LOMA 361 CORRECT TEST PAPER ANSWERS AND
QUESTIONS SET A+
of the commissioner of the state of domicile
✔✔Revenue account - ✔✔also called income accounts, are the accounts used to
record and report a company's revenues.
An insurance company complies with accounting and financial reporting requirements
by classifying its premium income, investment income, and fee income by individual or
group product line and by product type: life, accident and health, credit life, and
annuities.
Thus, insurers typically credit one of several accounts according to the revenue source,
product line, and product type.
✔✔Premium accounting - ✔✔the maintenance of detailed accounting records and
reports of insurance premium transactions, such as premium billing and collections.
Premium income includes premiums that an insurer receives from the various product
lines that it sells as well as any reinsurance premiums that the insurer receives from
providing reinsurance coverage.
*****calculate premium income on an accrual basis
*** The receipt of policy premiums increases both and insurers revenues and its assets
The most important objectives are to:
-Bill for premiums before their due date, with sufficient lead time between the billing and
due dates
-Record the receipt of premiums in the premium accounting system
-Classify premium income by product type, jurisdiction, and other specified categories
so that the insurer can use the data to calculate taxable income and prepare financial
statements by line of business
-Accept premium payments after the expiration of the grace period under circumstances
acceptable to the insurer
-Terminate a policy or change the policy from a premium-paying status to a specified
nonforfeiture option, if the policyowner has not paid the premium
,✔✔Typical sources of investment income are .. - ✔✔- Interest income on policy loans,
bonds, and mortgages
- Rental income on real estate
- Cash dividends on stock owned by the insurer"
✔✔Collected income - ✔✔Amount of income received In cash during an accounting
period.
can have both earned and unearned portions
✔✔Unearned Income - ✔✔Income received from sources other than employment.
reported as a liability
✔✔Uncollected income - ✔✔Income due before the Financial reporting date , But which
the insurer has not received as to the reporting date.
*this is reported as an asset
✔✔deferred income - ✔✔Premiums due after the statutory reporting period But before
the next policy anniversary date. Payments are usually made monthly or quarterly .
Under U.S. GAAP, one type of income that has not been earned or received by the
insurer and is classified as an asset is Deferred income
✔✔gross investment income - ✔✔the accrual-basis amount of investment income,
representing the total amount of income an insurer earned during the reporting period,
before deducting expenses and amortization.
✔✔net investment income - ✔✔Under GAAP, The accrual-basis amount of investment
income that remains after deducting expenses and amortization from an insurer's gross
investment income.
In notes to their financial statements or supplementary schedules that accompany the
statements, insurers typically categorize net investment income by investment type—
such as bonds or mortgages—and type of income—such as interest or dividends."
✔✔Investment Expenses - ✔✔Costs associated with investing the insurers assets
✔✔general and administrative expenses - ✔✔Costs incurred as a result of undertaking
normal business activities to generate sales and to support products
✔✔Contractual benefit expenses - ✔✔Costs of paying contractual obligation's to policy
owners and beneficiaries.
, This is the largest expense for life insurance companies
✔✔Operating expenses - ✔✔Cost of business operations other than contractual benefit
expenses
Examples include acquisition, development, maintenance, overhead expenses
✔✔Acquisition Expenses - ✔✔Cost for obtaining and issuing new business. An example
is a first year agent commission, contract issue expenses, advertising expenses, and
underwriting expenses.
customer service operating expenses, renewal commissions and a couple others are
maintenance expenses.
✔✔Development expenses - ✔✔Costs related to designing, testing, and implementing a
new product. Examples include new administrative software expenses and business
license fees
✔✔Maintenance expenses - ✔✔Product related costs that are incurred on in force
policies and contracts.
Examples include renewal commissions, some agency or branch office expenses, and
customer service operating expenses.
First year agent commissions are an acquisition expense
✔✔Overhead expenses - ✔✔Costs of normal business operations that are not directly
connected with any product. Examples include utility expenses, some agency or branch
office expenses and at some information systems expenses
✔✔Control Account - ✔✔Summarizes a accounting entries and monitors the expenses
that are reported in a company's financial statements. Atypical example includes
commissions and insurers to agents as well as amounts that agents sold to the insurer.
✔✔Reinsurance allowances - ✔✔Payments intended to cover all or part of the direct
writers acquisition costs and other costs related to the reinsured business
✔✔Premium taxes - ✔✔Taxes on the paid premium income and insured receives within
a particular jurisdiction.
Most states allow insurers to deduct policy owner dividends from their gross premiums
before calculating these
investment income and reinsurance premiums are typically excluded from the formula
that determines the amount due from an insurer
QUESTIONS SET A+
of the commissioner of the state of domicile
✔✔Revenue account - ✔✔also called income accounts, are the accounts used to
record and report a company's revenues.
An insurance company complies with accounting and financial reporting requirements
by classifying its premium income, investment income, and fee income by individual or
group product line and by product type: life, accident and health, credit life, and
annuities.
Thus, insurers typically credit one of several accounts according to the revenue source,
product line, and product type.
✔✔Premium accounting - ✔✔the maintenance of detailed accounting records and
reports of insurance premium transactions, such as premium billing and collections.
Premium income includes premiums that an insurer receives from the various product
lines that it sells as well as any reinsurance premiums that the insurer receives from
providing reinsurance coverage.
*****calculate premium income on an accrual basis
*** The receipt of policy premiums increases both and insurers revenues and its assets
The most important objectives are to:
-Bill for premiums before their due date, with sufficient lead time between the billing and
due dates
-Record the receipt of premiums in the premium accounting system
-Classify premium income by product type, jurisdiction, and other specified categories
so that the insurer can use the data to calculate taxable income and prepare financial
statements by line of business
-Accept premium payments after the expiration of the grace period under circumstances
acceptable to the insurer
-Terminate a policy or change the policy from a premium-paying status to a specified
nonforfeiture option, if the policyowner has not paid the premium
,✔✔Typical sources of investment income are .. - ✔✔- Interest income on policy loans,
bonds, and mortgages
- Rental income on real estate
- Cash dividends on stock owned by the insurer"
✔✔Collected income - ✔✔Amount of income received In cash during an accounting
period.
can have both earned and unearned portions
✔✔Unearned Income - ✔✔Income received from sources other than employment.
reported as a liability
✔✔Uncollected income - ✔✔Income due before the Financial reporting date , But which
the insurer has not received as to the reporting date.
*this is reported as an asset
✔✔deferred income - ✔✔Premiums due after the statutory reporting period But before
the next policy anniversary date. Payments are usually made monthly or quarterly .
Under U.S. GAAP, one type of income that has not been earned or received by the
insurer and is classified as an asset is Deferred income
✔✔gross investment income - ✔✔the accrual-basis amount of investment income,
representing the total amount of income an insurer earned during the reporting period,
before deducting expenses and amortization.
✔✔net investment income - ✔✔Under GAAP, The accrual-basis amount of investment
income that remains after deducting expenses and amortization from an insurer's gross
investment income.
In notes to their financial statements or supplementary schedules that accompany the
statements, insurers typically categorize net investment income by investment type—
such as bonds or mortgages—and type of income—such as interest or dividends."
✔✔Investment Expenses - ✔✔Costs associated with investing the insurers assets
✔✔general and administrative expenses - ✔✔Costs incurred as a result of undertaking
normal business activities to generate sales and to support products
✔✔Contractual benefit expenses - ✔✔Costs of paying contractual obligation's to policy
owners and beneficiaries.
, This is the largest expense for life insurance companies
✔✔Operating expenses - ✔✔Cost of business operations other than contractual benefit
expenses
Examples include acquisition, development, maintenance, overhead expenses
✔✔Acquisition Expenses - ✔✔Cost for obtaining and issuing new business. An example
is a first year agent commission, contract issue expenses, advertising expenses, and
underwriting expenses.
customer service operating expenses, renewal commissions and a couple others are
maintenance expenses.
✔✔Development expenses - ✔✔Costs related to designing, testing, and implementing a
new product. Examples include new administrative software expenses and business
license fees
✔✔Maintenance expenses - ✔✔Product related costs that are incurred on in force
policies and contracts.
Examples include renewal commissions, some agency or branch office expenses, and
customer service operating expenses.
First year agent commissions are an acquisition expense
✔✔Overhead expenses - ✔✔Costs of normal business operations that are not directly
connected with any product. Examples include utility expenses, some agency or branch
office expenses and at some information systems expenses
✔✔Control Account - ✔✔Summarizes a accounting entries and monitors the expenses
that are reported in a company's financial statements. Atypical example includes
commissions and insurers to agents as well as amounts that agents sold to the insurer.
✔✔Reinsurance allowances - ✔✔Payments intended to cover all or part of the direct
writers acquisition costs and other costs related to the reinsured business
✔✔Premium taxes - ✔✔Taxes on the paid premium income and insured receives within
a particular jurisdiction.
Most states allow insurers to deduct policy owner dividends from their gross premiums
before calculating these
investment income and reinsurance premiums are typically excluded from the formula
that determines the amount due from an insurer
