Quiz 2 Flashcards
An Individual applied for auto insurance and obtained coverage from ABC Insurance Company. Who is the first party in the contract?
The agent
The insured and agent
ABC Insurance Company
The insured
The insured
Which statement best describes a peril?
A storm damaged the insured’s home.
Driving to the grocery store exposes the insured to loss.
Smoking cigars caused the insured to pay a higher premium for life insurance
Gas cans in the insured’s garage are leaking and increasing the likelihood of a fire
A storm damaged the insured’s home.
The best example of reduction as a risk management techinque is
increasing a deductible
buying an insurance policy
wearing a seat belt
choosing not to go mountain climbing
wearing a seat belt
Grace leaves her car unlocked when she goes shopping. She figures her car and its contents are insured, so there is no reason to worry. Which type of hazard is this example of?
Moral
Morale
Hopeless
Physical
Morale
A flood is an example of?
morale hazard
peril
moral hazard
speculative risk
peril
An insurance company incorporated in Wisconsin but conducting business in Ohio is known as
Domestic
Nonadmitted
Foreign
Alien
Foreign
All of the following statements about a stock insurance company are true EXCEPT
pays dividends to stockholders
is participating company
has shareholders
nonparticipating company
is participating company
What do insurance companies use to help predict how many losses will occur in a group or class of indivduals?
Law of large number
Speculative Risk
Risk Retention Groups
Adverse Selection
Law of large number
States require companies to have a license to sell insurance in the state. The license is called
admittance license
certificate of authority
reinsurance license
producer’s license
certificate of authority
All of the following are requirements of an insurable pure risk EXCEPT
premiums must be calculable
the loss must have bee accidental
premiums must be payment options
risk must be catastrophic for the insurance company
risk must be catastrophic for the insurance company
Insurers may be classified according to their financial strength. This includes all of the following factors EXCEPT
loss of experience
investment performance
operating expenses
number of clients
number of clients
Jody passes out a business card with her company’s logo to all new prospects that she meets at a networking social. This is an example of
apparent authority
implied authority
agent authority
corporate authority
implied authority
In insurance, he insurance agent acts on behalf of
the claimant
the principal
the customer
the adjuster
the principal
Which of the following types of advertising does not involve an agent and is conducted through the mail, by advertisements in newspapers and magazine or the internet?
direct writing
cold calling
captive agent system
direct response
direct response
Which of the following individuals represent only one insurance company?
managing general agent
general agent
independent agent
captive agent
captive agent
What is a contract or device for transferring risk from a person, business, or organization to an insurance company?
Adverse Selection
Agency
Law of numbers
Insurance
Insurance
Which of the following represents a pure risk?
The chance your house may burn down
game of craps
stock market
business investmen
The chance your house may burn down
One morning, a group of thieves entered an apartment and stole belongings from an apartment after the owner left the door open. What was the hazard?
door left open
the belongings
the group of thieves
the apartment
door left open
Since Susan lives in a good area across the street from the fire department, she decides to cancel her fire insurance policy. This is an example of which risk management method?
transfer
control
saving money
retention
retention
Sometimes an individual or business has an exceptionally large or specialized risk that no authorized insurer can or will cover. In this case, the individual or business may call
Statefarm insurance company
non-admitted insurance company
admitted insurance company
foreign insurance company
non-admitted insurance company
Insurance companies often purchase insurance to cover their own exposure to loss. This is called
reinsurance
loss control
admitted insurance
surplus lines
reinsurance
Which is NOT an element of an insurable risk?
Accidental
Reasonable
Catastrophic
Affordable
Catastrophic
An individual in a position of financial trust is called
an independent agent
a broker
an accountant
a fiduciary
a fiduciary
The authority made explicit in a producer’s written agency agreement with the insurer is known as
apparent authority
implied authority
express authority
suggested authority
express authority
