Insurance Exam Practice Chapter 2

Manitoba Mutual's most recent accounting year produced the following results Expenses 35$ Million Premiums 100$ Million Losses 70$ Million The company's combined ratio is A. 35% B. 70% C. 75% D. 105%

105%

Assuming a rate of 1$ per thousand dollars of insurance, a policy covering a building valued at 250,000$ would produce a premium of A. 25$ B. 250$ C. 2,500$ D. 25,000$

250$

Each of the following is an example of a proprietary insurer EXCEPT A. Lloyd's of London B. A mutual company C. A Stock company D. A reciprocal insurer

A reciprocal insurer

When determining the amount to charge prospective policyholders, a company must follow basic guidelines concerning rates that include all of the following EXCEPT A. Rate adequacy B. Absence of discrimination C. Rate reasonableness D. Absence of unfair discrimination

Absence of discrimination

To be considered an agent, a person must perform all of the following EXCEPT A. Take applications for insurance B. Collect and remit premiums C. Adjust and pay claims D. Solicit insurance on behalf of a company

Adjust and pay claims

A company authorized to do business in a state but formed under the laws of a country other than the United States is a what?

Alien insurer

States use various types of approval systems when evaluating an insurance company's rates. Which of the following is an example of State rate Law? A. Prior approval B. File and use C. Open competition D. All of the above

All of the above

The government may write insurance for which of the following types of risks? A. Crop insurance B. unemployment insurance C. Flood insurance D. All of the above

All of the above

The type of authority the public has reason to believe an agent possesses is

Apparent

All of the following lines of business are placed routinely in the surplus lines market except? A. Boiler and machinery B. Aviation C. Earthquake D. Professional Liability

Boiler and Machinery

The amount of insurance a company can write based on its financial status is referred to as

Capacity

An agent who represents a single insurance company under contract is referred to as what type of agent?

Captive

When an insurance company becomes authorized to do business in a particular state it receives a A. Appointment B. Certificate of authority or charter C. Article of incorporation D. Authorization

Certificate of authority or charter

To obtain an insurance license, an applicant must perform all of the following EXCEPT A. Pass an examination B. Complete an application C. complete a course study D. Complete college

Complete college

An insurance company underwriter may take one of several actions when reviewing applications for insurance. Which of the following is NOT an example of an appropriate underwriting action? A. Deciding which applicants to insure B. Determining the proper classification for a risk C. Deciding how much to charge applicants based on their income D. Determining which applicants do not qualify for the company's products

Deciding how much to charge applicants based on their income

When an insurance company distributes its products directly to consumers via phone, mail or other means, it is called a

Direct writer

An insurer incorporated and formed under the laws of the state in which it is domiciled is what type of company?

Domestic

Property and casualty insurers must create reserves to pay for claims that may arise in the future. Which of the following is NOT an example of a method used to establish loss reserves? A. Average value B. Expected settlement C. Loss Ratio D. Tabular

Expected settlement

The type of authority given to an agent in his or her agency contract is

Express

The difference between an agent and a broker is that the agent is authorized to act on behalf of a A. Brokerage B. Customer C. State D. Insurance company

Insurance company

Each of the following is a method used to regulate insurance companies EXCEPT A. Legislation B. Courts C. NAIC D. State Insurance Departments

NAIC

A producer may include any of the following EXCEPT A. Insurance agent B. Insurance broker C. Stock broker D. Solicitor

Producer

An insurer that is unincorporated and refers to its policyholders as members or subscribers is a

Reciprocal insurer

The mechanism used to expand the capacity of a primary insurer to write more business is called

Reinsurance

The entity used to place insurance in the surplus lines market is referred to as a what?

Surplus lines broker

Which of the following statements about non admitted insurers is TRUE? A. They may not do business in the United States B. They may place business only through other insurance companies C. They may operate only as re-insurers D. They may be authorized or unauthorized

They may be authorized or unauthorized

The three types of authority given to agents are

express, implied and apparent

An agent who conducts business in another state on a regular basis is referred to as an

nonresident agent