Pennsylvania general insurance concepts practice questions
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Section 2.0 General Insurance Concepts is 10% of both the Pennsylvania Life exam (Series 16-01) and the Accident and Health exam (Series 16-02). [1] The outline lists risk and the ways to handle it, the elements of insurable risks, classifications of insurers (mutual and stock; admitted and non-admitted; foreign, domestic and alien), the elements of a contract, the authority of producers and the law of agency, and the legal ideas that shape insurance contracts, such as indemnity, good faith, fraud, and warranties versus representations. [1]
Many of these are general terms, but several have a Pennsylvania law behind them. This page sets out those laws and gives 10 practice questions.
Pennsylvania law behind the concepts
Classes of insurers. The Insurance Company Law lists the classes of companies that may be incorporated, including stock life insurance companies and mutual life insurance companies. [2]
Admitted and nonadmitted. In the surplus lines article of the Insurance Company Law, an "admitted insurer" is "An insurer licensed to do an insurance business in this Commonwealth." A "nonadmitted insurer" is one "not authorized and not licensed to do an insurance business in this Commonwealth." [2] Life insurance and annuities are left out of the definition of surplus lines insurance, so they are not placed with nonadmitted insurers that way. [2]
Domestic and foreign. In the Insurance Department Act's risk-based capital article, a domestic insurer is one "incorporated or organized under the laws of this Commonwealth." A foreign insurer is licensed by the Department to do business here but incorporated or organized under the laws of another jurisdiction. [3]
Consideration. A Pennsylvania accident and health policy may not be issued unless "the entire money and other considerations therefor are expressed therein." [2]
Legal purpose and insurable interest. No one may insure another person's life unless the beneficiary has an insurable interest in that life. [2]
Producers and agency. Under the Insurance Department Act, an insurance producer is "A person that sells, solicits or negotiates contracts of insurance." An appointment is a written agreement under which the producer may sell, solicit or negotiate the insurer's contracts for compensation. [3] A producer may not act on behalf of or as a representative of an insurer unless appointed by that insurer. A producer who represents the consumer must first sign a written agreement with the consumer that describes the services and fully discloses the fee. [3]
Representations, not warranties. Every group accident and sickness policy must provide that, in the absence of fraud, statements by applicants, the policyholder or an insured person "shall be deemed representations and not warranties." [2]
Fraud. Under Pennsylvania's criminal code, a person commits insurance fraud by knowingly and with intent to defraud presenting a claim statement to an insurer that contains false, incomplete or misleading information about a material fact. Knowingly assisting, abetting, soliciting or conspiring with someone to do so is also an offense. [4]
Practice questions
1. An insurer licensed to do an insurance business in Pennsylvania is called what?
A. Nonadmitted insurer
B. Admitted insurer
C. Alien insurer
D. Surplus lines insurer
Answer: B. (Insurance Company Law, section 1602) [2]
2. A company organized under Pennsylvania law is what kind of insurer here?
Answer: Domestic. A domestic insurer is one incorporated or organized under the laws of this Commonwealth. (Insurance Department Act, section 501-A) [3]
3. An insurer licensed by the Department but organized under another jurisdiction's laws is what kind of insurer?
Answer: Foreign. (section 501-A) [3]
4. Can a Pennsylvania life policy be placed as surplus lines insurance with a nonadmitted insurer?
Answer: No. The definition of surplus lines insurance leaves out life insurance and annuities. (Insurance Company Law, section 1602) [2]
5. Which contract element does a Pennsylvania health policy satisfy by stating the full premium and other considerations in the policy?
Answer: Consideration. The policy must express "the entire money and other considerations therefor." (Insurance Company Law, section 617(A)(1)) [2]
6. Under Pennsylvania law, which statement defines an insurance producer?
A. Anyone who pays premiums
B. A person that sells, solicits or negotiates contracts of insurance
C. Only a person employed by an insurer
D. A person who adjusts claims
Answer: B. (Insurance Department Act, section 601-A) [3]
7. A licensed producer wants to act as a representative of an insurer. What must happen first?
Answer: The insurer must appoint the producer. (Insurance Department Act, section 671-A(a)) [3]
8. A producer will represent a consumer for a fee. What must be in place before starting?
Answer: A written agreement with the consumer that describes the services and fully discloses the fee. (section 671-A(b)) [3]
9. In a group accident and sickness policy, how are an applicant's statements treated if there is no fraud?
Answer: As representations, not warranties. (Insurance Company Law, section 621.2) [2]
10. A claimant knowingly sends an insurer a claim form with false information about a material fact, intending to defraud. What has happened under Pennsylvania law?
Answer: Insurance fraud. (18 Pa.C.S. 4117(a)(2)) [4]
Study tips for section 2.0
- Pair the insurer terms: admitted or nonadmitted is about the license here; domestic or foreign is about where the company was organized.
- Know the definitions of sell, solicit and negotiate along with "insurance producer," because licensing questions use them too.
- A representation is a statement believed true; the law treats applicant statements this way unless there is fraud.
- Risk, hazard, peril and the ways to handle risk are also on the outline. [1]
Try the Pennsylvania life practice test or the Pennsylvania accident and health practice test to practice this section with the rest of the exam.
Prep Retention is independent and is not affiliated with PSI or the state.
Sources
Laws and exam documents quoted as of October 2026.
- PSI, Pennsylvania Life outline, Series 16-01, and Accident and Health outline, Series 16-02 (effective 3/1/2026): https://proctor2.psionline.com/media/programs/PAINS/16-01xx.pdf and https://proctor2.psionline.com/media/programs/PAINS/16-02xx.pdf
- Insurance Company Law of 1921 (Act of May 17, 1921, P.L. 682, No. 284), Sections 201, 412, 617, 621.2 and 1602: https://www.palegis.us/statutes/unconsolidated/law-information/view-statute?iFrame=true&txtType=HTM&SessYr=1921&SessInd=0&ActNum=0284
- Insurance Department Act of 1921 (Act of May 17, 1921, P.L. 789, No. 285), Sections 501-A, 601-A and 671-A: https://www.palegis.us/statutes/unconsolidated/law-information/view-statute?iFrame=true&txtType=HTM&SessYr=1921&SessInd=0&ActNum=0285
- 18 Pa.C.S. 4117: https://www.palegis.us/statutes/consolidated/view-statute?iFrame=true&txtType=HTM&ttl=18&div=0&chapter=41§ion=17&subsctn=0