Fin 462 Exam 2 Questions

Insurers use _____ to modify a standardized policy to fit an insured's unique coverage needs

endorsements

The workers' compensation claim payment is the _____ available to the injured worker

exclusive remedy

_____ is designed to reward loss prevention and loss reduction efforts

experience rating

To make automobile insurance available to high-risk drivers, various states have used all except which of the following approaches?

federal mandatory plans

Insurance consumers can get information about the financial strength of insurance companies from

financial ratings firms

An umbrella policy

provides excess liability coverage

"Fiscal policy" describes direct government actions to

put money into or take money out of the economy

A property insurance ____ is the cost per each $100 of exposed value

rate

Property that is permanently attached to land, such as buildings, is called

real property

The benefits of an insurance company holding more capital includes:

reduced risk of insolvency

_____ is a transaction engaged in by two insurers who agree to share premiums and losses

reinsurance

Pro rata reinsurance occurs if the

reinsurer and primary insurer share losses on a proportional basis

Which of the following coverages is not an exception to the rule of indemnity?

replacement cost insurance

If a business has large differences in the value of the inventory it has on hand during the year, the cost of its insurance requires the _____ form of insurance policy

reporting

Ceding insurance coverage means the coverage has been

shifted to a reinsurer

Stare decisis means

stand by things that are decided

A broker is

the agent of the insured

Treaty reinsurance means

the primary insurer must cede business and the reinsurer must accept business during the period covered by the treaty

Currently, workers' compensation programs are administered by

the state governments

The basic form of business property coverage provides protection against all the following perils except

theft of currency

What is the impact of the parol evidence rule?

written evidence takes precedence over oral evidence

The two main regulatory approaches to supervising insurers' prices are called

prior approval and competitive rating

Which of the following categories would not be covered by business CGL policies?

professional liability

Floater policies cover

property that is moved easily and frequently

Which of the following is (are) true about the purchase of reinsurance by insurers?

- the purchase of reinsurance reduces underwriting risk - reinsurance can substitute for capital and allow an insurer to hold less capital without increasing its insolvency risk - when an insurer buys reinsurance, it is giving up some of its potential underwriting profit to the reinsurer

The federal law that allows the combination of banks and insurance companies is the

Gramm-Leach-Bliley (GLB) Act

Which of the following designations cannot be earned by insurance agents?

HMO

Professional liability insurance policies would not include which of the following?

Lumberjack cutoff policy

The first insurance case dealing with the question of state versus federal insurance regulations to reach the US Supreme Court was

Paul vs. Virginia

All except which of the following parties are participants in the insurance markets?

The Federal Reserve

Assume an excess-of-loss reinsurance arrangement with the primary insurer retaining the first $10 million of loss and the reinsurer providing $50 million of coverage. Assume that a $50 million covered loss occurs. Based on this data, which of the following statements is true?

The primary insurer pays $10 million; the reinsurer pays $40 million

What type of insurance policy is often used for artwork and collector's items?

a valued insurance policy

"Replacement cost at the time of loss less depreciation" is the definition of

actual cash value

The responsibilities of the _____ functions include calculating the value of insurer reserves and examining trends in insured loss data to forecast future premiums

actuarial

Assets that are readily available to pay claims are called

admitted assets

Which of the following is not one of the categories of indirect losses?

advertising

Which of the following is considered when calculating a property insurance rate?

all of the above

A fire insurance underwriter considers all except which of the following in setting prices?

all of the above are considered: - the materials used to build the structure - the activities undertaken by the person or business using the building - the quality of the fire protection services provided by the local government

Because insurance contracts are considered contracts of adhesion, which of the following statements is true?

ambiguities are construed against the writer of the contract

In most states, the insurance commissioner is

appointed by the governor

Independent loss adjusters

are technically agents of the insured

The definition of agent is a person who is

authorized to act for another person

A temporary insurance contract is called a(n)

binder

The insurance company purchasing insurance from the reinsurer is called the

ceding insurance company

Which of the following statements is true?

conditional receipts are used only in life insurance

The most important choice a consumer must make when purchasing insurance is

coverage from a company of unquestioned solvency

Which of the following were not used as legal defenses by employers before workers' compensation laws existed, allowing employers to avoid making payments to injured workers?

dishonorable discharge of duties

"Insurance provided by a licensed insurer within the state providing the license" is the definition of

domestic insurance

Which one of the following is NOT a reason for insurers to hold 'adequate' economic capital?

eliminate any chance of insolvency

States have three general requirements relating to eligibility to receive unemployment benefits. These requirements include all except which of the following? a. a waiting period b. an earnings period c. a continuing interest in employment d. fully insured status for Social Security benefits

fully insured status for Social Security benefits

Firms engaged in the automobile business must purchase ____ to cover their liability exposure

garage coverage form

Unemployment insurance is called an automatic stabilizer because it

gives purchasing power to people who would not be able to make purchases without these payments

All except which of the following criteria are specified in the model for perfect competition?

government regulation

The capital-to-assets ratio for property-liability insurers is _______ the capital-to-assets ratio of life-health insurers

greater than

A _____ is created by insurance regulators to pay for the unpaid claims of the policyholders of an insolvent insurance company

guaranty fund

Which of the following statements is false?

increasing the probability of insolvency will allow an insurer to achieve a higher volume of premiums

Which of the following is not an excluded injury under workers' compensation insurance program?

injuries caused by a fellow employee

Which of the following statements is true? (ch 23)

inland marine insurance is a term used mostly in the US

If an insurer's liabilities exceed the value of its assets, it is

insolvent

The National Association of Insurance Commissioners (NAIC)

is a voluntary organization of all state insurance commissioners

Insurers call claims filed many years after the alleged negligence

long-tail claims

An insurance company which is owned by its policyholders is called a:

mutual insurer

Jan is injured by Dan while driving when Dan fails to stop at a stop sign. Jan sues Dan for $50,000 in damages. The court finds Dan 90% responsible for the accident and Jan 10% responsible. Under the doctrine of contributory negligence, Jan will collect

nothing; she contributed to the damages

A(n) _____ policy requires the insurance company providing the coverage at the time of the negligence to pay the claim

occurrence-based liability insurance

Subrogation in insurance means that

one party is being substituted for another in terms of legal rights

Dr. Xavier Self, M.D., purchases a one-year, claims-made, professional liability policy on June 1, 2003. It has a retroactive date of June 1, 2000. It also has two years of tail coverage that ends on June, 1, 206. Which of the following incidents would be covered by this policy?

patient injured December 31, 2003; claim filed July 1, 2005