FOI - Chapter 1

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Questions and Answers

What is the primary purpose of insurance?

To ensure profits for the insurance company

To cover all past losses irrespective of their cause

To provide financial support for future and accidental losses (correct)

To protect against deliberate losses only

Which type of insurance generates over 50% of P&C premiums in Canada?

Automobile Insurance (correct)

Property Insurance

Liability Insurance

Health Insurance

What distinguishes private insurers from government insurers in Canada?

Private insurers are owned by the government

Only private insurers can issue liability insurance

Government insurers provide lower premiums

Private insurers are focused on generating profits (correct)

What is a mutual insurance company primarily focused on?

Providing insurance at the lowest possible price for policyholders Signup and view all the answers

What may insurance companies choose to offer in lieu of repairing or replacing damaged items?

Indemnity in money or another valuable form Signup and view all the answers

What is a consequence of allowing individuals to purchase insurance after a loss?

Reduced motivation to buy insurance before a loss Signup and view all the answers

In the context of property and casualty insurance, what is NOT a type of coverage provided?

Health insurance Signup and view all the answers

What was the primary contribution of Hermann Ebbinghaus to psychology?

Development of the concept of the forgetting curve Signup and view all the answers

Stock insurance companies primarily derive their operating funds from what source?

Public sale of stock and private funds Signup and view all the answers

How can students mitigate the effects of the forgetting curve?

Through continuous review and participation in class activities Signup and view all the answers

What does the forgetting curve illustrate?

The gradual loss of learned information over time Signup and view all the answers

What is a key expectation for students during the course?

To participate in discussions and review content regularly Signup and view all the answers

What is one historical example mentioned regarding the origins of insurance?

The enactment of fire insurance due to a significant fire disaster in London Signup and view all the answers

Which of the following is part of the basic licensing training for new brokers?

Customer Service for Insurance Professional (CSIP) Signup and view all the answers

What level of broker is associated with obtaining the CAIB designation?

Experienced Broker Signup and view all the answers

Which of the following was a method used by Chinese boat operators in 5000 BC to manage risk?

Utilizing multiple boats to navigate rapids Signup and view all the answers

Which of the following is a characteristic of the Direct Writing System in insurance distribution?

Producers are employees of the insurer. Signup and view all the answers

What percentage of insurance in Canada is sold through the Independent Brokerage System?

Over 80% Signup and view all the answers

Which of the following is NOT a role of independent brokerages in the insurance distribution process?

Pay salaries to the insurers. Signup and view all the answers

In the Agency System, how are agents primarily compensated?

Commission and bonuses for business sold. Signup and view all the answers

What is true about Lloyd’s of London?

It is an insurance market, not an insurance company. Signup and view all the answers

Which provinces in Canada have compulsory auto insurance coverages?

BC, SK, MB, Quebec Signup and view all the answers

What is a primary characteristic of brokers in the Independent Brokerage System?

They typically own the business they produce. Signup and view all the answers

What distinguishes independent brokers from agents in the Agency System?

Independent brokers can handle a wide range of insurers. Signup and view all the answers

What is the primary function of syndicates in marine insurance?

To gather underwriting members to collectively assume risks Signup and view all the answers

What role do underwriting agents play in syndicates?

They manage the syndicate's affairs and appoint expert underwriters Signup and view all the answers

What is the main purpose of the 'slip' in the insurance distribution process?

To provide essential underwriting information for risk placement Signup and view all the answers

How is membership to Lloyd's open?

It requires meeting specific financial requirements set by the Committee of Lloyd’s Signup and view all the answers

What happens once 100% of the risk is subscribed in the underwriting process?

The slip is submitted to the Policy Signing Office Signup and view all the answers

What is one primary function of insurance related to financial loss?

Allows people to share their losses among a larger group Signup and view all the answers

How does insurance serve as a basis for the credit system?

By protecting investments and reducing financial worry Signup and view all the answers

Which of the following is NOT a function of the insurance industry?

Offering financial gains through investment Signup and view all the answers

What does the principle of indemnity in insurance dictate?

Payments are made only for the exact amount of loss Signup and view all the answers

What is one of the risks that insurance helps individuals manage?

The risk of financial loss due to specific perils Signup and view all the answers

What does the concept of avoidance refer to in insurance?

Eliminating the chances of financial loss by not owning property Signup and view all the answers

Which group of professionals are notably employed by insurance companies?

Independent brokers, adjusters, and actuaries Signup and view all the answers

Which of the following describes the function of loss prevention in the insurance industry?

Educating the public on ways to avoid losses and reduce severity Signup and view all the answers

Study Notes

The Forgetting Curve

Hermann Ebbinghaus developed the concept of the forgetting curve, illustrating the loss of learned information over time.
Regular review and study are critical for retaining information; intervals between learning and assessment increase the likelihood of forgetting.

Course Expectations and Participation

Active participation in course activities is encouraged to facilitate learning.
Students should prepare by studying at home, posing questions in class, and reviewing content weekly.

Insurance Overview

Insurance operates on the principle of risk sharing, allowing individuals to pool resources for support during times of need.
The history of fire insurance began after the Great Fire of London in 1666, highlighting the need for formal risk management.

Functions of Insurance

Spread the Risk: Losses are shared among many participants, allowing individuals to pay into a common fund for collective protection.
Support Credit Systems: Insurance access enables consumers to obtain credit by protecting their investments.
Eliminate Worry: Insurance encourages entrepreneurship by mitigating financial risks through manageable premiums.
Loss Prevention: Through education and campaigns, the insurance industry works to prevent losses and minimize their impact.
Employment Source: The insurance sector is a significant employer, supporting various professions like law, medicine, and construction.

Definition and Analysis of Insurance

Insurance involves a commitment by one party to indemnify another against financial losses resulting from specific risks.
Payments under insurance only occur when these identified risks manifest.
The principle of indemnity ensures that compensation equals the actual loss experienced, preventing profit from insurance claims.

Property and Casualty Insurance in Canada

Types of Insurance: Includes automobile, property, and liability coverage.
Private Insurers: Made up of stock and mutual companies, provide the majority of insurance in Canada.
Government Insurers: Offer mandatory coverages, including auto insurance, with some competition from private insurers.

Distribution of Insurance

Direct Writing System: Insurers employ producers to sell limited product lines directly.
Independent Brokerage System: Dominant in Canada, with many agents representing multiple insurance companies.
Agency System: Agents work for one insurer but are independent in client interactions.

Lloyd's of London

Not an insurance company but a market for underwriting, particularly for marine insurance.
Lloyd’s operates through syndicates where underwriters assume risks collectively.

Key Terminology

Important terms, such as liability, risk, perils, and indemnity, are critical to understanding insurance principles.
The definitions clarify the mechanisms and responsibilities inherent in insurance contracts.

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Description

This quiz covers key concepts on the forgetting curve as introduced by Hermann Ebbinghaus and the foundational principles of insurance, including risk sharing and historical context. Understanding these concepts is crucial for effective learning and participation in any course. Explore how active engagement and memory retention strategies can enhance your educational experience.