Question 1

Comparison shopping for insurance is generally not worthwhile since very little price variation is found in either life or property insurance.

Accepted Answer

A) True 
 B)False  False

Question 2

When choosing the proper amount of insurance:

Accepted Answer

A)  one should always insure those exposures that occur most frequently 
B)  one should always take a little bit less insurance than the agent recommends to save some money in the long run 
C)  one should never expose more to loss than one can afford to lose 
D)  one should take the biggest deductible that is available 
A)  one should always insure those exposures that occur most frequently 
B)  one should always take a little bit less insurance than the agent recommends to save some money in the long run 
C)  one should never expose more to loss than one can afford to lose 
D)  one should take the biggest deductible that is available C

Question 3

The insurance commissioner applies the state insurance code to regulate insurance companies and their activities.

Accepted Answer

A) True 
 B)False  True

Question 4

CLU stands for:

Accepted Answer

A)  Chartered Life Underwriter 
B)  Casualty Life Underwriter 
C)  Claims Litigation Underwriter 
D)  Chartered Legal Underwriter 
A)  Chartered Life Underwriter 
B)  Casualty Life Underwriter 
C)  Claims Litigation Underwriter 
D)  Chartered Legal Underwriter

Question 5

All the following are requirements for perfect competition except:

Accepted Answer

A)  a well-established regulatory environment 
B)  numerous sellers, each holding a small market share 
C)  numerous well-informed consumers 
D)  a homogeneous, perfectly substitutable product 
A)  a well-established regulatory environment 
B)  numerous sellers, each holding a small market share 
C)  numerous well-informed consumers 
D)  a homogeneous, perfectly substitutable product

Question 6

All of the following are rights of insurance consumers except:

Accepted Answer

A)  the right to accurate information 
B)  the right to have complaints heard 
C)  the right to affordable prices 
D)  the right to product development and improvement 
A)  the right to accurate information 
B)  the right to have complaints heard 
C)  the right to affordable prices 
D)  the right to product development and improvement

Question 7

Participants in the American insurance market include all of the following except:

Accepted Answer

A)  insurance buyers 
B)  insurance companies 
C)  insurance regulators 
D)  the FDIC 
A)  insurance buyers 
B)  insurance companies 
C)  insurance regulators 
D)  the FDIC

Question 8

CPCU stands for:

Accepted Answer

A)  Certified Property and Casualty Underwriter 
B)  Claims, Property, and Casualty Underwriter 
C)  Chartered Property Casual Underwriter 
D)  Chartered Professional Claims Underwriter 
A)  Certified Property and Casualty Underwriter 
B)  Claims, Property, and Casualty Underwriter 
C)  Chartered Property Casual Underwriter 
D)  Chartered Professional Claims Underwriter

Question 9

Automobile insurance plans, also known as assigned risk plans, are designed to give discounts to good drivers who have had no insurance claims or motor vehicle tickets for at least three years.

Accepted Answer

A) True 
 B)False

Question 10

A lack of insurance for high-risk drivers:

Accepted Answer

A)  makes the insurance market more efficient 
B)  should change their behavior 
C)  makes insurance costs go up 
D)  reduces regulation in the insurance market 
A)  makes the insurance market more efficient 
B)  should change their behavior 
C)  makes insurance costs go up 
D)  reduces regulation in the insurance market

Question 11

Moody's Investors Service provides what type of information about insurers?

Accepted Answer

A)  Financial strength 
B)  Average time it takes them to pay valid claims 
C)  Daily stock price reports 
D)  Complaint history 
A)  Financial strength 
B)  Average time it takes them to pay valid claims 
C)  Daily stock price reports 
D)  Complaint history

Question 12

David and Kathy have asked you about A.M. Best Reports services. They specifically want to know if there are any criticisms of Best's and other rating agencies. You would be correct if you told them:

Accepted Answer

A)  all the agencies tend to agree on the ratings for a given company, so it's difficult to compare them 
B)  ratings are merely estimates, and are no guarantee that the future of the insurer will remain the same 
C)  it only takes one letter grade to sum up the condition of a company 
D)  the ratings firms have almost never made mistakes in their assessments of companies, so they're due to make one any time now 
A)  all the agencies tend to agree on the ratings for a given company, so it's difficult to compare them 
B)  ratings are merely estimates, and are no guarantee that the future of the insurer will remain the same 
C)  it only takes one letter grade to sum up the condition of a company 
D)  the ratings firms have almost never made mistakes in their assessments of companies, so they're due to make one any time now

Question 13

The main thrust of state insurance regulation with respect to the consumer has been to protect consumers from abusive practices, and to protect them from insolvent insurers.

Accepted Answer

A) True 
 B)False

Question 14

All the following are true concerning FAIR (Fair Access to Insurance Requirements) plans except:

Accepted Answer

A)  they are one possible solution to the insurance availability problem 
B)  they are found in only four states 
C)  they are designed to deal with unavailability of property insurance 
D)  they have not been profitable in most states most years 
A)  they are one possible solution to the insurance availability problem 
B)  they are found in only four states 
C)  they are designed to deal with unavailability of property insurance 
D)  they have not been profitable in most states most years

Question 15

Prior to September 11, 2001, property insurance policies:

Accepted Answer

A)  covered terrorism 
B)  excluded terrorism from coverage 
C)  covered war 
D)  were very expensive 
A)  covered terrorism 
B)  excluded terrorism from coverage 
C)  covered war 
D)  were very expensive

Question 16

Mr. Murray has asked you to help him choose an insurance company. Which of the following criteria would you not recommend that he take into consideration?

Accepted Answer

A)  Insurer's financial strength 
B)  Insurer's claims service 
C)  Insurer's service both before and after a loss 
D)  The recommendation of at least two different insurance agents 
A)  Insurer's financial strength 
B)  Insurer's claims service 
C)  Insurer's service both before and after a loss 
D)  The recommendation of at least two different insurance agents

Question 17

Which of the following statements about joint underwriting associations is correct?

Accepted Answer

A)  All states have joint underwriting associations. 
B)  All those who want to get insurance can join. 
C)  Insurance companies charge the involuntary market losses to the voluntary market. 
D)  They provide assigned risk plans. 
A)  All states have joint underwriting associations. 
B)  All those who want to get insurance can join. 
C)  Insurance companies charge the involuntary market losses to the voluntary market. 
D)  They provide assigned risk plans.

Question 18

The text associates low cost insurance with a bargain.

Accepted Answer

A) True 
 B)False

Question 19

The efficient insurance market requires all of the following conditions except:

Accepted Answer

A)  numerous sellers and buyers 
B)  well-informed consumers 
C)  numerous purchase substitutes (homogeneity) 
D)  a government subsidy for lower-income citizens 
A)  numerous sellers and buyers 
B)  well-informed consumers 
C)  numerous purchase substitutes (homogeneity) 
D)  a government subsidy for lower-income citizens

Question 20

Finding the lowest price is the first responsibility of the smart insurance consumer.

Accepted Answer

A) True 
 B)False

Exam 9: Insurance Markets: Economics and Issues

Comparison shopping for insurance is generally not worthwhile since very little price variation is found in either life or property insurance.

When choosing the proper amount of insurance:

The insurance commissioner applies the state insurance code to regulate insurance companies and their activities.

CLU stands for:

All the following are requirements for perfect competition except:

All of the following are rights of insurance consumers except:

Participants in the American insurance market include all of the following except:

CPCU stands for:

Automobile insurance plans, also known as assigned risk plans, are designed to give discounts to good drivers who have had no insurance claims or motor vehicle tickets for at least three years.

A lack of insurance for high-risk drivers:

Moody's Investors Service provides what type of information about insurers?

David and Kathy have asked you about A.M. Best Reports services. They specifically want to know if there are any criticisms of Best's and other rating agencies. You would be correct if you told them:

The main thrust of state insurance regulation with respect to the consumer has been to protect consumers from abusive practices, and to protect them from insolvent insurers.

All the following are true concerning FAIR (Fair Access to Insurance Requirements) plans except:

Prior to September 11, 2001, property insurance policies:

Mr. Murray has asked you to help him choose an insurance company. Which of the following criteria would you not recommend that he take into consideration?

Which of the following statements about joint underwriting associations is correct?

The text associates low cost insurance with a bargain.

The efficient insurance market requires all of the following conditions except:

Finding the lowest price is the first responsibility of the smart insurance consumer.

Introduction to Enterprise Risk Management and Insurance

Risk Identification

Risk Assessment and Pooling

Risk-Handling Techniques: Loss Control, Risk Transfer, and Loss Financing

Risk-Handling Techniques: Diversification and Hedging

Fundamentals of Insurance

Insurable Perils and Insuring Organizations

Insurance Functions

Insurance Regulation

Insurance Contracts

The Personal Auto Policy

Homeowners Insurance

Professional Financial Planning

Life Insurance Policies

Standard Life Insurance Contract Provisions and Options

Annuities

Health Insurance and Disability Income

Employee Benefits

Social Security

Unemployment and Workers Compensation Insurance

Commercial Property Insurance

Commercial Liability Insurance

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