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1. A property and casualty broker tells a prospect that a competing insurer is on the verge of insolvency, knowing the statement is false. Under the Unfair Insurance Practices Act, this conduct is best described as:

Section 790.03(b) prohibits making, publishing, or circulating any false, maliciously critical, or derogatory statement calculated to injure any person engaged in the business of insurance. Lying about a competitor's financial condition is the classic example of defamation of an insurer. Twisting involves misrepresentations to induce a policy replacement, boycott involves coercive agreements not to deal, and rebating involves giving improper inducements to the insured.

2. Under the Fair Claims Settlement Practices Regulations, after an insurer receives proof of claim, within how many calendar days must it accept or deny the claim in whole or in part?

10 CCR §2695.7(b) requires the insurer to accept or deny a claim, in whole or in part, no later than 40 calendar days after receiving proof of claim. The 15-day figure relates to acknowledging receipt of the claim, and 30 days is the deadline to issue payment after an agreement is reached. Sixty days is not a benchmark in the regulation.

3. An insured calls her insurer to report a covered fire loss. By what deadline must the insurer acknowledge receipt of the claim communication?

10 CCR §2695.5(e)(1) requires the insurer to acknowledge receipt of a claim communication immediately, but in no event more than 15 calendar days after receipt. The longer 40-day window is the deadline to accept or deny coverage, not to acknowledge.

4. Once an insurer and insured agree on the amount of a covered loss, the insurer must tender payment within how many calendar days?

Under 10 CCR §2695.7(h), once the amount due is determined and not in dispute, payment must be tendered within 30 calendar days. Fifteen days is the acknowledgment deadline, and 40 days is the accept-or-deny deadline.

5. A licensed P&C broker-agent renewing a license must complete how many hours of continuing education during each two-year license period?

Section 1749 requires 24 hours of continuing education every two-year license term for a fire-and-casualty or life-only licensee, including at least 3 hours of ethics. The other figures are not the statutory requirement for a P&C broker-agent.

6. Which statement best describes the distinction between an insurance agent and a broker under California law?

Section 31 defines an insurance agent as a person authorized to transact insurance on behalf of an insurer. Section 33 defines a broker as a person who, for compensation and on behalf of another, transacts insurance other than life with, but not on behalf of, an admitted insurer. So an agent represents the insurer, while a broker represents the insured. Only brokers may charge a broker fee, the opposite of choice (b).

7. A P&C broker collects $5,000 in premiums from a client to bind a homeowners policy with an admitted insurer. Under the fiduciary duty statute, the broker must:

Section 1733 requires a licensee who handles premiums to hold them in a fiduciary capacity and not commingle them with personal or business operating funds. Premiums are trust funds that must be remitted to the insurer net of commission or returned to the insured. Choices (a), (c), and (d) are all commingling or conversion violations.

8. Which of the following is NOT a statutory ground on which the Insurance Commissioner may deny, suspend, or revoke a producer license?

Section 1668 lists grounds for discipline including felony or moral-turpitude misdemeanor convictions, fraud or misrepresentation in the application, and conduct showing incompetence or untrustworthiness. Mere non-membership in a private trade association is not a basis for discipline.

9. Under the California Insurance Information and Privacy Protection Act, when must an insurer give an applicant a Notice of Information Practices?

Section 791.02 requires the Notice of Information Practices to be delivered at or before the time information is collected from a source other than the applicant or insured (for example, an investigative consumer report or MIB). Post-claim or only-on-request delivery does not satisfy the statute.

10. An adjuster discovers that a claimant filed a written statement she knew to be false in support of a workers' compensation claim. Under California law, this conduct is:

Section 1871.4 makes it unlawful to knowingly present a false or fraudulent statement in support of a workers' compensation claim. The offense is a wobbler punishable by up to five years in state prison plus substantial fines. Withdrawal of the claim is no defense once the false statement has been made.

11. Insurers writing certain lines of insurance in California must establish what unit to investigate possible fraudulent claims?

Article 4.5 of the Insurance Code (§1875.20 et seq.) requires insurers to maintain a Special Investigative Unit, or SIU, to detect and investigate suspected insurance fraud. The FAIR Plan handles residual property risks, not fraud investigation, and DMHC regulates HMOs.

12. Which is a core statutory power of the California Insurance Commissioner?

Section 12921 charges the Commissioner with executing and enforcing the Insurance Code and adopting reasonable regulations. Workers' compensation benefit levels are set by the Legislature in the Labor Code, HMO rates fall under DMHC, and individual tort suits are handled by the courts.

13. An applicant wants to buy a fire policy on a beachfront cottage. The policy will be valid only if the applicant has insurable interest. Insurable interest in property must exist:

Section 250 (and §280) provide that insurable interest in property must exist at the time of loss. Unlike life insurance, where insurable interest is required only at inception, property insurance follows an indemnity principle and requires the insured to actually stand to suffer economic loss when the event occurs.

14. An insurer that decides not to renew a personal lines property policy must mail the named insured written notice of non-renewal at least how many days before expiration?

Section 678 requires at least 45 days' written notice before expiration of a personal lines property policy if the insurer elects not to renew. Ten and 30 days are not sufficient. Sixty days is not the statutory minimum for non-renewal of a personal property policy.

15. When an insurer offers a new or renewal residential property policy, California law requires it to offer earthquake coverage through:

Section 10086 of the Mandatory Earthquake Insurance Offer Law requires every residential property insurer to offer earthquake coverage at the time it issues or renews a homeowners policy. The offer must be written and may be accepted or declined; coverage is not bundled automatically, and surplus lines and the federal NFIP do not satisfy the requirement.

16. Under Proposition 103, before a property and casualty insurer may use a new rate in California, the rate must be:

Proposition 103 (codified at §1861.05) introduced a prior-approval system: P&C insurers must file rates with the Commissioner and obtain approval before using them. File-and-use is not allowed for most personal lines after Prop 103. DMHC and the FAIR Plan do not approve rates.

17. An insurer routinely tells claimants that policy benefits are lower than they actually are, hoping to settle for less. Under §790.03(h), this conduct is best classified as:

Section 790.03(h) enumerates 16 unfair claims settlement practices, including misrepresenting pertinent facts or policy provisions to claimants. Twisting concerns replacement of policies, defamation concerns false statements about insurers, and boycott concerns coercion among insurers.

18. A friend offers to sell a homeowners policy on the side without ever applying for a license. Under §1631, transacting insurance without a license:

Section 1631 expressly prohibits any person from soliciting, negotiating, or effecting contracts of insurance unless that person holds a valid license. The penalty includes fines, restitution, and potential criminal prosecution. Lack of commission, one-off transactions, and non-admitted insurer status are not defenses.

19. Which act by a P&C licensee best illustrates a violation of the premium trust statutes (§1733-§1734)?

Sections 1733-1734 require premiums to be held in fiduciary trust and not commingled or converted. Depositing client premiums into the broker's personal account is the textbook example of commingling and conversion. The other choices describe lawful conduct.

20. Under the Fair Claims Settlement Practices Regulations, an insurer's claim adjuster must do which of the following at the beginning of the claim?

10 CCR §2695.4(a) requires the insurer to disclose to a first-party claimant all benefits, coverages, time limits, or other provisions of any policy that may apply to the claim. Waiting for counsel, partial disclosure, or no disclosure is a violation of the regulation.

21. A producer's license issued by the Insurance Commissioner is valid for what period before it must be renewed?

Section 1633 provides that producer licenses are issued for a two-year term and must be renewed before expiration. One, three, and four years are not the statutory cycle.

22. Under the California Insurance Information and Privacy Protection Act, an insurer may generally disclose personal information collected from an applicant to a third party only if:

Section 791.13 prohibits disclosure of personal information to nonaffiliated third parties without the individual's written authorization, except for specific enumerated purposes such as fraud investigation, regulatory examination, or actuarial study. Internal underwriting preference, marketing without limit, and the passage of time are not exceptions.

23. When a producer fails to complete the required continuing education before the renewal date, the Commissioner may:

Section 1749.3 makes completion of the required continuing education a precondition of renewal; the Commissioner cannot renew a license that fails the CE requirement. The other options are not authorized remedies.

24. A California consumer wants to file a regulatory complaint about a full-service HMO. The complaint should be filed with:

Full-service HMOs operate under the Knox-Keene Health Care Service Plan Act and are regulated by the Department of Managed Health Care. The CDI regulates traditional indemnity and PPO products but not HMOs.

25. A producer tells a client that an admitted insurer's policy contains a 'guaranteed dividend,' when no such dividend is contractually guaranteed. This violates §790.03(a) as:

Section 790.03(a) prohibits making, issuing, or circulating any misrepresentation regarding the terms or benefits of any policy. Promising a guaranteed dividend that does not exist is a textbook misrepresentation. Coercion, boycott, and unauthorized practice of law are separate violations.

26. If a licensed P&C broker-agent moves to a new business address, the licensee must notify the Commissioner of the change within how many days?

Section 1724.5 requires a licensee to file a notice of change of address with the Commissioner within 30 days. Shorter periods are not statutory.

27. An insurer adopts a policy of consistently failing to acknowledge claim communications within the regulatory time frame. This is most accurately characterized as:

Section 790.03(h) prohibits unfair claim settlement practices when committed knowingly or with such frequency as to indicate a general business practice. A repeated failure to acknowledge claims is exactly the kind of pattern the statute targets.

28. After a declared wildfire emergency, California law restricts an insurer from cancelling or non-renewing a residential property policy in the affected ZIP code for what period?

Section 675.1 and §677.2 prohibit cancellation or non-renewal solely because a covered property is in a declared wildfire emergency area for one year after the emergency declaration. Six months, 30 days, and 5 years are not the statutory moratorium.

29. Which form of inducement to purchase insurance is expressly prohibited under California's anti-rebating laws?

Section 750 (anti-rebating) makes it unlawful to give any valuable consideration not specified in the policy as an inducement to insurance. A $200 cash-equivalent gift card is a classic rebate. Advertising specialties of nominal value, commission-sharing with another licensed agent, and accurate quoting are not rebates.

30. An insurer in good faith reports a suspected fraudulent claim to law enforcement. Under California law, the insurer is:

Section 1879.5 grants insurers civil immunity for good-faith reports of suspected fraud to authorized agencies. Strict liability and conviction-based liability are not part of the statute, and the insurer is not required to pay a suspected fraudulent claim while the matter is investigated.