A manufacturing company just hired a new risk manager, and she has instituted several
employee safety programs. She has persuaded the insurer writing the company’s
workers compensation insurance to base the premium on the company’s actual loss
experience during the current period rather than on the company’s historical
performance. This type of plan is called a(n)
A) retrospectively rated plan.
B) class rated plan.
C) experience rated plan.
D) judgment rated plan.
An emerging concern for risk managers is the greater volatility that has been observed
in weather patterns – higher high temperatures, lower low temperatures, record rainfall,
drought, etc. Collectively, this risk is called
A) global warming risk.
B) hurricane risk.
C) speculative risk.
D) climate change risk.
Ken purchased a PAP with liability limits of 100/300/50, medical payments coverage,
and collision coverage. Ken fell asleep while driving late at night. He crossed the center
line and hit a car approaching from the other direction. The following losses occurred:
– The driver of the other car suffered $30,000 in bodily injuries.
– Ken’s car sustained $5,000 in damages.
– Ken incurred $5,000 in medical expenses.
– The car that Ken hit was a total loss.
Which of Ken’s Personal Auto Policy (PAP) coverages will cover the other driver’s
medical expenses?
A) bodily injury liability
B) collision coverage
C) medical payments coverage
D) property damage liability
ABC Company purchased an ISO Commercial General Liability Policy. The agent who
sold ABC the coverage noted that the coverage trigger in this policy was different from
the trigger in the previous policy. The new policy covers only those claims which are
first reported during the policy period, provided the event occurred after a retroactive
date. This type of policy is known as
A) extended reporting coverage.
B) claims-made coverage.
C) accident only coverage.
D) occurrence coverage.
Which of the following statements about the change of plan provision in a life
insurance contract is (are) true?
I. A change to a lower premium policy results in a refund of the difference in the cash
values of the two policies.
II. A change to a higher premium policy requires evidence of insurability.
A) I only
B) II only
C) both I and II
D) neither I nor II
Appliance World sells small appliances. The store purchased an ISO crime coverage
policy. Last night, someone used a crowbar to pry open a locked door, leaving marks of
forced entry. The thief took a number of appliances. The crime that occurred in this case
is called
A) burglary.
B) shoplifting.
C) larceny.
D) robbery.
Reimbursement for spoilage of frozen food caused by failure of a refrigeration unit at a
frozen foods processor can be covered under
A) equipment breakdown insurance.
B) extra expense insurance.
C) builders risk insurance.
D) difference in conditions insurance.
All of the following statements describe the flexibility available to the owner of a
universal life insurance policy EXCEPT
A) Policy loans are permitted on an interest-free basis.
B) The frequency of premium payments can be varied.
C) The death benefit can be increased with evidence of insurability.
D) Premium payments can be any amount provided there is sufficient cash value to
keep the policy in force.
Which of the following statements about policies sold to preferred risks is (are) true?
I. Preferred risks are people whose mortality experience (deaths per thousand at a given
age) is expected to be more favorable than average.
II. Insurers require preferred risks to purchase at least a minimum amount of life
insurance, such as $250,000.
A) I only
B) II only
C) both I and II
D) neither I nor II
LMN Mutual Insurance Company has total liabilities of $300 million. The company has
total assets of $380 million. What is LMN’s policyholders’ surplus?
A) $680 million
B) $340 million
C) $80 million
D) -$80 million
Risk management is concerned with
A) the identification and treatment of loss exposures.
B) the management of speculative risks only.
C) the management of pure risks that are uninsurable.
D) the purchase of insurance only.
Which of the following statements is (are) true about life insurance company
investments?
I. The majority of life insurance company general account assets are invested in bonds.
II. The majority of life insurance company separate account assets are invested in
stocks.
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following statements regarding employer liability insurance under the
workers compensation insurance coverage form is (are) true?
I. Employer liability insurance covers an employee injury that occurs on the job but
may not be considered work-related.
II. If an injured employee sues a negligent third-party, and the third-party sues the
employer for contributory negligence, the lawsuit is covered under employer liability
insurance.
A) I only
B) II only
C) both I and II
D) neither I nor II
James was injured in an auto accident caused by another motorist’s negligence. He
received severe facial lacerations and injured his back in the accident. In payment for
his pain, suffering, and disfigurement, losses which cannot be specifically itemized,
James will receive
A) punitive damages.
B) special damages.
C) imputed damages.
D) general damages.
A computerized data base that permits risk managers to store and analyze risk
management data is called a
A) risk management information system.
B) risk management Intranet.
C) risk management web site.
D) risk map.