General Insurance (quiz)- ExamFX Flashcards
For the reported losses of an insured group to become more likely to equal the statistical probability of loss for that particular class, the insured group must become
Larger
-according to the law of large numbers, the larger a group becomes, the easier it is to predict losses. Insurers use this law in order to predict certain types of losses and set appropriate premiums
The risk of loss may be classified as
Pure risk and speculative risk
-pure risks involve the probability or possibility of loss with no chance of gain. Pure risks are generally insurable. Speculative risks involve uncertainty as to whether the final outcome will be gain or loss. Speculative risks are generally uninsurable
A participating insurance policy may do what
Pay dividends to the policyowner
-a participating insurance policy will pay dividends to the owner based upon actual mortality cost, interest earned and costs
To legally transact insurance in this state, an insurer must obtain what
Certificate of Authority
All of the following are examples of risk retention except
A) self-insurance
B) deductibles
C) premiums
D) copayments
C) premiums
-retention is a planned assumption of risk, or acceptance of responsibility for the loss by an insured through the use of deductibles, copayments, or self-insurance
An insurance contract must contain all of the following to be considered legally binding except
A) competent parties
B) offer and acceptance
C) beneficiary’s consent
D) consideration
C) beneficiary’s consent
Which of the following is the most common way to transfer risk
A) increase control of claims
B) lessen the possibility of loss
C) name a beneficiary
D) purchase insurance
D) purchase insurance
A situation in which a person can only lose or have no change represents
Pure risk
An insurances purchased an insurance policy 5 years ago. Last year, the insured received a dividend check from the insurance company that was not taxable. The year, the insurer did not send a check. From what type of insurer did the insured purchase the policy?
Mutual
What insurance concept is associated with the names Weiss and Fitch?
Guides describing company financial integrity
-because an insurance company’s strength and stability are two crucial factors in its sustainability, independent rating services have formed to publish regular updates on the financial integrity of different insurance companies. Weiss and Fitch are two of these services, although there are more
Which law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated?
Law of large numbers
What is the major difference between a stock company and a mutual company?
Ownership
The authority granted to an agent through the agent’s contract is referred to as
Express
-express powers are written into the contract between the insurer and the agent
In insurance, an offer is usually made when
An applicant submits application to the insurer
