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4 Cards in this Set

  • Front
  • Back
Phantom Insurance Company employs claims representatives based in five Midwestern states but has no claims employees in California, where one of its policyowners is involved in a serious auto accident. Phantom will most likely use which of the following to adjust the claim?
(A) independent adjuster

The answer is (A). (B) is incorrect because insurance agents usually adjust only small, uncomplicated claims. (C) is incorrect because public adjusters represent the public, not insurers. (D) is incorrect because staff adjusters are employees of the insurer, and according to the question, Phantom has no employees in California.
Which of the following statements concerning reinsurance agreements is (are) correct? I. Treaty reinsurance enables an insurer that is underwriting a policy to decide whether that specific policy will be reinsured. II. With facultative reinsurance, some types of exposures are automatically reinsured.
(D) Neither I nor II

The answer is (D). I is incorrect because treaty reinsurance is automatic and does not require a specific decision for each policy that is reinsured. II is incorrect because facultative reinsurance is optional and requires a specific decision for each policy that is reinsured.
Which of the following statements concerning insurance company investments is (are) correct? I. The aggregate amount invested by property-liability insurers is much larger than the aggregate amount invested by life insurers. II. Liquidity is a major consideration for the investment of funds by most life insurers.
(D) Neither I nor II

The answer is (D). I is incorrect because the aggregate amount invested by property-liability insurers is much smaller than the amount invested by life insurers. II is incorrect because liquidity is not a major consideration for most life insurers, since their investable funds will not need to be paid out until well into the future.
All the following statements concerning insurance underwriting are correct EXCEPT
(C) Underwriting is independent of insurance pricing.

The answer is (C). Underwriting involves both the selection and pricing of applicants.