Question 1

In 1933, Congress passed the Glass-Steagall Act. The act separated ________.

Accepted Answer

A)  deregulation of the financial system, internationalization of the insurance industry, and demutualization. 
B)  commercial banking, investment banking, and insurance. 
C)  deregulation of the financial system, commercial banking, and demutualization. 
D)  commercial banking, investment banking, and deregulation of the financial system. 
A)  deregulation of the financial system, internationalization of the insurance industry, and demutualization. 
B)  commercial banking, investment banking, and insurance. 
C)  deregulation of the financial system, commercial banking, and demutualization. 
D)  commercial banking, investment banking, and deregulation of the financial system.

Question 2

Liability insurance insures against the inability of employed persons to earn an income in either their own occupation or any occupation.

Accepted Answer

A) True 
 B)False

Question 3

Explain how insurance companies are regulated and rated?

Accepted Answer

According to the McCarran Ferguson Act o

Question 4

Until the past decade, the major type of health insurance available was ________ insurance.

Accepted Answer

A)  medical 
B)  indemnity 
C)  reimbursement 
D)  well-being 
A)  medical 
B)  indemnity 
C)  reimbursement 
D)  well-being

Question 5

Insurance companies provide insurance policies for which the policyholder pays insurance ________. Insurance companies promise to pay specified sums contingent on the occurrence of future events and thus are ________. The major part of the insurance company ________ is deciding which applications for insurance they should accept and which ones they should reject. Insurance companies have two sources of income: the initial underwriting income and the ________.

Accepted Answer

A)  underwriting process; premiums; risk bearers; investment income 
B)  investment income; premiums; risk bearers; underwriting process 
C)  premiums; risk bearers; underwriting process; investment income 
D)  payments; risk bearers; investment process; insurance income 
A)  underwriting process; premiums; risk bearers; investment income 
B)  investment income; premiums; risk bearers; underwriting process 
C)  premiums; risk bearers; underwriting process; investment income 
D)  payments; risk bearers; investment process; insurance income

Question 6

Which of the below is TRUE of a mutual insurance company?

Accepted Answer

A)  Mutual insurance companies have stock and external owners. 
B)  While stock insurance companies have two constituencies, their stockholders and their policyholders, mutual insurance companies only have one, since their policyholders and their owners are the same. 
C)  The owners, and not the policyholders, care primarily or even solely about the performance on their insurance policies, notably the company's ability to pay on the policy. 
D)  Traditionally the smallest insurers have been mutual, but recently there have been many demutualizations, that is, conversions by mutual companies to stock companies. 
A)  Mutual insurance companies have stock and external owners. 
B)  While stock insurance companies have two constituencies, their stockholders and their policyholders, mutual insurance companies only have one, since their policyholders and their owners are the same. 
C)  The owners, and not the policyholders, care primarily or even solely about the performance on their insurance policies, notably the company's ability to pay on the policy. 
D)  Traditionally the smallest insurers have been mutual, but recently there have been many demutualizations, that is, conversions by mutual companies to stock companies.

Question 7

For ________, the risk insured against is the death of the "insured."

Accepted Answer

A)  life insurance 
B)  health insurance 
C)  property insurance 
D)  automobile insurance 
A)  life insurance 
B)  health insurance 
C)  property insurance 
D)  automobile insurance

Question 8

The passage of the Financial Modernization Act of 1999 accelerated the convergence of ________.

Accepted Answer

A)  insurance, investment, and pension products. 
B)  insurance, savings, and health care products. 
C)  health care, investment, and pension products. 
D)  insurance, health care, and pension products. 
A)  insurance, investment, and pension products. 
B)  insurance, savings, and health care products. 
C)  health care, investment, and pension products. 
D)  insurance, health care, and pension products.

Question 9

The performance of the insurance product depends almost solely on the performance of the portfolio selected without adjusting for the fees or expenses of the insuring company.

Accepted Answer

A) True 
 B)False

Question 10

The third element of an insurance company is the distribution component or the sales force. There are different types of distribution forces. Describe two of these forces.

Accepted Answer

First, there are the agents who are asso

Question 11

Globalization has occurred in many industries, but not in the insurance industry.

Accepted Answer

A) True 
 B)False

Question 12

Which of the below statements is FALSE?

Accepted Answer

A)  Companies that provide insurance in both life and long-term care insurance products are called multiline insurance companies. 
B)  Health insurance has predominately, but not completely, separated from life insurance and become a separate industry. 
C)  Life insurance companies have also increasingly offered investment-oriented products, both annuities, variable and fixed, and mutual funds. 
D)  Disability insurance is now sold primarily by pure disability companies but is also offered by some life insurance companies. 
A)  Companies that provide insurance in both life and long-term care insurance products are called multiline insurance companies. 
B)  Health insurance has predominately, but not completely, separated from life insurance and become a separate industry. 
C)  Life insurance companies have also increasingly offered investment-oriented products, both annuities, variable and fixed, and mutual funds. 
D)  Disability insurance is now sold primarily by pure disability companies but is also offered by some life insurance companies.

Question 13

The performance of separate account products depends on the performance of the ________ portfolio chosen and is not affected by the performance of the overall insurance company's ________ portfolio.

Accepted Answer

A)  separate account; general account 
B)  general account; separate account 
C)  separate account; liability account 
D)  mutual account; general account 
A)  separate account; general account 
B)  general account; separate account 
C)  separate account; liability account 
D)  mutual account; general account

Question 14

The key distinction between life insurance and property and casualty insurance companies lies in the difficulty of projecting whether or not a policyholder will be paid off and how much the payment will be.

Accepted Answer

A) True 
 B)False

Question 15

Under what condition can a participating policy pay a higher dividend than the guaranteed minimum?

Accepted Answer

A participating policy pays a

Question 16

Whereas a life insurance company provides the guarantee of a minimum dividend on its term life policies, the policies' actual dividend may increase if the investment portfolio performs well.

Accepted Answer

A) True 
 B)False

Question 17

Few insurance companies use independent brokers or producer groups to distribute their products rather than their own agents.

Accepted Answer

A) True 
 B)False

Exam 6: Insurance Companies

In 1933, Congress passed the Glass-Steagall Act. The act separated ________.

Liability insurance insures against the inability of employed persons to earn an income in either their own occupation or any occupation.

Explain how insurance companies are regulated and rated?

Until the past decade, the major type of health insurance available was ________ insurance.

Which of the below is TRUE of a mutual insurance company?

For ________, the risk insured against is the death of the "insured."

The passage of the Financial Modernization Act of 1999 accelerated the convergence of ________.

The performance of the insurance product depends almost solely on the performance of the portfolio selected without adjusting for the fees or expenses of the insuring company.

The third element of an insurance company is the distribution component or the sales force. There are different types of distribution forces. Describe two of these forces.

Globalization has occurred in many industries, but not in the insurance industry.

Which of the below statements is FALSE?

The performance of separate account products depends on the performance of the ________ portfolio chosen and is not affected by the performance of the overall insurance company's ________ portfolio.

The key distinction between life insurance and property and casualty insurance companies lies in the difficulty of projecting whether or not a policyholder will be paid off and how much the payment will be.

Under what condition can a participating policy pay a higher dividend than the guaranteed minimum?

Whereas a life insurance company provides the guarantee of a minimum dividend on its term life policies, the policies' actual dividend may increase if the investment portfolio performs well.

Few insurance companies use independent brokers or producer groups to distribute their products rather than their own agents.

Introduction

Financial Institutions, Financial Intermediaries, and Asset Management Firms

Depository Institutions: Activities and Characteristics

The U.S. Federal Reserve and the Creation of Money

Monetary Policy in the United States

Investment Companies and Exchange Traded Funds

Pension Funds

Properties and Pricing of Financial Assets

The Level and Structure of Interest Rates

The Term Structure of Interest Rates

Risk/Return and Asset Pricing Models

Primary Markets and the Underwriting of Securities

Secondary Markets

Treasury and Agency Securities Markets

Municipal Securities Markets

Markets for Common Stock: The Basic Characteristics

Markets for Common Stock: Structure and Organization

Markets for Corporate Senior Instruments: I

Markets for Corporate Senior Instruments: II

The Markets for Bank Obligations

The Residential Mortgage Market

Mortgage-Backed Securities Market

Market for Commercial Mortgage Loans and Commercial Mortgage-Backed Securities

Market for Asset-Backed Securities

Financial Futures Markets

Options Markets

Pricing of Futures and Options Contracts

The Applications of Futures and Options Contracts

OTC Interest Rate Derivatives: Forward Rate Agreements, Swaps, Caps, and Floors

Market for Credit Risk Transfer Vehicles: Credit Derivatives and Collateralized Debt Obligations

The Market for Foreign Exchange and Risk Control Instruments

Filters

The performance of separate account products depends on the performance of the portfolio chosen and is not affected by the performance of the overall insurance company's portfolio.