Fundamentals of Insurance Test Questions 7 Correct Answers

Insurance industry is over 700 years old? - AnswerTrue First type of insurance: - AnswerMarine Lloyd's of London is not an insurance company? - AnswerTrue Why was it important to the colonists of the new world to transfer the risks associated with the trade industry? - AnswerBecause they stood to lose everything with the loss of any one cargo What two insurance markets did the new colonies have? - AnswerLife & Fire Why were possessions so important to the colonists? - AnswerBecause they had so few What was significant of fire marks? - AnswerThey helped determine fire fighters whether or not to fight the fire By the end of the 19th century, what major types of insurance had developed? - AnswerFire & Flood Insurance was a luxury to early colonists? - AnswerFalse What is one problem with insurance being regulated by states? - AnswerThere's different regulations for each state What did Paul vs. Virginia decide? - AnswerTo regulate insurance by state Why was Paul vs. Virginia overturned? - AnswerInterstate commerce The McCarren-Ferguson Act which is still in effect today, mandates what? - AnswerThat insurance will be regulated by state Although insurance is mandated on a state level, which 3 areas are regulated federally? - AnswerLabor, tax, and securities In terms of insurance, what is risk? - AnswerThe uncertainty of an outcome Installing smoke detectors is an example of what? - AnswerRisk Management Which is an example of Intentional Risk Retention? - AnswerCarrying a deductible Keeping copies of your social security card in a fire safe box is a: - Answerduplication New safety measures placed on products is a result of: - Answerproduct liability claims Evaluating the frequency and severity of a loss is a key part of: - AnswerUnderwriting What does loss frequency determine? ** - AnswerNumber of losses per exposure Evaluating loss frequency and severity helps to: - AnswerCreate pricing and rates in the insurance industry Risks with an exposure level of __ may not be eligible for insurance. - Answerhigh frequency/high severity The Law of Large Numbers does which of the following:** - AnswerMakes predictions about losses and pool similar risks. By pooling risks by classification, insurers determine: - AnswerPremium Rates The area in which a home or building is located effects their rates? - AnswerTrue Would a business in an urban area have a higher or lower rate? - AnswerHigher What is a written premium?** - AnswerThe amount charged for a policy Earned premiums differ depending on a particular schedule? - AnswerTrue The expense ration equals:** - AnswerIncurred writing expenses over the written premium A combined ration of over 100% would indicate? - AnswerLoss What gives and insurer an idea of how efficiently they are operating?** - AnswerExpense Ratio What represents 70% of the premium dollar?** - AnswerClaim expenses A company's surplus is associated with their ability to: - AnswerWrite business Combined ratio measures underwriting profitability? - AnswerTrue Why is it important to have reinsurance?** - AnswerTo shift some financial burden An increase in losses would:** - AnswerNegatively affect profitability How many people are employed in the insurance industry in the US? - AnswerOver 2.3 million All of the following are companies that