Insurance MCQ

Loss exposure surveys or checklists are comprehensive and apply to almost any organization. The survey's major weakness is that they A. Are expensive. B. May omit an important exposure. C. Have to be custom designed for each business. D. Take too long to complete. Answer: B. May omit an important exposure.

The best description of a first-party claim is a claim  A. Made by the liable party against the policyholder. B. Made by the policyholder against the insurer. C. Made by the insurer against the policyholder. D. Made by the policyholder against someone to whom the policyholder may be liable. Answer: B. The best description of a first-party claim is a claim made by the policyholder against the insurer.

The insurer's rights to recover and sell or otherwise dispose of insured property on which the insurer has paid a total loss are called  A. Fiduciary rights. B. Salvage rights. C. Constructive rights. D. Catastrophe rights. Answer: B. Salvage rights allow the insurer to recover and sell or otherwise dispose of insured property on which the insurer has paid a total loss.

Which one of the following is true regarding enterprise-wide risk management (ERM)?  A. ERM is an approach to risk management that focuses primarily on loss exposures associated with pure risk. B. In practice, implementation of ERM occurs at the departmental or business unit level. C. Implementation of ERM is fairly consistent among organizations, regardless of their size, nature, or complexity. D. ERM is an approach to managing all of an organization's key risks and opportunities. Answer: D. ERM is an approach to managing all of an organization's key risks and opportunities.

Juan received a phone call from an angry policyholder. The insured received a bill as a result of a workers compensation premium audit. The individual does not understand why premium has increased when his total payroll is lower than originally projected. Juan advises the insured that he will contact the auditor, review the audit, and call back with an explanation. Which one of the following producer functions is Juan performing? A. Consulting B. Customer service C. Premium collection D. Risk management review Answer: B. Customer service

Gulford Insurance Company (Gulford) is a direct writer of commercial insurance in Pennsylvania. Management is frustrated by the continued lack of success in the more rural western part of the state. They believe that there is a profitable market in this territory, but have trouble continuing to justify the cost of assigning agents to this territory. It is difficult to penetrate the market without a local presence. Which one of the following distribution systems should Gulford consider for this territory? A. Managing general agents B. Surplus lines brokers C. Independent agents D. National brokers Answer: C. Independent agents

For a one-year policy covering losses that take several years to develop, all of the following ratios are likely to be revised for several years following the policy period, EXCEPT: A. Expense ratio B. Combined ratio C. Loss ratio D. Overall operating ratio Answer: A. The loss ratio, combined ratio, and overall operating ratio all would change as the losses develop for several years after the policy period.