Which of the following statements about the regulation of life insurance companies is (are) true? I. The percentage of assets a life insurance company may invest in a specific type of asset (e.g., stocks or bonds) is generally limited by law. II. The purpose of limiting the accumulation of surplus is to prevent an insurer […]
Which of the following statements about schedule rating is (are) true? I. It involves the determination of a basis rate for each exposure, which is then modified by credits or debits. II. It is based on the assumption that certain physical characteristics of the insured’s operations will influence the insured’s future loss experience. A) I […]
In schedule rating, each building is individually rated on several factors. One factor refers to the quality of the city’s water supply and fire department, and the risk control devices installed in the building. This factor is called A) exposure. B) occupancy. C) protection. D) housekeeping. ANSWER Answer: C
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 […]