Chapter 1 General Insurance

Question 1

What is a Reciprocal Insurance Company

Answer 1

A reciprocal insurance company is a group-owned insurer whose main activity is risk sharing.

Question 2

is lloyds of london an insurance company.

Answer 2

Lloyds of London is not an insurance company, but consists of groups of underwriters called Syndicates,

Question 3

what members are typically involved with the Fraternal Benefits Society

Answer 3

Usually organized on a non-profit basis, fraternal benefit societies are primarily social organizations that engage in charitable and benevolent activities that provide life and health insurance to their members. Membership typically consists of members of a given faith, lodge, order, or society.

Question 4

What does RRG stand for

Answer 4

Risk Retention Group

Question 5

What are the three types of domiciles

Answer 5

 Domestic Insurer –
 Foreign Insurer –
 Alien Insurer –
Are you able to define and explain each of these domiciles?

Question 6

– A licensed individual who negotiates insurance contracts with insurers, on behalf of the applicant. represents the applicant or insured’s interests, not the insurer, and thus does not have. who is this

Answer 6

Broker

Question 7

what is risk

Answer 7

– A condition where the chance, likelihood, probability or potential for a loss exists; Uncertainty concerning a loss.

Question 8

the company selling during reinsurance is called the what.

Answer 8

the ceding company

Question 9

the company who purchases from the ceding company during a reinsurance is called the what.

Answer 9

The reinsurer

Question 10

what are the two types of risk when considering risk managment.

Answer 10

Types of Risk
 Speculative Risk
 Pure Risk
Are you able to define these types of risk?

Question 11

What is defined as the cause of a loss.

Answer 11

Peril

Question 12

Reduction, decrease, or disappearance of value.

Answer 12

Loss - . The basis of a claim for damages under the terms of an insurance policy.

Question 13

An insured burns down his/her own house to collect the insurance payout. is an example of what hazard

Answer 13

moral hazrd- Dishonest tendencies that increase the probability of a loss; certain characteristics and behaviors of people.

Question 14

Flammable material stored near a furnace. is an example of what hazard

Answer 14

Physical Hazard - – A physical condition that increases the probability of loss; use, condition, or occupancy of property.

Question 15

I dont need to lock the house is an example of what hazard.

Answer 15

Morale Hazard – Attitude that increases the probability of a loss.

Question 16

what does the acronym STARR stand for when it comes to risk

Answer 16

Sharing
Transfer
Avoidance
Reduction
Retention

Are you able to explaine what each of these means?

Question 17

There are 5 elements of fraud, what are they.

Answer 17

1. False statement, made intentionally and that pertains to a material fact
2. Disregard for the victim
3. Victim believes the false statement
4. Victim makes a decision and/or acts based on the belief in, or reliance upon, the false statement
5. The victim’s decision and/or action results in harm

Question 18

A rate charged to a group of policyholders who have similar exposures and experience.

Answer 18

Class Rating

Question 19

A rate based on the policyholder’s actual loss history when compared to the loss history of similar risks.

Answer 19

Experience Rating

Question 20

A rate used for a policyholder because a large enough pool of similar risks is not available to any other type of rate. It is primarily used for commercial and specialty risks because of the number of unique variables involved

Answer 20

Individual Rating

Question 21

How is the company loss ratio calculated

Answer 21

Paid losses + loss reserves ÷ total earned premium

Question 22

Stock Insurance Company offers insurers non participating policies. True or false

Answer 22

True where as Mutual Insurance Companys offer participating policies.

Question 23

Dividends are not guaranteed from which type of insurance company.

Answer 23

Dividends are not guaranteed from stock or mutual insurance companies.

Question 24

to assume the financial risk one’s self. This is generally an option only for large companies.

Answer 24

Self-Insurer

Question 25

name the two types of reinsurance

Answer 25

Treaty Agreements

Facultative Agreement

Can you explain what these agreements are?

Question 26

what market is used when insurance cannot be obtained int he ordinary market.

Answer 26

Residual Market

Question 27

Gather and interpret statistical information used in rate making. This is what department.

Answer 27

Actuarial Department

Question 28

Responsible for the selection of risks and rating that determines actual policy premium. This is what department

Answer 28

Underwriting Department

Question 29

this department Assists the policyholder in the event of a loss.

Answer 29

Claims Department

Question 30

defines the relationship between an insurance company, known as the principal, and a producer operating as its agent. this law is known as what?

Answer 30

Law of Agency