fin 230 homework 1-4

Damages assessed against the negligent party in a tort action sometimes include amounts that are designed to punish that party. Such damages are called A) Punitive damages B) Exemplary damages C) Special damages D) General Damages E) Explicit damages

A) Punitive damages

If an insurance company writes 1,000 insurance policies this year with a death benefit of $10,000 for each policy, and each policy has a 2% probability paying out the death benefit in each year, what is the insurance company's maximum possible loss for this year? A) $10,000 B) $200,000 C) $1,000,000 D) $10,000,000 E) None of the above

1,000*10,000 10,000,000

The following are examples of insurance distribution systems except for: A) Self-insurance B) Exclusive agencies C) Independent agencies D) Independent agents E) Independent brokers F) Internet based sales

A) Self-insurance

The definition of "risk" suggested by the professor is that risk is A) A condition of the real world B) A state of mind C) A subjective uncertainty D) A psychological phenomenon

A) A condition of the real world

Probability may be defined as: A) A measure of the likelihood of occurrence B) Similar to risk C) A measure of the degree of uncertainty D) The number of losses that occur during the life of the exposure E) All of the above

A) A measure of the likelihood of occurrence

The type of insurance company in which insureds are also insurers and in which the members of the group assume liability for losses individually rather than collectively is A) A reciprocal B) A pure assessment mutual C) Any mutual insurer D) Lloyd's of London E) None of the above

A) A reciprocal

From the Insured's Perspective, not owning or riding in an automobile is an example of which type of risk mitigation? A) Avoidance B) Hazard Risk C) Retention D) Loss Prevention E) Transfer F) Combination G) Pure Risk

A) Avoidance

Which section of an insurance policy is unique to each individual insured? A) Declarations B) Definitions C) Insuring clause D) Coverages E) Conditions

A) Declarations Declarations that part of an insurance policy containing the representations of the applicant.

The doctrine of contributory negligence A) Has been replaced in many jurisdictions by the doctrine of comparative negligence B) Is a defense that benefits the injured party C) Is currently applied only in the field of employers liability D) Applies only in the case of automobile accidents E) Actually contributed to the increase in liability damages F) None of the above

A) Has been replaced in many jurisdictions by the doctrine of comparative negligence

All of the following are correct statements about aleatory contracts, except which one? A) If you paid the premium to your agent, but your agent does not turn it over to the insurance company, then the contract between you and the insurer is still valid B) If there is a loss, the insured may collect more than the amount of the premium C) This is a contract in which the consideration between the parties is not equal D) Aleatory insurance contracts do not create hazard risk E) Aleatory contracts tend to not be commutative between the contract's parties

A) If you paid the premium to your agent, but your agent does not turn it over to the insurance company, then the contract between you and the insurer is still valid An aleatory contract is a contract in which the performance of one or both parties is contingent upon the occurrence of a particular event.

Which of the following is least likely to be held legally liable? A) Infants B) Minors C) Insurance companies D) Charitable institutions E) Municipalities F) Corporations

A) Infants

Reinsurance A) Is insurance for insurance companies B) Is required by regulators for insurers C) Is purchased through Lloyds exchanges D) Is usually not available E) Can reduce the total costs of catastrophes

A) Is insurance for insurance companies

Purposely leaving your old bicycle unlocked for thieves in order to collect insurance money for a new bicycle is a _____, while accidentally running into a bus while you were setting up a playlist on your mobile phone is a _____. - A) Moral hazard, morale hazard B) Morale hazard, morale hazard C) Moral hazard, societal hazard D) Societal hazard, moral hazard E) Societal hazard, physical hazard

A) Moral hazard, morale hazard

In the event of a total loss to property insured under a stated value policy, payment will generally be made for A) The face amount of the policy B) Replacement cost C) Actual cash value D) The cost to repair or replace the property E) None of the above

A) The face amount of the policy

The primary consideration in deciding how to deal with a particular risk is A) The potential loss severity and one's ability to bear it B) The probability that the loss will occur C) The expected value of the loss D) The cost of insurance E) All of the above are of equal importance?

A) The potential loss severity and one's ability to bear it

During the decade of the 1990s, virtually every state in the U.S enacted some sort of tort reform. These statutes A) Usually involved limits on joint and several liability and pain and suffering B) Failed to address the issue of punitive damages C) Have withheld virtually all of the challenges to their constitutionality D) Have virtually eliminated pressure at the federal level for tort reform E) All of the above

A) Usually involved limits on joint and several liability and pain and suffering

In order to void a contract when the insured has made a misrepresentation, in most states the insurer must generally prove that the misrepresentation: A) Was both intentional and material B) Was intentional only, since all statements made by the insured are presumed to be material C) Involved a material fact, regardless of intent D) Was made; there is no need to prove materiality or intent E) None of the above

A) Was both intentional and material

The term "hazard" refers to: A) The same thing as the term peril B) A condition that increases the chance of loss C) The same thing as a risk D) Uncertainty regarding loss E) The same thing as probability of loss

B) A condition that increases the chance of loss

General unemployment in a recession would generally be considered to be A) A static fundamental risk B) A dynamic fundamental risk C) A static particular risk D) A dynamic particular risk E) None of the above

B) A dynamic fundamental risk

To be technically correct, we should define "weather" as: A) A peril B) A hazard C) A risk D) A loss E) It depends on the insurance division defining "weather" F) Any of the above is equally correct

B) A hazard

The risks most suited to treatment by insurance are those in which there is: A) A high probability and a low potential severity B) A low probability and a high potential severity C) A high probability and a high potential severity D) A low probability and a low potential severity E) None of the above

B) A low probability and a high potential severity

Adverse Selection: A) Is generally considered to be unavoidable B) Affects the accuracy of insurer's predictions C) Creates a random pattern of insured exposures D) Has little effect on the operation of the insurance mechanism E) More than one of the above

B) Affects the accuracy of insurer's predictions

If an agent tells an insured that a breach of a policy condition will not affect the coverage and payment of a claim, and a loss occurs, the agent may A) Deny coverage if the breach contributed to the loss B) Be liable for the loss because the agent's acts are considered acts of the insurer C) Deny liability if the agent was not authorized to make such statements D) Deny liability because a waiver must be in writing before it is valid E) None of the above

B) Be liable for the loss because the agent's acts are considered acts of the insurer

If an agent tells an insured that a breach of a policy condition will not affect the policy's coverages, and a loss occurs, the insurer may: A) Deny coverage if the breach contributed to the loss B) Be liable for the loss because the agents acts are considered acts of the insurer C) Deny liability if the agent was not authorized to make such statements D) Deny liability because a waiver must be in writing before it is valid E) None of the above

B) Be liable for the loss because the agents acts are considered acts of the insurer

Brokers differ from insurance agents in that A) Brokers are compensated by their clients on a fee basis, while agents receive only a commission from their insurance company B) Brokers are not agents of the company, and therefore cannot bind the company C) Brokers operate primarily in the life insurance field, while agents operate in both the life insurance field and the property and liability insurance field. D) Agents may bind a company orally, while brokers have the authority to bind only in writing E) None of the above

B) Brokers are not agents of the company, and therefore cannot bind the company

EZ Insurance has an automobile combine ratio of 103.2. This means A) EZ is unprofitable B) EZ is showing an underwriting loss on automobile insurance C) EZ is making a 3.2% profit on automobile insurance D) EZ is showing an underwriting profit on automobile insurance E) None of the above

B) EZ is showing an underwriting loss on automobile insurance

Waiver: A) Is the same thing as an estoppel B) Involves the relinquishment of a known right C) Is an obsolete doctrine, seldom used in insurance today D) Is an exception to the principle of indemnity E) None of the above

B) Involves the relinquishment of a known right

An insurance agent's authority to act on behalf of an insurer: A) Is limited to the express authority expressly granted in an agency contract B) May include authority that is not expressly granted by contract C) Is limited by the doctrine of implied agency restrictions D) Includes stipulated authority and implied authority, but not ostensible authority E) None of the above

B) May include authority that is not expressly granted by contract

Which of the following would permit the insurance company to void your automobile policy? A) Concealing the fact that your brother was convicted of drunken driving B) Misstating your age C) Driving without a license D) Lending your car to someone without a license E) All of the above

B) Misstating your age

By definition, estoppel: A) Is the failure to disclose known facts B) Prevents one from denying a fact if the fact was admitted to be true by previous actions C) Allows the insurer to deny liability on the basis of the insured's previous actions D) Is the intentional abandonment of a known right E) None of the above

B) Prevents one from denying a fact if the fact was admitted to be true by previous actions

The type of insurance that is characterized by individual equity and contractual arrangements is generally referred to as: A) Social insurance B) Private insurance C) Property-liability insurance D) Public guarantee insurance programs E) Government insurance programs F) Individual life insurance G) Public welfare insurance H) None of the above

B) Private insurance Private Insurance- voluntary insurance programs available from a private firm or from the government by which an individual may obtain protection against the possibility of loss due to a contingency.

Vicarious liability involves a situation where one person becomes legally liable because of the negligence of another. One of the doctrines upon which vicarious liability may be based is A) Negligence per se B) Respondeat superior C) Sovereign immunity D) The fellow servant doctrine E) Strict liability F) None of the above

B) Respondeat superior

Assume an individual's expected loss on their home from fire is $20,000 once every twenty years. The cost of insurance to protect against this loss is $1,715 per year (averaged). If the individual chooses to purchase this insurance, they are most likely: A) Risk neutral B) Risk averse C) Risk seeking D) None of the above

B) Risk averse 1,715*20 > 20,000

The most difficult step in the risk management process is likely to be A) Determination of objectives B) Risk identification C) Evaluating risks D) Selection of the risk treatment device E) Evaluation and review

B) Risk identification

Which of the following statements about risk management is correct? A) Risk management is simply another term for corporate insurance buying B) Risk management has relevance for organizations of all sizes C) Risk management has an anti-insurance bias and seeks to minimize the use of insurance in dealing with risk D) Risk management is concerned primarily with the risk problems of public corporations E) Risk management is a function of business and as such has little relevance for the individual

B) Risk management has relevance for organizations of all sizes

A peril, as distinguished from a hazard, is defined as A) A condition that increases the likelihood of loss B) The cause of loss C) The same thing as a risk D) The result of a loss E) None of the above

B) The cause of loss

In an insurance contract, subrogation provides that: A) Three parties may collect from the insurer as a result of one negligent act B) The insured's right to collect from a negligent third party is transferred to the insurer to the extent he or she receives payment from the insurer C) The insured must give up the right to receive damages from the insurance company if the insured is negligent D) The insured may collect from his insurer and the negligent party's insurer E) None of the above

B) The insured's right to collect from a negligent third party is transferred to the insurer to the extent he or she receives payment from the insurer

For the insurance company, a meaningful measure of risk is: A) The probability that an individual loss will or will not occur B) The possible deviation of actual from predicted results C) The size of the population insured D) The relationship of the premium to average loss E) None of the above

B) The possible deviation of actual from predicted results

The type of retention that is always undesirable is A) Unfunded retention B) Unintentional retention C) Conscious retention D) Voluntary retention E) All forms of retention are undesirable

B) Unintentional retention

Which of the following does not constitute an insurable interest? A) A bank holding mortgage on your home B) You make an offer to buy a neighbor's car C) You inherit a ski lodge in Aspen, Colorado D) Your lease makes you liable for fire damage to your rented premises E) You have custody of a valuable painting when the owner is away

B) You make an offer to buy a neighbor's car

Because of the fact that the terms of an insurance contract are fixed by the insurer instead of being determined by a bargaining process, the insurance policy is said to be A) A contract of utmost good faith B) An aleatory contract C) A contract of adhesion D) A contract of indemnity E) A voided contract F) An insurance policy contract

C) A contract of adhesion

The possibility of loss resulting from a home fire is an example of: A) A static fundamental risk B) A dynamic fundamental risk C) A static particular risk D) A dynamic particular risk E) A static dynamic risk F) A fundamental particular risk

C) A statistic particular risk static risk - losses that would occur if there were no changes in the economy. particular risk- losses that arise out of individual events and are felt by individuals rather than by the entire group.

Which of the following is not required for an ideal insurable risk? A) Large number of similar exposure units B) Calculable expected average loss C) Ability of the insured to accept a high deductible D) Definite time and place of insurable event E) Measurable economic losses F) Stochastic and serendipitous losses

C) Ability of the insured to accept a high deductible

The term enterprise risk management refers to A) Risks related to derivatives and futures B) Financial risk management C) Combining pure, speculative and operational risks into a single portfolio? D) Risks of profit-making organizations E) None of the above

C) Combining pure, speculative and operational risks into a single portfolio

The most favorable doctrine from the perspective of a least-at-fault injured person is A) Contributory negligence B) Last clear chance C) Comparative negligence D) The principles of common law E) Concurrent negligence

C) Comparative negligence

One night after a football win, you drink way too much beer. In your drunken stupor you make an after-midnight deal and you sign a contract. The next day you realize what an idiot you were and you need to get out of the contract. Which requirement of a valid contract would allow this? A) Offer and acceptance B) Consideration C) Competent parties D) Legal Purpose E) None of the above

C) Competent parties

Which of the following would be an example of "loss prevention?" A) Purchasing a less expensive car B) Switching insurance from one company to another C) Installing a home security system with a sign in the front yard D) Chasing the robber down the street after being robbed E) Purchasing a Burglary and Robbery Insurance after being robbed

C) Installing a home security system with a sign in the front yard

The combined ratio A) Predicts future revenue of an insurance company B) Increases when dividends and profitability increase C) Is used because of the accounting principle of matching cannot be used with premium earned and claims paid D) Is affected by investment income E) Of over 100 is desirable F) Increases when written premium increases

C) Is used because of the accounting principle of matching cannot be used with premium earned and claims paid

The combined ratio A) Predicts future revenue of an insurance company B) Increases when dividends and profitability increase C) Is used because of the accounting principle of matching cannot be uses with the premium earned and claims paid D) Is affected by investment income E) Of over 100 is desirable F) Increases as premium increases

C) Is used because of the accounting principle of matching cannot be uses with the premium earned and claims paid

Insurance which is required by law: A) Is classified as a social insurance coverage B) Is classified as a compulsory-private insurance coverage C) May be social or private, depending on other characteristics D) May be social or private, depending on other characteristics E) Is usually classified as a public guarantee program F) None of the above

C) May be social or private, depending on other characteristics

The ultimate goal of risk management is to A) Minimize insurance expenditures B) Make certain that uninsured losses do not occur C) Minimize the adverse effects of losses and uncertainty connected with risks D) Get the best buys in the field of insurance E) Eliminate financial loss

C) Minimize the adverse effects of losses and uncertainty connected with risks

The main objective of insurance companies must be A) Increased industry regulation B) Employee education C) Profit D) Efficiency E) Market reputation

C) Profit

Which of the following represents an exception to the principle of indemnity? A) Actual cash value payment of insurance losses B) The doctrine of insurable interest C) Replacement cost coverage D) Subprogation E) Other insurance provisions

C) Replacement cost coverage Replacement cost coverage is the amount it would cost to repair or replace an item with another item the same kind/quality as the original.. IN TODAYS MARKET

A major difference between stock and mutual insurers is: A) Stock insurers are incorporated and mutual insurers are not B) Mutual insurers are not taxed, while stock insurers pay tax C) Stock insurers are owned by their stockholders, whole mutual insurers are owned by their policyholders D) Stock insurers pay dividends to policy holders and mutual insurers do not E) None of the above

C) Stock insurers are owned by their stockholders, whole mutual insurers are owned by their policyholders

According to the law of large numbers, as the number of exposure units is increased: A) The probability of losses decreases B) The chance or probability of total loss increase C) The accuracy of predictions should be better D) The accuracy of predictions should remain about the same E) None of the above

C) The accuracy of predictions should be better

Adverse selection is a term used to describe: A) The choice of the wrong insurance to fit a specific need B) An underwriting error on the part of an insurance company C) The tendency of the poorer than average risks to seek insurance to a greater extent than do the better than average risks D) A loss situation in which the chance of loss cannot be determined E) None of the above

C) The tendency of the poorer than average risks to seek insurance to a greater extent than do the better than average risks

From the insured's perspective, the purchase of insurance is an example of: A) Avoidance B) Retention C) Transfer D) Loss Prevention E) Combination

C) Transfer

Liability insurance is concerned primarily with the financial consequences of A) Crimes B) Intentional torts C) Unintentional torts D) Unintentional torts which are also crimes E) All of the above

C) Unintentional torts Unintentional torts result from negligence or carelessness. In these cases, the injured party may be entitled to damages in a civil action even though the tort feasor had no malicious intent as in an intentional tort.

Because of the fact that the terms of an insurance contract are fixed by the insurer instead of being determined by a bargaining process, the insurance policy is said to be: A) A contract of utmost good faith B) An aleatory contract C) A contract of indemnity D) A contract of adhesion E) A voided contract F) An insurance policy contract

D) A contract of adhesion

Corporations have been implementing Enterprise Risk Management at a more rapid pace in the last decade because of which of the following trends and changes? A) Increased Federal regulation regarding public statements by corporate executives B) Increased volatility in the markets C) Competition D) All of the above E) None of the above

D) All of the above

Multiple line operation A) Has been the dominant form of operation in the American insurance industry since about the time of the civil war B) Involves the combination of property insurance, liability insurance, life insurance, and health insurance by a single insurance company C) Was retarded primarily by the reluctance of insurance companies to engage in such operations D) Extends the concept of diversification to the insurance field, permitting the combination of property and liability insurance by a single company E) None of the above

D) Extends the concept of diversification to the insurance field, permitting the combination of property and liability insurance by a single company

The principle of indemnity requires that: A) Insurance rates must be neither too high nor too low B) The insured should be made whole for all types of losses suffered C) Insureds who have claims must pay part of the losses that result D) Insureds are fully compensated for economic losses suffered E) The insured must be paid the benefits that his or her premium has purchased F) None of the above

D) Insureds are fully compensated for economic losses suffered

The cyclical nature of the U.S property and liability insurance industry, in which insurance prices and the availability of insurance fluctuate over time A) Is evidence of a conspiracy on the part of insurers B) Reflects mismanagement on the part of insurance company executives C) Is gradually changing to a more stable market D) Is evidence that the industry is highly competitive E) None of the above

D) Is evidence that the industry is highly competitive

An individual who had a chance and failed to avoid an accident would likely be liable under the doctrine of A) Respondeat superior B) Res ipsa loquitor C) Negligence per se D) Last clear chance E) Contributory negligence

D) Last clear chance

The oldest of the modern fields of insurance is probably A) Fire insurance B) Life insurance C) Casualty insurance D) Marine insurance E) Health insurance

D) Marine insurance

Insurance companies A) Are members of the NAIC B) Must belong to an underwriting association C) Cannot make risky investments with their premium revenue D) Must use actuarial data E) Prefer to use agents

D) Must use actuarial data

Insurance actuarial services are primarily responsible for A) Customer selection B) Claims costs C) Regulatory profitability D) Predicting the impact of risk and uncertainty E) All of the above

D) Predicting the impact of risk and uncertainty

A pedestrian injured by an object falling from a building would probably attempt to establish liability on the basis of the doctrine of A) Comparative negligence B) Respondeat Superior C) Caveat Lector D) Res Ipsa Loquitor E) None of the above

D) Res Ipsa Loquitor

All but which of the following might be interposed as a defense by a negligent party in a tort action? A) Assumption of risk B) Contributory negligence C) Comparative negligence D) Res ipsa loquitor E) Last clear chance

D) Res ipsa loquitor (the thing speaks for itself) rebuttable presumption that the defendant was negligent: the presumption arises on proof that the instrumentality causing the injury was in the defendant's exclusive control, and that the accident is one that ordinarily does not happen in the absence of negligence.

When an insurer denies liability because it does not believe the insured is liable, A) The effect is the same as denial because of a policy exclusion B) The insured must retain his or her own counsel to defend the suit C) The policy provides for arbitration of the dispute D) The insurer will defend the suit and pay up to the policy limit if the insured is liable E) None of the above

D) The insurer will defend the suit and pay up to the policy limit if the insured is liable

Which would be an example of a transfer of risk by "contractual arrangement?" A) Paying your electric bill with cash B) Selling stock in your new business C) Replacing the bald tires on your automobile D) The one-year warranty on your i>clicker E) Your company decides not to produce a dangerous product.

D) The one-year warranty on your i>clicker

Those risks most suited to treatment by loss prevention are those in which: A) The probability is low and the potential severity is high B) The probability and potential severity are both low C) The probability is high and potential severity are both high D) The probability is high and the potential severity is low E) None of the above

D) The probability is high and the potential severity is low

One way the principle of indemnity is enforced is: A) Through valued policy laws B) To a greater extent in life insurance than in the field of property insurance C) To the same extent in all fields of insurance D) Through the principle of subrogation E) None of the above

D) Through the principle of subrogation Subrogation an assignment or substituting of one person for another by which the rights of one are acquired by another in collecting a debt or a claim, as an insurance company stepping into the rights of a policyholder indemnified by the company.

When there is a difference of opinion about the meaning of the terms in an insurance contract because they are capable of more than one interpretation, the courts A) Usually use the preferred meaning in Webster's Dictionary B) Utilize the preferred meaning in Black's Law Dictionary C) Usually favor the insurance company D) Usually favor the insured E) Declare the contract void

D) Usually favor the insured

Risk avoidance would be the best solution in all of the following instances except which one? A) No other alternative is available B) The risk cannot be transferred C) When the frequency and severity of loss are high D) When the probability or frequency cannot be determined E) When premiums are excessively expensive

D) When the probability or frequency cannot be determined

Price competition in the insurance industry A) Occurs primarily at the insurer level where prices are set B) Occurs at the agency level through the selection of insurers C) Occurs despite the regulated pricing structure D) Is sometimes based on the selectivity an insurer exercises E) All of the above

E) All of the above

Risk management contributes to organization profit A) By reducing expenditures for insurance B) By reducing the cost of losses C) By allowing the organization to engage in certain speculative risks D) By preserving the organization's operating effectiveness E) All of the above

E) All of the above

You sell your car to a woman who responds to an ad that you placed online, but you mistakenly pay the insurance renewal premium on the car after you sell it. During the policy term you find out that the woman you sold the car to was in an accident that caused extensive damage to the car. Which of the following is true? A) You can collect for damages done to the car since you had placed insurable interest at the inception of the policy B) You cannot collect on the losses to the car, because you were not in the accident C) You can collect under your policy, but you must turn the payment over to the woman who bought the car D) You cannot collect for the loss to the car since you did not have an insurable interest in the car at the time of the loss E) It is your option to decide if you want to collect for the loss to the car and make payment to the woman to whom you sold the car

D) You cannot collect for the loss to the car since you did not have an insurable interest in the car at the time of the loss

Insurance policies contain exclusions because: A) Some perils are uninsurable B) Some types of property must be covered under special policies C) Some coverages are subject to separate rating D) Some perils are covered under other policies E) All of the above

E) All of the above

Involuntary and unintended retention occurs when: A) The risk is not recognized B) Insurance coverage is not available C) Insurance does not cover the intended exposure D) Loss control measures are improperly implemented E) All of the above

E) All of the above

The combination of a large number of exposure units by an insurer is important for the operation of insurance because: A) It reduces uncertainty in the aggregate B) It allows the insurer to make accurate predictions C) It spreads losses among the members of the group D) It makes the insurer's aggregate risk less than a summation of the risks of the individuals E) All of the above

E) All of the above

The traditional disadvantages of the mutual insurance structure that have become more apparent in recent years include the fact that A) Mutual insurers have limited mechanisms for accessing capital B) The structure of mutual insurers is not particularly flexible C) Mutuals cannot use stock to acquire other companies D) Federal legislation to allow banks and insurers to affiliate requires that there be a holding company structure. E) All of the above

E) All of the above

The underwriting process is designed to: A) Collect relevant applicant information B) Protect company profits C) Adhere to legal requirements D) Determine policy form and riders for individual applicants E) All of the above

E) All of the above

In most jurisdictions, a property owner owes the highest degree of care to A) An invitee B) A trespasser C) A social guest D) A licensee E) An invitee F) The degree of care owed is the same to all

E) An invitee

Lloyd's of London A) Is licensed in about half of the states B) Is the parent company of the so-called American Lloyds C) Is a mutual insurance company D) Is a capital stock insurance company E) Is similar in its operation to the New York Stock Exchange

E) Is similar in its operation to the New York Stock Exchange

Which of the following types of insurance is a "Personal-Involuntary-Private-Property&Liability" type of policy? A) Health Maintenance Organization (an HMO policy) B) Disability Income Protection (DI) C) Social Security (OASDI) D) Business Owners policy (BOP) E) Personal Auto Policy (PAP) F) Homeowners Insurance (HO)

E) Personal Auto Policy (PAP

Which of the following is not true with respect to the property and liability insurance industry? A) There are few barriers to entry by new competitors B) Competition has produced changes in market share of competitors over time C) The fields is highly decentralized, with no firm controlling as much as 10% of the market D) The business is highly cyclical E) Profits have consistently been above those in other industries

E) Profits have consistently been above those in other industries

The willingness to pay a premium for car insurance that is higher than your expected losses represents: A) Speculative risk B) Expected loss C) Risk neutrality D) Risk Seeking E) Risk Aversion

E) Risk Aversion

The term "risk" is best defined as: A) The same thing as the term "peril" B) A condition that increases the chance of loss C) As a hazard D) Uncertainty regarding future losses E) The same thing as probability of loss

E) the same thing as probability of loss

The elements of an ideal insurable risk: A) Require that the probability of a given loss be known B) Include the requirement of loss payments C) Must be advantageous to the insured D) Requires multiple types of units to be pooled E) Must be present or the exposure cannot be insured F) Are desirable, but some insurable risks do not possess them G) More than one of the above

F) Are desirable, but some insurable risks do not possess them