Syllabus Chapter 6
Chapter 5 Types of Insurers and Marketing Systems
1. Which of the following statements about stock insurers is true?
A) They issue assessable policies.
B) They are not permitted to write property and liability insurance.
C) Stockholders bear any losses and share in any profits.
D) They are owned by their policyholders.
2. Which of the following statements about mutual insurers is true?
A) They are legally organized as partnerships.
B) They have a board of directors which is selected by state insurance departments.
C) They are owned by their stockholders.
D) They may pay dividends to their policyholders.
3. Why are some mutual insurers referred to as "assessment mutuals"?
A) They charge low premiums because the loss exposures of their insureds are thoroughly assessed before a
policy is written.
B) They are noted for being very thorough in their assessment of investment opportunities.
C) They are assessed for state premium taxes only if they make a profit.
D) They can assess policyholders if premiums are insufficient to pay losses and expenses.
4. The corporate structure of mutual insurers has changed in recent years. All of the following are examples
of significant changes EXCEPT
A) demutualization of some insurers.
B) sharp increase in the number of mutual insurance companies.
C) increase in company mergers.
D) formation of mutual holding companies.
5. Which of the following statements is true about fraternal insurers?
A) They are legally organized as stock insurers.
B) They specialize in writing life and health insurance.
C) They are taxed more heavily than other types of insurers because of discriminatory marketing practices.
D) They account for the majority of life insurance in force in the United States.
6. Which of the following statements about reciprocal exchanges is (are) true?
I. Reciprocal exchanges usually specialize in health insurance.
II. Reciprocal exchanges are unincorporated mutual insurance companies.
A) I only
B) II only
C) both I and II
D) neither I nor II
7. Which of the following statements about Lloyd's of London is true?
A) Coverage is actually written by syndicates who belong to Lloyd's of London.
B) New individual members or Names who belong to the various syndicates have unlimited legal liability.
C) It operates as an admitted insurer throughout the United States.
D) It allows underwriters to write coverage without meeting stringent financial requirements.
8. Temporary evidence of insurance until a policy is actually issued is provided by a(n)
A) binder.
B) brokerage agreement.
, C) pre-approval form.
D) endorsement.
9. Which of the following statements about insurance brokers is (are) true?
I. They legally represent the insured rather than the insurance company.
II. They are prohibited from being licensed as agents.
A) I only
B) II only
C) both I and II
D) neither I nor II
10. Neil needs insurance that is unavailable in the state where he lives. To obtain insurance from a
nonadmitted insurer, Neil should contact a
A) surplus lines broker.
B) nonadmitted agent.
C) general agency broker.
D) direct writer.
11. Which of the following statements about life insurance marketing systems is true?
A) Insurance brokers are not permitted to sell life insurance.
B) Some exclusive agents who market property and liability insurance also sell life insurance.
C) Independent insurance agents are not permitted to market life insurance.
D) Financial institutions such as banks are not permitted to market life insurance.
12. Which of the following statements about personal producing general agents is (are) true?
I. They often have the option of recruiting and training sub-agents.
II. They are independent agents who produce substantial amounts of life insurance with one insurer.
A) I only
B) II only
C) both I and II
D) neither I nor II
13. Advantages of the direct response system for marketing life insurance include which of the following?
I. Advertising can be specifically directed to selected markets.
II. Complex products can be easily sold.
A) I only
B) II only
C) both I and II
D) neither I nor II
14. Which of the following statements about the exclusive agency system for marketing property and
liability insurance is true?
A) Exclusive agents typically have complete ownership of policy expirations.
B) A higher commission rate is usually paid on exclusive agents' renewal business than on new business.
C) Exclusive agents represent several different insurance companies.
D) New exclusive agents may start as employees and after a training period become independent
contractors.
15. All of the following statements about the independent agency system are true EXCEPT
A) Agents are often authorized to adjust small claims.
B) Agents are compensated on the basis of commissions.
Chapter 5 Types of Insurers and Marketing Systems
1. Which of the following statements about stock insurers is true?
A) They issue assessable policies.
B) They are not permitted to write property and liability insurance.
C) Stockholders bear any losses and share in any profits.
D) They are owned by their policyholders.
2. Which of the following statements about mutual insurers is true?
A) They are legally organized as partnerships.
B) They have a board of directors which is selected by state insurance departments.
C) They are owned by their stockholders.
D) They may pay dividends to their policyholders.
3. Why are some mutual insurers referred to as "assessment mutuals"?
A) They charge low premiums because the loss exposures of their insureds are thoroughly assessed before a
policy is written.
B) They are noted for being very thorough in their assessment of investment opportunities.
C) They are assessed for state premium taxes only if they make a profit.
D) They can assess policyholders if premiums are insufficient to pay losses and expenses.
4. The corporate structure of mutual insurers has changed in recent years. All of the following are examples
of significant changes EXCEPT
A) demutualization of some insurers.
B) sharp increase in the number of mutual insurance companies.
C) increase in company mergers.
D) formation of mutual holding companies.
5. Which of the following statements is true about fraternal insurers?
A) They are legally organized as stock insurers.
B) They specialize in writing life and health insurance.
C) They are taxed more heavily than other types of insurers because of discriminatory marketing practices.
D) They account for the majority of life insurance in force in the United States.
6. Which of the following statements about reciprocal exchanges is (are) true?
I. Reciprocal exchanges usually specialize in health insurance.
II. Reciprocal exchanges are unincorporated mutual insurance companies.
A) I only
B) II only
C) both I and II
D) neither I nor II
7. Which of the following statements about Lloyd's of London is true?
A) Coverage is actually written by syndicates who belong to Lloyd's of London.
B) New individual members or Names who belong to the various syndicates have unlimited legal liability.
C) It operates as an admitted insurer throughout the United States.
D) It allows underwriters to write coverage without meeting stringent financial requirements.
8. Temporary evidence of insurance until a policy is actually issued is provided by a(n)
A) binder.
B) brokerage agreement.
, C) pre-approval form.
D) endorsement.
9. Which of the following statements about insurance brokers is (are) true?
I. They legally represent the insured rather than the insurance company.
II. They are prohibited from being licensed as agents.
A) I only
B) II only
C) both I and II
D) neither I nor II
10. Neil needs insurance that is unavailable in the state where he lives. To obtain insurance from a
nonadmitted insurer, Neil should contact a
A) surplus lines broker.
B) nonadmitted agent.
C) general agency broker.
D) direct writer.
11. Which of the following statements about life insurance marketing systems is true?
A) Insurance brokers are not permitted to sell life insurance.
B) Some exclusive agents who market property and liability insurance also sell life insurance.
C) Independent insurance agents are not permitted to market life insurance.
D) Financial institutions such as banks are not permitted to market life insurance.
12. Which of the following statements about personal producing general agents is (are) true?
I. They often have the option of recruiting and training sub-agents.
II. They are independent agents who produce substantial amounts of life insurance with one insurer.
A) I only
B) II only
C) both I and II
D) neither I nor II
13. Advantages of the direct response system for marketing life insurance include which of the following?
I. Advertising can be specifically directed to selected markets.
II. Complex products can be easily sold.
A) I only
B) II only
C) both I and II
D) neither I nor II
14. Which of the following statements about the exclusive agency system for marketing property and
liability insurance is true?
A) Exclusive agents typically have complete ownership of policy expirations.
B) A higher commission rate is usually paid on exclusive agents' renewal business than on new business.
C) Exclusive agents represent several different insurance companies.
D) New exclusive agents may start as employees and after a training period become independent
contractors.
15. All of the following statements about the independent agency system are true EXCEPT
A) Agents are often authorized to adjust small claims.
B) Agents are compensated on the basis of commissions.
