Gwen is in charge of accounting at Integrity Insurance Company. Integrity is a
publicly-traded insurer. In describing her job, Gwen said, “There aren’t too many
businesses where you are required to keep two sets of book.” Gwen’s comment most
likely refers to her company
A) preparing accounting statements using statutory and GAAP accounting.
B) preparing one set of records for the insurer’s managers and another set for the
policyholders.
C) preparing one set of books using dishonest values and another set using current
market values.
D) preparing one set of accounting statements considering investment income and
another set of accounting statements not considering investment income.
Which of the following is an example of private insurance?
A) unemployment insurance
B) Social Security
C) life insurance
D) federal deposit insurance
Sharon lives in a state that has a no-fault automobile insurance law. Under the law, an
injured person has the right to sue the negligent driver only if the bodily injury claim
exceeds a dollar or verbal threshold. The no-fault law in Sharon’s state is a(n)
A) pure no-fault plan.
B) modified no-fault plan.
C) add-on plan.
D) choice no-fault plan.
The deductible used for automobile collision losses is an example of a(n)
A) calendar year deductible.
B) elimination period.
C) straight deductible.
D) aggregate deductible.
Under one type of rate regulation, insurers do not have to register their rates with state
regulatory authorities. However, insurers may be required to furnish rate schedules and
supporting data to state officials. A fundamental assumption underlying this type of
rating law is that market forces will determine the price and availability of insurance,
rather than discretionary acts of regulators. This type of rate regulation is called
A) a flex-rating law.
B) a prior-approval law.
C) a file-and-use law.
D) no filing required.
Which of the following statements is (are) true with respect to the use of credit-based
insurance scores as an auto insurance rating factor?
I. Insurers claim that drivers who have poor insurance scores are expected to have
relatively more accidents.
II. The use of insurance scores in personal lines underwriting is controversial.
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following requirements must be met by a top-heavy pension plan to retain
its qualified status?
I. A special rapid vesting schedule must be used for non-key employees.
II. Certain minimum benefits or contributions must be provided for non-key employees.
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following statements regarding insurance and hedging is true?
A) Both insurance and hedging deal with pure risks.
B) Insurance reduces objective risk while hedging involves only risk transfer and not
risk reduction.
C) Hedging reduces objective risk while insurance involves only risk reduction and not
risk transfer.
D) Both insurance and hedging reduce risk but do not involve the transfer of risk.
High deductible group health insurance plans have all of the following characteristics
EXCEPT
A) health savings accounts or health reimbursement accounts.
B) high dollar deductibles.
C) low coverage limits.
D) major medical insurance.
The property and liability insurance industry fluctuates between periods of increasing
insurance rates and tight underwriting standards, and decreasing insurance rates and
loosening underwriting standards. Profitability in the industry follows these cyclical
movements. What is this pattern of fluctuations called?
A) the claims cycle
B) the underwriting cycle
C) the business cycle
D) the accounting cycle
The purchase of term insurance is justified by which of the following circumstances?
I. The insured wants to save money through the policy for a specific need.
II. The insured has a temporary need for life insurance protection.
A) I only
B) II only
C) both I and II
D) neither I nor II
An Inter-Ocean Transfer cargo ship was forced to jettison some cargo in heavy seas.
The various interests in the voyage at the time the property was jettisoned were
If $400,000 worth of iron ore was jettisoned, for how much of this amount would
Inter-Ocean Transfer be responsible under general average?
A) nothing
B) $160,000
C) $200,000
D) $400,000
Which of the following statements is (are) true concerning benefit payments under
long-term care insurance?
I. Reimbursement policies pay for actual charges up to a specified daily limit.
II. Per diem policies pay a specified daily benefit regardless of the charges incurred.
A) I only
B) II only
C) both I and II
D) neither I nor II
When selling life annuities, what risk is the insurer pooling?
A) bad investment performance
B) premature death
C) bad expense experience
D) excessive longevity
Which of the following statements concerning the securitization of risk is (are) true?
I. Securitization increases the capacity of the insurance industry.
II. Securitization can be used to protect against catastrophic loss.
A) I only
B) II only
C) both I and II
D) neither I nor II
The requirement that losses should be accidental and unintentional in order to be
insurable results in which of the following?
I. Decrease in moral hazard
II. More accurate prediction of future losses
A) I only
B) II only
C) both I and II
D) neither I nor II
Brian purchased an unendorsed Homeowners 3 policy. Under the policy, Brian’s
detached garage is also covered. Which of the following statements regarding coverage
on the garage is true?
A) The garage is covered on a named-perils basis.
B) Any losses to the garage are settled on an actual cash value basis.
C) The cost of removing debris is included in the policy limit on the garage, but if the
damage and cost of removing debris exceed the limit, an additional five percent of the
policy limit is available.
D) The garage is covered under the dwelling coverage, Part A.
A personal lines insurance company initiating banking and investment services for its
policyowners demonstrates which financial services industry trend?
A) convergence
B) demutualization
C) mass merchandising
D) consolidation