WEBCE COMMERCIAL LINES ONE
ZERO ACTUAL EXAM COMPLETE
QUESTIONS 100 PERCENT CORRECT
⩥ Claims. Answer: The major cost component of insurance premiums
and the reason businesses purchase insurance
⩥ Claims costs consume what percentage of the premium dollar?.
Answer: Between 50 and 90
⩥ Case Reserve. Answer: The estimated amount for which open claims
are likely to be settled or adjudicated
⩥ Incurred Loss. Answer: The resulting number when the portions of a
claim that have been paid are combined with the case reserve
⩥ Incurred Losses Affect. Answer: The amount of premiums paid by
insured businesses
⩥ Regulation. Answer: A law, rule, or other order prescribed by
authority, especially to regulate or control conduct
,⩥ Reasons for Regulation in the Insurance Industry. Answer: Preserve
insurer solvency, complex product and unequal knowledge, ensure fair
rates, promote social objectives
⩥ Why is maintaining insurance solvency the most important objective
of insurance regulation?. Answer: The insured is totally reliant on the
financial backing of the insurers promise to pay for a covered loss
⩥ Paul v. Virginia 1868. Answer: Concluded that insurance was not
interstate commerce and thus did not fall under federal jurisdiction
⩥ South-Eastern Underwriters Association case 1944. Answer: Found
that insurance was interstate commerce and should accordingly be
regulated by the federal government
⩥ McCarran Ferguson Act 1945. Answer: Returned insurance regulation
to the states with narrow or limited applicability of specified federal
laws to insurance
⩥ Advantages of State Regulation. Answer: Well established, more
flexible and adaptable to change, allows for experimentation, allows a
decentralization of political influence
⩥ Advantages of Federal Regulation. Answer: Some states have
inadequate personnel to properly regulate, some states lack funding,
, greater operating efficiencies, establish a more consistent and uniform
way of addressing insurer insolvencies
⩥ Entities Actively Involved in Insurance Regulation. Answer: The
courts, legislative bodies, state insurance departments
⩥ Solvency Regulation. Answer: An insurer that cannot keep its promise
to pay for a covered loss because of its bankrupt condition can be
devastating to and insured business; thus, areas in which insurer
solvency is regulated include insurer licensing and capital requirements
and financial regulation
⩥ Insurer Licensing and Capital Requirements. Answer: An insurer must
meet certain capital or surplus standards to be granted a license to write
insurance in a particular jurisdiction
⩥ Capital or Surplus. Answer: The assets of an entity remaining after
deduction of liabilities (the net worth of a business or person)
⩥ Financial Regulation. Answer: Insurers are continuously subject to
addition financial requirements such as admitted assets, unearned
premium reserves, loss reserves, and risk-based capital
⩥ Admitted Assets. Answer: Assets whose value is included in the
annual statement of an insurer to the state insurance department; can
ZERO ACTUAL EXAM COMPLETE
QUESTIONS 100 PERCENT CORRECT
⩥ Claims. Answer: The major cost component of insurance premiums
and the reason businesses purchase insurance
⩥ Claims costs consume what percentage of the premium dollar?.
Answer: Between 50 and 90
⩥ Case Reserve. Answer: The estimated amount for which open claims
are likely to be settled or adjudicated
⩥ Incurred Loss. Answer: The resulting number when the portions of a
claim that have been paid are combined with the case reserve
⩥ Incurred Losses Affect. Answer: The amount of premiums paid by
insured businesses
⩥ Regulation. Answer: A law, rule, or other order prescribed by
authority, especially to regulate or control conduct
,⩥ Reasons for Regulation in the Insurance Industry. Answer: Preserve
insurer solvency, complex product and unequal knowledge, ensure fair
rates, promote social objectives
⩥ Why is maintaining insurance solvency the most important objective
of insurance regulation?. Answer: The insured is totally reliant on the
financial backing of the insurers promise to pay for a covered loss
⩥ Paul v. Virginia 1868. Answer: Concluded that insurance was not
interstate commerce and thus did not fall under federal jurisdiction
⩥ South-Eastern Underwriters Association case 1944. Answer: Found
that insurance was interstate commerce and should accordingly be
regulated by the federal government
⩥ McCarran Ferguson Act 1945. Answer: Returned insurance regulation
to the states with narrow or limited applicability of specified federal
laws to insurance
⩥ Advantages of State Regulation. Answer: Well established, more
flexible and adaptable to change, allows for experimentation, allows a
decentralization of political influence
⩥ Advantages of Federal Regulation. Answer: Some states have
inadequate personnel to properly regulate, some states lack funding,
, greater operating efficiencies, establish a more consistent and uniform
way of addressing insurer insolvencies
⩥ Entities Actively Involved in Insurance Regulation. Answer: The
courts, legislative bodies, state insurance departments
⩥ Solvency Regulation. Answer: An insurer that cannot keep its promise
to pay for a covered loss because of its bankrupt condition can be
devastating to and insured business; thus, areas in which insurer
solvency is regulated include insurer licensing and capital requirements
and financial regulation
⩥ Insurer Licensing and Capital Requirements. Answer: An insurer must
meet certain capital or surplus standards to be granted a license to write
insurance in a particular jurisdiction
⩥ Capital or Surplus. Answer: The assets of an entity remaining after
deduction of liabilities (the net worth of a business or person)
⩥ Financial Regulation. Answer: Insurers are continuously subject to
addition financial requirements such as admitted assets, unearned
premium reserves, loss reserves, and risk-based capital
⩥ Admitted Assets. Answer: Assets whose value is included in the
annual statement of an insurer to the state insurance department; can
