Question 1

An insurance company collected $31.0 million in premiums and disbursed $28 million in losses.Loss adjustment expenses amounted to $5.0 million.The firm is profitable

Accepted Answer

A)  if dividends paid to policyholders is $4 million and income generated on investments is $4 million.
B)  if dividends paid to policyholders is $10 million and income generated on investments is $14 million.
C)  if dividends paid to policyholders is $6 million and income generated on investments is $2 million.
D)  if dividends paid to policyholders is $10 million and income generated on investments is $4 million. B

Question 2

As of 2015,assets of property-casualty insurers totaled approximately ________,which was ______ of the assets of the life insurance industry.

Accepted Answer

A)  $900 billion;20 percent
B)  $1,800 billion;35 percent
C)  $4,250 billion;90 percent
D)  $5,750 billion;105 percent B

Question 3

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. A

Question 4

The primary function of insurance companies is to

Accepted Answer

A)  generate fees for the banks that sell insurance products.
B)  sell a variety of consumer investment products.
C)  protect policyholders from adverse events.
D)  assist in the transfer of wealth into the future.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

As of 2015,the primary regulator of both the life and property-casualty insurance industry is/are the

Accepted Answer

A)  state insurance commissions.
B)  NAIC.
C)  Federal Reserve.
D)  IRIS.

Question 7

The property casualty insurance industry is concentrated where a few large firms dominate the market.

Accepted Answer

A) True 
 B)False

Question 8

Annuities are popular retirement savings products because investment returns on contributions are tax-deferred.

Accepted Answer

A) True 
 B)False

Question 9

Variable universal life insurance policies

Accepted Answer

A)  have fixed premiums and a fixed benefit payout.
B)  have fixed premiums,but allow the benefit payout to vary with investment returns.
C)  have a fixed benefit payout,but allow the premium to vary with investment returns.
D)  allow both the premium and benefit payout to vary with investment returns.

Question 10

As with the life insurance industry,property-casualty firms tend to invest the majority of their assets and long-term investments.

Accepted Answer

A) True 
 B)False

Question 11

Property-casualty insurers tend to have a higher level of liquidity risk than life insurers.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Credit default swaps are a product offered by insurance companies.

Accepted Answer

A) True 
 B)False

Question 14

The process of life insurance uses risk pooling to transfer income-related uncertainties from a group of individuals to an insured individual.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is an advantage of converting from a mutual insurance company to a stockholder-controlled company?

Accepted Answer

A)  Publicly held companies have access to equity markets for additional capital for future business expansion.
B)  Mutual organizations are subject to higher regulatory standards than public companies.
C)  Ability to offer more insurance products than those allowed under mutual ownership.
D)  Publicly held insurance companies can convert to federal charters but mutual organizations cannot.

Question 16

Commercial banks sold over 25% of fixed-return annuities,an insurance product,in 2015.

Accepted Answer

A) True 
 B)False

Question 17

You start an annuity with $1million and expect to receive 12 equal payments beginning at the end of the first year.The guaranteed annual interest rate is 6 percent.The annual payments that you expect to collect are

Accepted Answer

A)  $88,333.33.
B)  $119,277.03.
C)  $59,638.51.
D)  $56,262.75.

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

As of 2015,chartering of life insurance companies can be done only at the state level.

Accepted Answer

A) True 
 B)False

Question 20

Separate accounts business only appears as a liability on a life insurer's balance sheet.

Accepted Answer

A) True 
 B)False

Exam 6: Financial Services: Insurance Companies

An insurance company collected $31.0 million in premiums and disbursed $28 million in losses.Loss adjustment expenses amounted to $5.0 million.The firm is profitable

As of 2015,assets of property-casualty insurers totaled approximately __,which was of the assets of the life insurance industry.

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

The primary function of insurance companies is to

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

As of 2015,the primary regulator of both the life and property-casualty insurance industry is/are the

The property casualty insurance industry is concentrated where a few large firms dominate the market.

Annuities are popular retirement savings products because investment returns on contributions are tax-deferred.

Variable universal life insurance policies

As with the life insurance industry,property-casualty firms tend to invest the majority of their assets and long-term investments.

Property-casualty insurers tend to have a higher level of liquidity risk than life insurers.

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

Credit default swaps are a product offered by insurance companies.

The process of life insurance uses risk pooling to transfer income-related uncertainties from a group of individuals to an insured individual.

Which of the following is an advantage of converting from a mutual insurance company to a stockholder-controlled company?

Commercial banks sold over 25% of fixed-return annuities,an insurance product,in 2015.

You start an annuity with $1million and expect to receive 12 equal payments beginning at the end of the first year.The guaranteed annual interest rate is 6 percent.The annual payments that you expect to collect are

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

As of 2015,chartering of life insurance companies can be done only at the state level.

Separate accounts business only appears as a liability on a life insurer's balance sheet.