The flashcards below were created by user
brandiobrad
on FreezingBlue Flashcards.
-
Financial definition of Insurance includes:
Pooling and LLN
-
What is dealt with in the underwriting process?
Subsidization
-
What invovles people with similar risk not paying the same premium (both smoke but one doesn't pay as high of a premium for it)
Subsidization
-
Expenses + Incurred Losses/Earned Premium =
Combined Ratio
-
Fire, Wind, Heart Disease, and a Car Collision are all examples of:
Perils
-
The values of insurance to society do not include:
Greater Exaggerated Losses
-
Requirements for an insurable risk from the standpoint of the insured (buyer) include:
Low probability of loss
-
Insurance prospers best under which of the following conditions:
Private Property Ownership, Developed industrialized society, and Well organized legal system
-
A domestic insurance company in Ohio is chartered and licensed where?
Ohio
-
What type of insurers have policyholders that own the company and receive tax free dividends?
Mutual
-
Are Mutual Insurers non profit?
yes
-
What are the four types of Mutual Insurers?
Factory, General, Class, County
-
What was the dollar amount for Life/Health Insurance in 2008?
$800 billion
-
Who are the three parties in the insurance marketplace?
Buyer, Seller, Regulator
-
Why is Insurance heavily regulated?
Maintain Solvency, Unequal Knowledge and bargaining power, Prices, and Promote Social Goals
-
Are Demand and Supply elastic or inelastic?
Both are inelastic, but supply is less inelastic
-
An insurable risk is:
An accidental loss, you're capable of determining when, where and amount of loss, loss exposures not subject to catastrophic potential losses
-
What is an example of plan implemented to promote social goals with insurance regulation?
FAIR plan (can't deny coverage based on location)
-
Solvency deals with:
Consumers suffer greatly if insurer can't pay and can't protect their interest so government does
-
Expected Losses, Expenses of Operation, Allowance for unexpected losses, and Investment earnings are examples of:
Components of Premiums
-
What is the main job of the underwriter?
To prevent adverse selection which leads to subsidization
-
What is the condition of the market when the standards for underwriting are more stringent?
Hard Market
-
This is used to determine an appropriate required rate of return of an asset
CAPM
-
Individual securities use this in relation to expected return and systematic risk of beta
SML
-
What is the equation for expected return?
E(r)= Rf [B(E(Rm) - Rf)]
-
Expected Losses + Operating Expenses + Reserve Unexpected Losses - Investment Earnings = ?
Insurance Premium
-
The first peril in a chain of events that causes a loss is:
Proximate Cause
-
An unplanned reduction of economic values that can be either indirect or direct is a:
Loss
-
This is a condition that increases frequency or severity of loss:
Hazard
-
What is the most important step in the RM Process?
Identify
-
What are the steps of the RM Process?
Identify, Measure, Choose Best Method, Implement, Review/Monitor
-
This position is a rate-maker, calculates dividends, loss reserves, and develops new policies:
Actuary
-
This allows potential investor to determine a firm's expected risk adjusted rate of return: is measured by Beta
CAPM
-
If a man is a salaried claims adjuster who works exclusively for Allstate, they would be a ____________ adjuster.
Staff
-
This type of adjuster protects their clients interest but they get a percentage of money:
Public
-
In underwriting what are some of the reports used to determine eligibility?
Credit Score, Motor Vehicle Record, Agent's Report
-
T/F An Insurance agent's primary compensation is in the form of commissions.
True
-
This job requries one to inform the customer about risk and coverages, provide the insured with incentive to act, and service to insured before and after loss
Agent
-
Does the insurance agent represent the insured or insurer?
Insurer (Company)
-
This job requires one to determine if a loss did happen and to ensure fair and prompt payment of all just claims:
Adjuster
-
The primary purpose of Insurance Regulation is:
To maintain insurer solvency
-
Insurance Brokers are agents of the insurance consumer (insured) or the insurer?
Insured (consumer)
-
T/F: Fair rates should be charged to each risk class to avoid subsidization.
True
-
T/F: Underwriter should select similar risks simlar to what actuary based rates on.
True
-
T/F: One purpose of underwriting is to reduce adverse selection against the insured.
False: reduce adverse selection against the insurer
-
These insurers write all lines of business and are in it to make a profit:
Proprietary Insurers
-
What are two ways to classify insurers according to chartering/licensing?
Foreign & Domestic (Domicile)
-
As individuals we are more concerned with these types of risk:
Pure
-
Why are insurance consumers not well informed?
Believe the rewards of being able to make informed decisions are not worth the effort to obtain the information
-
T/F: Life/Health companies have more cash and invested assets than Property/Casualty insurers.
True
-
Is spending too much on insurance in total a problem with poor risk management execution?
No
-
Who are the primary regulators of Insurance?
States
-
Do states set rates on certain types of insurance policies sold to regulate?
Yes
-
Do regulators examine operations and financial statements to protect their solvency?
yes
-
The Underwriting Cycle's equation is defined as:
Firm's loss ratio + Expense ratio over time
-
If payments for fire losses to homes an example of a cost to society of insurance?
No
-
T/F: The underwriting cycle measures losses and expenses over time
True
-
Is living in a hurricane prone area a peril?
No
-
Is an earthquake a peril?
yes
-
Is losing money in the stock market a pure risk?
No
-
Is losing your wallet a pure risk?
yes
-
Are stock insurance companies profit in nature?
yes
-
What are the questions a claims adjuster would ask?
Did loss happen, Is loss covered, What is the amount of loss?
-
A public claims adjuster is hired and paid by who?
Insured
-
Does Lloyds of Lond cover losses that members can't?
No
-
Do individuals/members have limited personal liability exposure with Lloyds of London?
Yes
-
Lloyd's of London doesn't sell insurance itself: True or False
true
-
Lloyds of London is (proprietary or mutual) insurers?
Proprietary
|
|