RMIN Test 1 pt 2 Questions and Answers Already Passed

RMIN Test 1 pt 2 Questions and Answers Already Passed All of the following are characteristics of insurance EXCEPT A) risk avoidance. B) pooling of losses. C) payment of fortuitous losses. D) indemnification. A) risk avoidance. Which of the following is implied by the pooling of losses? A) sharing of losses by an entire group B) inability to predict losses with any degree of accuracy C) substitution of actual loss for average loss D) increase of objective risk A) sharing of losses by an entire group According to the law of large numbers, what happens as the number of exposure units increases? A) Actual results will increasingly differ from probable results. B) Actual results will more closely approach probable results. C) Nondiversifiable risk will decrease. D) Objective risk will increase. B) Actual results will more closely approach probable results. According to the law of large numbers, what should happen as an insurer increases the number of units insured? A) The amount the insurer expects to pay in claims should decrease. B) Underwriting expenses should decrease. C) Actual results will more closely approach expected results. D) The insurer's profitability should become more variable. C) Actual results will more closely approach expected results. Characteristics of a fortuitous loss include which of the following? I. The loss is certain to occur. II. The loss occurs as a result of chance. A) I only B) II only C) both I and II D) neither I nor II B) II only From the viewpoint of the insurer, all of the following are characteristics of an ideally insurable risk EXCEPT A) The loss must be accidental. B) The loss should be catastrophic. C) The premium must be economically feasible. D) There must be a large number of exposure units. B) The loss should be catastrophic. From the standpoint of the insurer, all of the following are characteristics of an ideally insurable risk EXCEPT A) The loss must be unintentional. B) The chance of loss must be calculable. C) The loss must be indeterminable. D) The loss must be measurable. C) The loss must be indeterminable. Why is a large number of exposure units generally required before a pure risk is insurable? A) It prevents the insurer from losing money. B) It eliminates intentional losses. C) It minimizes moral hazard. D) It enables the insurer to predict losses more accurately. D) It enables the insurer to predict losses more accurately. The requirement that losses should be accidental and unintentional in order to be insurable results in which of the following? I. Decrease in moral hazard II. More accurate prediction of future losses A) I only B) II only C) both I and II D) neither I nor II C) both I and II Which of the following is implied by the requirement that a loss should be determinable and measurable to be insurable? I. The loss must be definite as to place. II. The loss must be definite as to amount. A) I only B) II only C) both I and II D) neither I nor II C) both I and II Methods by which insurers may minimize or avoid catastrophic losses include which of the following? I. The use of reinsurance II. Concentrating coverage written in one geographic region A) I only B) II only C) both I and II D) neither I nor II A) I only Which of the following types of risks best meets the