Exam 7: Financial Operations of Insurers

Reasons for the unearned premium reserve include which of the following? I.To pay losses that occur during the policy period. II.To pay premium refunds to policyholders in the event of cancellation.

Which of the following statements about property and casualty insurance company operating results is (are)true? I.An insurance company can have a combined ratio greater than 1 (or 100 percent)and still be required to pay income taxes. II.By all measures,the property and casualty insurance industry is highly profitable when compared to other industries.

Which of the following statements about schedule rating is (are)true? I.It involves the determination of a basis rate for each exposure,which is then modified by credits or debits. II.It is based on the assumption that certain physical characteristics of the insured's operations will influence the insured's future loss experience.

Which of the following statements is (are)true about the loss ratio method of class rating? I.The pure premium is calculated,and it is loaded to cover expenses,profit,and contingencies. II.The actual loss ratio is compared to the expected loss ratio,and the rate is adjusted accordingly.

ABC Insurance Company's investment income ratio last year was 4.2 percent.The company's combined ratio last year was 102.6 percent.What was ABC's overall operating ratio?

Which of the following statements concerning regulatory objectives of rate making is (are)true? I.Rates must not be unfairly discriminatory. II.Rates must be adequate.

A property and liability insurance company's loss ratio and expense ratio,respectively,for 2016 - 2018 were: 2016: 74% 31% 2017: 68% 33% 2018: 66% 30% Which of the following statements is true about the company's underwriting results for this time period?

One liability on a property and liability insurance company's balance sheet is for the costs associated with settling and paying reserved claims.This liability is the

Small Town used to be just that-a small town 6 miles from Large City.Over the years,the area between Small Town and Large City has developed,and now Small Town is part of the suburbs surrounding Large City.An auto insurer that operated in the area had a large increase in auto claims from Small Town insureds.The insurer did not adjust its rates,and this year will lose money because of claims attributable to higher population density.Which business rating objective did this insurer fail to meet?

Which of the following statements about methods for estimating loss reserves for property and casualty insurers is (are)true? I.The judgment method involves the use of a statutory formula to estimate the loss reserve. II.The average value method is used when the number of claims is large and the average claim is relatively small.

LMN Mutual Insurance Company has total liabilities of $300 million.The company has total assets of $380 million.What is LMN's policyholders' surplus?

The unit of measurement used in property and casualty insurance pricing is called the

Under one type of merit rating,the class or manual rate is adjusted upward or downward based on past loss history.This type of merit rating is called

A manufacturing company just hired a new risk manager,and she has instituted several employee safety programs.She has persuaded the insurer writing the company's workers compensation insurance to base the premium on the company's actual loss experience during the current coverage period rather than on the company's historical performance.This type of plan is called a(n)

In schedule rating,each building is individually rated on several factors.One factor refers to the quality of the city's water supply and fire department,and the risk control devices installed in the building.This factor is called

All of the following statements about regulatory objectives of insurance rate making are true EXCEPT

One item that appears on an insurance company's financial statements is a liability that represents an estimate of the claims reported and adjusted but not yet paid,claims reported and filed but not yet adjusted,and claims incurred but not yet reported to the company.This liability is called the insurer's

The assets of a property and liability insurance company are primarily

Which of the following would not appear in the asset section of an insurance company's balance sheet?

JKL Insurance Company reported the following information on its accounting statements last year: Premiums Written $90,000,000 Loss Adjustment Expenses $5,000,000 Underwriting Expenses 30,000,000 Premiums Earned $100,000,000 Incurred Losses $70,000,000 What was JKL's combined ratio last year?