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Pennsylvania Insurance Regulation and Producer Licensing: Practice Questions

20 free practice questions with explanations. Pick an answer for each, then check your score.

Exam weight: Insurance Regulation section (21%) of the 16-03 outline on the Pennsylvania Life, Accident and Health producer exam (16-03). Updated 2026-11-04.

Quick study guide

Who needs a license

You need a producer license for each line of authority before you sell, solicit or negotiate insurance in Pennsylvania (40 P.S. § 310.3). To sell is to exchange a contract for money for an insurer, to solicit is to try to sell or urge someone to apply to a particular insurer, and to negotiate is to advise a buyer on a contract's substantive terms (310.1). An individual must be at least 18, pass the exam for each line unless exempt (a CLU seeking life or accident and health, for example), submit fingerprints and pay the $55 resident or $110 nonresident fee (310.4–310.6). A nonresident gets the lines held at home without the exam (310.10). Managers and exclusive general agents need their own license, with a fine of up to $1,000 a day for operating without one (310.31).

Keeping the license

A license lasts up to two years, cannot be transferred and is issued only in the licensee's own name; notify the commissioner in writing before using a fictitious name (310.7). Each two-year period needs 24 CE credit hours, at least 3 in ethics, and up to 24 extra hours carry forward (310.8(b)). Missing the requirement by the expiration date is treated as a voluntary termination (31 Pa. Code § 39a.10). A lapsed license can be reinstated within one year, retroactively if requested within 60 days (310.8(d)); military service can justify a waiver (310.8(e)).

Deadline	Rule
30 days	Report a new address, phone or email (310.11(19)); report criminal charges, or another jurisdiction's final administrative action (310.78); insurer reports a terminated appointment (310.71a(a))
15 days	Insurer mails the producer a copy of a for-cause termination report (310.71a(d))
10 days	Minimum notice before a disciplinary hearing (310.91(a))
180 days	Longest term of a temporary license (310.9(b))

Discipline and penalties

The Insurance Commissioner licenses producers (310.2) and may investigate anyone in the business of insurance (1171.7). After notice and a hearing the commissioner may deny, suspend, refuse to renew or revoke a license, impose up to $5,000 per violation, or order the person to cease and desist (310.91). Defying an unfair-practices cease and desist order can cost up to $10,000 per violation (1171.11). An insurer without a certificate of authority, and anyone soliciting for it, faces $1,000 to $10,000 per offense (40 P.S. § 47).

Money and representation

Premiums are held as a fiduciary and never mixed with your own money without the insurer's express consent (310.96); converting them is theft (310.42). Commissions go only to licensees, apart from renewals earned while licensed and nominal referral fees (310.72); no fee may be charged for completing an application (310.74). A producer who represents a consumer needs a signed agreement first (310.71(b)). Knowingly filing a false claim is a third-degree felony (18 Pa.C.S. § 4117).

Practice questions

Under 40 P.S. § 310.1, which activity is the definition of "solicit"?
1. A.Attempting to sell insurance, or urging a person to apply for a particular kind of insurance from a particular insurer
2. B.Advising a prospective buyer directly about the substantive benefits and terms of a particular contract
3. C.Running general insurance advertising that reaches readers both inside and outside Pennsylvania
4. D.Exchanging a contract of insurance for money or its equivalent on behalf of an insurance entity
Show answer
Answer: A. Section 310.1 defines solicit as attempting to sell insurance or asking or urging a person to apply for a particular kind of insurance from a particular insurance entity. Exchanging a contract for money on an insurer's behalf is the definition of sell, and advising a buyer on a particular contract's substantive terms is negotiate. Mass-media advertising by someone who does not sell, solicit or negotiate Pennsylvania risks is one of the activities section 310.3(b) says does not make a person an insurance producer.
Source: PA 16-03 outline 1.0: State regulation, negotiate, sell, solicit (40 P.S. §§ 310.1, 310.3); 40 P.S. § 310.1; 40 P.S. § 310.3
An Ohio resident holds an Ohio life producer license only. She applies for a Pennsylvania nonresident license for both life and accident and health. What does 40 P.S. § 310.10 provide?
1. A.She gets life on proof of her Ohio license; for accident and health she must first meet Pennsylvania's own requirements
2. B.She receives a 180-day temporary license for both lines while she studies for the exam
3. C.She receives both lines, because a nonresident license covers any line the applicant requests
4. D.She receives neither line until she passes the full Pennsylvania exam for both lines
Show answer
Answer: A. Section 310.10(a) lets a person licensed as a resident producer in another state obtain a Pennsylvania nonresident license for the equivalent lines of authority held in the home state, on an application, proof of the home state license and the fee ($110 under 310.5(c)). For a line not held at home, the applicant must comply with the requirements of the act, such as the exam, before applying. The exam exemption in 310.4(d)(6) covers only lines held in the other state, and temporary licenses under 310.9 are for situations like a licensee's death or disability, not for study time.
Source: PA 16-03 outline 1.0: Licensing, resident/nonresident (40 P.S. §§ 310.3–310.5, 310.10); 40 P.S. § 310.10; 40 P.S. § 310.4; 40 P.S. § 310.5
A Pennsylvania resident producer dies, and his widow wants to keep his agency running until it can be sold. Under 40 P.S. § 310.9, what may the Insurance Department issue her?
1. A.A temporary producer license lasting up to two years, which may be renewed once
2. B.A temporary producer license lasting no more than 180 days, which cannot be transferred
3. C.Nothing, because temporary licenses go only to designees of producers in military service
4. D.A full producer license issued without an exam, valid until the agency is sold
Show answer
Answer: B. Section 310.9(a)(1) allows a temporary license for the surviving spouse or court-appointed personal representative of a resident licensee who dies or becomes disabled, to run the business until it is sold or transferred, the licensee returns, or new personnel are licensed. Under 310.9(b) the license may not exceed 180 days and is not transferable, and the department may require a sponsoring insurer or limit the lines (310.9(c)). The designee of a producer entering the armed forces is a separate eligible category, not the only one.
Source: PA 16-03 outline 1.0: Licensing, temporary license (40 P.S. § 310.9); 40 P.S. § 310.9
A Pennsylvania producer keeps the same office but changes her business telephone number and email address. What does 40 P.S. § 310.11(19) require?
1. A.Reporting the changes on her next license renewal application
2. B.Nothing, because only a change of mailing address has to be reported
3. C.Notifying the department of the new phone number and email within 30 days
4. D.Notifying the department within 10 days and paying an amendment fee
Show answer
Answer: C. Section 310.11 lists acts a licensee must not commit, and paragraph (19) is failing to notify the department of a change of address, telephone number and email address within 30 days. Phone and email changes count, not just the address, and waiting for renewal misses the deadline. Because it is a prohibited act, a violation can lead to discipline under section 310.91.
Source: PA 16-03 outline 1.0: Licensing, change in contact information (40 P.S. § 310.11(19)); 40 P.S. § 310.11
A Pennsylvania producer's license lapses because she forgot to renew. Forty-five days later she files a completed renewal form, pays the lapsed license fee and proves all her CE is done. Under 40 P.S. § 310.8(d), what happens?
1. A.She must reapply as a new applicant and pass the licensing exam again
2. B.The license is reinstated only from the date the department approves the request
3. C.She must wait one full year from the lapse before she may request reinstatement
4. D.The license is reinstated retroactively, effective on the date it lapsed
Show answer
Answer: D. Section 310.8(d) says the department shall reinstate a lapsed license retroactively, effective on the lapse date, if the request, completed renewal application, lapsed license fee and proof of CE arrive within 60 days after the lapse. A request made more than 60 days after the lapse gets prospective reinstatement, effective only when reinstated, and after more than one year the person must reapply for the license. The lapsed license renewal fee is $165 (310.8(f)(3)).
Source: PA 16-03 outline 1.0: Licensing, renewal (40 P.S. § 310.8); 40 P.S. § 310.8
A Pennsylvania producer is charged with a misdemeanor that has nothing to do with insurance. Under 40 P.S. § 310.78, when must he report it to the Insurance Department?
1. A.Never, because only offenses involving insurance must be reported
2. B.Only if he is convicted, within 30 days after the final judgment is entered
3. C.Within 30 days of being charged, then send the court documents as they become available
4. D.At his next license renewal, by answering the questions on the renewal form
Show answer
Answer: C. Section 310.78(b) requires a licensee to report criminal charges to the department within 30 days of being charged, and then to provide the complaint, information or indictment, any pretrial hearing order and the final disposition within 30 days of their availability. The duty starts at the charge, not a conviction, and covers any criminal conduct. Administrative actions taken in another jurisdiction are reported within 30 days of final disposition, with a copy of the order (310.78(a)).
Source: PA 16-03 outline 1.0: Licensing, duty to report administrative or criminal actions (40 P.S. § 310.78); 40 P.S. § 310.78
A Pennsylvania producer licensed in her own name wants to do business as "Keystone Family Insurance." Under 40 P.S. § 310.7, what must she do?
1. A.Notify the commissioner in writing before she begins using the name
2. B.Begin using the name, then report it to the department within 30 days
3. C.Transfer her individual license to a business entity with that name
4. D.Nothing, as long as her legal name appears on every policy she sells
Show answer
Answer: A. Section 310.7(1) says a producer license is issued only in the name of the applicant or business entity, and a licensee doing business under a fictitious name must notify the commissioner in writing prior to using it. Notice after the fact is too late. Licenses are nontransferable (310.7(3)); a business entity needs its own license with a designated licensee (310.5(b)).
Source: PA 16-03 outline 1.0: Licensing, fictitious names (40 P.S. § 310.7); 40 P.S. § 310.7
During one two-year license period a Pennsylvania producer completes 54 approved continuing education credit hours, 4 of them in ethics. How many hours may she carry forward to her next license period?
1. A.24 hours, the most that can be carried forward
2. B.None, because excess hours never carry forward
3. C.12 hours, half of the two-year requirement
4. D.30 hours, every hour above the requirement
Show answer
Answer: A. Section 310.8(b)(1) requires 24 credit hours of approved CE for each two-year license period and lets a licensee carry forward excess hours up to a maximum of 24 into the next period. She has 30 excess hours, so only 24 carry over. At least 3 of the 24 required hours must be in ethics (310.8(b)(2)), which her 4 ethics hours meet. Not completing CE by the license expiration date is treated as a voluntary termination of the license (31 Pa. Code § 39a.10).
Source: PA 16-03 outline 1.0: Licensing, continuing education (40 P.S. § 310.8(b); 31 Pa. Code Ch. 39a); 40 P.S. § 310.8; 31 Pa. Code § 39a.10
A Pennsylvania producer is deployed on active military duty, and her license lapses because she could not complete CE or renew in time. Under 40 P.S. § 310.8(e), what may she do?
1. A.Renew only after completing double the CE hours for the period she missed
2. B.Nothing; she must reapply as a new producer and pass the licensing exam again
3. C.Ask the department to waive the CE for the lapsed period and the lapsed license fee, with documentation
4. D.Rely on an automatic waiver that applies to service members without any request
Show answer
Answer: C. Section 310.8(e) lets a licensee who could not timely renew because of military service or another extenuating circumstance ask the department to waive the CE for the lapsed period and the lapsed license fee. The request must include enough detail and supporting documentation to show the waiver is needed; if there is good cause, the department grants it and lets the licensee renew. The waiver must be requested, and the statute imposes no extra CE. Separately, a producer entering active service can have a designee hold a temporary license (310.9(a)(3)).
Source: PA 16-03 outline 1.0: Licensing, waiver due to military or extenuating circumstances (40 P.S. § 310.8); 40 P.S. § 310.8
After a hearing, the Pennsylvania Insurance Department finds that a producer violated the producer licensing law in three separate transactions. Under 40 P.S. § 310.91, what is the largest civil penalty the commissioner may impose?
1. A.$5,000 in total for all three violations
2. B.$30,000, at up to $10,000 for each violation
3. C.$3,000, at up to $1,000 for each violation
4. D.$15,000, at up to $5,000 for each violation
Show answer
Answer: D. Section 310.91(d)(2) allows a civil penalty not exceeding $5,000 for each action in violation of the act, so three violations can bring up to $15,000. The commissioner may combine it with denial, suspension, refusal to renew or revocation, a cease and desist order, or other conditions, in addition to any court-imposed penalty. Before acting, the department must give notice fixing a hearing at least ten days later (310.91(a)).
Source: PA 16-03 outline 1.0: Disciplinary actions, penalties and fines (40 P.S. §§ 310.11, 310.91); 40 P.S. § 310.91
After a hearing, the commissioner orders a producer to cease and desist from a practice that violates Pennsylvania's Unfair Insurance Practices Act. The producer keeps doing it. Under 40 P.S. § 1171.11, what civil penalty may a court impose for each violation of the order?
1. A.Up to $100 a day until the producer corrects the violation
2. B.Up to $5,000 for each violation, capped at $50,000 in six months
3. C.Up to $1,000 for each violation, capped at $10,000 in six months
4. D.Up to $10,000 for each violation while the order is in effect
Show answer
Answer: D. Section 1171.9 lets the commissioner, after a hearing, order a violator to cease and desist, or suspend or revoke the license for a practice defined in section 1171.5. In an action filed by the commissioner, section 1171.11(3) lets the court impose up to $10,000 for each violation of that order while it is in effect. The $5,000/$50,000 and $1,000/$10,000 limits apply to the underlying practices themselves, depending on whether the person knew or should have known they were violations. The $100-a-day fine is for not answering department inquiries or paying fees after notice (310.12).
Source: PA 16-03 outline 1.0: Disciplinary actions, cease and desist order (40 P.S. §§ 310.91, 1171.9) and penalties (1171.11); 40 P.S. § 1171.11; 40 P.S. § 1171.9; 40 P.S. § 310.12
A Pennsylvania insurance agency argues that the Insurance Commissioner cannot investigate it for unfair practices because it is not an insurance company. Under 40 P.S. § 1171.7, is the agency right?
1. A.Yes; the commissioner's examination power reaches only insurers that hold a certificate of authority
2. B.No, but only after a consumer has filed a written complaint naming the agency
3. C.Yes, unless the Attorney General first obtains a court order allowing the investigation
4. D.No; the commissioner may examine and investigate every person engaged in the business of insurance in the state
Show answer
Answer: D. Section 1171.7 lets the commissioner examine and investigate the affairs of every person engaged in the business of insurance in Pennsylvania to determine whether that person has engaged in an unfair method of competition or an unfair or deceptive act or practice. Producers and agencies are included, and no court order or consumer complaint is a precondition. Under section 310.2 the commissioner must also license producers and approve and administer the licensing exams and CE programs, and may require documents, including fingerprints, to verify applications.
Source: PA 16-03 outline 1.0: State regulation, commissioner's general duties and powers (40 P.S. §§ 310.2, 1171.7); 40 P.S. § 1171.7; 40 P.S. § 310.2
A Pennsylvania producer solicits policies and forwards premiums for a company that has no Pennsylvania certificate of authority. Under 40 P.S. § 47, what is the producer's exposure?
1. A.Automatic revocation of his license, with no monetary penalty allowed
2. B.He is treated as the company's agent in lawsuits against it and owes $1,000 to $10,000 per offense
3. C.None, because only the unauthorized company itself can be penalized under the statute
4. D.A forfeiture of up to $500 for each policy the company issued through him
Show answer
Answer: B. Section 47(b) says anyone soliciting or negotiating a policy, collecting or forwarding premiums or delivering policies for a company without a certificate of authority is deemed its agent in any legal proceedings against it, and owes a civil penalty of $1,000 to $10,000 for each offense. The unauthorized company faces the same range under 47(a), and the commissioner may issue a cease and desist order with a hearing within 15 days (47(c), (d)). The $500-per-policy forfeiture in section 47a applies to an authorized insurer that exceeds the powers granted by its certificate.
Source: PA 16-03 outline 1.0: Company regulation, certificate of authority (40 P.S. §§ 47, 47a, 420); 40 P.S. § 47; 40 P.S. § 47a
A Pennsylvania producer collects premiums for three different insurers. Which way of holding the money does 40 P.S. § 310.96 allow?
1. A.Her personal checking account, as long as she sends each insurer its money by the end of the month
2. B.One account for all three insurers, as long as each insurer's funds can be identified in her records
3. C.Mixed with her own funds, as long as each policyholder agrees to it in writing
4. D.Any account, if she uses the money for office costs and repays it within 30 days
Show answer
Answer: B. Section 310.96 makes a producer responsible in a fiduciary capacity for all funds received, and bars mingling them with her own funds or funds held in another capacity without the express consent of the insurance entity for which they were received. A separate account for each insurer is not required as long as each insurer's funds are reasonably ascertainable from her books and records. Policyholder consent does not satisfy the rule, and using premiums for office costs is a misuse of fiduciary funds.
Source: PA 16-03 outline 1.0: Producer regulation, fiduciary responsibility (40 P.S. § 310.96); 40 P.S. § 310.96
A Pennsylvania producer agrees to act for a consumer, not an insurer, in shopping for coverage, and the consumer will pay her a fee. Under 40 P.S. § 310.71(b), what must she do before acting for the consumer?
1. A.Explain the fee orally to the consumer when she delivers the policy
2. B.File the fee arrangement with the Insurance Department and wait for its approval
3. C.Sign a written agreement with the consumer that sets out her services and fully discloses the fee
4. D.Obtain an appointment from every insurer she plans to approach for quotes
Show answer
Answer: C. Section 310.71(b) requires a producer acting on behalf of an insurance consumer to execute a written agreement with the consumer before representing them, delineating the services to be provided and fully disclosing the fee the consumer will pay. A producer who is not acting as an insurer's representative does not need an appointment (310.71(a)), and the statute requires no department approval of the fee. Disclosure at delivery is too late, and section 310.74 bars any fee for completing an application.
Source: PA 16-03 outline 1.0: Producer regulation, producer disclosure requirements (40 P.S. § 310.71(b)); 40 P.S. § 310.71; 40 P.S. § 310.74
A Pennsylvania life producer retires and lets her license expire in good standing. Policies she sold while licensed keep renewing. Under 40 P.S. § 310.72, may the insurer keep paying her renewal commissions?
1. A.No, because commissions may never go to an unlicensed person
2. B.Yes, because she was licensed when the policies were sold
3. C.Only if she passes the licensing exam again and is reappointed
4. D.Yes, but only for the first 12 months after her license ends
Show answer
Answer: B. Section 310.72(a) generally bars paying a commission to a person who is not a licensee, but 310.72(b)(1) allows a renewal or other deferred commission to someone who was a licensee at the time of the sale, solicitation or negotiation. The exception does not apply to a licensee under suspension or a former licensee whose license was revoked. The statute sets no 12-month limit, and section 310.73 mirrors these rules for the person accepting the commission.
Source: PA 16-03 outline 1.0: Producer regulation, commissions and fees (40 P.S. §§ 310.72–310.74); 40 P.S. § 310.72; 40 P.S. § 310.73
A Pennsylvania life insurer ends a producer's appointment after finding that she forged a client's signature on an application. Under 40 P.S. § 310.71a, what must the insurer do?
1. A.Notify the department within 30 days, report the reason, and mail the producer a copy within 15 days
2. B.List the termination only on its next annual report of appointed producers
3. C.Notify the department within 10 days, keeping the reason confidential from the producer
4. D.Tell the producer only, since the department learns of terminations at license renewal
Show answer
Answer: A. Section 310.71a(a) requires an insurer that terminates an appointment to notify the department within 30 days after the effective date, and 310.71a(b) requires it to say so when the reason was a violation of the act; forgery is a prohibited act under 310.11(9). Within 15 days of that report the insurer must mail a copy to the producer by certified mail or overnight carrier, and the producer has 30 days to file written comments (310.71a(d)). An appointment otherwise lasts until the insurer ends it in writing or the license ends (310.71(d)).
Source: PA 16-03 outline 1.0: Appointment procedures, appointment termination (40 P.S. § 310.71a); 40 P.S. § 310.71a; 40 P.S. § 310.71
A Pennsylvania producer deposits a client's premium check in his own account and spends it on personal bills instead of sending it to the insurer. Under 40 P.S. § 310.42, how is this treated?
1. A.As a private civil dispute between him and the insurer, with no criminal penalty
2. B.As an unfair trade practice punishable only by a cease and desist order
3. C.As theft, punishable under the theft chapter of the Crimes Code, 18 Pa.C.S. Chapter 39
4. D.As a late remittance that is excused if he pays the insurer within 15 days
Show answer
Answer: C. Section 310.42(a) bars a producer from fraudulently appropriating or converting to his own use, or withholding or using, money received as a producer contrary to the insurer's instructions or without its consent, and 310.42(b) makes a violation a theft punishable under 18 Pa.C.S. Chapter 39. Misappropriating money received in the course of business is also a prohibited act under 310.11(4), so the department can act against the license and impose up to $5,000 per violation under 310.91. Repaying the money later does not undo the offense.
Source: PA 16-03 outline 1.0: Misappropriation of funds (40 P.S. §§ 310.11(4), 310.42); 40 P.S. § 310.42; 40 P.S. § 310.11
A licensed producer employed by a bank sells annuities on the bank's premises. Under 40 P.S. § 310.77(a), what written disclosure must the applicant receive at or before the time of application?
1. A.That the annuity is not a deposit, is not FDIC-insured, is not bank-guaranteed and may carry investment risk
2. B.That the bank will make good the annuity's principal if the issuing insurer becomes insolvent
3. C.That the annuity is insured by the FDIC up to the standard limit for deposit accounts
4. D.That the producer earns no commission on the sale because she is paid a bank salary
Show answer
Answer: A. Section 310.77(a) requires a licensee employed by or affiliated with a financial institution who sells annuities or life insurance (other than credit life) on its premises to give a written disclosure at or before application. It must state that the product is not a deposit, is not insured by the FDIC or any federal agency, is not guaranteed by the institution, and, where appropriate, is subject to investment risk including loss of principal. The bank does not guarantee the product, and section 310.77(b) also requires the sales area to be kept separate from where deposits are taken.
Source: PA 16-03 outline 1.0: Privacy of consumer financial information (40 P.S. § 310.77(a)); 40 P.S. § 310.77
An insured knowingly submits a padded theft claim, listing items that were never stolen, to collect more from his insurer. Under 18 Pa.C.S. § 4117, what grade of offense is this?
1. A.A misdemeanor of the first degree
2. B.A summary offense with only a fine
3. C.A felony of the third degree
4. D.A civil violation with no criminal grade
Show answer
Answer: C. Knowingly and with intent to defraud presenting a claim statement containing false, incomplete or misleading material information is an offense under 18 Pa.C.S. § 4117(a)(2), and 4117(d) grades offenses under subsection (a) as felonies of the third degree. Offenses under subsection (b), such as knowingly filing an application containing false information, are misdemeanors of the first degree. Courts may also impose civil penalties of up to $5,000 for a first violation, $10,000 for a second and $15,000 for each later one (4117(j)). Pennsylvania's Insurance Fraud Prevention Act defines insurance fraud by reference to section 4117 (40 P.S. § 325.3).
Source: PA 16-03 outline 1.0: Insurance fraud regulation (40 P.S. §§ 325.1–325.62; 18 Pa.C.S. § 4117); 18 Pa.C.S. § 4117; 40 P.S. § 325.3

Where these questions come from: Pennsylvania Life, Accident and Health producer exam outline (series 16-03, PSI, effective 1 Mar 2026), section 1.0: Insurance Regulation (21%). See how we write questions.