Exam 7: Financial Operations of Insurers

Which of the following statements about retrospective rating is true?

A manufacturing company just hired a new risk manager,and she has instituted several employee safety programs.She has persuaded the insurer writing the company's workers compensation insurance to base the premium on the company's actual loss experience during the current period rather than on the company's historical performance.This type of plan is called a(n)

Which of the following statements about property and casualty insurance company operating results is (are)true? I.An insurance company can have a combined ratio greater than 1 (or 100 percent)and still be required to pay income taxes. II.By all measures,the property and casualty insurance industry is highly profitable when compared to other industries.

Which of the following statements is (are)true concerning investments of property and casualty insurers and life insurers? I.Property and casualty insurance companies place greater emphasis on liquidity than do life insurers. II.Life insurance company investments are,on average,of longer duration than property and casualty insurance company investments.

In schedule rating,each building is individually evaluated based on several rating factors.One factor refers to the possibility that the building will be damaged or destroyed by a fire that starts at an adjacent property and spreads to the building.This rating factor is known as

Which of the following statements about judgment rating is true?

JKL Insurance Company reported the following information on its accounting statements last year: Premiums Written $90,000,000 Loss Adjustment Expenses $5,000,000 Underwriting Expenses $30,000,000 Premiums Earned $100,000,000 Incurred Losses $70,000,000 What was JKL's expense ratio last year?

Which of the following statements about schedule rating is (are)true? I.It involves the determination of a basis rate for each exposure,which is then modified by credits or debits. II.It is based on the assumption that certain physical characteristics of the insured's operations will influence the insured's future loss experience.

An Econodeath Insurance Company actuary calculated the present value of the expected death claim the company will pay if it sells whole life insurance to a 30-year-old woman.This value is called the

To protect policyholders,state laws place limitations on a life insurance company's investments.The assets backing interest-sensitive products,such as variable life insurance and variable annuities,are not subject to these restrictions.Assets backing interest-sensitive products are placed in a special account called the life insurer's

Under one method of estimating a loss reserve,the reserve is based on life expectancy,duration of disability,and similar factors.This method of estimating loss reserves is called the

All of the following would appear in the asset section of an insurance company's balance sheet EXCEPT

A strip-mall includes eight identical-sized retail units.All of the units were built at the same time and each has an identical sprinkler system.Unit number two is a dry cleaning business.Unit number three is a bar and grill.Unit number four is a dress shop.The owners of these three units are all insured by the same insurance company,but the property insurance premiums vary significantly.Which of the following rating factors best explains the difference in premiums?

Life insurance policyowners may borrow the cash value from their life insurance policies.Where are life insurance policy loans shown on a life insurance company's financial statements?

Under one type of merit rating,the class or manual rate is adjusted upward or downward based on past loss history.This type of merit rating is called

The portion of an insurance premium allocated to expenses,profit,and a margin for contingencies is called the

JKL Insurance Company reported the following information on its accounting statements last year: Premiums Written $90,000,000 Loss Adjustment Expenses $5,000,000 Underwriting Expenses $30,000,000 Premiums Earned $100,000,000 Incurred Losses $70,000,000 What was JKL's loss ratio last year?

All of the following statements about regulatory objectives of insurance rate making are true EXCEPT

A property and casualty insurer's loss reserve includes estimates for all of the following EXCEPT

All of the following items would appear in the income section of an insurance company's income and expense statement EXCEPT