Assignment 2 Quiz Questions revised

A stock insurer is distinguished from a mutual insurer by the fact that A. Owners are not necessarily insureds. B. It seeks to generate a profit. C. It is governed by a board of directors. D. Owners have voting

a

How does a flex rating law work? A. Insurers may adjust rates within a range without prior approval. B. Insurers may change rates without prior approval, but they are subject to regulatory review. C. Insurers may adjust rates within a range with prior approval. D. Insurers may adjust rates at will, but are required to file a rate schedule.

a

In developing insurance rates, a state mandatory rate law requires the insurer to A. Use state developed rates. B. Establish and file rates for all admitted lines of insurance. C. Use rates developed by the National Association of Insurance Commissioners (NAIC). D. Maintain rates equal to policyholder surplus. .

a

Prompt and professional loss adjustment services are a responsibility of what part of an insurer's organization? A. The claims function B. The loss control function C. The premium audit function D. The underwriting function

a

Riko's insurance agent was caught embezzling several insureds' premiums, which involves what area of insurance company operations and what punishment by state regulators? A. Sales; agent license revoked B. Underwriting; agent license revoked C. Claim handling; operating license suspended D. Claim handling; operating license revoked

a

Some communities in the US celebrate holidays with firecrackers. Firecracker vendors put stands in the parking lots of shopping centers before the holidays. One shopping center owner want to sponsor a firecracker vendor's booth found that his insurance did not cover the exposure. He found that none of the insurers licensed to do business in the state sold insurance coverage for the exposures. How can the shopping center owner obtain appropriate coverage for the exposure from the firecracker vendor's booth? A. By obtaining coverage through the excess and surplus lines market B. By pooling the risk with other shopping center owners with similar exposures C. Through a proportionate sharing arrangement with multiple insurers D. From alien insurers in countries that also celebrate holidays with firecrackers

a

The premium charged for an insurance policy should be A. Commensurate with the exposure. B. Equal to the exposure. C. Concurrent with the exposure. D. Equivalent to the exposure.

a

What is solvency? A. The ability of an insurer to meet its obligations as they become due B. Transparency of policy language C. The process of a state taking over the assets and obligations of a failing insurer D. Destructive competition

a

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 B. Whether the account should be written as a personal insurance policy or a commercial insurance policy C. Whether any loss control recommendations will be made D. Whether claims will be paid or denied

a

Which one of the following is a key focus of states' insurance regulation? A. Insurer licensing. B. Product branding. C. Premium taxation. D. Producer concentration.

a

Which one of the following is generally exempt from state insurance regulations pertaining to policy forms and rates? A. Surplus line insurers B. Workers compensation insurers C. Commercial property insurers D. Health insurers

a

Which one of the following is true about the functions within an insurance organization? A. Each function contributes or detracts from the overall effectiveness of the insurer. B. Insurers use common terminology to identify these functions. C. These well defined functions operate with a high degree of independence. D. The essential functions are always performed by insurer personnel

a

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. 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

Which one of the following statements is true? 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

insurersWhich one of the following is generally exempt from state insurance regulations pertaining to policy forms and rates? A. Surplus line insurers B. Workers compensation insurers C. Commercial property insurers D. Health insurers

a

Danny's insurance agent was caught embezzling several insureds' premiums, which involves what area of insurance company operations and what punishment by state regulators? A. Sales; agent license revoked B. Underwriting; agent license revoked C. Claim handling; operating license suspended D. Claim handling; operating license revoked

a .

A mutual insurance company is owned by A. Independent investors. B. Policyholders. C. State insurance departments. D. Mutual funds.

b

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? A. Financial requirements B. Sales C. Field examinations D. Annual statements

b

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 A. File-and-use laws. B. Use-and-file laws. C. Prior-approval laws D. Flex rating laws.

b

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 A. File-and-use laws. B. Use-and-file laws. C. Prior-approval laws. D. Flex rating laws.

b

Which one of the following insurance customers may be compelled to meet its liability insurance needs through the excess and surplus lines market? A. Hair salon in a strip mall B. Hazardous waste facility C. Family restaurant D. Clothing store in a mall

b

Which one of the following insurance customers might be able to meet its liability insurance needs through the excess and surplus lines market? A. Hobby shop in a proprietor-owned building B. Major airline requiring multi-billion dollar limits C. Plumbing outfit with one full-time and two part-time employees D. Landscaping company with two full-time and five seasonal workers

b

Which one of the following is true regarding the administration of the Insurance Regulatory Information System (IRIS)? A. If the insurer has financial ratios that are inside predetermined norms, IRIS identifies the company for regulatory attention. B. If regulators determine that an insurer is insolvent, the state insurance department places it in receivership. C. If an insurer cannot be rehabilitated, the state's guaranty fund may be available to increase the effects of the insurer insolvency. D. Under a special provision in state licensing laws, state regulators are empowered to completely take over an insurer at any time.

b

Which one of the following statements is correct regarding government insurance programs? A. Government insurers cannot function as primary insurers for duties such as collecting premiums, providing coverage, or paying claims. B. Government programs can operate as reinsurers, reinsuring 100 percent of the risk or that part in excess of the private insurer's retention. C. Government partnerships with private insurers usually develop in especially desirable lines of business. D. Government insurance programs cannot operate in direct competition with private insurers.

b

Why are insurance regulators concerned about the effects of large catastrophes? A. They could lead to destructive competition. B. Insurers may become insolvent. C. Insurance rates will rise. D. Licensed insurers will be unable to handle demand.

b

subscribersOwners of reciprocal insurance exchanges are also known as A. Policyholders. B. Subscribers. C. Correspondents. D. Names.

b

A reciprocal insurance exchange A. Is a subsidiary that provides all or part of the insurance for a parent company. B. Transfers potential costs of insured loss exposures from one insurer to another insurer. C. Is an unincorporated association providing insurance coverage to its subscribers. D. Is a stock corporation providing insurance for its policyholders.

c

All of the following are types of private insurers, EXCEPT: A. Stock insurers B. Mutual insurers C. State workers compensation funds D. Reciprocal insurance exchanges

c

Destructive competition in the insurance industry could result in A. Oversupply of insurance. B. Excess regulation. C. Insurance shortages. D. Inadequate regulation.

c

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? A. Incentive to purchase insurance B. Pooling of loss exposures C. Prevent economic disruption D. Reduced risk to society

c

For an insurer to be considered solvent, states require it to have financial reserves A. As a fraction of its ordinary expenses. B. Equal to its ordinary expenses. C. Well in excess of its ordinary expenses. D. Double its ordinary expenses.

c

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 type of contractual transferring agreement to meet its needs? A. Mutual insurance B. Reciprocal insurance C. Reinsurance D. Interinsurance

c

Most states regulate the excess and surplus lines market by A. Establishing a monitoring board comprised of all insurers licensed to do business in the state. B. Examining the market conduct practices of the unlicensed insurers. C. Requiring that licensed surplus lines brokers transact business with the unlicensed insurers. D. Approving the policy forms and rates used by the unlicensed insurers.

c

The capital of a stock insurance company comes primarily from A. Sale of insurance policies. B. Return on invested premium reserves. C. Sale of company stock. D. Leveraging the difference from when a premium is paid in and when a claim is paid out.

c

Unfair trade practices acts involve which one of the following insurance company operations? A. Rate filings B. Coverage form design C. Underwriting D. Financial reporting

c

Which one of the following statements concerning government insurance programs is true? A. Businesses seeking flood insurance under the National Flood Insurance Program (NFIP) must purchase it at local federal government offices. B. Various state insurance programs provide crop insurance for perils such as drought, disease, excessive rain and hail. C. Fair Access to Insurance Requirements (FAIR) plans make basic property insurance available to property owners who can't get it otherwise. D. The federal government provides workers compensation insurance to employers who cannot get it from private insurers.

c

An Ohio insurer that is licensed to sell insurance in Michigan is known as what in Michigan? A. An alien insurer B. A domestic insurer C. A captive insurer D. A foreign insurer

d

Generally, how often must a foreign insurer's license be renewed? A. Every five years B. Every two years C. Semi-annually D. Annually

d

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? A. Crop B. Flood C. General liability D. Workers compensation

d

The two objectives of insurance policy form regulation are to ensure that policies are clear and readable and to A. Ensure that the insurers rights are protected. B. Ensure policies are negotiable between an insurer and insured. C. Limit policies' length and complexity. D. Detect and address any policy provisions that are unfair.

d

What term refers to the ability of an insurer to meet its obligations as they become due? A. Capacity B. Reserves C. Capital D. Solvency

d