Question 1

Which of the following best describes a pure risk?

Accepted Answer

A) an uncontrollable risk that cannot be insured 
B) the outcome will either be a loss or no change 
C) the outcome will be either a loss or a gain 
D) a risk with three possible outcomes 
A) an uncontrollable risk that cannot be insured 
B) the outcome will either be a loss or no change 
C) the outcome will be either a loss or a gain 
D) a risk with three possible outcomes

Question 2

If insurance did not exist in the United States,which of the following might reasonably be expected to happen?

Accepted Answer

A) Banks would lower their interest rates on car loans 
B) Moral hazards would increase 
C) Morale hazards would decrease 
D) In general, only small businesses would be able to survive 
A) Banks would lower their interest rates on car loans 
B) Moral hazards would increase 
C) Morale hazards would decrease 
D) In general, only small businesses would be able to survive

Question 3

Warren is the president of The Huge Insurance Company. His Vice-President in charge of Finance comes to him one day and says "Warren,our combined ratio for the year is 105%." Warren replies,"Let's party!" Why isn't Warren upset about the high combined ratio?

Accepted Answer

A) The company probably made enough money on its investments to make up for the underwriting losses 
B) The company has actually made a 5% profit on its insurance business 
C) The combined ratio really isn't that important...it only measures the combined productivity of all regional offices the company owns 
D) The combined ratio is not an important indicator of underwriting results 
E) The combined ratio is an important indicator of investment results 
A) The company probably made enough money on its investments to make up for the underwriting losses 
B) The company has actually made a 5% profit on its insurance business 
C) The combined ratio really isn't that important...it only measures the combined productivity of all regional offices the company owns 
D) The combined ratio is not an important indicator of underwriting results 
E) The combined ratio is an important indicator of investment results

Question 4

Increased predictability means lower objective risk.

Accepted Answer

A) True 
 B)False

Question 5

Speculative risks refer to those events which can only result in loss.

Accepted Answer

A) True 
 B)False

Question 6

If insurance did not exist in the United States,which of the following might reasonably be expected to happen?

Accepted Answer

A) Banks would lower their interest rates on home mortgages and auto loans 
B) Moral hazards would decrease 
C) Morale hazards would decrease 
D) In general, only large businesses would be able to survive 
A) Banks would lower their interest rates on home mortgages and auto loans 
B) Moral hazards would decrease 
C) Morale hazards would decrease 
D) In general, only large businesses would be able to survive

Question 7

Examine the following list of "risks." Determine which of these are "pure risks"
I.The risk that your antique Corvette will depreciate in market value
II.The risk that you will have a collision in your Corvette,thus causing you to spend thousands of dollars in repair costs
III.The risk that someone will steal your Corvette
IV.The risk that you will buy a house and lightning will strike your roof,thus causing you to have to purchase a new roof
V. The risk that you will invest your life savings in a business venture that fails,thus causing you to lose your entire investment

Accepted Answer

A) I, II, III, IV, and V 
B) I, II, and IV 
C) I, II, III, and IV 
D) II, III, and IV 
A) I, II, III, IV, and V 
B) I, II, and IV 
C) I, II, III, and IV 
D) II, III, and IV

Question 8

Which of the following is not a peril?

Accepted Answer

A) Car collision 
B) Vandalism 
C) Earthquake 
D) Faulty wiring 
A) Car collision 
B) Vandalism 
C) Earthquake 
D) Faulty wiring

Question 9

The primary reason the insurance mechanism functions successfully is the:

Accepted Answer

A) existence of adverse selection 
B) ease with which underwriting results can be measured 
C) predictability of losses via the law of large numbers 
D) existence of many non-industrial nations 
A) existence of adverse selection 
B) ease with which underwriting results can be measured 
C) predictability of losses via the law of large numbers 
D) existence of many non-industrial nations

Question 10

Which one of the following losses is an indirect loss?

Accepted Answer

A) damage to a car when a tree falls on it 
B) loss caused by an arsonist who burns down a building to collect insurance proceeds 
C) monetary losses due to the inability to produce and sell goods when a machine is destroyed 
D) monetary losses due to a legal liability claim 
A) damage to a car when a tree falls on it 
B) loss caused by an arsonist who burns down a building to collect insurance proceeds 
C) monetary losses due to the inability to produce and sell goods when a machine is destroyed 
D) monetary losses due to a legal liability claim

Which of the following best describes a pure risk?

If insurance did not exist in the United States,which of the following might reasonably be expected to happen?

Warren is the president of The Huge Insurance Company. His Vice-President in charge of Finance comes to him one day and says "Warren,our combined ratio for the year is 105%." Warren replies,"Let's party!" Why isn't Warren upset about the high combined ratio?

Increased predictability means lower objective risk.

Speculative risks refer to those events which can only result in loss.

If insurance did not exist in the United States,which of the following might reasonably be expected to happen?

Which of the following is not a peril?

The primary reason the insurance mechanism functions successfully is the:

Which one of the following losses is an indirect loss?

Defining the Insurable Event

Risk Management

Financial Services Companies

Insurance Occupations

the Insurance Market: the Economic Problem

Insurance Regulation

Insurance Contracts

Basic Property and Liability Insurance Contracts

Homeowners Insurance

the Personal Auto Policy

Professional Financial Planning

Life Insurance Policies

Standard Life Insurance Contract Provisions And Options

Annuities

Medical Expense and Disability Insurance

Advanced Topics in Risk Management

Commercial Property Insurance

Commercial Liability Insurance

Bonding,Crime Insurance and Reinsurance

Employee Benefits

Social Security

Unemployment and Workers Compensation Insurance

Filters

Exam 1: Fundamentals and Terminology

Which of the following best describes a pure risk?

If insurance did not exist in the United States,which of the following might reasonably be expected to happen?

Warren is the president of The Huge Insurance Company. His Vice-President in charge of Finance comes to him one day and says "Warren,our combined ratio for the year is 105%." Warren replies,"Let's party!" Why isn't Warren upset about the high combined ratio?

Increased predictability means lower objective risk.

Speculative risks refer to those events which can only result in loss.

If insurance did not exist in the United States,which of the following might reasonably be expected to happen?

Which of the following is not a peril?

The primary reason the insurance mechanism functions successfully is the:

Which one of the following losses is an indirect loss?

Defining the Insurable Event

Risk Management

Financial Services Companies

Insurance Occupations

the Insurance Market: the Economic Problem

Insurance Regulation

Insurance Contracts

Basic Property and Liability Insurance Contracts

Homeowners Insurance

the Personal Auto Policy

Professional Financial Planning

Life Insurance Policies

Standard Life Insurance Contract Provisions And Options

Annuities

Medical Expense and Disability Insurance

Advanced Topics in Risk Management

Commercial Property Insurance

Commercial Liability Insurance

Bonding,Crime Insurance and Reinsurance

Employee Benefits

Social Security

Unemployment and Workers Compensation Insurance

Filters