Assignment 5 - Government Insurance Programs

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

A. Fair Access to Insurance Requirements (FAIR) plans make basic property insurance available to property owners who can't get it otherwise.

Which one of the following statements is correct regarding government involvement in insurance? Select one: 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. Federal and state government are involved in insurance to facilitate compulsory insurance purchases.

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

A. Prevent economic disruption

Which one of the following correctly describes a reason for government involvement in property-casualty insurance? Select one: A. Selling insurance provides the government with a non-tax source of revenues and profits. B. Government programs can meet legitimate public demands unmet by private insurers. C. Competition from government plans keeps private insurer's premiums competitive. D. Preventing high-risk individuals or activities from being insured is in the public interest.

B. Government programs can meet legitimate public demands unmet by private insurers.

Which one of the following statements is correct regarding government insurance programs? Select one: 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. Government programs can operate as reinsurers, reinsuring 100 percent of the risk or that part in excess of the private insurer's retention.

Which one of the following is a federal insurance plan in which the government can partner with private insurers, who sell insurance and provide claim settlement services? Select one: A. Beach and Windstorm Plan B. National Flood Insurance Program (NFIP) C. Terrorism Risk Insurance Program (TRIP) D. Residual Auto Plan

B. National Flood Insurance Program (NFIP)

The state of Maryland operates a residual auto plan (the Maryland Auto Insurance Fund—MAIF) that provides coverage for drivers who are unable to obtain coverage from private insurers. Which one of the following is the best rationale for the MAIF program? Select one: A. Private insurers face limited competition, and the state increases competitive pressures by operating this type of plan. B. Auto insurance for high-risk drivers is profitable, and the program enables the state to share in the profits. C. Auto insurance is compulsory, and the program makes it possible for all drivers to have reasonably priced insurance. D. Private insurers overcharge for auto insurance, and the state provides a low-cost alternative.

C. Auto insurance is compulsory, and the program makes it possible for all drivers to have reasonably priced insurance.

Which one of the following statements is correct with respect to the U.S. property-casualty insurance market? Select one: A. It is immature. B. It functions perfectly. C. It is cyclical. D. It meets all consumer needs.

C. It is cyclical.

Which one of the following is an example of a partnership under which the government operates a reinsurance plan, providing reinsurance on specific loss exposures for which private insurers retain only part of the loss? Select one: A. Beach and Windstorm Plan B. National Flood Insurance Program (NFIP) C. Terrorism Risk Insurance Program (TRIP) D. Residual Auto Plan

C. Terrorism Risk Insurance Program (TRIP)

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

C. Workers compensation