Crash Course Pt. 1

Which of the following is an unincorporated association whose members provide coverage for one another?

reciprocal

ABC Company is attempting to minimize the severity of potential losses within its company. The company is engaged in risk

reduction

Which of the following types of risk is insurable?

pure

What type of risk involves the potential for loss with no possibility for gain?

pure risk

A(n) _____ agent is an insurance agent who represents only one insurance company

captive

A _______ agent may represent several insurers

independent

Which of the following financial products creates an instant estate, no matter when the date of death?

life insurance

Risk ____ is the process of analyzing exposures that create risk and designing programs to handle them.

management

A ___________ insurer assumes risk from another insurance company

Reinsurance

An insurer has a contractual agreement which transfers a portion of its risk exposure to another insurer. What type of contractual agreement is this?

Reinsurance contract

How can an insurance company minimize exposure to loss?

Reinsuring risks

What is the accounting measurement of an insurance company's future obligations to its policyowners?

Reserves

Which of the following can be defined as "the potential for loss"?

Risk

A reciprocal insurer typically has an administrator who manages the premiums collected from the group's members. This administrator is called an

attorney-in-fact

A hold-harmless clause is an example of risk

"transfer". A hold-harmless clause found in a contract shifts liability for loss from one party to another.

An insurable risk requires

that the chance of loss be calculable

An agent's authority to bind an insurer to an insurance contract may be granted in the

Agent's contract and the insurance company's appointment

Which of these statements regarding insurance is false?

As the number of insured units increases, the number of losses decreases

Insurance is not characterized as which of the following?

As the number of insureds increase the number of losses decrease

Which of the following types of insurers limits the exposures it writes to those of its owners?

Captive insurer

When a ceding insurer transfers a portion of its risk to an assuming insurer on a case by case basis, this process is referred to as

Facultative reinsurance

A condition that increases the possibility of financial loss is called an

Hazard

For insurance purposes, similar objects which are exposed to the same group of perils are referred to as

Homogeneous exposure units

Which of the following is a syndicate established by a group of insurers to share underwriting duties?

Lloyd's organization

Which of the following is not an example of risk retention?

Not doing a business deal after deciding it would be too risky

Dividends from a mutual insurance company are paid to whom?

Policyholders

Which of the following accurately describes a participating insurance policy?

Policyowners may be entitled to receive dividends

The law of large numbers enables an insurer to

Predict losses

According to the law of large numbers, how would losses be affected if the number of similar insured units increases?

Predictability of losses will be improved

Which of the following outlines the authority given to the producer on behalf of the insurer?

Producer contract

Which of these statements is not a characteristic of the law of large numbers?

Rates can be calculated to compensate for losses

Which of the following is NOT an objective of the Nationality Association of Insurance Commissioners?

Regulate state insurance commissioners

Which of the following describes the act of insuring a risk against possible losses?

Risk transfer

What type of risk involves the potential for loss and the possibility for gain?

Speculative

Which one of these is NOT considered to be an element of an insurable risk?

Speculative risk

Who regulates an insurer's claim settlement practices?

State insurance departments

Which group is the do not call registry designed to protect against?

Telemarketers

Which reinsurance contract between two insurers involves an automatic sharing of the risks assumed?

Treaty reinsurance

Which of the following can be defined as a cause of loss?

peril

Which term describes the elimination of a hazard?

risk avoidance

A group-owned insurance company that is formed to assume and spread the liability risks of its members is known as a

risk retention group

A business becoming incorporated is an example of risk ____.

risk transfer

A stock insurance company is owned by it's

shareholders

Dividends from a stock insurance company are normally sent to

shareholders

Which of the following involves sharing an uncertain risk with another similar group?

to transfer

Purchasing insurance is an example of risk

transference