AD BANKER AL P&C PRACTICE COMP EXAM
Which rating method listed below is established by the underwriter?
A. Manual rating
B. Retrospective rating
C. Individual rating
D. Judgment rating - Answers - D.
Judgment rating is the Only rating method that is determined by the underwriter. All
other rating methods are determined by the actuarial department of the insurance
company. 1.11
The type of insurance company in which the policyholder is considered an owner, with
the right to vote and share in the profits, is a:
A. Fraternal benefit society
B. Mutual company
C. Stock company
D. Risk retention group - Answers - B.
A mutual company is mutually owned by the policyholders. Policyholders participate in
the company's profits in the form of dividends and each policyholder has voting rights.
Stock companies are owned by stock holders. Fraternal benefit societies are non-profit
organizations and are member owned. Risk retention groups are group-owned insurers
specializing in limited risks such as: theme parks, go-cart tracks, etc. 1.2
A morale hazard:
A. Is being dishonest on an application or claim form
B. Is the extent to which one may be affected by a peril
C. Is a physical condition that increases the probability of loss
D. Arises through an individual's carelessness or irresponsible actions - Answers - D.
A morale hazard refers to a persons behavior, or a persons morale. It refers to an
increase in the possibility of loss through an individual's carelessness or irresponsible
actions.
1.8
A good example of Risk Reduction might be:
A. When one takes action to minimize the severity of a potential loss
B. Insuring only those risks that threaten the financial stability of the insured
C. The transfer of the risk to an insurance company
D. The elimination of the exposure to a specific risk - Answers - A.
Risk Reduction involves applying techniques for prevention or reduction of potential
loss, such as installing sprinkler systems, burglar alarms, safety guards on machinery,
etc. 1.8
, Insurance binders are:
A. Limited to personal lines risks
B. Valid for 30 days
C. Temporary or interim insuring agreements
D. Required to be written - Answers - C.
An insurance binder is considered to be an interim insuring agreement, which is
basically a temporary policy. It may be oral or written and is generally valid for up to 90
days. It does not guarantee the issue of the policy and may be cancelled at anytime by
the insurer. 2.1
Which of the following would NOT be found in the policy declarations page?
A. Limits of insurance, deductibles, amount of premium
B. A description of the property to be insured
C. A legal representative in the event of the insured's death
D. Insurers promise of protection - Answers - D.
The insurers promise of protection would be found in the policy's Insuring Clause, not
the Declarations. Remember, the Declarations describe the: Who, What, Where, When
and How Much, parts of the policy. It is the policy cover page providing a quick overview
of the policy. 2.4
The right to request an appraisal belongs to:
A. Both answers
B. The insurance company
C. Neither answer
D. The insured - Answers - A.
When the insured and the insurer cannot agree on the amount of indemnification/claims
settlement, either party may demand an appraisal of a loss.
In PURE contributory states, when an individual is found to have contributed to his or
her own loss in any way, another party:
A. May be held liable only in the case of gross negligence
B. Will be assigned a degree of fault and both parties share in the loss settlement pro
rata
C. May not be held liable
D. Is not liable because the claimant is sued under the common law: Assumption of
Risk - Answers - C.
Contributory negligence prevents recovery if the claimant is found to have contributed to
the loss in any way, case dismissed. Assumption of risk is a common law defense that
indicates if a person consciously exposes himself to danger, he must assume part of the
risk. A degree of fault is assigned to each party only in the case of comparative
Which rating method listed below is established by the underwriter?
A. Manual rating
B. Retrospective rating
C. Individual rating
D. Judgment rating - Answers - D.
Judgment rating is the Only rating method that is determined by the underwriter. All
other rating methods are determined by the actuarial department of the insurance
company. 1.11
The type of insurance company in which the policyholder is considered an owner, with
the right to vote and share in the profits, is a:
A. Fraternal benefit society
B. Mutual company
C. Stock company
D. Risk retention group - Answers - B.
A mutual company is mutually owned by the policyholders. Policyholders participate in
the company's profits in the form of dividends and each policyholder has voting rights.
Stock companies are owned by stock holders. Fraternal benefit societies are non-profit
organizations and are member owned. Risk retention groups are group-owned insurers
specializing in limited risks such as: theme parks, go-cart tracks, etc. 1.2
A morale hazard:
A. Is being dishonest on an application or claim form
B. Is the extent to which one may be affected by a peril
C. Is a physical condition that increases the probability of loss
D. Arises through an individual's carelessness or irresponsible actions - Answers - D.
A morale hazard refers to a persons behavior, or a persons morale. It refers to an
increase in the possibility of loss through an individual's carelessness or irresponsible
actions.
1.8
A good example of Risk Reduction might be:
A. When one takes action to minimize the severity of a potential loss
B. Insuring only those risks that threaten the financial stability of the insured
C. The transfer of the risk to an insurance company
D. The elimination of the exposure to a specific risk - Answers - A.
Risk Reduction involves applying techniques for prevention or reduction of potential
loss, such as installing sprinkler systems, burglar alarms, safety guards on machinery,
etc. 1.8
, Insurance binders are:
A. Limited to personal lines risks
B. Valid for 30 days
C. Temporary or interim insuring agreements
D. Required to be written - Answers - C.
An insurance binder is considered to be an interim insuring agreement, which is
basically a temporary policy. It may be oral or written and is generally valid for up to 90
days. It does not guarantee the issue of the policy and may be cancelled at anytime by
the insurer. 2.1
Which of the following would NOT be found in the policy declarations page?
A. Limits of insurance, deductibles, amount of premium
B. A description of the property to be insured
C. A legal representative in the event of the insured's death
D. Insurers promise of protection - Answers - D.
The insurers promise of protection would be found in the policy's Insuring Clause, not
the Declarations. Remember, the Declarations describe the: Who, What, Where, When
and How Much, parts of the policy. It is the policy cover page providing a quick overview
of the policy. 2.4
The right to request an appraisal belongs to:
A. Both answers
B. The insurance company
C. Neither answer
D. The insured - Answers - A.
When the insured and the insurer cannot agree on the amount of indemnification/claims
settlement, either party may demand an appraisal of a loss.
In PURE contributory states, when an individual is found to have contributed to his or
her own loss in any way, another party:
A. May be held liable only in the case of gross negligence
B. Will be assigned a degree of fault and both parties share in the loss settlement pro
rata
C. May not be held liable
D. Is not liable because the claimant is sued under the common law: Assumption of
Risk - Answers - C.
Contributory negligence prevents recovery if the claimant is found to have contributed to
the loss in any way, case dismissed. Assumption of risk is a common law defense that
indicates if a person consciously exposes himself to danger, he must assume part of the
risk. A degree of fault is assigned to each party only in the case of comparative
