Exam 2: Insurance and Risk

Methods by which insurers may minimize or avoid catastrophic losses include which of the following? I.The use of reinsurance II.Concentrating coverage written in one geographic region

Which of the following is an example of private insurance?

Ashley opened an all-you-can-eat buffet restaurant.The price per-person was based on what Ashley believed an average restaurant patron would consume.The restaurant began to lose money.Ashley concluded that her patrons had "above average" appetites,and were attracted to her restaurant because they could eat as much as they wanted while being charged an average price.A similar phenomenon exists in insurance markets.This problem is called

Which of the following is a basic characteristic of insurance?

LMN Insurance sells homeowners insurance.The LMN homeowners policy combines property and casualty insurance in the same contract.Insurance policies combining property and casualty coverage in the same contract are called

Insurance companies collect premiums in advance.Since the premiums collected are not needed to pay losses and expenses immediately,the funds can be loaned to business firms.Because of this fact,insurance benefits society by

Reasons why market,financial,and production risks are often uninsurable include which of the following? I.The potential to produce a catastrophic loss is great. II.The chance of loss cannot be accurately estimated.

The premium that insurance companies charge does not cover the cost of expected losses only.The premium must also cover the cost of compensating agents and other costs of doing business.The amount added to the pure premium to cover these costs is called the

Which of the following is a form of casualty insurance?

Which of the following is implied by the pooling of losses?

Which of the following statements regarding insurance and gambling is (are)true? I.Insurance is used to handle existing pure risks,while gambling creates a new speculative risk. II.Insurance usually involves risk avoidance,while gambling typically involves only risk reduction.

Adverse selection occurs

Inland marine insurance provides coverage for

Which of the following is a result of adverse selection?

From the standpoint of the insurer,which of the following is a characteristic of an ideally insurable risk?

Which of the following statements regarding insurance and hedging is (are)true? I.Insurance involves the transfer of an insurable risk while hedging handles risk that is typically uninsurable. II.Insurance transactions can reduce objective risk,while hedging typically involves only risk transfer and not risk reduction.

Which of the following types of risks is normally uninsurable by private insurers?

According to the law of large numbers,what should happen as an insurer increases the number of units insured?

The tendency for unhealthy people to seek life or health insurance at standard rates is an example of

XYZ Insurance Company writes coverage for most perils which can damage property.XYZ,however,does not write flood insurance on property located in flood plains.Which requirement of an ideally insurable risk might be violated if XYZ wrote flood insurance on property located in flood plains?