MICHIGAN PROPERTY & CASUALTY
INSURANCE EXAM QUESTIONS AND
CORRECT VERIFIED ANSWERS
RiskA2-A2Ans--TheA2possibilityA2thatA2aA2lossA2willA2occur
SpeculativeA2RiskA2-A2Ans--ChanceA2ofA2lossA2orA2gain
PureA2RiskA2-A2Ans--onlyA2theA2possibilityA2ofA2loss
PerilA2-A2Ans--causeA2ofA2loss
ExposureA2-A2Ans--TheA2potentialA2forA2accidentsA2andA2otherA2losses
DirectA2LossA2-A2Ans--LossA2thatA2isA2aA2directA2resultA2ofA2aA2peril,A2suchA2asA2fire.
IndirectA2LossA2-A2Ans--LossA2thatA2isA2aA2resultA2orA2consequenceA2ofA2aA2directA2loss
MoralA2HazardA2-A2Ans--AriseA2fromA2aA2person'sA2characterA2(dishonesty)
MoraleA2HazardA2-A2Ans--
AA2conditionA2ofA2carelessnessA2orA2indifferenceA2thatA2increasesA2theA2frequencyA2orA2se
verityA2ofA2loss.
PhysicalA2HazardA2-A2Ans--
aA2physicalA2conditionA2thatA2increasesA2theA2frequencyA2orA2severityA2ofA2loss
SharingA2riskA2-A2Ans--TwoA2orA2moreA2individualsA2shareA2risk
transferA2riskA2-A2Ans--TheA2purposeA2ofA2insurance
AvoidanceA2-A2Ans--eliminatingA2certainA2riskA2byA2notA2engagingA2inA2certainA2activity
RetentionA2-A2Ans--Self-insurance,A2personA2willA2payA2forA2loss
ReductionA2-A2Ans--LesseningA2theA2possibilityA2orA2severityA2ofA2aA2loss.
LawA2ofA2LargeA2NumbersA2-A2Ans--
AA2principleA2statingA2thatA2theA2largerA2theA2numberA2ofA2similarA2exposureA2unitsA2consi
dered,A2theA2moreA2closelyA2theA2lossesA2reportedA2willA2equalA2theA2underlyingA2probabili
tyA2ofA2loss.
ElementsA2ofA2InsurableA2RiskA2-A2Ans--Calculable
Affordable
, Non-catastrophic
Homogeneous
Accidental
Measurable
AdverseA2SelectionA2-A2Ans--
risksA2thatA2haveA2aA2greaterA2thanA2averageA2chanceA2ofA2loss
ReinsurancdA2-A2Ans--TransfersA2riskA2fromA2oneA2insurerA2toA2another
StockA2InsurerA2-A2Ans--OwnedA2byA2stockholders
MutualA2InsurerA2-A2Ans--ownedA2byA2policyholders
FraternalA2BenefitA2SocietyA2-A2Ans--
AnA2insuranceA2companyA2formedA2toA2provideA2insuranceA2forA2membersA2ofA2anA2affiliat
edA2lodge,A2religious,A2orA2fraternalA2organizationA2withA2aA2representativeA2formA2ofA2gov
ernment.
ReciprocalA2InsurersA2-A2Ans--
areA2unincorporatedA2groupsA2ofA2individualA2membersA2thatA2provideA2insuranceA2forA2ot
herA2membersA2throughA2indemnityA2contracts.A2EachA2memberA2actsA2asA2bothA2insurerA
2andA2insuredA2andA2areA2managedA2byA2AttorneyA2inA2Fact.
Lloyd'sA2AssociationA2-A2Ans--
insuranceA2providedA2byA2individualA2underwriters,A2usuallyA2insureA2unusualA2risks
RiskA2RetentionA2GroupA2(RRG)A2-A2Ans--
aA2mutualA2insuranceA2companyA2formedA2toA2insureA2peopleA2inA2theA2sameA2business,A
2occupation,A2orA2profession
SelfA2insurersA2-A2Ans--
TheseA2insurersA2doA2notA2transferA2theirA2shareA2ofA2aA2lossA2toA2anA2insuranceA2compan
y,A2butA2insteadA2establishA2theirA2ownA2poolA2ofA2reservesA2toA2coverA2lossesA2thatA2may
A2arise.
DomesticA2InsurerA2-A2Ans--
AnA2insuranceA2companyA2thatA2conductsA2businessA2inA2theA2stateA2ofA2incorporation.
ForeignA2InsurerA2-A2Ans--
AnA2insurerA2licensedA2toA2operateA2inA2aA2stateA2butA2incorporatedA2inA2anotherA2state.
AlienA2InsurerA2-A2Ans--
AnA2insuranceA2companyA2thatA2isA2incorporatedA2outsideA2theA2UnitedA2States
CertificateA2ofA2AuthorityA2-A2Ans--stateA2licenseA2forA2anA2insuranceA2company
INSURANCE EXAM QUESTIONS AND
CORRECT VERIFIED ANSWERS
RiskA2-A2Ans--TheA2possibilityA2thatA2aA2lossA2willA2occur
SpeculativeA2RiskA2-A2Ans--ChanceA2ofA2lossA2orA2gain
PureA2RiskA2-A2Ans--onlyA2theA2possibilityA2ofA2loss
PerilA2-A2Ans--causeA2ofA2loss
ExposureA2-A2Ans--TheA2potentialA2forA2accidentsA2andA2otherA2losses
DirectA2LossA2-A2Ans--LossA2thatA2isA2aA2directA2resultA2ofA2aA2peril,A2suchA2asA2fire.
IndirectA2LossA2-A2Ans--LossA2thatA2isA2aA2resultA2orA2consequenceA2ofA2aA2directA2loss
MoralA2HazardA2-A2Ans--AriseA2fromA2aA2person'sA2characterA2(dishonesty)
MoraleA2HazardA2-A2Ans--
AA2conditionA2ofA2carelessnessA2orA2indifferenceA2thatA2increasesA2theA2frequencyA2orA2se
verityA2ofA2loss.
PhysicalA2HazardA2-A2Ans--
aA2physicalA2conditionA2thatA2increasesA2theA2frequencyA2orA2severityA2ofA2loss
SharingA2riskA2-A2Ans--TwoA2orA2moreA2individualsA2shareA2risk
transferA2riskA2-A2Ans--TheA2purposeA2ofA2insurance
AvoidanceA2-A2Ans--eliminatingA2certainA2riskA2byA2notA2engagingA2inA2certainA2activity
RetentionA2-A2Ans--Self-insurance,A2personA2willA2payA2forA2loss
ReductionA2-A2Ans--LesseningA2theA2possibilityA2orA2severityA2ofA2aA2loss.
LawA2ofA2LargeA2NumbersA2-A2Ans--
AA2principleA2statingA2thatA2theA2largerA2theA2numberA2ofA2similarA2exposureA2unitsA2consi
dered,A2theA2moreA2closelyA2theA2lossesA2reportedA2willA2equalA2theA2underlyingA2probabili
tyA2ofA2loss.
ElementsA2ofA2InsurableA2RiskA2-A2Ans--Calculable
Affordable
, Non-catastrophic
Homogeneous
Accidental
Measurable
AdverseA2SelectionA2-A2Ans--
risksA2thatA2haveA2aA2greaterA2thanA2averageA2chanceA2ofA2loss
ReinsurancdA2-A2Ans--TransfersA2riskA2fromA2oneA2insurerA2toA2another
StockA2InsurerA2-A2Ans--OwnedA2byA2stockholders
MutualA2InsurerA2-A2Ans--ownedA2byA2policyholders
FraternalA2BenefitA2SocietyA2-A2Ans--
AnA2insuranceA2companyA2formedA2toA2provideA2insuranceA2forA2membersA2ofA2anA2affiliat
edA2lodge,A2religious,A2orA2fraternalA2organizationA2withA2aA2representativeA2formA2ofA2gov
ernment.
ReciprocalA2InsurersA2-A2Ans--
areA2unincorporatedA2groupsA2ofA2individualA2membersA2thatA2provideA2insuranceA2forA2ot
herA2membersA2throughA2indemnityA2contracts.A2EachA2memberA2actsA2asA2bothA2insurerA
2andA2insuredA2andA2areA2managedA2byA2AttorneyA2inA2Fact.
Lloyd'sA2AssociationA2-A2Ans--
insuranceA2providedA2byA2individualA2underwriters,A2usuallyA2insureA2unusualA2risks
RiskA2RetentionA2GroupA2(RRG)A2-A2Ans--
aA2mutualA2insuranceA2companyA2formedA2toA2insureA2peopleA2inA2theA2sameA2business,A
2occupation,A2orA2profession
SelfA2insurersA2-A2Ans--
TheseA2insurersA2doA2notA2transferA2theirA2shareA2ofA2aA2lossA2toA2anA2insuranceA2compan
y,A2butA2insteadA2establishA2theirA2ownA2poolA2ofA2reservesA2toA2coverA2lossesA2thatA2may
A2arise.
DomesticA2InsurerA2-A2Ans--
AnA2insuranceA2companyA2thatA2conductsA2businessA2inA2theA2stateA2ofA2incorporation.
ForeignA2InsurerA2-A2Ans--
AnA2insurerA2licensedA2toA2operateA2inA2aA2stateA2butA2incorporatedA2inA2anotherA2state.
AlienA2InsurerA2-A2Ans--
AnA2insuranceA2companyA2thatA2isA2incorporatedA2outsideA2theA2UnitedA2States
CertificateA2ofA2AuthorityA2-A2Ans--stateA2licenseA2forA2anA2insuranceA2company