Insurance Quiz - BASIC INSRUANCE CONCEPTS AND PRINCIPLES
Which of the following is the correct formula for computing a loss ratio?
(Incurred losses + loss adjusting expense)/earned premium = Loss ratio
A tornado that destroys property would be an example of which of the following?
A peril
The protection of the insurer from adverse selection is provided in part by...
A profitable distribution of exposures.
In property and casualty insurance, insurable interest must exist...
At the time of loss
The growing tendency of individuals to file lawsuits and to claim tremendous amounts for alleged damages is known as...
Legal hazards arise from court actions which increase the likelihood or size of loss.
Insurance is a contract by which one seeks to protect another from...
Loss
Which rating method provides an insurer with that portion of a rate that does not include provisions of expenses (other than adjusting expense) or profit is based on historical aggregate loss and loss adjustment expenses projected through development to their ultimate value and through trending to a future point in time?
Loss costs rating
To achieve the profitable distribution of exposures,
Preferred risks and poor risks are balanced, with average risks in the middle.
Peril is most easily defined as...
The cause of loss insured against
With respect to the business of insurance, a hazard is...
Any condition or exposure that increases the possibility of loss occurring. Hazards are generally classified as either physical, moral, or morale.
A contract which one party undertakes to indemnify another against loss is called...
Insurance
What do individuals use to transfer their risk of loss to a larger group?
Insurance
All of the following are examples of risk retention EXCEPT
Premiums
Which of the following is them most common way to transfer risk?
Purchase Insurance
A situation in which a person can only lose or have no change represents...
Pure Risk
The risk of loss may be classified as...
Pure risk and speculative risk
Following a career change, an insured is no longer required to perform many physical activities, so he has implemented a program where he walks and jogs for 45 minutes each morning. The insured has also eliminated most fatty foods from his diet. Which method of dealing with risk does this scenario describe?
Reduction
A form of insurance between insurance companies is known as...
Reinsurance
Which one of the following is NOT an element of insurability?
Risk of loss is speculative
The type of insurance that guarantees the behavior of person and the performance of contract other than insurance polices is known as...
Surety Insurance
What is the name of insurance that guarantees or indemnifies owners of real or personal property against a loss or damage suffered to the property because of liens in the tile of property?
Title insurance
When an individual purchases insurance, what risk management technique is he or she practicing?
Transfer
The process an insurer uses to evaluate applications and determine if a policy should be issued and on what terms, conditions, and rates is known as...
Underwriting