Which of the following statements about the use of risk-based capital requirements is (are) true? I. Insurers must have a certain amount of capital depending on the riskiness of their investments and insurance operations. II. Insurers may be required to take certain actions depending on how much capital they have relative to their risk-based capital […]
Monopoly Insurance is the only company marketing a certain line of insurance in a state. After complaints from several consumers, the State Insurance Department investigated Monopoly’s rates. The regulators determined that Monopoly was taking advantage of being the only insurer offering the line by charging more than double the actuarial cost of the coverage. Which […]
A strip-mall includes eight identical-sized retail units. All of the units were built at the same time and each has an identical sprinkler system. Unit number two is a dry cleaning business. Unit number three is a bar and grill. Unit number four is a dress shop. The owners of these three units are all […]
Ratemakers at ABC Insurance Company calculated the pure premium to be $280 for a risk they were considering insuring. What is the gross rate for this risk, assuming a 30 percent expense ratio? A) $364 B) $400 C) $430 D) $520 ANSWER Answer: B
A property and liability insurance company’s loss ratio and expense ratio, respectively, for 2013 – 2015 were: 2013: 74% 31% 2014: 68% 33% 2015: 66% 30% Which of the following statements is true about the company’s underwriting results for this time period? A) The insurer made money from its underwriting activities each year. B) The […]
Which of the following statements about retrospective rating is true? A) The premium for the current period is determined by the loss experience in prior periods. B) The premium for the current period is determined by the loss experience during the current period. C) The premium for the current period is determined by predicted future […]
Which of the following statements about experience rating is (are) true? I. The insured’s past loss experience is used to determine the premium for the next policy period. II. Its use is generally limited to small firms whose actual experience lacks credibility. A) I only B) II only C) both I and II D) neither […]
Nathan was hired as an actuary with ABC Insurance. Nathan was asked to calculate the annual premium for a new product and to explain his calculations to ABC’s director of ratemaking. Nathan calculated the pure premium and presented this value as the final premium. After Nathan’s presentation, the director of ratemaking said, “You left out […]
Small Town used to be just that—a small town 6 miles from Large City. Over the years, the area between Small Town and Large City has developed, and now Small Town is part of the suburbs surrounding Large City. An auto insurer that operated in the area had a large increase in auto claims from […]
XYZ Insurance Company uses class rating to determine the rate to charge for insurance. For one type of insurance, the pure premium XYZ actuaries calculated is $75 per unit. If XYZ’s expense ratio is 25 percent, what is the gross rate for this coverage? A) $37.50 B) $55.25 C) $75.00 D) $100.00 ANSWER […]
