Question 1

Common sources of underwriting information for life and health insurance include all of the following EXCEPT

Accepted Answer

A) the application. 
B) a physical examination. 
C) the Medical Information Bureau. 
D) the applicant's income tax return. 
A) the application. 
B) a physical examination. 
C) the Medical Information Bureau. 
D) the applicant's income tax return.

Question 2

In a reinsurance transaction,the ceding commission is paid by

Accepted Answer

A) the insured to the ceding company. 
B) the reinsurer to the ceding company. 
C) the ceding company to the insured. 
D) the ceding company to the reinsurer. 
A) the insured to the ceding company. 
B) the reinsurer to the ceding company. 
C) the ceding company to the insured. 
D) the ceding company to the reinsurer.

Question 3

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.

Accepted Answer

A) I only 
B) II only 
C) both I and II 
D) neither I nor II 
A) I only 
B) II only 
C) both I and II 
D) neither I nor II

Question 4

Which of the following statements about claims settlement is true?

Accepted Answer

A) Agents are never authorized to settle claims. 
B) Independent adjusters may be used in a geographic area where the volume of business is too low for an insurer to have its own adjusters. 
C) A public adjuster is a salaried employee who works for one insurer. 
D) A staff claims representative is hired by a policyholder to represent him or her if the policyholder does not agree with the claim settlement offered by the insurer. 
A) Agents are never authorized to settle claims. 
B) Independent adjusters may be used in a geographic area where the volume of business is too low for an insurer to have its own adjusters. 
C) A public adjuster is a salaried employee who works for one insurer. 
D) A staff claims representative is hired by a policyholder to represent him or her if the policyholder does not agree with the claim settlement offered by the insurer.

Question 5

Which of the following statements about treaty reinsurance is true?

Accepted Answer

A) Under a surplus-share treaty,100 percent of the ceding insurer's liability must be transferred to the reinsurer. 
B) Using a quota-share treaty increases the ceding insurer's unearned premium reserve. 
C) Under an excess-of-loss treaty,the reinsurer pays losses in full only if they are less than the ceding insurer's retention limit. 
D) Using a reinsurance pool provides financial capacity to write large amounts of insurance. 
A) Under a surplus-share treaty,100 percent of the ceding insurer's liability must be transferred to the reinsurer. 
B) Using a quota-share treaty increases the ceding insurer's unearned premium reserve. 
C) Under an excess-of-loss treaty,the reinsurer pays losses in full only if they are less than the ceding insurer's retention limit. 
D) Using a reinsurance pool provides financial capacity to write large amounts of insurance.

Question 6

If an underwriter suspects moral hazard,the underwriter may ask an outside firm to investigate the applicant and make a detailed report to the insurer.This report is called a(n)

Accepted Answer

A) inspection report. 
B) application. 
C) M)I.B.report. 
D) agent's report. 
A) inspection report. 
B) application. 
C) M)I.B.report. 
D) agent's report.

Question 7

The unearned premium reserve of an insurer is

Accepted Answer

A) an asset representing the investments made with premium income. 
B) a liability representing the unearned portion of gross premiums on outstanding policies. 
C) a liability representing claims that have been filed,but not yet paid. 
D) the portion of the insurer's net worth belonging to policyowners. 
A) an asset representing the investments made with premium income. 
B) a liability representing the unearned portion of gross premiums on outstanding policies. 
C) a liability representing claims that have been filed,but not yet paid. 
D) the portion of the insurer's net worth belonging to policyowners.

Question 8

Which of the following statements about treaty reinsurance is true?

Accepted Answer

A) The reinsurer is required to underwrite each individual applicant that is reinsured. 
B) The reinsurer must accept all business that falls within the scope of the treaty. 
C) The ceding insurer can choose which business falling within the scope of the treaty it wishes to reinsure. 
D) It protects the reinsurer by requiring the ceding insurer to charge adequate premiums. 
A) The reinsurer is required to underwrite each individual applicant that is reinsured. 
B) The reinsurer must accept all business that falls within the scope of the treaty. 
C) The ceding insurer can choose which business falling within the scope of the treaty it wishes to reinsure. 
D) It protects the reinsurer by requiring the ceding insurer to charge adequate premiums.

Question 9

Jan is employed by an insurance company.She reviews applications to determine whether her company should insure the applicant.If insurable,Jan assigns the applicant to a rating category based on the applicant's degree of risk.Jan is a(n)

Accepted Answer

A) underwriter. 
B) actuary. 
C) loss control engineer. 
D) claims adjustor. 
A) underwriter. 
B) actuary. 
C) loss control engineer. 
D) claims adjustor.

Question 10

All of the following are methods that a property and liability insurance company can use to protect against catastrophic losses EXCEPT

Accepted Answer

A) sale of catastrophe bonds. 
B) purchase of common stock. 
C) purchase of excess-of-loss reinsurance. 
D) quota share reinsurance with a low retention percentage. 
A) sale of catastrophe bonds. 
B) purchase of common stock. 
C) purchase of excess-of-loss reinsurance. 
D) quota share reinsurance with a low retention percentage.

Question 11

The price per unit of insurance is called the

Accepted Answer

A) premium. 
B) loss adjustment expense. 
C) rate. 
D) loss reserve. 
A) premium. 
B) loss adjustment expense. 
C) rate. 
D) loss reserve.

Question 12

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)

Accepted Answer

A) quota-share treaty. 
B) surplus-share treaty. 
C) excess-of-loss treaty. 
D) reinsurance pool. 
A) quota-share treaty. 
B) surplus-share treaty. 
C) excess-of-loss treaty. 
D) reinsurance pool.

Question 13

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)

Accepted Answer

A) actuary. 
B) underwriter. 
C) claims adjuster. 
D) producer. 
A) actuary. 
B) underwriter. 
C) claims adjuster. 
D) producer.

Question 14

The underwriting process begins with the

Accepted Answer

A) agent. 
B) desk underwriter. 
C) inspection report. 
D) actuary. 
A) agent. 
B) desk underwriter. 
C) inspection report. 
D) actuary.

Exam 6: Insurance Company Operations

Common sources of underwriting information for life and health insurance include all of the following EXCEPT

In a reinsurance transaction,the ceding commission is paid by

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.

Which of the following statements about claims settlement is true?

Which of the following statements about treaty reinsurance is true?

If an underwriter suspects moral hazard,the underwriter may ask an outside firm to investigate the applicant and make a detailed report to the insurer.This report is called a(n)

The unearned premium reserve of an insurer is

Which of the following statements about treaty reinsurance is true?

Jan is employed by an insurance company.She reviews applications to determine whether her company should insure the applicant.If insurable,Jan assigns the applicant to a rating category based on the applicant's degree of risk.Jan is a(n)

All of the following are methods that a property and liability insurance company can use to protect against catastrophic losses EXCEPT

The price per unit of insurance is called the

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)

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)

The underwriting process begins with the

Risk and Its Treatment

Insurance and Risk

Introduction to Risk Management

Enterprise Risk Management

Types of Insurers and Marketing Systems

Financial Operations of Insurers

Government Regulation of Insurance

Fundamental Legal Principles

Analysis of Insurance Contracts

Life Insurance

Life Insurance and Contractual Provisions

Buying Life Insurance

Annuities and Individual Retirement Accounts

Health-Care Reform;individual Health Insurance Coverages

Employee Benefits: Group Life and Health Insurance

Employee Benefits: Retirement Plans

Social Insurance

The Liability Risk

Auto Insurance

Auto Insurance Continued

Homeowners Insurance,section I

Homeowners Insurance,section II

Other Property and Liability Insurance Coverages

Commercial Property Insurance

Commercial Liability Insurance

Crime Insurance and Surety Bonds

Filters