Forensics and Network Intrusion exam fully solved & updated

Mutual Insurance Company - ANSWER-A _________ insurance company is owned by its policyholders Reinsurance - ANSWER-If a company wants to transfer all or part of the risk it has accepted, it would buy which type of insurance? Domestic Insurer - ANSWER-An insurer organized under the laws of this state, whether or not it is admitted to do business in this state Foreign Insurer - ANSWER-An insurer not organized under the laws of this state, but in one of the other states or jurisdictions within the United States, whether or not is is admitted to do business in the state or jurisdiction Alien Insurer - ANSWER-An insurer organized under the laws of any jurisdiction outside of the United States, whether or not it is admitted to do business in this state Admitted vs. Non-admitted - ANSWER-Refers to whether or not an insurer is approved or authorized to write business in this state Admitted (Authorized) Insurer - ANSWER-An insurer authorized by this state's Commissioner of Insurance to do business in this state. It has received a Certificate of Authority to do business in this state Non-admitted (Unauthorized) Insurer - ANSWER-An insurer has either applied for authorization to do business in this state and was declined or they have not applied. They are not authorized to transact insurance in this state Foreign - ANSWER-Which is an insurance company that is organized under the laws of another state within the United States? Underwriting Department - ANSWER-Which insurance company department accepts the insurance risk? Law of Agency - ANSWER-A relationship between two or more parties where one party (the agent or producer) acts on behalf of the other party, known as the principal or insurer. The agent/producer binds the actions and words of the principal/insurer Insurer (Principal) - ANSWER-Insurer is the source of authority from which the producer must abide Insurer is responsible for all acts of a producer, when producer is acting within the scope of its authority Producer (Agent) - ANSWER-A person or agency appointed by an insurance company to respect it and to present policies on its behalf Express Authority - ANSWER-Authority that is written into the producer's agency contract Example: the producers binding authority if written in the contract Implied Authority - ANSWER-Authority the public assumes the producer has Example: the business activities of providing quotes, completing applications, and accepting premiums on behalf of the insurer Apparent Authority - ANSWER-Authority created when the producer exceeds the authority expressed in the agency contract. This occurs when the insurer does nothing to counter the public impression that such authority exists Example: the producer's acceptance of premiums on a lapsed policy Broker - ANSWER-A licensed individual who negotiates insurance contracts with insurers on behalf of the applicant Producer (Agent) - ANSWER-Which individual represents the insurance company when selling an insurance policy? Implied - ANSWER-Which type of authority does the public assume an agent has when quoting insurance? -A fiduciary duty -Forwarding premiums to the insurer on a timely basis -Reporting material facts that may affect underwriting -A duty to recommend the purchase of suitable policies - ANSWER-A producer has these responsibilities to the insurer: -A duty to recommend only high rate policies - ANSWER-A producer does NOT have this responsibility to the insurer: Fair Credit Reporting Act (15 USC d) - ANSWER-1. Protects consumer privacy 2. When an application is taken, it must inform the applicant a credit report will be obtained 3. Applicant has the right to review the report Applicant challenge - ANSWER-Credit reporting agency must reinvestigate within 6 months, if applicant challenges accuracy Inaccuracies - ANSWER-Agency must forward to applicant inaccurate information given out within previous 2 years Disallowed information - ANSWER-Report must not include lawsuits over 7 years old or bankruptcies over 10 years old Financial Anti-Terrorism Act (USA Patriot Act) - ANSWER-Imposes record keeping and government reporting requirements on banks, financial institutions, and non-financial businesses for specific financial transactions and customer financial records Fraudulent Act - ANSWER-Involves a misstatement of material fact by a person who knows or believes that statement to be false. This statement is made to another person who relies on its accuracy to make a decision or to act and is subsequently harmed by relying on the deliberately false statement State fraudulent insurance acts - ANSWER-These acts protect producers, brokers, and insurers in the event fraudulent information is provided by consumers Merchant Marine Act of 1920 (The Jones Act) - ANSWER-Allows insured seamen to make claims for injuries suffered during the course of employment. Regulates maritime commerce in US waters, transportation of cargo, and the rights of seamen Motor Carrier Regulatory and Modernization Act (The Motor Carrier Act of 1980) - ANSWER-This deregulated the trucking industry by prohibiting any entity from interfering with a motor carrier's right to set its own rates Financial Privacy Rule - ANSWER-Requires financial institutions, including insurers, to provide each consumer with a privacy notice at the time the consumer relationship is established and annually thereafter Terrorism Risk Insurance Act of 2002 (TRIA) - ANSWER-A response to 9/11; To assure that commercial, property, and liability insurance would continue to be able to provide coverage for the peril of terrorism Violent Crime Control and Law Enforcement Act of 1994 (18 USC 1033, 1034) - ANSWER-This act made it a felony for a person to engage in the business of insurance after being convicted of a state or federal felony crime involving dishonesty or breach of trust Dishonesty - ANSWER-Deceit, misrepresentation, untruthfulness, falsification Breach of trust - ANSWER-Based on fiduciary relationship of parties and the wrongful acts violating the relationship Reciprocity - ANSWER-If consent is granted by any state, other states must allow the applicant to work in their states as well Consent Withdrawal - ANSWER-If conditions of consent are not continually met, the consent may be withdrawn Fair Credit Reporting Act - ANSWER-A federal regulation called the _________________ protects consumer privacy Risk - ANSWER-A condition where the chance, likelihood, probability, or potential for a loss exists Management - ANSWER-The determination of what types of protection are required to meet and insured's needs Speculative Risk - ANSWER-Situations where there is a chance for loss, gain, or neither loss nor gain to occur; This risk cannot be insured Example: gambling Pure Risk - ANSWER-Situations where there is no chance for gain; the only outcome is for nothing to occur or for a loss to occur; This risk can be insured Examples: damage to property by fire or natural disaster; financial loss as a result of death Loss - ANSWER-Reduction, decrease, or disappearance of value; The basis of a claim for damages under the terms of an insurance policy Peril - ANSWER-The cause of a loss Hazard - ANSWER-A specific condition that increases the probability, likelihood, or severity of a loss from a peril Physical Hazard - ANSWER-A physical condition that increases the probability of loss; use, condition, or occupancy of property Example: Flammable material near a furnace Moral Hazard - ANSWER-Dishonest tendencies that increase the probability of a loss; certain characteristics and behaviors of people Example: An insured burns down his/her own house to collect an insurance payout Morale Hazard - ANSWER-Attitude that increases the probability of a loss Example: Indifference or carelessness of leaving one's house or vehicle unlocked Loss Exposure - ANSWER-The condition of being at risk for a loss purely by existing property, and people are at risk for loss Adverse Selection - ANSWER-An imbalance created when risks that are more prone to losses than the average standard risk are the only risks seeking insurance within a specific marketplace Example: Those living in earthquake-prone areas seek to buy earthquake insurance Managing Risk: Sharing - ANSWER-Investments of a large number of people may be pooled by use of a corporation or partnership Managing Risk: Transfer - ANSWER-Transferring risk from one party to another (such as from a consumer to an insurance company) via a contract Managing Risk: Avoidance - ANSWER-Elimination of the risk; avoiding an activity that gives rise to the chance of loss (It is impossible to avoid all risk) Managing Risk: Reduction - ANSWER-Minimizing the chance of loss, but not preventing the risk by pooling or spreading the risk among a large number of persons or entities Example: Sprinkler systems, burglar alarms, pollution controls, safety guards Managing Risk: Retention - ANSWER-Assuming responsibility for a loss; Self insure the entire loss or a portion of the loss Example: Choosing deductibles Law of Large Numbers - ANSWER-As the number of units in a group increases, the more likely it is to predict a particular outcome Insurable Risks must include: - ANSWER-1. A large number of homogeneous units with the same perils 2. The chance of loss must be calculable by statistical expectation 3. The loss must be measurable 4. The premiums must be affordable 5. The loss must be accidental in nature 6. Catastrophic perils are not covered (war, nuclear hazard, illegal operations, etc.) Moral Hazard - ANSWER-Dishonest tendencies that increase the probability of loss are what type of hazard? A large group with dissimilar members - ANSWER-This is NOT included in an insurable risk: Insurance Contract - ANSWER-A legal contract purchased to indemnify the insured against a loss, damage, or liability arising from an unexpected event; Transfers risk from the insured to the insurer Principle of Indemnity - ANSWER-The insured is restored to the same financial or economic condition that existed prior to the loss; The insured should not profit from an insurance transaction Insurability - ANSWER-The ability of an applicant to meet and insurer's underwriting requirements Underwriting - ANSWER-The process of selecting, classifying, and rating a risk for the purpose of issuing insurance coverage Insurable Events - ANSWER-Any event, past or present, that may cause loss or damage or create legal liability on the part of an insured The Principle of Indemnity - ANSWER-Which principle of insurance restores the insured to the same economic condition that existed before the loss? Contract Law - ANSWER-Pertains to the formation and enforcement of contracts Tort Law - ANSWER-Torts are civil wrongs; they're not crimes or breaches of contract. They result in injuries or harm that constitute the basis of a claim by a third party Contract of Utmost Good Faith - ANSWER-Both parties bargain in good faith when forming and entering into the contract. The two parties rely upon the statements and promises of the other and assume no attempt to conceal or deceive has been made Estoppel - ANSWER-Prevents the denial of a fact, if the fact was admitted to be true previously Hold Harmless Agreement - ANSWER-A contractual agreement that transfers the liability of one party to another party; Used by landlords, contractors, and others as a way to avoid or reduce risk Parol Evidence Rule - ANSWER-A written contract may not be altered without the written consent of both parties Waiver - ANSWER-Voluntary surrender of a known right, claim, or privilege Consideration - ANSWER-Made by the applicant: the premium of payment Made by the insurer: its promise to pay for covered losses Contract of Adhesion - ANSWER-One party writes the contract, without input from the other party on a "take-it-or-leave-it" basis, without negotiation. Any doubt or ambiguity found in the document is construed in favor of the party that did not write it (the insured) Aleatory Contract - ANSWER-The exchange of value is unequal. The insured's premium payment is less than the potential benefit to be received in the event of a loss. The insurer's payment in the event of a loss may be must greater, or much less, than the insured's premium payment Valued Contract - ANSWER-A contract that pays a stated amount in the event of a loss (Most insurance policies are NOT valued contracts unless they are endorsed) Indemnity Contract - ANSWER-An agreement to pay on behalf of another party under specified circumstances, such as when a loss occurs Endorsement - ANSWER-A policy form that alters or adds to the provisions of a property and casualty insurance contract Personal Contract - ANSWER-Owner cannot transfer or assign ownership of an insurance policy to another person Non-Personal Contract - ANSWER-Owner may transfer or assign ownership of a life or health insurance policy to another person Assignment - ANSWER-Policy owners may not assign or transfer their rights under and insurance contract without the written consent of the insurer Lapse Date - ANSWER-The date when insurance coverage ends, if not cancelled prior, policy will terminate by end of grace period if premium is not paid Unilateral Contract - ANSWER-Only one party is legally bound to the contactual obligations after the premium is paid to the insurer. Only the insurer makes the promise of future performance, and only the insurer can be charged with breach of contract Conditional Contract - ANSWER-Both parties must perform certain duties and follow rules of conduct to make the contract enforceable Reasonable Expectations Doctrine - ANSWER-The reasonable expectations of policy owners are honored by the courts although the strict terms of the policy may not support these expectations Representations - ANSWER-Statements made by the applicant on the application that are believed to be true to the best of the knowledge and belief of the applicant; may be withdrawn prior to policy issuance Misrepresentations - ANSWER-A false statement contained in the application; usually does not void coverage or the policy Concealment - ANSWER-The willful hiding or obscuring of material facts pertinent to the issuance of insurance (or a claim); results in the denial of coverage and may void the policy Warranties - ANSWER-Statements in the application or stipulations in the policy that are guaranteed true in all respects. If warranties are later discovered untrue, the contract is voided Fraud - ANSWER-Intentional deception of the truth in order to induce another to part with something of value or to surrender a legal right 1. False statement 2. Disregard for the victim 3. Victim believes the false statement 4. Victim makes a decisions and/or acts based on the belief in, or reliance upon, the false statement 5. Victim's decision and/or action results in harm - ANSWER-Fraud must contain: Void Contract - ANSWER-An agreement without legal effect because it was made illegally or it was declared void by the courts because it does not contain all the elements of a legal contract Voidable Contract - ANSWER-A valid contract that for reasons satisfactory to a court, may be set aside by one of the parties Example: An insurer may void or revoke coverage for misrepresentation or fraud Indemnity - ANSWER-What is NOT an element of a legal contract? Underwriter - ANSWER-Primary responsibility is the selection of risks to be insured and determining the classification and premium rate of an accepted risk Field Underwriter - ANSWER-The producer Line and Staff Underwriters - ANSWER-Employed by the insurer Underwriting Factors - ANSWER-1. Nature of the risk 2. Hazards that are present 3. Claims history 4. Other factors that depend upon the type of risk being insured When they do not cover projected losses and expenses - ANSWER-When are premium rates considered inadequate? Rate - ANSWER-The dollar amount charged for a particular unit of insurance (such as $5 per $1,000 of insurance) Premium - ANSWER-The total cost for the amount of insurance purchased (such as $50,000 of coverage = $5 rate x 50 (per $1,000 of insurance) for a $250 premium) Class Rating - ANSWER-A rate charged to a group of policyholders who have similar exposures and experiences Experience Rating - ANSWER-A rate based on the policyholder's actual loss history when compared to the loss history of similar risks Individual Rating - ANSWER-A rate used for a policyholder because a large enough pool of similar risks is not available to any other type of rate (primarily used for commercial and specialty risks because of the number of unique variables involved) "A" Rating or Judgement Rating - ANSWER-An individual rate that doesn't use loss history as a component and that is derived largely from the underwriter's evaluation and best judgement the risk poses to the insurer Loss Cost Rating - ANSWER-A rating organization provides insurer with he portion of a rate that does not include provisions for expenses or profit Manual Rating - ANSWER-The use of rates contained in a manual published by the insurer or those of the rating organization of which it is a member Merit Rating - ANSWER-The use of rates that rewards a policyholder that takes measures to decrease the probability of loss by the implementation of safety programs, loss control programs, etc. Retrospective Rating - ANSWER-The use of rates that adjust the policy premium to reflect the current loss experience of the policyholder Deposit Premium - ANSWER-The required initial premium paid into the policy that is subject to adjustment Schedule Rating - ANSWER-A method of rating property and liability risks by using charges and credits to modify a class rate based on the nature of the particular risk being rated File and Use - ANSWER-Rates must be filed with the state insurance regulatory authority (Department of Insurance) and may be used as soon as they are filed Prior Approval - ANSWER-Insurers cannot use rates until approved by the DOI, or until a specific time period has expired after the filing Mandatory Rates - ANSWER-Some states require that mandatory rates be used for certain lines of insurance Open Competition - ANSWER-A state relies on competition between insurers to produce fair and adequate rates Loss Reserves - ANSWER-The net premiums plus interest reflects possible future contract obligations Case Reserve Method - ANSWER-A loss reserve established for each claim, when reported Average Value Method - ANSWER-A loss reserve established based on average settlements of particular claim types Loss Ratio Method - ANSWER-A loss reserve formula based upon the expected losses for a particular class or line Tabular Method - ANSWER-A loss reserve based upon the estimated length of an insured's or claimant's life or expected disability Loss Ratio - ANSWER-Determined by dividing 'Paid Losses + Loss Reserves' by 'Total Earned Premiums' Expense Ratio - ANSWER-Determined by dividing and insurer's 'Total Operating Expenses' by 'Written Premiums' Combined Ratio - ANSWER-Sum of the loss ratio and expense ratio Marital Status - ANSWER-What is NOT a factor considered by an underwriter?