Alabama Property & Casualty Insurance License Exam — All Questions
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2 questions
Alabama Market Conduct & Ethics
A Alabama producer offers a prospect part of the producer's own commission in cash to induce the purchase of a policy. This practice is:
- a.Prohibited as unlawful rebating under the state's unfair trade practices law✓
- b.Required to be reported but otherwise lawful
- c.Permitted for personal auto policies only
- d.Permitted if the producer discloses it to the insurer
Rebating — giving any part of the premium or commission, or other valuable consideration, to induce a purchase — is prohibited under Alabama's unfair trade practices law because it can create unfair discrimination between similar policyholders.
Alabama Market Conduct & Ethics
Premiums a Alabama producer collects from clients before remitting them to the insurer are:
- a.Automatically forfeited to the state guaranty association
- b.The producer's personal income as soon as they are received
- c.Exempt from any trust-accounting requirement
- d.Held in a fiduciary capacity and must not be commingled or converted for personal use✓
Alabama, like other states, treats collected premiums as fiduciary funds belonging to the insurer or the insured. Commingling or converting them is grounds for license discipline and can be a crime; accurate trust accounting is required.