AINS 21 Practice Exams
All of the following describe Lloyd's, EXCEPT: Select one: A. An insurance and reinsurance marketplace B. Primarily insurers unusual exposures C. Operated by syndicates D. Insurance underwritten by a Name
B. Primarily insurers unusual exposures
The two major sources of an insurer's investment funds are policyholders' surplus and Select one: A. Reserves for unearned premiums. B. Premiums received but not yet used to pay claims. C. Reserves for loss expenses. D. Acquisition expenses.
B. Premiums received but not yet used to pay claims.
Successful underwriting ensures selected applicants Select one: A. Receive coverage that adequately reflect their loss exposure. B. Never experience losses that exceed the amount the insurer anticipated when pricing coverage. C. Do not require monitoring for increases in hazards. D. Can use the standard forms developed by insurance advisory organizations.
A. Receive coverage that adequately reflect their loss exposure.
The capital of a stock insurance company comes primarily from Select one: A. Sale of company stock. B. Sale of insurance policies. C. Return on invested premium reserves. D. Leveraging the difference from when a premium is paid in and when a claim is paid out.
A. Sale of company stock.
Atwell Insurance Company has the following expenses: Dividends $50,000 Claim staff salaries $90,000 Agents' commissions $180,000 Advertising costs $30,000 Rent and utilities $40,000 What is the amount of Atwell Insurance Company's acquisition expenses? Select one: A. $210,000 B. $260,000 C. $310,000 D. $410,000
A. $210,000
Brown Insurance Company has the following expenses: Dividends $70,000 Claim staff salaries $100,000 Agents' commissions $200,000 Advertising $50,000 Rent and utilities $60,000 What is the amount of Brown Insurance Company's acquisition expenses? Select one: A. $250,000 B. $300,000 C. $350,000 D. $450,000
A. $250,000
Earned premium for XYZ Insurance (XYZ) for the year was $500 million and incurred losses were $400 million. Incurred underwriting expenses were $60 million. XYZ had a net investment gain of $40 million for the year. Which one of the following is XYZ's overall gain or loss from operations? Select one: A. $80 million gain B. $80 million loss C. $200 million gain D. $200 million loss
A. $80 million gain
Which one of the following is considered to be an acquisition expense for an insurance company? Select one: A. Advertising expenses B. Guarantee fund expenses C. Losses D. Dividends
A. Advertising expenses
Earned premiums are the portion of written premiums that Select one: A. Apply to the part of the policy period that has already occurred. B. Are available to generate investment income. C. Are billed at the beginning of the policy period. D. Apply to the part of the policy period that follows a loss.
A. Apply to the part of the policy period that has already occurred.
Though premiums are an obvious cost of insurance, many insureds believe they are too high because Select one: A. Benefits are intangible until a loss occurs. B. Insurers only use eighty cents from every premium dollar to pay losses. C. Premiums are not a regular cost of living. D. Insureds do not deliberately cause losses.
A. Benefits are intangible until a loss occurs.
If a customer slips and falls in an insured's store, which one of the following provides protection in the event of a lawsuit? Select one: A. Commercial general liability (CGL) insurance B. Workers compensation insurance C. Commercial property insurance D. Commercial crime insurance
A. Commercial general liability (CGL) insurance
Underwriting income (or loss) is calculated by subtracting losses and expenses from Select one: A. Earned premium. B. Written premium. C. Paid premium. D. Unearned premium.
A. Earned premium.
Todd is a producer selling commercial insurance to small to medium sized businesses. Because some of them are struggling to pay the premiums, and because Todd gets more commissions the more policies he sells, he has started giving a portion of the policy premium back to his customers that place multiple coverages with him. In doing so, Todd is specifically engaging in the unfair trade practice of Select one: A. Rebating. B. Misrepresentation. C. False advertising. D. Tie-in sales.
A. Rebating.
Which one of the following is considered to be an acquisition expense for an insurance company? Select one: A. Sales commissions B. Dividends C. Losses D. Guarantee fund expenses
A. Sales commissions
Which one of the following statements is correct regarding government involvement in insurance? Select one: A. Federal and state government are involved in insurance to facilitate compulsory insurance purchases. B. Most organizations obtain workers compensation insurance through federal or state insurance programs. C. Government insurance plans typically incur significant costs in marketing and sales commissions. D. Legislators find it more straightforward to invite and analyze bids from private insurers than to establish government plans.
A. Federal and state government are involved in insurance to facilitate compulsory insurance purchases.
Sometimes the existence of insurance encourages losses. The result of this phenomenon is that it Select one: A. Increases the total cost of insurance. B. Increases competition in the industry. C. Reduces the term of many policies. D. Reduces agents' commissions.
A. Increases the total cost of insurance.
The primary role of insurance is to Select one: A. Indemnify individuals and organizations for covered losses. B. Make a profit for the insurance company's shareholders. C. Sell insurance policies to individuals and organizations. D. Educate individuals and organizations about loss prevention.
A. Indemnify individuals and organizations for covered losses.
Coverage for miscellaneous types of property such as movable property, goods in domestic transit, and property used in transportation and communication, typically is provided by Select one: A. Inland marine insurance. B. Business income insurance. C. Auto physical damage insurance. D. Crime insurance.
A. Inland marine insurance.
Which one of the following statements is correct regarding the benefits provided by insurance? Select one: A. Insurance helps reduce the financial burden to society by compensating accident victims. B. The reduction in losses paid by insurers due to risk control measures benefits individual insureds but not society as a whole. C. Insurance reduces the financial consequences of loss exposures but not the related uncertainty. D. The primary role of insurance is to meet mandatory insurance requirements.
A. Insurance helps reduce the financial burden to society by compensating accident victims.
Which one of the following statements is true? Select one: A. Insurance regulators review policies to determine if they benefit consumers. B. Regulators set coverage standards, but allow insurers to determine policy language. C. Insurers must be free to create policies that are in their best interest. D. Insurance policies are private contracts, the language of which is largely unregulated.
A. Insurance regulators review policies to determine if they benefit consumers.
Destructive competition in the insurance industry could result in Select one: A. Insurance shortages. B. Inadequate regulation. C. Excess regulation. D. Oversupply of insurance.
A. Insurance shortages.
Why are insurance regulators concerned about the effects of large catastrophes? Select one: A. Insurers may become insolvent. B. Licensed insurers will be unable to handle demand. C. They could lead to destructive competition. D. Insurance rates will rise.
A. Insurers may become insolvent.
Most of the income an insurer receives is either from underwriting or Select one: A. Investments. B. Nonadmitted assets. C. Losses. D. Policyholders' surplus.
A. Investments.
The two primary types of health insurance coverage are Select one: A. Medical and Disability Income. B. Sickness and Accident. C. Disability Income and Sickness. D. Accident and Medical.
A. Medical and Disability Income.
Which one of the following statements is true? Select one: A. Mutual insurance companies include some large national insurers. B. Mutual insurers are usually large national insurers. C. Mutual insurers are exclusively regional or local insurers. D. Mutual insurers include few regional insurers.
A. Mutual insurance companies include some large national insurers.
Insurance is not the only risk management transfer technique. When circumstances are appropriate, transfer can be accomplished through Select one: A. Noninsurance transfer techniques. B. Retention. C. Avoidance. D. Loss prevention.
A. Noninsurance transfer techniques.
A northeastern state in the US has a mandatory rate law in effect. A southeastern state has established a file-and-use law. A Pacific coast state requires insurers to follow a prior-approval law, and a midwest state has enacted a flex rating law. Which one of the states and its regulators asserts the greatest extent of control over insurer rates? Select one: A. Northeastern B. Pacific coast C. Southeastern D. Midwest
A. Northeastern
Term life insurance Select one: A. Provides protection for a specified period with no cash value. B. Provides lifetime protection. C. Allows the policyholder to borrow against policy savings. D. Accrues a cash value.
A. Provides protection for a specified period with no cash value.
Excella Insurance is a private insurer operating in the state of Arkansas. It primarily sells personal auto and homeowners policies and complies with all the necessary licensing and regulations required. Which one of the following is true for Excella in regard to this? Select one: A. State insurance regulators are only one of many stakeholders that are interested in an insurer's financial health. B. Paying expenses and making a reasonable profit is the ultimate measure of the insurer's success. C. Excella strives to make sure its revenue is equal to or less than its expenses and claim payments to remain financially viable. D. Excella must fully comply with insurance regulations so that the federal government does not revoke its license.
A. State insurance regulators are only one of many stakeholders that are interested in an insurer's financial health.
The size of an employer's loss exposure for workers compensation insurance is based on Select one: A. The amount of its payroll. B. The extent of its operations. C. The final premium audit. D. The number of its employees.
A. The amount of its payroll.
Which one of the following is the most common reason premium audits are conducted? Select one: A. The amount of the loss exposure is unknown at the start of the policy period. B. The amount of actual losses are not known at the start of the policy period. C. Loss control activities during the policy period may reduce the risk of loss. D. Claim examiners have discovered unacceptable operations during the policy period.
A. The amount of the loss exposure is unknown at the start of the policy period.
Some loss exposures are not easy to retain, avoid, or control. Which one of the following risk management techniques is frequently used to treat such exposures? Select one: A. Transfer B. Reunderwriting C. Prevention D. Reinsurance
A. Transfer
Unfair trade practices acts involve which one of the following insurance company operations? Select one: A. Underwriting B. Rate filings C. Coverage form design D. Financial reporting
A. Underwriting
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 Select one: A. Use-and-file laws. B. File-and-use laws. C. Prior-approval laws. D. Flex rating laws.
A. Use-and-file laws.
Earned premium for ABC Insurance (ABC) for the year was $400 million and incurred losses were $500 million. Incurred underwriting expenses were $60 million. ABC had a net investment gain of $40 million for the year. Which one of the following is ABC's overall gain or loss from operations? Select one: A. $120 million gain B. $120 million loss C. $200 million gain D. $200 million loss
B. $120 million loss
Which one of the following describes the characteristics of a mutual insurance company? Select one: A. An unincorporated association that earns profits for its individual investors. B. A corporation owned by policyholders that provides insurance to its policyholders. C. An unincorporated association that provides reciprocal coverage to subscribers. D. A corporation owned by stockholders that earns profits for the stockholders.
B. A corporation owned by policyholders that provides insurance to its policyholders.
The premium charged for an insurance policy should be Select one: A. Equivalent to the loss exposure. B. Commensurate with the loss exposure. C. Equal to the loss exposure. D. Concurrent with the loss exposure.
B. Commensurate with the loss exposure.
Coverage for money, securities, and other property from various causes of loss such as burglary, robbery, theft, and employee dishonesty typically is provided by Select one: A. Professional liability insurance. B. Commercial crime insurance. C. Ocean marine insurance. D. Inland marine insurance.
B. Commercial crime insurance.
Liability coverage for loss exposures arising from a business organization's premises and operations, its products, or its completed work is typically provided by Select one: A. Professional liability insurance. B. Commercial general liability insurance. C. Auto liability insurance. D. Personal liability insurance.
B. Commercial general liability insurance.
Which one of the following is a typical adjuster activity during the claim handling process? Select one: A. Notify underwriters of larger loss exposures than were originally contemplated. B. Contacting the insured. C. Controlling the loss. D. Determining policy terms and conditions
B. Contacting the insured.
The two objectives of insurance policy form regulation are to ensure that policies are clear and readable and to Select one: A. Ensure policies are negotiable between an insurer and insured. B. Detect and address any policy provisions that are unfair. C. Ensure that the insurers rights are protected. D. Limit policies' length and complexity.
B. Detect and address any policy provisions that are unfair.
The type of insurance that provides periodic income payments to an insured who is unable to work because of sickness or injury is Select one: A. Medical insurance. B. Disability income insurance. C. Term life insurance. D. Long-term care insurance.
B. Disability income insurance.
Which one of the following statements concerning government insurance programs is true? Select one: A. The federal government provides workers compensation insurance to employers who cannot get it from private insurers. B. Fair Access to Insurance Requirements (FAIR) plans make basic property insurance available to property owners who can't get it otherwise. C. Businesses seeking flood insurance under the National Flood Insurance Program (NFIP) must purchase it at local federal government offices. D. Various state insurance programs provide crop insurance for perils such as drought, disease, excessive rain and hail.
B. Fair Access to Insurance Requirements (FAIR) plans make basic property insurance available to property owners who can't get it otherwise.
Which one of the following correctly describes a reason for government involvement in property-casualty insurance? Select one: A. Selling insurance provides the government with a non-tax source of revenues and profits. B. Government programs can meet legitimate public demands unmet by private insurers. C. Competition from government plans keeps private insurer's premiums competitive. D. Preventing high-risk individuals or activities from being insured is in the public interest.
B. Government programs can meet legitimate public demands unmet by private insurers.
Which one of the following categories of loss expenses can an insurer use to compare its revenue and expenses? Select one: A. Loss reserves at end of period B. Incurred losses C. Loss reserves at beginning of period D. Change in loss reserves
B. Incurred losses
Which one of the following statements is correct regarding insurance as a source of investment funds? Select one: A. Insurers cannot invest premium income because it must be available to pay claims. B. Insurers' investment income helps keep premiums at a reasonable level. C. Insurance provides a source of investment funds for insurers but not for policyholders. D. Insurers are prohibited from investing in social projects.
B. Insurers' investment income helps keep premiums at a reasonable level.
The largest expense category for most insurers is payment for Select one: A. Additions to loss reserves. B. Losses arising from claims. C. Loss adjustment expenses. D. Acquisition expenses.
B. Losses arising from claims.
Which one of the following is true regarding a homeowners policy? Select one: A. It only provides liability coverage. B. Most include coverage for theft of contents within the home. C. It excludes losses caused by wind and lightning. D. It only provides property coverage.
B. Most include coverage for theft of contents within the home.
A stock insurer is distinguished from a mutual insurer by the fact that Select one: A. It seeks to generate a profit. B. Owners are not necessarily insureds. C. It is governed by a board of directors. D. Owners have voting rights.
B. Owners are not necessarily insureds.
Insurance Company wrote a commercial liability policy for a manufacturer of off-road motorcycles. The potential costs of the insured's loss exposure exceed Insurance Company's capacity. Insurance Company could consider which one of the following types of contractual transferring agreement to meet its needs? Select one: A. Interinsurance B. Reinsurance C. Mutual insurance D. Reciprocal insurance
B. Reinsurance
Market conduct regulation focuses on insurers' treatment of applicants for insurance, insureds, and others who present claims for coverage. Market conduct regulation affects all of the following areas of operations of an insurer, EXCEPT: Select one: A. Claims handling B. Risk control C. Sales D. Underwriting
B. Risk control
Sally is a recent college graduate who lives in the suburbs and drives to work daily in the city. She recognizes that owning a car creates both property damage and liability exposures for her and at the same time she has the burden of student loans. For someone in Sally's circumstances the most practical risk management technique for dealing with her auto-related loss exposures is Select one: A. Retention. B. Risk transfer. C. Avoidance. D. Loss control.
B. Risk transfer.
A stock insurer differs from a reciprocal insurance exchange in which one of the following ways? Select one: A. Both are formed to provide profit to investors. However, the stock insurer is managed through a board of directors. B. Stockholders own a stock insurer. Subscribers own a reciprocal insurance exchange. C. Both are owned by stockholders. However, the reciprocal insurance exchange provides coverage to investors. D. A stock insurer provides insurance to its policyholder-owners. A reciprocal insurance exchange provides insurance to investors.
B. Stockholders own a stock insurer. Subscribers own a reciprocal insurance exchange.
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 Select one: A. Similar for insureds with similar loss exposures. B. Sufficient to pay all claims and the expenses related to those claims. C. Able to generate a fair return for the insurer but no to excessive or unrealistic profit. D. Similar to the rates charged by other insurers operating in the state.
B. Sufficient to pay all claims and the expenses related to those claims.
Prompt and professional loss adjustment services are a responsibility of which one of the following parts of an insurer's organization? Select one: A. The premium audit function B. The claims function C. The loss control function D. The underwriting function
B. The claims function
Retention is often used in combination with insurance as a way of treating loss exposures. One of the major downsides of individuals using retention alone is Select one: A. The record keeping associated with retained losses. B. The potential for financial ruin. C. The unavailability of insurer loss control services. D. Availability of insurer loss settlement services.
B. The potential for financial ruin.
From a risk management viewpoint, insurance is used to Select one: A. Prevent the cost of losses. B. Transfer the cost of losses. C. Reduce the cost of losses. D. Isolate the cost of losses.
B. Transfer the cost of losses.
Which one of the following is part of written premiums? Select one: A. Underwriting expenses B. Unearned premiums C. Investment income D. Policyholders' surplus
B. Unearned premiums
For an insurer to be considered solvent, states require it to have financial reserves Select one: A. Equal to its ordinary expenses. B. Well in excess of its ordinary expenses. C. Double its ordinary expenses. D. As a fraction of its ordinary expenses.
B. Well in excess of its ordinary expenses.
As a single mother on a very tight budget, Ciara is tempted to skimp on her insurance. However, her friend Mehmet tells her not to skimp on insurance, because it will help manage her cash flows. Which one of the following examples best illustrates Mehmet's point? Select one: A. Ciara finds it difficult to come up with a $787 auto insurance premium every six months. B. When her car's windshield breaks, Ciara has to pay only $100 of the $600 cost of replacing it. C. When her car's transmission goes out a month after the warranty expires, Ciara is faced with a $1,100 repair bill. D. Ciara needs her car to get to her job, and she needs her job to make car payments and pay for her car insurance.
B. When her car's windshield breaks, Ciara has to pay only $100 of the $600 cost of replacing it.
Which one of the following best describes what is determined by the insurer's staff review of applications from prospective insureds? Select one: A. Whether any loss control recommendations will be made B. Whether the characteristics of the customer match the insurer's underwriting criteria. C. Whether the account should be written as a personal insurance policy or a commercial insurance policy D. Whether claims will be paid or denied
B. Whether the characteristics of the customer match the insurer's underwriting criteria.
When an employee is injured on the job, coverage for his or her medical care and lost wages will be provided by the insured's Select one: A. Commercial umbrella policy. B. Workers compensation policy. C. Commercial package policy. D. Commercial general liability (CGL) policy.
B. Workers compensation policy.
Which one of the following is an opportunity cost of insurance? Select one: A. The payment of commissions to agents B. An insurer's loss on invested premiums C. An insured's funds that could be invested elsewhere if purchasing insurance were not necessary D. The cost of claims payments that would not have been necessary if insureds' carelessness had not caused losses
C. An insured's funds that could be invested elsewhere if purchasing insurance were not necessary
Generally, how often must a foreign insurer's license be renewed? Select one: A. Every two years B. Every five years C. Annually D. Semi-annually
C. Annually
The state of Maryland operates a residual auto plan (the Maryland Auto Insurance Fund—MAIF) that provides coverage for drivers who are unable to obtain coverage from private insurers. Which one of the following is the best rationale for the MAIF program? Select one: A. Auto insurance for high-risk drivers is profitable, and the program enables the state to share in the profits. B. Private insurers face limited competition, and the state increases competitive pressures by operating this type of plan. C. Auto insurance is compulsory, and the program makes it possible for all drivers to have reasonably priced insurance. D. Private insurers overcharge for auto insurance, and the state provides a low-cost alternative.
C. Auto insurance is compulsory, and the program makes it possible for all drivers to have reasonably priced insurance.
A homeowners insurance policy typically includes Select one: A. Only property coverage. B. Only liability coverage. C. Both property and liability coverage. D. Umbrella coverage.
C. Both property and liability coverage.
A policy that combines property, crime, and liability coverages into one policy is referred to as a(n) Select one: A. Workers compensation policy. B. Employee dishonesty policy. C. Commercial package policy (CPP). D. Commercial umbrella policy.
C. Commercial package policy (CPP).
Which one of the following statements is correct regarding the benefits of insurance? Select one: A. One disadvantage of insurance is that it promotes inefficient use of policyholders' funds. B. Insurance policies typically cannot be used to provide evidence of financial resources. C. Contractors must usually provide evidence of liability insurance before a construction contract is granted. D. Insurers generally do not provide incentives to organizations to implement risk control measures.
C. Contractors must usually provide evidence of liability insurance before a construction contract is granted.
Properties of Insurtech Companies include all of the following, EXCEPT: Select one: A. Capable of assisting traditional insurers with new products and services. B. Takes advantage of the current digital world by using web-enabled platforms and mobile devices. C. Elimination for the need of underwriters given the technological advances in this space. D. They were born out of emerging technologies.
C. Elimination for the need of underwriters given the technological advances in this space.
Which one of the following is true regarding the administration of the Insurance Regulatory Information System (IRIS)? Select one: A. If an insurer cannot be rehabilitated, the state's guaranty fund may be available to increase the effects of the insurer insolvency. B. Under a special provision in state licensing laws, state regulators are empowered to completely take over an insurer at any time. C. If regulators determine that an insurer is insolvent, the state insurance department places it in receivership. D. If the insurer has financial ratios that are inside predetermined norms, IRIS identifies the company for regulatory attention.
C. If regulators determine that an insurer is insolvent, the state insurance department places it in receivership.
Which one of the following statements is correct regarding the benefits that insurance provides? Select one: A. Insurers are prohibited from investing in such things as research or technological advancements. B. The premiums collected by insurers must be held in cash to be available to pay claims. C. Investment income helps keep insurance premiums at a reasonable level. D. Insurance provides a source of investment funds for insurers but not for insureds.
C. Investment income helps keep insurance premiums at a reasonable level.
A type of insurer that has a board of directors elected by policyholders and that may pay dividends to policyholders as a return of a portion of premiums paid is a Select one: A. Stock insurer. B. Captive insurer. C. Mutual insurer. D. Reciprocal insurance exchange.
C. Mutual insurer.
Which one of the following is an operating cost of insurers? Select one: A. An insured's funds that could be invested elsewhere if purchasing insurance were not necessary B. Increased property losses because people have insurance C. Producers' commissions D. Increased liability loss payments because people have insurance
C. Producers' commissions
State government involvement in Workers Compensation Insurance involves all of the following, EXCEPT: Select one: A. Operating as a residual market. B. Functioning as an exclusive insurer. C. Providing coverage through insurance pools. D. Competing with private insurers.
C. Providing coverage through insurance pools.
One of the costs of insurance is said to be opportunity costs. This means that if capital and labor were not being used in the insurance business, they could be used elsewhere and making other productive contributions to Select one: A. The insurance industry. B. The agency system. C. Society. D. Government.
C. Society.
Insurers are required to submit annual financial statements to Select one: A. The state guaranty fund. B. The National Association of Insurance Commissioners (NAIC). C. State insurance departments. D. The Insurance Regulatory Information System (IRIS).
C. State insurance departments.
What is solvency? Select one: A. The process of a state taking over the assets and obligations of a failing insurer B. Transparency of policy language C. The ability of an insurer to meet its obligations as they become due D. Destructive competition
C. The ability of an insurer to meet its obligations as they become due
State governments can be involved in insurance at various levels. Some states provide which one of the following types of insurance in competition with private insurers? Select one: A. General liability B. Flood C. Workers compensation D. Crop
C. Workers compensation
An Ohio insurer that is licensed to sell insurance in Michigan is known as what in Michigan? Select one: A. An alien insurer B. A domestic insurer C. A captive insurer D. A foreign insurer
D. A foreign insurer
Harry has a new sports car that is insured with an Insurance Services Office, Inc. (ISO) Personal Auto Policy sold through his neighborhood agent. Because this is the first new car he's ever owned, Harry is interested in making sure he is fully covered and knowledgeable about his insurance policy. Which one of the following is true for Harry? Select one: A. Harry understands his policy is modular one, combining various coverage forms and other documents especially tailored to his needs. B. As the policy is a contract of utmost good faith, both his insurer and his agent are the parties expected to be ethical in their dealings with one another. C. Harry can rest assured that if his new car is a total loss, he can expect to make a profit while being restored to his pre-loss financial position. D. An insurance contract, like the ISO policy Harry purchased, has certain additional characteristics other than those of typical valid contracts.
D. An insurance contract, like the ISO policy Harry purchased, has certain additional characteristics other than those of typical valid contracts.
A flex rating law is Select one: A. A state law under which insurance rates are set by a state agency or rating bureau and all licensed insurers are required to use those rates. B. An insurance rating law that allows insurers to develop and use rates without having to file with or get approval from the state insurance department. C. An insurance rating law in which the rates and supporting rules must be filed with and approved by the state insurance department before they can be used. D. 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.
D. 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.
A reinsurance company Select one: A. Is formed to write all or part of the insurance for a parent company. B. Provides primary insurance for loss exposures that private insurers are unwilling to provide. C. Transfers losses to a primary insurer. D. Assumes loss exposures from a primary insurer.
D. Assumes loss exposures from a primary insurer.
A company interested in improving cash flow should consider meeting its insurance needs through which one of the following types of insurance organizations? Select one: A. Stock insurers B. Reciprocal insurance exchanges C. Mutual insurers D. Captive insurers
D. Captive insurers
A small business owner concerned about something happening and not being able to work or earn a living for an extended period of time due to an accident should purchase Select one: A. Universal life insurance. B. Personal liability insurance. C. Medical insurance. D. Disability insurance.
D. Disability insurance.
Which one of the following is the best measure of the amount of insurance provided for a given period? Select one: A. Paid premium B. Written premium C. Unearned premium D. Earned premium
D. Earned premium
Don is an agent trying to find appropriate coverage for his customer, Wayne Industrial Supplies, which has large, unique, and hard-to-place commercial loss exposures. Fortunately, Wayne is in a state that has deregulated some insurance coverages, which will make Don's job a little easier. Based on this information, which one of the following statements is true? Select one: A. Surplus lines insurers are generally not exempt from insurance regulations pertaining to policy forms and rates. B. For workers compensation, Don knows most states will exempt this type of commercial coverage from regulation. C. There is a standard definition, across states, of the size of business to qualify for exemption from rate and form regulation. D. If Wayne's loss exposures can be covered by inland or ocean marine coverages, these may be exempt from regulation.
D. If Wayne's loss exposures can be covered by inland or ocean marine coverages, these may be exempt from regulation.
Insurance customers' loss exposures arise out of their activities, as well as Select one: A. Insurers' requirements. B. Insureds' goals. C. Insurers' coverages. D. Insureds' property.
D. Insureds' property.
Which one of the following is a key focus of states' insurance regulation? Select one: A. Premium taxation. B. Product branding. C. Producer concentration. D. Insurer licensing.
D. Insurer licensing.
Expenses associated with an insurer's underwriting activity include all of the following, EXCEPT: Select one: A. Premium taxes, licenses, and fees B. Loss adjustment expenses C. Payment for losses D. Investment expenses
D. Investment expenses
The salaries of investment professionals who are employed by an insurance company are categorized as Select one: A. General expenses. B. Other underwriting expenses. C. Acquisition expenses. D. Investment expenses.
D. Investment expenses.
A reciprocal insurance exchange Select one: A. Is a stock corporation providing insurance for its policyholders. B. Is a subsidiary that provides all or part of the insurance for a parent company. C. Transfers potential costs of insured loss exposures from one insurer to another insurer. D. Is an unincorporated association providing insurance coverage to its subscribers.
D. Is an unincorporated association providing insurance coverage to its subscribers.
Risk control is intended to prevent or reduce losses. When practicing sound risk control, an organization Select one: A. Is likely to see the same economic benefit as compared to insurance. B. Will not be required to expend economic resources to insure those loss exposures. C. Will often be able to eliminate losses from those loss exposures. D. Is likely to use insurance to treat those loss exposures.
D. Is likely to use insurance to treat those loss exposures.
Liability coverage to individuals and families for bodily injury and property damage arising from the insured's personal premises or activities is typically provided by Select one: A. Auto liability insurance. B. Commercial general liability insurance. C. Professional liability insurance. D. Personal liability insurance.
D. Personal liability insurance.
Pravalt Construction Company pays less than its competitors for workers compensation insurance because Pravalt has had substantially fewer employee injuries than other firms in its class. This illustrates which one of the following benefits of insurance? Select one: A. Enable efficient use of resources B. Meet legal requirements C. Reduce social burden D. Promote risk control
D. Promote risk control
What term refers to the ability of an insurer to meet its obligations as they become due? Select one: A. Reserves B. Capacity C. Capital D. Solvency
D. Solvency
All of the following are types of private insurers, EXCEPT: Select one: A. Stock insurers B. Mutual insurers C. Reciprocal insurance exchanges D. State workers compensation funds
D. State workers compensation funds
An insurer that was formed for the purpose of earning a profit for its stockholders is a Select one: A. Captive insurer. B. Mutual insurer. C. Reciprocal insurance exchange. D. Stock insurer.
D. Stock insurer.
Owners of reciprocal insurance exchanges are also known as Select one: A. Policyholders. B. Correspondents. C. Names. D. Subscribers.
D. Subscribers.
Which one of the following is generally exempt from state insurance regulations pertaining to policy forms and rates? Select one: A. Workers compensation insurers B. Commercial property insurers C. Health insurers D. Surplus line insurers
D. Surplus line insurers
Life insurance that provides coverage for a specified period with no cash value is called Select one: A. Universal life. B. Whole life. C. Long-term care insurance. D. Term life insurance.
D. Term life insurance.