CEBS GBA 1 AND 2 Exam Questions and
Answers Verified Solutions Latest Update
2026/2027
Question:
What are the 4 distinct characteristics of insurance?
Answer:
1) Pooling of losses
2) Payment only for random losses
3) Risk transfer
4) Indemnification
Question:
According to the law of numbers, pooling implies what 2 things?
Answer:
1) The sharing of losses by the entire group
2) The prediction of future losses with some accuracy.
Question:
A __________ loss is one that is unforseen and unexpected and occurs as a result of chance.
Answer:
random
Question:
What is the sole exception to the element of risk transfer, assuming the risk itself rather than an
insurance company?
Answer:
self-insurance
,Question:
_____________________ restores the individual to their preexisting state had the loss not
occurred.
Answer:
indemnification
Question:
________________ occurs because individuals and businesses are more likely to have claims, and
more inclined to purchase insurance, than those who are less likely to have claims..
Answer:
Adverse selection
Question:
True or False: Adverse selection, if unchecked, will lead toward more healthy individuals seeking
insurance and lowering premiums..
Answer:
False: Adverse selection, if unchecked, will lead toward more sick individuals seeking insurance,
driving up insurance premiums, and then even fewer healthy individuals will purchase, continuing
the spiral of higher costs.
Question:
True or False: Adverse selection occurs when individual buyers of health insurance know more
about their health status than do insurers..
Answer:
True
Question:
_______________ is the problem faced by insurers because individuals are more likely to use
unneeded health services when they are not paying the full cost of those services..
,Answer:
Moral hazard
Question:
What is the primary tool that insurers have to combat the moral hazard problem?.
Answer:
Coinsurancce (%) and copayments ($)
Question:
What is the generic term for any outside party, typically an insurance company or a a government
program, which pays for part or all of a patient's health care services?.
Answer:
third-party payer
Question:
What are the two broad categories of health insurers?.
Answer:
1) Private insurers
2) Public programs / insurers
Question:
What are the 3 major private insurers?.
Answer:
1) Blue Cross Blue
Shield
2) Commercial insurers
3) Self-insurers
Question:
, _________________ Plans originated as a number of separate insurance programs offered by
individual hospitals.
a) Blue Cross
b) Red Cross
c) Blue Shield
d) Red Shield
e) Humana.
Answer:
a) Blue Cross
Question:
_________________ Plans originated as a number of separate insurance programs offered by
individual physicians.
a) Blue Cross
b) Red Cross
c) Blue Shield
d) Red Shield
e) Humana.
Answer:
c) Blue Shield
Question:
What type of health insurance is issued by life insurance companies, casualty insurance companies,
and companies formed exclusively to offer health care insurance?.
Answer:
commercial health insurance
Question:
True or False: Commercial insurance companies are taxable (for- profit) entities..
Answer:
True
Answers Verified Solutions Latest Update
2026/2027
Question:
What are the 4 distinct characteristics of insurance?
Answer:
1) Pooling of losses
2) Payment only for random losses
3) Risk transfer
4) Indemnification
Question:
According to the law of numbers, pooling implies what 2 things?
Answer:
1) The sharing of losses by the entire group
2) The prediction of future losses with some accuracy.
Question:
A __________ loss is one that is unforseen and unexpected and occurs as a result of chance.
Answer:
random
Question:
What is the sole exception to the element of risk transfer, assuming the risk itself rather than an
insurance company?
Answer:
self-insurance
,Question:
_____________________ restores the individual to their preexisting state had the loss not
occurred.
Answer:
indemnification
Question:
________________ occurs because individuals and businesses are more likely to have claims, and
more inclined to purchase insurance, than those who are less likely to have claims..
Answer:
Adverse selection
Question:
True or False: Adverse selection, if unchecked, will lead toward more healthy individuals seeking
insurance and lowering premiums..
Answer:
False: Adverse selection, if unchecked, will lead toward more sick individuals seeking insurance,
driving up insurance premiums, and then even fewer healthy individuals will purchase, continuing
the spiral of higher costs.
Question:
True or False: Adverse selection occurs when individual buyers of health insurance know more
about their health status than do insurers..
Answer:
True
Question:
_______________ is the problem faced by insurers because individuals are more likely to use
unneeded health services when they are not paying the full cost of those services..
,Answer:
Moral hazard
Question:
What is the primary tool that insurers have to combat the moral hazard problem?.
Answer:
Coinsurancce (%) and copayments ($)
Question:
What is the generic term for any outside party, typically an insurance company or a a government
program, which pays for part or all of a patient's health care services?.
Answer:
third-party payer
Question:
What are the two broad categories of health insurers?.
Answer:
1) Private insurers
2) Public programs / insurers
Question:
What are the 3 major private insurers?.
Answer:
1) Blue Cross Blue
Shield
2) Commercial insurers
3) Self-insurers
Question:
, _________________ Plans originated as a number of separate insurance programs offered by
individual hospitals.
a) Blue Cross
b) Red Cross
c) Blue Shield
d) Red Shield
e) Humana.
Answer:
a) Blue Cross
Question:
_________________ Plans originated as a number of separate insurance programs offered by
individual physicians.
a) Blue Cross
b) Red Cross
c) Blue Shield
d) Red Shield
e) Humana.
Answer:
c) Blue Shield
Question:
What type of health insurance is issued by life insurance companies, casualty insurance companies,
and companies formed exclusively to offer health care insurance?.
Answer:
commercial health insurance
Question:
True or False: Commercial insurance companies are taxable (for- profit) entities..
Answer:
True
