South Dakota Life & Health Insurance Exam — All Questions

A South Dakota producer offers a prospect part of the first-year commission as cash back if the prospect buys a policy. This practice is:

• a.Allowed if the amount is small
• b.Prohibited as unlawful rebating✓
• c.Allowed if disclosed verbally
• d.Required to be reported but otherwise legal

Rebating — giving a portion of the premium or commission, or any valuable consideration not stated in the policy, as an inducement to buy — is prohibited under South Dakota's Unfair Trade Practices Act. It is barred because it can create unfair discrimination between policyholders who are otherwise in the same class.

Under South Dakota insurance law, which conduct best describes 'twisting'?

• a.Selling policies to two members of the same family
• b.Charging different premiums based on the insured's actual age
• c.Submitting an application electronically
• d.Using misrepresentation or incomplete comparisons to persuade a policyholder to drop one policy and buy another✓

Twisting is inducing a policyholder to lapse, surrender, or replace an existing policy through misrepresentation or misleading comparisons. It is a prohibited unfair trade practice in South Dakota because it can leave the consumer worse off — for example with new contestable and suicide periods and fresh acquisition costs.

A South Dakota producer collects a premium from a client. Ethically and legally, how must the producer treat that money?

• a.As the producer's own income to spend immediately
• b.As a gift the producer may keep if the policy is not issued
• c.As funds held in a fiduciary capacity that must be remitted to the insurer and not commingled or used personally✓
• d.As money that may be loaned to other clients

Premiums a producer collects belong to the insurer or the client, not the producer. South Dakota treats this as a fiduciary duty: the funds must be accounted for and remitted properly, and must not be commingled with personal funds or converted. Misappropriating premiums is grounds for license discipline and can be a crime.