WebCE General Insurance & Life Insurance Questions with Correct Answers

Buying life or health insurance is an example of which risk management technique? risk avoidance risk reduction risk retention risk transfer Correct 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 Correct 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 Correct 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 Correct 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. Correct 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. Correct 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 producing general agents (PPGAs) are commonly hired to manage career agencies. Correct Answer Personal producing general agents (PPGAs) are commonly hired to manage career agencies. The federal Risk Retention Act of 1986 contains guidelines for which of the following entities? reinsurance companies surplus lines insurance companies Fraternal insurance companies risk retention groups Correct Answer risk retention groups Which of the following best describes an agent's responsibilities? An agent has no fiduciary duty toward insurers, applicants, or insureds. An agent has to act in the best interests of insureds, applicants, and insurers. An agent only has to act in the best interests of the insured or applicant, but not the insurer. An agent only has to act in the best interests of the insurer he or she represents. Correct Answer An agent has to act in the best interests of insureds, applicants, and insurers. An insurance producer tells a life insurance applicant that he has the authority to waive the medical exam that is normally required by the insurer with every application. The insurer may be required to accept the application without a medical exam due to the producer's: implied authority express authority apparent authority imputed authority Correct Answer apparent authority All of the following are part of a producer's responsibilities to an applicant EXCEPT: avoiding replacing an insurance policy unless doing so will clearly benefit the applicant research other insurance companies' insurance products if requested by the applicant