Question 1

When a fraternal insurer began operations,it asked each member,regardless of age,to pay $20 per month to the fraternal's group life insurance plan.In exchange,each member received the same amount of life insurance.Soon younger members of the group began to drop out when they realized their premiums were subsidizing a group with a higher chance of loss.Which important underwriting principle was violated in this case?

Accepted Answer

A)  An underwriting profit should be attained.
B)  Moral hazard should be avoided.
C)  Insureds should be selected according to underwriting standards.
D)  There should be equity among policyholders.

Question 2

Factors that may result in more restrictive underwriting decisions include which of the following?
I.Inadequate rates.
II.The unavailability of reinsurance at favorable terms.

Accepted Answer

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

Question 3

Most insurance companies require their marketing representatives to submit an evaluation of the prospective insured.This important source of underwriting information is called the

Accepted Answer

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

Question 4

Which of the following statements is (are) true about life insurance company investments?
I.The majority of life insurance company general account assets are invested in bonds.
II.The majority of life insurance company separate account assets are invested in stocks.

Accepted Answer

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

Question 5

Sue double-majored in mathematics and statistics in college.She also enrolled in a number of finance courses.After graduation,she was hired by Econodeath Insurance Company.Her job is to calculate premium rates for life insurance coverages.Sue is a(n)

Accepted Answer

A)  actuary.
B)  underwriter.
C)  claims adjustor.
D)  producer.

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.

Question 7

The underwriting process begins with the

Accepted Answer

A)  agent.
B)  desk underwriter.
C)  inspection report.
D)  acceptance of the application.

Question 8

Insurers obtain data which can be used to determine rates from

Accepted Answer

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

Question 9

ABC Insurance Company entered into a reinsurance agreement with XYZ Reinsurance.Under the contract,XYZ Re has no liability unless ABC's loss ratio exceeds 75 percent for the year.XYZ Re agreed to pay all losses in excess of the 75 percent loss ratio.ABC Insurance Company is using reinsurance to

Accepted Answer

A)  stabilize profits.
B)  reduce the unearned premium reserve.
C)  provide large risk capacity.
D)  retire from a line or territory.

Question 10

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.

Exam 6: Insurance Company Operations

ABC Insurance Company entered into a reinsurance agreement with XYZ Reinsurance.Under the contract,XYZ Re has no liability unless ABC's loss ratio exceeds 75 percent for the year.XYZ Re agreed to pay all losses in excess of the 75 percent loss ratio.ABC Insurance Company is using reinsurance to

Correct Answer
verified

Most insurance companies require their marketing representatives to submit an evaluation of the prospective insured.This important source of underwriting information is called the

Correct Answer
verified

Which of the following statements is (are) true about life insurance company investments? I.The majority of life insurance company general account assets are invested in bonds. II.The majority of life insurance company separate account assets are invested in stocks.

Correct Answer
verified

Insurers obtain data which can be used to determine rates from

Correct Answer
verified

Sue double-majored in mathematics and statistics in college.She also enrolled in a number of finance courses.After graduation,she was hired by Econodeath Insurance Company.Her job is to calculate premium rates for life insurance coverages.Sue is a(n)

Correct Answer
verified

The underwriting process begins with the

Correct Answer
verified

Which of the following statements about treaty reinsurance is true?

Correct Answer
verified

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

Correct Answer
verified

Factors that may result in more restrictive underwriting decisions include which of the following? I.Inadequate rates. II.The unavailability of reinsurance at favorable terms.

Correct Answer
verified

Correct Answer
verified

Exam 6: Insurance Company Operations

ABC Insurance Company entered into a reinsurance agreement with XYZ Reinsurance.Under the contract,XYZ Re has no liability unless ABC's loss ratio exceeds 75 percent for the year.XYZ Re agreed to pay all losses in excess of the 75 percent loss ratio.ABC Insurance Company is using reinsurance to

Correct AnswerverifiedShow Answer

Most insurance companies require their marketing representatives to submit an evaluation of the prospective insured.This important source of underwriting information is called the

Correct AnswerverifiedShow Answer

Which of the following statements is (are) true about life insurance company investments? I.The majority of life insurance company general account assets are invested in bonds. II.The majority of life insurance company separate account assets are invested in stocks.

Correct AnswerverifiedShow Answer

Insurers obtain data which can be used to determine rates from

Correct AnswerverifiedShow Answer

Sue double-majored in mathematics and statistics in college.She also enrolled in a number of finance courses.After graduation,she was hired by Econodeath Insurance Company.Her job is to calculate premium rates for life insurance coverages.Sue is a(n)

Correct AnswerverifiedShow Answer

The underwriting process begins with the

Correct AnswerverifiedShow Answer

Which of the following statements about treaty reinsurance is true?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Factors that may result in more restrictive underwriting decisions include which of the following? I.Inadequate rates. II.The unavailability of reinsurance at favorable terms.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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verified

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