Chapter 1-10 Multiple Choice Quiz Questions Flashcards
Ch 1. Which of the following is an appropriate question to ask when determining whether a risk should be rated by class or schedule?
Can this risk be placed in a class? When determining whether the risk should be rated by class or schedule, the underwriter should consider if the risk can be placed in a class.
Ch 1. Loadings are additional charges added to the basic rate for certain features of a risk - True or False?
True - An underwriter could add loadings (additional charges) to the basic rate for features of the risk that are considered to be more hazardous than the average risk in that class
Ch 1. Underwriters cannot modify coverage to address the needs of existing or prospective insureds - True or False?
False - One of an underwriter’s important kills is the ability to chose and perhaps modify coverage to address the needs of an existing or prospective insured
Ch 1. Loss control inspectors typically group hazards in four main categories, including
Physical hazards - loss control inspectors typically group hazards in four main categories, including physical hazards. Physical hazards are any aspect of the physical risk that may make a loss more likely.
Ch 1. Good communication is an adversarial process - True or False?
False - Good communication is not adversarial, and good business communication avoids confrontation. The other person should be treated as a partner with whom the underwriter works to achieve a common goal, rather than a subordinate or an adversary
Ch1. How is self-insured retention (SIR) different from a deductible?
The insurer is not involved in losses that fall within the SIR
Ch 1. What are LDFs?
Loss Development Factors
Ch 1. What are the four main categories of hazards identified by loss control inspectors?
Attitude to loss prevention on the part of the risk’s management, physical hazards, housekeeping, and neighbourhood
Ch 1. What coverage will a wrap-up policy provide for Shady Acres project?
It will address liability exposures arising out of the work on the project for all parties
Ch 1. What is a potential issue with a manuscript wording?
It is unique and, therefore, untested
Ch 1. When should the class rating approach to rating be used?
When statistics can be gathered on a large number of risks that share common characteristics
Ch 1. When should the class rating approach to rating be used?
When statistics can be gathered on a large number of risks that share common characteristics
Ch 1. When should the schedule rating approach to rating be used?
When the available statistical data are fragmented are too fragmented for class rating
Ch 2. Does statistically improbable loss occur?
Yes. The statistical improbability of loss does not rule out the possibility of it. Especially when studying losses due to a natural catastrophe, the underwriter should remember that possibility is not the same as probability
Ch 2. How is the loss triangle method used?
It groups losses by year over successive time periods to show a history of change in the amounts of all losses. the loss triangle method groups losses year over successive time periods to show a history of change in the amounts of all losses. By reviewing patterns of loss development factors calculated in this historical loss triangle, the actuary or underwriter can estimate future losses.
Ch 2. Losses must be analyzed for ______ that will lead the underwriter to an assessment of the experience
Patterns
Ch 2. Underwriters must distinguish between _______ and _______ risks
Undesirable and desirable. As with the risk that has had one or more serious losses, the risk that has had none must be scrutinized on its merits, which may be due to pure luck in spite of poor conditions, or it may reflect management’s commitment to loss prevention. the difference is between undesirable and desirable risks.
Ch 2. What extra source of information may an experienced underwriter have that an inexperienced underwriter will need to develop?
Familiarity with the industry. The underwriter’s familiarity with the industry of which a risk is part could arise either from extensive experience in underwriting the industry or from direct experience working in the industry.
Ch 2. What formula is used to project settlement values?
Total incurred losses x Loss development factor. Once loss development factors have been calculated for an account, the underwriter can go back and project losses at their ultimate settlement values as follows: Total Incurred Losses x Loss Development Factor
Ch 2. What is a loss run?
A summary or report of loss experience for a risk over a specified time. A loss run is a summary or report of loss experience for a risk over a specified time.
Ch 2. what is the formula used to calculate an incurred loss ratio?
Total incurred losses / Earned Premium. Incurred loss ratio is the ratio of incurred losses to earned premium.
Ch 2. What situation happens frequently with many clients, but causes an underwriter to have an incomplete loss picture for an insured?
Unreported losses. Underwriters should consider the situations in which the insured is covered but does not report recurrent losses that, according to the statistics, frequently happen. The loss picture for an insured can look very different when one looks beneath the surface presented by the loss run.
Ch 2. Which two related concepts should an underwriter understand regarding losses and claims?
Loss frequency and Loss severity
Ch 3. The amount of insurance for a project site should be _______
The estimated completed value of the project. The amount of insurance for a project site should be the same as the estimated completed value of the project. This should include the value of landscaping, hoardings, site preparation, and other items if they are meant to be insured
Ch 3. What are primary considerations when underwriting builders insurance?
Qualifications and expertise of the policyholder, natural features of the site, and methods of type of construction
Ch 3. What are two causes of loss covered by equipment breakdown insurance but typically excluded by an all-risk property policy?
Mechanical breakdown and Electrical arcing. An all risks property policy usually excludes loss arising from the explosion, bursting, or rupture of boilers and pressure vessels, mechanical breakdown, and electrical arcing. An equipment breakdown policy complements the property policy and fills in certain gaps in its coverage by responding to all these causes of loss.
Ch 3. What is contingent business interruption insurance?
Insurance for a business interruption caused by the interruption of a supplier’s or the client’s business
Ch 3. What is covered by an equipment breakdown policy?
Loss from a sudden and accidental breakdown of an object resulting in physical damage to the object and any resultant property damage directly caused by the breakdown.
Ch 3. What is the difference between the American and British forms of business interruption insurance?
In the American system, an insured who suffers an interruption of business is considered indemnified after the product and a place to sell it have been restored. In the British system, business is considered interrupted for as long as the level of business income is affected.
Ch 3. What risk is more likely to occur in a property with a legalized grow operation?
Fire
Ch 3. What type of inspection is important for most equipment breakdown insurers?
Loss prevention inspection
Ch 3. What was included in the IBC Homeowners forms after the passage of the Cannabis Act?
A special limit applying a specified dollar limit to coverage of “cannabis in all consumable forms and cannabis plants, whether for recreational or medicinal use”
Ch 3. Who is generally named as insureds in a builders risk insurance policy?
The general contractor and the owner
Ch 4. Umbrella liability policies provide the same coverage as the primary policy - True or False?
False - The umbrella policy provides additional limits of insurance in excess of underlying limits. Unlike the excess policy, the umbrella policy provides broader coverage than the primary policy.
Ch 4. What is another name for professional liability insurance?
Errors and Omissions - Professional liability insurance also known as errors and omissions insurance covers liability exposure from providing a specialized service while practising a profession. It covers liability arising out of negligent acts, errors, and omissions in the delivery of professional services or the failure to deliver those services
Ch 4. What area is covered by an umbrella policy
Worldwide - The coverage provided by umbrella policies is worldwide. As with all other aspects of an umbrella policy, however the underwriter must review and confirm this feature
Ch 4. Fraudulent, dishonest or criminal acts are typically exclusions from a Directors and Officers policy
True - Directors and officers insurance does not insure against fraudulent, dishonest of criminal acts to insure against such acts would be against public policy.
Ch 4. Contractors seeking wrap-up insurance must have an established record of
Financial and business competence. Contractors seeking wrap-up must have an established record of financial and business competence.
Ch 4. How should an underwriter analyze the financial strength of an enterprise?
Analyze the latest annual report and financial statements for the risk and obtain a current financial analysis from a third party. compare the risk with others in its industry group using financial ratios.
Ch 4. The wording for wrap-up insurance is the insurers standard liability wording with amendments regarding which of the following?
Named insured section, description of operations, and aggregate limits of insurance
Ch 4. What does it mean if professional liability policy wordings are written on a claims-made basis?
It covers claims even if the wrongful act that gave rise to the claim did not take place during the policy period - provided that it did not take place before the retroactive date stated in the policy
Ch 4. What does SIR stand for when referring to an excess policy?
Self-Insured Retention - One reason a standalone excess policy is written is that the excess policy may stand in excess of an insureds SIR
Ch 4. what is directors and officers insurance?
Insurance to defend and indemnify directors and officers of a profit or non-profits company. Directors and officers insurance ins basically a specialized form of liability insurance. In effective, it functions as errors and omissions insurance to cover the obligation of an insured enterprise, whether non-profit or for profit, to defend and indemnify its directors and officers for claims made against them
Ch 4. What is the performance of a duty of care for a profession?
Performing to the standard of other professionals in a field
Ch 4. What is the purpose of excess policy?
To provide additional limits of insurance. The excess policy typically follows form - the provisions of the excess policy follow or correspond to, the provisions of the primary policy. Essentially, the sole purpose of the excess policy is to provide additional limits of insurance
Ch 4. What is wrap-up insurance?
It insures against exposure to liability for loss or damage to third parties on the part of participants in a commercial construction project, whether small or large, a new building or a renovation
Ch 4. Which of the following factors will have the largest influence in how much directors and officers insurance is needed?
Whether the company is private or publicly traded and whether its for-profit or non-profit enterprise
Ch 4. Which people involved with a project will the underwriter need detailed background information for while considering whether they will issue a wrap-up policy.
Named insured, owner, general contractor and construction manager
Ch 5. Which of these companies experienced a major privacy breach that affected 3 billion user accounts?
Yahoo
Ch 5. what is an example of a widely used ridesharing app?
Uber. Established in 2010, is one of the most widely used ridesharing services and is available through the Uber app
Ch 5. What is Level 3 of the levels of vehicle automation?
Conditional automation. Level 3 vehicle automation is conditional automation, where all aspects of the dynamic driving task is completed by an automated system, with th eexpectation that the human driver will respond appropriately to an intervention request.
Ch 5. What is an example of a phishing scam?
Deactivation scare is a phishing scam where an email claims the recipients account will be deactivated unless they immediately follow a link and enter their name/password
Ch 5. In what year was a ridesharing endorsement first offered in Ontario?
2016, a major Canadian insurer launched a ridesharing endorsement in Ontario
Ch 5. What was the term AI coined?
1956.
