RMIN 4000 Edmunds Test 3 Questions
and Answers | Latest Update | 2024/2025
| 100% Verified
What is subrogation and why is it important in insurance?
✔✔ Subrogation is the process by which an insurer seeks to recover costs from a third party
responsible for a loss after the insurer has paid the claim.
Describe the concept of excess and surplus lines in insurance.
✔✔ Excess and surplus lines are insurance policies offered by insurers who are not licensed in
the insured's state but provide coverage for high-risk or unusual risks not covered by standard
insurers.
What is actuarial risk and how does it affect insurance pricing?
✔✔ Actuarial risk refers to the risk assessed using statistical methods to predict the likelihood
and financial impact of future claims, influencing how insurance premiums are set.
Explain the term insurance deductible and its purpose.
✔✔ An insurance deductible is the amount the policyholder must pay out-of-pocket before the
insurance coverage begins to pay for a loss, used to share the cost of claims.
1
,What is a reinsurance treaty and how does it function?
✔✔ A reinsurance treaty is an agreement between an insurer and a reinsurer where the reinsurer
accepts certain risks from the insurer, helping the insurer manage risk exposure and stabilize
financial performance.
What is moral hazard and how does it impact risk management strategies?
✔✔ Moral hazard refers to the increased risk of loss when an insured party may act less
cautiously because they do not bear the full financial consequences, affecting how risks are
managed and mitigated.
What is the role of claims adjusters in the insurance industry?
✔✔ Claims adjusters investigate and evaluate insurance claims to determine the extent of the
insurer's liability and ensure fair and accurate settlement of claims.
Describe loss prevention measures in risk management.
✔✔ Loss prevention involves strategies and practices aimed at reducing the frequency and
severity of potential losses before they occur.
2
,What is the significance of coverage limits in an insurance policy?
✔✔ Coverage limits define the maximum amount an insurer will pay for a covered loss,
establishing the boundary of financial protection provided by the policy.
What does moral hazard indicate about the behavior of insured parties?
✔✔ Moral hazard indicates that insured parties might engage in riskier behavior because they are
shielded from the full financial impact of their actions by insurance coverage.
What is the concept of insurance fraud and its impact on the industry?
✔✔ Insurance fraud involves providing false information or making false claims to receive
undeserved insurance benefits, leading to higher costs for insurers and increased premiums for
policyholders.
Explain premium financing and its typical use in insurance.
✔✔ Premium financing involves borrowing money to pay insurance premiums, typically used by
businesses or individuals who need to spread the cost of coverage over time.
What is the purpose of risk transfer in insurance?
3
, ✔✔ Risk transfer involves shifting the financial burden of potential losses from an individual or
organization to an insurance company, providing protection against unforeseen events.
What does actuarial tables refer to in insurance?
✔✔ Actuarial tables are statistical tools used by insurers to estimate the probability of certain
events occurring and to calculate premiums and reserves based on these probabilities.
What is business interruption insurance and what does it cover?
✔✔ Business interruption insurance covers the loss of income that a business suffers due to a
covered event that disrupts its operations, such as a fire or natural disaster.
Describe the concept of loss of use coverage in property insurance.
✔✔ Loss of use coverage provides compensation for additional living expenses incurred when a
policyholder's property becomes uninhabitable due to a covered loss.
What is moral hazard in relation to insurance claims management?
✔✔ Moral hazard refers to the tendency of insured parties to take more risks or be less cautious
because they know they are covered by insurance, potentially leading to higher claim costs.
4
and Answers | Latest Update | 2024/2025
| 100% Verified
What is subrogation and why is it important in insurance?
✔✔ Subrogation is the process by which an insurer seeks to recover costs from a third party
responsible for a loss after the insurer has paid the claim.
Describe the concept of excess and surplus lines in insurance.
✔✔ Excess and surplus lines are insurance policies offered by insurers who are not licensed in
the insured's state but provide coverage for high-risk or unusual risks not covered by standard
insurers.
What is actuarial risk and how does it affect insurance pricing?
✔✔ Actuarial risk refers to the risk assessed using statistical methods to predict the likelihood
and financial impact of future claims, influencing how insurance premiums are set.
Explain the term insurance deductible and its purpose.
✔✔ An insurance deductible is the amount the policyholder must pay out-of-pocket before the
insurance coverage begins to pay for a loss, used to share the cost of claims.
1
,What is a reinsurance treaty and how does it function?
✔✔ A reinsurance treaty is an agreement between an insurer and a reinsurer where the reinsurer
accepts certain risks from the insurer, helping the insurer manage risk exposure and stabilize
financial performance.
What is moral hazard and how does it impact risk management strategies?
✔✔ Moral hazard refers to the increased risk of loss when an insured party may act less
cautiously because they do not bear the full financial consequences, affecting how risks are
managed and mitigated.
What is the role of claims adjusters in the insurance industry?
✔✔ Claims adjusters investigate and evaluate insurance claims to determine the extent of the
insurer's liability and ensure fair and accurate settlement of claims.
Describe loss prevention measures in risk management.
✔✔ Loss prevention involves strategies and practices aimed at reducing the frequency and
severity of potential losses before they occur.
2
,What is the significance of coverage limits in an insurance policy?
✔✔ Coverage limits define the maximum amount an insurer will pay for a covered loss,
establishing the boundary of financial protection provided by the policy.
What does moral hazard indicate about the behavior of insured parties?
✔✔ Moral hazard indicates that insured parties might engage in riskier behavior because they are
shielded from the full financial impact of their actions by insurance coverage.
What is the concept of insurance fraud and its impact on the industry?
✔✔ Insurance fraud involves providing false information or making false claims to receive
undeserved insurance benefits, leading to higher costs for insurers and increased premiums for
policyholders.
Explain premium financing and its typical use in insurance.
✔✔ Premium financing involves borrowing money to pay insurance premiums, typically used by
businesses or individuals who need to spread the cost of coverage over time.
What is the purpose of risk transfer in insurance?
3
, ✔✔ Risk transfer involves shifting the financial burden of potential losses from an individual or
organization to an insurance company, providing protection against unforeseen events.
What does actuarial tables refer to in insurance?
✔✔ Actuarial tables are statistical tools used by insurers to estimate the probability of certain
events occurring and to calculate premiums and reserves based on these probabilities.
What is business interruption insurance and what does it cover?
✔✔ Business interruption insurance covers the loss of income that a business suffers due to a
covered event that disrupts its operations, such as a fire or natural disaster.
Describe the concept of loss of use coverage in property insurance.
✔✔ Loss of use coverage provides compensation for additional living expenses incurred when a
policyholder's property becomes uninhabitable due to a covered loss.
What is moral hazard in relation to insurance claims management?
✔✔ Moral hazard refers to the tendency of insured parties to take more risks or be less cautious
because they know they are covered by insurance, potentially leading to higher claim costs.
4
