Exam 7: Financial Operations of Insurers

Which of the following statements about retrospective rating is true?

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

A loss reserve established for each individual claim when it is reported to a property and casualty insurance company is called a(n)

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

Which of the following is an expense for a life insurance company?

XYZ Insurance Company expects $500,000 in claims and loss adjustment expenses for each 1,000 properties that it insures in a certain category of business insurance.What pure premium should XYZ charge for each property insured?

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

A property and liability insurance company's loss reserve and unearned premium reserve are

All of the following statements about class rating are true EXCEPT

MedProf Insurance markets medical malpractice insurance.The company's combined ratio in 2015 was 95.4.Its expense ratio was 25.4.What was the company's loss ratio?

Which of the following items would appear in the revenue section of an insurance company's income and expense statement?

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

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?

All of the following statements about business objectives in designing a rating system are true EXCEPT

Life insurance policyholders 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?

Monopoly Insurance is the only company marketing a certain line of insurance in a state.After complaints from several consumers,the State Insurance Department investigated Monopoly's rates.The regulators determined that Monopoly was taking advantage of being the only insurer offering the line by charging more than double the actuarial cost of the coverage.Which regulatory rating objective was Monopoly violating?

One life insurance company reserve is designed to smooth the company's reported surplus over time by absorbing fluctuations in security prices that are not attributable to changing interest rates.This reserve is called the

Ratemakers at ABC Insurance Company calculated the pure premium to be $280 for a risk they were considering insuring.What is the gross rate for this risk,assuming a 30 percent expense ratio?

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

Which of the following statements about experience rating is (are)true? I.The insured's past loss experience is used to determine the premium for the next policy period. II.Its use is generally limited to small firms whose actual experience lacks credibility.