P & C unit 1 check point
Josephines sell insurance for one company and is an independent contractor, not an employee of the insurer. She is
A captive agent Reason - Independent and captive agents sell insurance products for serval companies; captive agents sell for only one company. Independent agents represent the insured.
All of the following statements regarding mutual insurers are correct EXCEPT
A mutual insurer has stock and stockholders Reason - Mutual insurers do not have stock or stockholders. Mutual insurers are owned by their policyholders, also known as policyowners.
An insured gives a producer the premium for an insurance policy. The producer sends the premium to the insurance company. In this situation, who is the fiduciary?
The Producer Reason - An insured gives a producer the premium for an insurance policy. The producer sends the premium to the insurance company. In this situation, who is the fiduciary?
According to the law of agency, an insurance agents acts on behalf of
The principal Reason - In insurance, the insurer is the principal and the producer is the agent.
All of the following are elements of insurable risks EXCEPT
The risk must be catastrophic for the insurance company Reason - Remember the acronym CANHAM: calculable, affordable, noncatastrophic, homogenous, accidental, and measurable.
At the state level, the government is involved
Providing unemployment insurance Reason - The state government is involved in providing unemployment insurance and may also provide workers' compensation through state funds. The federal government provides flood, war risk, federal cop, and nuclear energy liability insurance.
All of the following statements regarding surplus lines insurers are correct EXCEPT
Surplus lines insurance is placed with an admitted carrier by a surplus lines agent Reason - Sometimes an individual or a business will have an exceptionally large or specialized risk that no authorized insurer can or will cover. In such cases, insurance may be obtained from an unauthorized/nonadmitted insurer on a surplus lines basis. Surplus lines insurance is placed with a nonadmitted carrier by a surplus lines agent or broker.
Which of the following risk management methods is used by insurance companies?
Transfer Reason - Insurance transfer the risk that it takes on from thousands, if not millions of insureds. Not everyone will have a claim. The large number of insureds that do not have a claim are covering the losses for those that do.
ABC Insurance company is licensed to sell insurance in Wisconsin. When the company is licensed in a state, it is considered
An admitted insurer Reason - Insurers licensed in the state are known as authorized or admitted. Insurers not licensed in the state or unauthorized means the same as nonadmitted. Domestic and foreign indicated where the insurer is domiciled. Admitted insurers may be categorized as domestic, foreign, or alien insurers.
In an insurance contract, the second party is
The insurer Reason - Insurance contracts have two parties: the first is the insured and the second is the insurer or insurance company.
ABC Insurance is headquartered in Wisconsin but doing business in Florida. While in Florida, ABC Insurance is classified as
A foreign insurer Reason - Depending on where an insurer is headquartered, it is classified as being domestic, foreign, or alien.
Susan decides to drive fast in a horrible snowstorm because she knows that if she gets in an accident that her insurance will cover her. This is an example of
A morale hazard Reason - There are 3 types of hazards: physical--wet floor, fallen down tree, ice on sidewalk, morale--carelessness, and moral--dishonesty
If a house burns down in a fire, the cause of loss is called
A peril Reason - The peril is the cause of the loss.
A car accident is an example of
A pure risk Reason - Insurance only covers pure risks, where there is the possibility of experiencing a loss, but not a gain. A car accident is an example of pure risk.
Insurance is a contract that
Transfers the risk of financial or business to an insurance company Reason - The purpose of insurance is to protect against losses caused by pure risk. This is accomplished through the insurance contact, which requires one party to pay a specified sum to another if previously identified event occurs. For the cost of a premium, a person or entity can purchase protection offered by the insurance contract and transfer risk to the insurer.
A bulk mail insurance advertising brochure sent by the insurer to every home in one zip code is an example of
Direct response marketing Reason - Direct response marketing includes mail, newspapers, magazines, television, and the internet. There is no producer or agent involved and insurance id sold directly to the public by the insurer.
Which of the following levels of agent authority is a written agreement with the insurer?
Express authority Reason - Express authority is a producer's written agency agreement with the insurer. Express authority is the specific wording in the specific wording in the contract that tells the producer what he can cannot do.
According to the law of large numbers,
The larger the number of risks combined into one group, the less uncertainty there will be as to the amount of loss that will be incurred Reason - The law of large numbers operates under the principle that the larger the number of similar risks combined into one group, the less uncertainty there will be as to the amount of loss that group will incur. Thus, an insurance company is able to determine in advance the approximate number of claims it will receive in a given time period for a given risk and place its business on a nonspeculative basis.