Risk Management Final
which is an example of a personal risk? A)all maybe considered a personal risk B)premature death C)lack of retirement income D)chance of being disabled
A
which of the following is not an element of a legal contract? A)conditions B)legal in purpose C)consideration D)competent parties
A
which would be an example of a "diversifiable" risk? A)investing in multiple investments like stocks, mutual funds, bonds etc B)an investor's monies are only in one stock C)a business owner using only one supplier D)putting all your cash in a bank vault
A
As an "Angel" investor, Bobby is always looking for good business projects to invest in. An insurance company would probably see Bobby's investment practices as: A)prudent B)pure C)speculative D)aggressive
C
This type of term policy has a death benefit that decreases over a period of time, but the premium rates tend to be fixed or level? A)increasing term B)annual renewable term C)decreasing term D)level term
C
An applicant for life insurance, having gone through a thorough underwriting process, the underwriter concludes the applicant is in excellent health, what will be the likely classification of the risk? A)none of the above B)standard C)sub standard D)preferred
D
An individual, from an underwriter's perspective, who is deemed to have a higher or expected "above average" probability of loss would be classified as: A)standard risk B)none of the above C)speculative risk D)adverse risk
D
Insurance carriers can be regulated by which of the following EXCEPT? A)courts B)State Insurance Depts C)legislation D)National Association of Insurance Commissioners (NAIC)
D
Margo blatantly lied when she told and insurance that she had never received treatment for high blood pressure and cholesterol on an application for life insurance. What has Margo committed? A)A warranty B)A misstatement C)A representation D)A material misrepresentation
D
An independent adjuster would be utilized by a property & casualty company generally in what kind of situation? A)working with a home owner claim one on one for a commission B)none of the above C)processing small claims D)processing large & multiple claims after a hurricane
D
An insurance contract represents what type of hazard to an insurer? A)pure B)moral C)social D)legal
D
FINRA, The SEC and The Dept of Financial Services (DFS) have regulatory and compliance oversight over what type of life insurance policy? A)joint life B)whole life C)universal life D)variable life
D
An insurer reimburses Darryl 100% for his personal property losses due to a fire in his apartment. This is an example that insurance contracts are: A)indemnity B)adhesion C)aleatory D)unilateral
A
David applied for, and was issued a $1million life insurance policy with a monthly premium of $200. After six months of premium payments, David is killed in an accident. His wife receives a check from the insurance company for $1 million. This is an example of the _____________ nature of insurance contracts? A)aleatory B)mandatory C)conditional D)adhesion
A
which actuarial situation best represents an insurer employing the "Law of Large Numbers" principle? A)measuring the life expectancy of 100,000 people in a given population B)measuring the life expectancy of 100 million people in a given population C)measuring the life expectancy of 10,000 people in a given population D)measuring the life expectancy of 1million people in a given population
B
This type of insurer uses the "mass media", i.e. TV, radio, newspapers, magazines etc, to sell products to a targeted consumer demographic? A)general agency B)direct response C)direct writing D)fraternal
B
which is an example of a peril? A)world war B)all of the above C)earth quake D)flu pandemic
B
What is the area of company operations by which the insurer is trying to promote "good will" to the public at large? A)production B)public relations C)investments D)marketing
B
Which generally is not an area of regulation by which state insurance regulators would review for insurance companies? A)agent licensing B)employee practices C)solvency D)premium pricing
B
Which is not an objective of reinsurance? A)stabilize profits B)increase the financial risk to the insurer C)provide protection against a catastrophic loss D)increase underwriting capacity
B
Which of the following is not a resource used by a life insurance underwriter to determine the insurability of a risk? credit report all of the above motor vehicle report (MVR) paramedical exam
B
Which statement(s) regarding elements of an insurable risk are true? I) losses must be large II) Losses can be catastrophic in nature III) Losses must be predictable IV) Losses must not be due to chance A) I, II, & III B) I & III C) I only D) II, III & IV
B
Risk managers often use the term ___________________ to describe the potentiality of a loss: A)loss reduction B)loss probability C)loss exposure D)risk control
C
Risked Base Capital (RBC) is a calculation that state insurance regulators use to determine an insurer's: capital assets ratio investment portfolio solvency accounts payable value
C
State regulators require that insurance companies engage in investments associated with the general account of an insurance company in a manner that is considered: A)aggressive B)high risk C)none of the above D)speculative
C
The area of company operations in which the insurance company is determining and calculating premium rates for its insurance products is called: A)claims B)underwriting C)rate making D)production
C
All of the following are criteria an actuary would consider to determine premium rates for life insurance EXCEPT? A)age B)investment risk tolerance C)health D)marital status
B
Lindsay, while applying for an insurance policy has not been very truthful in many of her responses on an insurance application. What type of hazard risk does Lindsay represent to the insurer? A)Legal B)Morale C)Moral D)Speculative
C
"_____________________" is the determination by which a P&C (property & casualty) insurer is more inclined to write new business if premium rates are deemed "manageable"? A)rate adequacy B)renewal C)reinsurance D)price negotiation
A
_______________________Is the amount of insurance the primary insurer (ceding company) will retain in reinsurance situations? A)Risk retention limit B)Cession limit C)Re cession D)Retrocession
A
A ratings company will generally review which of the following aspects of an insurance company? A)company's liability obligations B)all of the above C)capitalization ratio D)A company's investable assets
B
A whole life policy endowing at age 100 means: A)the policy owner receives the death benefit at age 100 B)answer C & D are correct C)The insurance company pays the living beneficiary or the policy owners estate the death benefit D)The cash value equals the death benefit at age 100
B
Amazon, Microsoft, and Apple Inc would most likely encounter which of the following risk? A) Government/Legislative B) All of the above C) Political D) Global
B
An insurance company investing millions of dollars into market research to determine their ideal target consumer for their products is carried out by which area of company operations? A)investments B)production C)rate making D)claims
B
Lloyd's was started in which country? A)Australia B)Great Britain C)GermanyAu D)Canada
B
A business owner wishing to insure a piece of property would be an example of: A)speculative B)a non quantifiable risk C)pure risk D)investor risk
C
Life insurance can be used primarily to: A)provide survivor income B)pay off debts C)all of the above D)pay funeral costs
C
which is not a policy covered by personal line insurance? A)auto insurance B)flood insurance C)homeowners insurance D)life insurance
D
This person or department determines which risks are acceptable to an insurer? A)underwriter B)actuary C)rate maker D)claims adjuster
A
which would not be considered a personal method of risk management ? A)transfer B)retention C)avoidance D)all can be considered a personal method of risk management?
A
a business entity that is started primarily to provide products and services for the benefit of the general public, without shareholders is a? A)describes none of the above B)non profit entity C)fraternal D)mutual insurer
B
what is an example of a non diversifiable risk? A)injuries incurred in a car accident B)a hurricane C)reduction in value of one's retirement account D)an individual who gets sick
B
In the underwriting process, the agent is referred to as: A)The field underwriter B)The liaison C)The producer D)the co-underwriter
A
Which type of insurer is referred to as "non-participating"? A)fraternal B)stock C)Lloyds D)mutual
B
An insurer domiciled in Stockholm, Sweden, but is carrying out business activities in New York is characterized as a ? A)alien insurer B)authorized insurer C)foreign insurer D)unauthorized insurer
A
An individual entering into a legal contract who's judgment was found to be "impaired" due to the influence of intoxicants or narcotics, the courts would likely deem this individual? A)incompetent B)competent C)insurable D)high risk
A
An insurer domiciled in Houston, Texas but is carrying out business activities in New York is referred to as a: A)foreign insurer B)authorized insurer C)domiciled insurer D)non admitted insurer
A
George, owner of Sparks technologies inc, is concerned that if his top production manager were to die prematurely, his business might be seriously impacted financially by the loss of his employee services. Consulting with George as a licensed agent, what insurance strategy might you recommend to George to protect his business interests? A)use life insurance to insure his key employee B)do nothing as the employee is unlikely to die while employed C)purchase a business liability policy D)use a retention strategy of putting funds aside to cover for such a loss
A
Ignoring the advice of his insurance advisor, Larry forgoes buying life insurance to protect his family, and instead invests funds monthly into a money market account as an alternate protection plan in the event of his premature death. What method of risk management is Larry employing? A) Risk Retention B) Sharing C) Transfer D) Consideration
A
One of the primary responsibilities of the National Association of Insurance Commissioners (NAIC) is to: A)be an advocate for the consumer insurance buying public B)maintain insurance laws C)enforce insurance laws D)supervise state regulators
A
The fact that only the insurer is held by the courts to making legally enforceable promises in a contract would mean that an insurance contract is? A) Uni-lateral B.) Tri-lateral C.) The insurer is never held by the courts to make legally enforceable promises. D.) Bi-lateral
A
The underlying assets of the "General Account" of an insurance company are least likely to be invested in: stocks cash bonds real estate
A
This life insurance policy insures two lives at the same time, but pays its death benefit when the first insured dies? A)joint life B)juvenile policy C)joint and survivorship D)joint annuity
A
What is an example of a "non-insurance" transfer? A)transferring the risk by way of a contract B)none of the above C)using reinsurance companies D)purchasing an insurance policy
A
What would be an example of an agent practicing risk management/loss prevention measures: A)all of the above B)being ethical C)following compliance guidelines D)owning errors and omissions liability insurance
A
Which department area of an insurance company is responsible for indemnifying claimants for losses incurred under their insurance policies? A)claims B)investments C)underwriting D)production
A
An insurer setting sales goals for its organization and engaging in public relation activities would be associated with what area of company operations? A)investments B)production C)rate making D)claims
B
Bob routinely drives without a seatbelt, Jessie loves bungy jumping on the weekends, and Harry has no sense of urgency to fix the brakes on his truck...All would be examples of a: A)moral risk B)morale risk C)inconsiderate risk D)hazardous risk
B
How do mutual insurer's define a dividend? A)return of profit/earnings B)return of excess/surplus premiums C)mutual companies don't pay dividends because they don't have share holders D)both A & B
B
If an insurer has a calculated Risked Based Capital (RBC) of 125% and above, what actions, if any, would state regulators take against that insurer? A)seize the assets of the insurer B)take no specific action against the insurer C)conduct a "trend" test on the insurer D)have the insurer submit additional financial documents
B
Jonathan is a policy holder with a stock based insurer. The insurer is distributing dividend's at the end of the year. Is Jonathan entitled to any share of that dividend distribution? A)maybe B)no C)yes, if he has shareholder voting rights D)yes
B
Term insurance can generally have all the following features EXCEPT? A)temporary protection B)no cash value accrual C)increasing premiums over time D)renewability
B
The insurance contracts of a life insurance company are typically of what duration of time? A)They are not defined by any time period B)long term in duration (20 years or more) C)short term (less than 6 months) D)2-5 years
B
The major reason(s) for insurer regulation is: A)maintain insurer solvency B)all of the above C)provide consumer education D)ensure reasonable insurance rates
B
The research done by an insurance company to understand consumer buying motives, needs of the consumer and overall developing a customer buying profile is? A)hieroglyphics B)psychographics C)demographics D)none of the above
B
This life insurance policy has premiums that increase each year, the death benefit remains level (fixed), and the policy is renewed each year without evidence of insurability? A)Level term B)Annual renewable term C)Whole life D)Universal life
B
This life insurance policy offers flexible premium payment options, flexible death benefit options and cash values that grow within a policy account where interest is credited? A)variable life B)universal life C)increasing term D)straight whole life
B
which statement(s) is true regarding brokers: I) brokers represent both the insurer and client II) brokers can only represent the client/insured III) a broker can sell on behalf of multiple insurers IV) a broker can bind insurance coverage A)II & IV B)II & III C)II, III & IV D)I, II & III
B
A ratings company will generally review which of the following aspects of an insurance company except? A)capitalization ratio's B)debt to asset ratio's C)an insurance company's employee personnel records D)It's investable assets
C
All of the following could be reasons by which an insurer may fail EXCEPT? A)bad loss ratio's B)inept management decisions C)poor underwriting D)conservative investing actions
C
An agent is explaining to Harry, a 40 year old male, in good health, that a policy that provides guaranteed level premiums for life, a guaranteed death benefit, and guaranteed cash value growth over time, would be an excellent policy for his life insurance needs. What type of life insurance policy is the agent likely alluding too? A)Variable life B)Level term C)Whole life D)Universal life
C
An insurer can be fined $__________up to a maximum of $____________for every day they do not produce requested financial documents to prove the insurer's solvency: A)$100 up to a max of $5,000 B)$500 up to a max of $10,000 C)$250 up to a max of $25,000 D)none of the above
C
An insurer's "solvency" is a reference to the insurer's: A)financial integrity B)maintain company operations C)all of the above D)ability to pay claims
C
Based on the medical underwriting results, the insured on a life insurance policy is believed by the underwriters to have an "average" life expectancy. The policy will be issued as: A)Sub standard B)Preferred C)Standard D)Super preferred
C
Hansel stated in a life insurance application that he believed that the last time he was treated at a medical facility was for gall bladder surgery in May 2009. However, it turns out that his surgery took place in June of 2010. How would the insurer initially view his incorrect statement? A)misrepresentation B)fraudulent statement C)representation D)warranty
C
In certain commercial risk underwriting situations , if "rates" (price per unit of insurance) are considered "adequate" or "manageable", and profits are high, the underwriter of a property & casualty company maybe more _______________in their decisions underwriting risks: A)retentive B)aggressive C)flexible D)conservative
C
The fact that the insurer writes the policy contract, and the courts can hold the insurer liable for the language in the contract, is an example of an insurance contract being a: A)contract that is aleatory in nature B)legal contract C)contract of adhesion D)conditional contract
C
The principle of insurance that states that the insured is restored to the approximate condition that was present prior to the occurrence of a loss is the: A)Principle of Capital Replacement B)None of the above C)Principle of Indemnity D)Principle of Subrogation
C
The ratio of investable assets in an insurance company's "separate" account is most likely to primarily consist of: A)real estate B)bonds C)stocks D)treasuries
C
The tendency of a person to seek insurance with a higher expectancy chance of loss is called? A)none of the above B)an acceptable loss selection C)An adverse risk selection D)a high risk selection
C
When Alan decides to pay premiums for an insurance contract, he is electing to use which form of risk management to protect his interests? A)elimination B)retention C)transfer D)reduction
C
Which Insurer type employs salaried employee's to sell its insurance products? A)general agency B)direct response C)direct writing D)fraternal
C
Which statement best describes risk? A)A financial risk to an insurance company is generally catastrophic in nature B)risks are losses that are guaranteed unpredictable C)Risk is the possibility that a loss could occur D)Risk is a concept that insurer's generally will not consider
C
Which step in the risk management involves calculating the probability of a loss and determining the potential financial impact of that loss exposure? A)implement risk exposure solution(s) B)Identify risk exposures C)analyze/evaluate risk exposures D)prioritize risk exposure
C
Which would be considered a prohibited sales practice of licensed agents? A)Rebating B)Twisting C)All of the above D)Misrepresentation
C
Which would not be a resource tool an underwriter uses to determine if a risk is acceptable? A)medical history B)an application C)race/ethnicity D)blood and urine samples
C
With life insurance companies, investable income primarily comes from the following EXCEPT? A)maturing investments B)premiums C)accounts payable D)investment earnings
C
With the underlying assets associated with the "separate" account of a life insurance company, state regulator's give the insurer an opportunity to be more ________________ with its investments: A)moderate B)conservative C)aggressive D)prudent
C
"loss reduction" as a method of a risk control technique, involves all of the following except? A)separation B)duplication C)diversification D)isolation
D
A ________________ is where an insurance company abandons or gives up a known legal right or privilege? A)contract B)estoppel C)rider D)waiver
D
A property & casualty actuary can determine premium rates based on all of the following factors EXCEPT? A)frequency & severity of floods, earthquakes or fires B)Traffic accidents C)Past loss ratio's D)Insured's health
D
A universal life insurance policy has all the following characteristics/features EXCEPT? A)interest rate crediting B)flexible death benefits C)flexible premiums D)separate investment accounts
D
An agent selling a variable life insurance policy should be mindful that the policy is ________________ for the consumer's protection needs: A)none of the above B)available C)manageable D)suitable
D
In order for an insurer to do business ion the state, it must be deemed an _______________ insurer by the state? A)legal B)bonafide C)domiciled D)authorized
D
This type of Insurer, known for insuring unusual risks, uses multiple financial investors grouped into syndicates that come together to pool and spread risk? A) Mutual Insurers B) Risk retention syndicates C) Fraternal organizations D) Lloyds
D
This type of individual is given the responsibility to build, grow and staff an agency from the ground up within a prescribed geographic area? A)Branch manager B)General manager C)none of the above D)General agent
D
________________is the process that identifies loss exposures faced by an organization, and selects the best technique(s) for addressing those exposures A)risk retention B)capital retention C)loss exposure D)risk management
D
which would not be considered a post "loss objective" for a company: A)continue company operations B)survive C)act with a social responsibility to society D)change the mission statement of the company
D