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75 Cards in this Set
- Front
- Back
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If an insurance company refuses to pay a claim that shouldbe paid or offers to settle a claim for less than it knows the claim is worthor denies a claim without adequate investigation, this could give rise to A. Bad faith claimagainst the Insurance company B. Unfair discriminationby Insurance company C. Long term profitfor the Insurance company D. Cancellation of Licensedoing business by the Insurance company |
A. Bad faith claimagainst the Insurance company |
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A "___________" letter from your insurer is anotice that even though the company is proceeding to handle your claim,depending on what happens, certain losses might not be covered by the terms ofthe policy. By such a letter, the company preserves its right to deny coverageat a later date based on the terms of the policy. A. Preservation ofrights B. Reservation ofrights C. Denial of rights D. None of the above |
B. Reservation of rights
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Insurance companies are exempted from Consumer protectionlaws in some states A. Yes B. Yes, becuaseInsurance is not consumable product C. No D. No, becauseInsurance customers are consumers |
A. Yes |
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The use of standard forms by insurers leads to a more A. Consistent interpretationof insurance policies B. Creative interpretationof insurance policies. C. Conservativeinterpretation of insurance policies. D. Coordinatedinterpretation of insurance policies. |
A. Consistent interpretationof insurance policies |
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A policy in which the insurer pays a stated amount in theevent of a specified loss (usually a total loss), regardless of the actualvalue of the loss is known as a A. Replacementpolicy. B. Valued policy. C. Conditionalpolicy. D. Specified policy. |
B. Valued policy. |
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Which one of the following statements is true regardingtypes of rates used by insurers? A. Class rates applyto all insureds in the same rating category. B. Merit ratingplans are also called manual rating plans. C. Class rates arenot based on loss statistics. D. Class ratesreflect loss characteristics of a particular insured. |
A. Class rates applyto all insureds in the same rating category. |
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Why would an underwriter modify the rate charged for thecoverage provided when evaluating an application for insurance? A. Because treatyreinsurance in unavailable for the exposures indicated B. To address themoral hazards the underwriter identified during investigation C. To better matchthe rate to the characteristics of the risk D. Because theapplicant is not acceptable for coverage |
C. To better match the rate to the characteristics of the risk
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In evaluating an application, an underwriter thinks that theclass of business is not one that the company wishes to write, but he wouldneed to physically inspect it to be certain. He also realizes that the business is located in an undesirable sectionof the city. Based on the locationalone, the underwriter decides not to issue the policy. According to many state insurance laws, thiswould be an example of A. Diversification. B. Unfairdiscrimination. C. Fairdiscrimination. D. Regulateddiscrimination. |
B. Unfairdiscrimination. |
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Select the Correct statement with respect to Auto Insurancein America A. Men Pay more forInsurance than Women due to their aggressiveness behind wheels B. Women Pay morefor Insurance than men due to their soft behind wheels C. Premium cannot bedifferent for men and women D. None of the above |
A. Men Pay more for Insurance than Women due to their aggressiveness behind wheels
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Most liability insurance policies exclude coverage forlosses intentionally caused by the insured because such losses do not meetwhich one of the following characteristics of an ideally insurable exposure? A. Large number ofsimilar exposure units B. Accidental C. Not catastrophic D. Not economicallyfeasible to insure |
B. Accidental
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Which of the following statements best describes the way inwhich “support for credit” is a benefit of insurance? A. Insurance isrequired to get a drivers license. B. Insurancesatisfies lenders that their loans will be repaid. C. Insurers lendmoney to fund new construction and other projects. D. People who areindemnified by insurance don’t have to borrow money to replace damagedproperty. |
B. Insurancesatisfies lenders that their loans will be repaid. |
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State insurance departments: A. Regulateinsurance rates to protect consumers from inadequate, excessive, or unfairlydiscriminatory rates. B. Are located inmost but not all states C. Provide a sourceof investment funds. D. Answer to thefederal government insurance department. |
A. Regulateinsurance rates to protect consumers from inadequate, excessive, or unfairlydiscriminatory rates. |
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A ratemaking concept through which actuaries base rates onactuarially calculated loss experience and place insureds with similarcharacteristics into the same rating class is A. Social equity B. Flex rating laws C. Actuarial equity D. Open competition |
C. Actuarial equity |
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Humongous Insurance Company is considering the purchase ofItty-Bitty Insurance Company. Following is financial data of Itty-BittyInsurance Company. Expense ratio 39% Loss ratio 57% Investmentincome ratio 18% The combined ratio for Itty-Bitty Insurance Company is: A. 96% B. 75% C. 114% D. 78% |
A. 96% |
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Binding authority A. Is usuallygranted in the agency contract B. Is granted by theagent to the principal. C. Is always oral. D. Is granted by thereinsurance treaty. |
A. Is usuallygranted in the agency contract |
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An independent agent A. Usuallyrepresents several unrelated insurance companies B. Is salaried bythe insurance company. C. Uses only mail,telephone, or Internet to solicit business D. Usually does notown its expiration list. |
A. Usuallyrepresents several unrelated insurance companies |
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Rebating is A. Requiring thatthe purchase of insurance be tied to some other sale or financial arrangement. B. Misrepresentingthe benefits, advantages, conditions, or terms of any insurance policy. C. Offering anythingof value, other than the insurance itself, to an applicant as an inducement tobuy or maintain insurance. D. All of the above. |
C. Offering anythingof value, other than the insurance itself, to an applicant as an inducement tobuy or maintain insurance. |
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Producers can be compensated by A. Salary. B. Commissions. C. Contingencycommissions. D. All of the above. |
D. All of the above. |
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Clara is insured by IIA Insurance Company. One night, on theway home from work, shewas involved in an auto accident. Clara ran a red lightwhen her brand new Mazda did not have any brakes, and her car struck the pickupdriven by Bill, an employee of Big Bob’s Produce Company. Bill was injured, anda claim was filed with IIA Insurance Company for injury to Bob and damage tothe pickup. If there had been no injuries and damage to both vehicles had beenminor, the claim would most likely be handled by a(n) A. Inside staffclaim representative. B. Outside staffclaim representative. C. Public adjuster. D. Independentadjuster. |
A. Inside staffclaim representative. |
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Which is an example of the reduction in value of property? A. A camera that wasworth $200 is run over by the truck; the camera is now worthless. B. Because abusiness owner had a fire, he has lost income. C. A homeowner mustlive in a motel while his burned home is repaired. D. Inflation causesa home to appreciate in value. |
A. A camera that wasworth $200 is run over by the truck; the camera is now worthless. |
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The parties that might be affected by a property lossinclude A. Users of theproperty B. The property owner. C. Secured lendersof money to the property owner. D. All of the above. |
D. All of the above. |
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Under tort law, an individual or organization can face aclaim for legal liability on the basis of A. Negligence. B. Intentionaltorts. C. Absoluteliability. D. All of the above. |
D. All of the above. |
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Out-of-court settlements are A. Settled by thecourt system. B. Advantageous tothe insurer because they eliminate uncertainty about the outcome of the claim. C. Not covered byliability coverage policies. D. Included inpunitive damages. |
B. Advantageous tothe insurer because they eliminate uncertainty about the outcome of the claim. |
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Insurance is a risk management technique called A. Avoidance B. Transfer C. Loss Control D. Retention |
B. Transfer |
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Which of the following is a Federal Government InsuranceProgram? A. Federal AirInsurance program B. Fair Access toInsurance Requirements Plan C. Social SecurityProgram D. State workerscompensation insurance program |
C. Social SecurityProgram |
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Which one of the following in the risk management process isinaccurate? 1. Identifying and analyzing lossexposures. 2. Gathering information to supportassumptions about the loss exposures. 3. Selecting the most appropriaterisk management techniques. 4. Implementing the chosentechniques in a risk management program . A. 1 B. 2 C. 3 D. 4 |
B. 2 |
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An annual report of all the insurance policies issued by aninsurance company sent to the respective state Departments of Motor Vehicles(DMV). B. A book ofInsurance laws maintained by the State insurance commissioners in the early1900s in North America. C. An automotivevehicle valuation company in the United States. D. A list of alldrivers in California with more than 6 major violations and 6 At-Faultaccidents maintained by the State Insurance Authority. |
C. An automotivevehicle valuation company in the United States. |
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N D Tiwari has been stopped by LAPD for speeding and aticket has been issued. Which statement is true? A. Tiwari' sinsurance company will automatically be notified by the state. B. Tiwari 'sinsurance company will review his driving record and learn about the violationwhen his policy comes up for renewal. C. Tiwari' sinsurance company will automatically raise his rates. D. Nothing willhappen. The insurance company cannot find out about the ticket issued toTiwari. |
B. Tiwari 'sinsurance company will review his driving record and learn about the violationwhen his policy comes up for renewal. |
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If you don’t understand all of the terms in your autoinsurance policy,what should you do? A. Contact yourinsurance agent,who is responsible for servicing your policy. B. Wait until youneed to file a claim to contact anyone. C. Contact yourstate’s department of insurance. D. Both A and C. |
D. Both A and C. |
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What is an SR-22 Document? A. In the UnitedStates, an SR-22 is a vehicle liability insurance document used by some stateDepartment of Motor Vehicles (DMV) offices. It provides proof that a driver hasthe minimum required liability insurance coverage for that particular state. B. An SR-22 documentis a signed statement from a driver convicted of Driving Under Influence (DUI)declaring that he/she will not drink again. C. An SR-22 documentis a written consent given by the Primary Insured on a policy to the Insurerstating that the Insurer can initiate liquidation of the Insured's property incase of any claims raised against the Insured, amount to more than the coveredlimits. D. An SR-22 is analternative to the drivers license issued by the state's DMV. |
A. In the UnitedStates, an SR-22 is a vehicle liability insurance document used by some stateDepartment of Motor Vehicles (DMV) offices. It provides proof that a driver hasthe minimum required liability insurance coverage for that particular state. |
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Match the Column A elements with Column B elements? Column A 1. Mutual Insurance Company 2. Direct Writing Agents 3. Independent Adjusters 4. Choicepoint 5. Lloyd's of London Column B A. Salaried employees of the Insurance companies. B. Owned by the policy holders. C. Handle claims for the Insurance companies for a fee. D. Investors own the association E. CLUE report A. 1C, 2E, 3A, 4B,5D B. 1B, 2E, 3C, 4A,5D C. 1B, 2A, 3C, 4E,5D D. 1D, 2A, 3D, 4E,5C |
C. 1B, 2A, 3C, 4E,5D |
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A ________ is a diagram that depicts the flow of aparticular operation or set of related operations within an organization. A. Process char B. Flow Chart C. Data Chart D. Sequence Chart |
B. Flow Chart |
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If the insurer cancels the policy, the return premium willbe calculated usually on a A. Short-rate basis. B. Flat Basis. C. Pro-rata basis. D. Penalty basis. |
C. Pro-rata basis. |
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The two major types of liabilities found on the financialstatements of insurers are: A. Policyholdersurplus and assets B. Unearned premiumreserve and loss reserve C. Admitted assetand nonadmitted assets D. Earned premiumsand underwriting expenses |
B. Unearned premiumreserve and loss reserve |
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Compensatory damages are intended to compensate a victim forharm actually suffered and can include A. Punitive damages B. Special damages. C. Hold harmlesscosts. D. Contractualobligations. |
B. Special damages. |
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Reinsurance is a contractual agreement: A. In which oneinsurer transfers some or all of its loss exposures to another insurer. B. That is formed asa subsidiary of its parent company for the purpose of writing insurance on theparent company. C. That ideallyinsures large numbers of similar exposure units. D. That insuresthrough an attorney-in-fact. |
A. In which oneinsurer transfers some or all of its loss exposures to another insurer. |
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Roadside assistance plans provides services EXCEPT A. 24 Hoursemergency towing services B. 24 Hours lost keyand lockout services C. 24 Hours batteryservices D. 24 Car hygieneservices |
D. 24 Car hygieneservices |
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An insurer’s capacity ratio is: A. Calculated bydividing its written premiums by its policyholder’s surplus. B. Calculated bysubtracting the investment income ratio from the combined ratio. C. Calculated bydividing net investment income by earned premiums for a particular period. D. The sum of theloss ratio and the expense ratio. |
A. Calculated bydividing its written premiums by its policyholder’s surplus. |
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Basic form coverage A. Is used on allproperty policies. B. Lists coveredcauses of loss. C. Is open peril. D. Covers all lossesexcept those specifically excluded. |
B. Lists coveredcauses of loss. |
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The claim handling process includes A. Investigating. B. Evaluating. C. Negotiation. D. All of the above. |
D. All of the above. |
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You have bought a flame red high performance engine car. Youwere surprised that despite your car has so many great safety features similarto other brand cars, your insurance company charged you more than what it wascharging for other brand cars. What could be the reason? A. The red colorcars are always perceived to received more traffic tickets B. The highperformance engine makes your car engine more prone to theft C. The Insurancecompany battling a case against your car brand company D. The Insurancecompany had some secret dealings with the rival company |
B. The highperformance engine makes your car engine more prone to theft |
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Claims-made coverage A. Is based on aretroactive date that determines when coverage starts. B. Covers liability claims that are made to theinsurer before the retroactive date. C. Does not limit thetime period for which a claim may be submitted. D. Includes aprovision for claims occurring after the policy period. |
A. Is based on aretroactive date that determines when coverage starts. |
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All of these statements about unfair claim practices arecorrect, EXCEPT: A. Unfair claimpractices specify claim practices that are illegal according to federal law. B. Misrepresentationof pertinent facts or insurance policy provisions relating to coverage at issuein a claim is an unfair claim practice. C. Refusal to pay aclaim without first conducting a reasonable investigation based on allavailable information is an unfair claim practice. D. Insuranceregulators usually learn of unfair claim practices when they receive complaintsfrom insureds and claimants. |
A. Unfair claimpractices specify claim practices that are illegal according to federal law. |
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What is the significance of 1994 Northridge Earthquake? A. 21st CenturyInsurance nearly went bankrupt due to the claims resulted due to the earthquakeand shortly after stopped selling Homeowners insurance policies. B. US FederalInsurance authority added the states of California and Florida to the list of coveredstates under the National Disaster Insurance programs. C. After theearthquake, California State Insurance department joined NAIC committee. D. All the above |
A. 21st CenturyInsurance nearly went bankrupt due to the claims resulted due to the earthquakeand shortly after stopped selling Homeowners insurance policies. |
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Humongous Insurance Company is considering the purchase ofItty-Bitty Insurance Company. Following is financial data of Itty-BittyInsurance Company. Expense ratio 39% Loss ratio 57% Investment income ratio 18% The overall operating ratio is: A. 96% B. 75% C. 114% D. 78% |
D. 78% |
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Being a owner of house in US A. It is mandatoryto buy homeowner's Insurance B. It is notmandatory to buy homeowner 's Insurance C. Stateautomatically provides homeowner' s Insurance D. The bank whichloaned should buy homeowners's Insurance |
B. It is notmandatory to buy homeowner 's Insurance |
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Implementation of the chosen Risk management techniquerequires that risk manager make decisions concerning: A. What should be done? B. Who should be responsible? C. How to allocatethe costs of the program D. All the above |
D. All the above |
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Loss reserves are A. The largest andmost important liabilities of property and liability insurance companies. B. An estimate ofthe amount of claims payments that an insurer will make in the future C. Always an estimate. D. All of the above. |
D. All of the above. |
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If an Insured is sued (Dragged to court) does the InsuranceCompany defend the Insured in court? A. Insurance companydefends the Insured until final judgment is given B. Insurance companydefends the Insured until the limits of the coverage is expended for the defense C. Insurance companydoes washes of hands as it is not their responsibility to go to court D. None of the above |
B. Insurance companydefends the Insured until the limits of the coverage is expended for the defense |
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The World Insurance Report 2008 explores currentdistribution models and changes in channel usage, and also takes an in-depthlook at successful versus at-risk multi-channel strategies. Find out what’sdriving multi-channel usage in mature markets and how changing customerprofiles and behaviors are impacting today’s insurance practices. The reportidentifies growth opportunities for leading insurance companies and featuresinsightful approaches for transforming current insurance practices intotomorrow’s winning strategies. Which ofthe below organizations publish this report? A. NationalAssociation of Insurance Commissioners (NAIC). B. AmericanAuthority of Insurance. C. Capgemini and theEuropean Financial Management & Marketing Association (EFMA). D. InternationalCouncil for Insurance Regulation and Legislation (ICIRL). |
C. Capgemini and theEuropean Financial Management & Marketing Association (EFMA). |
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All of the following are true, EXCEPT: A. The standardmarket refers collectively to insurers who voluntarily offer insurancecoverages at markets designed for customers with average or better-than-averageloss exposures. B. Excess andsurplus lines insurance consists of insurance coverages, usually available inthe standard market, that are written by unlicensed insurers. C. Nonadmitted (orunlicensed) insurers are insurers that are not licensed in many of the statesin which they operate and that write excess and surplus lines insurance coverages D. The excess andsurplus lines market is not subject to any state regulation. |
D. The excess andsurplus lines market is not subject to any state regulation. |
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Some insurers now use expert systems in the underwritingprocess. The primary purpose of theseexpert systems is to A. Reduce claimexpenses and loss adjustment expenses. B. Replaceunderwriting decision-making and enhance accuracy. C. Emulate theunderwriting decision-making process as it would be performed by expertunderwriters. D. Modernizeinsurance company information systems. |
C. Emulate theunderwriting decision-making process as it would be performed by expertunderwriters. |
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A dispute between neighbors can turn into a never-endingfeud. Which form of law provides a forum for hearing disputes between privateparties? A. Criminal law B. Statutory law C. Constitutionallaw D. Civil law |
D. Civil law |
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Loss frequency is A. A term used toindicate how often losses are not expected to occur B. Used to predictthe likelihood of different kind of losses in the future C. A term used toindicate how often losses occur D. All the above |
C. Aterm used to indicate how often losses occur
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Jim canceled his auto policy 315 days after the inceptiondate. The one-year premium is $1,095. Assuming that a year is 365 days, what isJim's pro rata premium refund? A. $50 B. $150 C. $780 D. $945 |
B. $150
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All of the following are true of insurance company financialstatements, EXCEPT: A. The major expensecategory for most insurance companies is payment for losses arising fromclaims. B. Underwritingexpenses include acquisition expenses, general expenses, and taxes and fees. C. On theirfinancial statements, insurance companies add expenses from investment incometo show the net income from investments. D. An insurer’s netunderwriting gain or loss is equal to its earned premiums minus its losses andunderwriting expenses for a specific period. |
C. On theirfinancial statements, insurance companies add expenses from investment incometo show the net income from investments. |
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Clara is insured by IIA Insurance Company. One night, on theway home from work, shewas involved in an auto accident. Clara ran a red lightwhen her brand new Mazda did not have any brakes, and her car struck the pickupdriven by Bill, an employee of Big Bob’s Produce Company. Bill was injured, anda claim was filed with IIA Insurance Company for injury to Bob and damage tothe pickup. Bill’s claim will most likely be handled for IIA Insurance Companyby a(n) A. Inside staffclaim representative. B. Outside staff claim representative. C. Insurance agenthandling Clara’s account. D. Public adjuster. |
B. Outside staff claim representative. |
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David Beckham wants to Insure his feet to the tune of 10million dollars each. Which of the following Insurance company will he mostlikely go to? A. Bankers mutualInsurance company B. Citi stockInsurance company C. Prudential LifeInsurance company D. Lords Excess andSurplus Insurance ltd. |
D. Lords Excess andSurplus Insurance ltd. |
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What is IRDA and which country does it belong to? A. InternationalRegulatory and Development authority, USA B. Insurance Ratesand development Association, Canada. C. InsuranceRegulatory and Development Authority (IRDA), India. D. Internal RevenueDepartment of America, USA. |
C. InsuranceRegulatory and Development Authority (IRDA), India. |
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Which of the following is not one of the primary objectivesof Insurance regulation? A. Rate regulation B. Solvencysurveillance C. Consumerprotection D. Market capitalizationof Insurance companies |
D. Market capitalizationof Insurance companies |
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A business installs a sprinkler system to reduce the amountof fire damage from potential fires. What kind of Risk management technique isthis A. Loss Reduction B. Loss Retention C. Loss Prevention D. None of the above |
A. Loss Reduction |
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Tom Hanks has been insured by Farmers Insurance company formore than 60 days. Farmers insurance cannot cancel Tom's policy under which ofthe following circumstances? A. Tom gets hisfirst speeding ticket. B. Tom does not paythe premiums. C. Tom lied on hisinsurance application. D. Tom 's licensehas been suspended. |
A. Tom gets hisfirst speeding ticket. |
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A guaranty fund is: A. Created by thefederal government for the purpose of providing insurance for the social good. B. The primaryfunding for the Fair Access to Insurance Requirements program. C. A state fund thatprovides a system to pay the claims of insolvent insurers. D. Managed by theNational Association of Insurance Commissioners. |
C. A state fund thatprovides a system to pay the claims of insolvent insurers. |
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A ________ is a risk management tool in the form of achecklist or questionnaire listing potential loss exposures that a household oran organization might face A. ExposureChecklist B. Loss exposuresurvey C. LossQuestionnaire D. Risk check list |
B. Loss exposuresurvey |
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Which are the third-party coverages in the below? A. Collision (COLL),Comprehensive coverage (COMP) B. BodilyInjury(BI), Property damage (PD) C. Medical Payments(Med Pay), Personal Injury Protection (PIP) D. Uninsured andUnderinsured Motorist Coverage (UM, UIM) |
B. BodilyInjury(BI), Property damage (PD) |
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In insurance terminology, which of the following refers to abook of business? A. All policies soldby an insurance company or agency B. All policies in aparticular territory C. All policiesproviding a particular type of insurance D. All the above |
D. All the above |
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Valuation provisions may include A. Replacement cost. B. Actual cashvalue. C. Agreed value. D. All of the above. |
D. All of the above. |
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Which of the below is NOT a step in Risk management process A. Identifying andanalyzing loss exposures B. Examining riskmanagement techniques C. Implementing theRisk D. Selecting themost appropriate techniques |
C. Implementing theRisk |
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Which of the following is one of the largest Mutual P &C Insurance companies operating in North America? A. State FarmInsurance B. Citi GroupInsurance C. 21st Insurance D. Allianz AG |
A. State FarmInsurance |
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Ideally insurable loss exposures include: A. Losses those areaccidental. B. Losses those aredefinite and measurable C. A large number ofsimilar exposure units. D. All of the above. |
D. All of the above. |
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Marketing management A. Provides producersupervision. B. Provides producermotivation. C. Provides productmanagement and development D. All of the above. |
D. All of the above. |
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All of the following are correct, EXCEPT: A. Insurance worksas a system of transferring and sharing the costs of losses B. The law of largenumbers assists the insurance mechanism by improving the relative accuracy ofprediction. C. Property lossexposures include negligence, real property, and personal property. D. A liability lossexposure presents the possibility of a claim alleging legal responsibility. |
C. Property lossexposures include negligence, real property, and personal property. |
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A Captive Insurance company is ______________ . A. The insurancecompany that accepts the loss exposure of the primary Insurer. B. The insurer thatis formed as a subsidiary of its own parent company, organization or group, forthe purpose of writing all or part of the insurance on the parent company orcompanies. C. An insurer thatis owned by its policy holders and formed as a corporation for the purpose ofproviding insurance to its policy holder-owners. D. A federalgovernment funded, state controlled insurance organization providing insuranceto unusual Insurance needs. |
B. The insurer thatis formed as a subsidiary of its own parent company, organization or group, forthe purpose of writing all or part of the insurance on the parent company orcompanies. |
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A bailment is A. Holding theproperty of another. B. An exclusion inthe property policy. C. A named peril. D. A lender thatloans money on a home, building, or other real property. |
A. Holding theproperty of another. |
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Brown Company' s Policy includes a liberalization clause.Brown 's insurer introduces a policy change that broadens coverage at noadditional premium. How will this changeapply to Brown' s existing policy? A. The broadenedcoverage does not apply to Brown Company 's policy. B. The broadenedcoverage automatically applies to Brown Company' s policy. C. The broadenedcoverage will apply to Brown Company 's policy with an endorsement. D. The broadenedcoverage will apply to Brown Company' s new policies as they are issued. |
B. The broadenedcoverage automatically applies to Brown Company' s policy. |
