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.Permitted if the producer discloses it to the insurer
- b.Permitted for personal auto policies only
- c.Prohibited as unlawful rebating under the state's unfair trade practices law✓
- d.Required to be reported but otherwise lawful
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.The producer's personal income as soon as they are received
- b.Held in a fiduciary capacity and must not be commingled or converted for personal use✓
- c.Automatically forfeited to the state guaranty association
- d.Exempt from any trust-accounting requirement
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.