Card Set Information
Financial definition of Insurance includes:
Pooling and LLN
What is dealt with in the underwriting process?
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)
Expenses + Incurred Losses/Earned Premium =
Fire, Wind, Heart Disease, and a Car Collision are all examples of:
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?
What type of insurers have policyholders that own the company and receive tax free dividends?
Are Mutual Insurers non profit?
What are the four types of Mutual Insurers?
Factory, General, Class, County
What was the dollar amount for Life/Health Insurance in 2008?
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?
This is used to determine an appropriate required rate of return of an asset
Individual securities use this in relation to expected return and systematic risk of beta
What is the equation for expected return?
E(r)= Rf [B(E(Rm) - Rf)]
Expected Losses + Operating Expenses + Reserve Unexpected Losses - Investment Earnings = ?
The first peril in a chain of events that causes a loss is:
An unplanned reduction of economic values that can be either indirect or direct is a:
This is a condition that increases frequency or severity of loss:
What is the most important step in the RM Process?
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:
This allows potential investor to determine a firm's expected risk adjusted rate of return: is measured by Beta
If a man is a salaried claims adjuster who works exclusively for Allstate, they would be a ____________ adjuster.
This type of adjuster protects their clients interest but they get a percentage of money:
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.
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
Does the insurance agent represent the insured or insurer?
This job requires one to determine if a loss did happen and to ensure fair and prompt payment of all just claims:
The primary purpose of Insurance Regulation is:
To maintain insurer solvency
Insurance Brokers are agents of the insurance consumer (insured) or the insurer?
T/F: Fair rates should be charged to each risk class to avoid subsidization.
T/F: Underwriter should select similar risks simlar to what actuary based rates on.
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:
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:
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.
Is spending too much on insurance in total a problem with poor risk management execution?
Who are the primary regulators of Insurance?
Do states set rates on certain types of insurance policies sold to regulate?
Do regulators examine operations and financial statements to protect their solvency?
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?
T/F: The underwriting cycle measures losses and expenses over time
Is living in a hurricane prone area a peril?
Is an earthquake a peril?
Is losing money in the stock market a pure risk?
Is losing your wallet a pure risk?
Are stock insurance companies profit in nature?
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?
Does Lloyds of Lond cover losses that members can't?
Do individuals/members have limited personal liability exposure with Lloyds of London?
Lloyd's of London doesn't sell insurance itself: True or False
Lloyds of London is (proprietary or mutual) insurers?