Chapter 4

Question 1

Key Term: The ratio of current assets to current liabilities

Answer 1

Current Ratio

Question 2

Key Term: Potential buyer of insurance

Answer 2

Prospect

Question 3

Key Term: 1. A commission paid in excess of the regular agents or brokers commission for additional services provided by the intermediary for administration costs associated with placing increased business with the insurer when supervising sub-agents in a given geographical territory, transferring a book of business, or placing a particular desirable business with the insurer.
2. In reinsurance, an amount paid to ceding company in addition to the acquisition cost to compensate for overhead expenses. Also called overwrite commission

Answer 3

Override Commission

Question 4

Key Term: A commission paid to an agent that depends upon the profit the insurer has realized from the agency’s business.

Answer 4

Contingent Commission

Question 5

Key Term: Analyzing a risk to quantify the potential for losses in a specific investment and to decide what is the appropriate action to take (or whether not to take action)

Answer 5

Risk Management

Question 6

Key Term: Any account that is considered uncollectible

Answer 6

Bad Debt