RMI final

David purchased and was issued a $1 million life insurance policy with a monthly premium of $200. after 6 months of premium payments, David is killed in an accident, his wife receives a check from the insurance company for $1 million. this is an example of the

aleatory nature of contracts

which of the following is considered risk factor in determining the RBC ratio

insurance risk asset risk interest rate risk

an insurance company does extensive statistical research to determine who is their target customer base by looking at factors such as age, race, gender and consumer geographic etc.?

demographics

which insurer type uses mass media to sell its insurance products

direct reponse

which insurer type employs salaried employees to sell its insurance products?

direct writing

what is the entity that is a powerful advocate group for consumers in the insurance industry and is made up of state insurance commissioners

NAIC

who passed legislative acts that had an impact on how the insurance and financial services industry is regulated

Paul vs virginia McCarran-Ferguson Ferguson act dodd-frank

which is an example of a peril?

world war flu pandemic earthquake

which area of an insurance company would state regulators look to regulate

agent sales practices advertising and marketing insurer and agent licensing

an insurer domiciled in stockholm, Sweden, but is carrying out business activities in New York is characterized as a(n)

alien insurer

this type of individual is given the responsibility to build, grow, and staff an agency from the ground up within a prescribed geographic area

a branch manager

what is an example of a non-diversifiable risk?

a hurricane

a violation of a person's legal rights or a failure to perform a legal duty owed to a certain person, firm, organization or society as a whole is called

a legal wrong

a property and casual insurer underwriter can make which decisions on the issuance of a policy

accept the policy as applied for issue the policy with a restriction or modification deny the issuance of the policy

how is an insurance company's surplus or net worth calculated

admitted assets - liabilities

the tendency of a person to seek insurance with a higher expectancy chance of loss is called

adverse selection

this is an employee of an insurance company who is responsible for determining premium insurance rates

an actuary

in order for an insurer to do business in the state, it must be deemed a(n)

authorized insurer by the state

an insurer can become insolvent for

bad claims experience poor underwriting bad management decision

property and casualty companies are more likely to invest the majority of their investable assets to

bonds

which statement is true regarding brokers

brokers only represent the client/insured brokers can sell on behalf of multiple insurers

which of the following is a characteristic of a permanent insurance?

cash value build up lifetime insurance protection endowment at a specified age

the _______________________ company in a potential reinsurance scenario is the insurer that originally writes the insurance

ceding

which are agent business practices an agent should follow is they wish to avoid potential fines and penalties and/or suspension/termination of an agent's license

coaching & mentoring personal development exhibiting ethical and moral behaviors

which of the following is an element of a legal contract?

consideration competent parties legal in purpose

the fact that the insurer writes the policy contract, and the courts can hold the insurer liable for the language in the contract, is an example of an insurance contract being a

contract of adhesion

which is considered a legal wrong

crime breach of contract tort

which of the following would be considered a macroeconomic risk exposure a business enterprise would need to address

cyber security government legislative actions technology risks

loss reduction as a method of a risk control technique involves which of the following

duplication seperation diversification

in any lawsuit the insurer can be identified as

either the plaintiff or defendent

which of the following are elements of negligence

existence of a legal duty damage or injury to a claimant failure to comply with a legal duty

an insurer domiciled in houston, Texas but is carrying out business activities in New York is referred to as

foreign insurer

the assets in ______________ fund contractual obligations for guaranteed dixed dollar benefits like whole life and fixed annutities

general account

amazon, microsoft, and apple would most like encounter which of the following risks?

government/legislative political global

Lloyd's was started in which country?

great Britain

which generally is considered by an agent to determine the life insurance needs of a household?

household assets household debt obligation income from social security salaries monthly household expenses other life insurance owned

which would be an example of a peril

hurricanes fire flood

what is the one step in a risk management process that makes all the other steps of risk management irrelevant for a business, if this step is not taken?

implement risk exposure solutions

an individual who the courts would have considered an impaired party entering into a contract would be deemed

incompetent

an insurer reimburses darryl 100% of his property losses due to a fire in his apartment. this is an example that insurance contracts are

indemnity

which is the type of an adjusted an insurance company might hire when a major catastrophic event like a hurricane has occurred, and multiple claims by property holders will need to be filed

independent adjuster

an insurer that does not manage the underwriting process well can lead to

insurer insolvency higher future premiums on insurance policies bad claims experience

a ratings company will generally review which of the following aspects of an insurance company

investable assets capitalization ratios debt to assets ratio

what is an example of a diversifiable risk

investing in multiple investments like stocks, mutual bonds, bonds, etc.

a licensed agent who provides either false information about their credentials, the company the represent, or falsehoods regarding the policies they sell is engaging in what form of prohibited sales practices

misrepresentation

Lindsay, while applying for an insurance policy has not been very truthful in many of her responses on an insurance application. what type of hazard risk does Lindsay represent to the insurer?

moral

bon routinely drives without a seatbelt, jessie loves bunny jumping on the weekends, and harry has no sense of urgency to fix he brakes on his truck. all would be examples of

morale risk

a ratings company will generally review which of the following aspects of an insurance company

its investable assets capitalization ratio a company's liability obligations

an estate planner is explaining to Gareth and his wife that there is a life insurance policy that they could consider buying that could pay their calculated estate taxes at their death. what type of life policy is the agent referring to

joint and survivorship policy

Jonas, owner of XYZ manufacturing, has one of the best production line managers in the industry. the ability of his production Line manager to manage a very efficient production line process is invaluable to almost all facets of company operations. an agent should recommend to jonas what type of insurance plan to protect the interests of his company should his production manager die unexpectedly?

key person life insurance

which is an example of a personal risk

lack of retirement income premature death chance of being disabled

an insurance contract represents what type of hazard to an insurer?

legal

the insurance contracts of a property and casualty insurance company are typically of what duration of time?

less than a eyar

which is not a policy covered by personal lines insurance

life insurance

this type of insurer known for unusual risks, use multiple financial investors grouped into syndicates that come together to pool and spread risk?

lloyds of london

risk managers often use this term to describe the potentiality of a loss

loss exposure

which statement(s) regarding elements of an insurance risk are true?

losses must be large losses must be predictable

margo blatantly lied when she told an agent that she never received treatment for high blood pressure and cholesterol on an application for life insurance. what has margo committed?

material misrepresentation

which of the following is a primary source of investable capital for life insurance companies

maturing investments investment earnings premium income

which actuarial situation best represents an insurer employing the "law of large numbers" principle?

measuring the life expectancy of 100 million people in a given population

a financial planner who is being sued by a client for failure to live up to the standards of their professional expertise, resulting in the client believing they have suffered a financial loss because they relied on the financial planners advice, is most likely being sued for

negligence

what is the failure to exercise the standard care required by law to protect others from unreasonable risk or harm

negligence

Jonathon is a policyholder with a stock based insurer. the insurer is distributing dividends at the end of the year. is Jonathon entitled to any share of the dividend distribution?

no

a business entity that is started primarily to provide products and services for the benefit of the general public without shareholders is a

non-profit entity

life insurance can do what

pay funeral expenses protect business interests provide survivor protection

gerry, age 28, has applied for a life insurance policy. from an underwriting risk standpoint, gerry is in excellent health with no known past or present health related issues. the underwriter would most likely issue his policy as a

preferred risk

the principle of insurance that states the insured is restored to the approximate financial condition that was present prior to the occurrence of a loss is the

principle of indemnity

an insurance company setting quarterly sales goals for its entire sales force would be part of what operational area of an insurance company

production

demographic research would fall under what area of company operations

production

an insurer investing in the infrastructure of a local community, donating monies to support public causes, or sponsoring a charity event, would be an example of an insurance company engaging in

public relations

a business owner wishing to insure a piece of property would be an example of

pure risk

brad, a licensed agent with BFG insurance company is soliciting Kerry to buy a life insurance policy. Kerry, however, is unsure if the policy is right for her, but to sweeten the incentive for Kerry to buy the policy, the agent offers Kerry 2 broadway theatre tickets to any show of her choice. the tickets have a total value of $750. what prohibited sales act is brad engaging in?

rebating

what is the process by which one insurer may transfer all or part of a financial liability to another insurer

reinsurance

Hansel stated in a life insurance application that he believed the last time he was treated at a medical facility was for gall bladder surgery in May 2009. However it turns out that his surgery took place June of 2010. How would the insurer initially view his incorrect statement?

representation

how do mutual insurer's define a dividend?

return of excess/surplus premiums

state insurance regulators use what kind of calculation as one of the variables by which the regulators determine if action is necessary or not for an insurer based on its solvency status

risk based capital

which statement best describes risk?

risk is the possibility that a financial loss could occur

what is the process that identifies loss exposures faced by an organization and selects the best technique for addressing those exposures

risk management

ignoring the advice of his insurance provider, Harold forgoes buying life insurance to protect his family, and instead invests funds monthly into a money market account as an alternate protection plan in the event of his premature death. What method of risk management is Harold employing?

risk retention

as an angel investor, bobby is always looking for good business projects to invest in. an insurance company would probably see bobby's investment practices as

speculative risk

state regulators have determined that ABC insurance company has a calculated Risk Based Capital ratio of less than 35%. what is the. likely action of the state regulators?

state regulators will seek to seize and take over the insurer

which type of insurer is referred to as "non-participating"?

stock

what is likely to be the lowest percentage investable asset that a life insurer would invest that supports the underlying assets of the general account of an insurance company

stocks

which would be considered a post "loss objective" for a company

survive continue company operations act with a social responsibility

an insurers calculated RBC ratio of 125% and above would mean state regulators would

take no action against the insurer recognize that the insurer is in very good financial shape deem the insurer has met the necessary financial requirements to continue standard business operations

a young couple who recently had a baby are house hunting and recognize this might be the time to consider buying life insurance. however they are on a tight budget given their present expenses. what type of life insurance might be best appropriate for their current financial status

term

this type of life insurance policy can provide a high death benefit, low initial premiums, but the protection is only temporary

term

the principle by which insurers determine the probability of future losses under insurance policies is called

the law of large numbers

A legal wrong for which the law allows a remedy in the form of money damages is called

tort

a plaintiff in a lawsuit is filing legal action in court against this party

tortfeasor

when Alan decides to pay premiums for an insurance contract, he is electing to use which form of risk management to protect his interest

transfer

which would be considered a personal method of risk management?

transfer avoidance retention

what is an example of a "non-insurance transfer"?

transferring the risk by way of a contract

when a reinsurer automatically agrees to issue all or part of the financial risk from an insurance company what is the type of contract both insurers will enter into

treaty

which is considered to be one of the reasons for a defective tort system

uncertain legal outcomes high jury awards delays settling lawsuit

Lynette is considering buying life insurance and is interest in a policy that builds up cash value overtime, gives her the opportunity not to be locked into set premium payments, and a death benefit she can increase or decrease subject to policy limitations. what kind of life insurance policy is she considering?

universal life

if a company buys a life insurance policy on a valuable employee in case the employee should die unexpectedly, can the business generally deduct the premium as an expense?

usually no

this type of life insurance policy offers a life insurance benefit along with the opportunity for policyholders to invest their premiums into a number of selected investment options known as "separate accounts"?

variable life

what is where an insurance company abandons or gives up a known right or privilege

waiver

this life insurance policy provides a guaranteed death benefit, guaranteed cash values and guaranteed fixed premiums

whole life