Insurance Operations

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Question 1
Free
Multiple Choice

Which of the following statements is incorrect?

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A

Insurance provides a payment to the insured under conditions specified by the insurance policy contract.

B

Individuals who are less exposed to specific conditions that cause financial damage are more likely to purchase insurance against those conditions.

C

Insurance can cause the insured to take more risks because they are protected.

D

Insurance companies employ underwriters to calculate the risk of specific insurance policies.

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Question 2
Free
Multiple Choice

Those insurance companies whose claims are ____ predictable need to maintain ____ liquidity.

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A

less; less

B

more; more

C

less; more

D

none of the above

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Question 3
Free
Multiple Choice

A ____ life insurance company is owned by its policyholders; most life insurance companies are ____ .

Choose correct answer/s
A

stock-owned; mutual

B

mutual; mutual

C

stock-owned; stock-owned

D

mutual; stock-owned

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Question 4
Free
Multiple Choice

____ insurance provides insurance for a policyholder only over a specified period.

Choose correct answer/s
A

Term

B

Whole life

C

Universal

D

A and C

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Question 5
Free
Multiple Choice

Which type of life insurance policy does not build a cash value for policyholders?

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A

whole life

B

term

C

universal life

D

All of the above build a cash value.

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Question 6
Multiple Choice

Which type of life insurance policy specifically accommodates the needs of people who need more insurance now than later?

Choose correct answer/s
A
whole life
B
term
C
decreasing term
D
universal life
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Question 7
Multiple Choice

Which type of life insurance policy can offer flexibility on the size and timing of premium payments?

Choose correct answer/s
A
whole life
B
term
C
universal life
D
decreasing term
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Question 8
Multiple Choice

Under ____ , the benefits awarded by the life insurance company to a beneficiary vary with the assets backing the policy.

Choose correct answer/s
A
whole life insurance
B
term insurance
C
variable life insurance
D
universal life insurance
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Question 9
Multiple Choice

____ is(are) not a typical source of funds for life insurance companies.

Choose correct answer/s
A
Deposit insurance premiums
B
Annuity plans
C
Investment income
D
Life and health insurance premiums
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Question 10
Multiple Choice

____ are the most popular assets of life insurance companies.

Choose correct answer/s
A
Corporate stocks and corporate debt securities
B
Treasury securities
C
Mortgages and mortgage-backed securities
D
State and local bonds
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Question 11
Multiple Choice

Which of the following is not a characteristic commonly assessed by insurance regulators to detect any problems in an insurance company?

Choose correct answer/s
A
liquidity of the asset portfolio
B
relative size of operating expenses
C
return on investment
D
All of the above are assessed by regulators.
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Question 12
Multiple Choice

The ratio of an insurance company's net profit to policyholders' surplus is called

Choose correct answer/s
A
liquidity ratio.
B
return on net worth.
C
net underwriting margin.
D
return on assets.
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Question 13
Multiple Choice

Life insurance companies can attempt to reduce their exposure to interest rate risk by

Choose correct answer/s
A
increasing their proportion of long-term assets.
B
diversifying the age distribution of their customer base.
C
increasing their proportion of short-term assets.
D
concentrating on an older age distribution of their customer base.
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Question 14
Multiple Choice

Which of the following is a difference in characteristics between life insurance companies and property and casualty insurance companies?

Choose correct answer/s
A
Property and casualty policies are longer term.
B
The type of policies offered by life insurance companies are less focused.
C
Future compensation amounts paid on property and casualty policies are more difficult to forecast.
D
Life insurance companies need to maintain a more liquid asset portfolio.
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Question 15
Multiple Choice

The most common use of funds for property and casualty insurance companies is for

Choose correct answer/s
A
corporate bonds and municipal securities.
B
Treasury bills.
C
corporate stock.
D
commercial paper.
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Question 16
Multiple Choice

____ effectively reallocates a portion of an insurance company's return and risk to other insurance companies.

Choose correct answer/s
A
Reinsurance
B
Cash flow underwriting
C
Factor insurance
D
Universal insurance
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Question 17
True/False

Individuals who are insured under a managed health care plan can usually choose any provider of health care services.

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True
False
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Question 18
Multiple Choice

____ insurance covers losses due to dishonest employees.

Choose correct answer/s
A
Key employee
B
Credit line
C
Malpractice
D
Fidelity bond
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Question 19
Multiple Choice

____ insurance covers losses due to a contract not being fulfilled.

Choose correct answer/s
A
Fidelity bond
B
Credit line
C
Surety bond
D
Business interruption
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Question 20
Multiple Choice

Which of the following is not involved in the regulation of the insurance industry?

Choose correct answer/s
A
the National Association of Insurance Commissioners (NAIC)
B
the Insurance Regulatory Information System (IRIS)
C
the Federal Deposit Insurance Corporation (FDIC)
D
All of the above are involved in the regulation of the insurance industry.
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