Insurance Company Operations

This question bank verified by Studydeets
All Questions
Filter by:
Question 1
Free
Multiple Choice

The primary function of an actuary is to

Choose correct answer/s
A

adjust claims.

B

determine premium rates.

C

negotiate reinsurance treaties.

D

invest insurance company assets.

Check answer
Question 2
Free
Multiple Choice

Insurers obtain data that can be used to determine rates from

Choose correct answer/s
A

pricing pools.

B

insurance advisory organizations.

C

banks.

D

reciprocal exchanges.

Check answer
Question 3
Free
Multiple Choice

Which of the following statements about underwriting policy is (are) true?
I)A company must establish an underwriting policy consistent with company objectives.
II)Underwriting policy is usually subjective and allows the underwriter considerable flexibility with respect to lines written and forms used.

Choose correct answer/s
A

I only

B

II only

C

both I and II

D

neither I nor II

Check answer
Question 4
Free
Multiple Choice

Which of the following statements about underwriting standards is (are) true?
I)One purpose of underwriting standards is to reduce adverse selection against the insurer.
II)Equitable rates should be charged so that each group of policyowners pays its own way in terms of losses and expenses.

Choose correct answer/s
A

I only

B

II only

C

both I and II

D

neither I nor II

Check answer
Question 5
Free
Multiple Choice

The underwriting process begins with the

Choose correct answer/s
A

agent.

B

desk underwriter.

C

inspection report.

D

actuary.

Check answer
Question 6
Multiple Choice

Common sources of underwriting information for life and health insurance include all of the following EXCEPT

Choose correct answer/s
A
the application.
B
a physical examination.
C
the Medical Information Bureau.
D
the applicant's income tax return.
To unlock the question
Question 7
Multiple Choice

If an underwriter suspects moral hazard, the underwriter may ask an outside firm to investigate the applicant and make a detailed report to the insurer. This report is called a(n)

Choose correct answer/s
A
inspection report.
B
application.
C
M.I.B. report.
D
agent's report.
To unlock the question
Question 8
Multiple Choice

One source of life and health insurance underwriting information is an organization that life and health insurance companies can join. As a member, life and health insurance companies report health impairments of applicants, and this information is shared with member companies. Although the information is shared, the underwriting decision of the member company is not disclosed. What is this organization called?

Choose correct answer/s
A
Fair Isaac Corporation (FICO)
B
Medical Information Bureau (MIB)
C
National Association of Insurance Commissioners (NAIC)
D
National Association of Mutual Insurance Companies (NAMIC)
To unlock the question
Question 9
Multiple Choice

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.

Choose correct answer/s
A
I only
B
II only
C
both I and II
D
neither I nor II
To unlock the question
Question 10
Multiple Choice

Which of the following is a function of the marketing department of an insurance company?

Choose correct answer/s
A
to settle claims after a loss has been reported
B
to determine the cost of products the insurer sells
C
to make final underwriting decisions
D
to identify production goals
To unlock the question
Question 11
Multiple Choice

Which of the following statements about claim settlement is (are) true?
I)The fair payment of claims requires an insurer to adopt a very liberal claims policy.
II)To prevent lawsuits, an insurer should provide no personal assistance to a claimant other than that which is required by contractual obligations.

Choose correct answer/s
A
I only
B
II only
C
both I and II
D
neither I nor II
To unlock the question
Question 12
Multiple Choice

Which of the following statements about claims settlement is true?

Choose correct answer/s
A
Agents are never authorized to settle claims.
B
Independent adjustors may be used in a geographic area where the volume of business is too low for an insurer to have its own adjustors.
C
A public adjustor is a salaried employee who works for one insurer.
D
A staff claims representative is hired by a policyholder to represent him or her if the policyholder does not agree with the claim settlement offered by the insurer.
To unlock the question
Question 13
Multiple Choice

Morgan was hired by an insurance company after she graduated from college. Upon completion of a training program, Morgan was assigned to a territory where she adjusts claims of the insurer's policyowners. Morgan is a(n)

Choose correct answer/s
A
public adjustor.
B
staff claims representative.
C
agent.
D
independent adjustor.
To unlock the question
Question 14
Multiple Choice

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

Choose correct answer/s
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.
To unlock the question
Question 15
Multiple Choice

Which of the following statements about reinsurance is true?

Choose correct answer/s
A
A reinsurer may not purchase reinsurance.
B
The reinsurer is the first insurer that provides claims services to the insured after a loss occurs.
C
The amount of insurance transferred to a reinsurer is called the net retention.
D
The insurer transferring business to a reinsurer is called the ceding company.
To unlock the question
Question 16
Multiple Choice

All of the following are reasons for a primary insurer to use reinsurance EXCEPT

Choose correct answer/s
A
to increase the unearned premium reserve.
B
to increase underwriting capacity.
C
to protect against catastrophic losses.
D
to stabilize profits.
To unlock the question
Question 17
Multiple Choice

The unearned premium reserve of an insurer is

Choose correct answer/s
A
an asset representing the investments made with premium income.
B
a liability representing the unearned portion of gross premiums on outstanding policies.
C
a liability representing claims that have been filed, but not yet paid.
D
the portion of the insurer's net worth belonging to policyowners.
To unlock the question
Question 18
Multiple Choice

A reinsurance contract that is entered into on a case-by-case basis after an application for insurance is received by a primary insurer is called

Choose correct answer/s
A
a reinsurance pool.
B
automatic treaty reinsurance.
C
retrocession.
D
facultative reinsurance.
To unlock the question
Question 19
Multiple Choice

Which of the following statements about treaty reinsurance is true?

Choose correct answer/s
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.
To unlock the question
Question 20
Multiple Choice

Which of the following statements about treaty reinsurance is true?

Choose correct answer/s
A
Under a surplus-share treaty, 100 percent of the ceding insurer's liability must be transferred to the reinsurer.
B
Using a quota-share treaty increases the ceding insurer's unearned premium reserve.
C
Under an excess-of-loss treaty, the reinsurer pays losses in full only if they are less than the ceding insurer's retention limit.
D
Using a reinsurance pool provides financial capacity to write large amounts of insurance.
To unlock the question