OTL EXAM CHAPTER 6 UPDATED QUESTIONS AND ANSWERS
The degree of uncertainty of a prediction is reduced as the size of the sample is increased is one of the
reliability factors in which concept? - CORRECT ANSWER✅✅Law of large numbers
What is an insurer's retention? - CORRECT ANSWER✅✅The maximum amount that the insurer can
insure
What does an underwriter watch for when there are more than one loss payees named on an insurance
application? - CORRECT ANSWER✅✅Financial hardship, poor property maintenance, and temptation
for fraud
Why do those who want to purchase insurance complete and submit an application? - CORRECT
ANSWER✅✅To provide information for risk assessment and premium calculation
Which type of loss do actuaries find difficult to predict the future, even when there is considerable data
available from the past? - CORRECT ANSWER✅✅Weather-related losses
Which national association is a main resource for and has a key initiative to create industry-standard
application forms? - CORRECT ANSWER✅✅Centre for Study of Insurance Operations/Centre D'Étude de
la Pratique D'Assurance (CSIO/CEPA)
What are the three decisions an underwriter can make about a risk? - CORRECT ANSWER✅✅Accept the
risk; Reject the risk; Accept the risk with conditions
What is pure premium? - CORRECT ANSWER✅✅Premium required to meet losses that occur
Cindy repaired the minor damage to her car that occurred from a collision with a shopping cart. Does
she need to declare the loss on her new automobile application? - CORRECT ANSWER✅✅Yes, this is still
a loss even though a claim was not made
The degree of uncertainty of a prediction is reduced as the size of the sample is increased is one of the
reliability factors in which concept? - CORRECT ANSWER✅✅Law of large numbers
What is an insurer's retention? - CORRECT ANSWER✅✅The maximum amount that the insurer can
insure
What does an underwriter watch for when there are more than one loss payees named on an insurance
application? - CORRECT ANSWER✅✅Financial hardship, poor property maintenance, and temptation
for fraud
Why do those who want to purchase insurance complete and submit an application? - CORRECT
ANSWER✅✅To provide information for risk assessment and premium calculation
Which type of loss do actuaries find difficult to predict the future, even when there is considerable data
available from the past? - CORRECT ANSWER✅✅Weather-related losses
Which national association is a main resource for and has a key initiative to create industry-standard
application forms? - CORRECT ANSWER✅✅Centre for Study of Insurance Operations/Centre D'Étude de
la Pratique D'Assurance (CSIO/CEPA)
What are the three decisions an underwriter can make about a risk? - CORRECT ANSWER✅✅Accept the
risk; Reject the risk; Accept the risk with conditions
What is pure premium? - CORRECT ANSWER✅✅Premium required to meet losses that occur
Cindy repaired the minor damage to her car that occurred from a collision with a shopping cart. Does
she need to declare the loss on her new automobile application? - CORRECT ANSWER✅✅Yes, this is still
a loss even though a claim was not made
