Exam 6: Insurance Company Operations

Antonio is a claims adjustor for LMN Insurance Company.After the insurer is notified that there has been a loss,Antonio meets with the insured.The first step in the claims process that Antonio should follow is to

All of the following statements about the settlement of a claim are true EXCEPT

Liability Insurance Company (LIC)was approached by a regional airline to see if LIC would write the airline's liability coverage.LIC agreed to write the coverage and entered into an agreement with a reinsurer.Under the agreement,LIC retains 25 percent of the premium and pays 25 percent of the losses,and the reinsurer receives 75 percent of the premium and pays 75 percent of the losses.This reinsurance arrangement is best described as

Which of the following statements about underwriting policy is (are)true? I.A company must establish an underwriting policy consistent with company objectives. II.Underwriting policy is usually subjective and allows the underwriter considerable flexibility with respect to lines written and forms used.

Which of the following statements about underwriting standards is (are)true? I.One purpose of underwriting standards is to reduce adverse selection against the insurer. II.Equitable rates should be charged so that each group of policyowners pays its own way in terms of losses and expenses.

All of the following are reasons for a primary insurer to use reinsurance EXCEPT

Insurers obtain data which can be used to determine rates from

One source of life and health insurance underwriting information is an organization that life and health insurance companies can join.As a member,life and health insurance companies report health impairments of applicants,and this information is shared with member companies.Although the information is shared,the underwriting decision of the member company is not disclosed.What is this organization called?

Pac-Coast Insurance (PCI)concentrates its underwriting activities in California.The company is concerned that if a catastrophic earthquake occurs,it might threaten the solvency of the company.To address this risk,PCI issued some debt securities.If a catastrophic earthquake occurs,PCI does not have to repay the borrowed funds or pay interest.The securities PCI issued are called

A reinsurance contract that is entered into on a case-by-case basis after an application for insurance is received by a primary insurer is called

Mark has been an underwriter for 20 years.An application he recently reviewed looked odd to him.The building value in the application seemed far too high,and Mark suspected the applicant might be planning to destroy the property after it is insured.Mark contacted an outside firm and hired someone to investigate the applicant and to prepare a report about the applicant.This report is called a(n)

The underwriting process begins with the

Most insurance companies require their marketing representatives to submit an evaluation of the prospective insured.This important source of underwriting information is called the

Sue double-majored in mathematics and statistics in college.She also enrolled in a number of finance courses.After graduation,she was hired by Econodeath Insurance Company.Her job is to calculate premium rates for life insurance coverages.Sue is a(n)

Beverly lives in a sparsely populated area in northern Idaho.Some insurance companies marketing coverage in northern Idaho cannot afford to have full-time adjustors there.Several insurers hire Beverly to adjust claims for their insureds.Beverly charges the insurers a fee for each claim that she settles.Beverly is a(n)

Ross studied engineering in college.After graduation,he went to work for an insurance company.Ross visits properties insured by his company.He conducts inspections and makes recommendations about alarm systems,sprinkler systems,and building construction.In what functional area does Ross work?

The process of transferring risk to the capital markets through the use of financial instruments such as bonds,futures contracts,and options is knows as

All of the following statements about life insurance company investments are true EXCEPT

One method through which reinsurance is provided is through an organization of insurers that underwrites insurance on a joint basis.Through the organization,financial capacity is available for large commercial risks.This reinsurance arrangement is a(n)

Which of the following statements about the investments of property and liability insurers is (are)true? I.Income from investments is important in offsetting any unfavorable underwriting experience. II.Because premium income is continually being received,the investment objective of liquidity is of little importance.