Managing Human Capital Exam Questions with Verified Solutions

Managing Human Capital Exam Questions with Verified Solutions An agent has authority to do all of the following, except: A. Appoint a solicitor as his or her representative. B. Represent the insured's interest. C. Solicit applications on insurer's behalf. D. Countersign insurance contracts - Answers B. Represent the insured's interest. * An Agent is primarily the representative of an insurer. Which type of insurance provides coverage when insurance is not available from an admitted carrier? A. Foreign B. Residual C. Facultative D. Surplus - Answers D. Surplus *Non-admitted business must be transacted through a surplus lines broker or producer. Which of the following is a physical hazard? A. Dishonesty on the part of an insured. B. An insured's attitude that good housekeeping is not important. C. The storage of flammables in a fireproof container. D. Uneven pavement in a sidewalk - Answers D. Uneven pavement in a sidewalk *A physical hazard is a physical condition that increases the probability of loss to the property. Which Federal entity administers the Terrorism Risk Insurance Program Reauthorization Act? A. Department of the Treasury B. Executive office C. Secretary os State D. Department of Defense - Answers A. Department of the Treasury. *The terrorism risk insurance act, which protects consumers by ensuring the continued widespread availability and affordability of property and casualty insurance for a terrorism risk, is administered by the dept. of treasury. The following statements regarding hazards are all correct, except: A. A gambling addiction could be a moral hazard. B. A moral hazard arises from a disposition for dishonesty. C. Ice on a sidewalk is a physical hazard. D. A moral hazard arises from an attitude of indifference to loss. - Answers D. A moral hazard arises from an attitude of indifference to loss. Which statement defines a peril? A. It is a condition that may increase a loss. B. It is the specific cause of loss. C. It is an indirect loss D. It is defined as a risk of financial loss. - Answers B. It is the specific cause of loss What is it called when less desirable insureds seek insurance coverage to a greater extent than better risks? A. Estoppel B. Sharing C. Adverse selection D. Law of large numbers - Answers C. Adverse selection *Adverse selection is the tendency of risks more prone to loss to seek greater than average coverage. The Law of Large Numbers provides that: A. As the number of insured units increases, predicability of losses improves. B. As the number of insured units increases, losses decrease C. If funds are insufficient to pay claims, the insured is assessed additional premium. D. Small certain losses are substituted for large uncertain losses. - Answers A. As the number of insured units increases, predictability of losses improves. *The larger the sample is, the more accurate the prediction is. Which of the following is not true about insurance? A. Risk is transferred to the insurer B. The insured may retain part of the risk through deductibles C. Declining to own a business is an example of risk avoidance D. Insurance covers intentional as well as unintentional losses - Answers D. Insurance covers intentional as well as unintentional losses. Which of the following is not an element of an insurable risk? A. The ability to set a measurable value on it. B. Accidental loss C. Large number of homogenous units D. Catastrophic perils - Answers D. Catastrophic Perils What is the name for an insurer authorized to write insurance policies in a particular state? - Answers A. Admitted Statements in the application that are guaranteed true but later found to be false at the time of application may result in which of the following? A. Establishment of a monetary penalty B. A waiver of the provisions of the warranty C. Voidance of the contract D. Nullification of the warranty - Answers C. Voidance of the contract *A breach of warranty is a determination that a warranty has proven to be untrue, whether intended as a falsehood or not, and may void the contract. When both parties to a contract must perform certain duties in order to make the contract enforceable, this is known as a(n): A. Aleatory contract B. Conditional contract C. Contract of adhesion D. Unilateral contract - Answers B. Conditional contract Each participant of a Lloyds association: A. Participates on every policy issued B. Is legally liable for teh unpaid part of any loss sustained by all defaulting underwriters. C. Insures against every risk that is underwritten. D. Is individually liable for each risk they assume. - Answers D. Is individually liable for each risk they assume Risk is defined as: A. Specific cause of loss B. Amount of loss C. Insurable interest in property D. Uncertainty or chance of loss - Answers Uncertainty or chance of loss. A hazard is best defined as: A. The loss itself B. The possibility of a loss C. A reduction in, decrease in, or disappearance of, value D. Something that increases the chance of loss - Answers D. Something that increases the chance of a loss. When Applicant P fails to disclose all of his motor vehicle violations in an applications for automobile insurance, he may be guilty of: A. Breach of warranty B. Avoidance C. Concealment D. Estoppel - Answers C. Concealment All of the following are considered part of the consideration of an insurance contract, except: A. Issuance of the policy B. The insurer's promise to indemnify in the event of loss C. The payment of a claim for the insured D. Payment of the initial premium - Answers A. Issuance of that policy *The issuance of a policy is not part of the consideration of an insurance contract. It is part of the agreement (acceptance). The owner of an antique store leaves valuable breakable items on display while heavy construction is taking place, believing that any pieces that fall and break will be covered by insurance. This demonstrates which hazard? A. Speculative hazard B. Physical hazard C. Moral hazard D. Morale hazard - Answers D. Morale hazard *considered an attitude of indifference or carelessness which increases the probability of a loss. Which type of risk involves the possibility of loss or gain? A. Pure B. Insurable C. Stable D. Speculative - Answers D. Speculative *A speculative risk is one where there is the possibility of gain or loss. An applicant could purchase an insurance policy to cover losses from all the following, except: A. Sudden and direct damage to property by natural causes. B. Loss of asset through torn actions brought against the person. C. An operation of drug smuggling. D. Loss of property through burglary or theft. - Answers C. An operation of drug smuggling Which of the following places insurance with a non-admitted insurer when insurance cannot be placed with an admitted insurer? A. Surplus Lines producer B. General Consultant C. General use producer D. Direct response company - Answers A. Surplus Lines Producer Which of the following is not true about insurance? A. It transfers risk B. It eliminates risk C. It is a means of sharing loss D. It protects against uncertainty - Answers B. It eliminates risk When an individual faces the risk of economic loss in the event of property damage, this indicates which of the following? A. Insurable interest B. Subrogation C. Merit Rating D. Limit of recovery - Answers A. Insurable Interest *Typically, if there is a risk of financial loss, there is an insurable interest. The reasonable Expectations Doctrine states that: A. Policy owner ay reasonably expect that all claims submitted will be paid. B. The insurer may reasonably expect full cooperation of the insured in the event of a loss. C. The reasonable expectations of policy owners will be honored even if the strict terms of the policy do not support these expectations D. A policy owner may expect the insurer to refund premiums if no claims are made. - Answers C. The reasonable expectations of policy owners will be honored even if the strict terms of the policy do not support these expectations. Insurance is an example of which type of risk management technique. A. Element of risk B. Retention of risk C. Transfer of risk D. Reduction of risk - Answers C. Transfer of risk Which of the following statements is true concerning the National Association of the Insurance Commissioners? A. The association promotes uniformity among states B. Regulations and laws are passed at its meetings C. The NAIC regulates the insurance industry in the United States and has enforcement powers D. The NAIC was responsible for passage of the McCarran Act - Answers A. The association promotes uniformity among states. * The NAIC is an advisory group that makes regulatory and legislative recommendations, but does not write or pass laws. If an insurer is incorporated in Rhode Island, but primarily does business in New York, what type of insurer would be considered in New York? A. Alien B. Nonadmitted C. Domestic D. Foreign - Answers D. Foreign Which of the following is not true of the Fair Credit Reporting Act? A. A consumer is protected from unwelcome personal information collection practices B. Errors in the report can only be changed by court action C. A consumer can obtain the information in the reporting agency file D. A consumer must be informed whenever insurance was denied due to an adverse report - Answers B. Errors in the report can only be changed by court action Rates are referred to as which of the following when the insurance company files for approval and then implement the rates? A. Open Competition B. Mandatory C. File and Use D. Prior Approval - Answers C. File and Use Which of the following terms refers to the risk management technique of assuming the responsibility for a loss? A. Avoidance B. Transfer