Questions and Answers
When an insurance company agrees to automatically assume a portion of the risk written by another insurance company, it is known as a(n)
Reinsurance treaty
All of the following are examples of risk retention EXCEPT
If a court ordered payment for a loss that was not covered in the policy even if it was clearly worded, it would be an example of which legal concept?
Reasonable expectations
A state-issued document empowering an insurance company to become an admitted insurer is called
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How does reinsurance benefit the insurer?
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The causes of loss insured against in an insurance policy are known as
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What insurance concept is associated with the words 'Weiss' and 'Fitch'?
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An individual applies for a life policy. Two years ago, he suffered a head injury from an accident and cannot remember parts of his past, but is otherwise competent. He has also been hospitalized for drug abuse, but does not remember this when applying for insurance. The insurer issues the policy and learns of his history one year later. What will probably happen?
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An applicant who knowingly fails to communicate a fact that would help an underwriter make a sound decision regarding coverage is guilty of
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An insurance producer who by contract is bound to write insurance for only one company or group of companies is classified as a/an
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Which type of authority is based on the actions, words, or deeds of the principal?
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Concerning insurance, the definition of a fiduciary responsibility is
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A group's reported losses are more likely to become equal to the statistical probability of loss,
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Adverse selection is a concept best described as
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Study Notes
Reinsurance and Risk Management
- Reinsurance treaty allows an insurance company to share a portion of the risk with another company.
- Risk retention examples include self-insurance; premiums do not qualify as retention methods.
Legal Concepts and Insurance Policies
- Reasonable expectations doctrine may compel payment for uncovered losses due to an unclear policy interpretation.
Licensing and Authority
- Certificate of authority is required for an insurance company to operate as an admitted insurer in a state.
- Apparent authority is based on the principal's actions, words, or deeds, affecting how agents represent the company.
Insurance Concepts and Coverage
- Reinsurance acts as a safety net for insurers, providing protection against catastrophic losses.
- Perils are the events or causes of loss that an insurance policy specifically covers.
Financial Integrity and Decision-Making
- Weiss and Fitch serve as guides for evaluating an insurance company's financial stability and integrity.
- Concealment refers to the act of withholding important information from an underwriter, which impacts coverage decisions.
Agent Classifications
- Captive agents are insurance producers contracted to sell for one specific company or group of companies.
Miscellaneous Considerations
- A life insurance policy may remain effective despite the applicant's past medical issues, provided there was no intentional concealment of relevant facts.
- Fiduciary responsibility in insurance involves managing the insurer's funds in a trust capacity.
- A larger insurance group will more accurately reflect overall loss probabilities due to the law of large numbers.
- Adverse selection occurs when individuals more likely to file claims seek insurance at higher rates than those with lower risks.
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Description
This quiz explores key concepts in insurance, including reinsurance, risk management, legal doctrines, and the licensing of insurance companies. Delve into the mechanisms that ensure financial integrity and effective decision-making in the insurance industry.
