Question 1

The financial services field is currently experiencing consolidation and convergence.If both of these trends continue,in the future we should observe

Accepted Answer

A) fewer financial institutions offering a narrower range of financial services products. 
B) fewer financial institutions offering a wider range of financial services products. 
C) more financial institutions offering a narrower range of financial services products. 
D) more financial institutions offering a wider range of financial services products.

Question 2

Why are some mutual insurers referred to as "assessment mutuals"?

Accepted Answer

A) They charge low premiums because the loss exposures of their insureds are thoroughly assessed before a policy is written. 
B) They are noted for being very thorough in their assessment of investment opportunities. 
C) They are assessed for state premium taxes only if they make a profit. 
D) They can assess policyowners if premiums are insufficient to pay losses and expenses.

Question 3

Which of the following statements about the sale of property and liability insurance through the direct response system is (are)true?
I.Selling expenses are higher because market segmentation tends to be less precise than with other marketing methods.
II.It is the most appropriate system for selling complex products.

Accepted Answer

A) I only 
B) II only 
C) both I and II 
D) neither I nor II

Question 4

Which of the following statements is (are)true with respect to the financial services industry?
I.The number of firms operating in the industry continues to increase at a high rate.
II.The Financial Modernization Act of 1999 permits financial institutions to compete in other financial markets outside their core business area.

Accepted Answer

A) I only 
B) II only 
C) both I and II 
D) neither I nor II

Question 5

The leaders of a religious group decided to start a life insurance organization to insure members of the religious group.The insurer will operate as a nonprofit organization,thus receiving favorable tax treatment.The insurer formed will be a

Accepted Answer

A) health maintenance organization. 
B) stock insurer. 
C) fraternal insurer. 
D) reciprocal exchange.

Question 6

In 2008,Liberty Mutual Insurance Company acquired Safeco Insurance Company.This acquisition demonstrates which financial services industry trend?

Accepted Answer

A) convergence 
B) demutualization 
C) mass merchandising 
D) consolidation

Question 7

All of the following statements about the independent agency system are true EXCEPT

Accepted Answer

A) Agents are often authorized to adjust small claims. 
B) Agents are compensated on the basis of commissions. 
C) The insurer rather than the agent owns the renewal rights to the business. 
D) The agent is an independent business person who represents several insurers.

Question 8

All of the following statements about fraternal insurers are true EXCEPT

Accepted Answer

A) They are a form of mutual insurer. 
B) They specialize in writing property and liability insurance. 
C) They enjoy tax advantages because of their nonprofit or charitable status. 
D) They market their coverage to members of a social organization or religious group.

Question 9

One type of insurer is a community-oriented health insurer.In most states,this insurer is set-up as a non-profit organization that provides coverage for hospital services,physicians' and surgeons' fees,and other medical services.This type of insurer is called a

Accepted Answer

A) stock insurer. 
B) captive insurer. 
C) health maintenance organization (HMO). 
D) Blue Cross/Blue Shield Plan.

Question 10

Advantages of the direct response system for marketing life insurance include which of the following?
I.Advertising can be specifically directed to selected markets.
II.Complex products can be easily sold.

Accepted Answer

A) I only 
B) II only 
C) both I and II 
D) neither I nor II

Question 11

Which of the following statements about stock insurers is true?

Accepted Answer

A) They issue assessable policies. 
B) They are not permitted to write property and liability insurance. 
C) Stockholders bear any losses and share in any profits. 
D) They are owned by their policyowners.

Question 12

Which of the following statements about mutual insurers is true?

Accepted Answer

A) They are legally organized as partnerships. 
B) They have a board of directors which is selected by state insurance departments. 
C) They are owned by their stockholders. 
D) They may pay dividends to their policyowners.

Question 13

Which of the following statements about a reciprocal exchange is (are)true?
I.It usually specializes in health insurance.
II.It is an unincorporated mutual insurance company.

Accepted Answer

A) I only 
B) II only 
C) both I and II 
D) neither I nor II

Question 14

Scott works in property and liability insurance marketing.He legally represents insurance purchasers,rather than insurance companies.Scott is paid a commission on the insurance placed with insurers.Scott is a(n)

Accepted Answer

A) exclusive agent. 
B) direct writer. 
C) branch manager. 
D) insurance broker.

Question 15

Some investors decided to start an insurance company.Each investor contributed $50,000 to raise the capital required to charter a new company.Each investor received an ownership interest in the company.The company will raise additional capital by selling ownership rights to other investors.Under this type of organization,the customer and owner functions are separate.This type of insurer is called a

Accepted Answer

A) stock company. 
B) reciprocal exchange. 
C) fraternal company. 
D) mutual company.

Question 16

The demutualization process is expensive and time consuming.As an alternative to demutualization,many states have enacted legislation allowing a mutual company to reorganize as a company that directly or indirectly controls another insurer.The other insurer is a stock company that can issue additional shares of stock to raise capital.The reorganized company is called a

Accepted Answer

A) captive insurance company. 
B) conglomerate. 
C) mutual holding company. 
D) stock holding company.

Question 17

Salespersons of a direct writer are considered to be

Accepted Answer

A) independent agents. 
B) independent contractors. 
C) employees. 
D) brokers.

Question 18

RST Insurance is an interesting company.It doesn't have any agents.Instead,the company sells insurance through radio ads,telemarketers,and newspaper and magazine inserts.This distribution method is called

Accepted Answer

A) reciprocal exchange. 
B) direct response system. 
C) mass merchandising. 
D) multiple distribution system.

Question 19

Temporary evidence of insurance until a policy is actually issued is provided by a(n)

Accepted Answer

A) binder. 
B) brokerage agreement. 
C) pre-approval form. 
D) endorsement.

Question 20

Cathy just started a job with XYZ Manufacturing Company.She attended an orientation and was given a packet providing information about the various employee benefits XYZ offers.One item in the packet was a booklet and application form from an auto insurer.The insurer offers lower premiums to XYZ employees.The insurer's plan for selling individually-underwritten auto insurance to employees of XYZ Manufacturing Company is called

Accepted Answer

A) direct response. 
B) mass merchandising. 
C) personal selling. 
D) multiple marketing.

Exam 5: Types of Insurers and Marketing Systems

The financial services field is currently experiencing consolidation and convergence.If both of these trends continue,in the future we should observe

Why are some mutual insurers referred to as "assessment mutuals"?

The leaders of a religious group decided to start a life insurance organization to insure members of the religious group.The insurer will operate as a nonprofit organization,thus receiving favorable tax treatment.The insurer formed will be a

In 2008,Liberty Mutual Insurance Company acquired Safeco Insurance Company.This acquisition demonstrates which financial services industry trend?

All of the following statements about the independent agency system are true EXCEPT

All of the following statements about fraternal insurers are true EXCEPT

One type of insurer is a community-oriented health insurer.In most states,this insurer is set-up as a non-profit organization that provides coverage for hospital services,physicians' and surgeons' fees,and other medical services.This type of insurer is called a

Advantages of the direct response system for marketing life insurance include which of the following? I.Advertising can be specifically directed to selected markets. II.Complex products can be easily sold.

Which of the following statements about stock insurers is true?

Which of the following statements about mutual insurers is true?

Which of the following statements about a reciprocal exchange is (are) true? I.It usually specializes in health insurance. II.It is an unincorporated mutual insurance company.

Scott works in property and liability insurance marketing.He legally represents insurance purchasers,rather than insurance companies.Scott is paid a commission on the insurance placed with insurers.Scott is a(n)

Salespersons of a direct writer are considered to be

RST Insurance is an interesting company.It doesn't have any agents.Instead,the company sells insurance through radio ads,telemarketers,and newspaper and magazine inserts.This distribution method is called

Temporary evidence of insurance until a policy is actually issued is provided by a(n)