What is the legal significance of a material misrepresentation in an insurance application? A) The contract is automatically voided from its inception. B) The contract is voidable at the insurer’s option. C) Loss payments are reduced by the degree of the misrepresentation. D) The insurer is immediately entitled to a higher premium. ANSWER […]
A false material statement made by an applicant for insurance is an example of A) concealment. B) breach of warranty. C) lack of offer and acceptance. D) misrepresentation. ANSWER Answer: D
The major argument in favor of an optional federal charter for insurers is that A) small insurers need a national charter to be competitive with large insurers. B) a federal charter will prevent insurer insolvencies. C) a federal charter will provide greater oversight of insurer market practices. D) national insurers are at a competitive disadvantage […]
The loss settlement under which of the following supports the principle of indemnity? A) life insurance B) valued policies C) replacement cost property insurance D) actual cash value property insurance ANSWER Answer: D
Which of the following is a fundamental purpose of the principle of indemnity? A) to reduce moral hazard B) to minimize physical hazards C) to settle property insurance losses on a replacement cost basis D) to require deductibles in all property insurance policies ANSWER Answer: A
All of the following are arguments in favor of using an applicant’s credit record in personal lines underwriting EXCEPT A) Most consumers have good credit records and benefit when credit history is used as a rating factor. B) Use of credit data in underwriting and rating eliminates price discrimination against minority groups when they purchase […]
Sam’s furniture was destroyed by a fire. The furniture cost $1200 when it was purchased, but similar new furniture now costs $1800. Assuming the furniture was 50 percent depreciated, what is the actual cash value of Sam’s loss? A) $600 B) $900 C) $1200 D) $1800 ANSWER Answer: B
A score derived from an individual’s credit history and other factors that is used by many auto and homeowners insurers for underwriting and rating purposes is called a(n) A) CLUE score. B) insurance score. C) expense ratio score. D) combined ratio score. ANSWER Answer: B
Under which of the following rules is actual cash value determined by taking into consideration all relevant factors an expert would use to determine the value of the property? A) the circumstantial evidence rule B) the broad evidence rule C) the property indemnity rule D) the objective value rule ANSWER Answer: B
The purpose of the Financial Analysis Solvency Tracking (FAST) system employed by the NAIC is to A) prioritize insurance companies for additional regulatory action. B) quicken the approval of rates in prior approval states. C) speed-up the claims settlement process for insurers charged with delaying claims payments. D) quickly address market conduct complaints by consumers. […]
