In setting goals, insurers carefully evaluate the interaction between premiums and loss ratio and how changes in each affect profit. Which one of the following statements concerning the relationship between premium and loss ratio is true?

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In setting goals, insurers carefully evaluate the interaction between premiums and loss ratio and how changes in each affect profit. Which one of the following statements concerning the relationship between premium and loss ratio is true?

A. If premiums increase by a greater percentage than incurred losses increase, the loss ratio will decrease.
B. If incurred losses increase at a faster rate than premiums, the loss ratio will improve.
C. If premiums decrease at a faster rate than losses increase, the loss ratio will decrease.
D. If losses decrease at a faster rate than premiums decrease, the loss ratio will increase.

Answer: A. If premiums increase by a greater percentage than incurred losses increase, the loss ratio will decrease.

Insurance

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An insured's building has an actual cash value of $200,000, and he has insured the property for $120,000 with an 80% coinsurance clause. A $40,000 loss occurs. How much will the policy pay?

An insured's building has an actual cash value of $200,000, and he has insured the property for $120,000 with an 80% coinsurance clause. A $40,000 loss occurs. How much will the policy pay? a) $0 b) $30,000 c) $32,000 d) $40,000 Answer: B

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The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive?

The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive? a) $0 b) $50,000 (50% of the policy value) c) $100,000 d) $300,000 (triple the amount of policy value) Answer: c) $100,000

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