Insurers (Insurance Companies or Carriers)
sell insurance coverage
Insurance Agencies
Insurance Agencies - independent Organizations that recruit, contract w/, and support sales agents and producers
Insurance Agents/Producers
licensed individuals representing an insurance company when transacting insurance
An Insured
the person or entity that purchased insurance to protect against loss of life, health, property or liability
National Association of Insurance Commissioners (NIAC)
An association comprised of all State/territorial insurance commissioners/regulators that:
- Provides resources, research, legislative and regulatory recommendations and interpretations for state insurance regulators
- Promotes uniformity between states b
Federal Insurance Office (FIO)
Established by the Dodd-Frank Wall Street Reform & Consumer Protection Act, this office monitors the insurance industry to identify issues and gaps in the state regulation of insurers and access to affordable insurance for underserved communities
McCarran-Ferguson Act of 1945
Determined that Federal Government can NOT regulate in areas over which the states have the authority to do so
Stock Insurance Company
A company owned by stockholders or shareholders. Directors and officers direct the company operations and are elected by stockholders. Stockholders receive taxable corporate dividends as a return of profit when declared by the Directors.
Mutual Insurance Company
A company owned by policyholders (who may be referred to as members). A Board of Trustees or Directors directs the company operations and is elected by policyholders. Policyholders receive non-taxable dividends as a return of unused premium when declared
Reciprocal Insurance Company
A group-owned insurer whose main activity is risk sharing. They are unincorporated, and formed by individuals, firms, and business corporations that exchange insurance on one another. Each member is known as a subscriber. Each subscriber assumes a part of
Lloyds of London
Not an insurance company, but consists of groups of underwriters called Syndicates, each of which specializes in insuring a particular type of risk. Lloyds provides a meeting place and clerical services for syndicate members who actually transact the busi
Fraternal Benefits Society
Usually organized on a non-profit basis, fraternal benefit societies are primarily social organizations that engage in charitable and benevolent activities that provide life and health insurance to their members. Membership typically consists of members o
Risk Retention Groups (RRGs)
Group-owned insurers that primarily assume and spread the liability related risks of their members. They are made up of a large number of homogeneous or similar units and membership is limited to risks with exposure to similar liability needs. RRGs are ow
Self-Insurer
To self-insure means to assume the financial risk one's self. This is generally an option only for large companies who may even reinsure for risks above certain maximum limits.
Residual Markets
A private coverage source of last resort for businesses and individuals who have been rejected by voluntary market insurers.
Risk Sharing Plan
Insurers agree to apportion among themselves those risks that are unable to obtain insurance through normal channels
Reinsurance Companies
An insurance company that assumes all or a portion of a risk for a primary or ceding insurance company; reinsurance transfers risk among insurance companies
Treaty Agreements
Reinsurance agreement that covers all risks contained in the subject line(s) of business automatically.
Facultative Agreements
Reinsurance agreement that allows ceding and reinsurance companies the opportunity to negotiate coverage for individual risks.
Financial Rating Services
Independent financial rating services evaluate and rate the financial stability of insurance companies. These companies assign publically viewable rating codes to show financial strength or weakness of each company rated.
Domicile
refers to the jurisdiction (i.e., state or country) where an insurer is formed or incorporated
Career Agency System
agents are recruited, trained, and supervised by a managing employee or contracted General Agent
Exclusive or Captive Agency System
Deals with the insured through an exclusive or captive agent who represents solely one company or group of companies having common ownership
Independent Agency
Agent or agency that can enter into agency agreements and represent more than one insurer
Direct Mail or Direct Response Company
Sells insurance policies directly to the public with licensed employees or contractors. Typically their marketing system utilizes direct mail, newspapers, magazines, radio, TV, internet, web sites, call centers, and vending machines
Mass Marketing
Used to target specific type of insurance to a large group of individuals (EX: AARP), allowing the insurer to reduce marketing and underwriting expenses
Law of Agency
Relationship between 2 or more parties where an agent/producer acts on behalf of the other party (= principal of the insurer). Agent/producer binds the actions and words of the principal
Insurer (Principal)
Insurer is the source of authority that the producer must abide by, but this means the Insurer is responsible for all acts of the producer within their scope of authority
Producer (Agent)
A person/agency appointed by an insurance company to represent it/present policies on its behalf
Express Authority that is written into their contract (EX: binding authority)
Authority that is written into their contract (EX: binding authority)
Implied Authority
Authority that the public assumes they have (EX: providing quotes, completing applications, accepting premiums)
Apparent Authority
Authority created when a producer exceeds the authority expressed in the agency contract. This occurs when the insurer does not counter public impression that such authority exists. (EX: producer's acceptance of premiums on a lapsed policy)
Broker
A licensed individual who negotiates insurance contracts with insurers on behalf of the applicant. Represents the applicant/insured's interests, not the insurer, and thus has no legal authority to bind the insurer
Fraud is an intentional act of any of the following, except:
a. Warranty
b. Deceit
c. Misrepresentation used to induce someone to part with something of value
d. Concealment
a. Warranty
Domestic Insurer
An insurer organized under the laws of this state, whether or not it is admitted to do business in this state.
Foreign Insurer
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 it is admitted to do business in the state or jurisdiction.
Admitted (Authorized) insurer
An insurer who is 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
An insurer who 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.
Surplus (excess) Lines Insurance
finds coverage when the kind or amount of insurance cannot be obtained from admitted insurers. Non-admitted business must be transacted through a Surplus Lines Broker.
Executives
Oversee the operation of the business.
Actuarial Department
Gather and interpret statistical information used in rate making. An actuary determines the probability of loss and sets premium rates.
Underwriting Department
Responsible for the selection of risks (persons and property to insure) and rating that determines actual policy premium.
Marketing/Sales Department
Responsible for advertising and selling.
Claims Department
Assists the policyholder in the event of a loss.
Alien Insurer
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.
Fair Credit Reporting Act
Protects consumer privacy by ensuring data collected is confidential, accurate, relevant, and used for proper and specific purposes
Financial Anti-Terrorism Act (USA Patriot Act)
imposes record keeping and government reporting requirements on banks/financial institutions/non-financial businesses for specific financial transactions and customer financial records
Fraud and False Statements (Fraudulent Insurance Act)
The act involves a misstatement of material fact by someone who knows it to be false. The statement is made to a person who relies on its accuracy to make a decision and is harmed by relying on the false information. The acts DON'T modify individual priva
Merchant Marine Act of 1920 (the Jones Act)
Allows insured seamen to make claims for injuries during the course of employment. Also regulates maritime commerce in US waters, transportation of cargo and the rights of seamen
Motor Carrier Regulatory & Modernization Act (Motor Carrier Act of 1980)
Deregulated the trucking industry by prohibiting any entity from interfering with a motor carrier's right to set their own rates. Motor carriers that transport property are required to show evidence of financial responsibility through insurance/bond/a gua
Gramm-Leach- Bliley Act (Financial Services Modernization act of 1999)
Repealed Glass-Steagall Act of 1933 allowing mergers of banks/security companies/insurance companies and established Financial Privacy Rule and Safeguards Rule
Financial Privacy Rule
requires financial institutions to provide a privacy notice and annually thereafter
Terrorism Risk Insurance Act and its Extensions of 2005 and 2007
Enacted in direct response to the terrorist attacks New York City and Washington, D.C. on September 11, 2001. Congress provided temporary financial compensation to insured parties during its crisis of recovery from the terrorist attacks
Terrorism Risk Insurance Program Reauthorization Act of 2007 (TRIPRA)
It protects consumers by addressing market disruptions and ensuring the continued widespread availability and affordability of property and casualty insurance for terrorism risk.
Dishonesty
Deceit, misrepresentation, untruthfulness, falsification.
Breach of Trust
Based on fiduciary relationship of parties and the wrongful acts violating the relationship. Penalties include fines and possible prison time
Reciprocity
If consent is granted by any state, other states must allow the applicant to work in their states as well
Consent Withdrawal
If conditions of consent are not continually met, the consent may be withdrawn
Risk
A condition where the chance, likelihood, probability or potential for a loss exists; Uncertainty concerning a loss.
Speculative Risk
Situations where there is a chance or possibility for loss, no loss or gain (i.e., gambling).
Pure Risk
Situations where there is no chance for gain, only loss. Only pure risks can be insured (For instance, the possibility of damage to property caused by a fire or other natural disaster; or the possibility of financial loss as a result of premature death).
Loss
Reduction, decrease, or disappearance of value. The basis of a claim for damages under the terms of an insurance policy.
Peril
The cause of a loss.
Hazard
A specific condition that increases the probability, likelihood, or severity of a loss from a peril.
Physical Hazard
A physical condition that increases the probability of loss; use, condition, or occupancy of property.
(Example: Flammable material stored near a furnace.)
Moral Hazard
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 the insurance payout.)
Morale Hazard
Attitude that increases the probability of a loss.
(Example: Indifference or carelessness of leaving one's house or vehicle unlocked)
Loss Exposure
The condition of being at risk for a loss. Purely by existing, property and people are at risk for loss.
Adverse Selection
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. For example, only those living in earthquake-prone areas seek to buy Earthquake insurance.Hi
Managing risk
the practice of analyzing exposures that create risk and designing programs to minimize the possibility of a loss.
Sharing
Investments of a large number of people may be pooled by use of a corporation or partnership
Transfer
Transferring the risk from one party to another, such as from a consumer to an insurance company.
Avoidance
Elimination of the risk. Avoid the activity that gives rise to the chance of loss.
Reduction
Minimizing the chance of loss, but not preventing the risk. (Example: sprinkler systems, burglar alarms) or Pooling or spreading the risk among a large number of persons or entities.
Retention
Assume the responsibility for loss. Self insure the entire loss or a portion of the loss. Choosing deductibles is a method of risk retention.
Law of Large Numbers
As the number of units in a group increases, the more likely it is to predict a particular outcome.
Principle of Indemnity
Insured is restored to the same financial or economic condition that existed prior to the loss and should not profit from an insurance transaction.
Insurability
The ability of an applicant to meet an insurer's underwriting requirements.
Underwriting
The process of selecting, classifying, and rating a risk for the purpose of issuing insurance coverage.
Insurable Events
Any event, past or present, that may cause loss or, damage or create legal liability on the part of an insured.
Contract law
Pertains to the formation and enforcement of contracts.
Tort Law
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
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
Prevents the denial of a fact, if the fact was admitted to be true previously.
Hold Harmless Agreement
A contractual agreement that transfers the liability of one party to another party; it is used by landlords, contractors, and others as a way to
avoid or reduce risk.
Parol Evidence Rule
A written contract may not be altered without the written consent of both parties.
Waiver
Voluntary surrender of a known right, claim or privilege
Offer
The offer for entering an insurance contract is the application submitted by the applicant.
Acceptance
The acceptance of an insurance contract takes place when the insurance company agrees to issue insurance. A counteroffer by the insurance company is not acceptance until the applicant accepts the counteroffer.
Contract of Adhesion
One party writes the contract, without input from the other party; one party (insurer) prepares the contract and presents it to the other party (applicant) on a "take-it-or-leave- it" basis, without negotiation. Any doubt or ambiguity found in the documen
Aleatory
The exchange of value is unequal. 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 much greater, or much less than the
insured's premium payment.
Valued Contract
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
An agreement to pay on behalf of another party under specified circumstances, such as when a loss occurs.
Applicant
The party submitting an application for insurance.
Application
A document submitted by an applicant to an insurer that provides information needed for the insurer to underwrite a risk; becomes part of the insurance contract. Most applications require statements on the application to be true to the best knowledge and
Endorsement
policy form that alters or adds to the provisions of a property and casualty insurance contract.
Personal Contract
Owner cannot transfer or assign ownership of an insurance policy (property and casualty) to another person.
Non-Personal Contract
Owner may transfer or assign ownership of a life or health insurance policy to another person.
Assignment
Policy owners may not assign or transfer their rights under an insurance contract without the written consent of the insurer.
Issue Age
Insured's original age on the policy issue date.
Attained Age
Insured's age at any point in time at issuance, renewal or conversion.
Effective or Issue Date
The date when insurance coverage begins.
Lapse Date
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
Only one party is legally bound to the contractual obligations after the premium is paid to the insurer. Only the insurer makes a promise of future performance, and only the insurer can be charged with breach of contract.
Conditional Contract
Both parties must perform certain duties and follow rules of conduct to make the contract enforceable. The insurer must pay claims if the insured has complied with all the policy's terms and conditions.
Reasonable Expectations Doctrine
What a reasonable and prudent policy owner would expect; the reasonable expectations of policy owners are honored by the Courts although the strict terms of the policy may not support these expectations.
Representations
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
A false statement contained in the application; usually does not void coverage or the policy. If material to the issuance of coverage, meaning the insurer would not have issued coverage had the misrepresentation not been made, coverage does not apply. In
Concealment
The willful holding back or secretion of material facts pertinent to the issuance of insurance (or a claim), even if the applicant or insured was not about the subject. Concealment results in denial of coverage and may void the policy.
Warranties
Statements in the application or stipulations in the policy that are guaranteed true in all respects. If warranties are later discovered untrue or breached (past, present or future), coverage (and sometimes the contract) is voided.
Fraud
Intentional deception of the truth in order to induce another to part with something of value or to surrender a legal right.
An applicant inaccurately representing information on the application is guilty of:
a. Concealment
b. Fraud
c. Waiver and Estoppel
d. Misrepresentation
d. Misrepresentation
Void Contract
An agreement without legal effect because it was made illegally or it was declared void by the courts because it doesn't contain all the elements of a legal contract.
Voidable Contract
A valid contract that for reasons satisfactory to a court, may be set aside by one of the parties
Underwriter
Underwriting protects the insurer against adverse selection and risks that are more likely than average to suffer losses. The underwriter's primary responsibility is the selection of risks to be insured. The underwriter also determines the classification,
Rate
The dollar amount charged for a particular unit of insurance, such as $5 per $1,000 of insurance.
Premium
The total cost for the amount of insurance purchased.
Class Rating
A rate charged to a group of policyholders who have similar exposures and experience.
Experience Rating
A rate based on the policyholder's actual loss history when compared to the loss history of similar risks.
Individual Rating
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 any specialty risks because of the number of unique variables involved.
A" Rating or Judgment Rating
An individual rate that doesn't use loss history as a component and that is derived largely from the underwriter's evaluation and best judgment the risk poses to the insurer.
Loss Cost Rating
A rating organization provides insurers with the portion of a rate that does not include provisions for expenses or profit.
Manual Rating
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
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
The use of rates that adjust the policy premium to reflect the current loss experience of the policyholder. Premium adjustments are subject to minimums and maximums.
Schedule Rating
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
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
Insurers cannot use rates until approved by the Department of Insurance, or until a specific time period has expired after the filing.
Mandatory Rates
Some states require that mandatory rates be used for certain lines of insurance.
Open Competition
A state relies on competition between insurers to produce fair and adequate rates.
Loss Reserves
The net premiums plus interest reflects possible future contract obligations. An accounting measurement of an insurer's future obligation to its policyholders.
Case Reserve Method
A loss reserve established for each claim, when reported.
Average Value Method
A loss reserve established based on average settlements of particular claim types.
Loss Ratio Method
A loss reserve formula based upon the expected losses for a particular class or line.
Tabular Method
A loss reserve based upon the estimated length of an insured's or claimant's life or expected disability.
Loss Ratio
Determined by dividing the sum of Paid Losses + Loss Reserves by Total Earned Premiums.
Expense Ratio
Determined by dividing an insurer's Total Operating Expenses by Written Premiums.
Combined Ratio
Sum of the loss ratio and expense ratio.
Which of the following best defines a hazard?
a. It increases the chance of loss
b. It increases the amount of loss
c. It eliminates the chance of loss
d. It is a cause of loss
a. It increases the chance of loss
Which term is described as the relinquishment of a legal right?
a. Rescission
b. Liability
c. Waiver
d. Estoppel
c. Waiver
Under the Fair Credit Reporting Act, which of the following statements is correct?
a. If an individual is denied coverage, they can request a copy of the report
b. The reporting agency has no responsibility to investigate inaccurate information
c. The rep
a. If an individual is denied coverage, they can request a copy of the report
All of the following statements regarding financial rating services are correct, except:
a. Independent rating services evaluate and rate the financial ability of insurance companies
b. The ratings are available to the public
c. Rating codes are assigned
d. Agents and producers must place business through an insurer with the lowest rates
A producer's unwritten authority that is assumed by the public to exist is known as:
a. Implied
b. Express
c. Assumed
d. Admitted
a. Implied
The following statements regarding hazards are all correct, except:
a. A moral hazard arises from an attitude of indifference to loss
b. Ice on a sidewalk is a physical hazard
c. A gambling addiction could be a moral hazard
d. A moral hazard arises from a
a. A moral hazard arises from an attitude of indifference to loss
Minimizing the chance of a loss is considered which of the following ways of managing risk?
a. Avoidance
b. Sharing
c. Reduction
d. Retention
c. Reduction
Which term is defined as the probability of loss?
a. Negligence
b. Peril
c. Liability
d. Risk
d. Risk
Which of the following can place business with an unauthorized insurer?
a. All licensed producers
b. Nonresident producers
c. Insurance counselors
d. Surplus lines producers
d. Surplus lines producers
A hazard is best defined as:
a. The loss itself
b. A reduction in, decrease in, or disappearance of, value
c. The possibility of a loss
d. Something that increases the chance of a loss
d. Something that increases the chance of a loss
All of the following are risk management techniques, except:
a. Avoidance
b. Retention
c. Transfer
d. Enhancement
d. Enhancement
An underwriter will consider each of the following factors when evaluating a risk, except:
a. Nature of the risk
b. Rates
c. Hazards
d. Claim history
b. Rates
Policy owner P has just finished painting the interior walls in his home, and stores leftover paint thinner in the basement near the furnace. What kind of hazard does the stored paint thinner present?
a. Morale
b. Physical
c. Moral
d. Peril
b. Physical
An agent that enters into agreements with more than one insurer is which of the following?
a. Direct
b. Exclusive
c. Independent
d. Captive
c. Independent
An insurer organized in another state than the state in which it is authorized to do business is known as which type of insurer?
a. Alien
b. Admitted
c. Domestic
d. Foreign
d. Foreign
When a producer exceeds the authority expressed in the agency contract and the insurer does not take action, which of the following types of authority is created?
a. Express
b. Implied
c. Actual
d. Apparent
d. Apparent
Insurance Company C has decided that it is insuring too many homes in a particular area. Therefore, it decides to reinsure Mr. R's Homeowners Policy because of the high value of his dwelling. The reinsurance contract can best be described as:
a. An agreem
An agreement between Insurance Company C and the reinsurer
Dividends issued by Stock insurers are paid to:
a. Service providers
b. Agencies
c. Policyholders
d. Stockholders
d. Stockholders
Which of the following constitutes the acceptance of an offer?
a. When the insurer makes a counteroffer
b. When the agent assures the applicant he or she will be covered
c. When the applicant completes the application
d. When an insurer issues a binder
d. When an insurer issues a binder
All of the following are types of insurers, except:
a. Stock insurers
b. Mutual insurers
c. Reciprocal insurers
d. Proprietary insurers
d. Proprietary insurers
When both parties to a contract must perform certain duties in order to make the contract enforceable, this is known as a(n):
a. Conditional contract
b. Contract of adhesion
c. Unilateral contract
d. Aleatory contract
a. Conditional contract
Which type of risk involves the possibility of loss or gain?
a. Speculative
b. Insurable
c. Stable
d. Pure
a. Speculative
What is the term for the idea that some risks are less desirable than average risks, and that these risks tend to seek coverage to a greater extent than more favorable risks:
a. Sharing
b. Law of Large Numbers
c. Adverse selection
d. Estoppel
c. Adverse selection
Which of the following statements is not correct regarding rates and premiums?
a. A premium is the total cost for the amount of insurance purchased
b. The rate is the amount charged for a particular unit of insurance
c. Rates are considered inadequate whe
d. Rates may only be excessive if the insurer is making up for lost reserves
Which of the following describes the purpose of the Gramm-Leach Bliley Act?
a. Deregulating the trucking industry
b. Establishing privacy protection for consumers
c. Enforcement of fraudulent insurance acts
d. Regulating investment companies
b. Establishing privacy protection for consumers
All of the following are producer responsibilities owed to the insured or applicant during an insurance transaction, except:
a. Forward premiums to the insurer on a timely basis
b. Review and evaluate the applicant's current coverage, limits, and risks
c.
c. The producer represents the insured's interests
What is the term for a contract written by one party on a "take it or leave it" basis?
a. Contract of Adhesion
b. Bilateral contract
c. Aleatory contract
d. Conditional contract
a. Contract of Adhesion
Which insurance company department determines the probability of loss and sets the premium rates?
a. Sales
b. Claims
c. Underwriting
d. Actuarial
d. Actuarial
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. Prior approval
b. Open Competition
c. Mandatory
d. File and use
a. Prior approval
A false statement in the application for insurance is ___________.
a. Misrepresentation
b. Representation
c. Unilateral
d. Concealment
a. Misrepresentation
The Principle of Indemnity helps avoid which of the following?
a. Adverse selection
b. Loss exposure
c. Underinsurance
d. Overpayment of a claim
d. Overpayment of a claim
Which of the following terms refers to the risk management technique of assuming the responsibility for a loss?
a. Transfer
b. Retention
c. Avoidance
d. Reduction
b. Retention
Which of the following individuals represents the insurance company when selling an insurance policy?
a. Producer
b. Broker
c. Adjuster
d. Insurer
a. Producer
[The producer or agent is licensed to represent the insurance company when transacting insurance business]
If an insurance company wants to transfer all or part of the risk it has accepted, it would buy which of the following types of insurance?
a. Residual
b. Reinsurance
c. Reciprocal
d. Insurer
b. Reinsurance
A ______________ insurance company is owned by its policyholders.
a. Stock
b. Reciprocal
c. Fraternal Benefits Society
d. Mutual
d. Mutual
[Its members, also called policyholders, own a mutual insurance company.]
Which of the following is an insurance company that is organized under the laws of another state within the United States?
a. Domestic
b. Alien
c. Foreign
d. Authorized
c. Foreign
Which of the following types of authority does the public assume an agent has when quoting insurance?
a. Authorized
b. Express
c. Apparent
d. Implied
d. Implied
Which insurance company department accepts the insurance risk?
a. Executive
b. Actuarial
c. Claims
d. Underwriting
d. Underwriting
[The Underwriting Department is responsible for evaluating the acceptability of a risk and, once accepted, determines the actual rate to be charged.
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 high-rate policies
d. A duty to recommend high-rate policies
A federal regulation called the ______________________ protects consumer privacy.
a. Consolidated Omnibus Budget Reconciliation Act
b. Fraudulent Insurance Act
c. Privacy Protection Act
d. Fair Credit Reporting Act
d. Fair Credit Reporting Act
Dishonest tendencies that increase the probability of loss is which of the following types of hazard?
a. Physical
c. Moral
b. Morale
d. Legal
c. Moral
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
c. Large group with dissimilar members
Which principle of insurance restores the insured to the same economic condition that existed before the loss?
a. Indemnity
b. Insurability
c. Adhesion
d. Underwriting
a. Indemnity
Each of the following is an element of a legal contract, except:
a. Consideration
b. Legal Purpose
c. Agreement
d. Indemnity
d. Indemnity
A warranty is defined as which of the following?
a. Intentional misrepresentation on the application
b. Statement in the application that is guaranteed to be true
c. A false statement in the application
d. What a reasonable and prudent buyer can expect
b. Statement in the application that is guaranteed to be true
Each of the following is a factor used by an underwriter, except:
a. Hazards
b. Marital status
c. Claims history
d. Outside factors
b. 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 pr
b. Paid losses + loss reserves � total earned premium