Term
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Definition
| The spreading of losses incurred by a few individuals over a larger group, so that average loss is substituted for actual loss, is known as... |
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Term
| All of the following are ideal characteristics for a risk to be privately insurable Except... |
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Definition
| The loss should be within the insured's control |
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Term
Which of the following statements is (are) true with respect to insurance and gambling?
I. Insurance is simply a wager that if a loss occurs, you'll be paid for the loss.
II. Both gambling and insurance are socially productive. |
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Definition
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| Claire does not own health insurance. For the past two weeks, she has been experiencing sharp abdominal pain. Given her condition, she would like to purchase health insurance. When higher-than-average risks (like claire) are insured at average premiums, looses are higher than anticipated. What is this problem called? |
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Definition
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Term
| Insurers use a process of selecting and classifying insurance applicant's to prevent individuals who have a higher-than-average probability of loss from obtaining insurance at average rates. This process is called... |
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Term
| Franklin is concerned that if he damages someone else's property of injured someone, he will have to pay a large damage award. What kind of insurance can Franklin purchase to protect himself against such claims? |
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Term
Which of the following statements is (are) true with regard to insurance fraud?
I. Insurance fraud hurts insurers but does not affect policy-owners.
II. Fraudulent claims are a cost of insurance to society. |
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Definition
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Term
| All of the following are benefits of insurance to society EXCEPT... |
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Definition
| Reduces insurance company operating expenses |
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Term
| Government insurance programs include insurance designed to deal with complex economic problems that are difficult to insure privately. These programs are compulsory, and the right to benefits is based upon past contributions or coverage under the program. These programs, which include workers compensation and social security, are called... |
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Definition
| Social insurance programs |
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Term
| All of the following risks are privately insurable EXCEPT... |
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Definition
| Adverse commodity price movements |
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Term
| A condition that increases the chance of loss is called a.. |
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Definition
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Term
| A publishing company solicits manuscripts for publication. The publishing company is concerned that an author might plagiarize material and that the person who was plagiarized might sue the publisher. To address this risk, the contract with the author includes a hold-harmless agreement. Through this agreement, the author, rather than the publisher, is held liable for plagiarism. In this situation, the publisher is using the hold-harmless agreement as what type of risk treatment measure? |
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Definition
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Term
| A risk that affects the entire economy, or a large number of persons or groups within the economy, is called a... |
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Definition
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Term
| All of the following are burdens of risk on society EXCEPT... |
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Definition
| Risk forces individuals to practice loss control |
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Term
| Dean's Discount Strore has been experiencing problems with shoplifting losses. Dean decided to install a camera monitoring system and to use magnetic price tags on products. If a tag is not demagnetized before the product bearing the tag leaves the store, an alarm bell sounds. These measures are examples of... |
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Definition
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Term
| An individual may commit an act that results in bodily injury or damage to someone's property. A court of law may order the person responsible for the wrongful act to pay damages to the party who was injured. This type of risk is called the... |
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Definition
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Term
| Kyle opened a sporting goods store. After a fire damaged the store, Kyle was forced to close the business for four weeks while repairs were completed. The loss of profits that could have been earned if the business had remained open is best described as a... |
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Definition
| Indirect (consequential) loss |
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Term
| The relative variation between expected losses and actual losses is called... |
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Definition
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Term
Which of the following statements is (are) true with respect to pure risks?
I. Pure risks may produce either a profit or a loss
II. Premature death and damage to property caused by a fire are pure risks |
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Definition
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Term
Which of the following statements is (are) true with respect to hazards?
I. Many physical hazards can be reduced through loss control measures
II. Attitudinal hazard is more serious than moral hazard |
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Definition
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Term
| The first step in the risk management process is to... |
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Definition
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Term
| All of the following risk treatment techniques are classified as risk control methods EXCEPT... |
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Definition
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Term
| Which of the following statements is (are) true with respect to the objectives of risk management? |
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Definition
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Term
| Tindall Company manufactures electronic components. Managers of the company are considering several diversification options. One possibility is production of prescription drugs. When Tindall Company managers learned of the potential legal liability that could result from the manufacture and sale of prescription drugs, the managers rejected the idea and decided to consider other diversification options. How did Tindall Company choose to deal with the risk of legal liability arising from the manufacture and sale of prescription drugs? |
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Definition
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Term
| Harris Petroleum, a fuel storage and delivery business, occasionally has difficulty in obtaining affordable pollution liability insurance. Jane Elmore, Risk Manager of Harris Petroleum, decided to form an insuance subsidiary for the purpose of writing pollution liability insurance for Harris Petroleum, as well as other insurance coverages. The insurance subsidiary will be based in Bermuda for regulatory reasons. What is such a subsidiary called? |
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Definition
| A captive insurance company |
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Term
| All of the following are methods used to pay retained losses EXCEPT... |
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Definition
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Term
Which of the following statements is (are) true with respect to identifying potential loss exposures?
I. A physical inspection of company plants and operations can help to identify major loss exposures
II. Historical claims data can help to identify major loss exposures |
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Definition
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Term
| Risk managers must consider the range of outcomes that could occur. The worst loss tat is likely to happen is called... |
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Definition
| The probable maximum loss |
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Term
| Rather than purchasing computers and software, ABC Company entered into a lease agreement with Computer Solutions Company (CSC). Under terms of the lease, CSC provides computers and software and is responsible for damage to the computers and software. ABC uses the lease to shift responsibility for hardware and software losses to CSC. ABC's use of the lease illustrates which method of dealing with risk? |
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Definition
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Term
| A written document that outlines the risk management objectives of a firm, as well as company policy with respect to the treatment of loss exposures, is called a... |
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Definition
| Risk management policy statement. |
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Term
| One marketing system for life and health insurance and property and liability insurance does not use agents or broker. Instead, potential customers are solicited by television, radio, print ads, and other media. This marketing system is called... |
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Definition
| The direct response system |
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Term
| All of the following are property and liability insurance marketing systems EXCEPT... |
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Definition
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Term
Which of the following statements about insurance companies is (are) true?
I. Mutual insurance companies are owned by their policy-owners
II> Stock insurance companies can issue assessable policies |
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Definition
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Term
| Paula is involved in insuance marketing. She represents insurance purchasers rather than insurance companies. She solicits insurance application and then attempts to place the coverage with the appropriate insurer. Paula does not have the authority to bind the insurance coverage. Paula is a… |
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Definition
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Term
| An unincorporated mutual in which insurance is exchanged among the members with each member insuring the other members and, in turn, being insured by the other members, is called a... |
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Definition
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Term
| He sells property and liability insurance. He is an employee of XYZ Insurance Company and is paid a salary plus a bonus if the insurance he sells is profitable for XYZ. Hal is a... |
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Definition
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Term
Which of the following statements about the independent agency system is (are) true?
I. Independent agents are paid a higher commission rate on new business than on renewal business
II. Independent agents, rather than insurers they represent, own the expiration rights to insurance business they write |
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Definition
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Term
| All of the following statements about Lloyd's of London are true EXCEPT.. |
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Definition
| Lloyd's of London syndicates are NOT permitted to write reinsurance |
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Term
| Brenda works for an insurance company that is owned by its policy-owners. The company provides life and health insurance to members of a certain religious faith. The type of company tat Brenda works for is called a... |
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Definition
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Term
| Some property and liability insurance companies market coverages to individuals who are members of a group under a single program of insurance at reduced premiums. This type of marketing system is known as a... |
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Definition
| Mass merchandising system |
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Term
| April is employed by an insurance company. Her job is to calculate the premium that policy owners must pay for life insurance. April majored in mathematics and minored in statistics in college. April is a... |
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Definition
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Term
Which of the following statements regarding reinsurance is (are) true?
I. Under treaty reinsurance, the primary insurer must shop for a reinsurer each time the primary company needs reinsurance.
II. Reinsurance can help a primary insurer to stabilize its profitability |
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Definition
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Term
| All of the following are objectives in claim settlement EXCEPT... |
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Definition
| Delay payment to increase insurer profitability |
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Term
| Tony has worked as an underwriter for ABC Insurance Company for the past 20 years. Recently, a property insurance application for a factory looked 'funny' to Tony. He suspected that the owner of the factory might be planning to intentionally cause a loss after he insurance was in force. Tony asked an outside firm to investigate the applicant before making a decision whether to issue the policy. This source of underwriting information is called a... |
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Definition
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Term
| The sales and marketing activities of insurers are known as... |
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Definition
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Term
| There is a tendency for individuals who have a higher-than-average probability of loss to seek insurance at standard (average) rates. If not controlled by careful underwriting, higher-than-anticipated losses will occur. This problem is called... |
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Definition
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Term
Which of the following statements regarding insurance company investments is (are) true?
I. Investment income helps to reduce the premium charged for insurance.
II. Life insurance companies tend to invest in longer-term investments than do property and liability insurance companies |
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Definition
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Term
| All of the following are reasons for an insurance company to use reinsurance EXCEPT... |
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Definition
| To reduce underwriting capacity |
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Term
| XYZ Insurance Company provides advice to its insureds on alarm systems, sprinkler systems, fire prevention, and workplace safety. What functional area at XYZ provides this assistance? |
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Definition
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Term
| Claire is a salaried employee who works for LMN Insurance Company. It is Claire's job to verify that covered losses have occurred, to assist insureds who have experienced losses, and to help arrange for payments to insureds after covered losses have occurred. Claire is a |
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