Question 1

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. B

Question 2

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. B

Question 3

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

Accepted Answer

A)  general agent. 
B)  actuary. 
C)  Certified Financial Planner. 
D)  special agent. 
A)  general agent. 
B)  actuary. 
C)  Certified Financial Planner. 
D)  special agent. D

Question 4

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 5

State insurance regulators require LMN Life Insurance Company to maintain a separate account. The assets in the separate account would support the liabilities for which of the following products?

Accepted Answer

A)  term life insurance 
B)  whole life insurance 
C)  fixed annuity 
D)  variable life insurance 
A)  term life insurance 
B)  whole life insurance 
C)  fixed annuity 
D)  variable life insurance

Question 6

All of the following statements about the settlement of a claim are true EXCEPT

Accepted Answer

A)  The insurance policy usually has a provision specifying how a notice of loss is to be made to the insurance company. 
B)  One step in the investigation of a claim is to determine whether the policy was in force when the loss occurred. 
C)  The adjustor must file the proof of loss, which is a sworn statement supporting his or her decision regarding a claim. 
D)  A policy provision may determine how disputes over claim settlements are resolved. 
A)  The insurance policy usually has a provision specifying how a notice of loss is to be made to the insurance company. 
B)  One step in the investigation of a claim is to determine whether the policy was in force when the loss occurred. 
C)  The adjustor must file the proof of loss, which is a sworn statement supporting his or her decision regarding a claim. 
D)  A policy provision may determine how disputes over claim settlements are resolved.

Question 7

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 8

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 9

Easy Pay Insurance Company may require insureds who suffer a loss to submit a sworn statement to substantiate that a loss occurred and to describe the conditions under which the loss occurred. This sworn statement is called a(n)

Accepted Answer

A)  binder. 
B)  proof of loss. 
C)  inspection report. 
D)  notice of loss. 
A)  binder. 
B)  proof of loss. 
C)  inspection report. 
D)  notice of loss.

Question 10

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 11

Amy heads the legal staff of a large property and liability insurance company. Amy's staff is likely involved in which of the following activities?

Accepted Answer

A)  reviewing investment options for the insurer's assets 
B)  reviewing language and policy provisions in insurance contracts 
C)  calculating premiums to be charged for the insurer's products 
D)  reviewing applications to determine if the company should insure the risk 
A)  reviewing investment options for the insurer's assets 
B)  reviewing language and policy provisions in insurance contracts 
C)  calculating premiums to be charged for the insurer's products 
D)  reviewing applications to determine if the company should insure the risk

Question 12

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 13

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

Accepted Answer

A)  a reinsurance pool. 
B)  automatic treaty reinsurance. 
C)  retrocession. 
D)  facultative reinsurance. 
A)  a reinsurance pool. 
B)  automatic treaty reinsurance. 
C)  retrocession. 
D)  facultative reinsurance.

Question 14

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

Accepted Answer

A)  to settle claims after a loss has been reported 
B)  to determine the cost of products the insurer sells 
C)  to make final underwriting decisions 
D)  to identify production goals 
A)  to settle claims after a loss has been reported 
B)  to determine the cost of products the insurer sells 
C)  to make final underwriting decisions 
D)  to identify production goals

Question 15

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 16

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 17

Mark has been an underwriter for 20 years. An application he recently reviewed looked odd 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)

Accepted Answer

A)  agent's report. 
B)  binder. 
C)  physical inspection. 
D)  inspection report. 
A)  agent's report. 
B)  binder. 
C)  physical inspection. 
D)  inspection report.

Question 18

Functions of an insurance company's legal department include which of the following?
I.Lobbying for legislation favorable to the insurance industry.
II.Drafting policy provisions.

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 19

Insurers obtain data that can be used to determine rates from

Accepted Answer

A)  pricing pools. 
B)  insurance advisory organizations. 
C)  banks. 
D)  reciprocal exchanges. 
A)  pricing pools. 
B)  insurance advisory organizations. 
C)  banks. 
D)  reciprocal exchanges.

Question 20

Which of the following statements about reinsurance is true?

Accepted Answer

A)  A reinsurer may not purchase reinsurance. 
B)  The reinsurer is the first insurer that provides claims services to the insured after a loss occurs. 
C)  The amount of insurance transferred to a reinsurer is called the net retention. 
D)  The insurer transferring business to a reinsurer is called the ceding company. 
A)  A reinsurer may not purchase reinsurance. 
B)  The reinsurer is the first insurer that provides claims services to the insured after a loss occurs. 
C)  The amount of insurance transferred to a reinsurer is called the net retention. 
D)  The insurer transferring business to a reinsurer is called the ceding company.

Exam 6: Insurance Company Operations

Which of the following statements about treaty reinsurance is true?

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

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

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)

State insurance regulators require LMN Life Insurance Company to maintain a separate account. The assets in the separate account would support the liabilities for which of the following products?

All of the following statements about the settlement of a claim are true EXCEPT

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.

The price per unit of insurance is called the

Easy Pay Insurance Company may require insureds who suffer a loss to submit a sworn statement to substantiate that a loss occurred and to describe the conditions under which the loss occurred. This sworn statement is called a(n)

The unearned premium reserve of an insurer is

Amy heads the legal staff of a large property and liability insurance company. Amy's staff is likely involved in which of the following activities?

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)

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

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

Which of the following statements about treaty reinsurance is true?

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

Functions of an insurance company's legal department include which of the following? I.Lobbying for legislation favorable to the insurance industry. II.Drafting policy provisions.

Insurers obtain data that can be used to determine rates from

Which of the following statements about reinsurance is true?

Risk and Its Treatment

Insurance and Risk

Introduction to Risk Management

Enterprise Risk Management and Related Topics

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 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

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