MICHIGAN PROPERTY & CASUALTY
INSURANCE EXAM QUESTIONS &
PASSED CORRECT ANSWERS
ALREADY GRADED A+
Risk - Correct Answer ✔✔ The possibility that a loss will occur
Speculative Risk - Correct Answer ✔✔ Chance of loss or gain
Pure Risk - Correct Answer ✔✔ only the possibility of loss
Peril - Correct Answer ✔✔ cause of loss
Exposure - Correct Answer ✔✔ The potential for accidents and other losses
Direct Loss - Correct Answer ✔✔ Loss that is a direct result of a peril, such as fire.
Indirect Loss - Correct Answer ✔✔ Loss that is a result or consequence of a direct loss
Moral Hazard - Correct Answer ✔✔ Arise from a person's character (dishonesty)
Morale Hazard - Correct Answer ✔✔ A condition of carelessness or indifference that
increases the frequency or severity of loss.
Physical Hazard - Correct Answer ✔✔ a physical condition that increases the frequency
or severity of loss
Sharing risk - Correct Answer ✔✔ Two or more individuals share risk
transfer risk - Correct Answer ✔✔ The purpose of insurance
Avoidance - Correct Answer ✔✔ eliminating certain risk by not engaging in certain
activity
Retention - Correct Answer ✔✔ Self-insurance, person will pay for loss
Reduction - Correct Answer ✔✔ Lessening the possibility or severity of a loss.
Law of Large Numbers - Correct Answer ✔✔ A principle stating that the larger the
number of similar exposure units considered, the more closely the losses reported will
equal the underlying probability of loss.
, Elements of Insurable Risk - Correct Answer ✔✔ Calculable
Affordable
Non-catastrophic
Homogeneous
Accidental
Measurable
Adverse Selection - Correct Answer ✔✔ risks that have a greater than average chance
of loss
Reinsurancd - Correct Answer ✔✔ Transfers risk from one insurer to another
Stock Insurer - Correct Answer ✔✔ Owned by stockholders
Mutual Insurer - Correct Answer ✔✔ owned by policyholders
Fraternal Benefit Society - Correct Answer ✔✔ An insurance company formed to
provide insurance for members of an affiliated lodge, religious, or fraternal organization
with a representative form of government.
Reciprocal Insurers - Correct Answer ✔✔ are unincorporated groups of individual
members that provide insurance for other members through indemnity contracts. Each
member acts as both insurer and insured and are managed by Attorney in Fact.
Lloyd's Association - Correct Answer ✔✔ insurance provided by individual underwriters,
usually insure unusual risks
Risk Retention Group (RRG) - Correct Answer ✔✔ a mutual insurance company formed
to insure people in the same business, occupation, or profession
Self insurers - Correct Answer ✔✔ These insurers do not transfer their share of a loss
to an insurance company, but instead establish their own pool of reserves to cover
losses that may arise.
Domestic Insurer - Correct Answer ✔✔ An insurance company that conducts business
in the state of incorporation.
Foreign Insurer - Correct Answer ✔✔ An insurer licensed to operate in a state but
incorporated in another state.
Alien Insurer - Correct Answer ✔✔ An insurance company that is incorporated outside
the United States
Certificate of Authority - Correct Answer ✔✔ state license for an insurance company
INSURANCE EXAM QUESTIONS &
PASSED CORRECT ANSWERS
ALREADY GRADED A+
Risk - Correct Answer ✔✔ The possibility that a loss will occur
Speculative Risk - Correct Answer ✔✔ Chance of loss or gain
Pure Risk - Correct Answer ✔✔ only the possibility of loss
Peril - Correct Answer ✔✔ cause of loss
Exposure - Correct Answer ✔✔ The potential for accidents and other losses
Direct Loss - Correct Answer ✔✔ Loss that is a direct result of a peril, such as fire.
Indirect Loss - Correct Answer ✔✔ Loss that is a result or consequence of a direct loss
Moral Hazard - Correct Answer ✔✔ Arise from a person's character (dishonesty)
Morale Hazard - Correct Answer ✔✔ A condition of carelessness or indifference that
increases the frequency or severity of loss.
Physical Hazard - Correct Answer ✔✔ a physical condition that increases the frequency
or severity of loss
Sharing risk - Correct Answer ✔✔ Two or more individuals share risk
transfer risk - Correct Answer ✔✔ The purpose of insurance
Avoidance - Correct Answer ✔✔ eliminating certain risk by not engaging in certain
activity
Retention - Correct Answer ✔✔ Self-insurance, person will pay for loss
Reduction - Correct Answer ✔✔ Lessening the possibility or severity of a loss.
Law of Large Numbers - Correct Answer ✔✔ A principle stating that the larger the
number of similar exposure units considered, the more closely the losses reported will
equal the underlying probability of loss.
, Elements of Insurable Risk - Correct Answer ✔✔ Calculable
Affordable
Non-catastrophic
Homogeneous
Accidental
Measurable
Adverse Selection - Correct Answer ✔✔ risks that have a greater than average chance
of loss
Reinsurancd - Correct Answer ✔✔ Transfers risk from one insurer to another
Stock Insurer - Correct Answer ✔✔ Owned by stockholders
Mutual Insurer - Correct Answer ✔✔ owned by policyholders
Fraternal Benefit Society - Correct Answer ✔✔ An insurance company formed to
provide insurance for members of an affiliated lodge, religious, or fraternal organization
with a representative form of government.
Reciprocal Insurers - Correct Answer ✔✔ are unincorporated groups of individual
members that provide insurance for other members through indemnity contracts. Each
member acts as both insurer and insured and are managed by Attorney in Fact.
Lloyd's Association - Correct Answer ✔✔ insurance provided by individual underwriters,
usually insure unusual risks
Risk Retention Group (RRG) - Correct Answer ✔✔ a mutual insurance company formed
to insure people in the same business, occupation, or profession
Self insurers - Correct Answer ✔✔ These insurers do not transfer their share of a loss
to an insurance company, but instead establish their own pool of reserves to cover
losses that may arise.
Domestic Insurer - Correct Answer ✔✔ An insurance company that conducts business
in the state of incorporation.
Foreign Insurer - Correct Answer ✔✔ An insurer licensed to operate in a state but
incorporated in another state.
Alien Insurer - Correct Answer ✔✔ An insurance company that is incorporated outside
the United States
Certificate of Authority - Correct Answer ✔✔ state license for an insurance company
