INS21: Mock Exam! Trivia Quiz

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The claim handling process includes
- Investigating.
- Evaluating.
- Negotiation.
- All of the above.

About This Quiz

INS21: Mock Exam! Trivia Quiz tests knowledge on insurance policies, coverage, and premium calculations. Key skills assessed include understanding of policy clauses, rate types, and pro-rata calculations. Essential for learners in business and finance.

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2.

The parties that might be affected by a property loss include
- Users of the property
- The property owner.
- Secured lenders of money to the property owner.
- All of the above.
Correct Answer

A. All of the above.

Explanation

All of the parties mentioned in the options can be affected by a property loss. Users of the property, such as tenants or customers, may lose access to the property or suffer damage to their personal belongings. The property owner may experience financial loss, damage to their investment, or potential legal liabilities. Secured lenders who have provided money to the property owner may face the risk of not being able to recover their loan if the property is damaged or destroyed. Therefore, all three parties mentioned can be affected by a property loss.

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3.

Implementation of the chosen Risk management technique requires that risk manager make decisions concerning:
- What should be done
- Who should be responsible
- How to allocate the costs of the program
- All the above
Correct Answer

A. All the above

Explanation

The implementation of the chosen Risk management technique requires the risk manager to make decisions regarding what actions should be taken to mitigate the risks, who should be responsible for carrying out these actions, and how to allocate the costs associated with the risk management program. All of these decisions are crucial in effectively managing and addressing risks within an organization.

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4.

State insurance departments:
- Regulate insurance rates to protect consumers from inadequate, excessive, or unfairly discriminatory rates.
- Are located in most but not all states
- Provide a source of investment funds.
- Answer to the federal government insurance department.
Correct Answer

A. Regulate insurance rates to protect consumers from inadequate, excessive, or unfairly discriminatory rates.

Explanation

State insurance departments regulate insurance rates to protect consumers from inadequate, excessive, or unfairly discriminatory rates. This means that they have the authority to review and approve insurance rates to ensure that they are fair and reasonable for consumers. This regulation helps to prevent insurance companies from charging excessively high rates or denying coverage based on discriminatory factors. By doing so, state insurance departments play a crucial role in safeguarding consumers' interests and ensuring that insurance remains accessible and affordable for all.

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5.

Reinsurance is a contractual agreement:
- In which one insurer transfers some or all of its loss exposures to another insurer.
- That is formed as a subsidiary of its parent company for the purpose of writing insurance on the parent company.
- That ideally insures large numbers of similar exposure units.
- That insures through an attorney-in-fact.
Correct Answer

A. In which one insurer transfers some or all of its loss exposures to another insurer.

Explanation

Reinsurance is a contractual agreement in which one insurer transfers some or all of its loss exposures to another insurer. This means that the original insurer, known as the ceding insurer, transfers the risk of potential losses to a reinsurer. The reinsurer then assumes responsibility for paying a portion of any claims that may arise from the original insurance policies. This arrangement helps the ceding insurer reduce its exposure to large losses and stabilize its financial position. It also allows the reinsurer to diversify its risk portfolio and earn premium income from assuming the transferred risks.

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1
6.

An independent agent
- Usually represents several unrelated insurance companies
- Is salaried by the insurance company.
- Uses only mail, telephone, or Internet to solicit business
- Usually does not own its expiration list.
Correct Answer

A. Usually represents several unrelated insurance companies

Explanation

An independent agent usually represents several unrelated insurance companies, meaning they have the ability to offer a variety of insurance options to their clients. This allows them to provide a wider range of coverage and find the best fit for each individual's needs. Unlike agents who are salaried by a specific insurance company, independent agents work on a commission basis, earning a percentage of the premiums they sell. They typically use various methods such as mail, telephone, or the internet to solicit business, making it convenient for clients to connect with them. Additionally, independent agents usually do not own their expiration list, which refers to the list of clients whose policies are about to expire.

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7.

Ideally insurable loss exposures include:
- Losses those are accidental.
- Losses those are definite and measurable
- A large number of similar exposure units.
- All of the above.
Correct Answer

A. All of the above.

Explanation

The ideal insurable loss exposures should meet certain criteria. They should be accidental, meaning they occur unexpectedly and unintentionally. They should also be definite and measurable, allowing for a clear determination of the amount of loss. Additionally, there should be a large number of similar exposure units, meaning there is a sufficient pool of potential insureds to spread the risk. Therefore, all of the given options - losses that are accidental, losses that are definite and measurable, and a large number of similar exposure units - should be present for an ideal insurable loss exposure.

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8.

Producers can be compensated by
- Salary.
- Commissions.
- Contingency commissions.
- All of the above.
Correct Answer

A. All of the above.

Explanation

Producers can be compensated through various means, including a salary, commissions, and contingency commissions. A salary is a fixed amount paid to producers on a regular basis. Commissions are a percentage of sales or profits that producers earn based on their performance. Contingency commissions are additional payments that producers receive if they meet certain targets or objectives. Therefore, the correct answer is "All of the above" as producers can be compensated through salary, commissions, and contingency commissions.

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1
9.

Valuation provisions may include
- Replacement cost.
- Actual cash value.
- Agreed value.
- All of the above.
Correct Answer

A. All of the above.

Explanation

Valuation provisions refer to the methods used to determine the value of an asset or property. Replacement cost is the cost to replace the asset with a similar one, while actual cash value is the current market value of the asset. Agreed value is a value that is agreed upon by the parties involved. Therefore, all of the options mentioned - replacement cost, actual cash value, and agreed value - can be considered as valuation provisions.

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1
10.

If the insurer cancels the policy, the return premium will be calculated usually on a
- Short-rate basis.
- Flat Basis.
- Pro-rata basis.
- Penalty basis.
Correct Answer

A. Pro-rata basis.

Explanation

When an insurer cancels a policy, the return premium is calculated on a pro-rata basis. This means that the premium refund will be calculated based on the portion of the policy period that remains unused. For example, if a policy is cancelled halfway through its term, the insured will receive a refund for the remaining half of the premium. This method ensures a fair and proportional refund based on the time the policy was in effect.

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11.

Marketing management
- Provides producer supervision.
- Provides producer motivation.
- Provides product management and development
- All of the above.
Correct Answer

A. All of the above.

Explanation

The correct answer is "All of the above" because marketing management encompasses a wide range of activities. It involves supervising producers to ensure that they meet the desired standards and objectives. It also includes motivating producers to perform at their best and achieve the desired results. Additionally, marketing management involves managing and developing products to meet the needs and preferences of the target market. Therefore, all the options mentioned (producer supervision, producer motivation, and product management and development) are part of marketing management.

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12.

A dispute between neighbours can turn into a never-ending feud. Which form of law provides a forum for hearing disputes between private parties?
- Criminal law
- Statutory law
- Constitutional law
- Civil law
Correct Answer

A. Civil law

Explanation

Civil law provides a forum for hearing disputes between private parties. Unlike criminal law which deals with offenses against the state, civil law focuses on resolving conflicts between individuals or organizations. In a dispute between neighbors, civil law would be the appropriate form of law to address the issue and seek a resolution. This could involve matters such as property disputes, contract disputes, or personal injury claims. Civil law aims to provide a fair and just resolution to conflicts and restore harmony between the parties involved.

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13.

The use of standard forms by insurers leads to a more
- Consistent interpretation of insurance policies
- Creative interpretation of insurance policies.
- Conservative interpretation of insurance policies.
- Coordinated interpretation of insurance policies.
Correct Answer

A. Consistent interpretation of insurance policies

Explanation

The use of standard forms by insurers helps ensure that insurance policies are interpreted consistently. This means that there is less room for subjective or creative interpretation of the policies, and instead, a more uniform and standardized approach is taken. This can be beneficial for both insurers and policyholders, as it reduces the potential for disputes or misunderstandings regarding policy coverage and terms.

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14.

You have bought a flame red high performance engine car. You were surprised that despite your car has so many great safety features similar to other brand cars, your insurance company charged you more than what it was charging for other brand cars. What could be the reason?
- The red color cars are alway percieved to recieved more traffic tickets
- The high performance engine makes your car engine more prone to theft
- The Insurance company battling a case against your car brand company
- The Insurance company had some secret dealings with the rival company
Correct Answer

A. The high performance engine makes your car engine more prone to theft

Explanation

The high performance engine in your car makes it more attractive to thieves, which increases the risk of theft. Insurance companies take into consideration the likelihood of a car being stolen when determining insurance premiums. Therefore, your insurance company charged you more because the high performance engine in your car increases the risk of theft compared to other brand cars.

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1
15.

Insurance is a risk management techinque called
- Avoidance
- Transfer
- Loss Control
- Retention
Correct Answer

A. Transfer

Explanation

Transfer is the correct answer because insurance is a risk management technique that involves transferring the risk of potential losses from an individual or organization to an insurance company. By purchasing insurance, individuals or organizations transfer the financial burden of potential losses to the insurance company in exchange for paying premiums. This allows them to protect themselves against the financial impact of unexpected events or losses.

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2
16.

N D Tiwari has been stopped by LAPD for speeding and a ticket has been issued. Which statement is true?
- Tiwari's insurance company will automatically be notified by the state.
- Tiwari's insurance company will review his driving record and learn about the violation when his policy comes up for renewal.
- Tiwari's insurance company will automatically raise his rates.
- Nothing will happen. The insurance company cannot find out about the ticket issued to Tiwari.
Correct Answer

A. Tiwari's insurance company will review his driving record and learn about the violation when his policy comes up for renewal.

Explanation

When N D Tiwari is stopped by the LAPD for speeding and issued a ticket, his insurance company will not be automatically notified by the state. However, his insurance company will review his driving record when his policy comes up for renewal and learn about the violation. This means that the insurance company will become aware of the ticket and may potentially raise his rates based on the violation.

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17.

Jim canceled his auto policy 315 days after the inception date. The one-year premium is $1,095. Assuming that a year is 365 days, what is Jim's pro rata premium refund?
- $50
- $150
- $780
- $945
Correct Answer

A. $150

Explanation

Jim's pro rata premium refund would be $150. This is because he canceled his policy 315 days after the inception date, which is 50 days before the policy expires. Since the premium is for a one-year period, Jim would be entitled to a refund for the remaining 50 days of coverage that he did not use. Therefore, the refund would be calculated as 50/365 * $1,095 = $150.

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2
18.

A ________ is a diagram that depicts the flow of a particular operation or set of related operations within an organization.
- Process char
- Flow Chart
- Data Chart
- Sequence Chart
Correct Answer

A. Flow Chart

Explanation

A flow chart is a visual representation that shows the sequence of steps or actions involved in a process or set of related operations within an organization. It uses various symbols and arrows to illustrate the flow of information or materials from one step to another. This diagram helps to understand the logical order of operations, identify bottlenecks or inefficiencies, and communicate the process to others.

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1
19.

David Beckham wants to Insure his feet to the tune of 10 million dollars each. Which of the following Insurance company will he most likely go to?
- Bankers mutual Insurance company
- Citi stock Insurance company
- Prudential Life Insurance company
- Lords Excess and Surplus Insurance ltd.
Correct Answer

A. Lords Excess and Surplus Insurance ltd.

Explanation

David Beckham would most likely go to Lords Excess and Surplus Insurance ltd. because they specialize in providing coverage for unique and high-value assets, such as body parts. Insuring his feet for $10 million each would fall under this category, making Lords Excess and Surplus Insurance ltd. the most suitable option for Beckham.

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0
20.

In insurance terminology, which of the following refers to a book of business?
- All policies sold by an insurance company or agency
- All policies in a particular territory
- All policies providing a particular type of insurance
- All the above
Correct Answer

A. All the above

Explanation

A book of business in insurance refers to all policies sold by an insurance company or agency. This includes all policies in a particular territory as well as all policies providing a particular type of insurance. Therefore, the correct answer is "All the above".

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21.

Out-of-court settlements are
- Settled by the court system.
- Advantageous to the insurer because they eliminate uncertainty about the outcome of the claim.
- Not covered by liability coverage policies.
- Included in punitive damages.
Correct Answer

A. Advantageous to the insurer because they eliminate uncertainty about the outcome of the claim.

Explanation

Out-of-court settlements are advantageous to the insurer because they eliminate uncertainty about the outcome of the claim. This means that by settling the claim outside of court, the insurer can avoid the risk of a potentially unfavorable judgment or higher damages being awarded. Settling out of court allows the insurer to have more control over the settlement amount and avoid the time and expense of a lengthy legal process. It also provides a quicker resolution for both parties involved in the claim.

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1
22.

Under tort law, an individual or organization can face a claim for legal liability on the basis of
- Negligence.
- Intentional torts.
- Absolute liability.
- All of the above.
Correct Answer

A. All of the above.

Explanation

Under tort law, an individual or organization can face a claim for legal liability on the basis of negligence, intentional torts, or absolute liability. Negligence refers to the failure to exercise reasonable care, resulting in harm or injury to another party. Intentional torts involve deliberate actions that cause harm or injury to another party, such as assault or defamation. Absolute liability holds a person or organization responsible for any harm or injury caused, regardless of fault or intent. Therefore, all of the options mentioned - negligence, intentional torts, and absolute liability - can lead to a claim for legal liability under tort law.

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23.

If you don’t understand all of the terms in your auto insurance policy, what should you do?
- Contact your insurance agent, who is responsible for servicing your policy.
- Wait until you need to file a claim to contact anyone.
- Contact your state’s department of insurance.
- Both A and C.
Correct Answer

A. Both A and C.

Explanation

If you don't understand all of the terms in your auto insurance policy, you should contact your insurance agent, who is responsible for servicing your policy. They can provide you with clarification and answer any questions you may have. Additionally, you can also contact your state's department of insurance for further assistance and guidance. Both options (A and C) are recommended to ensure a clear understanding of your policy.

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1
24.

A Captive Insurance company is ______________ .
- The insurance company that accepts the loss exposure of the primary Insurer.
- The insurer that is formed as a subsidiary of its own parent company, organization or group, for the purpose of writing all or part of the insurance on the parent company or companies.
- An insurer that is owned by its policy holders and formed as a corporation for the purpose of providing insurance to its policy holder-owners.
- A federal government funded, state controlled insurance organization providing insurance to unusual Insurance needs.
Correct Answer

A. The insurer that is formed as a subsidiary of its own parent company, organization or group, for the purpose of writing all or part of the insurance on the parent company or companies.

Explanation

A Captive Insurance company is an insurer that is formed as a subsidiary of its own parent company, organization, or group, for the purpose of writing all or part of the insurance on the parent company or companies. This means that the captive insurance company is created by the parent company to provide insurance coverage specifically for the parent company's risks. It allows the parent company to have more control over its insurance coverage and potentially save costs by retaining the risk within the organization.

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1
25.

Which of the following is not one of the primary objectives of Insurance regulation?
- Rate regulation
- Solvency surveillance
- Consumer protection
- Market capitalization of Insurance companies
Correct Answer

A. Market capitalization of Insurance companies

Explanation

Insurance regulation aims to ensure the stability and integrity of the insurance industry, protect policyholders, and maintain fair competition. Rate regulation, solvency surveillance, and consumer protection are all primary objectives of insurance regulation as they directly contribute to these goals. However, market capitalization of insurance companies is not a primary objective of insurance regulation. While market capitalization can be influenced by regulatory measures, it is primarily determined by market forces and investor confidence, rather than being a direct objective of regulation.

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26.

Roadside assistance plans provides services EXCEPT
- 24 Hours emergency towing services
- 24 Hours lost key and lockout services
- 24 Hours battery services
- 24 Car higene services
Correct Answer

A. 24 Car higene services

Explanation

The correct answer is 24 Car higene services. Roadside assistance plans typically offer services such as emergency towing, lost key and lockout assistance, and battery services. However, car hygiene services are not typically included in roadside assistance plans. These plans are primarily focused on providing immediate assistance in emergency situations, rather than maintenance or cleaning services for the vehicle.

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2
27.

Tom Hanks has been insured by Farmers Insurance company for more than 60 days. Farmers insurance cannot cancel Tom's policy under which of the following circumstances?
- Tom gets his first speeding ticket.
- Tom does not pay the premiums.
- Tom lied on his insurance application.
- Tom's license has been suspended.
Correct Answer

A. Tom gets his first speeding ticket.

Explanation

Tom Hanks has been insured by Farmers Insurance for more than 60 days, which means that his policy has already been in effect for a significant period of time. The insurance company cannot cancel his policy based on the fact that he gets his first speeding ticket because this is a common occurrence and does not violate any terms or conditions of the policy. However, the other options such as not paying premiums, lying on the insurance application, or having a suspended license may be valid reasons for the insurance company to cancel Tom's policy.

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28.

Match the Column A elements with Column B elements? Column A Column B 1. Mutual Insurance Company A. Salaried employees of the Insurance companies. 2. Direct Writing Agents B. Owned by the policy holders. 3. Independent Adjusters C. Handle claims for the Insurance companies for a fee. 4. Choicepoint D. Investors own the association 5. Lloyd's of London E. CLUE report
- 1C, 2E, 3A, 4B, 5D
- 1B, 2E, 3C, 4A, 5D
- 1B, 2A, 3C, 4E, 5D
- 1D, 2A, 3D, 4E, 5C
Correct Answer

A. 1B, 2A, 3C, 4E, 5D
29.

A ratemaking concept through which actuaries base rates on actuarially calculated loss experience and place insureds with similar characteristics into the same rating class is
- Social equity
- Flex rating laws
- Actuarial equity
- Open competition
Correct Answer

A. Actuarial equity

Explanation

Actuarial equity is a ratemaking concept where rates are determined based on actuarially calculated loss experience. This means that the rates are set based on the statistical analysis of past claims and the expected future claims for a particular group of insured individuals. Insureds with similar characteristics are placed into the same rating class, ensuring fairness and consistency in the pricing of insurance policies. This approach helps to ensure that premiums are accurately reflective of the risk associated with each insured individual or group.

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30.

Which one of the following in the risk management process is inaccurate? 1. Identifying and analyzing loss exposures. 2. Gathering information to support assumptions about the loss exposures. 3. Selecting the most appropriate risk management techniques. 4. Implementing the chosen techniques in a risk management program .
- 1
- 2
- 3
- 4
Correct Answer

A. 2

Explanation

The risk management process involves identifying and analyzing loss exposures, gathering information to support assumptions about the loss exposures, selecting the most appropriate risk management techniques, and implementing the chosen techniques in a risk management program. Therefore, the statement that "Gathering information to support assumptions about the loss exposures" is inaccurate.

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1
31.

Why would an underwriter modify the rate charged for the coverage provided when evaluating an application for insurance?
- Because treaty reinsurance in unavailable for the exposures indicated
- To address the moral hazards the underwriter identified during investigation
- To better match the rate to the characteristics of the risk
- Because the applicant is not acceptable for coverage
Correct Answer

A. To better match the rate to the characteristics of the risk

Explanation

The underwriter may modify the rate charged for the coverage provided when evaluating an application for insurance in order to better match the rate to the characteristics of the risk. This means that the underwriter wants to ensure that the premium charged for the insurance policy accurately reflects the level of risk associated with insuring the applicant. By modifying the rate, the underwriter can adjust the premium to align with the specific characteristics of the risk, such as the probability of a claim occurring and the potential severity of the claim. This helps to ensure that the premium charged is fair and appropriate for the level of risk being assumed by the insurer.

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32.

A guaranty fund is:
- Created by the federal government for the purpose of providing insurance for the social good.
- The primary funding for the Fair Access to Insurance Requirements program.
- A state fund that provides a system to pay the claims of insolvent insurers.
- Managed by the National Association of Insurance Commissioners.
Correct Answer

A. A state fund that provides a system to pay the claims of insolvent insurers.

Explanation

A guaranty fund is a state fund that provides a system to pay the claims of insolvent insurers. This means that if an insurance company becomes insolvent and is unable to fulfill its obligations to policyholders, the guaranty fund steps in to ensure that policyholders are still able to receive the benefits they are entitled to. The fund acts as a safety net for policyholders and helps to maintain the stability and integrity of the insurance industry.

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33.

Which of the below is NOT a step in Risk management process
- Identifying and analyzing loss exposures
- Examining risk management techniques
- Implementing the Risk
- Selecting the most appropriate techniques
Correct Answer

A. Implementing the Risk

Explanation

The step "Implementing the Risk" is not a part of the risk management process. Risk management involves identifying and analyzing potential risks, examining different risk management techniques, and selecting the most appropriate ones to mitigate or manage those risks. However, implementing the risk itself is not a step in the process. The focus is on implementing the chosen risk management techniques, not the risk itself.

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34.

A business installs a sprinkler system to reduce the amount of fire damage from potential fires. What kind of Risk management technique is this
- Loss Reduction
- Loss Retention
- Loss Prevention
- None of the above
Correct Answer

A. Loss Reduction

Explanation

The installation of a sprinkler system is a loss reduction technique in risk management. By installing the sprinkler system, the business aims to minimize the potential damage caused by fires. Loss reduction techniques focus on reducing the severity or impact of a potential loss. In this case, the sprinkler system helps to mitigate the risk of fire damage by quickly extinguishing fires and limiting their spread, thereby reducing the potential loss of property and assets.

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35.

Which of the following is one of the largest Mutual P & C Insurance companies operating in North America?
- State Farm Insurance
- Citi Group Insurance
- 21st Insurance
- Allianz AG
Correct Answer

A. State Farm Insurance

Explanation

: State Farm Insurance is one of the largest mutual Property & Casualty (P&C) insurance companies operating in North America. As a mutual insurance company, it is owned by its policyholders rather than shareholders, and its primary focus is providing insurance products to individuals and families. State Farm offers a wide range of insurance services, including auto, home, life, and other property and casualty coverage. While other large insurance companies operate in North America, State Farm's status as a mutual insurer sets it apart, emphasizing customer ownership and providing policyholders with dividends or benefits based on the company's financial performance. This structure contrasts with publicly traded companies, which have shareholders who receive dividends from profits.

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36.

What is IRDA and which country does it belong to?
- International Regulatory and Development authority, USA
- Insurance Rates and development Association, Canada.
- Insurance Regulatory and Development Authority (IRDA), India.
- Internal Revenue Department of America, USA.
Correct Answer

A. Insurance Regulatory and Development Authority (IRDA), India.

Explanation

The correct answer is Insurance Regulatory and Development Authority (IRDA), India. IRDA is a regulatory body that oversees and regulates the insurance industry in India. It is responsible for promoting and protecting the interests of policyholders, ensuring the stability and growth of the insurance market, and maintaining fair and transparent practices within the industry.

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0
37.

Which one of the following statements is true regarding types of rates used by insurers?
- Class rates apply to all insureds in the same rating category.
- Merit rating plans are also called manual rating plans.
- Class rates are not based on loss statistics.
- Class rates reflect loss characteristics of a particular insured.
Correct Answer

A. Class rates apply to all insureds in the same rating category.

Explanation

Class rates apply to all insureds in the same rating category. This means that all individuals or entities within a specific rating category will be charged the same rate for insurance coverage. The rating category is determined based on certain characteristics or factors that are common among the insureds, such as occupation, location, or type of business. Class rates ensure that individuals or entities with similar risk profiles are charged similar premiums, providing a fair and equitable pricing structure for insurance coverage.

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2
38.

A "___________" letter from your insurer is a notice that even though the company is proceeding to handle your claim, depending on what happens, certain losses might not be covered by the terms of the policy. By such a letter, the company preserves its right to deny coverage at a later date based on the terms of the policy.
- Preservation of rights
- Reservation of rights
- Denial of rights
- None of the above
Correct Answer

A. Reservation of rights

Explanation

A "reservation of rights" letter from your insurer is a notice that even though the company is proceeding to handle your claim, depending on what happens, certain losses might not be covered by the terms of the policy. By such a letter, the company preserves its right to deny coverage at a later date based on the terms of the policy.

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39.

Binding authority
- Is usually granted in the agency contract
- Is granted by the agent to the principal.
- Is always oral.
- Is granted by the reinsurance treaty.
Correct Answer

A. Is usually granted in the agency contract

Explanation

Binding authority is typically granted in the agency contract between the principal and the agent. This contract outlines the terms and conditions under which the agent can act on behalf of the principal and make decisions that are legally binding. It is not granted by the agent to the principal, nor is it always oral or granted by a reinsurance treaty.

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0
40.

Which is an example of the reduction in value of property?
- A camera that was worth $200 is run over by the truck; the camera is now worthless.
- Because a business owner had a fire, he has lost income.
- A homeowner must live in a motel while his burned home is repaired.
- Inflation causes a home to appreciate in value.
Correct Answer

A. A camera that was worth $200 is run over by the truck; the camera is now worthless.

Explanation

The example of a camera being run over by a truck and becoming worthless demonstrates a reduction in the value of property. The camera, which was originally worth $200, is now completely worthless due to the damage caused by the accident. This incident represents a clear depreciation in the value of the camera, as it can no longer be used or sold for any value.

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41.

A bailment is
- Holding the property of another.
- An exclusion in the property policy.
- A named peril.
- A lender that loans money on a home, building, or other real property.
Correct Answer

A. Holding the property of another.

Explanation

A bailment refers to the act of holding the property of another person. It is a legal relationship where one person, known as the bailee, holds the possession of another person's property, known as the bailor, for a specific purpose and period of time. The bailee is responsible for taking care of the property and returning it to the bailor once the purpose of the bailment is fulfilled. This concept is important in contract law and helps define the rights and responsibilities of both parties involved in the bailment agreement.

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42.

What is an SR-22 Document?
- In the United States, an SR-22 is a vehicle liability insurance document used by some state Department of Motor Vehicles (DMV) offices. It provides proof that a driver has the minimum required liability insurance coverage for that particular state.
- An SR-22 document is a signed statement from a driver convicted of Driving Under Influence (DUI) declaring that he/she will not drink again.
- An SR-22 document is a written consent given by the Primary Insured on a policy to the Insurer stating that the Insurer can initiate liquidation of the Insured's property in case of any claims raised against the Insured, amount to more than the covered limits.
- An SR-22 is an alternative to the drivers license issued by the state's DMV.
Correct Answer

A. In the United States, an SR-22 is a vehicle liability insurance document used by some state Department of Motor Vehicles (DMV) offices. It provides proof that a driver has the minimum required liability insurance coverage for that particular state.

Explanation

An SR-22 document is a vehicle liability insurance document that is required by some state Department of Motor Vehicles (DMV) offices in the United States. It serves as proof that a driver has the minimum required liability insurance coverage for their particular state. This document is typically required for drivers who have been involved in certain violations, such as DUIs or driving without insurance. The SR-22 helps to ensure that these drivers are meeting their financial responsibility obligations and have the necessary insurance coverage in place.

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43.

The two major types of liabilities found on the financial statements of insurers are:
- Policyholder surplus and assets
- Unearned premium reserve and loss reserve
- Admitted asset and nonadmitted assets
- Earned premiums and underwriting expenses
Correct Answer

A. Unearned premium reserve and loss reserve

Explanation

The correct answer is unearned premium reserve and loss reserve. These are the two major types of liabilities found on the financial statements of insurers. The unearned premium reserve represents the portion of premiums that have been collected but have not yet been earned by the insurance company. The loss reserve represents the estimated amount that the insurance company will have to pay out in claims for policies that have already been issued. These reserves are important for insurers to ensure that they have enough funds to cover potential claims and fulfill their obligations to policyholders.

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44.

Most liability insurance policies exclude coverage for losses intentionally caused by the insured because such losses do not meet which one of the following characteristics of an ideally insurable exposure?
- Large number of similar exposure units
- Accidental
- Not catastrophic
- Not economically feasible to insure
Correct Answer

A. Accidental

Explanation

Liability insurance policies typically exclude coverage for losses intentionally caused by the insured because such losses do not meet the characteristic of being accidental. Accidental losses are events that occur unexpectedly and unintentionally, whereas intentionally caused losses are deliberate actions taken by the insured. Insurance is designed to provide coverage for unforeseen and accidental events, not intentional acts. Therefore, intentional losses are not considered ideally insurable exposures and are excluded from liability insurance policies.

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1
45.

In evaluating an application, an underwriter thinks that the class of business is not one that the company wishes to write, but he would need to physically inspect it to be certain. He also realizes that the business is located in an undesirable section of the city. Based on the location alone, the underwriter decides not to issue the policy. According to many state insurance laws, this would be an example of
- Diversification.
- Unfair discrimination.
- Fair discrimination.
- Regulated discrimination.
Correct Answer

A. Unfair discrimination.

Explanation

The underwriter's decision not to issue the policy based solely on the location of the business is considered unfair discrimination. This is because the underwriter is making a decision based on a factor that is not directly related to the risk of the business itself. State insurance laws often prohibit unfair discrimination, which involves treating individuals or businesses differently based on factors that are not relevant to the insurance risk. In this case, the underwriter should evaluate the risk of the business based on its own merits, rather than making a decision based on the location alone.

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46.

If an Insured is Sued(Dragged to court) does the Insurance Company defend the Insured in court?
- Insurance company defends the Insured until final judgement is given
- Insurance company defends the Insured until the limits of the coverage is expended for the defence
- Insurance company does washes of hands as it is not their responsibility to go to court
- None of the above
Correct Answer

A. Insurance company defends the Insured until the limits of the coverage is expended for the defence

Explanation

The correct answer is that the insurance company defends the insured until the limits of the coverage are expended for the defense. This means that the insurance company will provide legal representation and cover the costs of defending the insured in court until the maximum amount specified in the insurance policy is reached. Once the coverage limits are exhausted, the insured may be responsible for their own legal defense.

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1
47.

Clara is insured by IIA Insurance Company. One night, on the way home from work, shewas involved in an auto accident. Clara ran a red light when her brand new Mazda did not have any brakes, and her car struck the pickup driven by Bill, an employee of Big Bob’s Produce Company. Bill was injured, and a claim was filed with IIA Insurance Company for injury to Bob and damage to the pickup. If there had been no injuries and damage to both vehicles had been minor, the claim would most likely be handled by a(n)
- Inside staff claim representative.
- Outside staff claim representative.
- Public adjuster.
- Independent adjuster.
Correct Answer

A. Inside staff claim representative.

Explanation

The claim would most likely be handled by an Inside staff claim representative because the accident involved minor damage to both vehicles and no injuries. An Inside staff claim representative is typically responsible for handling low-value claims that do not require extensive investigation or negotiation. Since the accident resulted in minor damage and no injuries, it can be assumed that the claim can be easily resolved without the need for external assistance from an outside staff claim representative, public adjuster, or independent adjuster.

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4
48.

All of the following are correct, EXCEPT:
- Insurance works as a system of transferring and sharing the costs of losses
- The law of large numbers assists the insurance mechanism by improving the relative accuracy of prediction.
- Property loss exposures include negligence, real property, and personal property.
- A liability loss exposure presents the possibility of a claim alleging legal responsibility.
Correct Answer

A. Property loss exposures include negligence, real property, and personal property.

Explanation

The correct answer is "Property loss exposures include negligence, real property, and personal property." This statement is incorrect because property loss exposures do not include negligence. Property loss exposures refer to the risks or potential for property damage or loss, such as damage to real property (land and buildings) or personal property (possessions). Negligence, on the other hand, refers to a failure to exercise reasonable care, which can lead to liability loss exposures.

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1
49.

Rebating is
- Requiring that the purchase of insurance be tied to some other sale or financial arrangement.
- Misrepresenting the benefits, advantages, conditions, or terms of any insurance policy.
- Offering anything of value, other than the insurance itself, to an applicant as an inducement to buy or maintain insurance.
- All of the above.
Correct Answer

A. Offering anything of value, other than the insurance itself, to an applicant as an inducement to buy or maintain insurance.

Explanation

Rebating is the act of offering something of value, other than the insurance itself, to an applicant as an inducement to buy or maintain insurance. This means that an insurance agent or company cannot provide any additional incentives or rewards to entice someone to purchase or continue their insurance coverage. This practice is considered unethical and can lead to unfair competition in the insurance market.

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Feb 18, 2010

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INS21: Mock Exam! Trivia Quiz

The claim handling process includes

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The parties that might be affected by a property loss include

Implementation of the chosen Risk management technique requires that risk manager make decisions concerning:

State insurance departments:

Reinsurance is a contractual agreement:

An independent agent

Ideally insurable loss exposures include:

Producers can be compensated by

Valuation provisions may include

If the insurer cancels the policy, the return premium will be calculated usually on a

Marketing management

A dispute between neighbours can turn into a never-ending feud. Which form of law provides a forum for hearing disputes between private parties?

The use of standard forms by insurers leads to a more

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Insurance is a risk management techinque called

N D Tiwari has been stopped by LAPD for speeding and a ticket has been issued. Which statement is true?

Jim canceled his auto policy 315 days after the inception date. The one-year premium is $1,095. Assuming that a year is 365 days, what is Jim's pro rata premium refund?

A ________ is a diagram that depicts the flow of a particular operation or set of related operations within an organization.

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In insurance terminology, which of the following refers to a book of business?

Out-of-court settlements are

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A Captive Insurance company is ______________ .

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Roadside assistance plans provides services EXCEPT

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Why would an underwriter modify the rate charged for the coverage provided when evaluating an application for insurance?

A guaranty fund is:

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Which of the following is one of the largest Mutual P & C Insurance companies operating in North America?

What is IRDA and which country does it belong to?

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Binding authority

Which is an example of the reduction in value of property?

A bailment is

What is an SR-22 Document?

The two major types of liabilities found on the financial statements of insurers are:

Most liability insurance policies exclude coverage for losses intentionally caused by the insured because such losses do not meet which one of the following characteristics of an ideally insurable exposure?

If an Insured is Sued(Dragged to court) does the Insurance Company defend the Insured in court?

All of the following are correct, EXCEPT:

Rebating is