Insurance Exam Practice Chapter 2
Manitoba Mutual's most recent accounting year produced the following results Expenses 35$ Million Premiums 100$ Million Losses 70$ Million The company's combined ratio is A. 35% B. 70% C. 75% D. 105%
105%
Assuming a rate of 1$ per thousand dollars of insurance, a policy covering a building valued at 250,000$ would produce a premium of A. 25$ B. 250$ C. 2,500$ D. 25,000$
250$
Each of the following is an example of a proprietary insurer EXCEPT A. Lloyd's of London B. A mutual company C. A Stock company D. A reciprocal insurer
A reciprocal insurer
When determining the amount to charge prospective policyholders, a company must follow basic guidelines concerning rates that include all of the following EXCEPT A. Rate adequacy B. Absence of discrimination C. Rate reasonableness D. Absence of unfair discrimination
Absence of discrimination
To be considered an agent, a person must perform all of the following EXCEPT A. Take applications for insurance B. Collect and remit premiums C. Adjust and pay claims D. Solicit insurance on behalf of a company
Adjust and pay claims
A company authorized to do business in a state but formed under the laws of a country other than the United States is a what?
Alien insurer
States use various types of approval systems when evaluating an insurance company's rates. Which of the following is an example of State rate Law? A. Prior approval B. File and use C. Open competition D. All of the above
All of the above
The government may write insurance for which of the following types of risks? A. Crop insurance B. unemployment insurance C. Flood insurance D. All of the above
All of the above
The type of authority the public has reason to believe an agent possesses is
Apparent
All of the following lines of business are placed routinely in the surplus lines market except? A. Boiler and machinery B. Aviation C. Earthquake D. Professional Liability
Boiler and Machinery
The amount of insurance a company can write based on its financial status is referred to as
Capacity
An agent who represents a single insurance company under contract is referred to as what type of agent?
Captive
When an insurance company becomes authorized to do business in a particular state it receives a A. Appointment B. Certificate of authority or charter C. Article of incorporation D. Authorization
Certificate of authority or charter
To obtain an insurance license, an applicant must perform all of the following EXCEPT A. Pass an examination B. Complete an application C. complete a course study D. Complete college
Complete college
An insurance company underwriter may take one of several actions when reviewing applications for insurance. Which of the following is NOT an example of an appropriate underwriting action? A. Deciding which applicants to insure B. Determining the proper classification for a risk C. Deciding how much to charge applicants based on their income D. Determining which applicants do not qualify for the company's products
Deciding how much to charge applicants based on their income
When an insurance company distributes its products directly to consumers via phone, mail or other means, it is called a
Direct writer
An insurer incorporated and formed under the laws of the state in which it is domiciled is what type of company?
Domestic
Property and casualty insurers must create reserves to pay for claims that may arise in the future. Which of the following is NOT an example of a method used to establish loss reserves? A. Average value B. Expected settlement C. Loss Ratio D. Tabular
Expected settlement
The type of authority given to an agent in his or her agency contract is
Express
The difference between an agent and a broker is that the agent is authorized to act on behalf of a A. Brokerage B. Customer C. State D. Insurance company
Insurance company
Each of the following is a method used to regulate insurance companies EXCEPT A. Legislation B. Courts C. NAIC D. State Insurance Departments
NAIC
A producer may include any of the following EXCEPT A. Insurance agent B. Insurance broker C. Stock broker D. Solicitor
Producer
An insurer that is unincorporated and refers to its policyholders as members or subscribers is a
Reciprocal insurer
The mechanism used to expand the capacity of a primary insurer to write more business is called
Reinsurance
The entity used to place insurance in the surplus lines market is referred to as a what?
Surplus lines broker
Which of the following statements about non admitted insurers is TRUE? A. They may not do business in the United States B. They may place business only through other insurance companies C. They may operate only as re-insurers D. They may be authorized or unauthorized
They may be authorized or unauthorized
The three types of authority given to agents are
express, implied and apparent
An agent who conducts business in another state on a regular basis is referred to as an
nonresident agent