1. In recent years, the total assets of insurance companies in the U.S. have been decreasing.
2. Due to a recent increase in demand for new insurance products, the number of life insurance companies as
been increasing in the United States.
3. The process of life insurance uses risk pooling to transfer income-related uncertainties from a group of
individuals to an insured individual.
4. Adverse selection is a situation where customers who most need insurance are more likely to apply for
insurance.
5. In 2008, ordinary life accounted for over 80% of policies in force.
6. Term life insurance includes a savings element as well as the pure insurance element.
7. A term life policy allows the policyholder to vary the maturity of the policy.
8. The policy that will pay a specific dollar benefit to beneficiaries and remains in effect as long as premiums
are paid is called whole life.
9. The policyholder can vary the premium payments on an endowment life policy.
10. In group life insurance, lower rates on policies can be offered because of cost economies as a result of mass
administration of plans and reduced selling and commission costs.
11. Employers that sponsor non-contributory group life insurance require the employee to pay the insurance
premiums.
12. Annuities are the reverse of life insurance in that they are different means of liquidating a fund.
13. The payments from an annuity offered by a life insurance company can either begin immediately or may be
deferred to start at some future date.
14. Annuities are popular retirement savings products because investment returns on contributions are
tax-deferred.
15. By regulation, the payments on an annuity contract must stop when the annuity holder dies.
16. The rate of growth in the annuities market is increasing primarily because of the recent changes in the
capital gains tax rates.
17. Life insurance companies also manage private pension plans that may include guaranteed investment
contracts (GICs).
18. Pension fund management is a relatively small portion of the life insurance industry.
19. By 2009, life insurance companies were managing over 40% of all private pension plans.
20. Loss exposures faced by insurers in accident and health lines are more similar to those faced by traditional
life insurance than by property-casualty insurance.
21. Although life insurance companies also provide health and accident insurance, they underwrite less than
35% of all health insurance policies.
22. The cash surrender value of a life insurance policy represents the payment to the insured’s beneficiaries at
the time of death.
23. The policy reserves on the liability side of the balance sheet of a life insurance company are estimated based
on actuarial assumptions of expected future liability commitments on currently existing contracts.
24. Because of the large amounts of policy reserves that life insurance companies carry as liabilities, they are
rarely surprised by unexpected fluctuations in expected future payouts.
25. As of 2009, chartering of life insurance companies can be done only at the state level.
26. Insurance guaranty funds involve a permanent fund similar to the FDIC for the purpose of compensating the
policyholders of failed insurers.
27. State-sponsored insurance guarantee funds are run and administered by private insurance companies
operating in the state.
28. Insurance guarantee funds are administered by federal insurance regulators.
29. A permanent guarantee fund for the insurance industry does not exist.
30. As currently structured, contributions to a state-sponsored guarantee fund are collected only after the actual
failure of an insurance company.
31. As currently structured, state guarantee funds will continue to collect premium payments and honor life
policies and annuity obligations of a failed insurance company.
32. In the case of an insurance company failure, policyholders immediately receive a payout of the cash
surrender value of their policies.
33. During the most recent financial crisis, life insurance companies with large proportions of separate accounts
business were well-protected from the decline in the debt and equity markets.
34. The growth of HMOs has increased the amount of health insurance premiums collected by life insurance
companies.
35. Property insurance involves coverage against the loss of personal property as well as protection against legal
liability claims.
36. PC underwriting risk only exists when the premiums generated on a given insurance line are less than the
claims (losses) on the line.
37. The largest property-casualty (PC) insurance companies have become less influential over the past decade.
38. In general, maximum levels of losses are more predictable for liability lines than for property lines.
39. The expected loss potential is more difficult to determine with low-severity, high-frequency events.
40. Automobile liability insurance provides protection against theft or damage to the vehicle.
41. Unexpected increases in inflation cause loss rates to increase more for long-tail risk than for short-tail risks.
42. Loss adjustment expenses refer to the costs surrounding the loss settlement process.
43. Property-casualty insurers tend to have a higher level of liquidity risk than life insurers.
44. One reason for the recent decline in the expense ratio for PC insurers is an increase dependence on
independent brokers to sell and distribute insurance policies.
45. Insurance companies have resisted the investment in technology that banks and other financial service firms
have pursued.
46. The Insurance Regulatory Information System (IRIS) is a standardized exam to measure the profitability of
insurance companies.
47. Unlike the banking industry, globalization of financial services is having little or no effect on the insurance
industry.
48. The primary function of insurance companies is to
49. The largest line of life insurance in terms of total contract value in the U.S. is
50. The problem of adverse selection
51. Insurance policy benefits are classified on an insurance company’s balance sheet as
52. Which of the following is pure life insurance with a savings element built in
53. An insurance policy that protects an individual over an entire lifetime is called
54. An insurance policy in which fixed premium payments are invested in mutual funds of stocks, bonds, and
money market instruments is called
55. Which of the following involves fixed premium payments and a benefit payout at the time of death that will
depend on investment returns over the life of the policy?
56. An insurance policy that often is the least expensive to the insured because of the policy does not include a
savings plan is called
57. An insurance policy that allows both the premium amount and the maturity of the life contract to be changed
by the insured is called
58. Which of the following insurance products protects a lender against a borrower’s death prior to repayment of
the debt?
59. An annuity is a financial contract that
60. Variable universal life insurance policies