Exam 2 4292 Quiz Questions

The three underwriting _______________ are to accept the submission, reject the submission, or make a counteroffer.

alternatives

P/C companies will often perform underwriting ______________, where they check to ensure that underwriting guidelines were followed after the fact.

audits

Underwriting _____________ refers to the amount of insurance a given underwriter is able to sell, and will typically increase throughout an underwriter's career.

authority

________________ are usually the largest asset on a property/casualty insurer's balance sheet.

bonds

An ____________ adjuster can be used by an insurer in a geographic area where they don't have a large group of company adjusters.

independent

_____________ is a form of asymmetric information that can lead an insured to take more risks due to the presence of insurance.

moral hazard

If I am an insurer and a loss occurs with a claim of $1,000, in addition to crediting my loss reserve account $1,000, I will debit my ___________ account $1,000.

surplus

Under SAP, the ______________ is defined as the difference between admitted assets and liabilities.

surplus

Using the loss ratio method, if a company had an actual loss ratio of 90% and an expected loss ratio of 85%, how much should they change their rates? Please answer to four decimal places.

0.0588

What is the two-year loss development factor? Please answer to four decimal places.

1.1388

Considering the above loss triangle, what is the 24 to 36 month (i.e., one year) loss development factor? Please answer to four decimal points.

1.1428

If an insurer sells an insurance policy with a one-year term for $100, how much of that $100 will be recorded in the unearned premium reserve after 6 months?

50

What is the estimate for the developed losses (as of 36 months) of accident year 3 based on the loss development factor method? Please answer to two decimal places.

8541.46

The insurer claim loss reserve is a liability that includes reported but not paid claims, as well as ______________ claims.

IBNR

A(n) ______________ can often be used by a company to adjust smaller claims, typically up to a stated dollar amount.

agent

The claims department can support the __________ department by providing information on claims that they can then use to set future rates.

actuarial

The primary problem underwriting is trying to solve is _______________ resulting from information asymmetries.

adverse selection

When a(n) _____________________ occurs, insurers may be reliant on independent adjusters as many claims need to be dealt with at once.

catastrophe

_____________ adjusters are salaried employees who work for one insurer.

company

The loading added when setting rates includes provisions for expenses, profit, and ______________.

contingencies

Because insurance claims payments are ______________, the claims department is important in determining whether a covered loss occurred.

contingent

One of the primary principles of underwriting is to achieve ____________ among policyholders--i.e., to make sure insureds are paying similar rates to others with similar risk profiles.

equity

While high quality bonds (SVO 1 and SVO 2) are carried at amortized (historical) cost, low quality bonds (SVO 3-6) are carried at _____________.

fair value

While occupied real estate and income-generating real estate are held at cost + improvements less depreciation, real estate that is available for sale is held at _____________.

fair value

This type of underwriting, known as __________ underwriting, is undertaken by agents as the first step in the underwriting process.

field

At its extreme, the claims settlement progress can protect an insurer against _____________.

fraud

A __________ market in the P/C insurance industry refers to a period of time when underwriting standards are tight, premiums are high, and insurance terms are unfavorable.

hard

After receiving notice of loss, the second step in the claims settlement process involves ______________ the contract and facts associated with the claim.

investigating

What ratemaking method would be most appropriate for a completely new line of business with no available historical claims information?

judgement

GAAP evaluates companies as a going concern, while SAP is concerned with _________________ value.

liquidity

___________________ are typically the largest single liability on a property/casualty insurer's balance sheet.

loss reserves

Less liquid assets that have limited resale value are considered _________________ assets under SAP.

nonadmitted

If an insurer initially estimated their loss reserve to be $750 million, but claims ended up being $600 million after all claims have been paid, that insurer initially ___________-reserved.

over

Claims settlement can help to achieve an insurer's _________ goal by ensuring claim adjustment expenses are efficiently used.

profit

A(n) ___________________ is an outside organization or person hired by an insured to represent the insured in a claim in exchange for a fee.

public adjuster

When considering ratemaking, the Premium divided by the number of exposure units would provide what number?

rate

The two most prominent functions of actuaries are __________ and loss reserving.

ratemaking

This is an unlawful underwriting process that involves setting unfairly high rates in geographic areas with relatively high minority populations.

redlining

For large insurance policies, an underwriter may need to ensure they can obtain ______________ to share the risk for the policy, prior to selling it to the customer.

reinsurance

A regulatory ratemaking objective is that rates are adequate, but not excessive and not ______________ discriminatory.

unfairly