RMI final
David purchased and was issued a $1 million life insurance policy with a monthly premium of $200. after 6 months of premium payments, David is killed in an accident, his wife receives a check from the insurance company for $1 million. this is an example of the
aleatory nature of contracts
which of the following is considered risk factor in determining the RBC ratio
insurance risk asset risk interest rate risk
an insurance company does extensive statistical research to determine who is their target customer base by looking at factors such as age, race, gender and consumer geographic etc.?
demographics
which insurer type uses mass media to sell its insurance products
direct reponse
which insurer type employs salaried employees to sell its insurance products?
direct writing
what is the entity that is a powerful advocate group for consumers in the insurance industry and is made up of state insurance commissioners
NAIC
who passed legislative acts that had an impact on how the insurance and financial services industry is regulated
Paul vs virginia McCarran-Ferguson Ferguson act dodd-frank
which is an example of a peril?
world war flu pandemic earthquake
which area of an insurance company would state regulators look to regulate
agent sales practices advertising and marketing insurer and agent licensing
an insurer domiciled in stockholm, Sweden, but is carrying out business activities in New York is characterized as a(n)
alien insurer
this type of individual is given the responsibility to build, grow, and staff an agency from the ground up within a prescribed geographic area
a branch manager
what is an example of a non-diversifiable risk?
a hurricane
a violation of a person's legal rights or a failure to perform a legal duty owed to a certain person, firm, organization or society as a whole is called
a legal wrong
a property and casual insurer underwriter can make which decisions on the issuance of a policy
accept the policy as applied for issue the policy with a restriction or modification deny the issuance of the policy
how is an insurance company's surplus or net worth calculated
admitted assets - liabilities
the tendency of a person to seek insurance with a higher expectancy chance of loss is called
adverse selection
this is an employee of an insurance company who is responsible for determining premium insurance rates
an actuary
in order for an insurer to do business in the state, it must be deemed a(n)
authorized insurer by the state
an insurer can become insolvent for
bad claims experience poor underwriting bad management decision
property and casualty companies are more likely to invest the majority of their investable assets to
bonds
which statement is true regarding brokers
brokers only represent the client/insured brokers can sell on behalf of multiple insurers
which of the following is a characteristic of a permanent insurance?
cash value build up lifetime insurance protection endowment at a specified age
the _______________________ company in a potential reinsurance scenario is the insurer that originally writes the insurance
ceding
which are agent business practices an agent should follow is they wish to avoid potential fines and penalties and/or suspension/termination of an agent's license
coaching & mentoring personal development exhibiting ethical and moral behaviors
which of the following is an element of a legal contract?
consideration competent parties legal in purpose
the fact that the insurer writes the policy contract, and the courts can hold the insurer liable for the language in the contract, is an example of an insurance contract being a
contract of adhesion
which is considered a legal wrong
crime breach of contract tort
which of the following would be considered a macroeconomic risk exposure a business enterprise would need to address
cyber security government legislative actions technology risks
loss reduction as a method of a risk control technique involves which of the following
duplication seperation diversification
in any lawsuit the insurer can be identified as
either the plaintiff or defendent
which of the following are elements of negligence
existence of a legal duty damage or injury to a claimant failure to comply with a legal duty
an insurer domiciled in houston, Texas but is carrying out business activities in New York is referred to as
foreign insurer
the assets in ______________ fund contractual obligations for guaranteed dixed dollar benefits like whole life and fixed annutities
general account
amazon, microsoft, and apple would most like encounter which of the following risks?
government/legislative political global
Lloyd's was started in which country?
great Britain
which generally is considered by an agent to determine the life insurance needs of a household?
household assets household debt obligation income from social security salaries monthly household expenses other life insurance owned
which would be an example of a peril
hurricanes fire flood
what is the one step in a risk management process that makes all the other steps of risk management irrelevant for a business, if this step is not taken?
implement risk exposure solutions
an individual who the courts would have considered an impaired party entering into a contract would be deemed
incompetent
an insurer reimburses darryl 100% of his property losses due to a fire in his apartment. this is an example that insurance contracts are
indemnity
which is the type of an adjusted an insurance company might hire when a major catastrophic event like a hurricane has occurred, and multiple claims by property holders will need to be filed
independent adjuster
an insurer that does not manage the underwriting process well can lead to
insurer insolvency higher future premiums on insurance policies bad claims experience
a ratings company will generally review which of the following aspects of an insurance company
investable assets capitalization ratios debt to assets ratio
what is an example of a diversifiable risk
investing in multiple investments like stocks, mutual bonds, bonds, etc.
a licensed agent who provides either false information about their credentials, the company the represent, or falsehoods regarding the policies they sell is engaging in what form of prohibited sales practices
misrepresentation
Lindsay, while applying for an insurance policy has not been very truthful in many of her responses on an insurance application. what type of hazard risk does Lindsay represent to the insurer?
moral
bon routinely drives without a seatbelt, jessie loves bunny jumping on the weekends, and harry has no sense of urgency to fix he brakes on his truck. all would be examples of
morale risk
a ratings company will generally review which of the following aspects of an insurance company
its investable assets capitalization ratio a company's liability obligations
an estate planner is explaining to Gareth and his wife that there is a life insurance policy that they could consider buying that could pay their calculated estate taxes at their death. what type of life policy is the agent referring to
joint and survivorship policy
Jonas, owner of XYZ manufacturing, has one of the best production line managers in the industry. the ability of his production Line manager to manage a very efficient production line process is invaluable to almost all facets of company operations. an agent should recommend to jonas what type of insurance plan to protect the interests of his company should his production manager die unexpectedly?
key person life insurance
which is an example of a personal risk
lack of retirement income premature death chance of being disabled
an insurance contract represents what type of hazard to an insurer?
legal
the insurance contracts of a property and casualty insurance company are typically of what duration of time?
less than a eyar
which is not a policy covered by personal lines insurance
life insurance
this type of insurer known for unusual risks, use multiple financial investors grouped into syndicates that come together to pool and spread risk?
lloyds of london
risk managers often use this term to describe the potentiality of a loss
loss exposure
which statement(s) regarding elements of an insurance risk are true?
losses must be large losses must be predictable
margo blatantly lied when she told an agent that she never received treatment for high blood pressure and cholesterol on an application for life insurance. what has margo committed?
material misrepresentation
which of the following is a primary source of investable capital for life insurance companies
maturing investments investment earnings premium income
which actuarial situation best represents an insurer employing the "law of large numbers" principle?
measuring the life expectancy of 100 million people in a given population
a financial planner who is being sued by a client for failure to live up to the standards of their professional expertise, resulting in the client believing they have suffered a financial loss because they relied on the financial planners advice, is most likely being sued for
negligence
what is the failure to exercise the standard care required by law to protect others from unreasonable risk or harm
negligence
Jonathon is a policyholder with a stock based insurer. the insurer is distributing dividends at the end of the year. is Jonathon entitled to any share of the dividend distribution?
no
a business entity that is started primarily to provide products and services for the benefit of the general public without shareholders is a
non-profit entity
life insurance can do what
pay funeral expenses protect business interests provide survivor protection
gerry, age 28, has applied for a life insurance policy. from an underwriting risk standpoint, gerry is in excellent health with no known past or present health related issues. the underwriter would most likely issue his policy as a
preferred risk
the principle of insurance that states the insured is restored to the approximate financial condition that was present prior to the occurrence of a loss is the
principle of indemnity
an insurance company setting quarterly sales goals for its entire sales force would be part of what operational area of an insurance company
production
demographic research would fall under what area of company operations
production
an insurer investing in the infrastructure of a local community, donating monies to support public causes, or sponsoring a charity event, would be an example of an insurance company engaging in
public relations
a business owner wishing to insure a piece of property would be an example of
pure risk
brad, a licensed agent with BFG insurance company is soliciting Kerry to buy a life insurance policy. Kerry, however, is unsure if the policy is right for her, but to sweeten the incentive for Kerry to buy the policy, the agent offers Kerry 2 broadway theatre tickets to any show of her choice. the tickets have a total value of $750. what prohibited sales act is brad engaging in?
rebating
what is the process by which one insurer may transfer all or part of a financial liability to another insurer
reinsurance
Hansel stated in a life insurance application that he believed the last time he was treated at a medical facility was for gall bladder surgery in May 2009. However it turns out that his surgery took place June of 2010. How would the insurer initially view his incorrect statement?
representation
how do mutual insurer's define a dividend?
return of excess/surplus premiums
state insurance regulators use what kind of calculation as one of the variables by which the regulators determine if action is necessary or not for an insurer based on its solvency status
risk based capital
which statement best describes risk?
risk is the possibility that a financial loss could occur
what is the process that identifies loss exposures faced by an organization and selects the best technique for addressing those exposures
risk management
ignoring the advice of his insurance provider, Harold forgoes buying life insurance to protect his family, and instead invests funds monthly into a money market account as an alternate protection plan in the event of his premature death. What method of risk management is Harold employing?
risk retention
as an angel investor, bobby is always looking for good business projects to invest in. an insurance company would probably see bobby's investment practices as
speculative risk
state regulators have determined that ABC insurance company has a calculated Risk Based Capital ratio of less than 35%. what is the. likely action of the state regulators?
state regulators will seek to seize and take over the insurer
which type of insurer is referred to as "non-participating"?
stock
what is likely to be the lowest percentage investable asset that a life insurer would invest that supports the underlying assets of the general account of an insurance company
stocks
which would be considered a post "loss objective" for a company
survive continue company operations act with a social responsibility
an insurers calculated RBC ratio of 125% and above would mean state regulators would
take no action against the insurer recognize that the insurer is in very good financial shape deem the insurer has met the necessary financial requirements to continue standard business operations
a young couple who recently had a baby are house hunting and recognize this might be the time to consider buying life insurance. however they are on a tight budget given their present expenses. what type of life insurance might be best appropriate for their current financial status
term
this type of life insurance policy can provide a high death benefit, low initial premiums, but the protection is only temporary
term
the principle by which insurers determine the probability of future losses under insurance policies is called
the law of large numbers
A legal wrong for which the law allows a remedy in the form of money damages is called
tort
a plaintiff in a lawsuit is filing legal action in court against this party
tortfeasor
when Alan decides to pay premiums for an insurance contract, he is electing to use which form of risk management to protect his interest
transfer
which would be considered a personal method of risk management?
transfer avoidance retention
what is an example of a "non-insurance transfer"?
transferring the risk by way of a contract
when a reinsurer automatically agrees to issue all or part of the financial risk from an insurance company what is the type of contract both insurers will enter into
treaty
which is considered to be one of the reasons for a defective tort system
uncertain legal outcomes high jury awards delays settling lawsuit
Lynette is considering buying life insurance and is interest in a policy that builds up cash value overtime, gives her the opportunity not to be locked into set premium payments, and a death benefit she can increase or decrease subject to policy limitations. what kind of life insurance policy is she considering?
universal life
if a company buys a life insurance policy on a valuable employee in case the employee should die unexpectedly, can the business generally deduct the premium as an expense?
usually no
this type of life insurance policy offers a life insurance benefit along with the opportunity for policyholders to invest their premiums into a number of selected investment options known as "separate accounts"?
variable life
what is where an insurance company abandons or gives up a known right or privilege
waiver
this life insurance policy provides a guaranteed death benefit, guaranteed cash values and guaranteed fixed premiums
whole life
