Hs 311 Insurance, Ch 4--T/f

Front 1

T/F
The purpose of underwriting is to select only those insureds who are expected to have no losses.

Back 1

False. The purpose of underwriting is to select insureds who, on average, will produce actual loss experience comparable to the expected loss experience incorporated into the premium rates.

Front 2

T/F
Among other things, reinsurance can help insurers spread large losses and reduce the surplus drain associated with writing new business

Back 2

True

Front 3

T/F
Under facultative reinsurance, the insurer agrees in advance to transfer some types of risks, and the reinsurer agrees to accept those risks.

Back 3

False. Under treaty reinsurance, the insurer agrees in advance to transfer some types of risks, and the reinsurer agrees to accept those risks. With facultative reinsurance, the insurer is under no obligation to offer the risk to the reinsurer, and the reinsurer is under no obligation to accept.

Front 4

T/F
The purpose of the claims settlement process is to determine the insurer's liability for a given loss and to reach agreement with respect to the amount of loss or damage payable under the insurance contract.

Back 4

True

Front 5

T/F
Most life insurance agents have their companies' authority to settle claims.

Back 5

False. A life insurance agent may become involved as an intermediary (such as by delivering a death proceeds check to a beneficiary), but not as an adjuster with authority to settle a claim.

Front 6

T/F
Independent adjusters usually represent the public, in contrast to staff adjusters, who represent insurers.

Back 6

False. As with staff adjusters, independent adjusters represent insurers. Public adjusters represent the public.

Front 7

T/F
In calculating the insurance premium, the pure (net) rate is multiplied by the number of units of coverage.

Back 7

False. In calculating the insurance premium, the gross rate (composed of the pure rate plus a loading for expenses, profit, and contingencies) is multiplied by the number of units of coverage.

Front 8

T/F
Under the loss ratio method of rate making, the actual loss ratio experienced is compared with the expected (or desired) loss ratio to determine the needed change in the existing insurance rate.

Back 8

True

Front 9

T/F
Both life and property-liability insurers invest more heavily in bonds than in stocks.

Back 9

True