Introduction to Insurance Contracts
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Questions and Answers

What type of insurance specifically covers funeral and burial expenses?

  • Pre-Need Insurance (correct)
  • Reinsurance
  • Variable Unit-Linked Insurance
  • General Insurance

    • What is the primary function of the Insurance Commission in the Philippines?

  • Limit consumer education about insurance
  • Manage insurance companies' investments
  • Ensure fair practices and protect policyholders' rights (correct)
  • Promote monopolies in the insurance market

    • Which type of insurance combines life coverage with investment components?

  • Pre-Need Insurance
  • Health Maintenance Organization (HMO)
  • General Insurance
  • Variable Unit-Linked Insurance (VUL) (correct)

    • What is the minimum paid-up capital required for Life and Non-Life Insurance Companies in the Philippines?

    <p>₱1 billion</p> Signup and view all the answers

    Which of the following best describes reinsurance?

    <p>Insurance purchased by insurance companies to manage risk</p> Signup and view all the answers

    Under the amended insurance code, when must existing life and non-life insurance companies reach a net worth of ₱1.3 billion?

    <p>December 31, 2022</p> Signup and view all the answers

    What is one of the roles of a Health Maintenance Organization (HMO)?

    <p>Provide network-based health insurance coverage</p> Signup and view all the answers

    Which of the following is NOT a function of the Insurance Commission?

    <p>Guaranteeing profits for insurance companies</p> Signup and view all the answers

    What is insurance primarily used for?

    <p>To protect against financial loss</p> Signup and view all the answers

    Which of the following best defines the term 'policyholder' in an insurance context?

    <p>The party that has the right to compensation</p> Signup and view all the answers

    What constitutes a significant insurance risk in an insurance contract?

    <p>An uncertain future event adversely affecting the policyholder</p> Signup and view all the answers

    Under PFRS 17, which of the following is NOT a type of contract to which it applies?

    <p>Investment contracts with fixed returns</p> Signup and view all the answers

    Which factor distinguishes insurance contracts from other types of agreements?

    <p>The transfer of significant insurance risk</p> Signup and view all the answers

    What is the purpose of compensation in an insurance contract?

    <p>To protect policyholders from financial loss upon an insured event</p> Signup and view all the answers

    What is meant by an 'insured event' in the context of an insurance contract?

    <p>An uncertain future event that creates insurance risk</p> Signup and view all the answers

    What type of insurance provides financial protection upon the insured's death?

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

    What is a characteristic of the commissions received by agents in non-life insurance?

    <p>It is an income for the insurance company.</p> Signup and view all the answers

    Which step is NOT part of the commissions process?

    <p>Reconciliation of salaries</p> Signup and view all the answers

    Which party does an insurance broker represent?

    <p>The customers or consumers.</p> Signup and view all the answers

    What is one of the audit objectives concerning commission payments?

    <p>To ensure compliance with commission limits set in contracts.</p> Signup and view all the answers

    Which audit procedure involves ensuring that commission payments do not exceed contractual limits?

    <p>Reviewing commission payment records.</p> Signup and view all the answers

    In the context of audits, what does 'Accuracy and Valuation' refer to among the audit assertions?

    <p>Verifying that commission calculations are correct.</p> Signup and view all the answers

    What should be done with commissions when a policy is cancelled?

    <p>Commissions should be recovered and adjusted.</p> Signup and view all the answers

    Which of the following is NOT a requirement for commission payments in terms of documentation?

    <p>Payments must be based on agent performance.</p> Signup and view all the answers

    What is the minimum solvency margin required for non-life insurance companies?

    <p>P500 million or 20% of the net premiums written</p> Signup and view all the answers

    According to the Insurance Commission, how often must insurance companies rotate their external auditors?

    <p>Every five years</p> Signup and view all the answers

    What is required for an insurance company to take on any insurance risk?

    <p>Payment of the premium or guarantee of payment</p> Signup and view all the answers

    What defines the sufficiency of assets according to Section 200?

    <p>Assets must cover liabilities and reserves for unexpired risks</p> Signup and view all the answers

    What is the RBC Ratio used for?

    <p>To measure capital adequacy aligned with risk profiles</p> Signup and view all the answers

    What is the cooling-off period required for an auditor after rotation?

    <p>Two years</p> Signup and view all the answers

    Which of the following statements regarding the sufficiency of assets is correct?

    <p>Assets must cover all obligations and liabilities</p> Signup and view all the answers

    What does the solvency margin ensure for an insurer?

    <p>The insurer can meet obligations even in adverse conditions</p> Signup and view all the answers

    Which of the following best defines an insurance claim?

    <p>A request to an insurance provider for payment following a loss covered by the policy.</p> Signup and view all the answers

    What is the primary difference between earned and unearned premiums?

    <p>Earned premiums are payments for coverage provided, whereas unearned premiums are for future coverage not yet provided.</p> Signup and view all the answers

    In which step of the claims process is the date of loss significant?

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

    Who are beneficiaries in the context of insurance?

    <p>Individuals entitled to receive benefits from the policy.</p> Signup and view all the answers

    What must happen before an insurance company releases payment for a claim?

    <p>The claim must be approved.</p> Signup and view all the answers

    Which type of claim is specifically for covering medical expenses?

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

    What is the initial action in the claims process?

    <p>Notification.</p> Signup and view all the answers

    Which of the following statements about life insurance claims is correct?

    <p>They are submitted only after the insured's death.</p> Signup and view all the answers

    Study Notes

    Introduction to Insurance

    • Insurance provides financial protection against potential losses, serving as a mechanism for risk management.
    • Insureds pay premiums to insurers for compensation in case of specified covered losses.

    Insurance Contracts

    • Defined by PFRS 17, an insurance contract involves significant risk transfer from the policyholder to the issuer.
    • Key definitions:
      • Policyholder: Individual entitled to compensation under the contract.
      • Insured Event: Uncertain future occurrence covered by the insurance.

    Key Factors of Insurance Contracts

    • Insurance Risk: Significant risk is transferred from the policyholder to the insurer.
    • Uncertainty: The triggering event must be uncertain.
    • Compensation: Insurer agrees to compensate for losses from the insured event.

    Types of Insurance

    • Life Insurance: Guarantees payment to beneficiaries upon the insured's death.
    • General Insurance: Covers property, liability, and asset losses.
    • Health Maintenance Organization (HMO): Provides health insurance, typically through a network of providers.
    • Pre-Need Insurance: Covers funeral expenses and related costs.
    • Reinsurance: Insurance that insurers purchase to manage risk.
    • Variable Unit-Linked Insurance (VUL): Combines life insurance with investment opportunities.

    Insurance Industry in the Philippines

    • Insurance Commission Responsibilities:
      • Protects policyholders and maintains fair practices.
      • Regulates the insurance market and ensures financial stability.
      • Promotes competition and consumer education.

    Regulatory Framework

    • Capital Requirements:

      • Life and non-life insurers require a minimum paid-up capital of ₱1 billion.
      • New reinsurance companies need at least ₱2 billion.
      • Increasing minimum net worth requirements for existing companies by specified deadlines.

    • Appointment of Auditors:

      • External auditors must be accredited by the Insurance Commission; may undergo partner rotation every five years.

    • Asset Sufficiency and Solvency Margin:

      • Companies must maintain sufficient assets to cover liabilities, with a minimum solvency margin of 50% of net worth for life insurers.

    • Inception of Risk: Insurance risk starts once premium payment is verified.

    Claims in Insurance

    • Claims are formal requests for payment due to an insured event occurrence.
    • Insurance claims types:
      • Health Insurance Claims: Cover medical expenses.
      • Life Insurance Claims: Made by nominees after the policyholder's death.
      • Group Life Insurance Claims: Offered by employers for employee benefits.

    Claims Process

    • Notification: Establishes the date of loss for claims filing timeline.
    • Verification: Involves evaluating the legitimacy and coverage of claims.

    Commissions in Insurance

    • Agents earn commissions based on a percentage of premiums.
    • Licensing distinctions:
      • Insurance Agents: Represent insurance companies.
      • Insurance Brokers: Represent consumers.

    Audit Program for Insurance Commissions

    • Objectives:

      • Verify accuracy and compliance of commission payments.
      • Assess internal controls over commission processes.

    • Audit Procedures Include:

      • Recalculating sample commissions for accuracy.
      • Reviewing compliance with limits and recovery of commissions for canceled policies.
      • Observing internal control effectiveness regarding commission payments.

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    Related Documents

    Audit Of The Insurance Industry Hand-Out PDF

    Description

    This quiz covers the fundamentals of insurance, including the nature of insurance contracts, key factors involved, and different types of insurance such as life and general insurance. It also explains risk management and the roles of policyholder and insurer in the context of PFRS 17.

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