Question 1

Match the descriptions with their terms:
-An insurance company without capital other than advance premiums deposited by its owners is a reciprocal, also called a/an ________________.

Accepted Answer

An insurance company without capital other than advance premiums deposited by its owners is a reciprocal, also known as an interinsurance exchange.

Question 2

Match the descriptions with their terms:
-A method of distributing property-liability insurance through payroll deduction is _________________.

Accepted Answer

Mass merchandising is the method of distributing property-liability insurance through payroll deduction.

Question 3

Match the descriptions with their terms:
-A nonprofit society using a lodge system to sell life and health insurance to members is a/an _________________.

Accepted Answer

Fraternal carriers are nonprofit societies that use a lodge system to provide life and health insurance to their members.

Question 4

Match the descriptions with their terms:
-A mutual insurer writing all lines of insurance is known as a/an _________________.

Accepted Answer

A mutual insurer that writes all lines of insurance is referred to as a "general writing mutual."

Question 5

Match the descriptions with their terms:
-An insurance market consisting of risks that have been rejected by domestic insurers is called a/an _________________.

Accepted Answer

The surplus line market refers to an insurance market for risks that have been rejected by standard, domestic insurers, often because they are too unusual or too risky. Lloyd's of London is a well-known example of a marketplace that provides such coverage.

Question 6

Match the descriptions with their terms:
-Coverage that is written by privately organized groups is called _________________, while coverage that is written by government bodies is known as public insurance.

Accepted Answer

Private insurance refers to coverage written by privately organized groups, as opposed to public insurance, which is provided by government bodies.

Question 7

Match the descriptions with their terms:
-Coverage required by law is _________________, while coverage purchased on a discretionary basis is voluntary coverage.

Accepted Answer

Involuntary coverage refers to insurance coverage that is required by law, such as auto liability insurance.

Question 8

Match the descriptions with their terms:
-The two main branches of insurance are property-liability insurance and _________________.

Accepted Answer

Life and health insurance is the correct match as it represents the other main branch of insurance alongside property-liability insurance.

Question 9

Match the descriptions with their terms:
-Some mutuals are both _________________; that is, they plan both to cut the initial rate somewhat below stock company levels and to pay a dividend, if warranted.

Accepted Answer

Participating and deviating mutuals plan to cut initial rates below stock company levels and pay dividends, which matches the description.

Question 10

Match the descriptions with their terms:
-_________________ are groups of names that combine their resources and employ a manager who determines which risks to insure.

Accepted Answer

Syndicates, such as those associated with Lloyd's of London, are groups of individuals or entities that come together to pool their resources under the management of one or more professionals to share in the risks and rewards of insurance underwriting.

Question 11

Match the descriptions with their terms:
-_________________ are established to reimburse policyholders for any losses caused by bankrupt insurers.

Accepted Answer

Guaranty funds are established to protect policyholders in the event that their insurance company becomes insolvent, ensuring that claims are paid out even if the insurer goes bankrupt.

Question 12

Direct writing

Accepted Answer

Direct writing is a method of selling insurance directly to customers without the use of independent agents. Over time, direct writers have increasingly adopted methods and technologies that make their operations more similar to those of insurers using indirect channels, such as online platforms and customer service centers, to enhance efficiency and customer satisfaction.

Question 13

The American Agency System

Accepted Answer

The American Agency System is designed in a way that often better serves the interests and needs of business consumers, who may require more complex and tailored insurance solutions, compared to individual consumers who might seek more straightforward coverage options.

Question 14

One of the differences between stock and mutual insurers is that

Accepted Answer

Stock companies do not issue assessable policies, meaning policyholders are not required to pay additional premiums if the company experiences financial difficulties.

Question 15

In 2002 what percent of property-liability insurance premiums did agency companies write in commercial lines?

Accepted Answer

Agency companies wrote 70.6% of property-liability insurance premiums in commercial lines in 2002.

Question 16

Leading states for chartering property-liability insurers include all but one of the following:

Accepted Answer

Massachusetts is not typically among the leading states for chartering property-liability insurers. States like Vermont, Pennsylvania, New York, and Texas are more recognized for their roles in the insurance industry, particularly in terms of being domiciles for insurers due to favorable regulatory environments or significant insurance markets.

Question 17

The largest broker in the United States is

Accepted Answer

Marsh is recognized as the largest insurance broker in the United States, based on brokerage revenues.

Question 18

Private passenger auto as a percent of total P-L premiums in 2002 is

Accepted Answer

The answer of Private passenger auto as a percent of...

Question 19

If your insurer becomes insolvent, you may usually successfully make a claim against

Accepted Answer

State guaranty funds are designed to protect policyholders in the event that their insurance company becomes insolvent. These funds are supported by insurers operating within the state and can provide a safety net for policyholders to recover some or all of their claims.

Question 20

The channel of distribution involving the least use of intermediaries between the insurer and the consumer is

Accepted Answer

The answer of The channel of distribution involving the least...

Quiz 22: Risk Management and the Insurance Industry

Match the descriptions with their terms: -An insurance company without capital other than advance premiums deposited by its owners is a reciprocal, also called a/an ________________.

Match the descriptions with their terms: -A method of distributing property-liability insurance through payroll deduction is _________________.

Match the descriptions with their terms: -A nonprofit society using a lodge system to sell life and health insurance to members is a/an _________________.

Match the descriptions with their terms: -A mutual insurer writing all lines of insurance is known as a/an _________________.

Match the descriptions with their terms: -An insurance market consisting of risks that have been rejected by domestic insurers is called a/an _________________.

Match the descriptions with their terms: -Coverage that is written by privately organized groups is called _________________, while coverage that is written by government bodies is known as public insurance.

Match the descriptions with their terms: -Coverage required by law is _________________, while coverage purchased on a discretionary basis is voluntary coverage.

Match the descriptions with their terms: -The two main branches of insurance are property-liability insurance and _________________.

Match the descriptions with their terms: -Some mutuals are both _________________; that is, they plan both to cut the initial rate somewhat below stock company levels and to pay a dividend, if warranted.

Match the descriptions with their terms: -_________________ are groups of names that combine their resources and employ a manager who determines which risks to insure.

Match the descriptions with their terms: -_________________ are established to reimburse policyholders for any losses caused by bankrupt insurers.