Florida Statutes and Rules Common to All Lines — practice questions

23% of the exam ≈20 real questions 23 free questions here

The biggest section of the 2-40 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.

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.

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. An insurer files a new individual health policy form and rate schedule for Florida. In the same week, one of its appointed agents is accused of forging an applicant's signature on a delivery receipt. Which statement correctly assigns regulatory responsibility?

   • AThe OIR reviews the form and rate filing; the DFS investigates and disciplines the agentCorrect
   • BThe DFS reviews the form and rate filing; the OIR investigates and disciplines the agent
   • CThe Financial Services Commission decides both matters directly
   • DThe OIR handles both matters, because both arise out of the same insurer's business

   Why: The split is by subject, not by whose business it is: under s. 20.121(3)(a), F.S., the OIR regulates insurers — certificates of authority, rates, policy forms, solvency, and market conduct — while the DFS licenses and disciplines agents and adjusters under ch. 626, F.S. Option D is the closest distractor, but the agent's forgery is licensee misconduct under s. 626.9541(1)(ee), F.S., which the DFS enforces. (Outline FL-I.A)

   Reference ss. 20.121(3)(a), 626.9541(1)(ee), F.S. — Outline FL-I.A

3. Which set of characteristics identifies a fraternal benefit society under Florida law?

   • AIncorporated, not for profit, without capital stock, operating on a lodge system for its membersCorrect
   • BA stock corporation owned by its shareholders that restricts sales to a single occupational group
   • CAn unincorporated group whose members exchange contracts through an attorney-in-fact
   • DA nonprofit insurer that may sell only to residents of a single Florida county

   Why: Section 632.601, F.S., defines a fraternal benefit society as an incorporated society, order, or supreme lodge, without capital stock and not for profit, operated solely for the benefit of its members and their beneficiaries, on the lodge system with a ritualistic form of work and a representative form of government. Option C is the closest distractor but describes a reciprocal insurer under s. 629.021, F.S. (Outline FL-I.E)

   Reference s. 632.601, F.S. — Outline FL-I.E

4. An entity with no Florida certificate of authority acts as an insurer and collects $250,000 in premiums from Florida residents. Under s. 624.401, F.S., the violation is classified as:

   • Aa felony of the third degree, regardless of the amount collected
   • Ba felony of the second degree
   • Ca felony of the first degreeCorrect
   • Da misdemeanor of the first degree

   Why: Transacting insurance without a certificate of authority is normally a third-degree felony, but s. 624.401(4)(b), F.S., escalates the classification by the amount of premium collected: less than $20,000 is a third-degree felony, $20,000 or more but less than $100,000 is a second-degree felony, and $100,000 or more is a first-degree felony. Because $250,000 exceeds $100,000, option C applies; option A states the baseline rule and ignores the escalation tiers. (Outline FL-I.E)

   Reference s. 624.401(4)(b), 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 agency principal diverts $150,000 of premium trust funds to cover business losses. Under s. 626.561, F.S., the criminal classification of the misappropriation is:

   • Aa felony of the third degree
   • Ba felony of the second degree
   • Ca felony of the first degreeCorrect
   • Da misdemeanor of the first degree

   Why: The tiers in s. 626.561(3), F.S., are: $300 or less, first-degree misdemeanor; more than $300 but less than $20,000, third-degree felony; $20,000 or more but less than $100,000, second-degree felony; and $100,000 or more, first-degree felony. Because $150,000 is above the top threshold, option C applies; option B is the closest distractor and would be correct only for amounts below $100,000. Misappropriation of fiduciary funds is also a compulsory ground for suspension or revocation under s. 626.611, F.S. (Outline FL-I.G)

   Reference ss. 626.561(3), 626.611, F.S. — Outline FL-I.G

10. An agent tells prospects that a competing insurer "is on the verge of collapse and will not be able to pay claims," a statement she knows to be false. This conduct is best classified as:

    • AdefamationCorrect
    • Btwisting
    • Cunfair discrimination
    • Dboycott

    Why: Defamation under s. 626.9541(1)(c), F.S., is knowingly making, publishing, disseminating, or circulating a false or maliciously critical or derogatory statement about the financial condition of an insurer that is calculated to injure it. Twisting — the closest distractor — also involves misleading statements, but it requires inducing an existing policyholder to lapse, forfeit, surrender, or convert a policy, and no existing policy is being replaced here. (Outline FL-I.I)

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

Drill other domains

• Types of Health Policies (19%)
• Policy Provisions, Clauses and Riders (18%)
• Social Insurance (7%)
• Other Insurance Concepts (6%)
• Field Underwriting Procedures (9%)
• Florida Statutes — Health Insurance (18%)

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