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Exam 6: Insurance Company Operations

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Question 31

Multiple Choice

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Which of the following statements about treaty reinsurance is true?

A) The reinsurer is required to underwrite each individual applicant that is reinsured.
B) The reinsurer must accept all business that falls within the scope of the treaty.
C) The ceding insurer can choose which business falling within the scope of the treaty it wishes to reinsure.
D) It protects the reinsurer by requiring the ceding insurer to charge adequate premiums.

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Question 32

Multiple Choice

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Most insurance companies require their marketing representatives to submit an evaluation of the prospective insured.This important source of underwriting information is called the

A) application.
B) agent's report.
C) inspection report.
D) physical inspection.

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Question 33

Multiple Choice

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Sue double-majored in mathematics and statistics in college.She also enrolled in a number of finance courses.After graduation,she was hired by Econodeath Insurance Company.Her job is to calculate premium rates for life insurance coverages.Sue is a(n)

The underwriting process begins with the

When a fraternal insurer began operations,it asked each member,regardless of age,to pay $20 per month to the fraternal's group life insurance plan.In exchange,each member received the same amount of life insurance.Soon younger members of the group began to drop out when they realized their premiums were subsidizing a group with a higher chance of loss.Which important underwriting principle was violated in this case?

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.

ABC Insurance Company entered into a reinsurance agreement with XYZ Reinsurance.Under the contract,XYZ Re has no liability unless ABC's loss ratio exceeds 75 percent for the year.XYZ Re agreed to pay all losses in excess of the 75 percent loss ratio.ABC Insurance Company is using reinsurance to

Insurers obtain data which can be used to determine rates from

All of the following statements about the settlement of a claim are true EXCEPT

Factors that may result in more restrictive underwriting decisions include which of the following? I.Inadequate rates. II.The unavailability of reinsurance at favorable terms.