All of the following statements about regulatory objectives of insurance rate making are true EXCEPT A) One purpose of rate adequacy is to maintain the solvency of insurers. B) Rates unfairly discriminate if loss exposures that are similar with respect to losses and expenses are charged substantially different rates. C) Insurers know in advance if […]
Which of the following is an expense for a life insurance company? A) loss reserves B) death benefits paid to a beneficiary C) unrealized capital gains D) realized capital gains ANSWER Answer: B
Which of the following statements about judgment rating is true? A) It involves the manual rating of exposures. B) It is used when the loss exposures are so diverse that a class rate cannot be calculated. C) It is a form of experience rating. D) It is only used when credible loss statistics are available. […]
Reasons for the unearned premium reserve include which of the following? I. To pay losses that occur during the policy period. II. To pay premium refunds to policyholders in the event of cancellation. A) I only B) II only C) both I and II D) neither I nor II ANSWER Answer: C
The portion of an insurance premium allocated to expenses, profit, and a margin for contingencies is called the A) loading. B) pure premium. C) gross premium. D) experience rate. ANSWER Answer: A
A property and casualty insurer’s loss reserve includes estimates for all of the following EXCEPT A) claims anticipated but not yet incurred. B) claims reported and adjusted but not yet paid. C) claims reported and filed but not yet adjusted. D) claims incurred but not yet reported to the company. ANSWER Answer: A
The unit of measurement used in property and casualty insurance pricing is called the A) unit rate. B) premium. C) exposure unit. D) experience unit. ANSWER Answer: C
Which of the following would not appear in the asset section of an insurance company’s balance sheet? A) loss reserves B) bonds C) common stock D) real estate ANSWER Answer: A
All of the following statements about class rating are true EXCEPT A) Exposures with similar characteristics are placed in the same underwriting class. B) The rate charged for each class reflects the average loss experience for that class. C) The complexity of class rating makes it inappropriate for personal lines coverages. D) It is based […]
Which of the following items would appear in the income section of an insurance company’s income and expense statement? A) underwriting expense B) bonds C) loss reserves D) premiums ANSWER Answer: D
