1. Principals often authorize another party to act on their behalf. This relatio nship is called a. Broker. b. Fiduciary. c. Agency.

d. Attorney in fact. ANSWER C 2. When an agency relationship is created between a principal and the agent, it requires a high degree of a. b. c. d. Trust. Patience. Oversight. Creativity.

ANSWER A 3. When an insurer appoints an agent to act its behalf, the agent's scope of aut hority is spelled out in the a. b. c. d. Broker of record letter. Insurance contract. Agency contract. Letter of intent.

ANSWER C 4. All of the following are true about the insurance agency relationship, EXCEPT : a. The agency agreement is a written agreement between the insurer and an agent b. The agency agreement gives the agent the right to represent the insurer and s ell insurance on the insurer'sbehalf c. The principal is the party the agent authorizes to bind coverage d. The agent is the party authorized by the principal to act on the principal's behalf ANSWER C 5. Which one of the following statements is true regarding the agency contract? a. The agent is the principal b. An agency contract is also c. Insurance agency contracts d. The agency contract states iness for the insurer. ANSWER D 6. In an insurance agency relationship, the agent's fundamental responsibility i s to act for the benefit of the a. b. c. d. Insured. Insurer. Broker. Policyholder. in the agency contract relationship. known as an agency endowment. usually have a fixed expiration date. the scope of the agency's authority to conduct bus

ANSWER B

7. The primary duty of a principal to its agent is to a. b. c. d. Pay the agent for services performed. Generate sales leads for the agent. Hire and train sales people. Be obedient.

ANSWER A 8. From an insured's point of view, relative to the concept of agency, little di stinction exists between the a. b. c. d. Broker and the claimant. Insurance agent and the insurance department. Broker and the insurer. Insurance agent and the insurer.

9. The laws of agency impose all of the following specific duties on agents, EXC EPT: a. b. c. d. Profitability Obedience Loyalty Accounting

ANSWER A 10. The laws of agency impose all of the following specific duties on all agents , EXCEPT: a. b. c. d. Prudence Accounting Loyalty Relaying information

ANSWER A 11. Which one of the following is the principal's primary duty to the agent? a. b. c. d. To To To To pay the agent for services performed act as the agent's legal representative educate and train the agent act on behalf of the agent in court proceedings

ANSWER A 12. The authority that the principal specifically grants to the agent is contain ed in the agency contract. This authorityis known as a. b. c. d. Implied authority. Apparent authority. Express authority Contractual authority.

ANSWER C 13. The scope of an agent's authority can go beyond the terms of the agency cont ract and may include authority to

perform other tasks necessary to accomplish the purpose of the agency relationsh ip. This authority is referred to as a. b. c. d. Implied authority. Apparent authority. Express authority Contractual authority.

ANSWER A 14. An agent may at times act on behalf of the principal in ways that the princi pal did not intend, and a third partyreasonably believes that the agent has sufficient authority. Th is authority is known as a. b. c. d. Implied authority. Apparent authority. Express authority Contractual authority.

ANSWER B 15. The authority that the principal specifically grants the agent is called a. b. c. d. Implied authority. Express authority. Apparent authority. Conditional authority

ANSWER B 16. When an insurance company appoints an insurance agent to serve as its repres entative, what specifies the scopeof authority given to the agent in this relationship? a. b. c. d. Implied authority Binding authority A unilateral contract An agency contract

ANSWER D 17. Authority that the insurance company specifically grants to an agent is call ed a. b. c. d. Binding authority Express authority Implied authority Apparent authority

ANSWER B 18. One of the main distinguishing features between independent agency systems a nd other marketing systems isthe ownership of a. b. c. d. The company expiration list. Insurance company stock. The sales prospecting list. The agency expiration list.

ANSWER D 19. An independent business owner or firm that sells insurance by representing c ustomers rather than insurers is a. An insurance broker. b. A managing general agency. c. An exclusive agent. d. A direct writer. ANSWER A 20. If a consumer or policyholder had a preference for dealing with sales repres entatives who are employees of theinsurer, which marketing system would they choose? a. b. c. d. Insurance broker Managing general agency Exclusive agent Direct writer

ANSWER D 21. An independent business owner or firm that sells insurance by representing c ustomers rather than insurance companies is which one of the following? a. b. c. d. An An An An independent adjuster underwriter insurance broker insurance carrier

ANSWER C 22. Sometimes an agent may be eligible for a commission based on its premium vol ume and profitability. This type of compensation is called a. b. c. d. A contingent commission. A sales commission. An indirect commission. An annual commission.

ANSWER A 23. Sometimes a policy is cancelled or non-renewed even though the agent was pai d its commission. In thesesituations the agent will be requested to return the a. b. c. d. Earned commission. Unearned commission. Contingent commission. Estimated commission.

ANSWER B 24. At the end of the year, agencies that have carefully selected business throu ghout the year can earn a sizeable a. Contingent commission. b. Sales commission.

c. Indirect commission. d. Annual commission. ANSWER A 25. For an independent agency or an exclusive agency, the percentage of the prem ium that goes to the agency or tothe producer for new policies sold or existing policies renewed is the a. b. c. d. Contingent commission Profit sharing Salary Sales commission

ANSWER D 26. An independent agent received his monthly commissions for the new policies h e has sold. Even though he wrote twenty new policies that month, his commission was low. Whi ch one of the following explains why this could occur? a. Commissions are not fully earned at the time of a sale. Other policies writte n by the agent might have been cancelled with the unearned portion of the commission returned to the insurance company. b. The agent failed to provide the level of service required by the insurance co mpany. The insurance commission was reduced as an incentive for better performance. c. The agent did not meet the premium volume and profitability levels that were specified in his contract; therefore, his commission was reduced. d. The agent is a salaried employee of the insurance company and receives only c ontingent commissions. ANSWER A 27. The managers of an independent agency are hoping to earn contingent commissi ons from several insurers at theend of the year. What should the agency managers attempt to do to earn contingent commissions? a. Reduce the number of homeowners policies written for houses in urban areas co mpared to the homeownerspolicies written for houses in rural areas. b. Reduce the number of employees required to acquire and service the policies i n the agency. c. Increase the premium volume and profitability level of the agency's business with those insurers. d. Increase the level of customer service provided to policyholders and claimant s. ANSWER C 28. With respect to advertising, programs that emphasize the names of both the i nsurer and the agent are typically the a. b. c. d. Agents' Trade Association. Exclusive agency system. Direct writing system. Independent agency system.

ANSWER B 29. Advertising by independent agencies promotes a. b. c. d. Brand recognition of the companies represented. The agency rather than the insurers it represents. Symbols used to increase recognition of the insurers represented. Attention to the prices of the policies offered.

ANSWER B 30. An insurer using independent agents typically will employ which one of the f ollowing to supervise itsproducers? a. b. c. d. Marketing representative Underwriter Captive agent Vice president of marketing

ANSWER A