WebCE Quizzes: General Insurance & Life Insurance with Complete Solutions!

Buying life or health insurance is an example of which risk management technique? risk avoidance risk reduction risk retention risk transfer - ANSWER-risk transfer What is the mathematical concept of probability that helps insurers estimate the statistical likelihood of mortality or morbidity losses at any given age? law of large numbers underwriting principle law of probability actuarial principle - ANSWER-law of large numbers A person who refuses to engage is risky activities like rock climbing for fear of injury or death is demonstrating which risk management technique? risk avoidance risk reduction risk retention risk sharing - ANSWER-risk avoidance Which of the following is an insurable risk? the possibility of losing money in stock investments the possibility of losing money gambling in Las Vegas the possibility of becoming disabled and unable to earn an income the possibility of one's home value decreasing due to a drop in market prices - ANSWER-the possibility of becoming disabled and unable to earn an income All the following statements regarding reinsurance are correct EXCEPT: Reinsurance is a risk-sharing process used by insurance companies. Claims are paid to the policyowner separately by each insurer participating in the reinsurance agreement. The insurer accepting some of the risk being transferred from another insurer is known as the reinsuring company. The insurer seeking to transfer some of its risk to another insurer is known as the ceding company. - ANSWER-Claims are paid to the policyowner separately by each insurer participating in the reinsurance agreement. All of the following are characteristics of a stock insurance company EXCEPT: They are governed by a board of directors. They may issue dividends. They have minimum financial capital requirements that must be met before they can conduct business. They are owned by policyowners. - ANSWER-They are owned by policyowners. All of the following statements regarding the career agency distribution system are correct EXCEPT: The managerial form of career agency system uses company employees as the agency managers. There are two types, the general agency system and the managerial system. It uses agents who primarily if not exclusively represent one insurer. Personal p