multiple choice questions chapter 71. advisory organizations or rating bureaus
(a) are more common in life insurance than in property and liability insurance.
(b) establish rates to which all member companies must adhere.
(c) were made illegal by the mccarran-ferguson act.
(d) collect loss statistics from member companies to use in the development of advisory loss costs or advisory rates.
2. in those types of insurance in which ratemaking and underwriting are merged into a single process, the underwriter is likely to use
(a) class rating.
(b) experience rating.
(c) merit rating.
(d) judgment rating.
3. all but which of the following are forms of merit rating?
(a) schedule rating.
(b) class rating.
(c) retrospective rating.
(d) experience rating.
4. an insurer’s underwriting policy is generally established by
(a) the desk underwriters.
(b) officers of the company.
(c) the insurance department.
(d) negotiation between the company and its agents.
5. the basic function of underwriting is to
(a) avoid insuring people who are likely to have losses.
(b) to make certain that only very good risks are insured..
(c) limit premiums written to an acceptable level.
(d) avoid adverse selection.
6. basically, a retrospectively rated insurance program is a
(a) form of class rating.
(b) variation of schedule rating.
(c) cost-plus arrangement in which actual losses determine the final premium.
(d) a variation of experience rating, since past losses determine the current premium.
7. an insurance company might use all but which one of the following as its representative in loss adjustment?
(a) a staff adjuster.
(b) an independent adjuster.
(c) a public adjuster.
(d) an independent agent.
8. ratemaking in insurance
(a) is usually done on a cooperative basis in the field of life insurance.
(b) inevitably leads to price-fixing by property and liability insurers.
(c) differs from pricing in other businesses since prices are set before costs are known.
(d) is not subject to governmental control.
9. in which of the following do property and liability insurance companies invest the greatest percentage of their assets?
(a) government and corporate bonds.
(b) corporate stocks.
(c) real estate.
(d) mutual funds.
10. in which of the following do life insurance companies invest the greatest percentage of their assets?
(a) government and corporate bonds.
(b) corporate stocks.
(c) real estate.
(d) mutual funds.
11. the importance of investment income in the overall performance of property and liability insurers has led to a phenomenon
(a) the underwriting cycle.
(b) loss ratio underwriting.
(c) deficit underwriting.
(d) cash flow underwriting.
12. an adjuster might legitimately decline to pay a loss under a policy because
(a) the loss was caused by the insured’s negligence.
(b) the property destroyed cannot be replaced.
(c) the insured violated a policy condition.
(d) all of the above.
13. for a given type of insurance the pure premium is computed to be $30 and the insurer’s expense ratio is .40. the gross premium for the coverage will be
(a) $40.
(b) $42.
(c) $45.
(d) $50.
14. an automobile rating plan in which the individual’s premium is based on his or her driving record is an example of
(a) judgment rating.
(b) retrospective rating.
(c) schedule rating.
(d) class rating which uses elements of experience rating.
15. which of the following is an important source of information for underwriters
(a) the application containing the insured’s statements.
(b) information from the agent or broker.
(c) information from external agencies.
(d) all of the above.
16. the termaccommodation risk refers to a situation in which an underwriter agrees to insure a particular applicant
(a) based on information in a credit report.
(b) based on information in the application.
(c) based on information from an external agency.
(d) that does not meet the company’s normal underwriting standards.
17. external agencies from which an underwriting may obtain information about an applicant include
(a) a state department of motor vehicles.
(b) the medical information bureau.
(c) a credit reporting agency.
(d) all of the above.
18. the use of credit scores in underwriting and pricing auto and homeowners insurance
(a) has been restricted by legislation in a number of states.
(b) is illegal under federal law because if considers an applicant’s age, sex, and race.
(c) is used primarily because it reflects the applicant’s ability to pay premiums.
(d) none of the above.
19. the term post-selection underwriting refers to
(a) the underwriting that occurs after all information has been gathered.
(b) the review of an underwriter’s decision by a senior underwriter.
(c) the final review in the underwriting process.
(d) consideration of whether insurance for an existing party should be continued.
20. restrictions on postselection underwriting
(a) generally make it easier for persons to obtain insurance.
(b) restrict or limit an insurer from discontinuing coverage for existing insureds.
(c) are beneficial to most insureds and have few negative effects.
(d) more than one of the above.
ScholarMatic: Explanation & Answer
Your ready answer from a verified tutor is just a click away for as little as $14.99
Click Order Now to get 100% Original Answer Customized to your instructions!
