Deck 12: Workers Compensation and Alternative Risk Financing

Question 1

Self insurance always saves a firm money.

Answer 1

False

Question 2

High interest rates encourage self-insurance.

Answer 2

True

Question 3

Assigned risk assessment for workers' compensation are usually quite low.

Answer 3

False

Question 4

Payments made to non-related insurers are tax deductible.

Question 5

The IRS is more likely to allows tax deductions for premiums paid to a single parent captive than an association captive.

Question 6

In 2001 private insurers paid 55 percent of all workers' compensation losses.

Question 7

When three-year expected losses are greater than $100,000, most firms should self-insure workers' compensation.

Question 8

When a firm self-insures workers' compensation, management often becomes more claims conscious.

Question 9

The retrospective system of rating is designed for small insureds.

Question 10

As interest rates increase, self-insurance for workers' compensation becomes more attractive.

Question 11

Firms with unstable work forces are candidates to self-insure workers' compensation.

Question 12

Few firms that self-insure workers' compensation purchase excess insurance.

Question 13

Match the descriptions with their terms:

-A/An _________________ is the situation where a worker permanently injures a part of his/her body.

A) assigned risk plan
B) association captive
C) excess insurance
D) experience modification factor
E) float
F) industry captive
G) large deductible plan
H) liquidating damages
I) loss conversion factor
J) offshore captive
K) onshore captive
L) partial permanent injury
M) RMIS
N) single parent captive
O) standard premium
P) workers' compensation insurance

Question 14

Match the descriptions with their terms:

-The _________________ equals the manual premium times the experience modification factor.

A) assigned risk plan
B) association captive
C) excess insurance
D) experience modification factor
E) float
F) industry captive
G) large deductible plan
H) liquidating damages
I) loss conversion factor
J) offshore captive
K) onshore captive
L) partial permanent injury
M) RMIS
N) single parent captive
O) standard premium
P) workers' compensation insurance

Question 15

Match the descriptions with their terms:

-Converted losses equal losses times the _________________.

A) assigned risk plan
B) association captive
C) excess insurance
D) experience modification factor
E) float
F) industry captive
G) large deductible plan
H) liquidating damages
I) loss conversion factor
J) offshore captive
K) onshore captive
L) partial permanent injury
M) RMIS
N) single parent captive
O) standard premium
P) workers' compensation insurance

Question 16

Match the descriptions with their terms:

-A/An _________________ reduces residual market assessment.

A) assigned risk plan
B) association captive
C) excess insurance
D) experience modification factor
E) float
F) industry captive
G) large deductible plan
H) liquidating damages
I) loss conversion factor
J) offshore captive
K) onshore captive
L) partial permanent injury
M) RMIS
N) single parent captive
O) standard premium
P) workers' compensation insurance

Question 17

Match the descriptions with their terms:

-Cash _________________ is the difference between accrued benefits and paid benefits.

A) assigned risk plan
B) association captive
C) excess insurance
D) experience modification factor
E) float
F) industry captive
G) large deductible plan
H) liquidating damages
I) loss conversion factor
J) offshore captive
K) onshore captive
L) partial permanent injury
M) RMIS
N) single parent captive
O) standard premium
P) workers' compensation insurance

Question 18

Match the descriptions with their terms:

-Another name for a risk management information system is _________________.

A) assigned risk plan
B) association captive
C) excess insurance
D) experience modification factor
E) float
F) industry captive
G) large deductible plan
H) liquidating damages
I) loss conversion factor
J) offshore captive
K) onshore captive
L) partial permanent injury
M) RMIS
N) single parent captive
O) standard premium
P) workers' compensation insurance

Question 19

Match the descriptions with their terms:

-_________________ covers the loss of income and medical costs resulting from work-related accidents.

A) assigned risk plan
B) association captive
C) excess insurance
D) experience modification factor
E) float
F) industry captive
G) large deductible plan
H) liquidating damages
I) loss conversion factor
J) offshore captive
K) onshore captive
L) partial permanent injury
M) RMIS
N) single parent captive
O) standard premium
P) workers' compensation insurance

Question 20

Match the descriptions with their terms:

-Workers' compensation laws often give _________________ for a disability such as loss of a leg or an eye.

A) assigned risk plan
B) association captive
C) excess insurance
D) experience modification factor
E) float
F) industry captive
G) large deductible plan
H) liquidating damages
I) loss conversion factor
J) offshore captive
K) onshore captive
L) partial permanent injury
M) RMIS
N) single parent captive
O) standard premium
P) workers' compensation insurance

Question 21

Match the descriptions with their terms:

-Even when firms self-insure, they often purchase ________________.

A) assigned risk plan
B) association captive
C) excess insurance
D) experience modification factor
E) float
F) industry captive
G) large deductible plan
H) liquidating damages
I) loss conversion factor
J) offshore captive
K) onshore captive
L) partial permanent injury
M) RMIS
N) single parent captive
O) standard premium
P) workers' compensation insurance

Question 22

Match the descriptions with their terms:

-The _________________ is the means by which the ratings adjustment takes into consideration the actual loss experience of the firm.

A) assigned risk plan
B) association captive
C) excess insurance
D) experience modification factor
E) float
F) industry captive
G) large deductible plan
H) liquidating damages
I) loss conversion factor
J) offshore captive
K) onshore captive
L) partial permanent injury
M) RMIS
N) single parent captive
O) standard premium
P) workers' compensation insurance

Question 23

Match the descriptions with their terms:

-Under a/an _________________, an insured is rejected by the regular market and is placed in a special plan for such risks.

A) assigned risk plan
B) association captive
C) excess insurance
D) experience modification factor
E) float
F) industry captive
G) large deductible plan
H) liquidating damages
I) loss conversion factor
J) offshore captive
K) onshore captive
L) partial permanent injury
M) RMIS
N) single parent captive
O) standard premium
P) workers' compensation insurance

Question 24

Match the descriptions with their terms:

-_________________ is where a noninsurance company owns 100 percent of an insurance subsidiary.

A) assigned risk plan
B) association captive
C) excess insurance
D) experience modification factor
E) float
F) industry captive
G) large deductible plan
H) liquidating damages
I) loss conversion factor
J) offshore captive
K) onshore captive
L) partial permanent injury
M) RMIS
N) single parent captive
O) standard premium
P) workers' compensation insurance

Question 25

Match the descriptions with their terms:

-A/An _________________ is one that is incorporated in the United States.

A) assigned risk plan
B) association captive
C) excess insurance
D) experience modification factor
E) float
F) industry captive
G) large deductible plan
H) liquidating damages
I) loss conversion factor
J) offshore captive
K) onshore captive
L) partial permanent injury
M) RMIS
N) single parent captive
O) standard premium
P) workers' compensation insurance

Question 26

Match the descriptions with their terms:

-A/An _________________ is one that is incorporated outside the United States.

A) assigned risk plan
B) association captive
C) excess insurance
D) experience modification factor
E) float
F) industry captive
G) large deductible plan
H) liquidating damages
I) loss conversion factor
J) offshore captive
K) onshore captive
L) partial permanent injury
M) RMIS
N) single parent captive
O) standard premium
P) workers' compensation insurance

Question 27

Match the descriptions with their terms:

-A/An _________________ consists of firms from the same industry.

A) assigned risk plan
B) association captive
C) excess insurance
D) experience modification factor
E) float
F) industry captive
G) large deductible plan
H) liquidating damages
I) loss conversion factor
J) offshore captive
K) onshore captive
L) partial permanent injury
M) RMIS
N) single parent captive
O) standard premium
P) workers' compensation insurance

Question 28

Match the descriptions with their terms:

-A/An _________________ is one where members of a trade association create the captive

A) assigned risk plan
B) association captive
C) excess insurance
D) experience modification factor
E) float
F) industry captive
G) large deductible plan
H) liquidating damages
I) loss conversion factor
J) offshore captive
K) onshore captive
L) partial permanent injury
M) RMIS
N) single parent captive
O) standard premium
P) workers' compensation insurance

Question 29

Which of the following items is not part of the retrospective premium?

A) loss conversion factor,
B) basic premium,
C) specific excess.

Question 30

A factor that favors purchasing workers' compensation insurance is

A) small firm,
B) high interest rates,
C) stable work force.

Question 31

Which of the following is not a workers' compensation benefit?

A) rehabilitation benefits,
B) medical benefits,
C) 90 percent of income replacement.

Question 32

In 2002 the only line of insurance that was greater than workers' compensation was

A) commercial multiple line,
B) auto,
C) homeowners'.

Question 33

The workers' compensation policy insures

A) workers' compensation,
B) workers' compensation and employers' liability,
C) workers' compensation, employers' liability, and retrospective liability.

Question 34

The advantages of private commercial insurers over state funds and self-insurance in the workers' compensation field include all but one of the following:

A) Private insurers offer more certainty in handling out-of-state claims than do other methods,
B) The services rendered by private insurers are generally better than those rendered by state funds,
C) Contributions in private insurance are tax deductible,
D) The insured has a choice of how much risk to transfer in private insurance plans,
E) Private insurers do not bother with experience rating and retrospective rating.

Question 35

Most workers' compensation laws are such that

A) all workers are covered,
B) about two-thirds of a workers' income is restored in the event of industrial accident,
C) a worker's benefits are fairly consistent between different states,
D) fairly complete medical services are provided for occupational injuries,
E) none of these is true.

Question 36

Workers' compensation usually replaces

A) 50 percent of an employee's income,
B) 66 2/3 percent of an employee's income,
C) 75 percent of an employee's income,
D) 80 percent of an employee's income.

Question 37

Workers' compensation pays on a

A) tort basis,
B) contributory negligence basis,
C) comparative basis,
D) no-fault basis.

Question 38

A typical payment period of workers' compensation losses is

A) six years,
B) four years,
C) seven years,
D) five years.

Question 39

Which of the following expenses are eliminated by self-insurance?

A) administrative,
B) loss adjusting,
C) loss control,
D) none of these.

Question 40

A high deductible workers' compensation plan

A) reduces assigned risk charges,
B) reduces losses,
C) avoids loss control costs,
D) none of these.

Question 41

Self-insurers must purchase

A) umbrella insurance,
B) excess umbrellas,
C) DIC policy,
D) excess-of-loss reinsurance.

Question 42

Services not needed by a self-insurer are

A) loss control,
B) loss adjusting,
C) claims administration,
D) none of these.

Question 43

Which is not part of a retrospective rating plan?

A) basic premium,
B) loss conversion factor,
C) converted losses,
D) none of these.

Question 44

An advantage of a captive insurer is

A) flexible investment regulation,
B) tax deductions for premiums,
C) no need for insurance,
D) none of these.

Question 45

The major advantage of a captive is

A) lower loss control expenses,
B) lower administrative costs,
C) tax deduction for premiums paid,
D) direct access to reinsurance markets.