Question 1

Which of the following statements is true about fraternal insurers?

Accepted Answer

A) They are legally organized as stock insurers. 
B) They specialize in writing life and health insurance. 
C) They are taxed more heavily than other types of insurers because of discriminatory marketing practices. 
D) They account for the majority of life insurance in force in the United States.

Question 2

Which of the following statements about Lloyds of London (are)true?
I.The majority of the business underwritten by Lloyds of London is for unusual risks,such as valuable race horses and professional athletes.
II.Lloyds of London is a group of underwriters who underwrite insurance,not an insurance company.

Accepted Answer

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

Question 3

Big Mutual Insurance Company would like to take advantage of financial services deregulation by acquiring a bank and a stock brokerage firm.Big Mutual,however,would have trouble raising the funds needed to make these acquisitions under the mutual form of organization.Big Mutual is planning to switch from the mutual form of organization to the stock form,and to issue shares of common stock to raise capital.This change in organizational structure is called

Accepted Answer

A) mutualization. 
B) retrocession. 
C) reinsurance. 
D) demutualization.

Question 4

Which of the following statements is (are)true regarding insurance agents and insurance brokers?
I.A property and liability insurance agent has the authority to bind the insurer for certain types of coverage.
II.A licensed broker who is not a licensed agent has the legal authority to bind an insurer.

Accepted Answer

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

Question 5

Which of the following statements about life insurance marketing systems is true?

Accepted Answer

A) Insurance brokers are not permitted to sell life insurance. 
B) Some exclusive agents who market property and liability insurance also sell life insurance. 
C) Independent insurance agents are not permitted to market life insurance. 
D) Financial institutions such as banks are not permitted to market life insurance.

Question 6

Which of the following statements is (are)true with regard to surplus lines brokers?
I.Surplus lines brokers are retail producers who deal directly with insurance consumers.
II.Surplus lines brokers do have authority to bind insurers.

Accepted Answer

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

Question 7

RST Insurance Company does not 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 8

A plan for selling individually underwritten property and liability insurance to members of a group is called

Accepted Answer

A) direct response. 
B) multiple distribution. 
C) niche marketing. 
D) mass merchandising.

Question 9

Intermediaries who are licensed as agents and/or brokers who sell most insurance policies are called

Accepted Answer

A) producers. 
B) surplus lines brokers. 
C) direct writers. 
D) underwriters.

Question 10

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) financial institution distribution. 
D) multiple marketing.

Question 11

Which of the following statements is (are)true about savings bank life insurance (SBLI)?
I.Each depositor at the savings bank receives life insurance equal to his or her savings account balance.
II.The goal of SBLI is to provide low-cost life insurance to consumers.

Accepted Answer

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

Question 12

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 13

ABC Term Life Insurance Company uses an interesting marketing system-it has no agents.Instead,the company markets its coverages through television and radio ads,newspaper inserts,and the Internet.The type of marketing system that ABC Term Life Insurance Company uses is called the

Accepted Answer

A) mass merchandising system. 
B) mixed marketing system. 
C) direct response system. 
D) worksite marketing system.

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

A reciprocal exchange is managed by a corporation that is authorized to collect premiums,pay losses,invest funds,seek new members,and perform other functions.This corporate manager is called a(n)

Accepted Answer

A) holding company. 
B) attorney-in-fact. 
C) resident agent. 
D) captive manager.

Question 16

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 policyholders if premiums are insufficient to pay losses and expenses.

Question 17

The difference between a retail and a wholesale insurance producer is

Accepted Answer

A) retail producers deal in personal insurance lines,wholesale producers deal in commercial lines. 
B) retail producers are compensated through a salary,wholesale producers are compensated through commissions. 
C) retail producers deal directly with insurance purchasers,wholesale producers do not deal with the end consumer of insurance. 
D) retail producers sell property and liability insurance,wholesaler producers sell life and health insurance.

Question 18

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 19

R.I.P.Company manufactures herbicide and pesticide.The company had difficulty finding affordable liability insurance.R.I.P.established its own insurance company based in Bermuda for the purpose of insuring R.I.P.'s loss exposures.The company that R.I.P.formed is called a

Accepted Answer

A) captive insurer. 
B) reciprocal insurer. 
C) fraternal insurer. 
D) holding company.

Question 20

Under one life insurance marketing system,agents conduct sales interviews at the workplace with the approval of the management of the business.There are few direct costs to the employer,and this marketing system is especially appropriate for low-income and middle-income workers.This life insurance marketing system is called the

Accepted Answer

A) direct response system. 
B) worksite marketing system. 
C) independent agency system. 
D) personal producing general agency system.

Exam 5: Types of Insurers and Marketing Systems

Which of the following statements is true about fraternal insurers?

Which of the following statements about life insurance marketing systems is true?

Which of the following statements is (are) true with regard to surplus lines brokers? I.Surplus lines brokers are retail producers who deal directly with insurance consumers. II.Surplus lines brokers do have authority to bind insurers.

RST Insurance Company does not have any agents.Instead,the company sells insurance through radio ads,telemarketers,and newspaper and magazine inserts.This distribution method is called

A plan for selling individually underwritten property and liability insurance to members of a group is called

Intermediaries who are licensed as agents and/or brokers who sell most insurance policies are called

Which of the following statements is (are) true about savings bank life insurance (SBLI) ? I.Each depositor at the savings bank receives life insurance equal to his or her savings account balance. II.The goal of SBLI is to provide low-cost life insurance to consumers.

ABC Term Life Insurance Company uses an interesting marketing system-it has no agents.Instead,the company markets its coverages through television and radio ads,newspaper inserts,and the Internet.The type of marketing system that ABC Term Life Insurance Company uses is called the

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)

A reciprocal exchange is managed by a corporation that is authorized to collect premiums,pay losses,invest funds,seek new members,and perform other functions.This corporate manager is called a(n)

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

The difference between a retail and a wholesale insurance producer is

R.I.P.Company manufactures herbicide and pesticide.The company had difficulty finding affordable liability insurance.R.I.P.established its own insurance company based in Bermuda for the purpose of insuring R.I.P.'s loss exposures.The company that R.I.P.formed is called a