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Problems with the current health care system in the United States include which of the
following?
I. Rising health care expenditures
II. Considerable waste and inefficiency in the health care system
A) I only
B) II only
C) both I and II
D) neither I nor II
In the context of a surety agreement, the party who agrees to answer for the debt,
default, or obligation of another party is called the
A) principal.
B) obligee.
C) surety.
D) fidelity.
Which of the following statements about the combined ratio is true?
A) It is equal to the loss ratio minus the expense ratio.
B) A combined ratio greater than 1 (or 100 percent) means an underwriting loss has
occurred.
C) The combined ratio considers the company's investment income.
D) A combined ratio less than 1 (or 100 percent) indicates that an underwriting loss has
occurred.
Steve was involved in an auto accident. Both drivers were partially at fault for the
accident. Steve's actual damages were $50,000. He was judged to be 60 percent at fault.
If Steve's state has a pure comparative negligence law, how much will Steve collect?
A) $0
B) $20,000
C) $30,000
D) $50,000
Which of the following is an advantage of state regulation of insurance over federal
regulation of insurance?
A) uniformity of laws
B) greater efficiency
C) more effective in negotiating international agreements pertaining to insurance
D) quicker response to local insurance problems
Monopoly Insurance is the only company marketing a certain line of insurance in a
state. After complaints from several consumers, the State Insurance Department
investigated Monopoly's rates. The regulators determined that Monopoly was taking
advantage of being the only insurer offering the line by charging more than double the
actuarial cost of the coverage. Which regulatory rating objective was Monopoly
violating?
A) Rates must be adequate.
B) Rates should encourage loss control.
C) Rates must not be excessive.
D) Rates must not unfairly discriminate.
Grace is a life insurance agent. She is attempting to sell a large life insurance policy, but
the prospective purchaser is having second thoughts. To persuade the prospective
purchaser, Grace said, "I will earn a $1,000 commission if you buy this policy. I'll give
you $500 of my commission if you buy the policy." In most states, what illegal sales
practice will Grace be guilty of if she splits her commission with the purchaser?
A) rebating
B) churning
C) twisting
D) backdating
If the insurer broadens coverage during the policy period without an increase in
premium, and the broadened coverage is not part of a general program revision, the
insured is entitled to the broadened coverage under which policy provision?
A) waiver of policy provisions
B) subrogation
C) liberalization clause
D) pair or set clause
All of the following are potential advantages of retention EXCEPT
A) lower expenses.
B) increased cash flow.
C) encouragement of loss prevention.
D) protection from catastrophic losses.
All of the following are extensions of coverage under the building and personal
property coverage form EXCEPT
A) newly acquired or constructed property.
B) valuable papers and records.
C) personal property temporarily off the premises.
D) currency and securities.
