Quia - INS 21 Quiz 2: session ins 21 chapter 2

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INS 21 Quiz 2: session ins 21 chapter 2

Thank you. Your responses have been automatically graded. Here are your results. Score Summary (Click on question number to jump to question.) Question 1 Question 2 Question 3 Question 4 Question 5 Question 6 Question 7 Question 8 Question 9 Question 10 Question 11 Question 12 Question 13 Question 14 Question 15 Question 16 correct correct incorrect correct correct correct correct correct correct incorrect correct incorrect correct correct correct correct Score: (81%) points earned 1 1 0 1 1 1 1 1 1 0 1 0 1 1 1 1 13 points possible 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 16

1. The National Association of Insurance Commissioners (NAIC) created a uniform financial statement for property and liability insurance companies. The purpose of the uniform statement is to Ensure that state insurance departments not mistake these companies for life insurers. Provide accounting expertise for those state insurance departments that do not have staff actuaries. Simplify the state insurance department's task of comparing the financial reports of many different insurers. (correct answer, your response)

Capture the essential criteria required for rate regulation. Points earned: 1 out of 1

2. All states require insurance agents to be licensed to transact insurance business in the state. Further, agents must meet continuing education requirements to maintain their licenses. All of these requirements have what purpose? To control the number of agents that transact business in a state to reduce the chance of over-aggressive competition. To ensure that these insurance company representatives have a prescribed minimum level of insurance knowledge. (correct answer, your response) To maintain a level of vigilance in protecting insurance companies against fraudulent behavior by the public.

To improve the image and public perception of the insurance profession.

Points earned: 1 out of 1

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Quia - INS 21 Quiz 2: session ins 21 chapter 2

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3. How does a stock insurance insurer differ from a reciprocal insurance exchange? a.Stockholders own a stock company. Subscribers own a reciprocal exchange (correct answer) A stock company provides insurance to its policyholder-owners. A reciprocal insurance provides insurance to investors. Each is owned by stockholders; however, the reciprocal insurance exchange provides coverage to investors. (your response) Each is formed to provide profit to investors; however, the stock insurer is managed through a board of directors.

Points earned: 0 out of 1

4. Which one of the following describes the characteristics of a mutual insurance company? A corporation owned by stockholders that earns profits for the stockholders. An unincorporated association that provides reciprocal coverage to subscribers. A corporation owned by policyholders that provides insurance to its policyholders. (correct answer, your response)

An unincorporated association that earns profits for its individual investors. Points earned: 1 out of 1

5. The type of insurance rating law that requires rate approval by the state insurance department before the rates can be used is Flex rating law. Open competition law. File-and-use law. Prior-approval law. (correct answer, your response) Points earned: 1 out of 1

6. Some federal government insurance programs provide coverage for loss exposures that private insurers have avoided largely because of the potential for catastrophic losses. An example of such a program is Workers compensation insurance funds Unemployment insurance programs Automobile insurance plans The National Flood Insurance Program (correct answer, your response) Points earned: 1 out of 1

7. Workers compensation insurance is offered through a residual market plan in some states, which means It is a state insurance plan that competes with private insurers to provide the insurance. It is a state fund that provides a system to pay the claims of insolvent insurers. It is a program that makes insurance available to those who cannot obtain coverage because private insurers will not voluntarily provide it. (correct answer, your response) It is an insurance plan that is the only source of workers compensation insurance allowed in the state.

Points earned: 1 out of 1

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Quia - INS 21 Quiz 2: session ins 21 chapter 2

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8. The Social Security program can be simply described as A federal program that provides retirement, survivorship, disability, and medical benefits to eligible individuals. (correct answer, your response) A federal welfare benefits program that provides a minimum level of housing, food, and income to eligible individuals and families. A state unemployment insurance program that provides income for a limited period of time to workers who become unemployed. A state program that provides a base level of income for retirement based on the level of income and duration of employment.

Points earned: 1 out of 1

9. Why would insurance regulators have a goal of assuring that the premiums charged by insurers are adequate? To maintain insurer solvency (correct answer, your response) To eliminate the potential of a monopoly To protect consumers from high insurance rates To promote equity among insurers Points earned: 1 out of 1

10. A ratemaking concept in which rates are based on calculated loss experience and insureds with similar characteristics are placed in the same rating class is called Unfair discrimination. Premium differential. Actuarial equity. (correct answer) Social equity. (your response) Points earned: 0 out of 1

11. States regulate the excess and surplus lines market by Establishing a monitoring board comprised of all insurers licensed to do business in the state. Licensing the excess and surplus lines brokers that transact business with the unlicensed insurers. (correct answer, your response)

Examining the market conduct practices of the unlicensed insurers.

Approving the policy forms and rates used by the unlicensed insurers. Points earned: 1 out of 1

12. One of the methods used by regulators to ensure insurance company solvency is through the Insurance Regulatory Information System (IRIS), which is The licensing system required for insurance companies that transact business in a state. The licensing process for alien insurers that are incorporated in another country. A periodic examination conducted by a team of state examiners, working at the insurer's home office to review activities including claims, underwriting, marketing, and accounting procedures. (your response) A system that gathers data from insurers financial statements and develops financial ratios to determine an insurers' overall financial condition. (correct answer)

Points earned: 0 out of 1

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Quia - INS 21 Quiz 2: session ins 21 chapter 2

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13. A reinsurance company Is formed to write all or part of the insurance for a parent company. Provides insurance for loss exposures that private insurers are unwilling to provide. Transfers losses to a primary insurer. Accepts loss exposures from a primary insurer. (correct answer, your response) Points earned: 1 out of 1

14. An automobile insurance policyholder has complained that her insurance premium is higher than her neighbor's premium. Both the policyholder and her neighbor have insurance with the same company, and they have identical vehicles. The policyholder feels that she is the subject of unfair discrimination. As the policyholder's agent, you know the policyholder has been responsible for several small auto accidents. The policyholder has mentioned that her neighbor has had no accidents or violation in the last three years. You must explain to the policyholder the objective of rate regulation ensuring that rates are not unfairly discriminatory, as it applies in her case. Which one of the following is an accurate explanation? Insureds with similar characteristics are usually placed in the same class and charged the same rate unless social equity required modification in that rate structure. This has probably occurred in your situation. Insureds with similar characteristics are placed in the same class and charged the same rate. However, your accidents have probably placed you in a different classification. Your premium is based on the loss experience for policyholders in your classification. (correct answer, your response) Your neighbor has probably received a credit based on the length of time he has had his policy with the company. This is not unfairly discriminatory because it is available to all policyholders over time. Your neighbor has been placed in a preferred category of policyholders, which gives him rights and privileges that you do not have. Your neighbor has been given a rate reduction based on excess profits that have been returned to policyholders. Points earned: 1 out of 1

15. In a northeastern state, Stable Insurance, an old and established insurance company that writes homeowners insurance in the northeast experienced three unprofitable years in a row. Large winter storms resulted in damage to homes that Stable insured. The losses for the last three years have drained the company's financial resources. At the end of the third year of the losses, Stable declared bankruptcy when it became insolvent. Stable was unable to pay for the claims that resulted from the last storm. Ted Van Wrinkle is a policyholder with Stable who filed a claim as a result of the last storm. Ted's house was damaged when the weight of snow and ice collapsed a portion of his roof. How will Ted be paid for his loss? Ted must join as a creditor in Stable's bankruptcy and receive a portion of his loss. The guaranty fund in Ted's state will pay for Ted's losses. (correct answer, your response) Ted will not be paid because there is no system to cover insolvency caused by underwriting losses.

The state government will provide compensation to Ted through the state's FAIR plan. Points earned: 1 out of 1

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Quia - INS 21 Quiz 2: session ins 21 chapter 2

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16. Some communities in the United States celebrate holidays with firecrackers. Firecracker vendors erect stands in the parking lot of shopping centers before the holidays.

One shopping center owner sponsoring a firecracker vendor's booth found that his insurance did not cover the exposure. He found that none of the insurers licensed to do business in the state sold insurance coverage for the exposures.

How can the shopping center owner obtain appropriate coverage for the exposure from the firecracker vendor's booth? By obtaining coverage through the excess and surplus lines market. (correct answer, your response)

By pooling the risk with other shopping center owners with similar exposures. Through a proportionate sharing arrangement with multipleinsurers. From alien insurers in countries that also celebrate holidays with firecrackers. Points earned: 1 out of 1

Done

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