47 notecards = 12 pages (4 cards per page)
Which of the following is a basic characteristic of insurance?
Which of the following is implied by the pooling of losses?
According to the law of large numbers, what happens as the number of exposure units increases?
According to the law of large numbers, what should happen as an insurer increases the number of units insured?
Characteristics of a fortuitous loss include which of the following?
From the viewpoint of the insurer, all of the following are characteristics of an ideally insurable risk EXCEPT
From the standpoint of the insurer, which of the following is a characteristic of an ideally insurable risk?
Why is a large number of exposure units generally required before a pure risk is insurable?
The requirement that losses should be accidental and unintentional in order to be insurable results in which of the following?
Which of the following is implied by the requirement that a loss should be determinable and measurable to be insurable?
Methods by which insurers may minimize or avoid catastrophic losses include which of the following?
Which of the following types of risks best meets the requirements for being insurable by private insurers?
Reasons why market, financial, and production risks are often uninsurable include which of the following?
Which of the following types of risks is normally uninsurable by private insurers?
Which of the following is a result of adverse selection?
The tendency for unhealthy people to seek life or health insurance at standard rates is an example of
Which of the following statements regarding insurance and gambling is (are) true?
In addition to marketing life insurance, life insurers typically sell which of the following products?
Inland marine insurance provides coverage for
Which of the following is classified as casualty insurance?
Which of the following is a form of casualty insurance?
Which of the following statements regarding private insurance and government insurance is (are) true?
All of the following are benefits to society that result from insurance EXCEPT
Which of the following statements about the insurance industry as a source of investment funds is (are) true?
All of the following are social costs associated with insurance EXCEPT
A group of farmers agreed that if any farmer suffered a property loss, the loss would be spread over the entire group. In this way, each farmer is responsible for the average loss of the group rather than the actual loss that each farmer sustained. Which characteristic of insurance is embodied in this agreement?
XYZ Insurance Company writes coverage for most perils which can damage property. XYZ, however, does not write flood insurance on property located in flood plains. Which requirement of an ideally insurable risk might be violated if XYZ wrote flood insurance on property located in flood plains?
ABC Appliance offers a warranty requiring an annual fee. The warranty may be purchased at the time of sale or at any time within the first year after the appliance was purchased. The warranty fee after the date of purchase is twice the time-of-purchase fee. When asked why the fee was higher after the date of purchase, ABC's president said, "Buying a warranty is voluntary. We've noted that those who buy the warranty after the purchase date have a greater need for service." Charging the same rate or a lower rate after the date of purchase would expose ABC to what problem that also impacts private insurers?
Insurance companies collect premiums in advance. Since the premiums collected are not needed to pay losses and expenses immediately, the funds can be loaned to business firms. Because of this fact, insurance benefits society by
LMN Insurance sells homeowners insurance. The LMN homeowners policy combines property and casualty insurance in the same contract. Insurance policies combining property and casualty coverage in the same contract are called
One branch of government insurance programs has a number of distinguishing characteristics. These programs are compulsory, they are financed by mandatory contributions rather than general tax revenues, and benefits are weighted in favor of low-income groups. These government insurance programs are called
Gina would like to buy a house. She will pay 10 percent of the cost of the house as a down payment and borrow the other 90 percent from a mortgage lender. The home will serve as collateral for the loan. The lender will not make the loan to Gina unless the home is insured. Using insurance to secure the collateral for a loan illustrates which of the following benefits of insurance to society?
ABC Insurance Company calculated the amount that it expected to pay in claims for each policy sold. Rather than selling the insurance for the amount it expected to pay in claims, ABC added an allowance to cover the cost of doing business, including commissions, taxes, and acquisition expenses. This allowance is called a(n)
JKL Insurance Company estimates that 14 out of every 100 homeowners it insures will file a claim each year. Last year, JKL insured 200 homeowners. According to the law of large numbers, what should happen if JKL insures 2,000 homeowners this year?
Apex Insurance Company wrote a large number of property insurance policies in an area where earthquake losses could occur. When the president of Apex was asked if she feared that a severe earthquake might put the company out of business, she responded, "Not a chance. We transferred most of that risk to other insurance companies." An arrangement by which an insurer that initially writes insurance transfers to another insurer part or all of the potential losses associated with such insurance is called
According to the law of large numbers, what should happen as an insurance company increases the number of loss exposures that it insures?
Which of the following statements regarding insurance and hedging is (are) true?
Ashley opened an all-you-can-eat buffet restaurant. The price per-person was based on what Ashley believed an average restaurant patron would consume. The restaurant began to lose money. Ashley concluded that her patrons had "above average" appetites, and were attracted to her restaurant because they could eat as much as they wanted while being charged an average price. A similar phenomenon exists in insurance markets. This problem is called
Which of the following statements concerning social insurance benefits is (are) correct?
Adverse selection occurs
Which of the following statements regarding insurance and hedging is true?
Which of the following is an example of private insurance?
If insurers were to provide indemnification for losses that were deliberately caused, which characteristic of ideally insurable risks would not be met?
An insurance company that sells earthquake insurance in an area where earthquakes are possible has subjected itself to the risk of insolvency if a severe earthquake occurs. An insurer can safely sell earthquake insurance in this area if it shifts the risk of catastrophic loss to another insurer. The shifting of insured risk from one insurer to another insurer is called
The premium that insurance companies charge does not cover the cost of expected losses only. The premium must also cover the cost of compensating agents and other costs of doing business. The amount added to the pure premium to cover these costs is called the
A discount store chain is concerned that cashiers might steal money from cash registers. To provide protection against theft by the cashiers, the discount store chain can purchase a
BBB Auto Club provides emergency road service and other services to its members. BBB Auto Club charges a higher membership fee to new members than it charges to members who are renewing their membership. When asked to explain this pricing policy, the auto club president noted, “New members often sign-up prior to taking a long road trip, so we have to charge more as first-year members have higher service utilization rates.” A similar phenomenon observed in insurance markets is called