Module 1: Functions of Insurance and Imperfect Information Flashcards
Check all that apply.
3 Generally recognized functions of insurance are:
a) risk transfer
b) risk prevention
c) risk pooling
d) risk allocation
3 generally recognized functions of insurance are:
a) risk transfer
c) risk pooling
d) risk allocation.
This is the risk that a party with insurance will increase risky behavior because the cost will be borne by the insurer (Pick 1)
a) Adverse Selection
b) Moral Hazard
b) Moral Hazard.
Scenario:
Sam purchases medical insurance AFTER learning he needs major surgery.
What is this an example of?
a) moral hazard
b) adverse selection
b) adverse selection
Scenario:
Amanda decides to not worry about installing smoke alarms now that she has homeowners insurance.
What is this an example of?
a) moral hazard
b) adverse selection
a) Moral Hazard
A representation is part of an insurance contract
A representation is NOT part of an insurance contract. It is collateral to it.
A warranty is a guarantee or promise which provides assurance by one party to another that specific facts or conditions are true or will happen. True or False?
True.
Check all that apply. In order to invoke the doctrine of Contra Proferentem, you must have:
a) clear language
b) ambiguous language
c) a negotiable contract
d) a contract of adhesion
You must have:
b) ambiguous language
d) a contract of adhesion
Scenario:
Sam states on his homeowners insurance contract that he has no fireplaces in his house when there are actually two. Later, his house gets burglarized.
What is this an example of?
a) Material Misrepresentaion
b) Immaterial Misrepresentation
b) Immaterial Misrepresentation
Scenario:
Amanda states on her homeowners insurance contract that her primary residence has an alarm system when actually it does not. Later her house is burglarized.
What is this an example of?
a) Material Misrepresentation
b) Immaterial Misrepresentation
a) Material Misrepresentation
In the Vlastos v. Sumitomo case, the court determined which of the following?
a) The warranty is ambiguous
b) There was a breach pf warranty
c) Endorsement No. 4 is a representation
d) Endorsement No. 4 is a warranty
a & d
The court determined that Endorsement No. 4 was a warranty but that the warranty was ambiguous
The issue in Neill vs. Nationwide Mutual Fire Insurance Co. was “did Neill make a material misrepresentation?” True or False?
True
The rule in Mackenzie v. Prudential Insurance Company of America has been upheld in a variety of courts in different parts of the country. True or False?
True. The rule in Mackenzie v. prudential Ins Co has been upheld in a variety of courts in different parts of the country
