CPCU 520 - Chapter 2 - Regulating Insurance Operations
Questions With Complete Solutions
A goal of rate regulation requires that
A. An insurer should charge all applicants for a particular type
of insurance the same rates.
B. Insurers in a territory should all charge similar rates for loss
exposures that are similar in terms of losses and expenses.
C. Loss exposures that are roughly similar regarding expected
losses and expenses should be charged substantially similar
rates.
D. An insurer should charge all insureds within a particular
rating territory substantially similar rates. correct answers Loss
exposures that are roughly similar regarding expected losses and
expenses should be charged substantially similar rates.
A non-admitted insurer is typically a
A. Domestic insurer.
B. Foreign insurer.
C. Surplus lines insurer.
D. Reciprocal insurer. correct answers Surplus lines insurer.
A risk retention group can write insurance only for its members,
and it may write
A. Only personal liability insurance.
B. Any line of business approved by the state department of
insurance.
C. Only commercial liability insurance.
,D. Only workers compensation insurance. correct answers Only
commercial liability insurance.
After a devastating hurricane, Blithe Insurance Company was
declared insolvent and the state's guaranty fund stepped in.
Which one of the following is most likely to be true regarding
how the guaranty fund will administer Blithe's policies?
A. The state will apply a deductible to unpaid claims of at least
$500.
B. The policies will terminate on the failure date, and claims that
arise after the failure date will not be paid.
C. For terminated policies, the state will provide for a refund of
unearned premiums to current policyholders.
D. Unpaid claims will be subject to a maximum limit of one half
of the policy limit. correct answers For terminated policies, the
state will provide for a refund of unearned premiums to current
policyholders.
All states have property-casualty insurance guaranty funds that
pay unpaid claims of insolvent insurers licensed in the particular
state. Which one of the following types of claims is covered by
all state funds?
Select one:
A. Life insurance claims
B. Title insurance claims
C. Homeowners insurance claims
D. Health insurance claims correct answers Homeowners
insurance claims
, Argot Insurance Company (Argot) wants to be licensed in a
certain state. The initial surplus has been derived mostly from its
premium deposits paid by prospective policyholders. A portion
of its initial surplus is going to be borrowed. Argot is
A. A domestic stock insurer.
B. An alien insurer.
C. A mutual insurer.
D. A non-admitted insurer. correct answers A mutual insurer.
Courts have ruled in some cases that an insurer's improper claim
handling constitutes not only a breach of contract or a violation
of insurance regulations but also creates an independent tort
which is the tort of
A. Insurer fraud.
B. Bad faith.
C. Collusion.
D. Misrepresentation. correct answers Bad faith.
Day-to-day regulation of the insurance business is performed by
state insurance departments, which fall within each state
government's
A. Executive branch.
B. Consumer branch.
C. Legislative branch.
D. Judicial branch correct answers Executive branch.
Delmond Insurance Company (Delmond) is implementing new
automobile rates because of excessive losses in their state. They
Questions With Complete Solutions
A goal of rate regulation requires that
A. An insurer should charge all applicants for a particular type
of insurance the same rates.
B. Insurers in a territory should all charge similar rates for loss
exposures that are similar in terms of losses and expenses.
C. Loss exposures that are roughly similar regarding expected
losses and expenses should be charged substantially similar
rates.
D. An insurer should charge all insureds within a particular
rating territory substantially similar rates. correct answers Loss
exposures that are roughly similar regarding expected losses and
expenses should be charged substantially similar rates.
A non-admitted insurer is typically a
A. Domestic insurer.
B. Foreign insurer.
C. Surplus lines insurer.
D. Reciprocal insurer. correct answers Surplus lines insurer.
A risk retention group can write insurance only for its members,
and it may write
A. Only personal liability insurance.
B. Any line of business approved by the state department of
insurance.
C. Only commercial liability insurance.
,D. Only workers compensation insurance. correct answers Only
commercial liability insurance.
After a devastating hurricane, Blithe Insurance Company was
declared insolvent and the state's guaranty fund stepped in.
Which one of the following is most likely to be true regarding
how the guaranty fund will administer Blithe's policies?
A. The state will apply a deductible to unpaid claims of at least
$500.
B. The policies will terminate on the failure date, and claims that
arise after the failure date will not be paid.
C. For terminated policies, the state will provide for a refund of
unearned premiums to current policyholders.
D. Unpaid claims will be subject to a maximum limit of one half
of the policy limit. correct answers For terminated policies, the
state will provide for a refund of unearned premiums to current
policyholders.
All states have property-casualty insurance guaranty funds that
pay unpaid claims of insolvent insurers licensed in the particular
state. Which one of the following types of claims is covered by
all state funds?
Select one:
A. Life insurance claims
B. Title insurance claims
C. Homeowners insurance claims
D. Health insurance claims correct answers Homeowners
insurance claims
, Argot Insurance Company (Argot) wants to be licensed in a
certain state. The initial surplus has been derived mostly from its
premium deposits paid by prospective policyholders. A portion
of its initial surplus is going to be borrowed. Argot is
A. A domestic stock insurer.
B. An alien insurer.
C. A mutual insurer.
D. A non-admitted insurer. correct answers A mutual insurer.
Courts have ruled in some cases that an insurer's improper claim
handling constitutes not only a breach of contract or a violation
of insurance regulations but also creates an independent tort
which is the tort of
A. Insurer fraud.
B. Bad faith.
C. Collusion.
D. Misrepresentation. correct answers Bad faith.
Day-to-day regulation of the insurance business is performed by
state insurance departments, which fall within each state
government's
A. Executive branch.
B. Consumer branch.
C. Legislative branch.
D. Judicial branch correct answers Executive branch.
Delmond Insurance Company (Delmond) is implementing new
automobile rates because of excessive losses in their state. They
