study 2

Which one of the following statements is correct regarding government involvement in insurance?

A. Federal and state government are involved in insurance to facilitate compulsory insurance purchases.

Which one of the following is a key focus of states' insurance regulation?

A. Insurer licensing.

Which one of the following statements is true?

A. Mutual insurance companies include some large national insurers.

A stock insurer is distinguished from a mutual insurer by the fact that

A. Owners are not necessarily insureds.

An insurer that was formed for the purpose of earning a profit for its stockholders is a

A. Stock insurer.

How does a stock insurer differ from a reciprocal insurance exchange?

A. Stockholders own a stock insurer. Subscribers own a reciprocal insurance exchange.

Which one of the following is generally exempt from state insurance regulations pertaining to policy forms and rates?

A. Surplus line insurers

What is solvency?

A. The ability of an insurer to meet its obligations as they become due

An Ohio insurer that is licensed to sell insurance in Michigan is known as what in Michigan?

D. A foreign insurer

Which one of the following best describes what is determined by the insurer's staff review of applications from prospective insureds?

A. Whether the characteristics of the customer match the insurer's eligibility and selection guidelines

Which one of the following is a typical adjuster activity during the claim handling process?

B. Contacting the insured.

Which one of the following correctly describes a reason for government involvement in property-casualty insurance?

B. Government programs can meet legitimate public demands unmet by private insurers.

Which one of the following is true regarding the administration of the Insurance Regulatory Information System (IRIS)?

B. If regulators determine that an insurer is insolvent, the state insurance department places it in receivership.

A mutual insurance company is owned by

B. Policyholders.

Market conduct regulation focuses on insurers' treatment of applicants for insurance, insureds, and others who present claims for coverage. Market conduct regulation affects which one of the following areas of operation?

B. Sales

Owners of reciprocal insurance exchanges are also known as

B. Subscribers.

Some insurance rating laws allow rates to be put into use immediately but require insurers to files the rates with the state within a specific period of time. These types of laws are known as

B. Use-and-file laws.

Which one of the following describes the characteristics of a mutual insurance company?

C. A corporation owned by policyholders that provides insurance to its policyholders.

A flex rating law is

C. An insurance rating law under which prior approval is required only if the new rates exceed a certain percentage above (and sometimes below) the rates previously file.

Which one of the following statements concerning government insurance programs is true?

C. Fair Access to Insurance Requirements (FAIR) plans make basic property insurance available to property owners who can't get it otherwise.

Destructive competition in the insurance industry could result in

C. Insurance shortages.

Following the terrorist attacks on the United States, insurers became reluctant to provide property insurance on target properties until the federal Terrorism Risk Insurance Program (TRIP) was introduced. Which one of the following social purposes did this government insurance program serve?

C. Prevent economic disruption

Most states regulate the excess and surplus lines market by

C. Requiring that licensed surplus lines brokers transact business with the unlicensed insurers.

When deciding to approve or disapprove an insurer's request for a rate, a state insurance commissioner must determine if the rates are adequate. Adequate means that the rates should be

C. Sufficient to pay all claims and the expenses related to those claims.

Kyle is a professional athlete who has had several successful seasons. He earns $10 million a year, and is hopeful that his salary will double when he renegotiates his contract next year. His financial adviser recommends that he purchase an umbrella policy with multi-million dollar limits to provide an excess layer of protection above his primary personal insurance policies. Kyle's insurance broker has approached many of the large, well-known insurance companies, and they have balked at writing limits as high as those needed by Kyle. The broker is likely to find the coverage that Kyle needs in the

C. Surplus lines insurance market.

Unfair trade practices acts involve which one of the following insurance company operations?

C. Underwriting

For an insurer to be considered solvent, states require it to have financial reserves

C. Well in excess of its ordinary expenses.

Gen Company is a start-up corporation specializing in providing genetic material for use in new, experimental and often controversial medical treatments. Reasons why its liability insurance needs may have to be met in the surplus lines market include which one of the following?

D. Its loss exposures require new forms of coverage.

What term refers to the ability of an insurer to meet its obligations as they become due?

D. Solvency

The size of an employer's loss exposure for workers compensation insurance is based on

D. The amount of its payroll.