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30 Cards in this Set
- Front
- Back
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What is the term that describes balancing preferred risks with poor risks, and average risks in the middle?
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Profitable distribution of exposures.
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The law of large numbers is a principal that basically says...
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the larger the amount of information gathered, the more reliable that information will be.
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Underwriting is a process of..
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risk selection, classification, rating, and determination of coverage's.
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When can a representation be altered or withdrawn?
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it can be altered or withdrawn only before the insurance is issued.
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What is rescission?
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Rescission is the revocation of a contract.
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Which of the following describes the situation when one party intentionally gives false information in order to benefit from unlawful gain?
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Fraud.
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Insurable interest is best described as...
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the policy owner must expect to suffer a loss when the insured dies or becomes disabled. The policy owner is expected to benefit from the insured's continuing to live.
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Which of the following is NOT part of a contract that is enforced by the law?
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tort law.
in order to be enforceable a contract must have: offer and acceptance, consideration, competent parties, and legal purpose. |
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For insurable interest to exist...
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the insured must establish that they actually own something to be insured.
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An insurance contract promises to pay benefits based upon a future uncertainty such as death or illness describes which feature of an insurance contract?
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Aleatory contract.
is based on an uncertain future events. |
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Hazard is best defined as...
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anything that increases the chance of loss or severity of loss due to a peril.
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An MGA acts as an agent and produces and underwrites gross direct written premium equal to OR more than ________% of the policyholder surplus as reported in the insurers last annual statement..
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5%
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Which are the main types of risks?
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Speculative and pure
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In regards to insurance, risk can be defined as...
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uncertainty regarding loss.
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Ideally insurable risk means...
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the risk is financially within reason and is reasonable to insure.
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For an insurance contract to be enforceable, which party must be considered competent?
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The applicant.
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The principle used as the basis for establishing probability of losses occurring in the insurance industry is...
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the Law of large numbers
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Risk is
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the uncertainty or chance of a loss occurring.
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________ involves the exchange of a premium for a promise, which means that the insurer is the only party making a legally enforceable promise to pay a claim.
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Unilateral Contract
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The only information that does NOT need to be communicated in a contract is...
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information the other party deems as confidential.
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Alcoholism is an example of what type of hazard?
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Moral Hazard.
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The price of insurance for each exposure is referred to as..
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the Rate
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A peril is..
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the actual cause of the loss.
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Insurance is a contract whereby one undertakes to indemnify another against:
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loss, damage or liability arising from a contingent or unknown event.
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The function of insurance is best described as...
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it spreads financial risk over a large group so as to minimize the loss to any one individual.
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All of of the following describe an MGA except
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the legal entity which acts on behalf of, or in place of, its principal.
an MGA can appoint/supervise/terminate the appointment of local agents in that territory. collects premium. Can accept/decline risks. |
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A hazard that deals with attitudes, behavior and habits is an example of
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Moral hazard
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What are the four major elements of a contract?
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Agreement, competent parties, legal purpose, consideration.
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What is meant by the term adverse selection?
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the tendency of people with greater than average exposures to loss will purchase insurance.
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Balancing poor risk with preferred risk, with the average or standard risk being in the middle is known as what?
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distribution of exposures.
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