Insurance is a complex product that individuals and businesses rely on for protection against financial loss resulting from death, illness, accidents or natural disasters. Because of the complexity of the products and the critical nature of protection that insurance must provide, it requires sales professionals with substantial specialized knowledge of the kinds of insurance products available and the ability to ascertain accurately the insurance needs of their clients.
Government regulation of insurance companies and agents began in the US more than 100 years ago with the purpose of protecting consumers, according to the National Association of Insurance Commissioners. The prime purpose of state regulators is to ensure that insurance companies stay solvent so that they can pay their claims, and state regulators’ most important consumer protection is to assure that insurers remain solvent so they can meet their obligations to pay claims.
Referred to as producers in the insurance industry, agents can sell one or more types of insurance, such as property and casualty, life, health, disability and long-term care. Property and casualty insurance agents sell policies that protect individuals and businesses from financial loss resulting from events such as automobile accidents, fire, or natural disasters that can damage property. Property and casualty insurance can also cover injured workers’ compensation, product liability claims or medical malpractice claims against businesses and professionals.
Life insurance agents sell policies that pay beneficiaries upon the death of the policyholder. Other agents sell health insurance, which covers the costs of medical care and loss of income due to illness or injury. They also may sell dental insurance and short-term and long-term-disability insurance policies.
Insurance agent licensing and testing is a state function, with each of the 50 US states and the District of Columbia establishing its own requirements. Virtually every state requires some form of pre-licensing education and an exam dedicated to each type of insurance product to certify an agent. While agents can gain licensure to sell several lines of insurance, they must take a separate exam to earn credentials in each.
Exams generally comprise approximately 100 multiple choice questions and cover both general insurance principles and the particular state‘s insurance regulations.
Following is an example of the kinds of questions included in the tests:
Which provision can provide for the payment of life insurance benefits to the insured while living?
A. A hospital confinement provision
B. A life reduction provision
C. A vanishing benefit provision
D. An accelerated benefit provision
Most states exams are administered by private testing services, such as Prometric, Pearson Vue, TSI Testing and PSI Exams. The testing companies handle registration, test administration, scoring and reporting of scores to the respective states to assist in the licensing function. A few states administer the test through their own testing systems. California, for instance, administers its own tests. Connecticut offers tests at a network of state-operated centers and testing through Pearson Vue. Kentucky and Indiana administer all tests of insurance agents. Alabama tests agents through a cooperative venture with the University of Alabama.
Typically, test takers can register online, by telephone or by fax. Registrants are provided a confirmation number that they must present on the day of the test along with two forms of identification.
Are you preparing to take an insurance licensing exam? Please consult our Insurance Test Directory.