AD Banker Chapter 1: General Insurance Satisfaction review exam Question and answers verified solution Save

A producer has each of the following responsibilities to the Insurer, except: a. A fiduciary duty b. Forwarding premiums to the insurer on a timely basis c. Reporting material facts that may affect underwriting d. A duty to recommend only high rate policies - ANSWERSd. A duty to recommend only high rate policies Each of the following must be included in an insurable risk, except: a. Calculable chance of loss b. Excluded catastrophic perils c. Large group with dissimilar members d. Accidental losses - ANSWERSc. Large group with dissimilar members Each of the following is an element of a legal contract, except: a. Consideration b. Legal Purpose c. Agreement d. Indemnity - ANSWERSd. Indemnity Each of the following is a factor considered by an underwriter, except: a. Hazards b. Marital status c. Claims history d. Outside factors - ANSWERSb. Marital status Which of the following calculations equals a company's loss ratio? a. All losses + expenses b. Paid losses + loss reserves ÷ total earned premium c. Losses + total operating expenses ÷ total written premium d. Paid losses + paid expenses ÷ total earned premium - ANSWERSb. Paid losses + loss reserves ÷ total earned premium Under the Fair Credit Reporting Act, which of the following statements is correct? a. The reporting agency has no responsibility to investigate inaccurate information. b. If an individual is denied coverage, they can request a copy of the report. c. The Act is designed to protect reporting agencies from the public. d. The reporting company can provide confidential information to anyone requesting it - ANSWERSb. If an individual is denied coverage, they can request a copy of the report. A peril is defined as which of the following? a. It is the specific cause of loss b. It is an indirect loss c. It is a condition that may increase a loss d. It is a risk of financial loss - ANSWERSa. It is the specific cause of loss What is the name for an insurer organized in the same state in which it is authorized to do business? a. Domestic b. Foreign c. Admitted d. Alien - ANSWERSa. Domestic All of the following are characteristics of a Mutual Insurance Company, except: a. Policyholders elect the Board of Directors b. Stockholders have ownership c. They provide insurance to members d. Profits are returned as dividends - ANSWERSb. Stockholders have ownership Which of the following is not within an agent's authority? a. Countersigning insurance contracts b. Selling applications on the insurer's behalf c. Using express authority d. Representing the insured's interest - ANSWERSd. Representing the insured's interest The Reasonable Expectations Doctrine states that the insured: a. Must fully cooperate with the insurer during the investigation of a claim in order to determine coverage for a loss b. Is entitled to coverage that a reasonable and prudent buyer can expect c. May reasonably expect that all claims submitted will be paid d. May expect the insurer to be reasonable in its consideration of a claim - ANSWERSb. Is entitled to coverage that a reasonable and prudent buyer can expect A false statement in the application for insurance is: a. Concealment b. Misrepresentation c. Unilateral d. Representation - ANSWERSb. Misrepresentation Which of the following is not an element of an insurable risk? a. The ability to set a measurable value on it b. Catastrophic perils c. Accidental loss d. Large number of homogenous units - ANSWERSb. Catastrophic perils What is the name for an insurer authorized to write insurance policies in a particular state? a. Admitted b. Domestic c. Non-Admitted d. Foreign - ANSWERSa. Admitted When Applicant P fails to disclose all motor vehicle violations in an application for automobile insurance, P may be guilty of: a. Breach of warranty b. Avoidance c. Estoppel d. Concealment - ANSWERSd. Concealment Which of the following is a characteristic of a Mutual Insurance Company? a. Members are provided insurance by the company b. A policyholder is a voting member on the Board of Directors c. Dividends are returned profits d. Stockholders have ownership - ANSWERSa. Members are provided insurance by the company The Gramm-Leach-Bliley Act was responsible for which of the following? a. Establishment of privacy protection for consumers b. Deregulation of the trucking industry c. Enforcement of fraudulent insurance acts d. Regulation of investment companies - ANSWERSa. Establishment of privacy protection for consumers Policyholder A's insurer is providing coverage on too many homes subject to wind losses. As a result, the company decides to reinsure those policies to share the high risk of wind loss. The reinsurance contract can best be described as which of the following? a. An agreement between your agent and the insurance company b. An agreement between you and the reinsurance company c. An agreement between the insurance company and the reinsurer d. An agreement between you, the insurance company, and the reinsurer - ANSWERSc. An agreement between the insurance company and the reinsurer The Reasonable Expectations Doctrine states that: a. The insurer may reasonably expect full cooperation of the insured in the event of a loss b. A policyowner may expect the insurer to refund premiums if no claims are made c. A policyowner may reasonably expect that all claims submitted will be paid d. The reasonable expectations of policyowners will be honored even if the strict terms of the policy do not support these expectations - ANSWERSd. The reasonable expectations of policyowners will be honored even if the strict terms of the policy do not support these expectations Possibility of loss is called: a. An insurable interest b. A hazard c. A risk d. A peril - ANSWERSc. A risk Which statement defines estoppel? a. Estoppel is the intentional abandonment of a known right b. Estoppel is the failure to disclose known facts c. Estoppel is the intentional misrepresentation of a material fact d. Estoppel prevents the denial of a fact previously established to be true - ANSWERSd. Estoppel prevents the denial of a fact previously established to be true Which of the following describes both the premium paid by the insured and the promise by the insurer to pay a covered loss and defend the insured in a lawsuit? a. Acceptance b. Consideration c. Offer d. Legal Purpose - ANSWERSb. Consideration Which of the following defines risk? a. Chance of loss b. Amount of loss c. Cause of loss d. Financial interest in property - ANSWERSa. Chance of loss The Terrorism Insurance Program created by TRIA is administered by which of the following federal entities? a. Department of Defense b. Department of the Treasury c. Department of State d. White House - ANSWERSb. Department of the Treasury Who do producers represent when transacting the business of insurance? a. The insurer b. The insured c. Themselves d. The Commissioner - ANSWERSa. The insurer An insurance contract is considered which type of contract because it restores the insured to the same financial condition as before the loss? a. An aleatory contract b. A contract of indemnity c. A unilateral contract d. A contract of adhesion - ANSWERSb. A contract of indemnity An applicant could purchase an insurance policy to cover losses from all the following, except: a. An operation of drug smuggling b. Loss of property through burglary or theft c. Sudden and direct damage to property by natural causes d. Loss of assets through tort actions brought against the person - ANSWERSa. An operation of drug smuggling An insurer that is authorized to do business in a particular state is said to be: a. Domestic b. Admitted c. Foreign d. Non-Admitted - ANSWERSb. Admitted For a claim to be paid, insurable interest for a property or casualty contract must exist at the time of: a. Policy delivery b. Premium payment c. Policy issuance d. Loss - ANSWERSd. Loss When writing an application for car insurance, Producer M asked the client, B, if B had been convicted of driving while intoxicated (DWI) in the past 10 years. B answered no, even though B had been convicted of a DWI last year. B is guilty of which of the following? a. Misrepresentation b. Waiver c. Unilateral statement d. Representation - ANSWERSa. Misrepresentation The shifting of risk of loss to another party is known as which of the following? a. Risk reduction b. Risk transfer c. Risk assumption d. Risk avoidance - ANSWERSb. Risk transfer Which of the following describes both the premium paid by the insured and the promise by the insurer to pay a covered loss and defend the insured in a lawsuit? a. Legal Purpose b. Acceptance c. Offer d. Consideration - ANSWERSd. Consideration When an insured fails to disclose known facts in an application for insurance, they may be guilty of: a. Twisting b. Concealment c. Waiver d. Breach of warranty - ANSWERSb. Concealment An alarm system installed in a home is considered which of the following ways to manage risk? a. Reduction b. Transfer c. Retention d. Avoidance - ANSWERSa. Reduction Each participant of a Lloyds association a. Insures against every risk that is underwritten b. Is legally liable for the unpaid part of any loss sustained by all defaulting underwriters c. Is individually liable for each risk they assume d. Participates on every policy issued - ANSWERSc. Is individually liable for each risk they assume Which is the correct term to describe a contract prepared by one party and submitted to the other party on a take-it-or-leave-it basis, without negotiations? a. Conditional contract b. Aleatory contract c. Valued contract d. Contract of adhesion - ANSWERSd. Contract of adhesion The most common method of managing risk is: a. Obtaining a Certificate of Security b. Avoiding all risks c. Self-insuring d. Purchasing insurance - ANSWERSd. Purchasing insurance Which of the following risks may be protected against by insurance? a. Involuntary risk b. Intentional Risk c. Pure Risk d. Catastrophic risk - ANSWERSc. Pure Risk When an applicant intentionally fails to make a material fact known, it is known as: a. Bad faith b. Concealment c. Deception d. Misrepresentation - ANSWERSb. Concealment A state requiring that the Commissioner agree that a company's rates are appropriate before they are made effective uses which type of rating approval? a. Open Competition b. File and use c. Mandatory d. Mandatory - ANSWERSc. Mandatory The owner of an antique store leaves valuable breakable items on display while heavy construction is taking place, believing that any pieces that fall and break will be covered by insurance. This demonstrates which hazard? a. Morale hazard b. Physical hazard c. Moral hazard d. Speculative hazard - ANSWERSa. Morale hazard Which of the following statements is true concerning the National Association of Insurance Commissioners? a. The NAIC establishes insurance law at the federal level b. The NAIC enforces insurance regulations c. The NAIC provides research and recommendations d. The NAIC appoints Commissioners/Directors of Insurance for each state - ANSWERSc. The NAIC provides research and recommendations Which statement defines a peril? a. It is a condition that may increase a loss b. It is the specific cause of loss