Chapter 6

Chapter 6 - Chapter6 InsuranceCompanyOperations 1) The...

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Chapter 6 Insurance Company Operations 1) The function of an actuary is to A) adjust claims. B) determine premium rates. C) negotiate reinsurance treaties. D) invest insurance company assets. Answer: B Question Status: Previous Edition 2) Insurers obtain data which can be used to determine rates from A) pricing pools. B) insurance advisory organizations. C) banks. D) reciprocal exchanges. Answer: B Question Status: Previous Edition 3) Which of the following statements about underwriting policy is (are) true? I. A company must establish an underwriting policy consistent with company objectives. II. Underwriting policy is usually subjective and allows the underwriter considerable flexibility with respect to lines written and forms used. A) I only B) II only C) both I and II D) neither I nor II Answer: A Question Status: Previous Edition 4) All of the following statements about underwriting standards are true EXCEPT A) The purpose of underwriting standards is to reduce adverse selection against the insurer. B) The underwriter should select only those insureds who are expected to have no losses. C) The underwriter should select a book of business so that there is a proper balance within each rate classification. D) Equitable rates should be charged so that each group of policyowners pays its own way in terms of losses and expenses. Answer: B Question Status: Previous Edition Chapter 6 Insurance Company Operations 61 5) The underwriting process begins with the A) agent. B) desk underwriter. C) inspection report. D) acceptance of the application. Answer: A Question Status: Previous Edition 6) Common sources of underwriting information for life and health insurance include all of the following EXCEPT A) the application. B) a physical examination.
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C) the Medical Information Bureau. D) the applicant ʹ s income tax return. Answer: D Question Status: Revised 7) If an underwriter suspects moral hazard, the underwriter may ask an outside firm to investigate the applicant and make a detailed report to the insurer. This report is called a(n) A) inspection report. B) application. C) M.I.B. report. D) agent ʹ s report. Answer: A Question Status: Revised 8) One source of life and health insurance underwriting information is an organization that life and health insurance companies can join. As a member, life and health insurance companies report health impairments of applicants, and this information is shared with member companies. Although the information is shared, the underwriting decision of the member company is not disclosed. What is this organization called? A) Fair Isaac Corporation (FICO) B) Medical Information Bureau (MIB) C) National Association of Insurance Commissioners (NAIC) D) National Association of Mutual Insurance Companies (NAMIC) Answer: B Question Status: Revised 62 Rejda · Principles of Risk Management and Insurance , Tenth Edition 9) Factors that may result in more restrictive underwriting decisions include which of the following? I. Inadequate rates.
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This note was uploaded on 06/15/2011 for the course RIM 3331 taught by Professor Papp during the Spring '11 term at Troy.

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Chapter 6 - Chapter6 InsuranceCompanyOperations 1) The...

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