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Insurance Review Questions: Chapters 4 & 5, Study notes of Credit and Risk Management

Review questions and answers for chapters 4 and 5 of a finance textbook focusing on insurance, including topics such as earthquake insurance, risk classification, branches of insurance industries, and insurance contracts.

Typology: Study notes

2011/2012

Uploaded on 03/11/2012

mejiaritch
mejiaritch 🇺🇸

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Download Insurance Review Questions: Chapters 4 & 5 and more Study notes Credit and Risk Management in PDF only on Docsity! Chapters 4 & 5: Review Questions for review use of FIN3360 students only, distributing, posting, or emailing is not permitted please note that actual exam questions can/will be different, including by style, content, format, and subject Questions - i 1. Why are earthquakes difficult to insure in a privately-operated insurance system? 1. Who would be receiving a subsidy if an insurer created a special insurance pool of people causing 2 or more accidents? Answers - ii 3. Why is theft jewelry a more difficult exposure to insure than fire loss? not all crimes are beyond the control of the insured, and the insurer must protect itself from fraud (easy in the case of jewelry) 4. What are the 4 major principles of risk classification? 1. separation and class homogeneity, 2. reliability, 3. incentive value, 4. social acceptability Questions - iii 5. What are the major branches of private life and non-life insurance industries? 6. What is the difference between a civil wrong and a criminal act (and give an example)? Answers - iii 5. What are the major branches of private life and non-life insurance industries? 1. fire insurance, 2. business income interruption, 3. marine insurance, 4. casualty insurance, 5. life insurance, 6. medical or disability insurance 6. What is the difference between a civil wrong and a criminal act (and give an example)? a civil wrong involves injury to a person or their property (causing a car accident by talking on a cellphone while driving); a criminal wrong involves a crime defined by statute (arson or burglary) ; some acts can be both Questions - v 9. Stock insurance companies have all of the following characteristics except? a. ownership by people other than insureds b. management elected by owners c. profits distributed to insureds d. incorporation 10. GLB Act allows banks, investment companies/ security dealers, and insurance companies to combine and form ______________________ Answers - v 9. Stock insurance companies have all of the following characteristics except? a. ownership by people other than insureds b. management elected by owners c. profits distributed to insureds d. incorporation 10. GLB Act allows banks, investment companies/ security dealers, and insurance companies to combine and form Financial Service Holding Companies Questions - vi 1. What areas of law should agents know? 2. Why could there be a conflict between agents and underwriters? Answers - vii 3. What is the difference between an agent and a broker? an agent represents the insurer, and is authorized to act on their behalf. A broker represents the consumer, and is authorized to find an insurer/premium the consumer will pay 4. Why do life insurance agents and property insurance agents have different grants of authority? Property agents have the authority to bind their companies to a contract; life agents never have that authority (life contracts are uncancellable and require medical exams) Questions - viii 5. A waiver is? a. a condition in property insurance b. a condition in life insurance only c. a condition in both life and property insurance d. an abandonment of a right 6. If an insurer ratifies an agent action, it means: a. The agent is fired b. The agent is promoted c. The agent acted illegally, but the insurer pays d. The agent acted beyond authority, but the company accepts the result Answers - viii 5. A waiver is? a. a condition in property insurance b. a condition in life insurance only c. a condition in both life and property insurance d. an abandonment of a right 6. If an insurer ratifies an agent action, it means: a. The agent is fired b. The agent is promoted c. The agent acted illegally, but the insurer pays d. The agent acted beyond authority, but the company accepts the result
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