Study 25

Which insurance company department determines the probability of loss and sets the premium rates? Actuarial Underwriting Sales Claims

Actuarial The Actuarial Department interprets the statistical information used in rate making, whereas the Underwriting Department is responsible for risk selection.

A(n) ___________ insurer is organized in that same state in which it is authorized to do business. Domestic Admitted Alien Foreign

Admitted A domestic insurer is organized under the laws of one state, whether or not it is admitted to do business in that state, and an alien is organized under the laws of any jurisdiction outside of the country.

Which of the following describes Fiduciary Responsibilities? A. Fiduciary Responsibilities are those responsibilities of a producer or agent to comply with insurance laws and regulations B. Anyone acting as an insurance producer or agent for an insurer shall be held responsible in a trust or fiduciary capacity for any money collected or received for the insurer C. Fiduciary Responsibilities are those responsibilities of a producer or agent to always act in the best interest of the client D. Fiduciary Responsibilities are the responsibilities of an insurer to see that claims are promptly paid

Anyone acting as an insurance producer or agent for an insurer shall be held responsible in a trust or fiduciary capacity for any money collected or received for the insurer A Fiduciary is a person holding the funds or property of another in a position of trust, as is the case when a producer, or agent collects premiums for the insurer.

Which authority is created when a producer exceeds the authority expressed in his agency contract by taking an insured's premium check after the policy cancels for non-payment and the insurer accepts the check? Express Implied Actual Apparent

Apparent A producer has apparent authority when he accepts premium on a lapsed policy, and the insurer reinstates the policy.

Which of the following defines risk? A. Financial interest in property B. Cause of loss C. Amount of loss D. Chance of loss

Chance of loss The uncertainty or chance of loss is the definition of risk.

___________ is the premium paid by the insured and the promise by the insurer to pay a covered loss and defend the insured in a lawsuit. Consideration Offer Acceptance Legal Purpose

Consideration Consideration is the term used to describe the rights, money, promises or property exchanged between the parties as part of a contract transaction.

A(n) ___________ insurer is organized in that same state in which it is authorized to do business. Domestic Admitted Alien Foreign

Domestic A domestic insurer is organized under the laws of one state, whether or not it is admitted to do business in that state, and an alien is organized under the laws of any jurisdiction outside of the country.

Insurable interest in property insurance: A. Must be present at the time the policy is written, but is not necessary at the time of loss B. Is not necessary at the time the policy is written or when the loss occurs C. Is only necessary at the time of loss D. Must be present at the time the policy is taken out

Is only necessary at the time of loss In order for a party to receive payment for a loss, they must have an insurable interest at the time of loss.

Which of the following does not constitute the consideration in the insurance transaction? A. The insurer's promise to indemnify in the event of loss B. Payment of the first premium C. Issuance of a binder D. The payment of a claim for the insured

Issuance of a binder The issuance of a policy or binder is not part of the consideration element of an insurance contract. It is part of the agreement element (acceptance).

All of the following are true of a Reciprocal Insurance Company, except: Each subscriber assumes part of the risk of all other subscribers If funds are insufficient to pay claims, the subscribers can be assessed for additional premium It is managed by an attorney-in-fact It is an incorporated entity, with a Board of Directors elected by policyholders

It is an incorporated entity, with a Board of Directors elected by policyholders A reciprocal insurance company is not incorporated, which is why it must be managed by an 'attorney-in-fact'.

Which of the following is not true about a Reciprocal Insurance Company? A. Each subscriber assumes a share of the risk of all other subscribers B. If funds are insufficient to pay claims, the subscribers are assessed for additional premium C. It is managed by an attorney-in-fact D. Members are grouped into syndicates

Members are grouped into syndicates

A state requiring that the commissioner agree that a company's rates are appropriate uses which type of rating approval? File and use Mandatory Open Competition Prior approval

Prior approval Prior approval requires that the rates cannot be used until the commissioner approves the rate, or until a set time period has expired after the filing.

A tornado is considered which of the following? Adverse selection Speculative risk Excluded peril Pure Risk

Pure Risk A pure risk is one in which there exists a possibility of loss or no loss, but no possibility of gain.

An underwriter will consider each of the following factors when considering a risk, except: A. Nature of the risk B. Rates C. Hazards D. Claim history

Rates The underwriter protects the insurer against adverse selection.

An agent has authority to do all of the following, except: Solicit applications on insurer's behalf Countersign insurance contracts Appoint a solicitor as his or her representative Represent the insured's interest

Represent the insured's interest An agent is primarily the representative of an insurer. A broker represents the insured. However, agents still have a responsibility to provide insureds with the most suitable products.

All of the following are options for dealing with risk, except: Avoiding the risk Transferring the risk Subrogating the risk Retaining the risk

Subrogating the risk Risk may be avoided, transferred, or retained.

Risk is defined as: The quiz is currently paused. Insurable interest in property Specific cause of loss Amount of loss Uncertainty or chance of loss

Uncertainty or chance of loss The uncertainty or chance of loss is the definition of risk.

Which term describes the relinquishment of a legal right? Estoppel Waiver Liability Rescission

Waiver Waiver is the voluntary relinquishment of a legal right.

Misrepresentations

are a false statement contained in the application

Fraud

is an intentional deception of the truth in order to induce another to part with something of value or to surrender a legal right

Concealment

is the willful holding back or secretion of material facts pertinent to the issuance of insurance or a claim.