The Dodd-Frank Act created a federal body with some limited regulatory authority. For
example, the organization can represent the federal government in international
negotiations regarding insurance and it can preempt state law where it conflicts with
negotiated international agreements. This body is called the
A) National Insurance Bureau.
B) Federal Office of Insurance.
C) Department of International Insurance.
D) International Insurance Bureau.
Congressional action in 2012 extended the National Flood Insurance Program (NFIP)
until 2017. Which of the following is a key provision of the Biggert-Waters Flood
Insurance Reform and Modernization Act of 2012?
A) elimination of the waiting period for coverage to start
B) elimination and phase-outs of several rate subsidies
C) write-off of the multi-billion dollar deficit attributable to Hurricane Katrina claims
D) elimination of deductibles in NFIP policies
All of the following statements about the income tax treatment of
individually-purchased life insurance are true EXCEPT
A) policyowner dividends are received tax-free.
B) the annual increase in cash value is not taxable while the policy remains in force.
C) premiums paid for individual life insurance are a tax deductible expense.
D) life insurance proceeds paid to a beneficiary in a lump-sum are received tax-free.
A company has a fleet of 200 vehicles. On average, 50 vehicles per year experience
property damage. What is the probability that any vehicle will be damaged in any given
year?
A) 10 percent
B) 20 percent
C) 25 percent
D) 50 percent
Why are insurance contracts said to be contracts of adhesion?
A) The values exchanged by the parties to the contract are not equal.
B) One party writes the contract, and the other party must accept the entire contract as
written.
C) Only one party makes a legally enforceable promise.
D) Conditions are placed on the insurer’s promise to perform.
Which of the following statements about the investments of property and liability
insurers is (are) true?
I. Income from investments is important in offsetting any unfavorable underwriting
experience.
II. Because premium income is continually being received, the investment objective of
liquidity is of little importance.
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following statements is (are) true with respect to SIMPLE retirement
plans?
I. Only large employers can start a SIMPLE plan, provided the employer does not
maintain another qualified plan.
II. SIMPLE plans are exempt from most nondiscrimination and administrative rules that
apply to qualified plans.
A) I only
B) II only
C) both I and II
D) neither I nor II
Under a dram shop law, a business may be held liable for damages resulting from
A) the sale of alcohol.
B) the creation of an unsafe work place.
C) the sale of prescription drugs.
D) the creation of a hostile work environment.
All of the following are programs to insure fundamental risks EXCEPT
A) federally subsidized flood insurance.
B) auto physical damage insurance.
C) Social Security.
D) unemployment insurance.
The authority of an agent to perform all incidental acts necessary to fulfill the purposes
of the agency agreement is called
A) implied authority.
B) declared authority.
C) apparent authority.
D) express authority.
A customer was injured when a furnace exploded following its faulty installation by a
heating and cooling business. For the heating and cooling business, this is an example
of
A) contingent liability.
B) completed operations liability.
C) products liability.
D) contractual liability.
Which of the following statements is (are) true with regard to an unendorsed ISO
Dwelling Form?
I. Each form provides $100,000 in personal liability coverage.
II. The Dwelling 3 form provides broader property coverage than the Dwelling 1 form.
A) I only
B) II only
C) both I and II
D) neither I nor II
No-fault benefits are provided by adding an endorsement to the auto insurance policy.
What is this endorsement typically called?
A) uninsured motorists coverage
B) personal injury protection coverage
C) nonowned vehicle liability coverage
D) add-on benefits coverage
Which of the following statements about group insurance is true?
A) Individual contracts are issued to each person covered under a group insurance plan.
B) The cost of group insurance is usually higher on a per-person basis than the cost of
individual insurance.
C) The actual experience of a large group is a factor in determining the premium that is
charged.
D) Individual evidence of insurability is usually required.
Which of the following statements about automobile insurers that specialize in insuring
high-risk motorists with poor driving records is (are) true?
I. The actual premium paid by an applicant is set by the federal government and is
independent of an applicant’s driving record.
II. The coverages available may be more limited than those written by insurers in the
standard market.
A) I only
B) II only
C) both I and II
D) neither I nor II
Nancy was injured when she drove her car through a stop sign and was struck by
Philip’s car. Philip saw Nancy and could have stopped. However, he failed to do so
since he had the right-of-way. Nancy can recover damages from Philip under which of
the following legal doctrines?
A) vicarious liability
B) the last clear chance rule
C) contributory negligence
D) the assumption of risk doctrine
A dividend option that allows the policyholder to purchase 1-year term insurance is
referred to as the
A) fifth dividend option.
B) policy loan dividend option.
C) paid-up additions dividend option.
D) family protection dividend option.
Hank bought a farm. There was an old barn on the land. One day Hank decided to take
a look at the barn. It was windy, and Hank could see the roof swaying in the wind. Hank
ran out of the barn fearing the roof might collapse. While driving home, Hank stopped
to see his insurance agent. He insured the barn for $20,000. The agent didn’t ask if the
roof might collapse, and Hank didn’t say anything about it. One week later there was a
strong wind and the roof collapsed. Assuming the insurer can prove it, under what legal
grounds could the insurer deny payment of the claim?
A) estoppel
B) concealment
C) warranty
D) misrepresentation
ABC Life Insurance Company insures both smokers and nonsmokers. Beth lied on her
life insurance application, checking the box for “no” in response to the question of
whether she smokes cigarettes or uses other tobacco products. Even though Beth
smokes 10 to 15 cigarettes each day, the policy was issued at the “preferred nonsmoker
rate.” Beth’s lie is materiel in this case because
A) it was in writing on the application.
B) it was given with the intent to deceive.
C) the policy would have been issued on different terms if the insurer knew the true
facts.
D) the policy would have been issued for a lower face value if the insurer knew the true
facts.
All of the following statements about the administration of a risk management program
are true EXCEPT
A) The risk manager is an important part of a firm’s management team.
B) A risk management policy statement can be used to educate top executives about the
risk management process.
C) If a risk management program is properly designed, periodic review of the program
is unnecessary.
D) In order to properly identify loss exposures, the risk manager needs the cooperation
of other departments.