Primary Insurance Qs from Scott

Question 1

(T/F) Having a small number of risk exposures is a characteristic of an ideally insurable risk?

Answer 1

FALSE – you’d like a large number of risk exposures

Question 2

(T/F) An indirect loss is a consequence of a direct loss?

Answer 2

TRUE

Question 3

(T/F) The essential purpose of regulation is for rate regulation, consumer protection, and preservation of insurer solvency?

Answer 3

TRUE

Question 4

(T/F) The objective of insurance is accomplished through risk transfer and sharing of loss?

Answer 4

TRUE

Question 5

(T/F) Pricing of insurance product is a function of the claims department?

Answer 5

FALSE – actuarial / underwriting

Question 6

(T/F) Is land insurable?

Answer 6

FALSE – cannot insure land itself, only structure (except for golf courses)

Question 7

(T/F) A company with an overall operating ratio of 105 should considered profitable?

Answer 7

FALSE – over 100 is not profitable

Question 8

(T/F) Insuring a catastrophic loss is a characteristic of an ideally insurable risk?

Answer 8

FALSE – do not want to insure catastrophic loss

Question 9

What is a hazard?
(1) Increase in the probability that a loss might occur
(2) The chance of a loss
(3) The uncertainty a loss might occur
(4) The cause of loss

Answer 9

(1) Increase in the probability that a loss might occur

Question 10

The principle that states that an insured should be restored to the same financial position after a loss?
(1) Insurability
(2) Adhesion
(3) Indemnity
(4) Subrogation

Answer 10

(3) Indemnity

Question 11

Small insurance company is owned by the policy holders and governed by the board of directors?
(1) Stock insurance company
(2) Mutual insurance company
(3) Reciprocal insurance company
(4) Lloyd’s

Answer 11

(2) Mutual insurance company

Question 12

What does the acronym COPE mean?

Answer 12

Construction
Occupancy
Protection
External Exposures