums collected
   • Cnot liable, because an agent acts for the insurer and not for the insured
   • Dliable only if the entity is later placed in liquidation

   Why: Section 626.901(2), F.S., makes any person who knew or reasonably should have known that a contract was entered into with an unauthorized insurer, and who solicited, negotiated, took application for, or effectuated it, liable to the insured for the full amount of the claim or loss not paid. Option B is the closest distractor: a premium refund is not the measure of liability, because the statute is designed to put the insured in the position the coverage promised. The guaranty association does not respond, because unauthorized insurers are not member insurers. (Outline FL-I.E)

   Reference s. 626.901(2), F.S. — Outline FL-I.E

5. An applicant was finally released from supervision 8 years ago following a felony conviction that was not a capital or first-degree felony, did not involve money laundering or embezzlement, was not related to the financial services business, and did not involve moral turpitude. Under s. 626.207, F.S., the applicant is:

   • Apermanently barred from licensure
   • Bsubject to a 15-year disqualifying period and therefore still ineligible
   • Csubject to a 7-year disqualifying period, which has now elapsedCorrect
   • Deligible only after obtaining a full pardon

   Why: Section 626.207(3)(b), F.S., assigns a 7-year disqualifying period to all felonies to which neither the permanent bar in subsection (2) nor the 15-year moral-turpitude period in paragraph (3)(a) applies; the period runs from final release from supervision or completion of the sentence, and all fines, costs, and restitution must be satisfied. Option B is the closest distractor, but the 15-year period applies only to felonies involving moral turpitude, which this scenario expressly excludes. (Outline FL-I.F)

   Reference s. 626.207(3)(b), F.S. — Outline FL-I.F

6. An insurer decides to terminate the appointment of one of its life agents. Under s. 626.471, F.S., the insurer must:

   • Agive the agent at least 60 days' advance written notice and file written notice with the department within 30 days after the terminationCorrect
   • Bgive the agent at least 30 days' advance written notice and file written notice with the department within 60 days after the termination
   • Cgive the agent no advance notice and notify the department only at the next birth-month renewal cycle
   • Dgive no notice at all, because appointments are terminable at will without any filing

   Why: Section 626.471, F.S., requires the appointing entity to give the agent at least 60 days' advance written notice of its intention to terminate the appointment, and to file written notice of the termination with the department within 30 days after terminating it, including a statement that the agent was notified and the reason for termination. Option B reverses the two periods, which is the most common error on this item. (Outline FL-I.F)

   Reference s. 626.471, F.S. — Outline FL-I.F

7. An unlicensed full-time clerical employee of a Florida insurance agency, whose pay includes no commissions and is unrelated to production, may perform all of the following EXCEPT:

   • Aincidentally taking an insurance application from a customer who telephones the agency
   • Bquoting a premium in response to an incoming inquiry
   • Creceiving a premium payment on an incoming inquiry
   • Dinitiating contact with a prospect for the purpose of soliciting insuranceCorrect

   Why: Section 626.0428(1), F.S., provides that a salaried employee who devotes full time to clerical work, with the incidental taking of applications or quoting or receiving premiums on incoming inquiries in the agency office, is not deemed an agent or customer representative so long as compensation includes no commissions and is not related to the production of applications, insurance, or premiums. Initiating contact to solicit insurance falls outside that shelter and is the unlicensed transacting of insurance under s. 626.112(1), F.S. Option A is the closest distractor, but the statute expressly allows the incidental taking of an application on an inbound contact. (Outline FL-I.F)

   Reference ss. 626.0428(1), 626.112(1), F.S. — Outline FL-I.F

8. A Florida life and health agent has been licensed for 27 years and holds an active CLU designation. Her biennial continuing education requirement is:

   • ANone; she is fully exempt from continuing education
   • BThe 4-hour update course plus 6 elective hoursCorrect
   • CThe 4-hour update course plus 16 elective hours
   • DThe 4-hour update course plus 20 elective hours

   Why: Under s. 626.2815, F.S., a licensee who has been licensed 25 years or more and who is a CLU or CPCU, or holds a bachelor's or higher degree in risk management or insurance with 18 or more insurance-related semester hours, must complete a minimum of only 6 elective hours every 2 years — but still must take the 4-hour update course. Option A is the closest distractor: long experience and a professional designation reduce the elective hours, but Florida grants no full exemption from the update course. (Outline FL-I.F)

   Reference s. 626.2815, F.S. — Outline FL-I.F

9. An agent occasionally collects premiums belonging to insurers that have not appointed her. Under s. 626.561, F.S., those funds must be:

   • Areturned directly to the insured within 15 days
   • Bmaintained in a separate account, so that the department may properly audit them, except for funds of surplus lines insurersCorrect
   • Ccommingled with the agency operating account, provided they are remitted within 30 days
   • Ddeposited into the agency's commission account and reported annually

   Why: Section 626.561(1), F.S., makes all such premiums trust funds received in a fiduciary capacity and requires funds belonging to insurers for which the licensee is not appointed — other than surplus lines insurers — to be maintained in a separate account so the department may properly audit them. Option C is the closest distractor and states the most common real-world violation: commingling is not cured by prompt remittance, and diverting fiduciary funds is a compulsory ground for suspension or revocation. (Outline FL-I.G)

   Reference s. 626.561(1), F.S. — Outline FL-I.G

10. A lender tells a mortgage applicant that his loan will be approved only if he buys his life insurance through the lender's affiliated agency. This practice is prohibited as:

    • Asliding — charging for a coverage the applicant did not knowingly request
    • Bcoercion, which is prohibited together with boycott and intimidationCorrect
    • Crebating — giving part of the premium back to the insured as an inducement
    • Dcontrolled business — writing insurance chiefly on the agent’s own interests

    Why: Section 626.9541(1)(d), F.S., prohibits entering into any agreement to commit, or committing, any act of boycott, coercion, or intimidation that results in or tends to result in unreasonable restraint of, or monopoly in, the business of insurance — conditioning credit on the purchase of insurance from a specified source is the classic example. Sliding is the closest distractor but concerns deceptively adding coverage or misstating that coverage is required by law, not using economic leverage to force the sale. (Outline FL-I.I)

    Reference s. 626.9541(1)(d), F.S. — Outline FL-I.I

Drill other domains

• Types of Policies and Features (Life and Annuities) (17.5%)
• Policy Riders, Provisions, Options and Exclusions (17.5%)
• Application, Underwriting and Policy Delivery (14%)
• Retirement and Other Insurance Concepts (9%)
• Florida Statutes — Life and Annuity (incl. Variable Products) (18%)

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