Question 1

The establishment of loss reserves generally requires considerable judgment and knowledge of the entity's business is known as:

Accepted Answer

Qualitative assessment involves using judgment and understanding of the business to evaluate non-quantifiable factors, such as the establishment of loss reserves.

Question 2

Schedule rating:

Accepted Answer

The answer of Schedule rating:
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Question 3

Claims adjusting involve:

Accepted Answer

The answer of Claims adjusting involve:
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Question 4

Who is responsible for accounting for customer remittance advices and the agent's current account?

Accepted Answer

The answer of Who is responsible for accounting for customer...

Question 5

In _______________, an adjustment is based on experience of an individual risk during the term of the policy and is generally subject to maximum and minimum premium limits specified in the policy.

Accepted Answer

The description of an adjustment based on experience during the policy term and subject to maximum and minimum limits aligns with the concept of retrospective premium adjustments. The other choices do not accurately describe this type of premium adjustment.

Question 6

The operating ratio is the combined ratio less than the ratio of investment income, to earned premiums.

Accepted Answer

The answer of The operating ratio is the combined ratio...

Question 7

In processing ______________, many entities keep a single file for each insured event, with separate identification of each claimant.

Accepted Answer

The answer of In processing ______________, many entities keep a...

Question 8

In which account current, for individual policies, the agent collects the premiums directly from the insureds, subtracts his or her commissions and remits the net premiums due to entity?

Accepted Answer

The answer of In which account current, for individual policies,...

Question 9

What allows an entity to eliminate the reserve that was recorded for the claim, even if it exceeded the amount paid for the settlement?

Accepted Answer

A structured settlement allows an entity to eliminate the reserve recorded for a claim by spreading the settlement payments over time, potentially reducing the immediate financial impact.

Question 10

The reason behind, when an insurance entity may request permission from the domiciliary state regulatory authority to use a specific accounting practice in the preparation of its statutory financial statements, may include:

Accepted Answer

The answer of The reason behind, when an insurance entity...

Question 11

Which control includes the procedures for system design, including the acquisition of software packages, should encourage active participation by the accounting department and internal auditors?

Accepted Answer

The answer of Which control includes the procedures for system...

Question 12

A premium deficiency relating to which insurance contracts indicate a probable loss on premiums yet to be earned.

Accepted Answer

The answer of A premium deficiency relating to which insurance...

Question 13

SAP stresses measurement of emerging earnings of a business from period to period while GAAP stresses measurement of the ability to pay claims in the future.

Accepted Answer

SAP (or IFRS) focuses on recognizing revenue when earned and expenses when incurred, while GAAP focuses on the accrual of expenses and liabilities to ensure that a company can pay its future obligations. While both frameworks have some overlap in their measurement and recognition criteria, their primary emphasis is different.

Question 14

What is based on statistical data and are large groups of similar risks can be classified by a few and easily identifiable characteristics and result in standard rates?

Accepted Answer

Manual rating is based on statistical data and involves classifying large groups of similar risks by identifiable characteristics to determine standard rates.

Question 15

Adjusting and Others (AO) reserves are often provided for by using the calendar year paid-to-paid method rather than the accident year paid-to-paid method used for Inflation in Defense & Cost Containment (DCC) reserves.

Accepted Answer

AO reserves are typically calculated using the calendar year paid-to-paid method, which aligns with the timing of payments, whereas DCC reserves often use the accident year paid-to-paid method to match expenses with the related claims.

Question 16

Primary coverage involves policies written between an insurer and a customer directly.

Accepted Answer

Primary coverage refers to insurance policies that are written directly between an insurer and a customer, without any intermediaries such as brokers or agents.

Question 17

Reduction for salvage is:

Accepted Answer

Reduction for salvage refers to the estimated amount receivable by the insurer from the disposition of damaged or recovered property, which is deducted from the claim amount.

Question 18

Scope of Examination and Report of Independent Certified Public Accountant states that:

Accepted Answer

The correct choice is A because it specifies that the insurer requires the independent certified public accountant to test the data used by the appointed actuary, which is a standard procedure to ensure accuracy and reliability in financial reporting.

Question 19

Changes in payment procedures or changes in the definition of payment date for coding purposes may or may not affect loss reserve developments.

Accepted Answer

The answer of Changes in payment procedures or changes in...

Question 20

Home office record-maintenance methods may include:

Accepted Answer

The answer of Home office record-maintenance methods may include:
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Exam 1: Accredited Financial Examiner