Insurance Exam 1 quiz questions
a. Which of the following is an external constraint to the insurers profitability goal? a. Policyholder fraud
a
An alien insurer is an insurer found in a. Another country
a
Many states have laws governing insurance contracts, but these laws don't necessarily indicate: a. Font size b. Readability c. Understandability
c
A producer is usually paid a fee for performing which one of the following functions? a. Premium collection b. Prospecting c. Policy issuance d. Consulting
d
What are the two main forms of licensing status a. Domestic insurer/ foreign insurer b. Exclusive writer /independent c. Proprietary/cooperative insurer d. Admitted / non-admitted
d
A commercial insurer has historically targeted small businesses. It is considering expanding its market to middle market organizations. To succeed, the insurer will need to develop a level of expertise in which one of the following areas? a. Risk financing alternatives b. Auditing c. Regulatory controls d. Claims handling
a
AM best gives a letter grade to each insurance company to describe the level of their a. Financial strength b. Premium volume c. Compliance issues
a
Guaranty funds mitigate the effects of insurer insolvency. Which one of the following statements is true regarding state guaranty funds? a. All states have separate laws governing property-casualty insurance guaranty funds. b. All states use a pre-insolvency assessment method to raise the necessary funds to pay insurer indebtedness. c. In most states, insurers cannot recoup all or part of the assessment through the use of insurance rate increases. d. Insurers can recoup part of the assessments through the use of guaranty fund surcharges to self-insured groups.
a
It is an unfair claim practice for a claim representative to fail to approve or deny coverage of a claim within a reasonable period after a. A proof-of-loss statement has been completed. b. The loss occurs. c. Oral notification to the insurer of the loss. d. The insurer receives any applicable medical reports or property appraisals.
a
Loss = $220,000, UW Exp. = $210,000, EPrem = $400,000, WPrem = $600,000 = what combined ratio? a. 90% b. 80% c. 110% d. 100%
a
Regardless of distribution system, all agents do what a. Prospect new clients b. Loss control surveys
a
The illegal practice of an agent sharing commission with an insurance applicant is called a. Rebating b. twisting
a
The illegal practice of making a policy seem better to the applicant when it isn't is called a. Twisting b. Rebating
a
The key reason for regulating insurance policy contracts is to ensure that polices are not a. Restrictive b. Expensive c. Complex d. Unreadable
a
What are two mains forms of insurer location? a. Domestic insurer/foreign insurer b. Admitted/non-admitted c. Exclusive writer /independent d. Proprietary/cooperative insurer
a
What distribution channel can effectively handle billing inquiries and initial claim reports? a. Call center
a
What is most likely to help an insurer become more profitable? a. Careful underwriting
a
What is the main benefit of the NAIC to the insurance industry? a. Propose uniform industry policy. (NAIC creates model law)
a
What is true of the current insurance marketplace a. There are fewer insurance companies now b. There are about the same number of insurance companies c. There are fewer mergers and acquisitions now
a
What type of distribution system would likely be best in reaching small Mom and Pop business? a. Independent agent b. An insurance broker c. Direct mail advertising d. Internet advertising
a
What type of insurer does not issue stock and has insured own the company with voting rights? a. Mutual insurer b. Reciprocal insurer c. Fraternal insurer d. Proprietary insurer
a
What type of insurer provides insurance for members of organizations to improve society? a. Fraternal insurer b. Mutual insurer c. Reciprocal insurer d. Proprietary insurer
a
When coverage isn't available in the standard market for a certain risk, where do they go next a. Surplus lines broker b. Exclusive writers c. Direct writers
a
Which distribution system would be used to target very large, national accounts a. Insurance brokers
a
Which of the following is NOT true about company licensing? a. The process is relatively simple
a
Which of the following would most likely threaten the profit goal of an insurance company? a. Unhappy customer complaints b. Consistent solvency c. Combined ratios less than 100%
a
Which one of the following distribution channels is also an efficient way to handle claim reporting and billing inquiries? a. Call centers b. Financial institutions c. Direct response d. Affinity marketing
a
Which one of the following is the better indicator of insurer insolvency? a. Rapid premium growth
a
Which one of the following statements about insurance distribution systems and channels is true? a. Surplus lines brokers can place coverage that is not available through standard market insurers. b. Managing general agents (MGAs) serve as employees of direct writer companies. c. Exclusive agents are usually free to represent as many or as few insurers as they want. d. Direct writer marketing systems use sales persons who are independent contractors
a
national accounts are unique because they a. have the most risk financing alternatives b. are covered easily with standardized form c. are very low maintenance
a
Compliance with legal requirements creates friction between profit goals and a. Underwriting goals b. Customer needs goals c. Solvency goals
b
Discrimination in insurance is a. Unfair b. Essential c. Prohibited d. Enforced
b
During a soft market cycle: a. Prices increase and competition increase b. Prices decrease and competition increases
b
Experts have identified factors that frequently contribute to insurer insolvencies. Which one of the following is one of these factors? a. Excessive reserves b. Rapid premium growth c. Extensive controls over managing general agents d. Excessive rates
b
How can premium growth help the insurer meet their profit goal? a. Those who grow premium the quickest are more successful b. Premium growth should be carefully managed
b
In the larger scope of risk management, insurance is the use of what technique? a. Loss control b. Risk transfer c. Retention d. Avoidance
b
Insurance industry trade associations is to educate regulators on critical issues in order to a. Summarize carrier policy b. Influence legislation c. Provide enforcement
b
Loss = $150,000, UW Exp. = $60,000, EPrem = $250,000, WPrem = $300,000 = what combined ratio? a. 90% b. 80% c. 110% d. 100%
b
Many non-admitted insurers are also what type of insurers a. Reciprocal insurers b. Surplus lines insurers c. Cooperative insurers d. Foreign insurers
b
One of the biggest problems in measuring insurer profitability arises from errors in estimating a. Unearned premiums. b. Loss reserves. c. Underwriting expenses. d. Investment income.
b
Rating agencies are placing new demands when assessing insurers' financial health. While many other exposures can affect solvency, no single exposure can affect policyholder security more instantaneously than a. Economic recessions. b. Catastrophes. c. Insurance regulation. d. Rate inadequacy.
b
The direct bill process is mostly used for payments of what types of premiums a. Small business accounts b. Personal insurance
b
What agency steps in if an insurance company appears to be nearing insolvency? a. AM Best b. State insurance Department
b
What are the two main forms of insurer marketing systems? a. Domestic insurer/ foreign insurer b. Exclusive writer /independent c. Proprietary/cooperative insurer d. Admitted / non-admitted
b
What is the best way to properly assess the coverage needs of an insurance applicant? a. Find out how much they will pay b. Conduct a risk management review
b
What is the main purpose of solvency regulation? a. Help insurers estimate their losses b. Help insurers keep their promises
b
What is the main revenue stream for a state insurance department? a. Licensing fees b. Premium taxes c. Assessments d. Compliance fees
b
What type of claim would be covered by the guaranty fund in any state? a. Life insurance b. Homeowners insurance c. Business owners insurance
b
What would be an unfair claims settlement practice? a. Requiring a proof of loss statement b. Taking an unreasonable amount of time
b
Which of the following is true of insurance regulation? a. It comes primarily from the feds b. Its fairly complex c. It is not a constraint to insurers d. Its pretty straightforward
b
Which of these is an internal issue that could prevent the insurer from meeting their goals? a. Regulations b. Efficiency c. Market cycles d. Inflation
b
Which of these items form an insurer's balance sheet is the hardest to accurately measure? a. Earned premium b. Loss reserves c. Investment income d. Underwriting expense
b
Which one of the following insurer goals creates a conflict between the profit goal and customer needs goal? a. Diversify risk b. Comply with legal requirements c. Expand customer base d. Societal obligations
b
Which one of the following statements about licensing insurers is correct? a. To be licensed in an additional state, a domestic insurer need only demonstrate that it satisfies the requirements imposed in its home state. b. Alien insurers must satisfy the requirements of domestic insurers and must usually establish a branch office and have funds on deposit in the U.S. c. Insurers that are not licensed in a particular state are expressly prohibited from writing any type of insurance in that state. d. If any insurer applying for a license in a given state meets that state's financial requirements, the insurance commissioner must grant the license.
b
· What type of insurer issues stock and has owners who may or may not be insureds? a. Mutual insurer b. Proprietary insurer c. Reciprocal insurer d. Admitted/non-admitted
b
A more seasoned agent will have an easier time getting qualified new business leads from a. Their website b. Direct response c. Existing customers
c
A producer will generally review a company's loss run report while performing which one of the following functions? a. Claims handling b. Sales c. Risk management review d. Customer service
c
An agency bill process in which the producer is usually not required to pay the insurer until the premium is collected from the policyholder is known as a. The statement basis. b. The account current basis. c. The item basis. d. The direct bill basis.
c
An insurer that targets large middle-market and national accounts would most likely use which one of the following distribution systems? a. Exclusive agent b. Internet c. Broker d. Direct
c
Demographic marketing means developing special programs for potential insureds who a. Live in a particular state b. Are high risk markets c. Are members of particular market segment
c
Insurance policy regulation can protect insureds from policies that are a. Expensive. b. Broad. c. Restrictive. d. Complex.
c
Insurer Z is a large national insurer that provides low-cost insurance to its policyholders who are the owners of Insurer Z. The insurer issues no common stock and has no stockholders. Its policyholders have voting rights, and they elect Insurer Z's board of directors. The board of directors appoints officers to manage the insurer. Insurer Z is a a. Reciprocal insurer. b. Cooperative insurer. c. Mutual insurer. d. Fraternal organization.
c
Loss = $150,000, UW Exp. = $105,000, EPrem = $200,000, WPrem = $300,000 = what combined ratio? a. 90% b. 80% c. 110% d. 100%
c
State insurance regulation of insurance policy form is designed to control a. Availability of optional coverages b. Claim practices c. Structure and content
c
Stulford's CEO Fernanda, is hoping investments of Stulford will assist in making the company profitable. This company has a loss ratio of 80 percent and underwriting expense ratio of 30 percent. Stulford has produced a net investment income of $1,000,000 and earned premium of $10,000,000. Stulford's overall operating ratio is a. 10% b. 90%. c. 100%. d. 110%
c
The practice of giving a portion of the producer's commission or some other financial advantage to an individual as an inducement to purchase a policy is known as a. Twisting. b. Discounting. c. Rebating. d. Fraud.
c
Though marketing plans are varied, they all serve the same fundamental purpose of a. Establishing the contractual relationship between producer and insurer to enable each to meet its goals. b. Developing compensation methods for producers. c. Providing the "roadmap" necessary to profitably and effectively acquaint sellers with potential buyers. d. Developing distribution channels for products and services.
c
What are the two main forms of legal ownership? a. Domestic insurer/ foreign insurer b. Exclusive writer /independent c. Proprietary/cooperative insurer
c
What insurance company division actively supports the promise of the company a. Actuarial b. Legal counsel c. Claims d. Underwriting
c
What is the purpose of a residual market plan? a. To pay the claims of insolvent insurers b. To market insurance to the public c. To source insurance for high risk individuals
c
What would not be included in the marketing plan for a new insurance product? a. Measure of success b. Target market c. Production plan
c
Which of the following is NOT a goal of insurance regulation? a. Maintain insurer solvency b. Prevent destructive competition c. Eliminate fraud
c
Which of the following would be most detrimental to the profitable operations of an insurer? a. Not being the preferred carrier with agents b. Repeated insured complaints c. Consistently understating reserves
c
Which one of the following best describes a factor in determining the types of investments that an insurer acquires? a. The volume of insurance it writes b. The level of operating expenses it incurs c. The nature of the risks that it assumes d. The number of claims it pays
c
Which one of the following correctly describes a typical element of an insurance product marketing plan? a. Production planning determines the procedures involved in actually producing the proposed new product. b. Situational analysis focuses on the company's internal environment and how it will affect the proposed new product. c. Marketing goals outline the proposed target market including detailed sales projections and how success will be measured. d. The product proposal and sales goals focus on detailed sales projections and estimated annual profits from the new product.
c
Which one of the following is an external constraint insurers contend with that may prevent them from meeting their goals? a. Financial resources b. Economies of scale c. Public opinion d. Level of expertise
c
Which one of the following statements is correct regarding competition and insurance regulation? a. Insurer price-cutting is generally in the best interests of consumers. b. Regulators encourage aggressive competition within the insurance industry. c. When rate levels are inadequate, some insurers may stop writing new business. d. Regulators attempt to keep insurance rates as low as possible.
c
Which one of the following statements is correct regarding internal constraints insurers face? a. While insurer inefficiency is undesirable, it is not believed to be a factor that leads to insolvency. b. Larger insurers can be more nimble and respond quickly to emerging trends. c. Financial constraints can affect insurers' ability to achieve profit goals. d. The insurance business is relatively simple and does not require specialized expertise.
c
Which one of the following statements is correct? a. One goal of rate regulation is to ensure that rates are not discriminatory in any way. b. "Discrimination" is always a negative word meaning unfair treatment. c. Discrimination is essential to insurance rating. d. The ability to differentiate among things is not a factor in insurance rating.
c
Why do state insurance departments perform market conduct exams? a. To ensure customers are happy b. To ensure the companies contribute locally c. To ensure compliance with laws
c
Alex, a premium auditor for Keithly Insurance Company, has received a workers compensation audit form which his insured completed for the prior year. He notes the payroll has been greatly decreased since the last audit. Which one of the following functional areas of Keithly can assist Alex with this audit's irregularity? a. Accounting and finance b. Risk control c. Human resources d. Special investigation unit
d
In addition to developing model laws, the National Association of Insurance Commissioners, in 1990, implemented an accreditation program to a. Address important problems and issues regarding unfair claims practices. b. Develop uniform financial statement forms that all states require insurers to file. c. Prevent destructive competition among insurers. d. Increase the uniformity of insurer solvency regulation across the states.
d
Omicron Manufacturing has approached Delta Insurance Brokerage to develop and implement a voluntary insurance program for life, health, and disability insurance for Omicron's employees. Delta puts together a program in which employees receive the coverage at discounted rates, and premiums are deducted from the employees' paychecks. Omicron and Delta are using which one of the following types of group marketing to offer this program? a. Direct response marketing b. Affinity marketing c. Mass marketing d. Franchise marketing
d
What has dramatically increased the use of alternative distribution channels in insurance a. Marketing departments b. State regulations c. Cost d. Technology
d
What is a unique division of claims that research very suspect claims? a. Call center unit b. Litigated claims unit c. Loss reserving unit d. Special investigation unit
d
Which one of the following can result from destructive competition? a. Certain types of insurance become unavailable b. Improving loss ratios c. Lack of development of new policy forms d. Excessive rates and unreasonable profits
d
Which one of the following is NOT an element of a worksite marketing program? a. Premium paid through payroll deduction b. Discounted premium c. Employer offered programs d. Employee must be a member of a targeted organization
d
Which one of the following is an external constraint that may prevent insurers from meeting their established goals? a. The insurer's size b. The insurer's financial resources c. The insurer's expertise d. The insurer's competition
d
Who has the primary role in preventing destructive competition? a. Agents b. Insureds c. Insurance companies d. Regulators
d
With very complex policies, which of these would be the best distribution method? a. Affinity marketing b. Internet marketing c. Direct response advertising d. Independent agency system
d
