Chapter 1 Intro to insurance Test

Which of the following has the primary responsibility of determining acceptable risks? A. Producer B. Adjuster C. Executives D. Underwriter

Which of the following has the primary responsibility of determining acceptable risks? D. Underwriter

A hazard is best defined as: A. Something that increases the chance of a loss B. A reduction in, decrease in, or disappearance of, value C. The possibility of a loss D. The loss itself

A hazard is best defined as: A. Something that increases the chance of a loss

All of the following are characteristics of mutual insurers, except: A. Policyholders elect the board of directors B. Surplus premiums may be returned as dividends C. Mutual insurers provide insurance to members D. Stockholders have ownership of the company

All of the following are characteristics of mutual insurers, except: D. Stockholders have ownership of the company

For an underwriter, the primary source of information about a consumer is: A. The consumer's criminal history B. The consumer's claim history C. The consumer's application for insurance D. The consumer's credit-based insurance score

For an underwriter, the primary source of information about a consumer is: C. The consumer's application for insurance

Self-insurance is an example of which of the following types of risk management? A. Eliminating the risk B. Avoiding the risk C. Retaining the risk D. Pooling the risk

Self-insurance is an example of which of the following types of risk management? C. Retaining the risk

A state that requires the Commissioner of Insurance to determine that a company's rates are appropriate before the rates are made effective uses which type of rating approval method? A. File and use B. Open competition C. Prior approval D. Mandatory

A state that requires the Commissioner of Insurance to determine that a company's rates are appropriate before the rates are made effective uses which type of rating approval method? C. Prior approval

Which of the following is correct about a stock insurance company? A. Policyholders own and control a stock insurance company B. A stock insurance company is one whose home office is in some other state, but does business in this state C. A stock insurance company is any insurance company whose home office is in this state and is incorporated in this state D. A stock insurance company is run by officers and directors and has a stated amount of capital stock owned by stockholders

Which of the following is correct about a stock insurance company? D. A stock insurance company is run by officers and directors and has a stated amount of capital stock owned by stockholders

Which of the following is not an element of an insurable risk? A. The ability to set a measurable value on it B. Accidental loss C. Catastrophic perils D. Large number of homogeneous units

Which of the following is not an element of an insurable risk? C. Catastrophic perils

Taxable corporate dividends are received by the shareholders of which type of insurer? A. Reciprocal insurer B. Risk retention group C. Mutual insurer D. Stock insurer

Taxable corporate dividends are received by the shareholders of which type of insurer? D. Stock insurer

When underwriters select risks, their goal is to: A. Select only low-risk clients B. Estimate a normal range of losses for the risk classification, and select risks that will meet those expectations C. Select only risks that have a higher probability of loss D. Charge higher rates to increase company profits

When underwriters select risks, their goal is to: B. Estimate a normal range of losses for the risk classification, and select risks that will meet those expectations