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1
Q

What is insurance?

A

Sharing the losses of a few among the many.

A contract, where the insurer for monetary consideration agrees to cover the insured for loss or liability as defined.

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2
Q

_______is based on the existence of a Risk.

A

Insurance

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3
Q

Insurance is a contract in which one party (_________). for monetary consideration agree to reimburse another (________) , for loss or liability for a loss on a defined subject caused by specified ________ or _______

A

Insurer
Insured
Hazard
Perils

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4
Q

The essential concepts of insurance are based upon the ___________________ of Risk.

A

Chance

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5
Q

Name two types of risk:__________ & ____________________.

A

Pure

Speculative

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6
Q

The insurance relating individuals in their private capacity. For example, private dwellings, private automobiles, seasonal dwellings, boats, jewelry, etc. are lines

A

Personal

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7
Q

Which is insurable, and which is not:
Insurable:___________________________________
NOT Insurable:_______________________________

A

Yes - Pure

Not - Speculative

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8
Q

Risks are classified into categories of risks: ___________________, __________________ , _______________________.

A

Personal, property, liability

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9
Q

The insurance relating to operations, such as stores, professional offices, trucking operations, and many other similar businesses are _______________________ lines.

A

Commercial

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10
Q

A contract in which one party, the insurer, for monetary consideration agrees to reimburse another, the insured, for loss or liability for a loss on a defined subject caused by specified hazards or perils.

A

Insurance

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11
Q

Means the chance of a loss. Insurance deals only with the pure risks, which entails a chance of loss but no chance of profit. Speculative risks exist where there is a chance of loss but there is also a chance of profit, and because of the chance of profit these are uninsurable risks.

A

Risk

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12
Q

An insurance term for a situation where the possibility of either a financial loss or a financial gain exists, such as purchasing shares, or betting on horses.

A

Speculative Risk

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13
Q

An event, which may cause a loss to occur

A

Peril

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14
Q

A condition, which may cause a peril to occur or make the loss more severe. A hazard can be either a physical hazard, which deals with nature of the actual risk, or a moral hazard, in that it relates to the human element of the risk.

A

Hazard

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15
Q

Paul buys a pair of rare sneakers and hopes to re-sell them online for a big profit. What is this an example of?

a. Illegal risk
b. Speculative risk
c. Pure risk
d. Moral risk

A

B

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16
Q

Insurance is based on the existence of

a. Risk
b. Loss
c. Indemnity
d. Consideration

A

a. Risk

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17
Q

Which type of risk can be insured?

a. Illegal risk
b. Pure risk
c. Speculative risk
d. Moral risk

A

b. Pure risk

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18
Q

Which of the following factors is an example of a physical hazard associated with a property risk?

a. Dishonest employee actions
b. Personal habits of the insured
c. Financial and labor problems
d. Poorly maintained heating units

A

d. Poorly maintained heating units

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19
Q

What is proximate cause?

a. Imagined cause of loss
b. The last link in a chain of events
c. Predetermined cause of damages
d. Immediate and effective cause of a loss

A

d. Immediate and effective cause of a loss

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20
Q

What is a defining attribute of speculative risk?

a. It is insurable
b. It is pure in nature
c. There is a chance of profit
d. There are no loss exposures

A

c. There is a chance of profit

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21
Q

What type of insurance salesperson sells policies on behalf of several insurers?

a. Adjuster
b. Broker
c. Underwriter
d. Employee of a direct writer

A

B - broker

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22
Q

Which of the following is an example of a moral hazard?

a. A building with an outdated, overloaded electric panel and exposed wiring.
b. A business with a good credit score.
c. A landlord with an excellent maintenance record for her rental units.
d. A manager with a careless attitude toward health and safety issues

A

d. A manager with a careless attitude toward health and safety issues

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23
Q

What is a peril?

a. An event that caused the loss to occur
b. An action that caused a loss to be more severe
c. A situation that increased the frequency of loss
d. A condition related to the physical features of a risk

A

a. An event that caused the loss to occur

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24
Q

What term is defined as the last link in a chain of events leading to the loss?

a. Remote cause
b. Effective cause
c. Proximate cause
d. Immediate Cause

A

d. Immediate Cause

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25
Q

A high-risk industrial operation is an example of what type of risk?

a. Niche risk
b. Special risk
c. Personal risk
d. Commercial risk

A

b. Special risk

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26
Q

Which of the following situations has the correct proximate cause of loss identified?

a. An individual trips and falls on loose carpet on stairs; the individual’s footwear is the proximate cause.
b. A cigarette tossed from an upper balcony lands on a lower balcony, causing a fire that damages the apartment unit; fire is the proximate cause.
c. Water damage to the interior of a home during a severe storm with an old/unmaintained roof; the proximate cause is the storm.
d. A negligent property owner does not clear snow from her sidewalks, and a visitor slips and falls; the fall is the proximate cause.

A

b. A cigarette tossed from an upper balcony lands on a lower balcony, causing a fire that damages the apartment unit; fire is the proximate cause.

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27
Q

Insurance means the undertaking by one person or organization to ______ another person or organization against loss, or liability for loss, for a certain risk or peril as described in a policy, or to pay a sum of money or another thing of value when a specified event happens

A

Indemnify

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28
Q

In addition to the Spread The Risk, list five supplementary functions of insurance:

A

Aid to: Security

Aid to: Credit

Promoting: Loss Prevention Activities

Providing: Capital

Providing: Employment

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29
Q

An insurer must make good the amount of the insured’s financial loss – no more and no less” is a definition of

A

Indemnity

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30
Q

People need to have what in a in property when they stand in such a legal relationship to it that they would be financially prejudiced by its loss or damage and is financially benefitted from its continued existence.

A

Insurable Interest

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31
Q

Defined as the value of an equivalent piece of property of the same age and condition and subject to the same wear and tear as the property that was lost or destroyed. This takes into account for depreciation.

A

ACV Actual Cash Value

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32
Q

Means that the insurer pays the cost of replacing the building, without any reduction for depreciation even of the value of the building was underestimated when the policy was set up.

A

Guaranteed Replacement Cost

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33
Q

Also known as replacement cost, is the current market value of the cost to replace the lost or damaged insured property.

A

Replacement Value

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34
Q

General Insurance is often referred to as _____ & ____ Insurance:

A

Property & Casualty

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35
Q

Actual cash value is calculated in one of three ways

A

The cost to repair or replace less any depreciation

Fair market value

Consideration of all relevant evidence of the value of the damaged property

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36
Q

Insurers can be divided into three basic groups:

A

Organizations operating for the profit of their owners Stock Companies

Co-operative organizations operating for the benefit of their members only

Government insurance organizations which can take the form of a government department or a crown corporation.

Captive Insurers: provides insurance to and is controlled by its owners

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37
Q

Under a ____ system of insurance, insured pay a fixed premium as their contribution to the communal fund. If the contributions of all policy holders are not sufficient to cover the losses of all policy holders, the shortfall is provided from the contributed capital of the investors.

A

stock company

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38
Q

Stock Insurance companies achieve profit from two main sources

A

Underwriting gain

Interests on investments

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39
Q

What is an assessment or premium note mutual?

A

assessment is paid in the event that there is not enough money to cover losses.

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40
Q

What is a factory mutual?

A

operate for the benefits of the members. Initially, it was only for factories. specializes in the field of fire prevention

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41
Q

What is a stock mutual?

A

originally a mutual, now has shareholders and operates for a profit.

42
Q

What is Lloyds?

A

investors can be individuals/corporations that form a “syndicate”. syndicates hire uw specialists.

43
Q

What is a co-operative stock mutual?

A

Charges for operating expenses/profit. Can’t ask for premium until renewal. Premium set at the start of the policy period. Can issue dividend checks.

44
Q

With respect to an insurance company’s organization, list departments that are common to all companies:

A

Accounting and Finance

Administration

Marketing

45
Q

With respect to an insurance company’s organization, list departments that are common to INSURANCE companies:

A

Actuarial

Claims

Underwriting

46
Q

______ are responsible for analyzing the data and performing the calculations that determine the price of the various classes of insurance; they are responsible for the basic ________

A

Actuaries

Ratemaking

47
Q

To insure again by transferring to another insurance company all or part of a liability assumed.

A

Reinsure

48
Q

When a company reinsures its liabilities with another, it ______ business. The amount ceded is called the ________.

A

Cedes

Cession

49
Q

When a reinsurer cedes part of its business to another reinsurer, that is a ______ and the second reinsurer is the _____.

A

retrocession

retrocessionaire

50
Q

There are two types of reinsurance with a brief explanation:

A

Treaty – an agreement between the insurer and reinsurer that provides for automatic reinsurance without the insurer having to submit every risk

Facultative – reinsurance placed on an individual case by case basis

51
Q

To provide compensation for loss or expenses incurred

A

Indemnify

52
Q

An agreement or promise between two or more persons that is intended to be legally enforceable and is constituted by the acceptance by one party of an offer made to him by the other party, to do or to abstain from doing a specific act. The offer and acceptance may either be expressed or be inferred through the conduct of the parties.

A

Contract

53
Q

A person who is employed or authorized to act on behalf of another. Agents can be independent or direct writers.

A

Agent

54
Q

One who contracts with at least two or more insurance companies to sell their insurance policies to the public and is paid a commission based on the percentage of each premium paid. This includes a fee for each policy serviced.

A

Independent Agent

55
Q

is a person who represents only one company and sells for only one company, and is also paid on a commission basis similar to the independent agent

A

Direct Agent

56
Q

A licensed independent person or firm who acts on behalf of an insured placing business with insurance companies

A

Broker

57
Q

one who investigates insurance claims, makes recommendations regarding the payment of benefits from insurance policies, and negotiates payments and settlements

A

Adjuster

58
Q

the part of the premium that has not been used or earned; premium representing the unexpired portion of the policy.

A

Unearned Premium

59
Q

that portion of premium earned or charged for the period of time a policy remained effective.

A

Earned Premium

60
Q

A reserve fund of an insurance company or reinsurance company, representing the unearned premiums

A

Unearned Premium Reserve

61
Q

An interest that the insured must have in the subject matter of the insurance purchased so that if the event insured against occurs, the insured will suffer a pecuniary loss

A

Insurable Interest

62
Q

A contract, expressed or implied, to repay in the event of a loss. The insured neither gains or loses.

A

Indemnity

63
Q

The fair market value of property, taking into account factors that might augment or reduce the value of the property in question.

A

Actual Cash Value

64
Q

A clause that pays replacement costs even if these exceed the amount of insurance on the dwelling building if all conditions are met

A

Guaranteed Replacement Cost

65
Q

First party insurance that indemnifies the owner or user of property for its loss, or loss of its income producing ability, when the loss or damage is caused by a covered peril.

A

Property Insurance

66
Q

Loosely used to describe an area of insurance not particularly or directly concerned with life insurance, fire insurance. It most frequently refers to liability, burglary and plate glass insurance but may include fidelity and surety.

A

Casualty Insurance

67
Q

IBNR

A

funds set aside to pay for losses that have been incurred but not yet reported.

68
Q

an insurance company that is owned and operated by its policyholders, who assume the risks of profit and loss and establish a corporation for the purposes of insuring one another against the possibility of fortuitous loss.

A

Mutual Insurance Company

69
Q

Insurance Companies of the mutual type (as distinct from stock

companies) that specialize in industrial risks and in loss prevention.

A

Factory Mutuals

70
Q

The amount of stock sold by a corporation.

A

Subscribed Stock

71
Q

Represents that part of the subscribed capital that has been paid in full by shareholders.

A

Paid-Up Capital

72
Q

The amount of money an insurance company gains as a result of its insurance operations. Excess of earned premiums collected over loss payments and expenses.

A

Underwriting Profit

73
Q

Funds that are set aside by an insurance company for the purpose of meeting obligations as they fall due. Such obligations would include liabilities for unearned premiums and the estimated costs of unpaid claims.

A

Reserves

74
Q

An amount carried as a liability in an insurers balance sheet representing, in respect of each claim, an amount equal to the estimated final settlement cost less any amounts already paid

A

Loss Reserve

75
Q

compensation based upon the amount of production; for example, independent insurance agents are compensated on the basis of a percentage of the premium.

A

Compensation

76
Q

One who specializes in the mathematics of insurance, mortality rates and the like

A

Actuary

77
Q

The process of compiling and analyzing data to establish rates that accurately reflect the level of risk.

A

Ratemaking

78
Q

The assertion of a demand made by one party against another for indemnity or restitution for personal injury or property damage

A

Claim

79
Q

One who adjusts losses on behalf of the insurance companies but is not employed by any one insurer.

A

Independent Adjuster

80
Q

Insurance purchased by an insurance company from another insurance company to provide it protection against large losses on cases it has already insured. Essentially, an insurance for insurance companies.

A

Reinsurance

81
Q

The measure of an insurers ability to issue contracts of insurance. Measured usually by the largest amount it will accept on a given risk or in certain situations, but the maximum volume of business that the company is prepared to accept.

A

Capacity

82
Q

What does insurance provide?

a -A way to profit after a loss

b- A way of sharing the losses of a few people among the many

c- Something for people to complain about

d- A financial burden for car owners

A

b - A way of sharing the losses of a few people among the many C81 Chapter 3 pg. 3-5

83
Q

Which of the following situations is an example of insurable interest in property?

a. A homeowner whose personal property is damaged as a result of the fire in his home.
b. The homeowner’s employer who provided the homeowner with a laptop that was damaged as a result of the fire.
c. The homeowner’s neighbour who couldn’t work in his home for the day as a result of the next-door fire-fighting activities
d. The neighbour’s car that was accidentally damaged by fire-fighters as they were putting away their fire-fighting equipment.

A

a. A homeowner whose personal property is damaged as a result of the fire in his home.

84
Q

Which of the following methods are commonly used to calculate the indemnity owed for property insurance policies?

a. Market value and manufacturer’s suggested retail price (MSRP)
b. Actual cash value (ACV) and replacement value
c. Actual cash value (ACV) and purchase price
d. Consumer Price Index (CPI) and replacement cost

A

b. Actual cash value (ACV) and replacement value

85
Q

What is a valued contract?

a. A contract that provides business interruption insurance up to a specified limit per loss
b. A contract that provides up to fifty percent of the total loss to the insured property
c. A contract that provides a pre-agreed amount if there is a total loss of the property insured
d. A contract that provides life insurance for an amount equal to the insured’s loss

A

c. A contract that provides a pre-agreed amount if there is a total loss of the property insured

86
Q

Which of the following perils is covered under an Extended Coverage (EC) Endorsement?

a. Riot
b. Flood
c. Vandalism
d. Earthquake

A

a. Riot
&
c. Vandalism

87
Q

Which party acts as an intermediary in arranging the insurance contract?

a. Broker
b. Lawyer
c. Insurer
d. Insured

A

a. Broker

88
Q

Which of the following terms is defined as a contract, expressed or implied, to repay in the event of a loss?

a. Indemnity
b. Subrogation
c. Replacement
d. Compensation

A

a. Indemnity

89
Q

When are valued contracts typically used?

a. To insure items that do not require an appraisal to pre-determine their value.
b. When an insurer has a history of good experience with a particular insured and wishes to reward the insured’s loyalty
c. To insure items for which it would be difficult to determine a true value after a loss has occurred.
d. When the principle of indemnity does not apply to a particular contract and needs to be overridden

A

c. To insure items for which it would be difficult to determine a true value after a loss has occurred -

Valued contracts are used when it is otherwise difficult to determine a value after a loss. The predetermined value is agreed to and documented in the policy before
a loss.

90
Q

Who deals with federal licensing and supervision of insurance companies?

a. The Insurance Companies Act through the Office of the Superintendent of Financial Institutions
b. The lieutenant-governor in council
c. The minister of transportation
d. The superintendent of insurance

A

a. The Insurance Companies Act through the Office of the Superintendent of Financial Institutions -

The Canadian government has enacted the Insurance Companies Act, which deals with the federal licensing and supervision of insurance companies and solvency standards for insurers. The act is enforced through the Office of the Superintendent of Financial Institutions

91
Q

What is a valued contract?

a. A contract that provides business interruption insurance up to a specified limit per loss
b. A contract that provides up to fifty percent of the total loss to the insured property
c. A contract that provides a pre-agreed amount if there is a total loss of the property insured
d. A contract that provides life insurance for an amount equal to the insured’s loss

A

c. contract that provides a pre-agreed amount if there is a total loss of the property insured

92
Q

A person who may be financially prejudiced by damage to a property he owns is said to have

a. Legal liability in the property
b. Legal capacity in the property
c. Insurable interest in the property
d. Right of subrogation in the property

A

c. Insurable interest in the property

93
Q

An ___________ is a request for insurance. It introduces the applicant to the insurance company and recognizes the broker of record. It can be made ______ or in _______.  Some forms of Insurance do not require an application to be completed to issue a policy.  

A

Application

Orally or Writing

94
Q

The duty of __________ is fundamental to the principle of Utmost Good Faith that underlies all insurance transactions. 

A

Disclosure

95
Q

A factual statement about the risk is known as a _________

A

Representation

96
Q

There are eight sections to an application: 

A 
Name Insured
Policy Term
Subject of Insurance
Loss Payees
Loss History
Prior Insurance
Brokers Report
Signatures
97
Q

The generic term for someone other than the named insured to whom the proceed of insurance will be paid.

A

Loss Payee

98
Q

A _________ is a special class of loss payee. Their interests are protected by a separate insuring clause, known as ta _________.

A

Mortgagee

Mortgagee Clause

99
Q

With respect to prior insurance, what may indicate a potential concern for underwriters? (2)

A
  • An unexplained gap in coverage

- Previous insurers declining, denying or refusing to renew insurance could indicate a moral hazard.

100
Q

The process of establishing rates for each class or insurance.

A

Ratemaking

101
Q

The ______ is the price of a unit of insurance. The _______ is arrived at multiplying the ______ times the amount of insurance purchased.

A

Rate

Premium

Rate

102
Q

Primarily, the determination of premiums required is an application of the principles derived from the Law of _________, __________ and ________. The probability of an event happening is spoken of as the chance an event may happen but cannot tell you which specific risks will suffer a loss.

A

Large Numbers

Probability Theory

Loss Probability

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