RM 360 Final Exam questions with
verified solutions already passed
insurance - correct answer ✔✔A practice or arrangement by which a company or government agency
provides a guarantee of compensation for specified loss, damage, illness, or death in return for payment
for a premium.
insurance company - correct answer ✔✔A business that provides coverage, in the form of compensation
resulting from loss, damages, injury, treatment, or hardship in exchange for premium payments. The
company calculates the risk of occurrence then determines the cost to replace (pay for) the loss to
determine the premium amount.
underwriting - correct answer ✔✔The process by which an insurer determines whether, and on what
basis, an insurance application will be accepted.
goals of an insurance company - correct answer ✔✔- earn a profit
- meet customer needs
- legal requirements
- diversify risk
- social responsibility
social responsibility - correct answer ✔✔provides jobs for the community, funds projects, encourage
employees to volunteer, offer benefits, and providing philanthropy
diversify risk - correct answer ✔✔the more spread out the risk the more profitable the company is,
geographically and with types of business
legal requirements - correct answer ✔✔the company is in good standing with all the required
departments
meeting customer needs - correct answer ✔✔look at the retention and loss ration
,earn a profit - correct answer ✔✔look at the pure loss ratio
McCarran Ferguson Act - correct answer ✔✔exempts the insurance industry from federal antitrust laws
so long as the states regulate insurance
Financial Modernization Act (GLB) - correct answer ✔✔a law that serves to partially deregulate the
financial industry. The law allows companies working in the financial sector to integrate their operations,
invest in each other's businesses and consolidate
Reasons for regulation - correct answer ✔✔-protect consumers against improper sales practices
-protect consumers against insolvent companies
-assure fair claims practices
protect consumers against improper sales practices - correct answer ✔✔-consumers can inspect the
policy they purchased but they might not be able to analyze and understand the complex legal
document
-protects against fraud and getting sold products they do not need
-states insurance regulators can review policy language and disapprove the policy form and
endorsements that are inconsistent with state protective laws
protect consumers against insolvent companies - correct answer ✔✔-protects insureds against the risk
that insurers will be unable to meet their financial obligation
-to maintain a sound financial condition for private insurers for several reasons
why to maintain a sound financial condition for private insurers - correct answer ✔✔-insurance provides
future protection
-regulation is needed to protect the public interest
-insurers have a reasonability to insureds
-insurers have become insolvent despite regulatory reviews
, assure fair claims practices - correct answer ✔✔responsible for determining whether insurance rates are
high enough to prevent destructive competition
each state has a DOI. Each DOI is responsible for: - correct answer ✔✔licensing companies, licensing
producers, approving policy forms, reviewing rates, investigating solvency, market conduct exams,
investigate policyholder complaints, and others
DOI are funded by...... - correct answer ✔✔premiums with the premium tax
insurance commissioners oversees DOI. they: - correct answer ✔✔-determine who to issue licenses to
-review pricing recommendations
-conduct exams
-and others
how do insurance commissioners get into the DOI? - correct answer ✔✔most are appointed
categories of insurers - correct answer ✔✔-domestic
-foreign
-alien
-non-admitted
domestic - correct answer ✔✔an insurer doing business in the jurisdiction in which it is incorporated
foreign - correct answer ✔✔an insurer licensed to operate in a state by incorporated in another state
alien - correct answer ✔✔an insurer domiciled in a country other than the united states
non-admitted - correct answer ✔✔-not backed by the state
-if the insurance company fails, the government will not come in to make payments on claims
-cannot sell in this state it is a surplus lines company
verified solutions already passed
insurance - correct answer ✔✔A practice or arrangement by which a company or government agency
provides a guarantee of compensation for specified loss, damage, illness, or death in return for payment
for a premium.
insurance company - correct answer ✔✔A business that provides coverage, in the form of compensation
resulting from loss, damages, injury, treatment, or hardship in exchange for premium payments. The
company calculates the risk of occurrence then determines the cost to replace (pay for) the loss to
determine the premium amount.
underwriting - correct answer ✔✔The process by which an insurer determines whether, and on what
basis, an insurance application will be accepted.
goals of an insurance company - correct answer ✔✔- earn a profit
- meet customer needs
- legal requirements
- diversify risk
- social responsibility
social responsibility - correct answer ✔✔provides jobs for the community, funds projects, encourage
employees to volunteer, offer benefits, and providing philanthropy
diversify risk - correct answer ✔✔the more spread out the risk the more profitable the company is,
geographically and with types of business
legal requirements - correct answer ✔✔the company is in good standing with all the required
departments
meeting customer needs - correct answer ✔✔look at the retention and loss ration
,earn a profit - correct answer ✔✔look at the pure loss ratio
McCarran Ferguson Act - correct answer ✔✔exempts the insurance industry from federal antitrust laws
so long as the states regulate insurance
Financial Modernization Act (GLB) - correct answer ✔✔a law that serves to partially deregulate the
financial industry. The law allows companies working in the financial sector to integrate their operations,
invest in each other's businesses and consolidate
Reasons for regulation - correct answer ✔✔-protect consumers against improper sales practices
-protect consumers against insolvent companies
-assure fair claims practices
protect consumers against improper sales practices - correct answer ✔✔-consumers can inspect the
policy they purchased but they might not be able to analyze and understand the complex legal
document
-protects against fraud and getting sold products they do not need
-states insurance regulators can review policy language and disapprove the policy form and
endorsements that are inconsistent with state protective laws
protect consumers against insolvent companies - correct answer ✔✔-protects insureds against the risk
that insurers will be unable to meet their financial obligation
-to maintain a sound financial condition for private insurers for several reasons
why to maintain a sound financial condition for private insurers - correct answer ✔✔-insurance provides
future protection
-regulation is needed to protect the public interest
-insurers have a reasonability to insureds
-insurers have become insolvent despite regulatory reviews
, assure fair claims practices - correct answer ✔✔responsible for determining whether insurance rates are
high enough to prevent destructive competition
each state has a DOI. Each DOI is responsible for: - correct answer ✔✔licensing companies, licensing
producers, approving policy forms, reviewing rates, investigating solvency, market conduct exams,
investigate policyholder complaints, and others
DOI are funded by...... - correct answer ✔✔premiums with the premium tax
insurance commissioners oversees DOI. they: - correct answer ✔✔-determine who to issue licenses to
-review pricing recommendations
-conduct exams
-and others
how do insurance commissioners get into the DOI? - correct answer ✔✔most are appointed
categories of insurers - correct answer ✔✔-domestic
-foreign
-alien
-non-admitted
domestic - correct answer ✔✔an insurer doing business in the jurisdiction in which it is incorporated
foreign - correct answer ✔✔an insurer licensed to operate in a state by incorporated in another state
alien - correct answer ✔✔an insurer domiciled in a country other than the united states
non-admitted - correct answer ✔✔-not backed by the state
-if the insurance company fails, the government will not come in to make payments on claims
-cannot sell in this state it is a surplus lines company
