Insurance Regulations and FS Analysis
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Questions and Answers

What is the main issue that can arise due to information asymmetry in insurance transactions?

  • Moral hazard
  • Deductible clause
  • Increased premium
  • Adverse selection (correct)
  • Which situation best describes moral hazard in insurance?

  • Increased premium charged for risky actions.
  • Medical examination requirement before insurance purchase.
  • Excessive risk-taking or reckless behavior by one party after the transaction. (correct)
  • One party possesses more information than the other before the transaction.
  • What is a common solution to the problem of adverse selection in insurance?

  • Deductible clause
  • Other information provision
  • Increased premium
  • Medical examination (correct)
  • In an insurance context, what does RBC2 stand for?

    <p>Risk Based Capital 2</p> Signup and view all the answers

    Which ratio is calculated by adding underwriting expenses and claims expenses then dividing by net earned premiums?

    <p>Combined Operating Ratio</p> Signup and view all the answers

    What does an insured individual engaging in reckless driving behavior after purchasing vehicle insurance represent?

    <p>Moral hazard</p> Signup and view all the answers

    What is the minimum capital requirement for insurance companies in 2022 according to the text?

    <p>P1,300,000,000</p> Signup and view all the answers

    What type of companies fall under the regulation of the Insurance Commission (IC) as per the text?

    <p>Reinsurance Companies</p> Signup and view all the answers

    What is the RBC Ratio Requirement according to the text?

    <p>RBC2 Ratio ≤ 50% of T1 Capital</p> Signup and view all the answers

    What is the Paid-up capital required for 'New Business' as mentioned in the text?

    <p>At least P1,000,000,000</p> Signup and view all the answers

    Which organization's requirement is at least P500,000,000 for its minimum capital according to the text?

    <p>Health maintenance organizations</p> Signup and view all the answers

    What is the main difference between Capital Ratio and RBC2 Ratio?

    <p>Capital Ratio focuses on net earned premium, while RBC2 Ratio focuses on gross written premium.</p> Signup and view all the answers

    How is the Expense Ratio calculated in insurance financial statement analysis?

    <p>By dividing the underwriting expenses by the net earned premium.</p> Signup and view all the answers

    What does a Loss Ratio of 102.63% indicate in insurance financial analysis?

    <p>Inadequate underwriting practices leading to a loss exceeding premiums earned.</p> Signup and view all the answers

    What does a Combined Operating Ratio of 139.47% suggest about an insurance company's performance?

    <p>Significant financial losses due to high operating and claims expenses.</p> Signup and view all the answers

    How does Insurance Margin differ from Expense Ratio, Loss Ratio, and Combined Operating Ratio in insurance financial analysis?

    <p>Insurance Margin represents the company's profit margin after deducting various expenses.</p> Signup and view all the answers

    Which ratio is most crucial for assessing an insurance company’s underwriting effectiveness?

    <p>Loss Ratio</p> Signup and view all the answers

    What does the Expense Ratio measure in insurance financial statement analysis?

    <p>The ratio of underwriting expenses to net earned premiums</p> Signup and view all the answers

    In insurance financial analysis, what does a Loss Ratio of 36.84% indicate?

    <p>High expenses compared to net earned premiums</p> Signup and view all the answers

    What aspect of an insurance company's performance does the Combined Operating Ratio primarily assess?

    <p>Expense management efficiency</p> Signup and view all the answers

    If an insurance company has an Insurance Margin of 102.63%, what does this suggest about its financial situation?

    <p>Losses being incurred on its underwriting activities</p> Signup and view all the answers

    When calculating the Loss Ratio in insurance financial statement analysis, what is considered a key component?

    <p>Net earned premiums</p> Signup and view all the answers

    How does the Expense Ratio differ from the Combined Operating Ratio in insurance financial analysis?

    <p>Expense Ratio focuses on expense efficiency, while Combined Operating Ratio assesses overall profitability.</p> Signup and view all the answers

    What is a common outcome of information asymmetry in insurance transactions?

    <p>Adverse Selection</p> Signup and view all the answers

    Which situation best exemplifies moral hazard in insurance?

    <p>An individual driving recklessly after purchasing vehicle insurance</p> Signup and view all the answers

    What is a common solution to moral hazard in insurance?

    <p>Increased premium for certain actions</p> Signup and view all the answers

    How is the Expense Ratio typically calculated in insurance financial statement analysis?

    <p>Underwriting Expenses divided by Net Earned Premiums</p> Signup and view all the answers

    What does an underwriting effectiveness ratio focus on in insurance financial analysis?

    <p>Operational Efficiency</p> Signup and view all the answers

    Which ratio combines underwriting expenses and claims expenses then divides them by net earned premiums?

    <p>Combined Operating Ratio</p> Signup and view all the answers

    What falls under the regulation of the Insurance Commission (IC) according to the text?

    <p>Insurance and Reinsurance companies</p> Signup and view all the answers

    What is the minimum Paid-up capital required for 'Microinsurance' as per the text?

    <p>At least P500,000,000</p> Signup and view all the answers

    What does a Risk-based capital (RBC) Ratio of 130% suggest about an insurance company's financial standing?

    <p>The company has an adequate capital buffer</p> Signup and view all the answers

    What is the new minimum Paid-up capital requirement for 'New Business' as mentioned in the text?

    <p>P900,000,000</p> Signup and view all the answers

    What is the purpose of the Risk-based capital (RBC) Requirement in insurance regulation?

    <p>To ensure that insurance companies have adequate capital to cover risks</p> Signup and view all the answers

    What is the purpose of the Combined Operating Ratio in insurance financial analysis?

    <p>Assess the profitability of underwriting operations</p> Signup and view all the answers

    In insurance financial statement analysis, what does a Loss Ratio of 102.63% indicate?

    <p>Excessive claims expenses compared to net earned premiums</p> Signup and view all the answers

    How is the Expense Ratio calculated in insurance financial statement analysis?

    <p>By dividing underwriting expenses by net earned premiums</p> Signup and view all the answers

    What does an Insurance Margin of 139.47% suggest about an insurance company's performance?

    <p>High underwriting profitability</p> Signup and view all the answers

    Which situation best exemplifies moral hazard in insurance?

    <p>Policyholder intentionally causing damage to claim insurance money</p> Signup and view all the answers

    What aspect of an insurance company's performance does the Loss Ratio primarily assess?

    <p>Claims management effectiveness</p> Signup and view all the answers

    What is the primary difference between adverse selection and moral hazard in insurance?

    <p>Adverse selection occurs before a transaction due to information asymmetry, while moral hazard occurs after a transaction when one party takes excessive risk.</p> Signup and view all the answers

    How can insurance companies address adverse selection in insurance transactions?

    <p>By conducting medical examinations and gathering additional information.</p> Signup and view all the answers

    What is the purpose of a deductible clause in insurance policies?

    <p>To reduce the financial burden on insurance companies by making policyholders share a portion of the risk.</p> Signup and view all the answers

    In insurance financial statement analysis, what does the Combined Operating Ratio assess?

    <p>Underwriting expenses and claims expenses relative to net earned premiums.</p> Signup and view all the answers

    What is the main consequence of information asymmetry in insurance transactions?

    <p>Adverse selection, leading to undesirable results for both parties involved.</p> Signup and view all the answers

    How does a Loss Ratio differ from an Expense Ratio in insurance financial statement analysis?

    <p>Loss Ratio measures claims expenses relative to net earned premiums, while Expense Ratio assesses overall expenses compared to premiums.</p> Signup and view all the answers

    What is the purpose of the Risk-based capital (RBC) Requirement in insurance regulation?

    <p>To assess an insurance company's financial stability based on its risk exposure</p> Signup and view all the answers

    What does a Loss Ratio of 55% suggest about an insurance company in financial analysis?

    <p>The company is profitable and paying out reasonable claims</p> Signup and view all the answers

    What aspect of an insurance company's performance does the Insurance Margin primarily reflect?

    <p>Underwriting profitability</p> Signup and view all the answers

    In the context of insurance regulation, what does a Capital RBC2 Ratio below 100% indicate?

    <p>The insurance company is at a high risk of insolvency</p> Signup and view all the answers

    How does the minimum capital requirement for Microinsurance companies differ from that of New Business as per the text?

    <p>New Business requires a higher capital amount than Microinsurance companies</p> Signup and view all the answers

    In insurance transactions, adverse selection occurs after the transaction has taken place.

    <p>False</p> Signup and view all the answers

    The Deductible clause is a common solution to moral hazard in insurance.

    <p>True</p> Signup and view all the answers

    The Expense Ratio in insurance financial analysis includes underwriting expenses and claims expenses divided by net earned premiums.

    <p>True</p> Signup and view all the answers

    RBC2 stands for Risk-Based Capital 2 in insurance financial statement analysis.

    <p>False</p> Signup and view all the answers

    Insurance Margin reflects the underwriting effectiveness of an insurance company in financial analysis.

    <p>False</p> Signup and view all the answers

    A Loss Ratio of 55% indicates that an insurance company is operating at a loss in financial analysis.

    <p>False</p> Signup and view all the answers

    The RBC2 Ratio is a simpler version of the Capital Ratio in insurance financial statement analysis.

    <p>False</p> Signup and view all the answers

    The Net Earned Premium (NEP) is calculated by deducting Reinsurance Expense from the Gross Written Premium (GWP).

    <p>True</p> Signup and view all the answers

    An Expense Ratio of 139.47% in insurance financial analysis indicates high efficiency in managing expenses.

    <p>False</p> Signup and view all the answers

    A Loss Ratio of 102.63% suggests that claims expenses exceed the net earned premium in insurance financial analysis.

    <p>True</p> Signup and view all the answers

    A Combined Operating Ratio of 36.84% in insurance financial analysis indicates high profitability for the insurance company.

    <p>False</p> Signup and view all the answers

    The Insurance Margin is calculated by combining the Expense Ratio and the Loss Ratio.

    <p>False</p> Signup and view all the answers

    The Insurance Commission (IC) falls under the Department of Finance (DOF).

    <p>True</p> Signup and view all the answers

    The minimum capital requirement for insurance companies in 2022 is P1,200,000,000.

    <p>False</p> Signup and view all the answers

    Microinsurance companies are required to have a minimum paid-up capital of at least P600,000,000.

    <p>False</p> Signup and view all the answers

    The RBC2 Ratio Requirement is that the RBC2 Ratio should be less than 100%.

    <p>False</p> Signup and view all the answers

    Local Corporations or Foreign branches do not fall under the regulation of the Insurance Commission (IC).

    <p>False</p> Signup and view all the answers

    An individual who drives carelessly after purchasing vehicle insurance is an example of moral hazard in insurance transactions.

    <p>True</p> Signup and view all the answers

    Adverse selection occurs when undesirable results arise due to asymmetric information after the transaction has taken place.

    <p>False</p> Signup and view all the answers

    The Risk-based capital (RBC) Ratio indicates the financial standing of an insurance company, with a higher ratio suggesting a stronger financial position.

    <p>True</p> Signup and view all the answers

    Insurance Margin is calculated by combining Underwriting Expenses and Claims Expenses and dividing them by Net Earned Premium.

    <p>False</p> Signup and view all the answers

    The Net Earned Premium is calculated by deducting Reinsurance Expense from the Gross written premium.

    <p>False</p> Signup and view all the answers

    The Deductible Clause is a common solution to addressing adverse selection in insurance transactions.

    <p>False</p> Signup and view all the answers

    A Loss Ratio of 102.63% in insurance financial statement analysis indicates high profitability for the insurance company.

    <p>False</p> Signup and view all the answers

    Expense Ratio measures the efficiency of managing expenses in insurance financial statement analysis.

    <p>True</p> Signup and view all the answers

    In insurance financial statement analysis, a Combined Operating Ratio of 139.47% suggests efficient management of underwriting and claims expenses.

    <p>False</p> Signup and view all the answers

    The Insurance Margin is calculated by dividing the Underwriting Expense and Claim Expense by the Net Earned Premium.

    <p>True</p> Signup and view all the answers

    An Expense Ratio of 36.84% in insurance financial statement analysis indicates high efficiency in managing expenses.

    <p>True</p> Signup and view all the answers

    The Capital Ratio is less complex than the RBC2 Ratio in insurance financial statement analysis.

    <p>True</p> Signup and view all the answers

    The Risk-Based Capital (RBC) Requirement is optional for insurance companies to comply with.

    <p>False</p> Signup and view all the answers

    The Insurance Commission (IC) regulates only Health maintenance organizations and Mutual Benefit Associations.

    <p>False</p> Signup and view all the answers

    The minimum Paid-up capital required for 'New Business' is P900,000,000 according to the text.

    <p>False</p> Signup and view all the answers

    The RBC2 Ratio Requirement states that T2 Capital should be less than 50% of T1 Capital.

    <p>False</p> Signup and view all the answers

    Microinsurance companies are required to have a minimum paid-up capital of at least P400,000,000.

    <p>False</p> Signup and view all the answers

    The premium of an insurance policy is determined based on the insured's creditworthiness.

    <p>True</p> Signup and view all the answers

    Policy limit is the minimum amount that an insurer will pay under a policy for a covered loss.

    <p>False</p> Signup and view all the answers

    Higher policy limits often come with lower premiums in insurance policies.

    <p>False</p> Signup and view all the answers

    The three critical components of most insurance policies are deductible, premium, and coverage limit.

    <p>False</p> Signup and view all the answers

    Insurance companies regulate Health Maintenance Organizations and Insurance Margin Associations.

    <p>False</p> Signup and view all the answers

    In insurance financial analysis, a Combined Operating Ratio below 100% suggests high efficiency in managing underwriting and claims expenses.

    <p>True</p> Signup and view all the answers

    Health insurance policies with lower deductibles tend to have lower annual premiums compared to policies with higher deductibles.

    <p>False</p> Signup and view all the answers

    Home insurance is not required by mortgage companies when financing a residential real estate transaction.

    <p>False</p> Signup and view all the answers

    Auto insurance is unnecessary when purchasing or leasing a car.

    <p>False</p> Signup and view all the answers

    Deductibles are always applied per policy, not per claim, in insurance policies.

    <p>False</p> Signup and view all the answers

    A policyholder is not required to pay any deductible out of pocket before the insurer pays a claim.

    <p>False</p> Signup and view all the answers

    High deductible policies are typically less expensive due to the increased number of small claims resulting from the lower out-of-pocket expense.

    <p>False</p> Signup and view all the answers

    Insurance is a contract where an individual pays an insurance company for financial reimbursement in case of losses.

    <p>False</p> Signup and view all the answers

    Insurance policies are not used to hedge against the risk of financial losses.

    <p>False</p> Signup and view all the answers

    The deductible, policy limit, and premium are not core components of most insurance policies.

    <p>False</p> Signup and view all the answers

    The main role of insurance is to help people financially protect themselves against expected events.

    <p>False</p> Signup and view all the answers

    Most people do not have any kind of insurance for their car, house, or life.

    <p>False</p> Signup and view all the answers

    Life, health, homeowners, commercial building, and auto are not the most common forms of insurance.

    <p>False</p> Signup and view all the answers

    Life insurance guarantees payment to named beneficiaries when the insured dies in exchange for the premiums paid by the policyholder during their lifetime.

    <p>True</p> Signup and view all the answers

    Endowment plans with educational benefits payable are one of the features offered by insurance companies in addition to life insurance.

    <p>True</p> Signup and view all the answers

    Whole Life Insurance Plans provide cash benefits starting at the end of the 5th policy year and every 3 years afterward until the age of 90.

    <p>False</p> Signup and view all the answers

    Insurance plans for women offer cash benefits equal to the face amount upon diagnosis of any covered female-specific critical illnesses and surgeries.

    <p>True</p> Signup and view all the answers

    Hospital income plans provide coverage for 5 years and offer a 25% return of premium if the insured outlives the coverage period.

    <p>False</p> Signup and view all the answers

    Insurance companies only offer life insurance plans and no other types of insurance.

    <p>False</p> Signup and view all the answers

    An insurance plan with cash benefits allows the policyholder to enjoy the face amount when the policy matures, even if they are deceased.

    <p>False</p> Signup and view all the answers

    The younger you are when you get insurance, the higher the premium will be.

    <p>False</p> Signup and view all the answers

    Travel insurance only covers losses associated with domestic travel, not international travel.

    <p>False</p> Signup and view all the answers

    Insurance policies usually consist of the premium, policy limit, and co-payment.

    <p>False</p> Signup and view all the answers

    Single pay front-end load insurance plans provide protection until age 88.

    <p>True</p> Signup and view all the answers

    It is advisable to religiously pay insurance premiums to avoid any lapse that may impact the benefits of the insurance plan.

    <p>True</p> Signup and view all the answers

    Insurance policies are primarily used to protect against losses that may result from damage to a third party.

    <p>False</p> Signup and view all the answers

    Life insurance is not considered one of the most common forms of insurance.

    <p>False</p> Signup and view all the answers

    The Deductible, policy limit, and premium are core components of most insurance policies.

    <p>True</p> Signup and view all the answers

    Health insurance is not mentioned as one of the most common forms of insurance.

    <p>False</p> Signup and view all the answers

    The key role of insurance is to help people financially protect themselves against predictable events such as routine medical check-ups.

    <p>False</p> Signup and view all the answers

    Insurance companies do not pool clients' risks to make payments more affordable for the insured.

    <p>False</p> Signup and view all the answers

    Endowment plans with educational benefits payable are not typically offered by insurance companies in addition to life insurance.

    <p>False</p> Signup and view all the answers

    Travel insurance covers losses associated with both domestic and international travel.

    <p>False</p> Signup and view all the answers

    Single pay front-end load insurance plans provide protection until age 70.

    <p>False</p> Signup and view all the answers

    Insurance companies require borrowers to have insurance coverage for the full or fair value of a property to finance a residential real estate transaction.

    <p>True</p> Signup and view all the answers

    Health insurance policies with higher deductibles result in more small claims due to lower annual premiums.

    <p>False</p> Signup and view all the answers

    Auto insurance is not necessary to protect a car investment when buying or leasing a vehicle.

    <p>False</p> Signup and view all the answers

    The three critical components of most insurance policies are premium, policy limit, and deductible.

    <p>True</p> Signup and view all the answers

    Insurance companies determine premiums based on the insured individual's credit score only.

    <p>False</p> Signup and view all the answers

    Policy limit refers to the minimum amount that an insurer will pay under a policy for a covered loss.

    <p>False</p> Signup and view all the answers

    Higher policy limits often come with lower premiums in insurance policies.

    <p>False</p> Signup and view all the answers

    Whole Life Insurance Plans provide cash benefits starting at the end of the 5th policy year and every 3 years afterward until the age of 90.

    <p>False</p> Signup and view all the answers

    Health insurance policies with lower deductibles tend to have lower annual premiums compared to policies with higher deductibles.

    <p>False</p> Signup and view all the answers

    An endowment plan with educational benefits payable is not a type of insurance offered by insurance companies.

    <p>False</p> Signup and view all the answers

    A Whole Life Insurance Plan provides cash benefits starting at the end of the 5th policy year.

    <p>False</p> Signup and view all the answers

    Insurance plans for women do not provide cash benefits upon diagnosis of any covered female-specific critical illnesses and surgeries.

    <p>False</p> Signup and view all the answers

    Hospital income plans provide coverage for 15 years and offer a 25% return of premium if the insured outlives the coverage period.

    <p>False</p> Signup and view all the answers

    Life insurance policies guarantee that the insurer pays a sum of money to named beneficiaries when the insured dies in exchange for the premiums paid by the policyholder during their lifetime.

    <p>True</p> Signup and view all the answers

    Insurance companies do not offer any type of insurance plan other than life insurance.

    <p>False</p> Signup and view all the answers

    An insurance policy with back-end load typically requires the policyholder to pay a fee upon purchasing the policy.

    <p>False</p> Signup and view all the answers

    Travel insurance is primarily designed to protect against financial losses associated with traveling abroad.

    <p>False</p> Signup and view all the answers

    The premium for an insurance policy tends to be lower if the policy is purchased at a younger age.

    <p>True</p> Signup and view all the answers

    Insurance policies with cash benefits allow the policyholder to receive the face amount only after their death.

    <p>False</p> Signup and view all the answers

    Paying insurance premiums regularly is crucial to avoid any default that may impact the benefits of the insurance plan.

    <p>True</p> Signup and view all the answers

    The older you are when you get an insurance policy, the lower the premium tends to be.

    <p>False</p> Signup and view all the answers

    What is the main purpose of insurance as described in the text?

    <p>To protect against financial losses from covered events</p> Signup and view all the answers

    In insurance, what does the policyholder receive from the insurance company?

    <p>Loss compensation and financial protection</p> Signup and view all the answers

    What is the primary reason insurance companies pool clients' risks according to the text?

    <p>To make payments more affordable for the insured</p> Signup and view all the answers

    What are the core components of most insurance policies?

    <p>Deductible, policy limit, and premium</p> Signup and view all the answers

    What does a Loss Ratio primarily assess in insurance financial analysis?

    <p>Claims expenses compared to net earned premium</p> Signup and view all the answers

    Which type of insurance is NOT mentioned as one of the most common forms of insurance in the text?

    <p>Commercial building insurance</p> Signup and view all the answers

    What is the main role of insurance according to the text?

    <p>To provide protection against unpredictable events</p> Signup and view all the answers

    Which factor primarily influences the premium of an insurance policy as mentioned in the text?

    <p>Creditworthiness of the insured or business</p> Signup and view all the answers

    What does the policy limit define in an insurance policy?

    <p>The maximum amount the insurer will pay for a covered loss</p> Signup and view all the answers

    What is typically true about insurance plans with higher policy limits according to the text?

    <p>They carry higher premiums</p> Signup and view all the answers

    Which statement accurately describes the calculation of premium in insurance policies?

    <p>It varies with the insurance company's operating expenses</p> Signup and view all the answers

    How does understanding the components of an insurance policy help in selecting the best policy?

    <p>By allowing for a better match of policy features with individual needs</p> Signup and view all the answers

    What does the face value of a general life insurance policy represent?

    <p>The maximum amount the beneficiary will receive upon death of the insured</p> Signup and view all the answers

    How does a high deductible impact the cost of an insurance policy?

    <p>Reduces the premium but increases out-of-pocket expenses</p> Signup and view all the answers

    What type of insurance policy is recommended for individuals with chronic health issues?

    <p>Policies with lower deductibles for better access to medical care</p> Signup and view all the answers

    Why do mortgage companies typically require home insurance from borrowers?

    <p>To protect against damage or theft of the property</p> Signup and view all the answers

    What is a crucial consideration when purchasing or leasing a car?

    <p>Protecting the investment through auto insurance</p> Signup and view all the answers

    Which type of insurance is primarily designed to protect against financial losses associated with traveling abroad?

    <p>Travel Insurance</p> Signup and view all the answers

    What does a Whole Life Insurance Plan provide starting at the end of the 6th policy year and every 2 years afterwards until the age of 100?

    <p>Cash benefit equal to the face amount</p> Signup and view all the answers

    What is the main feature of an Insurance plan for women mentioned in the text?

    <p>Cash benefit equal to the face amount upon diagnosis of female-specific critical illnesses</p> Signup and view all the answers

    What is the primary coverage period provided by a Hospital income plan as mentioned in the text?

    <p>10 years with a 50% return of premium</p> Signup and view all the answers

    Which type of insurance plan offers cash benefit equal to a percentage of the Face Amount starting at a specific policy year until age 100?

    <p>Whole Life Insurance Plan</p> Signup and view all the answers

    In addition to life insurance, which insurance plan promises cash benefit upon diagnosis of female-specific critical illnesses and surgeries?

    <p>Insurance plan for women</p> Signup and view all the answers

    When does a Whole Life Insurance Plan start providing cash benefit equal to a percentage of the Face Amount?

    <p>At the end of the 6th policy year and every 2 years afterwards until age 100</p> Signup and view all the answers

    Which component is NOT mentioned as part of most insurance policies according to the text?

    <p>Co-pay</p> Signup and view all the answers

    What is a recommended strategy regarding the age at which insurance should be obtained?

    <p>Get insurance at a younger age for lower premiums</p> Signup and view all the answers

    What is advised regarding the payment of insurance premiums based on the text?

    <p>Religiously pay premiums to avoid policy default</p> Signup and view all the answers

    Which insurance plan allows the policyholder to enjoy the face amount when it matures, even if they are alive?

    <p>Endowment Plan</p> Signup and view all the answers

    What is a key benefit of a single pay back-end load investment-linked insurance plan according to the text?

    <p>Lower initial fee upon purchase</p> Signup and view all the answers

    What distinguishes travel insurance from other types of insurance?

    <p>It provides protection against travel-related losses and costs</p> Signup and view all the answers

    What is the policy limit in an insurance policy?

    <p>The maximum amount the insurance company will pay for a covered loss</p> Signup and view all the answers

    How is an insurance policy's premium determined?

    <p>By the insured's risk profile and creditworthiness</p> Signup and view all the answers

    What role does the deductible play in an insurance policy?

    <p>It is the amount the insured has to pay before the insurer covers a claim</p> Signup and view all the answers

    Why do higher policy limits usually come with higher premiums?

    <p>To compensate for the increased potential payout by the insurer</p> Signup and view all the answers

    What does an insurance company consider when determining an individual's premium?

    <p>Their risk profile and creditworthiness</p> Signup and view all the answers

    Which component of an insurance policy determines how much an insurer will pay under that policy for a covered loss?

    <p>Policy limit</p> Signup and view all the answers

    What does a life insurance policy guarantee according to the text?

    <p>Payment to named beneficiaries upon the insured's death</p> Signup and view all the answers

    What type of 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?

    <p>Whole Life Insurance Plan</p> Signup and view all the answers

    Which insurance plan provides cash benefits equal to the face amount upon diagnosis of any covered female-specific critical illnesses and surgeries?

    <p>Insurance plan for women with critical illnesses coverage</p> Signup and view all the answers

    What is the primary feature of an Endowment plan with educational benefits payable?

    <p>Payment for education expenses at specific intervals</p> Signup and view all the answers

    In insurance policies, what does a Hospital income plan offer after the coverage period?

    <p>Return of premium if the insured outlives coverage period</p> Signup and view all the answers

    What distinguishes a Whole Life Insurance Plan from other insurance plans mentioned in the text?

    <p>Cash benefit starting at the end of the 6th policy year</p> Signup and view all the answers

    What is the primary purpose of insurance according to the text?

    <p>To help people financially protect themselves against life's uncertainties</p> Signup and view all the answers

    Which components make up most insurance policies according to the text?

    <p>Deductible, premium, and policy limit</p> Signup and view all the answers

    How do insurance companies make payments more affordable for the insured?

    <p>By pooling clients' risks</p> Signup and view all the answers

    What do insurance policies hedge against according to the text?

    <p>The risk of financial losses and property damage</p> Signup and view all the answers

    Which factor primarily helps in making insurance payments more affordable for the insured?

    <p>Pooling clients' risks</p> Signup and view all the answers

    What is the core purpose of an insurance contract according to the text?

    <p>To provide financial protection and reimbursement against losses</p> Signup and view all the answers

    What term is used to describe the maximum amount an insurer will pay to a beneficiary upon the death of the insured?

    <p>Face value</p> Signup and view all the answers

    In insurance, why are policies with very high deductibles typically less expensive?

    <p>They result in fewer small claims</p> Signup and view all the answers

    What type of insurance is recommended for individuals with chronic health issues according to the text?

    <p>Health insurance</p> Signup and view all the answers

    Which insurance policy component must be satisfied by the policyholder before the insurer pays a claim?

    <p>Deductible</p> Signup and view all the answers

    What is the primary purpose of health insurance policies with lower deductibles according to the text?

    <p>Access to medical care</p> Signup and view all the answers

    Which type of insurance is typically mandated by mortgage companies for property owners?

    <p>Home Insurance</p> Signup and view all the answers

    Which type of insurance plan provides protection until age 88 with a single pay and front-end load?

    <p>Whole life insurance</p> Signup and view all the answers

    What is the primary reason provided in the text for getting insurance at a younger age?

    <p>To receive lower premiums</p> Signup and view all the answers

    In insurance, what are the core components mentioned to make up most insurance policies according to the text?

    <p>Deductible, policy limit, premium</p> Signup and view all the answers

    Why is it advisable in the text to religiously pay the insurance premiums?

    <p>To maintain the benefits of the insurance plan</p> Signup and view all the answers

    What is recommended in the text to be included in an insurance plan for you to enjoy the face amount when it matures while you are still alive?

    <p>Cash benefits</p> Signup and view all the answers

    What is emphasized in the text regarding the travel insurance policy?

    <p>&quot;It covers costs associated with traveling&quot;</p> Signup and view all the answers

    Study Notes

    • Information asymmetry in insurance transactions can lead to adverse selection and moral hazard.
    • Adverse selection occurs when one party has more information before the transaction, like a person with cancer buying life insurance.
    • Solutions to adverse selection include medical examinations and gathering other relevant information.
    • Moral hazard happens when one party takes excessive risks after the transaction, like driving recklessly after buying vehicle insurance.
    • Solutions to moral hazard include implementing a deductible clause and increasing premiums for certain actions.
    • Common ratios used in financial statement analysis for insurance companies include expense ratio, loss ratio, combined operating ratio, and insurance margin.
    • Insurance regulations set by the Insurance Commission under the Department of Finance dictate minimum capital requirements, with new businesses needing at least P1,000,000,000 in paid-up capital.

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    Related Documents

    INSURANCE PART 1.pptx
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