According to the law of large numbers, what happens as the number of exposure units increases? A) Actual results will increasingly differ from probable results. B) Actual results will more closely approach probable results. C) Nondiversifiable risk will decrease. D) Objective risk will increase. ANSWER Answer: B
Date: September 19th, 2020
Which of the following statements regarding insurance and gambling is (are) true? I. Insurance is used to handle existing pure risks, while gambling creates a new speculative risk. II. Insurance usually involves risk avoidance, while gambling typically involves only risk reduction. A) I only B) II only C) both I and II D) neither I […]
Date: September 19th, 2020
According to the law of large numbers, what should happen as an insurer increases the number of units insured? A) The amount the insurer expects to pay in claims should decrease. B) Underwriting expenses should decrease. C) Actual results will more closely approach expected results. D) The insurer’s profitability should become more variable. […]
Date: September 19th, 2020
Inland marine insurance provides coverage for A) goods being shipped on land. B) premature death of members of the armed forces. C) goods being shipped on ocean-going vessels. D) liability exposures of nonprofit organizations. ANSWER Answer: A
Date: September 19th, 2020
Which of the following is implied by the pooling of losses? A) sharing of losses by an entire group B) inability to predict losses with any degree of accuracy C) substitution of actual loss for average loss D) increase of objective risk ANSWER Answer: A
Date: September 19th, 2020
Which of the following is a form of casualty insurance? A) fire insurance B) general liability insurance C) inland marine insurance D) ocean marine insurance ANSWER Answer: B
Date: September 19th, 2020
The requirement that losses should be accidental and unintentional in order to be insurable results in which of the following? I. Decrease in moral hazard II. More accurate prediction of future losses A) I only B) II only C) both I and II D) neither I nor II ANSWER Answer: C
Date: September 19th, 2020
Which of the following is classified as casualty insurance? A) workers compensation insurance B) fire insurance C) marine insurance D) life insurance ANSWER Answer: A
Date: September 19th, 2020
Why is a large number of exposure units generally required before a pure risk is insurable? A) It prevents the insurer from losing money. B) It eliminates intentional losses. C) It minimizes moral hazard. D) It enables the insurer to predict losses more accurately. ANSWER Answer: D
Date: September 19th, 2020
From the standpoint of the insurer, which of the following is a characteristic of an ideally insurable risk? A) The loss must be intentional. B) There must be a small number of unique loss exposures. C) The chance of loss must be calculable. D) The loss must be indeterminable. ANSWER Answer: C
Date: September 19th, 2020
