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Question 1 of 10
1. Question
What is defined as the relative variation of actual loss from expected loss?
Correct
Objective risk is an extremely useful concept for an insurer or a corporate risk manager. Objective risk declines as the number of exposures increases. More specifically, it varies inversely with the square root of the number of cases under observation.
Incorrect
Objective risk is an extremely useful concept for an insurer or a corporate risk manager. Objective risk declines as the number of exposures increases. More specifically, it varies inversely with the square root of the number of cases under observation.
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Question 2 of 10
2. Question
Risk Management has certain objectives after a loss occurs. Which of the following statements are the post-loss objectives?
I. The first objective means that the firm should prepare for potential losses in the most economical way
II. The most important objective is the survival of the firm
III. The second objective is to continue operating
IV. The final objective is to meet any legal obligationsCorrect
The post-loss objectives include survival of the firm, continued operations, the stability of earnings, continued growth, and social responsibility.
Incorrect
The post-loss objectives include survival of the firm, continued operations, the stability of earnings, continued growth, and social responsibility.
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Question 3 of 10
3. Question
What is defined as a comprehensive risk management program that addresses all risks faced by organization-pure risks, speculative financial risks, strategic risks, and operational risks?
Correct
The advantages of an enterprise risk management in a firm include improved risk assessment, increases risk awareness, integrated response to the full range of risks, alignment of the organization’s tolerance for risk with its strategies and practices, fewer operational surprises and losses, increased competitive advantage, reduced earnings volatility, and better compliance with corporate governance guidelines.
Incorrect
The advantages of an enterprise risk management in a firm include improved risk assessment, increases risk awareness, integrated response to the full range of risks, alignment of the organization’s tolerance for risk with its strategies and practices, fewer operational surprises and losses, increased competitive advantage, reduced earnings volatility, and better compliance with corporate governance guidelines.
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Question 4 of 10
4. Question
Loss forecasting is the process of identifying the risks the organization faces, and then analyzing the potential frequency and severity of these loss exposures. Which of the following techniques assist in predicting loss levels?
I. Probability Analysis
II. Progression Analysis
III. Forecasting based on the loss distribution
IV. Forecasting based on the gain distributionCorrect
Risk managers can employ several techniques to assist in predicting loss levels, including the following:
(1) Probability analysis
(2) Regression analysis
(3) Forecasting based on loss distributionsIncorrect
Risk managers can employ several techniques to assist in predicting loss levels, including the following:
(1) Probability analysis
(2) Regression analysis
(3) Forecasting based on loss distributions -
Question 5 of 10
5. Question
What is this type of private insurer, which is defined as an incorporated organization in which insurance is exchanged among the members called subscribers?
Correct
Reciprocal exchange is insurance exchanged among the members; each member of the reciprocal insures the other members and, in turn, is insured by them. Also, a reciprocal is managed by an attorney-in-fact. The attorney-in-fact is usually a corporation that is authorized by the subscribers to seek new members, pay losses, collect premiums, handle reinsurance arrangements, invest the funds, and perform administrative duties.
Incorrect
Reciprocal exchange is insurance exchanged among the members; each member of the reciprocal insures the other members and, in turn, is insured by them. Also, a reciprocal is managed by an attorney-in-fact. The attorney-in-fact is usually a corporation that is authorized by the subscribers to seek new members, pay losses, collect premiums, handle reinsurance arrangements, invest the funds, and perform administrative duties.
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Question 6 of 10
6. Question
Insurers are regulated primarily by the states and also by the federal government. What are the major reasons for insurance regulation?
I. Maintain insurer solvency
II. Compensate for inadequate consumer payment
III. Ensure low rates
IV. Make insurance availableCorrect
Major reasons for the regulation of insurance include the following:
(1) Maintain insurer solvency
(2) Compensate for inadequate consumer knowledge
(3) Ensure reasonable rates
(4) Make insurance availableIncorrect
Major reasons for the regulation of insurance include the following:
(1) Maintain insurer solvency
(2) Compensate for inadequate consumer knowledge
(3) Ensure reasonable rates
(4) Make insurance available -
Question 7 of 10
7. Question
Replacement cost insurance is a third exception to the principle of indemnity. Which of the following scenarios is an example of replacement cost insurance?
Correct
Replacement cost insurance means there are no deductions for physical depreciation in determining the amount paid for the loss.
Incorrect
Replacement cost insurance means there are no deductions for physical depreciation in determining the amount paid for the loss.
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Question 8 of 10
8. Question
Health insurance contracts typically contain a coinsurance percentage clause, which is a provision that requires the insured to pay a specified percentage of covered medical expenses over the deductible. Which of the following are the purposes of coinsurance in health insurance?
I. To increase premium
II. To reduce premium
III. To prevent overutilization of policy benefits
IV. To prevent underutilization of policy benefitsCorrect
The purposes of coinsurance in health insurance are the following:
(1) To reduce premiums
(2) To prevent overutilization of policy benefits
Because the insured pays part of the cost, premiums are reduced. Also, the patient will not demand the most expensive medical services if he or she pays part of the cost.Incorrect
The purposes of coinsurance in health insurance are the following:
(1) To reduce premiums
(2) To prevent overutilization of policy benefits
Because the insured pays part of the cost, premiums are reduced. Also, the patient will not demand the most expensive medical services if he or she pays part of the cost. -
Question 9 of 10
9. Question
What is this type of beneficiary, wherein the policyholder reserves the right to change the beneficiary designation without the beneficiary’s consent?
Correct
The revocable beneficiary has only the expectation of benefits, and the policyholder can change the beneficiary whenever desired. All policy rights under the contract can be exercised without the consent of the revocable beneficiary.
Incorrect
The revocable beneficiary has only the expectation of benefits, and the policyholder can change the beneficiary whenever desired. All policy rights under the contract can be exercised without the consent of the revocable beneficiary.
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Question 10 of 10
10. Question
What is this tax-deferred product, which is defined as a periodic payment that continues for a fixed period or the duration of a designated life or lives?
Correct
An annuity provides protection against living too long and exhausting your savings while you are still alive. Thus, the fundamental purpose of an annuity is to provide a lifetime income that cannot be outlived. It protects against the loss of income due to excessive longevity and the exhaustion of savings.
Incorrect
An annuity provides protection against living too long and exhausting your savings while you are still alive. Thus, the fundamental purpose of an annuity is to provide a lifetime income that cannot be outlived. It protects against the loss of income due to excessive longevity and the exhaustion of savings.