Question 1
- If Paul is found in the unfortunate circumstance where he is deemed to be liable legally despite the fact that fault or negligence are not capable of being proved, this would be an example of:
1.
general damages.
2.
comparative negligence.
3.
an intentional tort.
4.
strict liability.
2.00000 points
Question 2
- As a result of an auto accident, Janet, a resident of Minnesota, commenced a lawsuit against William for injuries she suffered. The court found that Janet was 40 percent at faul in the accident and William was 60 percent at fault in the accident. The common law doctrine of contributory negligence indicates that Janet should receive:
1.
40% of her actual damages
2.
nothing.
3.
60% of her actual damages.
4.
100% of her actual damages.
2.00000 points
Question 3
- After graduating from college, if you were acting in a position as a risk manager, which of the following items would be helpful to you in your effort to identify pure loss exposures?
1.
commodity prices
2.
physical inspections
3.
currency exchange rates
4.
interest rate movements
2.00000 points
Question 4
- If a person is knowledgeable of the law of large numbers, she would conclude that it would indicate what should happen as an insurer experiences an increase in the number of units insured?
1.
Underwriting expenses would decrease
2.
The amount the insurer expects to pay in claims should decrease
3.
Actual results will more closely approach expected results
4.
The insurer’s profitability should become more variable
2.00000 points
Question 5
- Your next door neighbor asks you to explain for a fortuitous type of loss which of the following characteristics would apply:
I. Loss is certain to occur
II. Loss occurs as a result of chance
1.
I only
2.
II only
3.
both I and II
4.
neither I nor II
2.00000 points
Question 6
- As an insurance agent located in Rhode Island you are reviewing the following situations that relate to open-perils coverage. Which of them is (are) considered to be true?
I. All losses are covered except those losses specifically excluded.
II. The burden of proof is on the insured to prove that a loss is covered.
1.
I only
2.
II only
3.
both I and II
4.
neither I nor II
2.00000 points
Question 7
- Your long-time downtown insurance agent would inform you that unique exclusions are used in insurance policies for each of the following reasons except to:
1.
reduce moral hazard.
2.
waive policy conditions.
3.
eliminate coverage for uninsurable perils.
4.
eliminate coverage not needed by typical insureds.
2.00000 points
Question 8
- Imagine that you are an insurance adjuster and someone asked you to define a loss frequency. You would respond with:
1.
probable size of the losses that may occur during some period.
2.
probable number of losses that may occur during some period.
3.
probability that any particular piece of property may be totally destroyed.
4.
probability that a liability judgment may exceed a firm’s net worth.
2.00000 points
Question 9
- Beacon Cigarette Corp., located in Illinois, is worried that it may be sued and held liable in a court of law and ordered to pay a large $$ award to a smoker harmed by the firm’s products. The characteristics of the legal system that serve to increase the frequency and severity of loss are known as:
1.
moral hazard.
2.
particular risk.
3.
speculative risk.
4.
legal hazard.
2.00000 points
Question 10
- In your position as an underwriter located in Vermont, you are aware of which of the following statements about underwriting standards as being true?
I. A purpose of underwriting standards is to reduce adverse selection occurring against the insurer.
II. Equitable rates should be charged to ensure that each group of policy owners will pay its own way in terms of losses and expenses.
1.
I only
2.
II only
3.
both I and II
4.
neither I nor II
2.00000 points
Question 11
- As the owner of Murray Insurance Agency, you would advise you client that a situation that involves strict liability includes which of the following?
1.
operating a car
2.
blasting operations
3.
manufacturing a product
4.
mining operations
2.00000 points
Question 12
- As a college student investigating the characteristics of firms organized as mutual insurers which of the following would you find as true?
1.
They are legally organized as partnerships.
2.
They have a board of directors which is selected by state insurance departments.
3.
They are owned by their stockholders.
4.
They may pay dividends to their policyholders.
2.00000 points
Question 13
- Your friend Jennifer from California tells you that she is in in need of insurance that is not available in the state where she lives. In order to obtain insurance from a non-admitted insurer, you advise her to get in touch with a:
surplus lines broker.
nonadmitted agent.
general agency broker.
direct writer.
2.00000 points
Question 14
- It is 2018 and Jim is estimating a loss reserve. The reserve is based on a calculation that includes duration of disability, life expectancy and similar factors. Such a method of estimating loss reserves is referred to as the:
1.
judgement method.
2.
tabular value method.
3.
loss ratio method.
4.
average value method.
2.00000 points
Question 15
- In the insurance sector, an insurance company’s property and casualty loss reserve amount will factor in estimates for each of the following items except:
1.
claims anticipated but not yet incurred.
2.
claims reported and adjusted but not yet paid.
3.
claims reported and filed but not yet adjusted.
4.
claims incurred but not yet reported to the company.
2.00000 points
Question 16
- You overhear from an insurance friend visiting from Connecticut that a form of loss reserve that is employed for each individual claim when it is reported to a property and casualty insurance company is called a(n)
1.
admitted asset.
2.
incurred-but-not-reported (IBNR) reserve.
3.
unearned premium reserve.
4.
case reserve.
2.00000 points
Question 17
- Ted’s Consignment was destroyed by a fire. The firm’s fixtures cost $1,200 when purchased, but similar new fixtures now costs $1,800. Assuming the fixtures were 50 percent depreciated, what is the actual cash value of Ted’s loss?
1.
$600
2.
$900
3.
$1200
4.
$1800
2.00000 points
Question 18
- The actual cash value would be calculated by an adjuster taking into account all relevant factors an expert would use to determine the value of the property under which rule?
1.
the circumstantial evidence rule
2.
the broad evidence rule
3.
the property indemnity rule
4.
the objective value rule
2.00000 points
Question 19
- ACME Insurance Company’s policyholders’ surplus would be defined as the difference between its
1.
assets and its liabilities.
2.
premium income and its expenses.
3.
reserves and its liabilities.
4.
assets and its nonadmitted assets.
2.00000 points
Question 20
- If you ran your own insurance agency, which kinds of risks would you deem best address the requirements needed to be insurable by a private insurance firm?
1.
most market risks
2.
property risks
3.
financial risks
4.
political risks
2.00000 points
Question 21
- A local Kiwanis Hall decided to launch a life insurance company to provide insurance to its members. The insurance company will operate as a nonprofit organization, thus receiving favorable tax treatment. The insurer formed will be considered to be a:
1.
health maintenance organization.
2.
stock insurer.
3.
fraternal insurer.
4.
reciprocal exchange.
2.00000 points
Question 22
- You have an insurance agent over to your house with a group of friends for dinner. In discussing insurance coverages she explains that an insurable interest for purposes of purchasing property and liability insurance will be supported by each of the following except for:
1.
former ownership of property.
2.
potential legal liability.
3.
secured creditors.
4.
contractual right.
2.00000 points
Question 23
- Which insurance law requires insurers to receive approval of rates prior to making use of them if the rate change is greater than a predetermined range?
1.
flex-rating law
2.
prior-approval law
3.
file-and-use law
4.
use-and-file law
2.00000 points
Question 24
- At an insurance conference that you attend in New Jersey, you learn that a commercial package policy contains a common policy conditions page. This page provides which of the following types of information?
I. A description of the property that is insured.
II. A provision describing the insurer’s right to audit the insured’s books and records
1.
I only
2.
II only
3.
both I and II
4.
neither I nor II
2.00000 points
Question 25
- You are taking a 4-hour P&C insurance license exam. Your next exam question indicates that the building and personal property insurance form provides several optional coverages. Which optional coverage provides that no deduction is taken for depreciation when settling a covered loss?
1.
extra expense.
2.
agreed value.
3.
replacement cost.
4.
inflation guard.
2.00000 points
Question 26
- Debby holds the position of senior risk and compliance manager of Distler Company, located in Florida. Debby wants to obtain protection for direct physical loss under the business and personal property (BPP) coverage form. Which causes of loss form should Debby complete to obtain this coverage?
1.
special form
2.
basic form
3.
standard form
4.
broad form
2.00000 points
Question 27
- Rachel Forman owns a building in New York that she has insured on a replacement cost basis for $2.4 million under a fire insurance policy that contains an 80 percent coinsurance clause. Assume that the building has a replacement cost of $4 million. How much will Rachel collect if the building sustains a covered fire loss with a replacement cost of $80,000?
1.
$50,000
2.
$60,000
3.
$66,667
4.
$80,000
2.00000 points
Question 28
- Wilson Shipping, located in Texas, owns 10 large cargo container ships which transport goods from Europe. The firm can obtain physical damage insurance on these vessels by purchasing
1.
hull insurance.
2.
cargo insurance.
3.
protection and indemnity insurance.
4.
freight insurance.
2.00000 points
Question 29
- The liability that is related to work being performed by outside contractors is referred to as
1.
contractual liability.
2.
contingent liability.
3.
care, custody, and control liability.
4.
customer’s liability.
2.00000 points
Question 30
- A homeowner in Detroit was injured when a furnace exploded following its faulty installation by a heating and cooling business. For the heating and cooling business, this is an example of
1.
contingent liability.
2.
completed operations liability.
3.
products liability.
4.
contractual liability
2.00000 points
Question 31
- Herget Gallery owns a building on Wharf Street in Washington, D.C. Herget Gallery purchased a Commercial General Liability Policy containing no endorsements. All of the claims below would be covered under the policy except for:
1.
An artist sued the gallery for slander after an employee of the gallery said the artist’s work looks like it was painted by an intoxicated monkey.
2.
A customer is injured when a painting falls from the wall and strikes the customer.
3.
A customer is injured after falling on a slippery floor at the gallery.
4.
An employee of the gallery accidentally started a fire that caused extensive damage to the building.
2.00000 points
Question 32
- A prerequisite provision that can be included in a claims-made commercial general liability policy provides coverage for claims filed after the policy has expired according to your professor. This provision is called a(n)
1.
extended reporting period provision.
2.
agreed amount endorsement.
3.
retroactive date provision.
4.
per-occurrence limit clause.
2.00000 points
Question 33
- The policy section addressing liability of an unendorsed PAP would cover which of the following situations if the insured is legally liable?
The insured injures a pedestrian while operating a friend’s new motorcycle.
The insured backs into and damages the garage door of his rented house.
The insured intentionally runs into another motorist’s car after the driver cut in front of him.
The insured damages a parked car while driving a dump truck for his employer.
2.00000 points
Question 34
- As an insurance agent located in Tennessee, your customer walks into your office and asks:
With respect to automobile insurance, what is the intended purpose of the extended non-owned liability coverage endorsement to the PAP? Your response would be:
1.
to provide liability coverage for an insured’s employer when an insured uses his or her auto for business purposes
2.
to provide liability coverage for an insured who occasionally operates a non-owned auto
3.
to provide liability coverage for anyone who loans a covered auto to another driver
4.
to provide liability coverage for an insured who operates a non-owned auto on a regular basis
2.00000 points
Question 35
- Nicole was injured badly by an uninsured drunk driver who was driving an F150 while she was riding in a friend’s car. Nicole and her friend each have a PAP with an uninsured motorists limit of $50,000. How much will be paid by each policy if it is determined that Nicole has $70,000 of bodily injuries?
1.
Each policy will pay $35,000.
2.
Nicole’s policy will pay $50,000, and the friend’s policy will pay nothing.
3.
Nicole’s policy will pay $50,000, and the friend’s policy will pay $20,000.
4.
The friend’s policy will pay $50,000, and Nicole’s policy will pay $20,000.
2.00000 points
Question 36
- Reinsurance would be used by Sundown Insurance, a primary insurer, for each of the following reasons except to:
1.
increase the unearned premium reserve.
2.
increase underwriting capacity.
3.
protect against catastrophic losses.
4.
stabilize profits.
2.00000 points
Question 37
- Benvi Insurance Company of New Mexico reported the following results on its
financial statements last year:
Premiums Written $90,000,000
Loss Adjustment Expenses $5,000,000
Underwriting Expenses 30,000,000
Premiums Earned $100,000,000
Incurred Losses $70,000,000
What was Benvi’s’s combined ratio last year?
1.
100.0
2.
103.3
3.
105.0
4.
108.3
2.00000 points
Question 38
- Sally is a teacher at a local high school. Her personal estimate of the chance of loss is a(n)
1.
objective probability.
2.
objective risk.
3.
subjective probability.
4.
a priori probability.
2.00000 points
Question 39
- In a group discussion with classmates the topic of retention arises. Each of the following are considered to be potential advantages of retention except:
1.
lower expenses.
2.
increased cash flow.
3.
encouragement of loss prevention.
4.
protection from catastrophic losses.
2.00000 points
Question 40
- Among the listed choices below, identify which is an expense for a life insurance company.
1.
loss reserves
2.
death benefits paid to a beneficiary
3.
unrealized capital gains
4.
realized capital losses
2.00000 points
Question 41
- The significant Dodd-Frank Act of 2010 gives authority to the Federal Insurance Office for which of the following?
1.
to represent the federal government in international discussions of insurance regulation
2.
to license and charter new insurance companies that plan to operate nationally
3.
to be the primary monitor of insurance company solvency
4.
to be the primary regulator of all aspects of insurance
2.00000 points
Question 42
- In a group discussion with your Northeastern MBA class, someone brings up the topic of insurable interest. Someone asks when is an insurable interest legally required to exist in life insurance? The correct response is:
1.
only at the time of the insured’s death
2.
only at the inception of the policy
3.
only at the time the beneficiary is paid
4.
both at the time of the insured’s death and at the inception of the policy
2.00000 points
Question 43
- In the realm of the insurance industry, casualty insurance coverage would apply to which of the following categories of insurability?
1.
workers compensation insurance
2.
fire insurance
3.
marine insurance
4.
life insurance
2.00000 points
Question 44
- As a medical doctor, you are curious about medical payments under a PAP. You wonder: Which of the following statements about the medical payments coverage of the PAP is true? The correct answer is:
1.
The amount of the benefit typically is $100,000.
2.
Covered expenses must be incurred within 30 days of the accident.
3.
Covered expenses include the cost of funeral services.
4.
The benefit limit applies on a per-accident basis rather than on a per-person basis.
2.00000 points
Question 45
- Danielle’s office building, located in Manchester, New Hampshire, was damaged by a fire caused by a careless tenant. After paying Danielle for the loss, the insurance company sued the tenant to recover its loss. This suit is based on the principle of
1.
warranty.
2.
insurable interest.
3.
utmost good faith.
4.
subrogation.
2.00000 points
46
- Please list and explain the advantages and disadvantages that accrue to an insurer when it decides to purchase reinsurance.
47
- List three methods used for determining case reserves and explain how these three methods differ in execution / processing.