Question 1

Which account refers to the reserve set-aside that contains the portion of a premium that has been paid before insurance coverage has been provided.

Accepted Answer

A) Unearned premiums. 
B) Prepaid premiums. 
C) Premium reserves. 
D) Policy reserves. 
E) Outstanding premiums. 
A) Unearned premiums. 
B) Prepaid premiums. 
C) Premium reserves. 
D) Policy reserves. 
E) Outstanding premiums.

Question 2

By regulation, the payments on an annuity contract must stop when the annuity holder dies.

Accepted Answer

A) True 
 B)False

Question 3

Term life insurance includes a savings element as well as the pure insurance element.

Accepted Answer

A) True 
 B)False

Question 4

The payments from an annuity offered by a life insurance company can either begin immediately or may be deferred to start at some future date.

Accepted Answer

A) True 
 B)False

Question 5

In group life insurance, lower rates on policies can be offered because of cost economies as a result of mass administration of plans and reduced selling and commission costs.

Accepted Answer

A) True 
 B)False

Question 6

Higher uncertainty of losses forces property & casualty firms to

Accepted Answer

A) invest in more short-term assets than life insurance firms. 
B) invest in more long-term assets than life insurance firms. 
C) hold a lower percentage of capital and reserves than life insurance firms. 
D) invest in riskier equity securities than life insurance firms. 
E) conduct more separate accounts business than life insurance firms. 
A) invest in more short-term assets than life insurance firms. 
B) invest in more long-term assets than life insurance firms. 
C) hold a lower percentage of capital and reserves than life insurance firms. 
D) invest in riskier equity securities than life insurance firms. 
E) conduct more separate accounts business than life insurance firms.

Question 7

Automobile liability insurance provides protection against theft or damage to the vehicle.

Accepted Answer

A) True 
 B)False

Question 8

Adverse selection is a situation where customers who most need insurance are more likely to apply for insurance.

Accepted Answer

A) True 
 B)False

Question 9

One reason for the recent decline in the expense ratio for PC insurers is an increased dependence on independent brokers to sell and distribute insurance policies.

Accepted Answer

A) True 
 B)False

Question 10

If the loss ratio on a line of insurance is 70 percent and loss adjustment expenses are 33 percent, then the line is profitable before dividends if the ratio of

Accepted Answer

A) commissions and other expenses are 15 percent and investment yields are 10 percent. 
B) commissions and other expenses are 5 percent and investment yields are 6 percent. 
C) commissions and other expenses are 16 percent and investment yields are 20 percent 
D) commissions and other expenses are 15 percent and investment yields are 12 percent. 
E) commissions and other expenses are 6 percent and investment yields are 4 percent. 
A) commissions and other expenses are 15 percent and investment yields are 10 percent. 
B) commissions and other expenses are 5 percent and investment yields are 6 percent. 
C) commissions and other expenses are 16 percent and investment yields are 20 percent 
D) commissions and other expenses are 15 percent and investment yields are 12 percent. 
E) commissions and other expenses are 6 percent and investment yields are 4 percent.

Question 11

As currently structured, Assuris continues to collect premium payments and honour life policies and annuity obligations of a failed life and health insurance company.

Accepted Answer

A) True 
 B)False

Question 12

Calculate the annual cash flows of a $2 million, 10-year fixed-payment deferred annuity earning a guaranteed 8 percent per year if annual payments are to begin at the end of the sixth (6th) year.

Accepted Answer

A) $218, 973.21. 
B) $202, 752.97. 
C) $343, 321.86. 
D) $405, 505.95. 
E) $437, 946.42. 
A) $218, 973.21. 
B) $202, 752.97. 
C) $343, 321.86. 
D) $405, 505.95. 
E) $437, 946.42.

Question 13

Annuities are the reverse of life insurance in that they are different means of liquidating a fund.

Accepted Answer

A) True 
 B)False

Question 14

The largest property & casualty (P&C) insurance companies have become less influential over the past decade.

Accepted Answer

A) True 
 B)False

Question 15

An insurance policy that protects an individual over an entire lifetime as long as the premiums are paid is called

Accepted Answer

A) term life. 
B) universal life. 
C) whole life. 
D) endowment life. 
E) variable life. 
A) term life. 
B) universal life. 
C) whole life. 
D) endowment life. 
E) variable life.

Question 16

The policyholder can vary the premium payments on an endowment life policy.

Accepted Answer

A) True 
 B)False

Question 17

Assuris is a corporation similar to CDIC for the purpose of compensating the policyholders of failed insurers.

Accepted Answer

A) True 
 B)False

Question 18

Insurance companies have resisted the investment in technology that banks and other financial service firms have pursued.

Accepted Answer

A) True 
 B)False

Question 19

Underwriting risk faced by property & casualty insurance companies may result from unexpected

Accepted Answer

A) increases in loss rates. 
B) decreases in loss adjustment expenses. 
C) increases in investment yields. 
D) cancellations of policies by customers. 
E) increases in policy premiums. 
A) increases in loss rates. 
B) decreases in loss adjustment expenses. 
C) increases in investment yields. 
D) cancellations of policies by customers. 
E) increases in policy premiums.

Question 20

In recent years, the total assets of insurance companies in Canada have been decreasing.

Accepted Answer

A) True 
 B)False

Exam 6: Insurance Companies

Which account refers to the reserve set-aside that contains the portion of a premium that has been paid before insurance coverage has been provided.

By regulation, the payments on an annuity contract must stop when the annuity holder dies.

Term life insurance includes a savings element as well as the pure insurance element.

The payments from an annuity offered by a life insurance company can either begin immediately or may be deferred to start at some future date.

In group life insurance, lower rates on policies can be offered because of cost economies as a result of mass administration of plans and reduced selling and commission costs.

Higher uncertainty of losses forces property & casualty firms to

Automobile liability insurance provides protection against theft or damage to the vehicle.

Adverse selection is a situation where customers who most need insurance are more likely to apply for insurance.

One reason for the recent decline in the expense ratio for PC insurers is an increased dependence on independent brokers to sell and distribute insurance policies.

If the loss ratio on a line of insurance is 70 percent and loss adjustment expenses are 33 percent, then the line is profitable before dividends if the ratio of

As currently structured, Assuris continues to collect premium payments and honour life policies and annuity obligations of a failed life and health insurance company.

Calculate the annual cash flows of a $2 million, 10-year fixed-payment deferred annuity earning a guaranteed 8 percent per year if annual payments are to begin at the end of the sixth (6th) year.

Annuities are the reverse of life insurance in that they are different means of liquidating a fund.

The largest property & casualty (P&C) insurance companies have become less influential over the past decade.

An insurance policy that protects an individual over an entire lifetime as long as the premiums are paid is called

The policyholder can vary the premium payments on an endowment life policy.

Assuris is a corporation similar to CDIC for the purpose of compensating the policyholders of failed insurers.

Insurance companies have resisted the investment in technology that banks and other financial service firms have pursued.

Underwriting risk faced by property & casualty insurance companies may result from unexpected

In recent years, the total assets of insurance companies in Canada have been decreasing.

Why Are Financial Institutions Special

Deposit-Taking Institutions

Finance Companies

Securities, Brokerage, and Investment Banking

Mutual Funds, Hedge Funds, and Pension Funds

Risks of Financial Institutions

Interest Rate Risk I

Interest Rate Risk II

Credit Risk: Individual Loans

Credit Risk: Loan Portfolio and Concentration Risk

Liquidity Risk

Foreign Exchange Risk

Sovereign Risk

Market Risk

Off-Balance-Sheet Risk

Technology and Other Operational Risks

Liability and Liquidity Management

Deposit Insurance and Other Liability Guarantees

Capital Adequacy

Product and Geographic Expansion

Futures and Forwards

Options, Caps, Floors, and Collars

Swaps

Loan Sales

Securitization Index

Filters

Calculate the annual cash flows of a $2 million, 10-year fixed-payment deferred annuity earning a guaranteed 8 percent per year if annual payments are to begin at the end of the sixth (6^th) year.