Deck 9: Insurance Companies

Question 1

The state of being reluctant to fully bear the financial and physical loss of an event.

A) adverse selection
B) risk averse
C) uncertainty
D) moral hazard

Answer 1

risk averse

Question 2

___________________ is the probability of a loss.

A) risk
B) uncertainty
C) moral hazard
D) adverse selection

Answer 2

risk

Question 3

An insurance company, similar to a bank, may experience when those people who are more likely to file a claim are those who will most likely apply for insurance and be granted insurance.

A) risk
B) uncertainty
C) moral hazard
D) adverse selection

Answer 3

adverse selection

Question 4

When an insured behaves less careful because of insurance.

A) adverse selection
B) moral hazard
C) no-fault insurance
D) reinsurance

Question 5

An insurance company would hire all the following insurance professionals except

A) underwriters
B) actuaries
C) co-insurers
D) claim adjusters

Question 6

To prevent the sale of insurance to individuals too risky to insure, _____________ review, approve, or reject applicants written by agents.

A) exclusive agents
B) independent agents
C) claim adjusters
D) underwriters

Question 7

This type of insurance company offers protection against financial costs associated with death and disability in exchange for premiums.

A) Casualty and property Insurance Company
B) Life Insurance Company
C) Health Insurance Company
D) Liability Insurance Company

Question 8

This type of insurance company offers financial protection against effects of property loss, damage, or destruction caused by fire, theft, storm, or acts of God.

A) Casualty Insurance Company
B) Property Insurance Company
C) Liability Insurance
D) Life and Health Insurance

Question 9

__ protects an insured from financial liabilities to those harmed by an accident, product failure, or professional malpractice.

A) Life insurance
B) Property insurance
C) Casualty insurance
D) Health insurance

Question 10

The following are problems faced by health insurance industry except

A) the growing cost of health care.
B) the large number of uninsured.
C) the increase in the cost of providing health care through Medicare and Medicaid.
D) the creation of HMOs that increase the cost of providing insurance to employees.

Question 11

Health Maintenance organizations have three major problems that include all of the following except

A) the inability of HMOs to accurately determine the cost of health care due to rising costs.
B) call for reforms that prohibit insured from suing HMOs for providing substandard medical services.
C) a large number of companies are now subscribing to the HMOs after negotiating for a set amount of fee.
D) criticisms that bureaucrats and not doctors are making decisions about medical procedures most appropriate for a patient.

Question 12

If you would like to be able to invest the cash value of your life insurance in mutual fund shares, you would buy insurance.

A) whole life
B) universal life
C) variable life
D) term life

Question 13

Life insurance coverage that provides a stream of income payments in the future to supplement income is called

A) annuities
B) term payments
C) disability payments
D) mortality

Question 14

To insure against living a longer than one expects, one would buy the following insurance except

A) term insurance
B) annuities.
C) long term
D) disability

Question 15

The joint federal and state program that provides long-term care to individuals after they have spent down most of their assets.

A) Medicare
B) Medicaide
C) disability
D) HMO

Question 16

Insurance companies invest most of their assets in

A) treasury bills
B) treasury bonds
C) money market securities
D) stocks and bonds

Question 17

According to the Life Insurance Fact Book 1999 published by the American Council of Life Insurance. the largest life insurance market in the world is

A) North America
B) South America
C) Asia
D) Europe

Question 18

No-fault auto insurance coverage

A) will enable the accident victim to collect from his/her own insurance company regardless of who caused the accident.
B) will enable the accident victim to collect from his/her own company when the accident is caused by him/her.
C) will enable the accident victim to collect from his/her company when the accident is caused by the other party.
D) will enable the accident victim to collect from the other party's insurance when the accident is caused by the party.

Question 19

The law that exempts life insurance companies from federal regulation and effectively defers regulation to each state insurance commissioner.

A) McFadden Act
B) McCarran-Ferguson Act
C) Interstate Banking and Branching Act
D) Gramm-Leach-Bliley Act

Question 20

Coinsurance serves as a defense against moral hazard by

A) requiring the insured to double insure against a possible loss.
B) requiring the insured to pay a proportion of the loss.
C) requiring the insured to avoid the risk of loss.
D) None of the above.

Question 21

For a property and casualty insurance. liquidity risk can be reduced by

A) increasing the maturity of asset investments.
B) increasing investments in real estate.
C) diversifying geographically to reduce catastrophic losses.
D) increase investments in stocks and bonds.

Question 22

Regulations of the insurance industry can be described by the following except

A) all states require agents to be licensed in the state they sell insurance.
B) the federal government indirectly regulates the insurance industry though the IRS and the SEC.
C) each state has its own standards of safety, capital requirements and accounting rules.
D) None of the above.

Question 23

In order to compensate for higher expected payouts for insuring high risk individuals, insurance companies charge

A) risk-based premiums.
B) average premiums.
C) coinsurance
D) deductibles.

Question 24

In an attempt to create some consistency among the 50different states, the__________________ develops model laws and regulations that are often used by states when they are revising or writing legislation.

A) McCarran-Ferguson Act
B) National Association of Insurance Commissioners
C) Financial Modernization Act
D) New York State insurance commissioner

Question 25

The _______________________ allowed insurance companies to combine with commercial banks and securities firms.

A) McCarran-Ferguson Act
B) Gramm-Leach-Bliley Act of 1999
C) Glass Steagall Act
D) New York State insurance commissioner

Question 26

Major losses to the insurance industry occurred with

A) the attack on the World Trade Center in 2001.
B) Hurricane Andrew in 1192.
C) Hurricane Katrina in 2005.
D) All of the above.

Question 27

Which of the following allows for a pure insurance product combined with a separate account that may be used by the policyholder to purchase mutual funds from a list of approved funds?

A) universal life insurance
B) whole life insurance
C) term life insurance
D) variable life insurance

Question 28

Which of the following allows for a pure insurance product combined with a separate account that grows at a fluctuating rate of interest similar to a money market account or a short term CD?

A) universal life insurance
B) whole life insurance
C) term life insurance
D) variable life insurance

Question 29

Which of the following provides a death benefit to an insured policyholder's beneficiary only if the insured dies within the specified period of time?

A) universal life insurance
B) whole life insurance
C) term life insurance
D) variable life insurance

Question 30

Which of the following charges a fixed premium and pays a fixed death benefit as long as the policyholder makes timely premium payments, and builds up a cash value?

A) universal life insurance
B) whole life insurance
C) term life insurance
D) variable life insurance

Question 31

Insurance to compensate insured policyholders needing assistance with the daily tasks of bathing, eating, dressing, and moving about is

A) disability insurance.
B) Long-term care insurance.
C) Health insurance.
D) An annuity.

Question 32

Insurance designed to cover a portion of an insured worker's previous income if the worker becomes unable to work because of illness or injury is

A) disability insurance.
B) Long-term care insurance.
C) Health insurance.
D) An annuity.

Question 33

Insurance that provides protection against the financial costs associated with events such as doctor visits, hospital stays, and prescription drugs is

A) disability insurance.
B) long-term care insurance.
C) health insurance.
D) an annuity.

Question 34

The practice by smaller insurance companies of sharing the risk of a large policy with other insurance companies to reduce risk exposure is

A) risk-based premiums.
B) coinsurance.
C) reinsurance.
D) a deductible.

Question 35

The percentage share or fixed amount of a claim that must be paid by the policyholder is

A) risk-based premiums.
B) coinsurance.
C) reinsurance.
D) a deductible.

Question 36

The fixed amount that the insured policyholder must pay before insurance coverage becomes effect is

A) risk-based premiums.
B) coinsurance.
C) reinsurance.
D) a deductible.

Question 37

Insurance charges that increase with the perceived risk of the policyholder are

A) risk-based premiums.
B) coinsurance.
C) reinsurance.
D) a deductible.

Question 38

The person who receives an insurance payment after a policyholder dies is

A) an annuitant.
B) the beneficiary.
C) a term lifer.
D) a whole lifer.