Exam 6: Insurance Company Operations

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?

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 is true regarding the information systems functional area of an insurance company? I.Computers and information systems are able to perform some tasks that previously were performed directly by employees. II.Information systems can speed the processing of policies by insurers.

A highly specialized technician who provides local agents in the field with technical help and assistance with marketing problems is called a(n)

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

Gwen is in charge of accounting at Integrity Insurance Company.Integrity is a publicly-traded insurer.In describing her job,Gwen said,"There aren't too many businesses where you are required to keep two sets of books." Gwen's comment most likely refers to her company

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.

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

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?

Catastrophe bonds are made available to institutional investors in the capital markets through an entity that is specially created for that purpose.This is entity is called a

Beverly lives in a sparsely populated area in northern Idaho.Some insurance companies marketing coverage in northern Idaho cannot afford to have full-time adjusters 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)

When a fraternal insurer began operations,it asked each member,regardless of age,to pay $20 per month to the fraternal's group life insurance plan.In exchange,each member received the same amount of life insurance.Soon younger members of the group began to drop out when they realized their premiums were subsidizing the older workers who had a higher chance of loss.Which important underwriting principle was violated in this case?

Delta Insurance Company has a surplus-share treaty with Eversafe Reinsurance.Delta has a retention limit of $200,000,and nine lines of insurance are ceded to Eversafe.How much will Eversafe pay if a $1,600,000 building insured by Delta suffers an $800,000 loss?

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 is a function of the marketing department of an insurance company?

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

Factors that may result in more restrictive underwriting decisions include which of the following? I.Inadequate rates. II.The unavailability of reinsurance at favorable terms.

Which of the following statements is (are)true with respect to catastrophe bonds? I.The bonds are issued by policyowners of the insurer. II.The bonds have relatively high interest (coupon)rates.

Huge Insurance Company is a property insurer that is interested in protecting itself against cumulative losses that exceed $200 million during the year.This protection can best be obtained using a(n)

Mark has been an underwriter for 20 years.An application he recently reviewed looked strange 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 hired an outside firm to investigate the applicant and to prepare a report about the applicant.This report is called a(n)