Question 1

Core competencies for the insurance industry that make the industry uniquely positioned to understand climate change and seek solutions for minimizing its impacts include which of the following:

Accepted Answer

All of the options listed are core competencies for the insurance industry that uniquely position the industry to understand climate change and seek solutions for minimizing its impacts. Risk management and finance are essential skills for assessing and managing the financial risks associated with climate change. Experience with weather-related damages and consulting with property owners and businesses on ways to reduce risks is important for understanding the physical risks associated with climate change. Experience in underwriting insurance for weather-related damages is necessary for assessing risk and pricing policies appropriately. Finally, hiring senior climate scientists and using analytics to assess underwriting risk and conduct research is essential for developing the technical expertise necessary to understand the science behind climate change and its impacts.

Question 2

Important concepts in insurance do not include which of the following:

Accepted Answer

All of the concepts mentioned (risk pooling, adverse selection risk, and moral hazard risk) are important concepts in insurance.

Question 3

Characteristics of whole life insurance do not include which of the following:

Accepted Answer

Whole life premiums do not necessarily get larger over an individual's life with age. The premiums are typically fixed when the policy is initially purchased and remain consistent throughout the insured's life.

Question 4

Which of the following is false concerning term insurance?

Accepted Answer

Term insurance is typically for a specific period of time, such as 10 or 20 years, and is not considered a long-term policy.

Question 5

Variable life insurance policies are like whole life insurance policies requiring a fixed premium over a policyholder's lifetime, but excess premiums earn variable rates rather than fixed rates of return based on a policyholder's choice of investments, passing on investment risk to the policyholder. A minimum death benefit is specified on the policy, but no maximum, with the actual payment to beneficiaries depending on yields earned on excess premiums.

Accepted Answer

Variable life insurance policies do require a fixed premium over the policyholder's lifetime but the excess premiums earn variable rates based on the policyholder's choice of investments, which passes on investment risk to the policyholder. The death benefit has a minimum specified but no maximum, and the actual payment to beneficiaries depends on the yields earned on excess premiums.

Question 6

The U.S. National Association of Insurance Commissioners (NAIC) in attempting to estimate the capital needed by a firm to safely absorb the losses to which it is subject for property/casualty companies includes which of the following risk categories:

Accepted Answer

The NAIC includes all of the risk categories listed in their estimation of necessary capital for property/casualty insurance companies. Investment or asset risk, credit risk such as reinsurance, off-balance sheet risk such as separate accounts, and underwriting risk such as loss ratio and reserve adequacy are all important factors to consider when determining the capital needed for a firm to safely absorb losses.

Question 7

Advantages of microinsurance products for developing countries and emerging markets does not include which of the following:

Accepted Answer

The advantages of microinsurance products for developing countries and emerging markets do not include higher premium costs. In fact, one of the primary advantages is lower premium costs, which make insurance more accessible and affordable to a larger market. Additionally, with higher volume, there can be lower costs and more efficient administration. Some policies are also offered with a small loan, with premiums set at a small percentage of the loan amount, which can help promote financial inclusion.

Quiz 11: Insurance Companies: Overview, Operations, and Performance Analysis