INSR 310 COMPREHENSIVE EXAM UPDATED QUESTIONS
AND SOLUTIONS GRADED A+
✔✔regulatory criteria with respect to rates - ✔✔- adequate (high enough to cover costs
- reasonable (not excessive)
- equitable to all EDs (not unfairly discriminatory)
✔✔INSCO business objectives with respect to rates - ✔✔- simplicity/ ease of use
- stability (customer relations)
- responsive (dynamic feed back)
- provision for contingencies
- encourage loss control (maintain affordability)
✔✔rate making methods - ✔✔1- manual rating
2- merit rating
3- judgement rating
✔✔rate making associations - ✔✔- cooperative pooling of information
- standardized policy forms/ language
✔✔INSCO functions/ operations continued - ✔✔- underwriting
- claims (adjusters)
- other "corporate" functions
- reinsurance
✔✔internal corporate functions - ✔✔investment, accounting, legal, DP, personnel
✔✔external corporate functions - ✔✔RM support services, inspections
✔✔why reinsure? - ✔✔-to increase premium writing capacity
- to stabilize profits and loss rates
- to gain expertise in a new line/ book/ territory of business
- to orderly exit an old line/ book/ territory of business
- for surplus relief
- better spread of risk
✔✔insurance is - ✔✔- an intangible product brought to market by INSCO that
represents a bundle of services and is alleatory, future oriented, risk contingent,
contains service contracts with everything embodied in a legal contract
✔✔general requirements of any/ all contracts - ✔✔- offer and acceptance
- legal purpose
- competent parties
- consideration exchanged
, ✔✔legal aspects of characteristics of insurance contracts - ✔✔- personal
- unilateral
- utmost good faith
- adhesion
- conditional
- indemnity (whole again)
- insurable interest
- subrogation (supports indemnity)
✔✔doctrine of concealment - ✔✔silence where obligated to speak
✔✔doctrine of warranty - ✔✔specifically referenced contract statement that must be
strictly complied with
✔✔why regulate? - ✔✔- maintain competition/ prevent collusion/ limit monopoly power/
antitrust
- future orientation requires some future perfonce guarantee
- complexity of contracts/ potential abuse
- to protect the public trust!
✔✔current regulatory environment - ✔✔- state legislatures
- judicial system
- state department of insurance
- federal government
✔✔ what is risk? - ✔✔any uncertainty regarding financial loss
✔✔three risk classifications: - ✔✔1- pure vs. speculative
2- static vs. dynamic
3- objective vs. subjective
✔✔risk is NOT - ✔✔probability
✔✔pure risk - ✔✔loss/no loss only
✔✔speculative risk - ✔✔loss/no loss/ gain
✔✔static risk - ✔✔unchanging over time
✔✔dynamic risk - ✔✔changing (especially w/ technology)
✔✔objective risk - ✔✔statistical variation from expectation
✔✔subjective risk - ✔✔individual perception/ psychology
AND SOLUTIONS GRADED A+
✔✔regulatory criteria with respect to rates - ✔✔- adequate (high enough to cover costs
- reasonable (not excessive)
- equitable to all EDs (not unfairly discriminatory)
✔✔INSCO business objectives with respect to rates - ✔✔- simplicity/ ease of use
- stability (customer relations)
- responsive (dynamic feed back)
- provision for contingencies
- encourage loss control (maintain affordability)
✔✔rate making methods - ✔✔1- manual rating
2- merit rating
3- judgement rating
✔✔rate making associations - ✔✔- cooperative pooling of information
- standardized policy forms/ language
✔✔INSCO functions/ operations continued - ✔✔- underwriting
- claims (adjusters)
- other "corporate" functions
- reinsurance
✔✔internal corporate functions - ✔✔investment, accounting, legal, DP, personnel
✔✔external corporate functions - ✔✔RM support services, inspections
✔✔why reinsure? - ✔✔-to increase premium writing capacity
- to stabilize profits and loss rates
- to gain expertise in a new line/ book/ territory of business
- to orderly exit an old line/ book/ territory of business
- for surplus relief
- better spread of risk
✔✔insurance is - ✔✔- an intangible product brought to market by INSCO that
represents a bundle of services and is alleatory, future oriented, risk contingent,
contains service contracts with everything embodied in a legal contract
✔✔general requirements of any/ all contracts - ✔✔- offer and acceptance
- legal purpose
- competent parties
- consideration exchanged
, ✔✔legal aspects of characteristics of insurance contracts - ✔✔- personal
- unilateral
- utmost good faith
- adhesion
- conditional
- indemnity (whole again)
- insurable interest
- subrogation (supports indemnity)
✔✔doctrine of concealment - ✔✔silence where obligated to speak
✔✔doctrine of warranty - ✔✔specifically referenced contract statement that must be
strictly complied with
✔✔why regulate? - ✔✔- maintain competition/ prevent collusion/ limit monopoly power/
antitrust
- future orientation requires some future perfonce guarantee
- complexity of contracts/ potential abuse
- to protect the public trust!
✔✔current regulatory environment - ✔✔- state legislatures
- judicial system
- state department of insurance
- federal government
✔✔ what is risk? - ✔✔any uncertainty regarding financial loss
✔✔three risk classifications: - ✔✔1- pure vs. speculative
2- static vs. dynamic
3- objective vs. subjective
✔✔risk is NOT - ✔✔probability
✔✔pure risk - ✔✔loss/no loss only
✔✔speculative risk - ✔✔loss/no loss/ gain
✔✔static risk - ✔✔unchanging over time
✔✔dynamic risk - ✔✔changing (especially w/ technology)
✔✔objective risk - ✔✔statistical variation from expectation
✔✔subjective risk - ✔✔individual perception/ psychology
