Ins21 - Mock Exam Quiz Questions
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Welcome to the INS21 Mock exam. All the best
- 1.Brown Company's Policy includes a liberalization clause. Brown's insurer introduces a policy change that broadens coverage at no additional premium. How will this change apply to Brown's existing policy?
- A.
The broadened coverage does not apply to Brown Company's policy.
- B.
The broadened coverage automatically applies to Brown Company's policy.
- C.
The broadened coverage will apply to Brown Company's policy with an endorsement.
- D.
The broadened coverage will apply to Brown Company's new policies as they are issued.
- 2.The use of standard forms by insurers leads to a more
- A.
Consistent interpretation of insurance policies
- B.
Creative interpretation of insurance policies.
- C.
Conservative interpretation of insurance policies.
- D.
Coordinated interpretation of insurance policies.
- 3.If the insurer cancels the policy, the return premium will be calculated usually on a
- A.
Short-rate basis.
- B.
Flat Basis.
- C.
Pro-rata basis.
- D.
Penalty basis.
- 4.Jim canceled his auto policy 315 days after the inception date. The one-year premium is $1,095. Assuming that a year is 365 days, what is Jim's pro rata premium refund?
- A.
$50
- B.
$150
- C.
$780
- D.
$945
- 5.A policy in which the insurer pays a stated amount in the event of a specified loss (usually a total loss), regardless of the actual value of the loss is known as a
- A.
Replacement policy.
- B.
Valued policy.
- C.
Conditional policy.
- D.
Specified policy.
- 6.Which one of the following statements is true regarding types of rates used by insurers?
- A.
Class rates apply to all insureds in the same rating category.
- B.
Merit rating plans are also called manual rating plans.
- C.
Class rates are not based on loss statistics.
- D.
Class rates reflect loss characteristics of a particular insured.
- 7.Why would an underwriter modify the rate charged for the coverage provided when evaluating an application for insurance?
- A.
Because treaty reinsurance in unavailable for the exposures indicated
- B.
To address the moral hazards the underwriter identified during investigation
- C.
To better match the rate to the characteristics of the risk
- D.
Because the applicant is not acceptable for coverage
- 8.In insurance terminology, which of the following refers to a book of business?
- A.
All policies sold by an insurance company or agency
- B.
All policies in a particular territory
- C.
All policies providing a particular type of insurance
- D.
All the above
- 9.In evaluating an application, an underwriter thinks that the class of business is not one that the company wishes to write, but he would need to physically inspect it to be certain. He also realizes that the business is located in an undesirable section of the city. Based on the location alone, the underwriter decides not to issue the policy. According to many state insurance laws, this would be an example of
- A.
Diversification.
- B.
Unfair discrimination.
- C.
Fair discrimination.
- D.
Regulated discrimination.
- 10.Some insurers now use expert systems in the underwriting process. The primary purpose of these expert systems is to
- A.
Reduce claim expenses and loss adjustment expenses.
- B.
Replace underwriting decision-making and enhance accuracy.
- C.
Emulate the underwriting decision-making process as it would be performed by expert underwriters.
- D.
Modernize insurance company information systems.
- 11.Select the Correct statement with respect to Auto Insurance in America
- A.
Men Pay more for Insurance than Women due to their aggessiveness behind wheels
- B.
Women Pay more for Insurance than men due to their soft behind wheels
- C.
Premium cannot be different for men and women
- D.
None of the above
- 12.Roadside assistance plans provides services EXCEPT
- A.
24 Hours emergency towing services
- B.
24 Hours lost key and lockout services
- C.
24 Hours battery services
- D.
24 Car higene services
- 13.Being a owner of house in US
- A.
It is mandatory to buy homeowner's Insurance
- B.
It is not mandatory to buy homeowner's Insurance
- C.
State automatically provides homeowner's Insurance
- D.
The bank which loaned should buy homeowners's Insurance
- 14.If an Insured is Sued(Dragged to court) does the Insurance Company defend the Insured in court?
- A.
Insurance company defends the Insured until final judgement is given
- B.
Insurance company defends the Insured until the limits of the coverage is expended for the defence
- C.
Insurance company does washes of hands as it is not their responsibility to go to court
- D.
None of the above
- 15.If an insurance company refuses to pay a claim that should be paid or offers to settle a claim for less than it knows the claim is worth or denies a claim without adequate investigation, this could give rise to
- A.
Bad faith claim against the Insurance company
- B.
Unfair descrimination by Insurance company
- C.
Long term profit for the Insurance company
- D.
Cancellation of Liscence doing business by the Insurance company
- 16.A "___________" letter from your insurer is a notice that even though the company is proceeding to handle your claim, depending on what happens, certain losses might not be covered by the terms of the policy. By such a letter, the company preserves its right to deny coverage at a later date based on the terms of the policy.
- A.
Preservation of rights
- B.
Reservation of rights
- C.
Denial of rights
- D.
None of the above
- 17.Insurance companies are exempted from Consumer protection laws in some states
- A.
Yes
- B.
Yes, becuase Insurance is not consumable product
- C.
No
- D.
No, because Insurance customers are consumers
- 18.You have bought a flame red high performance engine car. You were surprised that despite your car has so many great safety features similar to other brand cars, your insurance company charged you more than what it was charging for other brand cars. What could be the reason?
- A.
The red color cars are alway percieved to recieved more traffic tickets
- B.
The high performance engine makes your car engine more prone to theft
- C.
The Insurance company battling a case against your car brand company
- D.
The Insurance company had some secret dealings with the rival company
- 19.Ideally insurable loss exposures include:
- A.
Losses those are accidental.
- B.
Losses those are definite and measurable
- C.
A large number of similar exposure units.
- D.
All of the above.
- 20.Most liability insurance policies exclude coverage for losses intentionally caused by the insured because such losses do not meet which one of the following characteristics of an ideally insurable exposure?
- A.
Large number of similar exposure units
- B.
Accidental
- C.
Not catastrophic
- D.
Not economically feasible to insure
- 21.Which of the following statements best describes the way in which “support for credit” is a benefit of insurance?
- A.
Insurance is required to get a drivers license.
- B.
Insurance satisfies lenders that their loans will be repaid.
- C.
Insurers lend money to fund new construction and other projects.
- D.
People who are indemnified by insurance don’t have to borrow money to replace damaged property.
- 22.
- A.
Insurance works as a system of transferring and sharing the costs of losses
- B.
The law of large numbers assists the insurance mechanism by improving the relative accuracy of prediction.
- C.
Property loss exposures include negligence, real property, and personal property.
- D.
A liability loss exposure presents the possibility of a claim alleging legal responsibility.
- 23.State insurance departments:
- A.
Regulate insurance rates to protect consumers from inadequate, excessive, or unfairly discriminatory rates.
- B.
Are located in most but not all states
- C.
Provide a source of investment funds.
- D.
Answer to the federal government insurance department.
- 24.Reinsurance is a contractual agreement:
- A.
In which one insurer transfers some or all of its loss exposures to another insurer.
- B.
That is formed as a subsidiary of its parent company for the purpose of writing insurance on the parent company.
- C.
That ideally insures large numbers of similar exposure units.
- D.
That insures through an attorney-in-fact.
- 25.
- A.
Created by the federal government for the purpose of providing insurance for the social good.
- B.
The primary funding for the Fair Access to Insurance Requirements program.
- C.
A state fund that provides a system to pay the claims of insolvent insurers.
- D.
Managed by the National Association of Insurance Commissioners.
- 26.All of the following are true, EXCEPT:
- A.
The standard market refers collectively to insurers who voluntarily offer insurance coverages at markets designed for customers with average or better-than-average loss exposures.
- B.
Excess and surplus lines insurance consists of insurance coverages, usually available in the standard market, that are written by unlicensed insurers.
- C.
Nonadmitted (or unlicensed) insurers are insurers that are not licensed in many of the states in which they operate and that write excess and surplus lines insurance coveages
- D.
The excess and surplus lines market is not subject to any state regulation.
- 27.A ratemaking concept through which actuaries base rates on actuarially calculated loss experience and place insureds with similar characteristics into the same rating class is
- A.
Social equity
- B.
Flex rating laws
- C.
Actuarial equity
- D.
Open competition
- 28.The two major types of liabilities found on the financial statements of insurers are:
- A.
Policyholder surplus and assets
- B.
Unearned premium reserve and loss reserve
- C.
Admitted asset and nonadmitted assets
- D.
Earned premiums and underwriting expenses
- 29.Humongous Insurance Company is considering the purchase of Itty-Bitty Insurance Company. Following is financial data of Itty-Bitty Insurance Company. Expense ratio 39% Loss ratio 57% Investment income ratio 18%The combined ratio for Itty-Bitty Insurance Company is:
- A.
96%
- B.
75%
- C.
114%
- D.
78%
- 30.Humongous Insurance Company is considering the purchase of Itty-Bitty Insurance Company. Following is financial data of Itty-Bitty Insurance Company. Expense ratio 39% Loss ratio 57% Investment income ratio 18% The overall operating ratio is:
- A.
96%
- B.
75%
- C.
114%
- D.
78%
- 31.An insurer’s capacity ratio is:
- A.
Calculated by dividing its written premiums by its policyholders surplus.
- B.
Calculated by subtracting the investment income ratio from the combined ratio.
- C.
Calculated by dividing net investment income by earned premiums for a particular period.
- D.
The sum of the loss ratio and the expense ratio.
- 32.
- A.
The major expense category for most insurance companies is payment for losses arising from claims.
- B.
Underwriting expenses include acquisition expenses, general expenses, and taxes and fees.
- C.
On their financial statements, insurance companies add expenses from investment income to show the net income from investments.
- D.
An insurer’s net underwriting gain or loss is equal to its earned premiums minus its losses and underwriting expenses for a specific period.
- 33.Binding authority
- A.
Is usually granted in the agency contract
- B.
Is granted by the agent to the principal.
- C.
Is always oral.
- D.
Is granted by the reinsurance treaty.
- 34.An independent agent
- A.
Usually represents several unrelated insurance companies
- B.
Is salaried by the insurance company.
- C.
Uses only mail, telephone, or Internet to solicit business
- D.
Usually does not own its expiration list.
- 35.Marketing management
- A.
Provides producer supervision.
- B.
Provides producer motivation.
- C.
Provides product management and development
- D.
All of the above.
- 36.
- A.
Requiring that the purchase of insurance be tied to some other sale or financial arrangement.
- B.
Misrepresenting the benefits, advantages, conditions, or terms of any insurance policy.
- C.
Offering anything of value, other than the insurance itself, to an applicant as an inducement to buy or maintain insurance.
- D.
All of the above.
- 37.Producers can be compensated by
- A.
Salary.
- B.
Commissions.
- C.
Contingency commissions.
- D.
All of the above.
- 38.All of these statements about unfair claim practices are correct, EXCEPT:
- A.
Unfair claim practices specify claim practices that are illegal according to federal law.
- B.
Misrepresentation of pertintent facts or insurance policy provisions relating to coverage at issue in a claim is an unfair claim practice.
- C.
Refusal to pay a claim without first conducting a reasonable investigation based on all available information is an unfair claim practice.
- D.
. Insurance regulators usually learn of unfair claim practices when they receive complaints from insureds and claimants.
- 39.Loss reserves are
- A.
The largest and most important liabilities of property and liability insurance companies.
- B.
An estimate of the amount of claims payments that an insurer will make in the future
- C.
Always an estimate.
- D.
All of the above.
- 40.The claim handling process includes
- A.
Investigating.
- B.
Evaluating.
- C.
Negotiation.
- D.
All of the above.
- 41.
- A.
Inside staff claim representative.
- B.
Outside staff claim representative.
- C.
Insurance agent handling Clara’s account.
- D.
Public adjuster.
- 42.Clara is insured by IIA Insurance Company. One night, on the way home from work, shewas involved in an auto accident. Clara ran a red light when her brand new Mazda did not have any brakes, and her car struck the pickup driven by Bill, an employee of Big Bob’s Produce Company. Bill was injured, and a claim was filed with IIA Insurance Company for injury to Bob and damage to the pickup. If there had been no injuries and damage to both vehicles had been minor, the claim would most likely be handled by a(n)
- A.
Inside staff claim representative.
- B.
Outside staff claim representative.
- C.
Public adjuster.
- D.
Independent adjuster.
- 43.Which is an example of the reduction in value of property?
- A.
A camera that was worth $200 is run over by the truck; the camera is now worthless.
- B.
Because a business owner had a fire, he has lost income.
- C.
A homeowner must live in a motel while his burned home is repaired.
- D.
Inflation causes a home to appreciate in value.
- 44.The parties that might be affected by a property loss include
- A.
Users of the property
- B.
The property owner.
- C.
Secured lenders of money to the property owner.
- D.
All of the above.
- 45.A bailment is
- A.
Holding the property of another.
- B.
An exclusion in the property policy.
- C.
A named peril.
- D.
A lender that loans money on a home, building, or other real property.
- 46.Basic form coverage
- A.
Is used on all property policies.
- B.
Lists covered causes of loss.
- C.
Is open peril.
- D.
Covers all losses except those specifically excluded.
- 47.Valuation provisions may include
- A.
Replacement cost.
- B.
Actual cash value.
- C.
Agreed value.
- D.
All of the above.
- 48.A dispute between neighbours can turn into a never-ending feud. Which form of law provides a forum for hearing disputes between private parties?
- A.
Criminal law
- B.
Statutory law
- C.
Constitutional law
- D.
Civil law
- 49.Under tort law, an individual or organization can face a claim for legal liability on the basis of
- A.
Negligence.
- B.
Intentional torts.
- C.
Absolute liability.
- D.
All of the above.
- 50.Compensatory damages are intended to compensate a victim for harm actually suffered and can include
- A.
Punitive damages
- B.
Special damages.
- C.
Hold harmless costs.
- D.
Contractual obligations.
- 51.Out-of-court settlements are
- A.
Settled by the court system.
- B.
Advantageous to the insurer because they eliminate uncertainty about the outcome of the claim.
- C.
Not covered by liability coverage policies.
- D.
Included in punitive damages.
- 52.Claims-made coverage
- A.
Is based on a retroactive date that determines when coverage starts.
- B.
Covers liability claims that are made to the insurer before the retroactive date.
- C.
Does not limit the time period for whicha claim may be submitted.
- D.
Includes a provision for claims occurring after the policy period.
- 53.Insurance is a risk management techinque called
- A.
Avoidance
- B.
Transfer
- C.
Loss Control
- D.
Retention
- 54.Which of the below is NOT a step in Risk management process
- A.
Identifying and analyzing loss exposures
- B.
Examining risk management techniques
- C.
Implementing the Risk
- D.
Selecting the most appropriate techniques
- 55.A ________ is a diagram that depicts the flow of a particular operation or set of related operations within an organization.
- A.
Process char
- B.
Flow Chart
- C.
Data Chart
- D.
Sequence Chart
- 56.A ________ is a risk management tool in the form of a checklist or questionnaire listing potential loss exposures that a household or an organization might face
- A.
Exposure Checklist
- B.
Loss exposure survey
- C.
Loss Questionnaire
- D.
Risk check list
- 57.A business installs a sprinkler system to reduce the amount of fire damage from potential fires. What kind of Risk management technique is this
- A.
Loss Reduction
- B.
Loss Retention
- C.
Loss Prevention
- D.
None of the above
- 58.Implementation of the chosen Risk management technique requires that risk manager make decisions concerning:
- A.
What should be done
- B.
Who should be responsible
- C.
How to allocate the costs of the program
- D.
All the above
- 59.Loss frequency is
- A.
A term used to indicate how often losses are not expected to occur
- B.
Used to predict the likelihood ofdifferent kind of losses in the future
- C.
A term used to indicate how often losses occur
- D.
All the above
- 60.Which are the third-party coverages in the below?
- A.
Collision (COLL), Comprehensive coverage (COMP)
- B.
Bodily Injury(BI), Property damage (PD)
- C.
Medical Payments (Med Pay), Personal Injury Protection (PIP)
- D.
Uninsured and Underinsured Motorist Coverage (UM, UIM)
- 61.Which of the following is a Federal Government Insurance Program?
- A.
Federal Air Insurance program
- B.
Fair Access to Insurance Requirements Plan
- C.
Social Security Program
- D.
State workers compensation insurance program
- 62.Which of the following is one of the largest Mutual P & C Insurance companies operating in North America?
- A.
State Farm Insurance
- B.
Citi Group Insurance
- C.
21st Insurance
- D.
Allianz AG
- 63.Which one of the following in the risk management process is inaccurate? 1. Identifying and analyzing loss exposures. 2. Gathering information to support assumptions about the loss exposures. 3. Selecting the most appropriate risk management techniques. 4. Implementing the chosen techniques in a risk management program .
- A.
1
- B.
2
- C.
3
- D.
4
- 64.What is the significance of 1994 Northridge Earthquake?
- A.
21st Century Insurance nearly went bankrupt due to the claims resulted due to the earthquake and shortly after stopped selling Homeowners insurance policies.
- B.
US Federal Insurance authority added the states of California and Florida to the list of covered states under the National Disaster Insurance programs.
- C.
After the earthquake, California State Insurance department joined NAIC committee.
- D.
All the above
- 65.Kelly Blue Book is ________________ .
- A.
An annual report of all the insurance policies issued by an insurance company sent to the respective state Departments of Motor Vehicles (DMV).
- B.
A book of Insurance laws maintained by the State insurance commissioners in the early 1900s in North America.
- C.
An automotive vehicle valuation company in the United States.
- D.
A list of all drivers in California with more than 6 major violations and 6 At-Fault accidents maintained by the State Insurance Authority.
- 66.Tom Hanks has been insured by Farmers Insurance company for more than 60 days. Farmers insurance cannot cancel Tom's policy under which of the following circumstances?
- A.
Tom gets his first speeding ticket.
- B.
Tom does not pay the premiums.
- C.
Tom lied on his insurance application.
- D.
Tom's license has been suspended.
- 67.N D Tiwari has been stopped by LAPD for speeding and a ticket has been issued. Which statement is true?
- A.
Tiwari's insurance company will automatically be notified by the state.
- B.
Tiwari's insurance company will review his driving record and learn about the violation when his policy comes up for renewal.
- C.
Tiwari's insurance company will automatically raise his rates.
- D.
Nothing will happen. The insurance company cannot find out about the ticket issued to Tiwari.
- 68.If you don’t understand all of the terms in your auto insurance policy, what should you do?
- A.
Contact your insurance agent, who is responsible for servicing your policy.
- B.
Wait until you need to file a claim to contact anyone.
- C.
Contact your state’s department of insurance.
- D.
Both A and C.
- 69.What is an SR-22 Document?
- A.
In the United States, an SR-22 is a vehicle liability insurance document used by some state Department of Motor Vehicles (DMV) offices. It provides proof that a driver has the minimum required liability insurance coverage for that particular state.
- B.
An SR-22 document is a signed statement from a driver convicted of Driving Under Influence (DUI) declaring that he/she will not drink again.
- C.
An SR-22 document is a written consent given by the Primary Insured on a policy to the Insurer stating that the Insurer can initiate liquidation of the Insured's property in case of any claims raised against the Insured, amount to more than the covered limits.
- D.
An SR-22 is an alternative to the drivers license issued by the state's DMV.
- 70.Match the Column A elements with Column B elements? Column A Column B 1. Mutual Insurance Company A. Salaried employees of the Insurance companies. 2. Direct Writing Agents B. Owned by the policy holders. 3. Independent Adjusters C. Handle claims for the Insurance companies for a fee. 4. Choicepoint D. Investors own the association 5. Lloyd's of London E. CLUE report
- A.
1C, 2E, 3A, 4B, 5D
- B.
1B, 2E, 3C, 4A, 5D
- C.
1B, 2A, 3C, 4E, 5D
- D.
1D, 2A, 3D, 4E, 5C
- 71.A Captive Insurance company is ______________ .
- A.
The insurance company that accepts the loss exposure of the primary Insurer.
- B.
The insurer that is formed as a subsidiary of its own parent company, organization or group, for the purpose of writing all or part of the insurance on the parent company or companies.
- C.
An insurer that is owned by its policy holders and formed as a corporation for the purpose of providing insurance to its policy holder-owners.
- D.
A federal government funded, state controlled insurance organization providing insurance to unusual Insurance needs.
- 72.The World Insurance Report 2008 explores current distribution models and changes in channel usage, and also takes an in-depth look at successful versus at-risk multi-channel strategies. Find out what’s driving multi-channel usage in mature markets and how changing customer profiles and behaviors are impacting today’s insurance practices. The report identifies growth opportunities for leading insurance companies and features insightful approaches for transforming current insurance practices into tomorrow’s winning strategies. Which of the below organizations publish this report?
- A.
National Association of Insurance Commissioners (NAIC).
- B.
American Authority of Insurance.
- C.
Capgemini and the European Financial Management & Marketing Association (EFMA).
- D.
International Council for Insurance Regulation and Legislation (ICIRL).
- 73.David Beckham wants to Insure his feet to the tune of 10 million dollars each. Which of the following Insurance company will he most likely go to?
- A.
Bankers mutual Insurance company
- B.
Citi stock Insurance company
- C.
Prudential Life Insurance company
- D.
Lords Excess and Surplus Insurance ltd.
- 74.Which of the following is not one of the primary objectives of Insurance regulation?
- A.
Rate regulation
- B.
Solvency surveillance
- C.
Consumer protection
- D.
Market capitalization of Insurance companies
- 75.What is IRDA and which country does it belong to?
- A.
International Regulatory and Development authority, USA
- B.
Insurance Rates and development Association, Canada.
- C.
Insurance Regulatory and Development Authority (IRDA), India.
- D.
Internal Revenue Department of America, USA.
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