Which of the following statements is true regarding the information systems functional
area of an insurance company?
I. Computers and information systems are able to perform some tasks that previously
were performed directly by employees.
II. Information systems can speed the processing of policies by insurers.
A) I only
B) II only
C) both I and II
D) neither I nor II
Reasons to adopt an enterprise risk management plan include all of the following
EXCEPT
A) to increase earnings volatility.
B) to treat risks facing the business in a more holistic way.
C) to increase net income.
D) to gain an advantage over competitors.
Which of the following statements about problems arising from the use of a coinsurance
clause is (are) true?
I. The amount of insurance should be periodically evaluated to avoid a coinsurance
penalty because of inflation.
II. An agreed value coverage option is one method used to solve the problem of values
that fluctuate throughout the policy term.
A) I only
B) II only
C) both I and II
D) neither I nor II
Fly-By-Night Insurance Company had much larger losses than forecast. The company
did not charge adequate premiums nor did the company purchase reinsurance. If
Fly-By-Night becomes insolvent, which of the following will help pay the unpaid
claims of the insurer?
A) guaranty fund
B) premium rebates
C) risk-based capital
D) admitted assets
Which of the following is a function of the marketing department of an insurance
company?
A) to settle claims after a loss has been reported
B) to determine the cost of products the insurer sells
C) to make final underwriting decisions
D) to identify production goals
Medical malpractice insurance written on a claims-made basis can leave a surgeon
vulnerable to malpractice claims if the surgeon retires, changes insurers, or drops
coverage. A provision can be added to the claims-made form that protects the surgeon
for future claims arising from incidents that occurred while the claims-made policy was
in force. This provision is called a(n)
A) cut-through endorsement.
B) drop-down endorsement.
C) agreed amount endorsement.
D) extended reporting period endorsement.
The principle of utmost good faith is supported by all of the following legal doctrines
EXCEPT
A) representations.
B) warranty.
C) subrogation.
D) concealment.
Tracy is a trust officer at a bank. One of her responsibilities is to manage funds that
have been set aside for the benefit of minor children. What type of bond guarantees that
Tracy will faithfully execute her required duties in this capacity?
A) fiduciary bond
B) public official bond
C) court bond
D) performance bond
The basic purpose of FAIR plans is to provide
A) property insurance to persons who cannot obtain it in normal markets.
B) automobile insurance to persons who cannot obtain it in normal markets.
C) health insurance to persons who cannot afford it in normal markets.
D) workers compensation insurance to employers who do business in several states.
The first step in ‘shopping for life insurance” is to
A) estimate the amount of life insurance to purchase.
B) decide whether you want a policy which pays dividends.
C) determine if you need life insurance.
D) decide on the best type of life insurance for you.
Mark has been an underwriter for 20 years. An application he recently reviewed looked
odd to him. The building value in the application seemed far too high, and Mark
suspected the applicant might be planning to destroy the property after it is insured.
Mark hired an outside firm to investigate the applicant and to prepare a report about the
applicant. This report is called a(n)
A) agent’s report.
B) binder.
C) physical inspection.
D) inspection report.
Arguments often used against no-fault automobile insurance laws include all of the
following EXCEPT
A) It is often difficult to determine which driver was negligent when a multiple-vehicle
accident occurs.
B) Many injured persons will not be compensated for their full losses because payments
for pain and suffering will be eliminated.
C) The defects of the negligence system are exaggerated, and the system needs only to
be reformed.
D) Claims of efficiency and premium saving are exaggerated, and automobile insurance
premiums might actually increase.
Which of the following statements is (are) true with respect to profit-sharing plans?
I. There is no limit on the amount that an employer can contribute annually to an
employee’s account under a profit sharing plan.
II. Profit sharing plans offer greater funding flexibility for employers than under other
qualified plans.
A) I only
B) II only
C) both I and II
D) neither I nor II
Loss control includes which of the following?
I. Loss reduction
II. Loss prevention
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following is covered under the building and personal property coverage
form?
A) the insured’s stock and inventory when located inside the insured building
B) vehicles owned by the insured
C) aircraft and watercraft owned by the insured
D) a manufacturing building owned by a key customer or key supplier of the insured.
The period during which a surviving spouse is ineligible for Social Security benefits is
referred to as the
A) emergency period.
B) readjustment period.
C) dependency period.
D) blackout period.