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Which one of the following insurer goals creates a conflict between the profit goal and customer needs goal? - Correct Answers ✅Comply with legal requirements Which one of the following statements is true with regard to the various forms of ownership of property-casualty insurers? - Correct Answers ✅State and federal governments provide insurance for exposures that are significant but not commercially insurable. Insurer A is a proprietary insurer that acts as an insurance marketplace. Its members underwrite any insurance or reinsurance purchased, and members are primarily partnerships or corporations with limited liability. Insurer A members belong to syndicates and delegate day-to-day operations to the syndicate manager. Insurer A is which one of the following? - Correct Answers ✅An insurance exchange Juan has a poor driving record and has been unable to obtain auto liability coverage from private insurers. Auto liability coverage is mandatory in his state. Since affordability is a concern, Juan wants auto liability coverage only. Which one of the following is an option for Juan to obtain coverage? - Correct Answers ✅Obtain coverage through his state's residual market
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Insurance pools operate either as a syndicate or through - Correct Answers ✅Reinsurance. Due to the possibility of an environmental pollution exposure resulting in extensive losses, several insurers in a particular state have joined together to insure the exposure. No single insurer was willing to insure the entire risk. This insurance arrangement is typical of - Correct Answers ✅An insurance pool. Specific measures of an insurer's operational performance are the investment income ratio, overall operating ratio, and the - Correct Answers ✅Return on equity ratio. Consider the following information reported by an insurance company: Incurred losses $8 million Incurred Underwriting Expenses $2 million Incurred Loss Adjustment Expenses $4 million Net Written Premiums $24 million Earned Premiums $16 million
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Which one of the following statements is correct regarding rate regulation? - Correct Answers ✅The degree of rate variation among competing insurers can affect whether or not rates are considered excessive. Which one of the following statements is correct with regard to the regulation of insurance policies? - Correct Answers ✅Legislation might require that certain standard mandatory policy provisions appear in certain types of insurance policies. The state regulation of unfair trade practices concerning the business of insurance is required under the - Correct Answers ✅McCarran Act. To prevent insurer insolvency and unfair discrimination against an insurance consumer, insurance regulators do which one of the following? - Correct Answers ✅Constrain insurers' ability to accept, modify, or decline applications for insurance Which one of the following would likely be indicated by a notation next to a specific classification in an insurer's underwriting
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guidelines? - Correct Answers ✅The need for the underwriter to get management approval before proceeding Depending on the type of insurance, insurers use automated underwriting systems to - Correct Answers ✅Encode underwriting guidelines. Which one of the following is determined by a company's underwriting policy? - Correct Answers ✅Composition of the insurer's book of business Which one of the following is a major constraint of underwriting policy? - Correct Answers ✅Reinsurance All of the following statements are true regarding the factors affecting the formation of an insurer's underwriting policy, EXCEPT: - Correct Answers ✅The higher an insurer's premium-to- surplus ratio, the greater its ability to expand premium writings. Which one of the following statements is correct with regard to underwriting guidelines? - Correct Answers ✅Compliance with underwriting guidelines ensures selection of loss exposures commensurate with planned rate levels.
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Which one of the following statements is correct with respect to premium auditing? - Correct Answers ✅NCCI rules specify audit requirements and restrict classification changes. A crucial responsibility of the premium auditing function is to classify insured exposures correctly. Underwriting must establish the classifications - Correct Answers ✅When the policy is issued. Most insurers give some producers the authority to pay claims up to a certain amount. In this role, producers function much like an - Correct Answers ✅Inside claim representative. Supervisors and managers often use a diary or suspense when handling claims as - Correct Answers ✅Reminder systems to review claim files. Liability policies cover insureds for compensatory damages an insured owes to a third party. Compensatory damages normally covered by the policy include - Correct Answers ✅Pain and suffering and out-of-pocket expenses claimed up to the policy limit.
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To determine if a person is a named "insured" under a policy, the claims representative would generally need to review - Correct Answers ✅The Declarations section and Definitions section. Benjamin has his home insured with Westfork Mutual under an HO-3 policy for $100,000. He is the named insured on the policy. There are three other residents of the home: Maria, Benjamin's mother; Daniel, his nephew; and Cian, a family friend. An accidental fire causes damage to the home and to personal property of all four occupants. Benjamin reports the loss to Westfork and Fatima, a claim representative, is assigned the claim. Which one of the following will most likely be Fatima's principal concern when analyzing coverage for the loss? - Correct Answers ✅Whether Maria's, Daniel's, and Cian's property would be covered Which one of the following statements is correct regarding actuarial services? - Correct Answers ✅Regulators sometimes require insurers to provide a consulting actuary's opinion verifying the accuracy and reasonableness of the staff actuaries' work. Given the following data and using the loss ratio ratemaking method, calculate the insurance rate change (rounded). Expected loss ratio63% Actual loss ratio55% Incurred losses$600,000 Earned premium$1,250,000 Expenses45% -
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accumulation of smaller losses from a single event. In liability insurance, these fluctuations are controlled by using - Correct Answers ✅Only basic limit losses. Liability insurance coverage is provided at various limits of coverage. Which one of the following statements is true regarding charges to increase limits above the basic limit? - Correct Answers ✅Higher limits can require a portion of the coverage to be reinsured, and the additional expense must be included in the rate. The purpose of loss reserve analysis is to determine whether the carried loss and loss adjustment expense reserves can be expected to adequately cover the losses that have been incurred but not yet paid. Which one of the following would participate in loss reserve analysis on behalf of potential investors or creditors? - Correct Answers ✅Rating agencies The main components of an insurer's bulk (or aggregate) loss reserves are reserves for unreported claims plus - Correct Answers ✅Reserves for losses that have inadequate case reserves and reserves for claims that have settled and then reopened.
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Customer Marna reported a slip-and-fall accident to a store owner who denied responsibility stating she should have been aware of the condition of the premises. Nine months later, Marna sued the store owner for $30,000 related to her injuries. The insurer was not aware of the incident until legal action was pursued. Prior to the legal action, the insurer would likely have used which one of the following types of loss reserves to account for this claim? - Correct Answers ✅Pure incurred but not reported loss reserves Reinsurance is best described as - Correct Answers ✅An agreement by a reinsurer to indemnify a primary insurer for losses. A primary insurer is able to obtain surplus relief through reinsurance by - Correct Answers ✅Receiving ceding commissions to offset policy acquisition expenses. All of the following are sources of reinsurance, EXCEPT: - Correct Answers ✅The Brokers & Reinsurance Markets Association (BRMA) Which one of the following statements is correct regarding treaty reinsurance? - Correct Answers ✅A long-term relationship with a reinsurer usually enables primary insurers to consistently fulfill producers' requests to place insurance with them.
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on each insurance policy; and is triggered when a loss on a policy exceeds the attachment point? - Correct Answers ✅Per policy States Insurer has a $1,200,000 xs $200,000 per policy excess of loss treaty with Coastal Reinsurer. States sustains the following losses: Policy 1: $180,000Policy 2: $400,000Policy 3: $1,500, How much will States Insurer retain for the loss under Policy 3? - Correct Answers ✅States Insurer will retain $300,000 for the loss under Policy 3—Of the total $1,500,000 loss, $1,200,000 is reinsured, leaving $300,000 retained. A key characteristic that distinguishes finite risk reinsurance from other types of reinsurance is that finite risk reinsurance - Correct Answers ✅Transfers a limited amount of risk to the reinsurer. Which one of the following is true regarding sidecar arrangements as an alternative to traditional and non-traditional reinsurance? - Correct Answers ✅Under these arrangements, the primary insurer charges a ceding commission and may receive a profit commission if the book of business is profitable.
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Information technology (IT) decision-support capabilities can help people make better business decisions. Which one of the following statements is correct with respect to IT decision- support? - Correct Answers ✅Decision-support applications produce results quickly and they incorporate business rules with knowledge that has developed over time Information technology (IT) can help insurers increase operational efficiency. Which one of the following would enable field claim representatives at a storm site to access policy information, transmit claims information, and settle losses or make partial payments immediately so that displaced families could return to their homes as soon as possible? - Correct Answers ✅Low cost mobile technology Insurers can use information technology (IT) to gain competitive advantage. Which one of the following statements is correct with respect to gaining competitive advantage? - Correct Answers ✅IT intelligence gives insurers better insight for underwriting, product development, and pricing. The source from which data was collected or derived, its timeliness or historical value, and its independence from other
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Alignment of information technology (IT) goals with business goals creates both potential benefits and challenges for an organization. Which one of the following is a common benefit? - Correct Answers ✅Compliance with insurance department regulations ABC Insurance Company is organized by geographic regions and has departmental operations within each region. Which one of the following best describes ABC's organizational structure? - Correct Answers ✅Multidivisional structure Which one of the following statements is correct with respect to forces that drive competition according to the Five Forces Model? - Correct Answers ✅Insurers can raise barriers to entry by offering unique or customized products or services. Which one of the following statements is correct with respect to the use of SWOT analysis to analyze the competitive environment?
- Correct Answers ✅Identifying internal strengths and weaknesses involves considering financial, physical, human, and organizational assets.
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To be successful, the differentiation business-level strategy must - Correct Answers ✅Accurately determine customers' preferences to develop products perceived as distinctive. Greatview Insurance is trying to improve the property claim handling process. The claims department has decided to review the various steps in the property claim handling process, from the time it is first reported until the final step when the payment is made. Which one of the following types of organizational strategies does this represent? - Correct Answers ✅Operational- level strategy Goshen Insurance has decided to develop a package policy to meet the needs of the rapidly growing home health care industry. In addition to property and general liability, the package will also include professional liability coverage and auto liability coverage for care givers when they are transporting patients. Which one of the following types of business-level strategies has Goshen Insurance decided to follow? - Correct Answers ✅Focused differentiation strategy Jancy Insurance Company is a direct writer of workers compensation insurance, operating in two states. Jancy enjoys strong financial ratings and customer loyalty. Jancy consistently
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Every state insurance department is headed by a state insurance commissioner, a director, or by a - Correct Answers ✅Superintendent. Which one of the following entities has as its vision to provide one place for producers to go to meet all aspects of the producer licensing and appointment process using an electronic communication network? - Correct Answers ✅The National Insurance Producer Registry All states have property-casualty insurance guaranty funds that pay unpaid claims of insolvent insurers licensed in the particular state. Which one of the following types of claims is covered by all state funds? - Correct Answers ✅Homeowners insurance claims Due to increased competition, an insurer deems it appropriate to decrease pricing on its commercial automobile line. The insurer submits the appropriate statistical data to the state insurance department, but continues to lose market share pending the department's response. The type of state rating law employed in this example is - Correct Answers ✅Prior approval law. Daniel is an insurance producer with over 20 years of experience. He has placed insurance programs using reinsurance
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arrangements, retention plans, and various captive arrangements. He has negotiated broad coverage and high limits for his customers. With which one of the following customer groups is Daniel most likely working? - Correct Answers ✅National accounts Which one of the following insurance consumer groups would have the most risk financing alternatives available to them? - Correct Answers ✅National accounts The independent agency and brokerage marketing system uses - Correct Answers ✅ManagiManaging general agents.ng general agents. Insurers sometimes grant underwriting authority to producers. This authority is usually granted based on all of the following, EXCEPT: - Correct Answers ✅Location Riko is an automobile claim representative who has been assigned a claim submitted by John. John owns a Honda Civic, which is insured in his name for liability, collision, and comprehensive coverage on a Personal Auto Policy (PAP). He is the only named insured on the policy. John lives with his parents and his sister, Carla. One Saturday, while John is asleep, Carla borrows his car to run errands. Unfortunately she backs into the concrete base of a
