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C11 Principles and Practice of Insurance > Textbook Review > Flashcards

Textbook Review Flashcards

1
Q

When binding coverage, limits on amounts which the brokers can bind are?

a. The maximum the insurer has capacity
b. The maximum the broker will entertain
c. A control on the intermediaries’ binding power
d. Control on the insurers coverage limits

A

c. A control on the intermediaries’ binding power

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2
Q

Premiums held in the brokerages trust account belong to

a. The Insurer
b. The Broker
c. The Regulator
d. The Insured

A

a. The Insurer

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3
Q

Who are the physical links between the insurer and consumer?

a. Underwriters
b. Intermediaries
c. Managing general agents Incorrect
d. Principles

A

b. Intermediaries

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4
Q

Offer and Acceptance forms which element of a legal contract under common law?

a. Genuine Intent
b. Consideration
c. Agreement
d. Capacity to Consent

A

c. Agreement

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5
Q

Who is responsible for overseeing privacy legislation in a province or territory

a. OSFI
b. Superintendent of Insurance
c. Ombudsperson
d. The insurer

A

c. Ombudsperson

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6
Q

Subrogation Is?

a. Process of reducing the amount of the loss
b. Carrying the specified amount of insurance required for full loss recovery
c. Process to recover a loss paid out from liable party
d. The reduction in value of property

A

c. Process to recover a loss paid out from liable party

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7
Q

This element is of an insurance contract states you have something to loose if the object ceases to exist

a. Utmost Good Faith
b. Insurable Interest
c. Contribution
d. Subrogation

A

b. Insurable Interest

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8
Q

Solvency is?

a. The ability to sell the companies assets
b. The ability to meet long-term financial commitments
c. The ability to provide a return on investments
d. The Stability of short-term financial commitments

A

b. The ability to meet long-term financial commitments

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9
Q

In which two provinces are salaried staff adjusters required to be licensed?

a. Alberta and British Columbia
b. New Brunswick and Quebec
c. Nova Scotia and Quebec
d. Newfoundland and Manitoba

A

b. New Brunswick and Quebec

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10
Q

Casualty Insurance refers to?

a. Life insurance Incorrect
b. Auto insurance
c. Liability insurance
d. Fire insurance

A

c. Liability insurance

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11
Q

Solvency is best defined as

a. Ability to pay off all debts
b. When a company shuts down it’s operations
c. When a business is unable to meet it’s long term financial commitments
d. A business entity’s ability to meet its long term financial commitments

A

d. A business entity’s ability to meet its long term financial commitments

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12
Q

The spread of risk is achieved by?

a. Insuring a large number of risks
b. Providing capital
c. Focusing on a small number of locations insured
d. Having a single class of business transacted

A

a. Insuring a large number of risks

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13
Q

What are the four steps to remediate a privacy breach?

a. Contain, Stop, Determine, Prevent
b. Contain, Evaluate, Determine, Prevent
c. Stop, Evaluate, Determine, Prevent
d. Contain, Evaluate, Assess, Prevent

A

b. Contain, Evaluate, Determine, Prevent

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14
Q

What is the immediate cause of a loss?

a. The cause that without the cause the event would not have happened
b. Separate from the proximate cause
c. A continuous sequence of events
d. The immediate and effective cause

A

b. Separate from the proximate cause

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15
Q

What is true in regards to adjuster and agent licensing in Canada?

a. All adjusters must be licensed, All agents must be licensed
b. All adjusters must be licensed, All agents except staff agents in New Brunswick and Quebec Must be Licensed
c. All Independent adjusters must be licensed, all Agents must be licensed
d. All staff adjusters must be licensed, all agents must be license

A

c. All Independent adjusters must be licensed, all Agents must be licensed

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16
Q

Earned premium is?

a. A reserve fund
b. Premium actually exposed to loss
c. Premium that has not been used
d. Pre-paid insurance

A

b. Premium actually exposed to loss

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17
Q

Insurable risk exists?

a. Where there is a chance of profit
b. Where there is a chance of profit or loss
c. Where this is a chance of loss but not of profit
d. Where there is a chance of profit but not of loss

A

c. Where this is a chance of loss but not of profit

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18
Q

A hazard is a condition that?

a. May cause a peril to occur
b. May cause a peril to occur or make the loss more severe
c. May make the loss more severe
d. Is attributable to the human element of risk

A

b. May cause a peril to occur or make the loss more severe

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19
Q

Insurance is only concerned with pure risk, a basic test to determine if something is insurancable is to ask the following:

a. Is there a chance of loss? Is there a chance of profit?
b. Is there a chance of loss? Is there a chance of peril?
c. Is there a chance of gain? Is there a chance of risk?
d. Is there is no chance of loss? Is there no chance of gain?

A

a. Is there a chance of loss? Is there a chance of profit?

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20
Q

There are many kinds of risk, they are usually divided into what three categories

a. Pet Insurance, Life Insurance, Home Insurance
b. Home risks, Commercial risks, Life risks
c. Personal risks, Property risks, Liability risks
d. Automobile risks, Liability risks, Pet Risks

A

c. Personal risks, Property risks, Liability risks

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21
Q

A moral hazard is:

a. a hazard arising from the character of the insured
b. a hazard arising from the cost of the insureds home
c. a hazard arising from the condition of the insured home
d. a hazard arising from the integrity of the insureds home

A

a. a hazard arising from the character of the insured

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22
Q

A physical hazard is:

a. A hazard arising from physical assault
b. A hazard arising from being struck by a vehicle
c. A hazard arising from the integrity of the insured
d. A hazard arising from the condition of the object

A

d. A hazard arising from the condition of the object

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23
Q

The Definition (Key-Term) of Indemnify States

a. Returns money if you do not use your insurance
b. Helps you get out of debt
c. Provides compensation for loss or expenses incurred
d. Is not related to insurance

A

c. Provides compensation for loss or expenses incurred

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24
Q

Risk can be spread by

a. Insuring small volumes of business
b. Writing the same type of risk
c. Making your policy wordings difficult to be read and limiting claims
d. Writing diverse types of risks, in many locations across Canada

A

d. Writing diverse types of risks, in many locations across Canada

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25
Q

General Insurance is also known as

a. P&C
b. P&U
c. E&O
d. Auto

A

a. P&C

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26
Q

Casualty Insurance is related to

a. Pet Insurance
b. Life Insurance
c. Injury Insurance
d. Liability Insurance

A

d. Liability Insurance

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27
Q

Unearned Premium

a. Can be spent, or invested by an insurer as it is profit
b. Must be available to refund to policyholder if policy is cancelled
c. Is used to pay claims
d. Makes up the working capital of an insurer

A

b. Must be available to refund to policyholder if policy is cancelled

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28
Q

Mutual Insurance Companies

a. Are owned by private corporations
b. Are designed to make profits
c. Are owned by policyholders
d. Are not common in Canada

A

c. Are owned by policyholders

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29
Q

Capacity is defined as

a. The measure of an insurers ability to issue contracts of insurance
b. The amount of money an insurance company has
c. The maximum amount of policies an insurance company can issue
d. The classes of business an insurer writes

A

a. The measure of an insurers ability to issue contracts of insurance

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30
Q

The following departments are unique to insurance companies

a. Claims, Policy Department, Actuarial
b. Underwriting, Actuarial, Claims
c. Repairs, Underwriting, Pricing
d. Claims, Underwrinting, Ratemaking

A

b. Underwriting, Actuarial, Claims

31
Q

Risk is the chance of

a. Gain
b. Hazard
c. Indemnity
d. Loss

A

d. Loss

32
Q

The following is not a distribution or delivery system for insurance in Canada. *Choose the incorrect response*

a. Independent Brokerage
b. Exclusive Agency
c. Independent Agency
d. Direct Agency Writer

A

d. Direct Agency Writer

33
Q

What are the main steps in the risk management process:

A
  1. Identifying and analyzing exposures
  2. Formulating options
  3. Selecting the best techniques
  4. Implementing the risk management plan
  5. Monitoring results and modifying the plan
34
Q

What is the concept of Insurance Fund Income, Insurance Fund, Fund Outgo. Explain how insurance premiums come in and leave the company

A

Funds income- premiums collected from many are pooled to pay for the losses of the few. The income of the fund must be sufficient to meet the losses paid out. Furthermore, the premium for each risk should be commensurate with that risk. Those more likely to have losses should pay higher premiums. Also, those insuring for higher amounts should pay higher premiums, although this does not mean higher rates. All members of the group must pay their fair share of the premium commensurate to the risk.

Insurance funds are pooled together and maybe invested, but must always be available to pay claims.

On the outgo side, it is important for the insurer to properly settle legitimate losses. Paying legitimate claims is the purpose of insurance, and inflated or inappropriate claims should be refused in fairness to all insureds who have contributed to the fund.

35
Q

Describe the two ways an insurance company generates a profit

A

Underwriting profits
investment profits

36
Q

List and describe the 5 elements of a contract

*HINT* The Acronym I provided in class is “C.L.A.I.M”

A

Capacity to contract

Legality of purpose

Agreement (offer and acceptance)

Genuine Intentions to contract

Consideration -Monetary value

37
Q

What does the acronym “OSFI” mean, and what is its 3 primary function?

A

Office of the Superintendent of Financial Institution

Establishment of insurance companies

Prerequisites to operation

Supervision during operation

38
Q

A homeowner loses the ability to continue to rent their basement suite after a fire is an example of?

a. An incidental loss
b. A direct loss
c. An indirect loss
d. A liability

A

c. An indirect loss

39
Q

Which organization would insure a driver with multiple driving infractions and accidents?

a. Insurance Bureau of Canada
b. Canadian Insurance Claims Managers Association
c. Institute of Catastrophic Loss Reduction
d. Facility Association

A

d. Facility Association

40
Q

Which of the following is NOT part of the Insuring agreements section?

a. Description of the property covered
b. Parties to the contract
c. Perils insured against
d. Circumstances under which the insured may receive the proceeds of insurance

A

b. Parties to the contract

41
Q

Making a change to a policy midterm is done by?

a. Endorsement
b. Manuscript
c. Certificate of Insurance
d. Binder

A

a. Endorsement

42
Q

The presence of a large number of loss payees may suggest?

a. Company credit is good
b. A potential moral hazard
c. Strong financial statements
d. Good cash flow

A

b. A potential moral hazard

43
Q

The short rate basis of returning premiums on a cancelled policy occurs when?

a. Insurer fails to give proper notice of termination
b. Insurer gives proper notice of termination
c. Insured terminates the policy before the end of the term
d. Insured and Insurer mutually consent to termination of the policy

A

c. Insured terminates the policy before the end of the term

44
Q

Conduct or statement either express or implied for a risk to be properly assessed is?

a. Duty of disclosure
b. Disclosure
c. Material fact
d. Representation

A

d. Representation

45
Q

What are the 5 essential elements of good client service provied by intermidiaries?

A

A dependable source of insurance advice

Adequate capacity and range of coverages

Accurate and adequate accounting and office methods

Good handling of claims

Appropriate handling of complaints

46
Q

Which organization offers investigative services?

a. Insurance Bureau of Canada
b. Insurance Brokers’ Association
c. Centre for Study of Insurance Operations
d. Underwriters Laboratories of Canada

A

a. Insurance Bureau of Canada

47
Q

The ability to provide a full range of insurance protection to clients is referred to as

A

Adequate capacity

48
Q

A situation involving a chance of loss, but no chance of gain.

A

Pure Risk

49
Q

These three components make up the Insurance Model

A

Funds income Premium from insureds

Insurance fund insurance

Fund Outgo claims payments

50
Q

This responsibility is found in both; Pre and Post loss objectives of Risk Management

A

What is Social Responsibility

51
Q

These FIVE functions make up the secondary functions of Insurance

A

Aiding Security,

Aiding Credit,

Promoting Loss Prevention,

Providing Capital,

Providing Employment

52
Q

The process of compiling and analyzing data to establish rates that accurately reflect the level of risk is known as what process?

A

What is Ratemaking

53
Q

Intermediaries (Brokers & Agents) must establish what two types of bank accounts for their business what are they and what is the purpose of each account

A

A trust account and an operating account

A Trust Account where premiums collected are deposited and from which the insurers would be paid for policies issued,

An operating account, which would be the general business account

54
Q

What is Risk

A

When there is a chance of loss. Specifically the loss or destruction of property of the possibility of incurring of a liability.

55
Q

These three departments are unique to insurance company operations

A

Actuarial,

Claims

Underwriting

56
Q

These four methods are used to distribute insurance in Canada

A

Independent agency system

Independent brokerage system

Exclusive agency system

Direct Writers

57
Q

These five reasons are the main reasons an insurer requires reinsurance

A

to increase capacity,

to maintain proper reserve and liability balance,

to reduce the effect of a catastrophic loss,

to provide stability in a fluctuating market,

to enable an insurer to cease operations

58
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 finacial loss

A

What is Insurable Interest

59
Q

This Act or federal statue is known for its governance over the collection and use of personal information

A

PIPEDA - Personal information protection and electronic documents act.

60
Q

These three elements are distinctive and must be present in all insurance contracts

A

Insurable Interest

Indemnity and

Utmost good faith

61
Q

What is the formula for coinsurance

A

Did
_______ X loss

Should

amount of insurance carried
———————————-

mimumum mount of insurance required

62
Q

These key steps have been identified to assist with remedying an accidental or deliberate breach of personal information. Also Known As a Privacy Breach

A

Contain the Breach

Evaluate the risk associated with the breach

Determine who needs to be notified of the breach and send the notice

Prevent future breaches by determining how the breach happened.

63
Q

The mathematical premise that states that the degree of uncertainty is reduced as the number of events increased is know as

A

The Law of Large Numbers

64
Q

This document can be a written or oral agreement given by the insurer to insure a risk pending the formal policy

A

A Binder

65
Q

Policy wordings that do not conform to the standard wording are known as

A

Manuscript wording

66
Q

These five (5) steps make up the process of rate-making

A

Classify risks

gather statistics on past losses

Calculate pure premium

Determine total premium, including loading

Calculate the rate or unit cost

67
Q

While all policies can vary, these five (5) main sections are usually found in every Insurance policy

A

Coverage Summary

Insuring Agreements

Statutory Conditions/General Conditions (QC)

Policy Conditions

Signature Clause

68
Q

In law a limitation of time which legal action can be taken this period is known as

A

A Prescription

69
Q

The assertion of a demand made by one party against another for indemnity is known

A

A claim

70
Q

What is Insurable Interest, indemnity and utmost good faith

A

The three elements distinctive to insurance and must be present in all insurance contracts

71
Q

This type of adjuster usually handles small, straightforward losses from the office or call center type environment

A

a telephone adjuster

72
Q

There are four (4) various types of adjusters you may work with on a claim what are they

A

Staff adjusters

Public Adjusters

Independent adjusters

Telephone adjusters

73
Q

What are the elements of a contract

A

Agreement (Offer and Acceptance),

Consideration,

Genuine Intent,

Legal Capacity to Contract

Legality of Purpose

74
Q

What is?

IIC

CIP

IBC

A

Insurance Institute of Canada

Chartered Insurance Professional

Insurance Bureau of Canada

C11 Principles and Practice of Insurance (11 decks)

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