Multiple Choice

Question 1

What is an insurer’s business?
Select one:

a. Advise clients on the best policy for them.

b. Work with government to set premium prices.

c. Earn premium while minimizing loss.

d. Propose changes to the Insurance Act.

Answer 1

The correct answer is: Earn premium while minimizing loss.

Question 2

What is risk?
Select one:

a. The chance that something bad can happen

b. The chance that one can lose a lot of money with investments

c. The chance of loss

d. The chance that one will not succeed in meeting a deadline

Answer 2

The correct answer is: The chance of loss

Question 3

Who primarily determines if an underwriter can accept or reject a risk?
Select one:

a. Broker

b. Reinsurer

c. Insurer

d. Regulator

Answer 3

The correct answer is: Insurer

Question 4

What type of underwriter is responsible for underwriting a group of risks?
Select one:

a. File underwriter

b. Independent underwriter

c. Reinsurance underwriter

d. Portfolio underwriter

Answer 4

The correct answer is: Portfolio underwriter

Question 5

Paul opens a new barber shop on a busy downtown street and expects to earn a big profit.
What is this an example of?
Select one:

a. Illegal risk

b. Speculative risk

c. Pure risk

d. Moral risk

Answer 5

The correct answer is: Speculative risk

Question 6

What type of underwriter is responsible for underwriting individual risks?
Select one:

a. Portfolio underwriter

b. File underwriter

c. Independent underwriter

d. Reinsurance underwriter

Answer 6

The correct answer is: File underwriter

Question 7

What is a line guide?
Select one:

a. A graph that sets out the insurer’s strategic plan in a visual format

b. The maximum number of risks an underwriter can accept in a 30-day period

c. A list of reinsurers with which an underwriter can do business

d. The maximum amounts of exposure an insurance company is prepared to accept on various classes of risk

Answer 7

The correct answer is: The maximum amounts of exposure an insurance company is prepared to accept on various classes of risk

Question 8

Which type of risk can be insured?
Select one:

a. Illegal risk

b. Pure risk

c. Speculative risk

d. Moral risk

Answer 8

The correct answer is: Pure risk

Question 9

What do underwriters do?
Select one:

a. Underline important information in a contract.

b. Accept or reject business.

c. Present the risks to the principals in the company they work for.

d. Investigate various risks in an insurance company.

Answer 9

The correct answer is: Accept or reject business.

Question 10

What is reinsurance?
Select one:

a. Insurance for third parties in a claim

b. Insurance that is automatically renewed

c. Insurance for insurers

d. Insurance available to underwriters only

Answer 10

The correct answer is: Insurance for insurers

Question 11

What are the five main elements of a policy?
Select one:

a. Coverage summary, insuring agreements, statutory conditions (Quebec general conditions), policy conditions, and signature clause

b. Declarations, coverage summary, statutory conditions (Quebec general conditions), policy conditions, and signature clause

c. Coverage summary, insuring agreements, subscription, statutory conditions (Quebec general conditions), and signature clause

d. Coverage summary, insuring agreements, statutory conditions (Quebec general conditions), premium agreements, and signature clause

Answer 11

The correct answer is: A. Coverage summary, insuring agreements, statutory conditions (Quebec general conditions), policy conditions, and signature clause

Question 12

What is the definition of utmost good faith?
Select one:

a. A person should not profit from a loss

b. A higher standard of honesty

c. A material change

d. Insurable interest

Answer 12

The correct answer is: A higher standard of honesty

Question 13

Which section of the policy states the effective date, term, and expiry date?
Select one:

a. Coverage summary

b. Statutory conditions

c. Policy conditions

d. Signature clause

Answer 13

The correct answer is: Coverage summary

Question 14

Ravi and Jamal are drinking at a bar. After a few too many rounds, Ravi agrees to buy Jamal’s brand-new Mercedes for $10,000. Jamal agrees to this price and the conditions. Is this a valid contract?
Select one:

a. No; it is missing genuine intent.

b. No; it is lacking capacity of the parties to contract.

c. Yes; there is an offer and acceptance.

d. No; the consideration is not adequate.

Answer 14

The correct answer is: No; it is lacking capacity of the parties to contract.

Question 15

What are two important skill sets of a successful underwriter?

Select one:

a. Technical skills and people skills

b. Ability to work quickly and under pressure

c. Ability to secure good reinsurance and to explain a position

d. Ability to sell a policy and negotiate the terms

Answer 15

The correct answer is: Technical skills and people skills

Question 16

Statutory conditions/Quebec general conditions must be printed on all of which of the following types of policies?
Select one:

a. Personal and commercial life liability policies

b. Life, automobile, and property policies

c. Surety, liability, and automobile policies

d. Automobile, accident and sickness (A&S), and fire insurance policies

Answer 16

The correct answer is: Automobile, accident and sickness (A&S), and fire insurance policies

Question 17

An adjuster is investigating a claim believed to have aspects of fraud. The insured is trying to claim for items without proof of ownership. If the adjuster pays for these items, it will contravene which feature of the contract?
Select one:

a.
Indemnity

b.
Agreement

c.
Acceptance

d.
Genuine intention

Answer 17

The correct answer is: Indemnity

Question 18

Sandeep offers to sell Mary his car for $22,000, but the offer expires on November 30. Mary responds on December 10. Which element of a contract is this related to?

Select one:

a. Offer and acceptance

b. Capacity

c. Legality

d. Consideration

Answer 18

The correct answer is: Offer and acceptance

Question 19

How can a contract best be defined?
Select one:

a. An agreement between two parties

b. A document that contains six elements for formation

c. An agreement between legally capable parties

d. A document that has no legal validity

Answer 19

The correct answer is: An agreement between legally capable parties

Question 20

What constitutes people skills for an underwriter?
Select one:

a. The ability to be technically proficient and train others

b. The ability to be analytical and inclusive

c. The ability to communicate well and be organized

d. The ability to be authoritative and make decisions quickly

Answer 20

The correct answer is: The ability to communicate well and be organized

Question 21

Would an underwriter be concerned with a loss that occurred in one of the insured’s sold locations? Why?
Select one:

a. No; the location has been sold and is no longer part of the exposure.

b. Yes; the underwriter needs to know why the loss occurred and if any preventive measures were taken in the insured’s current locations to reduce or avoid the same type of loss.

c. No; the underwriter only needs to know about prior losses from the locations to be insured.

d. Yes; the underwriter needs to factor all locations the insured has owned into the premium due to reinsurance requirements.

Answer 21

The correct answer is: Yes; the underwriter needs to know why the loss occurred and if any preventive measures were taken in the insured’s current locations to reduce or avoid the same type of loss.

Question 22

What is an application?
Select one:

a. The person who applies for insurance

b. A request by an insured for insurance

c. A document that gives the specifications on the insured

d. A document legally notarized confirming the insurance policy is valid

Answer 22

The correct answer is: A request by an insured for insurance

Question 22

What information is NOT required on a typical personal-lines insurance application?
Select one:

a. Applicant’s name

b. Applicant’s occupation

c. Applicant’s salary

d. Applicant’s loss record

Answer 22

The correct answer is: Applicant’s salary

Question 23

Which claims history would an underwriter be most concerned about?
Select one:

a. A large weather loss ten years ago

b. A fire loss six years ago caused by a lightning strike

c. A series of small claims in a two-year period

d. A theft claim four years ago, after which the owner installed a burglar alarm

Answer 23

The correct answer is: A series of small claims in a two-year period

Question 24

What is business insurance also known as?
Select one:

a. Surety bonds

b. Personal-lines insurance

c. Marine insurance

d. Commercial-lines insurance

Answer 24

The correct answer is: Commercial-lines insurance

Question 25

Which is one of the most important pieces of information an underwriter uses to assess a risk?

Select one:

a. The losses an applicant has suffered in the past

b. The number of years the applicant has been approved for a business loan

c. The extent of employee training and the length of time employees have been with the company

d. The company’s image in the community

Answer 25

The correct answer is: The losses an applicant has suffered in the past

Question 26

What is a homeowners policy?
Select one:

a. A rental agreement between a tenant and landlord

b. An insurance policy for dwelling risks that always includes a mortgage clause

c. An insurance agreement for the use of a vacation rental property

d. A multi-peril insurance policy for dwelling risks, combining coverages for fire and extended coverages, including theft and liability

Answer 26

The correct answer is: A multi-peril insurance policy for dwelling risks, combining coverages for fire and extended coverages, including theft and liability

Question 27

What is the difference between an additional insured and an additional named insured on the policy?

Select one:

a. An additional insured is someone other than the named insured who is protected by the terms of the policy; an additional named insured is someone other than the named insured who has additional rights and responsibilities under the policy.

b. An additional insured must be related to the named insured in the policy; an additional named insured is not related to the named insured.

c. An additional insured must be under the age of 21; an additional named insured would be someone over the age of 21.

d. An additional insured must reside in the household of the named insured; an additional named insured cannot reside in the household of the named insured.

Answer 27

The correct answer is: An additional insured is someone other than the named insured who is protected by the terms of the policy; an additional named insured is someone other than the named insured who has additional rights and responsibilities under the policy.

Question 28

What special right does the mortgage clause give to the mortgagee?
Select one:

a. The mortgagee is obligated to pay part of the premium.

b. They are a named insured under the policy and therefore share all the rights of the owner.

c. They are entitled to be paid for their interest in the property in the event of a loss even if the insured violated a term of the policy and cannot collect.

d. They will be sent a refund if the policy is ever cancelled.

Answer 28

The correct answer is: They are entitled to be paid for their interest in the property in the event of a loss even if the insured violated a term of the policy and cannot collect.

Question 29

Why would the underwriter be concerned about a number of denied claims on an applicant’s history?
Select one:

a. The coverage in place at the time may have been inadequate.

b. The perils insured may not have covered the claims in question.

c. The claims may have been under the policy deductible.

d. A denied claim costs the insurer more than a claim never made.

Answer 29

The correct answer is: A denied claim costs the insurer more than a claim never made.

Question 30

Which of the following is considered private protection?
Select one:

a. Retention pond with a pump in the neighbourhood

b. Fire hydrants

c. Fire department

d. Fire alarm in the building

Answer 30

The correct answer is: Fire alarm in the building

Question 31

Which of the following is NOT a concern regarding the construction of a building?
Select one:

a. The age and location of the building

b. The nature of the neighbouring risks

c. The general layout, including open spaces

d. The source of heat

Answer 31

The correct answer is: The nature of the neighbouring risks

Question 32

Why is there a bigger threat of exposure with a commercial building?
Select one:

a. The business operation may not suit the neighbourhood.

b. Employees may not be trained for emergency situations.

c. Commercial buildings are more prone to flooding.

d. Commercial buildings are often built much closer together than homes.

Answer 32

The correct answer is: Commercial buildings are often built much closer together than homes.

Question 33

What is a main concern of a seasonal business in cottage country?
Select one:

a. The building is vacant or unoccupied for long periods of time.

b. The building may be close to a forest increasing the danger of loss through a forest fire.

c. The owner may not be generating enough revenue to pay the bills.

d. Staff must look for other employment in the off season.

Answer 33

The correct answer is: The building is vacant or unoccupied for long periods of time.

Question 34

Which of the following would be considered standard construction for a dwelling?
Select one:

a. A straw bale building

b. A building constructed of recycled rubber tires

c. A concrete block building with a slate tile roof

d. An underground dwelling

Answer 34

The correct answer is: A concrete block building with a slate tile roof

Question 35

Which of the following would be a non-standard heating system for a dwelling?
Select one:

a. Gas or oil-fired furnace

b. Electric baseboard heaters

c. Outdoor wood-fired boiler

d. Electric furnace

Answer 35

The correct answer is: Outdoor wood-fired boiler

Question 36

Which of the following is NOT an example of an exposure risk to a dwelling?
Select one:

a. A three-storey apartment building on an adjoining lot

b. The dwelling has had an addition built by a non-licensed contractor

c. The dwelling is in cottage country backing onto a fast-flowing river

d. The dwelling is in a congested older section of the city where the homes are very close to each other

Answer 36

The correct answer is: The dwelling has had an addition built by a non-licensed contractor

Question 37

What does the acronym COPE stand for?
Select one:

a. Construction, occupancy, perils, and emergency

b. Construction, occupancy, protection, and exposure

c. Construction, obstacles, protection, and exposure

d. Construction, occupancy, perils, and exposure

Answer 37

The correct answer is: Construction, occupancy, protection, and exposure

Question 38

For which of the following risks is the underwriter most likely to request a loss control inspection?
Select one:

a. A home built in 1990 insured for $350,000

b. A manufacturing risk insured for $5,000,000

c. A $50,000 tenant policy in a high-rise building

d. A heritage home insured for $700,000

Answer 38

The correct answer is: A manufacturing risk insured for $5,000,000

Question 39

Why is a sprinkler system considered desirable in a commercial risk?
Select one:

a. It will cause water damage to the contents.

b. It will lessen the chance of a fire occurring.

c. It will help to contain the fire to one area.

d. It will eliminate the need for fire extinguishers for alarm stations.

Answer 39

The correct answer is: It will help to contain the fire to one area.

Question 40

What is NOT a concern to an underwriter regarding the applicant’s dwelling?
Select one:

a.
The home has a swimming pool

b.
The colour of the painted walls

c.
The home’s previous claims or losses

d.
The home has a home-based business

Answer 40

The correct answer is: The colour of the painted walls

Question 41

What term is used to describe an infringement of rights on many people?
Select one:

a.
Private nuisance

b.
Public nuisance

c.
Breach of contract

d.
Statute law

Answer 41

The correct answer is: Public nuisance

Question 42

What term is used to describe a demonstration that is stopping traffic on a main road of the city?
Select one:

a.
Private nuisance

b.
Public nuisance

c.
Traffic violation

d.
An inference

Answer 42

The correct answer is: Public nuisance

Question 43

What does it mean for individuals who are legally obligated to pay under the law?

Select one:

a.
They have a responsibility.

b.
They have money.

c.
They have insurance.

d.
They have access to previous court cases.

Answer 43

The correct answer is: They have a responsibility.

Question 44

Burning trash in a garage and having the smoke continuously blow onto the neighbour’s property is an example of what?
Select one:

a.
Public nuisance

b.
Private nuisance

c.
Breach of contract

d.
Civil law

Answer 44

The correct answer is: Private nuisance

Question 45

Which of the following is an example of a contractual entrant?
Select one:

a.
Having dinner at a relative’s home

b.
Working from your home office

c.
Attending a live theatre production

d.
Taking a walk in the woods

Answer 45

The correct answer is: Attending a live theatre production

Question 46

What term is used to identify the insured in the insurance contract?
Select one:

a.
Third party

b.
Second party

c.
First party

d.
Best party

Answer 46

The correct answer is: First party

Question 47

What is an invitee?
Select one:

a.
A person who enters onto premises under a contract with the occupier-for example, a hotel guest or a theatre-goer

b.
A person who is expressly or impliedly invited onto the premises for some purpose involving economic or potential economic benefit to the occupier of the premises

c.
A person joining friends at the local park for a picnic

d.
A person taking a stroll in the neighbourhood

Answer 47

The correct answer is: A person who is expressly or impliedly invited onto the premises for some purpose involving economic or potential economic benefit to the occupier of the premises

Question 48

What insurance term is used to equate responsibility or actions arising from ownership or use of something?
Select one:

a.
Law

b.
Statute

c.
Liability

d.
Obligation

Answer 48

The correct answer is: Liability

Question 49

What does a personal umbrella policy cover?
Select one:

a.
Automobile liability only

b.
Homeowner liability only

c.
Professional liability only

d.
Excess limits of liability for all liability

Answer 49

The correct answer is: Excess limits of liability for all liability

Question 50

What does an application for insurance allow an underwriter to assess?
Select one:

a.
Vehicle branding

b.
Legal hazards

c.
Physical hazards

d.
Regulatory issues

Answer 50

The correct answer is: Physical hazards

Question 51

What is the Canadian Loss Experience Automobile Rating (CLEAR) system based on?
Select one:

a.
Cost of repairs and personal injury

b.
Cost of insurance expenses

c.
Cost of reinsurance

d.
Cost of repairs and passenger injury

Answer 51

The correct answer is: Cost of repairs and passenger injury

Question 52

Where are credit checks banned in Canada?
Select one:

a.
Alberta

b.
Newfoundland and Labrador and Ontario

c.
Nova Scotia

d.
Manitoba

Answer 52

The correct answer is: Newfoundland and Labrador and Ontario

Question 53

Why must an underwriter obtain a signed application from an applicant who becomes an insured?
Select one:

a.
The insurer requires it

b.
It is required by law

c.
An underwriter does not need a signed application

d.
A signed application is never required

Answer 53

The correct answer is: It is required by law

Question 54

The client has two minor convictions and has been licensed for less than four years. This business meets the current filed guidelines. As a precaution, the underwriter might send it to which of the following?
Select one:

a.
The government carrier

b.
Another private carrier

c.
The risk sharing plan

d.
Another underwriter

Answer 54

The correct answer is: The risk sharing plan

Question 55

John owns a pizzeria. He has hired a few drivers to deliver for his business. John requires that his drivers use their own vehicles. What insurance should John have?

Select one:

a.
Non-owned automobile insurance

b.
Garage policy

c.
Recreational vehicles policy

d.
Public automobile policy

Answer 55

The correct answer is: Non-owned automobile insurance

Question 56

Which body of government approves policy forms for automobile insurance?
Select one:

a.
Federal government

b.
Municipal government

c.
Provincial and territorial governments

d.
Consortium of insurers in Canada

Answer 56

The correct answer is: Provincial and territorial governments

Question 57

Which peril is the primary concern when an underwriter is inquiring about how an applicant stores its vehicles?
Select one:

a.
Flood

b.
Fire

c.
Theft

d.
Windstorm

Answer 57

The correct answer is: Theft

Question 58

Why is the manufacturer’s suggested retail price (MSRP) considered unfair?
Select one:

a.
New technology does not make cars safer.

b.
Vehicle price is the only predictor of repair costs.

c.
New technology does not make cars smarter.

d.
Most collision claims result in repair rather than replacement of the vehicle.

Answer 58

The correct answer is: Most collision claims result in repair rather than replacement of the vehicle.

Question 59

Which of the following is NOT important when an underwriter is reviewing an application for automobile insurance?
Select one:

a.
Information about the applicant

b.
Use of the vehicle

c.
Repairs that may have been made to the vehicle

d.
Colour of the automobile’s interior

Answer 59

The correct answer is: Colour of the automobile’s interior

Question 60

Underwriting loss is the amount of money an insurance company loses under which circumstance?
Select one:
a.
As a result of its insurance operations
b.
As a result of its investment decisions
c.
When the amount of income tax paid is lower than the pure premiums collected
d.
When the amount of earned premiums collected is higher than the claims paid out

Answer 60

A. As a result of its insurance operations

Question 61

What does it mean for the insurer if the premiums are too low?
Select one:
a.
The insurer cannot use reinsurance.
b.
The insurer will pay out more money than it takes in and will go out of business.
c.
The insurer must increase policy deductibles.
d.
The insurer will not be allowed to pay producer commissions.

Answer 61

The correct answer is: The insurer will pay out more money than it takes in and will go out of business.

Question 62

What type of rating does a commercial automotive building with many unique exposures have?
Select one:
a.
Homogenous rating
b.
Group rating
c.
Schedule rating
d.
Predictive rating

Answer 62

The correct answer is: Schedule rating

Question 63

Which statement describes unallocated loss adjustment expenses (ULAE)?
Select one:
a.
These expenses can be attached to a specific claim.
b.
They are not related to the claims function.
c.
They do not need to be recognized in the development of insurance prices.
d.
They are costs that cannot be attached or attributed to a specific claim.

Answer 63

The correct answer is: They are costs that cannot be attached or attributed to a specific claim

Question 64

Which of the following statistics is NOT required by the actuarial department?
Select one:
a.
Historical data
b.
Cost for settling claims
c.
Determination of a rating class
d.
Brokerage commissions

Answer 64

The correct answer is: Brokerage commissions

Question 65

What is pure premium?
Select one:
a.
Portion of premium that is used to cover expenses
b.
Portion of the total premium that is used to cover profits
c.
Portion of the total premium that is used to pay expected losses
d.
Portion of the premium that is used to cover salaries

Answer 65

The correct answer is: Portion of the total premium that is used to pay expected losses

Question 66

What main factors allow an underwriter some degree of flexibility when rating a risk?
Select one:
a.
Type of insurance and the construction of the property
b.
Type of insurance and the replacement cost
c.
Type of insurance and the size of the risk
d.
Type of insurance and the record of maintenance on the risk

Answer 66

The correct answer is: Type of insurance and the size of the risk

Question 67

When is class rating used?
Select one:
a.
When statistics can be gathered on a large number of risks that share common characteristics
b.
When a risk is measured against fixed standards of construction and protection
c.
When enough data is collected in a certain geographical area relating to building construction
d.
When all factors for construction meet COPE specifications

Answer 67

The correct answer is: When statistics can be gathered on a large number of risks that share common characteristics

Question 68

Paolo is an actuary who has decided to look at various rating exposures for the local movie theatre. Which of the following is NOT an exposure he should consider?
Select one:
a.
Type of film shown
b.
Number of seats
c.
Sales of tickets
d.
Area of movie theatre

Answer 68

The correct answer is: Type of film shown

Question 69

What does the mathematical theory of the law of large numbers maintain?
Select one:
a.
Big numbers produce big losses.
b.
The larger the sample size, the more reliable the results.
c.
The larger the territory, the larger the losses.
d.
Larger premiums produce larger losses.

Answer 69

The correct answer is: The larger the sample size, the more reliable the results.

Question 70

Which organization tests products for safety?
Select one:
a.
Canadian Independent Adjusters Association
b.
Insurance Bureau of Canada
c.
Underwriters Laboratories of Canada
d.
Insurance Institute of Canada

Answer 70

The correct answer is: Underwriters Laboratories of Canada

Question 71

What is a benefit of good relations between the underwriter and the claims department?
Select one:
a.
Learning of changes in arbitration practices that will affect the future assessment of risks
b.
Utilizing claims experts in the interpretation of learning technologies
c.
Having the claims department help cover up a mistake an underwriter made when drafting policy wordings
d.
Learning of changes in legal jurisdiction of newly released judgments that will affect the future assessment of risks

Answer 71

The correct answer is: Learning of changes in legal jurisdiction of newly released judgments that will affect the future assessment of risks

Question 72

Which organization works with legislative bodies to create a framework where property and casualty insurance is practised?
Select one:
a.
Underwriters Laboratories of Canada
b.
Insurance Bureau of Canada
c.
SCM Risk Management Services
d.
Insurance Institute of Canada

Answer 72

The correct answer is: Insurance Bureau of Canada

Question 73

Which statement is false when discussing the benefits of an underwriter having good relationships with other insurance professionals?
Select one:
a.
Good relationships help build trust between the underwriter and insurance professionals.
b.
Trust between the underwriter and insurance professionals helps attract and retain profitable business.
c.
An underwriter is not expected to form, maintain, and expand their network of professional relationships.
d.
One of the most important benefits of good relationships is the dissemination of information they make possible.

Answer 73

The correct answer is: An underwriter is not expected to form, maintain, and expand their network of professional relationships.

Question 74

Which statement about IBC’s Agreement of Guiding Principles is false?
Select one:
a.
Almost all insurers in Canada subscribe to these principles.
b.
They provide guidance concerning multiple insurance policies where the law is unclear.
c.
They are mandatory for all insurers to abide by.
d.
They are useful where gaps exist in the law.

Answer 74

The correct answer is: They are mandatory for all insurers to abide by.

Question 75

Which organization is the premier source of professional education and career development for the country’s property and casualty insurance industry?
Select one:
a.
Insurance Bureau of Canada
b.
Insurance Institute of Canada
c.
Underwriters Laboratories of Canada
d.
SCM Risk Management Services

Answer 75

The correct answer is: Insurance Institute of Canada

Question 76

What is risk management?
Select one:
a.
Adjusting a claim in such a way that results in the overpayment of the loss
b.
Comparing actual work performed on a risk with contractual requirements
c.
Analyzing a risk to quantify the potential for losses in a specific investment and to decide on the appropriate action to take (or whether not to take action)
d.
Resolving disputes between parties to a contract whereby impartial, neutral persons are chosen by the parties to determine their rights and obligations

Answer 76

The correct answer is: Analyzing a risk to quantify the potential for losses in a specific investment and to decide on the appropriate action to take (or whether not to take action)

Question 77

What is a loss reserve?
Select one:
a.
Funds set aside for emergencies in a department
b.
A share of mix of risks with reinsurers, including attractive and less attractive risks
c.
A share of only the most questionable risks
d.
An amount carried as a liability on an insurer’s balance sheet representing, for each claim, an amount equal to the estimated final settlement cost less any amounts already paid

Answer 77

The correct answer is: An amount carried as a liability on an insurer’s balance sheet representing, for each claim, an amount equal to the estimated final settlement cost less any amounts already paid

Question 78

In the event of a loss that is covered by multiple policies issued by different insurers, what does IBC’s Agreement of Guiding Principles state about how the loss is paid??
Select one:
a.
The reinsurer for all the insurers pays the loss.
b.
The insured selects the lead insurer to pay the loss.
c.
Each insurer pays its proportionate share of the loss.
d.
The broker may elect one insurer of the group of insurers to pay the loss.

Answer 78

The correct answer is: Each insurer pays its proportionate share of the loss.

Question 79

What must underwriters do to establish underwriting credit?
Select one:
a.
Demonstrate to the facultative reinsurer a thorough knowledge of each risk and the underwriting exposures it represents
b.
Take the risk off their hands
c.
Weigh the considerations of the broker that may have an impact on the risk
d.
Ensure they have sound relationships with other underwriters in the field

Answer 79

The correct answer is: Demonstrate to the facultative reinsurer a thorough knowledge of each risk and the underwriting exposures it represents

Question 80

Canadian industry’s annual premium volume?
Select one:
a.
Two thirds
b.
50 percent
c.
One third
d.
25 percent

Answer 80

The correct answer is: One third

Question 81

Which statement correctly describes decentralized insurers?
Select one:
a.
They are more consistent in applying risk assessment and setting terms.
b.
They give much more autonomy and discretion to their underwriters.
c.
They are more detailed in their line guide or procedure manuals.
d.
They are more rigid in their approach than that of centralized insurers.

Answer 81

The correct answer is: They give much more autonomy and discretion to their underwriters.

Question 82

As is the case with lawsuits for insurers, what should underwriters do when their file(s) on a given account may be required as evidence?
Select one:
a.
Ensure that nothing is written that might embarrass or undermine the insurer
b.
Ensure that files are underwritten quickly
c.
Leave personal notes on files so they can process expediently
d.
Do not adhere to company guidelines

Answer 82

The correct answer is: Ensure that nothing is written that might embarrass or undermine the insurer

Question 83

How do underwriters develop and use good judgment when matters are not directly addressed in the insurer’s manual?
Select one:
a.
Through trial and error
b.
By using reasons for limitations set by the organization
c.
By referring to the insurer’s line guide
d.
By looking at the internal environment of their organization

Answer 83

The correct answer is: Through trial and error

Question 84

What needs to be considered when there has been a merger or an acquisition between two or more insurance entities?
Select one:
a.
The procedure manual respects the various work environments that are now united.
b.
The senior management team is a good mix of the different separate entities.
c.
The price of the stock is considerably higher now that there is one larger company, making the shareholders happy.
d.
The different corporate cultures are aligned and supported.

Answer 84

The correct answer is: The different corporate cultures are aligned and supported.

Question 85

Which statement correctly describes a captive insurance company?
Select one:
a.
Must be larger than $500,000 to gain an economic advantage, according to the International Risk Management Institute
b.
Is usually created to write the parent company’s own insurance
c.
Is the same as a reciprocal insurer
d.
Provides coverage for only one specific type of risk

Answer 85

The correct answer is: Is usually created to write the parent company’s own insurance

Question 86

When the economy is thriving, what do insurers notice about their business?
Select one:
a.
There are more claims.
b.
There are fewer claims.
c.
There is an increase in mergers and acquisitions among their clients’ businesses.
d.
Underwriters tend not to be as vigilant when reviewing insurance applications.

Answer 86

The correct answer is: There is an increase in mergers and acquisitions among their clients’ businesses.

Question 87

What has the rise in concern over pollution liability led to in governments?
Select one:
a.
The convening of international pollution cooperative bodies
b.
The convening of environmental NGOs
c.
More awareness from the UN regarding pollution and environmental controls
d.
More extensive statutes governing pollution control and the emergence of environmental regulation as an independent field of law

Answer 87

The correct answer is: More extensive statutes governing pollution control and the emergence of environmental regulation as an independent field of law

Question 88

When the economy is sluggish, what do insurers notice about their business?
Select one:
a.
There are more claims.
b.
There are fewer claims.
c.
People tend not to pay their premiums.
d.
People tend not to obtain insurance.

Answer 88

The correct answer is: There are more claims.

Question 89

Which statement is false regarding centralized insurers?
Select one:
a.
Centralized insurers retain the bulk of underwriting authority in the head office or for supervisors or managers.
b.
With a centralized insurer, underwriters may be prevented from developing personal and expert relationships.
c.
Centralized insurers have a less rigid approach than that of decentralized insurers.
d.
With centralized insurers, restrictive limits may be offset by greater certainty or predictability in decision making.

Answer 89

The correct answer is: Centralized insurers have a less rigid approach than that of decentralized insurers.