Chapter 15 Insurance Company

Question 1

policies provide protection against untimely death or illness, and/or transfer wealth through time to retirement

Answer 1

Life Insurance

Question 2

protects against personal injury and liability associated with specific events

Answer 2

Property and Casualty Insurance

Question 3

assess and price risk

Answer 3

Insurance Underwriters

Question 4

sell insurance contracts

Answer 4

Insurance Brokers

Question 5

is the problem that customers who apply for insurance policies are more likely to be those in need of coverage

Answer 5

adverse selection problem

Question 6

occurs when, after an insurer and a customer enter into an insurance contract, the insured engages in risky behavior because the risk is covered

Answer 6

Moral Hazard

Question 7

premiums are invested in market securities

value of policy depends on the value of the securities

Answer 7

Variable Life Insurance Policy

Question 8

are investment vehicles that liquidate a fund (pay investors) over a long period of time

Answer 8

Annuities

Question 9

Insurance companies can attempt to share risks by buying insurance from other insurance companies

Answer 9

Reinsurance

Question 10

a measure of overall profitability

equals the loss ratio plus LAE to premiums written plus commissions and other expenses to premiums written

Answer 10

Combined Ratio

Question 11

a measure of overall profitability

equals the combined ratio minus the investment yield

Answer 11

Operating Ratio