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
