HLT362 WEEK 3 FULLY SOLVED EXAM PAPER
GRADED A+
◉ Pure risk vs. Speculative risk.
Answer: Pure risk involves chance of loss ONLY (accident or
misfortune). Speculative risk involves chance of loss OR gain
(gambling, stock investment).
◉ Risk management.
Answer: Treating or mitigating loss exposures through 1: avoidance;
2: retention (deductibles); 3: sharing; 4: reduction; or 5: transfer.
◉ Mortality vs. Morbidity tables.
Answer: Mortality is the statistical possibility of death @ each age.
Morbidity is the statistical possibility & extent of disability @ each
age.
◉ Loss exposure.
Answer: Potential circumstance that could cause a loss; measured in
dollars.
◉ Law of Large Numbers.
,Answer: Mathematical law stating the larger # of occurrences, the
more predictable the losses; used to calculate premiums.
◉ Types of hazards.
Answer: Physical - slippery floor; Moral - dishonest acts; Morale -
carelessness or recklessness.
◉ Factors that determine premium.
Answer: 1: mortality probability charge; 2: Insurer's investment
return; 3: expenses (admin costs, commissions). 1 - 2 = net; 1 - 2 + 3
= gross.
◉ Rate (as defined by CIC).
Answer: Price of insurance per exposure unit.
◉ Premium modes.
Answer: Monthly; Quarterly; Semi-annually; Annually (cheapest due
to less admin cost).
◉ Earned vs. Unearned premium.
Answer: Earned premium is $ paid for coverage to date. Unearned
premium is $ paid & returnable due to coverage not provided.
,◉ Insurer (as defined by CIC).
Answer: Any person, assoc., org., partnership, business trust, LLC, or
corp. capable of making an insurance contract.
◉ Departments of an Insurer.
Answer: Underwriting - determines insurability; Marketing/Sales -
determines products; Actuarial - determines rates; Claims -
investigates/pays claims.
◉ Types of Insurers (by domicile).
Answer: Domestic - within home state; Foreign - outside home state;
Alien - outside home country.
◉ Types of Insurers (by ownership).
Answer: Policyholders - Mutual (participating) co., may pay
dividends; Stockholders - Stock (non-participating) co., no
dividends.
◉ Types of Insurers (by authorization).
Answer: Authorized (admitted) - can conduct business in state;
Unauthorized (non-admitted) - cannot conduct business in state (w/
one exception).
◉ Types of Insurers (by sector).
, Answer: Private sector (Commercial) - provides LA&H, P&C, & LTC;
Public sector (Gov't) - provides flood, work. comp.,
Medicare/Medicaid, Group Life (SGLI/FEGLI).
◉ Types of Insurers (miscellaneous).
Answer: Fraternal - non-profit, members only; Reciprocal -
unincorp'd org., members insure each other; Lloyd's Assoc. - groups
sharing risks; Surplus lines - special market risks.
◉ Types of Licensed Producers.
Answer: Agents - represent Insurer; Brokers - represent themselves
& Insured; Solicitors - represent one agent to solicit leads.
◉ Errors & Omissions (E&O).
Answer: An unintentional mistake committed by an insurance
representative; may be covered by E&O insurance.
◉ Types of Agency Authority.
Answer: Actual/Expressed - written powers; Implied - unwritten but
customary practices; Apparent - perceived powers.
◉ Elements to contract.
GRADED A+
◉ Pure risk vs. Speculative risk.
Answer: Pure risk involves chance of loss ONLY (accident or
misfortune). Speculative risk involves chance of loss OR gain
(gambling, stock investment).
◉ Risk management.
Answer: Treating or mitigating loss exposures through 1: avoidance;
2: retention (deductibles); 3: sharing; 4: reduction; or 5: transfer.
◉ Mortality vs. Morbidity tables.
Answer: Mortality is the statistical possibility of death @ each age.
Morbidity is the statistical possibility & extent of disability @ each
age.
◉ Loss exposure.
Answer: Potential circumstance that could cause a loss; measured in
dollars.
◉ Law of Large Numbers.
,Answer: Mathematical law stating the larger # of occurrences, the
more predictable the losses; used to calculate premiums.
◉ Types of hazards.
Answer: Physical - slippery floor; Moral - dishonest acts; Morale -
carelessness or recklessness.
◉ Factors that determine premium.
Answer: 1: mortality probability charge; 2: Insurer's investment
return; 3: expenses (admin costs, commissions). 1 - 2 = net; 1 - 2 + 3
= gross.
◉ Rate (as defined by CIC).
Answer: Price of insurance per exposure unit.
◉ Premium modes.
Answer: Monthly; Quarterly; Semi-annually; Annually (cheapest due
to less admin cost).
◉ Earned vs. Unearned premium.
Answer: Earned premium is $ paid for coverage to date. Unearned
premium is $ paid & returnable due to coverage not provided.
,◉ Insurer (as defined by CIC).
Answer: Any person, assoc., org., partnership, business trust, LLC, or
corp. capable of making an insurance contract.
◉ Departments of an Insurer.
Answer: Underwriting - determines insurability; Marketing/Sales -
determines products; Actuarial - determines rates; Claims -
investigates/pays claims.
◉ Types of Insurers (by domicile).
Answer: Domestic - within home state; Foreign - outside home state;
Alien - outside home country.
◉ Types of Insurers (by ownership).
Answer: Policyholders - Mutual (participating) co., may pay
dividends; Stockholders - Stock (non-participating) co., no
dividends.
◉ Types of Insurers (by authorization).
Answer: Authorized (admitted) - can conduct business in state;
Unauthorized (non-admitted) - cannot conduct business in state (w/
one exception).
◉ Types of Insurers (by sector).
, Answer: Private sector (Commercial) - provides LA&H, P&C, & LTC;
Public sector (Gov't) - provides flood, work. comp.,
Medicare/Medicaid, Group Life (SGLI/FEGLI).
◉ Types of Insurers (miscellaneous).
Answer: Fraternal - non-profit, members only; Reciprocal -
unincorp'd org., members insure each other; Lloyd's Assoc. - groups
sharing risks; Surplus lines - special market risks.
◉ Types of Licensed Producers.
Answer: Agents - represent Insurer; Brokers - represent themselves
& Insured; Solicitors - represent one agent to solicit leads.
◉ Errors & Omissions (E&O).
Answer: An unintentional mistake committed by an insurance
representative; may be covered by E&O insurance.
◉ Types of Agency Authority.
Answer: Actual/Expressed - written powers; Implied - unwritten but
customary practices; Apparent - perceived powers.
◉ Elements to contract.
