93 Questions
What is the main issue that can arise due to information asymmetry in insurance transactions?
Adverse Selection
Which of the following is an example of moral hazard in insurance?
Driving safely after purchasing vehicle insurance
What solution can help mitigate adverse selection in insurance transactions?
Medical Examination
Which ratio helps measure the profitability of an insurance company through the relationship between insurance profit and net earned premium?
Margin Insurance Profit
In insurance, what does RBC2 stand for?
Risk-Based Capital 2
Which term in insurance refers to a person who assesses the risk and determines the premiums and terms of coverage?
Underwriter
What is the main difference between CAR and RBC2 Ratio?
RBC2 Ratio is more complex than CAR
What does GEP stand for in the context of insurance financial statement analysis?
Gross Earned Premium
In the provided example, what is the result of deducting Reinsurance Expense from GEP?
Net Written Premium
What does the Loss Ratio measure in insurance financial statement analysis?
The percentage of claims against the total premium earned
What does the Combined Operating Ratio indicate about an insurance company?
Overall efficiency in managing expenses and claims
When calculating Insurance Margin, what two expenses are typically included?
Underwriting Expenses and Claims Expenses
What is the new minimum capital requirement for insurance companies as of 2022?
P1,300,000,000
What type of companies fall under the regulation of the Insurance Commission (IC) as mentioned in the text?
Insurance and Reinsurance Companies
What is the required minimum paid-up capital for new insurance businesses?
P1,000,000,000
What does the Risk-based capital (RBC) Requirement measure for insurance companies?
Solvency
What does the RBC2 Ratio signify for insurance companies in relation to their capital requirements?
It should be less than 50% of T1 Capital
The minimum capital requirement for insurance companies in 2022 is P1,000,000,000 for new business and P500,000,000 for microinsurance.
False
The Risk-based capital (RBC) Requirement is not applicable to insurance companies according to the text.
False
The RBC2 Ratio must be less than 100% for an insurance company to meet the requirement.
False
The T2 Capital should be more than 50% of the T1 Capital to meet the RBC Ratio Requirement.
False
The Insurance Commission falls under the Department of Health according to the text.
False
The RBC2 Ratio is simpler to calculate compared to the Capital Adequacy Ratio (CAR) in insurance financial statement analysis.
False
When calculating the Expense Ratio, underwriting expenses are divided by the net earned premium.
True
The Loss Ratio is calculated by dividing claims expenses by the net earned premium in insurance financial statement analysis.
True
A Combined Operating Ratio below 100% indicates a profitable insurance company.
True
In insurance financial statement analysis, the Insurance Margin is calculated by adding Expense Ratio and Loss Ratio.
False
In the context of insurance financial statement analysis, the Net Earned Premium (NEP) is calculated by deducting reinsurance expenses from the gross written premium.
False
Adverse selection happens when both parties in a transaction have symmetric information.
False
Moral hazard refers to a situation where one party takes excessive risks because it knows the other party will bear the consequences.
True
A deductible clause is a solution to adverse selection in insurance transactions.
False
The Expense Ratio is calculated by dividing Claims Expense by Net Earned Premium.
False
The Loss Ratio measures the profitability of an insurance company through the relationship between insurance profit and net earned premium.
False
RBC2 stands for Risk-Based Capital 2 and signifies the minimum capital requirement set for insurance companies.
True
The premium for an insurance policy is determined based on the insured's credit score.
False
Policy limit is the minimum amount that an insurer will pay under a policy for a covered loss.
False
Higher policy limits often result in lower insurance premiums.
False
Insurance policies commonly include deductible, premium, and lifetime maximum as critical components.
False
The premium for an insurance policy is usually expressed as an annual cost.
False
The deductible in an insurance policy is the maximum amount the insurer will pay under that policy.
False
Travel insurance typically covers only international travel, not domestic travel.
False
Life insurance, health insurance, homeowners insurance, and auto insurance are the most common types of insurance policies.
True
It is recommended to get insurance at a younger age as the premiums are usually higher.
False
Insurance policies always provide cash benefits to the insured individual when they mature.
False
Missing premium payments for insurance can lead to policy lapses that may impact the benefits in case of an unfortunate event.
True
Auto insurance is not considered one of the core components of most insurance policies.
True
The face value in a general life insurance policy is the amount paid to the policyholder upon the death of the insured.
False
Policies with high deductibles are generally more expensive due to the increased out-of-pocket expenses for the policyholder.
False
Health insurance policies with higher deductibles usually offer more affordable access to medical care throughout the year.
False
Virtually all mortgage companies require borrowers to have insurance coverage for the market value of a property.
False
Auto insurance is essential to protect investments in real estate transactions.
False
Home insurance covers damages or theft of personal possessions outside the home as well.
False
An endowment plan with educational benefits payable is an example of a life insurance policy.
False
The Whole Life Insurance Plan mentioned provides cash benefits starting at the end of the 5th policy year.
False
The Hospital income plan offers a return of premium if the insured does not outlive the coverage period.
False
Insurance companies offer plans that allow the option to choose between Euro or US Dollar currency.
False
The Life Insurance policy guarantees payment to named beneficiaries only if the insured dies during their lifetime.
False
Annual premiums for auto insurance are paid by auto insurance companies to individuals involved in accidents.
False
Insurance policies are primarily used to hedge against risks that may result from damage to the insured or their property, not from liability for damage or injury caused to a third party.
False
The core components that make up most insurance policies include the premium, policy limit, and deductible.
False
The RBC2 Ratio signifies the minimum capital requirement set for insurance companies, not how efficiently the company is using its capital.
True
The Combined Operating Ratio below 100% indicates a profitable insurance company, rather than a company facing financial challenges.
True
The Loss Ratio measures the relationship between insurance profit and net earned premium, not the profitability of an insurance company.
False
Adverse selection occurs in insurance transactions when one party takes excessive risks knowing that the other party will bear the consequences.
False
What does the policy limit refer to in insurance?
The maximum amount an insurer will pay for a covered loss
How is an insurance policy's premium typically expressed?
Monthly
What factor can influence the determination of an insurance policy's premium?
Creditworthiness
In insurance, what does the deductible represent?
The amount the insured must pay out of pocket before the insurer covers the rest
Which of the following components of an insurance policy can vary based on different factors?
Premium
How does a higher policy limit typically affect insurance premiums?
Increases premiums
What is the significance of paying the insurance premium religiously, as advised in the text?
To ensure cash benefits are available when the policy matures
Why is it recommended to purchase insurance at a younger age?
To have lower premiums
Which component mentioned in the text is crucial for enjoying the face amount of an insurance policy when you are still alive?
Cash Benefits
In insurance policies, what does the term 'front-end load' generally refer to?
A policy where premiums are higher initially
What is the core purpose of travel insurance based on the provided text?
To cover costs and losses related to traveling
Why is getting an insurance plan with cash benefits advisable according to the text?
To enjoy the face amount when the policy matures
What is the primary purpose of insurance as discussed in the text?
To protect against loss resulting from specific contingencies or perils
Which of the following best describes how insurance companies make payments more affordable for the insured?
By pooling clients' risks together
In insurance, what does the term 'indemnifies' mean?
To reimburse for a covered loss
Why do insurance policies hedge against the risk of financial losses?
To protect against potential damage or liability related losses
What does the deductible in an insurance policy refer to?
The minimum amount that must be paid out-of-pocket by the insured
What is the primary purpose of auto insurance based on the text?
To provide reassurance in case of accidents or vehicle damage
Which insurance plan provides cash benefits equal to a percentage of the Face Amount starting at the end of the 6th policy year and every 2 years afterwards until the age of 100?
Whole Life Insurance Plan
What additional feature do insurance companies offer nowadays besides life insurance plans?
Option to choose between Euro or US Dollar currency
What is the purpose of an Endowment plan with educational benefits payable as per the text?
To pay educational benefits at the end of the policy term
What is the main difference between Whole Life Insurance Plan and Insurance plan for women mentioned in the text?
Cash benefit equal to the face amount upon diagnosis of female-specific critical illnesses
Which insurance plan guarantees payment to named beneficiaries upon the insured's death in exchange for premiums paid during their lifetime?
Whole Life Insurance Plan
What is the purpose of a deductible in an insurance policy?
To reduce small claims and make policies less expensive
Why might health insurance policies with lower deductibles have higher annual premiums?
To offset the higher costs of healthcare services
What is a common requirement by mortgage companies related to home insurance?
Requiring proof of insurance coverage for property value
In what situation do policies with very high deductibles tend to be less expensive?
When they reduce the number of small claims
What is a key reason why auto insurance is important when buying or leasing a car?
To maintain the investment in the car
How does having a lower deductible in a health insurance policy affect access to medical care?
It makes access to care more affordable throughout the year
This quiz covers topics related to financial statement analysis for insurance companies, including risk assessment, information asymmetry, transfer of risk, adverse selection, and moral hazard. Dive into the complexities of analyzing financial statements in the insurance sector.
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