Question 1

The MIB is most helpful to which of the following professionals?

Accepted Answer

A)  Life insurance agent 
B)  Life insurance underwriter 
C)  Property insurance agent 
D)  Secret defenders of the galaxy 
A)  Life insurance agent 
B)  Life insurance underwriter 
C)  Property insurance agent 
D)  Secret defenders of the galaxy

Question 2

Which of the following is not a duty of the agent?

Accepted Answer

A)  No self-dealing at principal's expense 
B)  Forwarding all premiums to the principal 
C)  Not submitting any type of business the insurer does not want 
D)  To guarantee the insurance buyer that the insurer will write them a policy at an affordable rate 
A)  No self-dealing at principal's expense 
B)  Forwarding all premiums to the principal 
C)  Not submitting any type of business the insurer does not want 
D)  To guarantee the insurance buyer that the insurer will write them a policy at an affordable rate

Question 3

Professional reinsurance companies:

Accepted Answer

A)  engage only in reinsurance transactions 
B)  make up only a small part of the reinsurance market 
C)  are located only in the United States 
D)  also act as primary insurers 
A)  engage only in reinsurance transactions 
B)  make up only a small part of the reinsurance market 
C)  are located only in the United States 
D)  also act as primary insurers

Question 4

Jerry works as a claims adjuster. He is hired by insurance companies on a contract basis to adjust claims when they need his services. What kind of claims adjuster is Jerry?

Accepted Answer

A)  Independent 
B)  Public 
C)  Private 
D)  Direct 
A)  Independent 
B)  Public 
C)  Private 
D)  Direct

Question 5

United Insurance Company insures Travelco for fire insurance. United reinsures 40% of this exposure with Promises Reinsurance company on a pro-rata basis. If a $400,000 insured loss occurs at Travelco, Promises Reinsurance will pay United:

Accepted Answer

A)  $0 
B)  $400,000 
C)  $160,000 
D)  $240,000 
A)  $0 
B)  $400,000 
C)  $160,000 
D)  $240,000

Question 6

Direct writing insurance companies typically use independent agents to represent them in the sales process.

Accepted Answer

A) True 
 B)False

Question 7

The brokerage function does not exist in life insurance sales.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements about insurance brokers is (are) true?

Accepted Answer

A)  They legally represent the insurance company. 
B)  They have the legal power to bind the insurance company and can provide coverage for their insureds immediately. 
C)  They have the right to approach a variety of insurers when searching for a particular product or coverage. 
D)  Both A and B are true. 
A)  They legally represent the insurance company. 
B)  They have the legal power to bind the insurance company and can provide coverage for their insureds immediately. 
C)  They have the right to approach a variety of insurers when searching for a particular product or coverage. 
D)  Both A and B are true.

Question 9

When a primary insurer "cedes" coverage to a reinsurer, the process is called:

Accepted Answer

A)  reinsurance 
B)  automatic coverage 
C)  retrocession 
D)  cession 
A)  reinsurance 
B)  automatic coverage 
C)  retrocession 
D)  cession

Question 10

Which of the following is not a type of reinsurance arrangement?

Accepted Answer

A)  Facultative reinsurance 
B)  Treaty reinsurance 
C)  Pro-rata reinsurance 
D)  Cooperative reinsurance 
A)  Facultative reinsurance 
B)  Treaty reinsurance 
C)  Pro-rata reinsurance 
D)  Cooperative reinsurance

Question 11

When a $1 million insured loss occurs and $300,000 of the loss is reinsured, the policy holder of the primary company will receive:

Accepted Answer

A)  $1 million from the primary company 
B)  $1,000,000 from the primary insurer and $300,000 from the reinsurer 
C)  $700,000 from the primary insurer and $300,000 from the reinsurer 
D)  fifty percent of the loss from each company 
A)  $1 million from the primary company 
B)  $1,000,000 from the primary insurer and $300,000 from the reinsurer 
C)  $700,000 from the primary insurer and $300,000 from the reinsurer 
D)  fifty percent of the loss from each company

Question 12

Denny Crane was an agent for Mutual of Florida Insurance, but his agency contract was recently revoked. One of his clients, Shirley Schmidt, has not yet been informed that he no longer represents Mutual of Florida. She drops by his office to deliver a premium payment, which he accepts and deposits into his own account. When Mutual of Florida does not receive Shirley Schmidt's premium, it sends her a cancellation notice. Before receiving her cancellation notice, she suffers a loss and expects Mutual of Florida to pay her claim. What will likely happen in this scenario?

Accepted Answer

A)  Mutual of Florida will likely have to pay the claim. 
B)  Mutual of Florida will not have to pay the claim, but Denny Crane likely will. 
C)  Neither Mutual of Florida, nor Denny Crane, will have to pay the claim. 
D)  The claim will be paid by the court, and it will then sue Mutual of Florida. 
A)  Mutual of Florida will likely have to pay the claim. 
B)  Mutual of Florida will not have to pay the claim, but Denny Crane likely will. 
C)  Neither Mutual of Florida, nor Denny Crane, will have to pay the claim. 
D)  The claim will be paid by the court, and it will then sue Mutual of Florida.

Question 13

Peggy's insurance agent, Skip Towne, convinces her to replace her existing health insurance policy with one that he claims is better. Peggy tells him that she will be glad to replace the policy if the coverage provided under the new one is the same or better than that provided by the existing policy. Skip assures her that coverage is equal or better under the new contract, so she changes policies. Three months later, when she becomes pregnant, the insurer denies all her claims for benefits. At that time, Peggy learns that her new policy does not provide maternity benefits, although her previous policy did. Based on information contained in the text, who should Peggy hold legally responsible for her lack of coverage?

Accepted Answer

A)  Skip Towne 
B)  Her new insurer 
C)  Her previous insurer 
D)  The government 
A)  Skip Towne 
B)  Her new insurer 
C)  Her previous insurer 
D)  The government

Question 14

What is the difference between an agent and a broker?

Accepted Answer

Both agents and brokers are controlled b

Question 15

Simpson is an employee of United of Nowhere Insurance. He is also an agent for them. Based on these facts, what type of insurance company MUST United of Nowhere be?

Accepted Answer

A)  Direct writer 
B)  Life and health 
C)  Stock 
D)  Property and casualty 
A)  Direct writer 
B)  Life and health 
C)  Stock 
D)  Property and casualty

Question 16

The primary difference between an insurance agent and an insurance broker is:

Accepted Answer

A)  their compensation scheme 
B)  the parties they each legally represent 
C)  the fringe benefits their employers provide 
D)  there is no practical or legal difference between them, other than their titles. 
A)  their compensation scheme 
B)  the parties they each legally represent 
C)  the fringe benefits their employers provide 
D)  there is no practical or legal difference between them, other than their titles.

Question 17

The first step in the underwriting process is:

Accepted Answer

A)  the desk underwriter review 
B)  the agent's field appraisal 
C)  the general agent's confidential report 
D)  the inspection report from Equifax or similar investigator 
A)  the desk underwriter review 
B)  the agent's field appraisal 
C)  the general agent's confidential report 
D)  the inspection report from Equifax or similar investigator

Question 18

Reinsurance transactions do not occur in life insurance.

Accepted Answer

A) True 
 B)False

Question 19

If an applicant for insurance informs his broker of all material facts regarding the risk, and the broker does not pass those facts along to the insurer, it's possible that the insurer can legally deny any subsequent claim.

Accepted Answer

A) True 
 B)False

Question 20

Quaniqua is an insurance agent who sells the products of over 20 different insurance companies. What type of agent is she?

Accepted Answer

A)  Exclusive 
B)  Direct-writing 
C)  Independent 
D)  Soliciting 
A)  Exclusive 
B)  Direct-writing 
C)  Independent 
D)  Soliciting

Exam 8: Insurance Functions

The MIB is most helpful to which of the following professionals?

Which of the following is not a duty of the agent?

Professional reinsurance companies:

Jerry works as a claims adjuster. He is hired by insurance companies on a contract basis to adjust claims when they need his services. What kind of claims adjuster is Jerry?

United Insurance Company insures Travelco for fire insurance. United reinsures 40% of this exposure with Promises Reinsurance company on a pro-rata basis. If a $400,000 insured loss occurs at Travelco, Promises Reinsurance will pay United:

Direct writing insurance companies typically use independent agents to represent them in the sales process.

The brokerage function does not exist in life insurance sales.

Which of the following statements about insurance brokers is (are) true?

When a primary insurer "cedes" coverage to a reinsurer, the process is called:

Which of the following is not a type of reinsurance arrangement?

When a $1 million insured loss occurs and $300,000 of the loss is reinsured, the policy holder of the primary company will receive:

What is the difference between an agent and a broker?

Simpson is an employee of United of Nowhere Insurance. He is also an agent for them. Based on these facts, what type of insurance company MUST United of Nowhere be?

The primary difference between an insurance agent and an insurance broker is:

The first step in the underwriting process is:

Reinsurance transactions do not occur in life insurance.

If an applicant for insurance informs his broker of all material facts regarding the risk, and the broker does not pass those facts along to the insurer, it's possible that the insurer can legally deny any subsequent claim.

Quaniqua is an insurance agent who sells the products of over 20 different insurance companies. What type of agent is she?

Introduction to Enterprise Risk Management and Insurance

Risk Identification

Risk Assessment and Pooling

Risk-Handling Techniques: Loss Control, Risk Transfer, and Loss Financing

Risk-Handling Techniques: Diversification and Hedging

Fundamentals of Insurance

Insurable Perils and Insuring Organizations

Insurance Markets: Economics and Issues

Insurance Regulation

Insurance Contracts

The Personal Auto Policy

Homeowners Insurance

Professional Financial Planning

Life Insurance Policies

Standard Life Insurance Contract Provisions and Options

Annuities

Health Insurance and Disability Income

Employee Benefits

Social Security

Unemployment and Workers Compensation Insurance

Commercial Property Insurance

Commercial Liability Insurance

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