Question 1

The largest line of life insurance in terms of total contract value in the U.S.is

Accepted Answer

A) ordinary life. 
B) group life. 
C) industrial life. 
D) credit life. 
E) noncontributory life. 
A) ordinary life. 
B) group life. 
C) industrial life. 
D) credit life. 
E) noncontributory life.

Question 2

As of 2014, sales of annuities and sales of traditional life insurance policies were approximately equal.

Accepted Answer

A) True 
 B)False

Question 3

Insurance guaranty funds involve a permanent fund similar to the FDIC for the purpose of compensating the policyholders of failed insurers.

Accepted Answer

A) True 
 B)False

Question 4

Although life insurance companies also provide health and accident insurance, they underwrite less than 35% of all health insurance policies.

Accepted Answer

A) True 
 B)False

Question 5

Underwriting risk faced by property-casualty insurance companies may result from unexpected

Accepted Answer

A) increases in loss rates. 
B) decreases in loss adjustment expenses. 
C) increases in investment yields. 
D) cancellations of policies by customers. 
E) increases in policy premiums. 
A) increases in loss rates. 
B) decreases in loss adjustment expenses. 
C) increases in investment yields. 
D) cancellations of policies by customers. 
E) increases in policy premiums.

Question 6

Calculate the annual cash flows of a $500,000, 12-year fixed-payment deferred annuity earning a guaranteed 5 percent per year if annual payments are to begin at the end of year 4.

Accepted Answer

A) $32,652.38. 
B) $79,018.76. 
C) $62,195.01. 
D) $65,304.76. 
E) $31,097.50. 
A) $32,652.38. 
B) $79,018.76. 
C) $62,195.01. 
D) $65,304.76. 
E) $31,097.50.

Question 7

An insurance policy in which fixed premium payments are invested in mutual funds of stocks, bonds, and money market instruments is called

Accepted Answer

A) term life. 
B) universal life. 
C) whole life. 
D) endowment life. 
E) variable life. 
A) term life. 
B) universal life. 
C) whole life. 
D) endowment life. 
E) variable life.

Question 8

Hurricane Sandy, which struck the east coast of the United States in 2012, continues to be the worst catastrophe for the PC industry.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is used as collateral when an insurance company issues policy loans?

Accepted Answer

A) Expected premium payments. 
B) Existing policies. 
C) Unearned premiums. 
D) Guarantee funds. 
E) U.S.Treasury Bills. 
A) Expected premium payments. 
B) Existing policies. 
C) Unearned premiums. 
D) Guarantee funds. 
E) U.S.Treasury Bills.

Question 10

With variable life insurance, the term "variable" refers to the variable nature of the benefit because premium payments are invested in mutual funds whose return can vary over time.

Accepted Answer

A) True 
 B)False

Question 11

The four basis classes or lines of life insurance are ordinary life, group life, industrial life, and credit life.

Accepted Answer

A) True 
 B)False

Question 12

The payments from an annuity offered by a life insurance company can either begin immediately or may be deferred to start at some future date.

Accepted Answer

A) True 
 B)False

Question 13

By 2015, life insurance companies were managing approximately 40% of all private pension plans.

Accepted Answer

A) True 
 B)False

Question 14

Loss adjustment expenses refer to the costs surrounding the loss settlement process.

Accepted Answer

A) True 
 B)False

Question 15

The problem of adverse selection

Accepted Answer

A) implies that many people who do not need insurance coverage have it through group plans. 
B) means that those people who apply for insurance are the least likely to need insurance coverage. 
C) causes insurance underwriters to alter the health statistics of the general population when determining appropriate premiums. 
D) creates a savings element along with the insurance component of the premium and policy. 
E) does not exist in the insurance industry. 
A) implies that many people who do not need insurance coverage have it through group plans. 
B) means that those people who apply for insurance are the least likely to need insurance coverage. 
C) causes insurance underwriters to alter the health statistics of the general population when determining appropriate premiums. 
D) creates a savings element along with the insurance component of the premium and policy. 
E) does not exist in the insurance industry.

Question 16

Annuities are an important product sold by life insurance companies.Which of the following statements is correct as of 2015?

Accepted Answer

A) Life insurance contracts continue to dominate premiums written while annuities are of less importance. 
B) The value of annuity sales are more than double those of traditional life insurance lines. 
C) Retirement accounts and private pension plans are not allowed access to the annuities of life insurance companies. 
D) The funds in an annuity can only be invested in guaranteed investment contracts (GICs). 
E) All annuities are listed as separate accounts business on the life insurer's balance sheet. 
A) Life insurance contracts continue to dominate premiums written while annuities are of less importance. 
B) The value of annuity sales are more than double those of traditional life insurance lines. 
C) Retirement accounts and private pension plans are not allowed access to the annuities of life insurance companies. 
D) The funds in an annuity can only be invested in guaranteed investment contracts (GICs). 
E) All annuities are listed as separate accounts business on the life insurer's balance sheet.

Question 17

Which of the following is pure life insurance with a savings element built in

Accepted Answer

A) term life. 
B) universal life. 
C) endowment life. 
D) variable universal life. 
E) variable life. 
A) term life. 
B) universal life. 
C) endowment life. 
D) variable universal life. 
E) variable life.

Question 18

The total assets of property-casualty insurers were approximately 35 percent of life insurer's total assets as of 2015.

Accepted Answer

A) True 
 B)False

Question 19

Life insurance guaranty funds

Accepted Answer

A) are sponsored by state insurance regulators. 
B) involve a permanent reserve fund similar to the FDIC's bank deposit reserve. 
C) require uniform contributions from each state when there is a failure of an insurance company. 
D) make policyholder payments immediately in the event of an insurance company failure. 
E) are regulated by the Federal Reserve Bank. 
A) are sponsored by state insurance regulators. 
B) involve a permanent reserve fund similar to the FDIC's bank deposit reserve. 
C) require uniform contributions from each state when there is a failure of an insurance company. 
D) make policyholder payments immediately in the event of an insurance company failure. 
E) are regulated by the Federal Reserve Bank.

Question 20

The expected loss potential is more difficult to determine with low-severity, high-frequency events.

Accepted Answer

A) True 
 B)False

Exam 6: Financial Services: Insurance

The largest line of life insurance in terms of total contract value in the U.S.is

As of 2014, sales of annuities and sales of traditional life insurance policies were approximately equal.

Insurance guaranty funds involve a permanent fund similar to the FDIC for the purpose of compensating the policyholders of failed insurers.

Although life insurance companies also provide health and accident insurance, they underwrite less than 35% of all health insurance policies.

Underwriting risk faced by property-casualty insurance companies may result from unexpected

Calculate the annual cash flows of a $500,000, 12-year fixed-payment deferred annuity earning a guaranteed 5 percent per year if annual payments are to begin at the end of year 4.

An insurance policy in which fixed premium payments are invested in mutual funds of stocks, bonds, and money market instruments is called

Hurricane Sandy, which struck the east coast of the United States in 2012, continues to be the worst catastrophe for the PC industry.

Which of the following is used as collateral when an insurance company issues policy loans?

With variable life insurance, the term "variable" refers to the variable nature of the benefit because premium payments are invested in mutual funds whose return can vary over time.

The four basis classes or lines of life insurance are ordinary life, group life, industrial life, and credit life.

The payments from an annuity offered by a life insurance company can either begin immediately or may be deferred to start at some future date.

By 2015, life insurance companies were managing approximately 40% of all private pension plans.

Loss adjustment expenses refer to the costs surrounding the loss settlement process.

The problem of adverse selection

Annuities are an important product sold by life insurance companies.Which of the following statements is correct as of 2015?

Which of the following is pure life insurance with a savings element built in

The total assets of property-casualty insurers were approximately 35 percent of life insurer's total assets as of 2015.

Life insurance guaranty funds

The expected loss potential is more difficult to determine with low-severity, high-frequency events.

Why Are Financial Institutions Special

Financial Services: Depository Institutions

Financial Services: Finance Companies

Financial Services: Securities Brokerage and Investment Banking

Financial Services: Mutual Funds and Hedge Funds

Risks of Financial Institutions

Interest Rate Risk I

Interest Rate Risk II

Credit Risk: Individual Loan Risk

Credit Risk: Loan Portfolio and Concentration Risk

Liquidity Risk

Foreign Exchange Risk

Sovereign Risk

Market Risk

Off-Balance-Sheet Risk

Technology and Other Operational Risks

Fintech Risks

Liability and Liquidity Management

Deposit Insurance and Other Liability Guarantees

Capital Adequacy

Product and Geographic Expansion

Futures and Forwards

Options, Caps, Floors, and Collars

Swaps

Loan Sales

Securitization

Filters