INS21: Mock Exam Quiz! MCQ
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Brown Company's Policy includes a liberalization clause. Brown's insurer introduces a policy change that broadens coverage at no additional premium. How will this change apply to Brown's existing policy?
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The broadened coverage does not apply to Brown Company's policy.
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The broadened coverage automatically applies to Brown Company's policy.
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The broadened coverage will apply to Brown Company's policy with an endorsement.
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The broadened coverage will apply to Brown Company's new policies as they are issued.
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The INS21: Mock Exam Quiz! MCQ assesses knowledge on insurance policy nuances such as coverage implications, rate calculations, and policy types. It's essential for understanding consistent policy interpretation and practical applications in real-world insurance scenarios.
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- 2.
The use of standard forms by insurers leads to a more:
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Consistent interpretation of insurance policies
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Creative interpretation of insurance policies.
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Conservative interpretation of insurance policies.
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Coordinated interpretation of insurance policies.
Correct Answer
A. Consistent interpretation of insurance policiesExplanation
The use of standard forms by insurers leads to a consistent interpretation of insurance policies. Standard forms provide a uniform set of terms and conditions that are widely recognized and understood within the insurance industry. This helps to minimize ambiguity and ensure that policies are interpreted in a consistent manner by insurers and policyholders. By using standard forms, insurers can avoid creative or conservative interpretations and instead provide a clear and consistent understanding of policy terms and coverage.Rate this question:
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- 3.
If the insurer cancels the policy, the return premium will be calculated usually on a:
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Short-rate basis.
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Flat Basis.
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Pro-rata basis.
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Penalty basis.
Correct Answer
A. Pro-rata basis.Explanation
When an insurer cancels a policy, the return premium is typically calculated on a pro-rata basis. This means that the premium refund is proportionate to the amount of time remaining on the policy. For example, if a policy is canceled halfway through its term, the insured would receive a refund of half of the premium paid. This method ensures that the insured is only charged for the time the policy was in effect and is a fair way to calculate the return premium.Rate this question:
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- 4.
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?
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$50
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$150
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$780
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$945
Correct Answer
A. $150Explanation
Jim's pro-rata premium refund would be $150. The pro-rata premium refund is calculated by dividing the number of unused days by the total number of days in the policy period (365) and then multiplying it by the total premium paid. In this case, Jim canceled his policy after 315 days, so he has 50 days remaining. Therefore, the refund would be (50/365) * $1,095 = $150.Rate this question:
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- 5.
A policy in which the insurer pays a stated amount in the event of a specified loss (usually a total loss), regardless of the actual value of the loss is known as a
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Replacement policy.
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Valued policy.
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Conditional policy.
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Specified policy.
Correct Answer
A. Valued policy.Explanation
A valued policy is a type of insurance policy where the insurer agrees to pay a predetermined amount in the event of a specified loss, regardless of the actual value of the loss. This means that the insured will receive a fixed amount of compensation, which is determined at the time the policy is issued. This is in contrast to an actual cash value policy, where the insurer pays the current market value of the loss. A valued policy provides a guaranteed payout to the insured, providing them with a sense of security in the event of a total loss.Rate this question:
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- 6.
Which one of the following statements is true regarding the types of rates used by insurers?
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Class rates apply to all insureds in the same rating category.
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Merit rating plans are also called manual rating plans.
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Class rates are not based on loss statistics.
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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 individuals or businesses with similar characteristics or risk profiles are grouped together and assigned the same rate. Class rates are not based on individual loss statistics but rather on the overall loss characteristics of the group. This allows insurers to simplify the rating process and ensure fairness by charging similar premiums to insureds with similar risks. Merit rating plans, on the other hand, are not the same as manual rating plans and do not necessarily apply to all insureds in the same rating category.Rate this question:
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- 7.
Why would an underwriter modify the rate charged for the coverage provided when evaluating an application for insurance?
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Because treaty reinsurance in unavailable for the exposures indicated
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To address the moral hazards the underwriter identified during investigation
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To better match the rate to the characteristics of the risk
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Because the applicant is not acceptable for coverage
Correct Answer
A. To better match the rate to the characteristics of the riskExplanation
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 the applicant. By adjusting the rate, the underwriter can ensure that the premium is neither too high nor too low for the risk involved, thus maintaining a fair and balanced pricing structure for the insurance coverage.Rate this question:
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- 8.
In insurance terminology, which of the following refers to a book of business?
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All policies sold by an insurance company or agency
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All policies in a particular territory
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All policies providing a particular type of insurance
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All the above
Correct Answer
A. All the aboveExplanation
A book of business in insurance terminology refers to all policies sold by an insurance company or agency, as well as all policies in a particular territory and all policies providing a particular type of insurance. This means that the correct answer is "All the above" as it encompasses all three options mentioned in the question.Rate this question:
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- 9.
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:
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Diversification.
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Unfair discrimination.
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Fair discrimination.
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Regulated discrimination.
Correct Answer
A. Unfair discrimination.Explanation
The underwriter's decision to not issue the policy based solely on the location of the business is considered unfair discrimination. Unfair discrimination refers to the practice of treating individuals or businesses differently based on certain characteristics that are not relevant to the risk being insured. In this case, the underwriter is discriminating against the business solely based on its location, which is not a fair or valid reason to deny coverage. State insurance laws often prohibit unfair discrimination to ensure that insurance companies do not unfairly deny coverage to certain individuals or businesses.Rate this question:
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- 10.
Some insurers now use expert systems in the underwriting process. The primary purpose of these expert systems is to:
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Reduce claim expenses and loss adjustment expenses.
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Replace underwriting decision-making and enhance accuracy.
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Emulate the underwriting decision-making process as it would be performed by expert underwriters.
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Modernize insurance company information systems.
Correct Answer
A. Emulate the underwriting decision-making process as it would be performed by expert underwriters.Explanation
Expert systems are designed to mimic the decision-making process of human experts in a specific domain. In the context of insurance underwriting, expert systems are used to emulate the decision-making process of expert underwriters. This means that the expert systems analyze the data and information provided, evaluate the risk factors, and make underwriting decisions based on the same criteria and considerations that expert underwriters would use. By emulating the underwriting decision-making process, these expert systems aim to enhance accuracy and consistency in underwriting, ultimately leading to better risk assessment and reduced claim expenses and loss adjustment expenses.Rate this question:
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- 11.
Select the Correct statement with respect to Auto Insurance in America.
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Men Pay more for Insurance than Women due to their aggessiveness behind wheels
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Women Pay more for Insurance than men due to their soft behind wheels
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Premium cannot be different for men and women
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None of the above
Correct Answer
A. Men Pay more for Insurance than Women due to their aggessiveness behind wheelsExplanation
In America, men pay more for insurance than women due to their aggressiveness behind the wheels. This is because statistically, men are more likely to engage in risky driving behaviors such as speeding, reckless driving, and DUI, which increases the likelihood of accidents and insurance claims. Insurance companies base their premiums on risk assessment, and since men are considered higher risk drivers, they are charged higher premiums compared to women.Rate this question:
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- 12.
Roadside assistance plans provide services EXCEPT
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24 Hours emergency towing services
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24 Hours lost key and lockout services
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24 Hours battery services
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24 Car higene services
Correct Answer
A. 24 Car higene servicesExplanation
Roadside assistance plans typically offer services such as emergency towing, lost key and lockout assistance, and battery services. These services are aimed at providing immediate help to drivers who encounter problems on the road. However, car hygiene services are not typically included in roadside assistance plans. Car hygiene services would involve cleaning and maintaining the cleanliness of the vehicle, which is not a service typically provided by roadside assistance plans.Rate this question:
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- 13.
Being a owner of house in US
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It is mandatory to buy homeowner's Insurance
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It is not mandatory to buy homeowner's Insurance
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State automatically provides homeowner's Insurance
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The bank which loaned should buy homeowners's Insurance
Correct Answer
A. It is not mandatory to buy homeowner's InsuranceExplanation
The correct answer is "It is not mandatory to buy homeowner's Insurance." This means that as a owner of a house in the US, it is not a requirement to purchase homeowner's insurance. While it is highly recommended to have homeowner's insurance to protect against potential damage or loss, it is not legally mandated. The decision to purchase homeowner's insurance is left to the discretion of the homeowner.Rate this question:
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- 14.
If an Insured is Sued(Dragged to court) does the Insurance Company defend the Insured in court?
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Insurance company defends the Insured until final judgement is given
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Insurance company defends the Insured until the limits of the coverage is expended for the defence
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Insurance company does washes of hands as it is not their responsibility to go to court
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None of the above
Correct Answer
A. Insurance company defends the Insured until the limits of the coverage is expended for the defenceExplanation
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 associated with defending the insured in court, as long as it falls within the limits of the coverage provided by the insurance policy. Once those limits are reached, the insured may be responsible for any further defense costs.Rate this question:
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- 15.
If an insurance company refuses to pay a claim that should be paid or offers to settle a claim for less than it knows the claim is worth or denies a claim without adequate investigation, this could give rise to
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Bad faith claim against the Insurance company
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Unfair descrimination by Insurance company
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Long term profit for the Insurance company
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Cancellation of Liscence doing business by the Insurance company
Correct Answer
A. Bad faith claim against the Insurance companyExplanation
When an insurance company refuses to pay a claim that should be paid, offers a lower settlement amount than what the claim is worth, or denies a claim without conducting a proper investigation, it can be considered as acting in bad faith. This means that the insurance company is not fulfilling its duty to act honestly and fairly towards its policyholders. A bad faith claim can be brought against the insurance company by the policyholder who believes they have been treated unfairly, seeking compensation for any damages caused by the company's actions.Rate this question:
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- 16.
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.
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Preservation of rights
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Reservation of rights
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Denial of rights
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None of the above
Correct Answer
A. Reservation of rightsExplanation
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.Rate this question:
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- 17.
Insurance companies are exempted from Consumer protection laws in some states.
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Yes
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Yes, becuase Insurance is not consumable product
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No
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No, because Insurance customers are consumers
Correct Answer
A. YesExplanation
Insurance companies are exempted from consumer protection laws in some states because insurance is not considered a consumable product. Unlike tangible goods that can be used up or consumed, insurance is a service that provides financial protection in the event of certain risks or losses. Therefore, it is treated differently under the law and may not be subject to the same consumer protection regulations as other products or services.Rate this question:
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- 18.
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?
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The red color cars are alway percieved to recieved more traffic tickets
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The high performance engine makes your car engine more prone to theft
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The Insurance company battling a case against your car brand company
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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 theftExplanation
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 risk factors associated with a particular car when determining the premium. In this case, the insurance company charged you more because the high performance engine increases the likelihood of theft, thereby increasing the risk for the insurance company.Rate this question:
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- 19.
Ideally, insurable loss exposures include:
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Losses those are accidental.
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Losses those are definite and measurable
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A large number of similar exposure units.
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All of the above.
Correct Answer
A. All of the above.Explanation
Insurable loss exposures refer to situations where an individual or entity faces the risk of suffering a loss that can be covered by an insurance policy. The given options suggest that ideally, insurable loss exposures should meet certain criteria. Firstly, the losses should be accidental, meaning they occur unexpectedly and unintentionally. Secondly, the losses should be definite and measurable, allowing for accurate assessment and quantification. Lastly, a large number of similar exposure units should be present, as this helps spread the risk and ensures a more stable insurance pool. Therefore, the correct answer is "All of the above" as all three criteria are important for insurable loss exposures.Rate this question:
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- 20.
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?
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Large number of similar exposure units
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Accidental
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Not catastrophic
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Not economically feasible to insure
Correct Answer
A. AccidentalExplanation
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 or unintentionally, while intentional losses are deliberately caused by the insured. Insurance is designed to protect against unforeseen events and risks, not intentional actions. Therefore, intentional losses do not align with the purpose of insurance and are excluded from coverage.Rate this question:
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- 21.
Which of the following statements best describes the way in which “support for credit” is a benefit of insurance?
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Insurance is required to get a drivers license.
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Insurance satisfies lenders that their loans will be repaid.
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Insurers lend money to fund new construction and other projects.
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People who are indemnified by insurance don’t have to borrow money to replace damaged property.
Correct Answer
A. Insurance satisfies lenders that their loans will be repaid. -
- 22.
All of the following are correct, EXCEPT:
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Insurance works as a system of transferring and sharing the costs of losses
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The law of large numbers assists the insurance mechanism by improving the relative accuracy of prediction.
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Property loss exposures include negligence, real property, and personal property.
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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 potential risks or hazards that can result in damage or loss to real property (land and buildings) or personal property (possessions or belongings). Negligence, on the other hand, refers to the failure to exercise reasonable care, which can lead to liability loss exposures.Rate this question:
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- 23.
State insurance departments:
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Regulate insurance rates to protect consumers from inadequate, excessive, or unfairly discriminatory rates.
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Are located in most but not all states
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Provide a source of investment funds.
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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. By doing so, they prevent insurance companies from charging excessively high premiums or denying coverage based on discriminatory factors. This regulation helps to ensure that consumers are not taken advantage of by insurance companies and promotes a fair and competitive insurance market.Rate this question:
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- 24.
Reinsurance is a contractual agreement:
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In which one insurer transfers some or all of its loss exposures to another insurer.
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That is formed as a subsidiary of its parent company for the purpose of writing insurance on the parent company.
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That ideally insures large numbers of similar exposure units.
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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
The correct answer is "In which one insurer transfers some or all of its loss exposures to another insurer." This option accurately describes reinsurance as a contractual agreement where one insurer transfers its loss exposures to another insurer. Reinsurance allows the primary insurer to mitigate its risk by sharing it with another insurer, thereby reducing the potential financial impact of large losses.Rate this question:
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- 25.
A guaranty fund is:
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Created by the federal government for the purpose of providing insurance for the social good.
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The primary funding for the Fair Access to Insurance Requirements program.
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A state fund that provides a system to pay the claims of insolvent insurers.
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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 their claims. The fund is designed to protect policyholders and provide them with a safety net in case their insurer goes bankrupt. It is not created by the federal government for the purpose of providing insurance for the social good, nor is it the primary funding for the Fair Access to Insurance Requirements program, nor is it managed by the National Association of Insurance Commissioners.Rate this question:
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- 26.
All of the following are true, EXCEPT:
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The standard market refers collectively to insurers who voluntarily offer insurance coverages at markets designed for customers with average or better-than-average loss exposures.
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Excess and surplus lines insurance consists of insurance coverages, usually available in the standard market, that are written by unlicensed insurers.
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Nonadmitted (or unlicensed) insurers are insurers that are not licensed in many of the states in which they operate and that write excess and surplus lines insurance coveages
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The excess and surplus lines market is not subject to any state regulation.
Correct Answer
A. The excess and surplus lines market is not subject to any state regulation.Explanation
The excess and surplus lines market is subject to state regulation.Rate this question:
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- 27.
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
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Social equity
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Flex rating laws
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Actuarial equity
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Open competition
Correct Answer
A. Actuarial equityExplanation
Actuarial equity is a ratemaking concept where rates are determined based on actuarially calculated loss experience. This means that actuaries analyze past data on losses and use statistical methods to predict future losses. Insureds with similar characteristics, such as age, location, and driving record, are placed into the same rating class. This ensures that rates are fair and reflect the risk associated with each insured. Actuarial equity helps to maintain fairness and accuracy in setting insurance rates.Rate this question:
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- 28.
The two major types of liabilities found on the financial statements of insurers are:
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Policyholder surplus and assets
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Unearned premium reserve and loss reserve
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Admitted asset and nonadmitted assets
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Earned premiums and underwriting expenses
Correct Answer
A. Unearned premium reserve and loss reserveExplanation
The correct answer is "Unearned premium reserve and loss reserve". Unearned premium reserve refers to the portion of insurance premiums that have been collected but have not yet been earned by the insurer. Loss reserve, on the other hand, is the estimated amount of money that an insurer sets aside to cover future claims. These two liabilities are significant for insurers as they represent the financial obligations they have towards policyholders and potential claimants.Rate this question:
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- 29.
Humongous Insurance Company is considering the purchase of Itty-Bitty Insurance Company. Following is financial data of Itty-Bitty Insurance Company. Expense ratio 39% Loss ratio 57% Investment income ratio 18%The combined ratio for Itty-Bitty Insurance Company is:
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96%
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75%
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114%
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78%
Correct Answer
A. 96%Explanation
The combined ratio is calculated by adding the expense ratio, loss ratio, and investment income ratio. In this case, the expense ratio is 39%, the loss ratio is 57%, and the investment income ratio is 18%. Adding these ratios together, we get a combined ratio of 114%. However, since the combined ratio represents the percentage of premiums used to cover expenses and losses, a higher ratio indicates a less profitable company. Therefore, the correct answer is 96%, which indicates a more favorable financial position for Itty-Bitty Insurance Company.Rate this question:
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- 30.
Humongous Insurance Company is considering the purchase of Itty-Bitty Insurance Company. Following is financial data of Itty-Bitty Insurance Company. Expense ratio 39% Loss ratio 57% Investment income ratio 18% The overall operating ratio is:
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96%
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75%
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114%
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78%
Correct Answer
A. 78%Explanation
The overall operating ratio is calculated by adding the expense ratio, loss ratio, and investment income ratio. In this case, the expense ratio is 39%, the loss ratio is 57%, and the investment income ratio is 18%. Adding these ratios together gives us a total of 114%. However, the question asks for the overall operating ratio, which is the complement of the total ratio. Therefore, subtracting 114% from 100% gives us 86%. Since the answer choices are in percentages, we can convert 86% to 78%. Therefore, the correct answer is 78%.Rate this question:
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- 31.
An insurer’s capacity ratio is:
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Calculated by dividing its written premiums by its policyholders surplus.
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Calculated by subtracting the investment income ratio from the combined ratio.
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Calculated by dividing net investment income by earned premiums for a particular period.
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The sum of the loss ratio and the expense ratio.
Correct Answer
A. Calculated by dividing its written premiums by its policyholders surplus.Explanation
The insurer's capacity ratio is calculated by dividing its written premiums by its policyholders surplus. This ratio helps determine the insurer's ability to cover potential losses and liabilities with its available surplus. A higher capacity ratio indicates a stronger financial position and ability to handle risks, while a lower ratio may suggest a potential vulnerability.Rate this question:
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- 32.
All of the following are true of insurance company financial statements, EXCEPT:
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The major expense category for most insurance companies is payment for losses arising from claims.
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Underwriting expenses include acquisition expenses, general expenses, and taxes and fees.
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On their financial statements, insurance companies add expenses from investment income to show the net income from investments.
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An insurer’s net underwriting gain or loss is equal to its earned premiums minus its losses and underwriting expenses for a specific period.
Correct Answer
A. On their financial statements, insurance companies add expenses from investment income to show the net income from investments.Explanation
Insurance companies do not add expenses from investment income to show the net income from investments on their financial statements. Instead, investment income is reported separately from underwriting income. The net income from investments is calculated by subtracting investment expenses from investment income.Rate this question:
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- 33.
Binding authority
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Is usually granted in the agency contract
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Is granted by the agent to the principal.
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Is always oral.
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Is granted by the reinsurance treaty.
Correct Answer
A. Is usually granted in the agency contractExplanation
Binding authority refers to the authority given to an agent by the principal in an agency contract. This authority allows the agent to bind the principal legally and make decisions on their behalf. While it is not always guaranteed to be granted in every agency contract, it is typically included as a standard provision. It is important for the agent to have binding authority in order to effectively carry out their duties and responsibilities on behalf of the principal.Rate this question:
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- 34.
An independent agent
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Usually represents several unrelated insurance companies
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Is salaried by the insurance company.
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Uses only mail, telephone, or Internet to solicit business
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Usually does not own its expiration list.
Correct Answer
A. Usually represents several unrelated insurance companiesExplanation
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 more personalized and tailored approach to insurance coverage, as they can compare and recommend policies from different companies. Unlike agents who are salaried by a specific insurance company, independent agents work on a commission basis and have the flexibility to choose the best policies for their clients' needs. They may use various methods such as mail, telephone, or the Internet to solicit business, and they typically do not own the expiration list, which refers to the list of policyholders whose policies are set to expire.Rate this question:
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- 35.
Marketing management
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Provides producer supervision.
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Provides producer motivation.
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Provides product management and development
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All of the above.
Correct Answer
A. All of the above.Explanation
The correct answer is "All of the above" because marketing management involves overseeing and coordinating various aspects of the marketing process. It includes supervising producers to ensure they meet the desired standards and goals, motivating producers to perform their best, and managing and developing the product to meet customer needs and preferences. Therefore, all of these options accurately describe the role and responsibilities of marketing management.Rate this question:
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- 36.
Rebating is
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Requiring that the purchase of insurance be tied to some other sale or financial arrangement.
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Misrepresenting the benefits, advantages, conditions, or terms of any insurance policy.
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Offering anything of value, other than the insurance itself, to an applicant as an inducement to buy or maintain insurance.
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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
The correct answer is "Offering anything of value, other than the insurance itself, to an applicant as an inducement to buy or maintain insurance." This is because rebating refers to the practice of giving something of value, such as cash or gifts, to an applicant as an incentive to purchase or continue an insurance policy. This is considered illegal in many jurisdictions as it can create unfair competition and undermine the integrity of the insurance market.Rate this question:
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- 37.
Producers can be compensated by
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Salary.
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Commissions.
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Contingency commissions.
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All of the above.
Correct Answer
A. All of the above.Explanation
Producers can be compensated through various means, including salary, commissions, and contingency commissions. Salary refers to a fixed amount paid to producers for their work, while commissions are a percentage-based payment based on the sales they generate. Contingency commissions are additional payments given to producers based on achieving specific targets or goals. Therefore, the correct answer is "All of the above" as producers can receive compensation through any combination of these methods.Rate this question:
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- 38.
All of these statements about unfair claim practices are correct, EXCEPT:
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Unfair claim practices specify claim practices that are illegal according to federal law.
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Misrepresentation of pertintent facts or insurance policy provisions relating to coverage at issue in a claim is an unfair claim practice.
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Refusal to pay a claim without first conducting a reasonable investigation based on all available information is an unfair claim practice.
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. Insurance regulators usually learn of unfair claim practices when they receive complaints from insureds and claimants.
Correct Answer
A. Unfair claim practices specify claim practices that are illegal according to federal law.Explanation
The given answer is incorrect because unfair claim practices are not necessarily specified as illegal according to federal law. Unfair claim practices can vary from state to state, and while some may be illegal under federal law, others may only be illegal under state law. Therefore, it cannot be stated that all unfair claim practices are illegal according to federal law.Rate this question:
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- 39.
Loss reserves are
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The largest and most important liabilities of property and liability insurance companies.
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An estimate of the amount of claims payments that an insurer will make in the future
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Always an estimate.
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All of the above.
Correct Answer
A. All of the above.Explanation
Loss reserves are the largest and most important liabilities of property and liability insurance companies. They represent an estimate of the amount of claims payments that an insurer will make in the future. Since loss reserves are based on estimates, they are always subject to change. Therefore, the correct answer is "All of the above" because all of the given statements are true about loss reserves.Rate this question:
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- 40.
The claim handling process includes
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Investigating.
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Evaluating.
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Negotiation.
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All of the above.
Correct Answer
A. All of the above.Explanation
The correct answer is "All of the above" because the claim handling process involves investigating the details of the claim to gather all necessary information, evaluating the validity and extent of the claim, and negotiating with the parties involved to reach a resolution. All three steps are crucial in effectively handling claims and ensuring a fair and satisfactory outcome for all parties involved.Rate this question:
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- 41.
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. Bill’s claim will most likely be handled for IIA Insurance Company by a(n)
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Inside staff claim representative.
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Outside staff claim representative.
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Insurance agent handling Clara’s account.
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Public adjuster.
Correct Answer
A. Outside staff claim representative.Explanation
Since Bill's claim is related to the accident caused by Clara, who is insured by IIA Insurance Company, it is most likely that his claim will be handled by an outside staff claim representative. This representative would be responsible for assessing the damage to the pickup and the injury to Bill, and processing the claim on behalf of IIA Insurance Company.Rate this question:
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- 42.
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)
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Inside staff claim representative.
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Outside staff claim representative.
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Public adjuster.
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Independent adjuster.
Correct Answer
A. Inside staff claim representative.Explanation
In this scenario, since there were no injuries and the damage to both vehicles was minor, the claim would most likely be handled by an inside staff claim representative. This is because inside staff claim representatives typically handle smaller and less complex claims that do not require extensive investigation or negotiation. They work directly for the insurance company and are responsible for evaluating and settling claims efficiently and effectively.Rate this question:
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- 43.
Which is an example of the reduction in value of property?
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A camera that was worth $200 is run over by the truck; the camera is now worthless.
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Because a business owner had a fire, he has lost income.
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A homeowner must live in a motel while his burned home is repaired.
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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 correct answer is an example of the reduction in value of property because the camera was worth $200 but after being run over by a truck, it is now worthless. This demonstrates a clear decrease in the value of the property.Rate this question:
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- 44.
The parties that might be affected by a property loss include
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Users of the property
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The property owner.
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Secured lenders of money to the property owner.
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All of the above.
Correct Answer
A. All of the above.Explanation
All parties mentioned in the options - users of the property, the property owner, and secured lenders of money to the property owner - can be affected by a property loss. Users of the property may lose access to it or face inconveniences, the property owner may suffer financial loss or damage to their investment, and secured lenders may face the risk of not recovering their loaned money. Therefore, all of the above parties can be affected by a property loss.Rate this question:
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- 45.
A bailment is
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Holding the property of another.
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An exclusion in the property policy.
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A named peril.
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A lender that loans money on a home, building, or other real property.
Correct Answer
A. Holding the property of another.Explanation
The correct answer is "Holding the property of another." A bailment refers to the legal relationship where one person (the bailee) holds the personal property of another person (the bailor) for a specific purpose. The bailee has temporary possession and control over the property but does not gain ownership. This can occur through agreements such as renting a storage unit or borrowing a friend's car. The bailee is responsible for taking reasonable care of the property and returning it to the bailor once the purpose of the bailment is fulfilled.Rate this question:
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- 46.
Basic form coverage
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Is used on all property policies.
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Lists covered causes of loss.
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Is open peril.
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Covers all losses except those specifically excluded.
Correct Answer
A. Lists covered causes of loss.Explanation
The correct answer is "Lists covered causes of loss." This statement suggests that the basic form coverage includes a list of causes of loss that are covered by the policy. This implies that the policyholder will be protected against the specific perils or events listed in the policy. It is important to note that this coverage is not open peril, as it only covers the causes of loss that are explicitly mentioned in the policy. Additionally, it does not cover losses that are specifically excluded from the policy.Rate this question:
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- 47.
Valuation provisions may include
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Replacement cost.
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Actual cash value.
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Agreed value.
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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 required to replace the asset with a similar one. Actual cash value is the current value of the asset, taking into account depreciation. Agreed value is a predetermined value agreed upon by the parties involved. Therefore, all of these options are examples of valuation provisions.Rate this question:
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- 48.
A dispute between neighbours can turn into a never-ending feud. Which form of law provides a forum for hearing disputes between private parties?
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Criminal law
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Statutory law
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Constitutional law
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Civil law
Correct Answer
A. Civil lawExplanation
Civil law provides a forum for hearing disputes between private parties. Unlike criminal law, which deals with offenses against society, civil law focuses on resolving conflicts between individuals or organizations. It encompasses various areas such as contract disputes, property disputes, and personal injury claims. In civil law cases, the objective is to provide compensation or resolve the dispute rather than punish the wrongdoer. Therefore, civil law is the appropriate form of law to address disputes between neighbors and potentially resolve their never-ending feud.Rate this question:
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- 49.
Under tort law, an individual or organization can face a claim for legal liability on the basis of
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Negligence.
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Intentional torts.
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Absolute liability.
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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 to another person or property. Intentional torts involve deliberate actions that cause harm or injury to another person, such as assault, battery, or defamation. Absolute liability holds individuals or organizations responsible for any harm or damage caused, regardless of fault or intent. Therefore, all three options - negligence, intentional torts, and absolute liability - can be grounds for legal liability under tort law.Rate this question:
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Quiz Review Timeline (Updated): Mar 22, 2023 +
Our quizzes are rigorously reviewed, monitored and continuously updated by our expert board to maintain accuracy, relevance, and timeliness.
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Current Version
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Mar 22, 2023Quiz Edited by
ProProfs Editorial Team -
Sep 29, 2015Quiz Created by
Waldo0102
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