1

Insurance as a transfer and sharing of cost of losses, what wud be more appropriate of
the following:
Its an insurance policy for the payment of premiums.

What of the following are ideally insurable loss exposures:

Loss exposures which are definite in time and measurable
Large exposures of similar but independent exposures
Loss exposures which are economically feasible to insure
Loss exposure of small dollar value

All of the following are private insures except

Stockholders
Mutual insures
Guaranty funds
Reciprocal insurers

All of the following are state insurance programs except:

Workers compensation
Unemployment program
FAIR Plans
Crop insurance

What exactly does the state insurance regulation do and options were:
Protects the consumer from paying a premium that is not excessive (this is right)

An example was given saying a particular person faces a covered loss and the process
of the insurance company covering the loss is an act of which principle
Indemnity
Utmost good faith
Transfer of unequal amounts
Adhesion

A person buying a series of insurances was told insurance is not just for safety but
also means of
Reduced social burden
Source of investment funds
Providing support for credit

A man who is a doctor recently had a fire accident at his clinic. Which insurance
should he have purchased to get additional living expenses?
Commercial general liability
Business income insurance
Professional liability
Property insurance
According to an insurer a claimant is one who is?

Make a claim to the insured charging responsibility

The insured who makes a claim
Litigation defendant
10 NAIC is solely developed for:
MODEL LAW (one of the options will have this)
11 Question on why we have IRIS
Financial ratios (answer will have this as one of its options)
12 Ratemaking is the process by which insurers use to calculate the rates that determine
the premium to charge for insurance coverage which is accurately done by
Actuary
Insurer
Independent adjusters
Agents
13 One of the following statements about E&S is true they are:
They E&S insurance is transacted by a licensed broker to other admitted insurers
They are characterized by poor loss experience
They are a form of insurance available by licensed insurers
They require to be file their rates with the state insurance regulation
14 To find the total gain of operation what is the other parameter required when we have
net underwriting gain as 2,000,000.
Net investment income
Net investment gain or loss
Loss ratio
Combined expenses
15 Non-admitted assets example would be:
Furniture and equipment
Stock
Bond
Money in transit
16 What of these would be present in a balance sheet?
Admitted assets
Revenues
Expenses
Net income
17 Capacity ratio is given by
Written premiums by its policy holder surplus
Earned premiums by its unearned premiums
Written premiums by its policy holder surplus

18. Problem:
Given:
Earned premium: $ 2,000,000
Written Premium: $2,000,000
Net Investment Income: $660,000
Incurred loss: $1,500,000
Underwriting Expenses: $200,000
7.) Calculate the loss ratio
.75
.1
.5
.35
8.) Calculate the expense ratio
.75
.10
.5
.33
9.) Calculate the Investment income
.33
.38
.10
.5
19 The agency is a relationship that exists when one party the agent acts in behalf of the
Principal
Broker
Independent adjusters
TPAs
20 A particular person say ABC sells insurance for a person who seeks it. ABC being the
independent agent who does all the formalities as per the agency contract given by the
principal. Finally the person purchases the insurance with the help of agent. This act
of the agent is what authority?
Implied
Express
Apparent
Binding
21 Responsibilities of the agent to the principal
Reasonable care
Loyalty
Accounting
All of the above

22 Difference between independent and exclusive

23 ABC advertises using the agents name and photo but mainly focuses on advertising
the insurance company it represents what kind of agency is DEF
Exclusive agency
Independent agency
Direct writing system
Insurance contract provision
24. Jane works for XYZ insurance and in an automobile firm. She has a client John who
buys a automobile from her. If she recommends him to buy XYZ insurance Which unfair
trade practice is it?
Tie- in sales
Rebating
Unfair trade practices
25. Formal enactments of federal, state and local legislative is referred to as
Statuary law
Common law
Constitutional law
26. What is civil law?
Government takes responsibility for prosecuting the wrongdoers.
Applies to wrongful acts that deem the society
Deals with a personal quarrel between two parties

27. In property insurance, carelessly taped electrical wiring is an example of

Cause of loss
Hazard
Peril
Time element loss
28. John is 22 yr old male, single who walks drives 15 miles per day. His insurer
(underwriter) says that this will be considered while deciding rating and will he will belong
to the large group of people in this category which type of rating was he talking about?

Class rating
Judgmental rating
Independent rating
Experience rating
29. When will you have Adverse selection?
When the premium is low as compared to loss exposures
30. XYZ wanted to incorporate risk management in his house. Which is the initial risk
management step?
Identifying loss exposure
Analysis Loss exposure
Examining the feasibility of the risk management technique
Implementing the risk management technique
31. Mary is the single parent and has to commute a long distance for work. There is no other
proper mode of transport and she is having a very critical economic situation, she wants to
buy a automobile to drop her children at school and also to commute to work. Which is the
best risk management tech which she can follow?
Retention
Insurance
Avoidance
Loss control

32. XYZ takes reinsurance with ABC cause there is no other way to continue doing business..
ACC to the AGREEMENT 50% of all the loss exposures will be reinsured by ABC.
Which kind of reinsurance is it?
Treaty reinsurance
Facultative reinsurance
Broad form coverage
33. A company ABC which is entitles to receive sales commission is also entitled to receive
contingent commission annually based on performance and is applicable to which of these
options:
Independent agency
Direct writing

Exclusive agency
34. in the case of property insurance apart from a owner who else has insurable interest and
name is specified in the declaration page:
Mortgagee
Bailee
Bailor
35. Which of the following is one an activity of the underwriter
Billing
Claim handling
Pricing coverage
All of the above

36. Some man has a lawn mower which isnt functioning well and the son points to his dad
saying this isnt working well. Immediately this man would tell his son he has insurance and they
have nothing to worry. What hazard would this be?
Morale Hazard
Moral hazard
Physical hazard
Legal hazard
37. There was a question on which way wud be used by an underwriter to gather info on an
applicant
financial rating services
38. there was question on cancellation of policy wat wud happen?

39. A person in an orginazation handles all the claims by phone email contacts what is he to the
insurer?
Inside claim representative
Field representative
Adjuster
Broker

40. There was this case study saying a company faced some serious claim in another state where
they werent located so what exactly should they do for handling their claims?
Independent Adjusters
brokers
Inside field representatives

41. all the various steps in claim handling shud be learnt

42. what is the necessity of having reservation of rights letter when one of which is to inform the
insured there cud be a coverage problem
Protect the insurer so that he can deny coverage later
43.if a man wants with property insurance gets actual cash value minus the depreciation. How or
where can he find this?
Insuarnce policy
By appraisers
By current market
44. for a policy to be enforced all of the following are wrong except
Into cocaine
Manic depression
Insurer agent not registered in one state where he sells insurance
The check of the insured bounced back
45. in liability insurance all of the following are presnt except
Co insurance
Aggregate limit
OCCURANCE LIMIT
Other value insurance

46. in the declartion page u wud find all of the following except
Full text of the policy exclusions
47. wat is not true abt modular policies?
It wil make a policy by itself wen different documents are added to it

48. wat happens when insurer cancels the policy?

49. wat is true abt nonadmitted assests

Cannot be converted to cash

50. There was a damage caused by mines

Mine subsidence is the answer
51. Read about other insurance provisions as well.

52. learn completed operations (the examples)

53. business operations(example)
54. which of these comes under statutes law
Workers compensation laws
55. vandalism comes under which coverage
Basic coverage
56. a person writes an article about another persons conduct badly. He publishes it what act willl
this be
Libel (intentional tort)
57. breach of warranty shud be read( example)
58.loss exposure survey is not the right way to identify los exposure why?
An important loss exposure can be overlooked

59.all the benefits for the various people involved or who consider risk management shud be
read.

1) Why is Insurance known as a Transfer System.

Ans: The gives a Insured periodic premium and the insurer covers insureds the loss

2) Why law of large numbers used

Ans: To predict the losses

3) All of them listed below are Ideally Insurable Except

Ans: Small heterogeneous exposures

4) Which statement is correct regarding Private Insurers.

Ans: Mutual insurance companies are owned by policy holders

5) which of the following is done by the state

Ans: Unemployment

6) All are Benefits of Insurance Except

Ans: Premiums paid by insured

7) What law of indemnity states

Ans: The Insured must not be financially in a better status than he was before the loss

8) A shop is damaged due to fire. The shop owner has a Business income insurance plan. He lost
a income of 5000 dollars in this period and spent 15000 dollars to repair the shop. How much
will the insurer pay.
Ans: 5000 dollars

9) A mechanic sets up stove at a house and when it was first used it causes fire accident. What
type of liability
Ans: Completed operations liability

10) The Insured bought a photograph polishing solution which the shopkeeper said will protect
the photograph. When the insured used it on a 5000 dollar photograph the photograph cracked.
Ans: Breach of Warranty

11) When the plumber came to fix a new sink he damaged the water pipe line. What liability is
this.
Ans: Business Operation Liability

12) The insurance program in which only those citizen who meet the eligibility criteria can
obtain is
Ans: Social Security Program (Old age plan)

13) The purpose of NAIC is

Ans: It creates the model law for the problem present

14) Why must the premium be Adequate

Ans: It must cover the loss, expenses and also the insurers nominal profit

15) The Law which says approval is required only when it is a certain percent above or below the
previously filed rates
Ans: Flex rating Laws

16) What IRIS does

Ans: Develops financial ratios to detecting insurers overall condition

17) What is required by the agent to renew license

Ans: Must pass the exams conducted

18) E&S can also insure

Ans: Those with poor loss exposure

19) What is earned premium

Ans: amount that applies to the part of policy period already occurred

20) Which is a non-admitted assets

Ans: Office Furniture

21) They will give Admitted asset, loss reserve liability, unearned Premium Reserve liability and
other liabilities. Find Policyholder surplus
Ans: Policy Holder Surplus= Admitted Asset- [loss reserve liability+unearned Premium Reserve
liability+other liabilities]

22) What will be present in an Income Statement

Ans: Earned Premium

23) They will give Incurred loss, Earned Premium, Written Premium, Incurred Underwritting
expenses and Net investment income. Find loss ratio,expense ratio and Investment Income Ratio

24) Capacity Ratio is

Ans: Ratio of written premium to Policy Holder surplus

25) Responsibility of Principal to Agent

Ans: Must pay for the services

26) An agent collects premium on behalf of the Principal even if not mentioned in the contract
Ans: Implied Authority

27)An agent is
Ans: A legal representative of an insurance company

28)Which of the following is correct regarding Advertisement

Ans: Exclusive Agency has agents photo and insurance company name in its ad

29) An ABC agency said it wont handle a clients requirement. It appoint and supervises agents.
What is it
Ans: Managing General Agency

30)A DEF agency gets commission based on the premium volume and profitability level
Ans: Contingent Commission

31) When something of value is given to make the client to buy the policy
Ans:Tie in sales

32) Advertising Liability applies when

a)misrepresentation of ad..
b)copying slogans..
c)..
ANS was d)All of the above

33) Sam writes something bad about Tom in a news papers editorial and they are not true. Then it
is
Ans: Intentional Tort

34) All are process of underwriting activities Except

Ans: Marketing the Policy

35) What is Schedule Rate

Ans: Many insured within rating class have loss characteristics that might not be fully reflected
in class rates

36) Decentralization
Ans: Delegates extends authority to personnel in the field office

37) They will ask to find the Premium by giving rate/100dollars and the property insurance limit

38) An insurer want to know the financial status of the company which it is going to insure

Ans: Financial Rating Services

39) Hazard due to dishonest Tendencies

Ans: Moral Hazard

40) What is true regarding canceling of policy

Ans: The Insurer has to give notice before the specified amount of days to the insured

41) Who is a claimant

Ans: One who Submits a Claim on the insureds policy

42) Who is public Adjuster

Ans: Someone who represents insured in claim

43) When Agreed Value is used

Ans: For Fine Art Properties

44) A step in Property Insurance claim

Ans: T check if insured has insurable interest

45) What statement is correct regarding damages

Ans: Compensatory damages is to compensate for the harm caused

46) Tom buys Policy from an agent Jack after agreeing the policy conditions and paid the
premium.

a)Agreement
b)Legal purpose
c)Consideration
Ans is d) All of the above

47) Declaration has

Ans: List of all Policies

48) Insurer cancels the policy which is of policy period six months after one month itself. the
premium was 300 dollars. what is the pro rata refund
Ans: 250dollars

49) All about the structure of policies are correct except

Ans: Endorsement can be added to a modular policy to make it a self contained one

50) Transfer of rights and duties to other person

Ans: Assignment

51) Which of these is correct regarding Boiler and Machinery

Ans: Less likely to explosion and must be properly maintained

52) Damage due to graffiti, spray paint

a)Basic Plan b)Broad Plan c) Special Plan
Ans: is d) All of the above

53) For named peril the burden of proof is on

Ans: Insured

54) Which of these is an indirect loss

Ans: Lost Income and Increased Expense

55) Mortgagee is
Ans: One who lends money for real property

56) Mortgagee has all the rights except

a) Pay Client if insured didnt

b) to get notified

c) May file the Claim

Ans: The d) option is the answer which I dont remember

57) CGL covers all except

Ans:

Loss

which

occurred

due

to

Billboard

58) What are not generally covered

a) Damage of Sofa by bird

b) Water Seepage

c)..

Ans: d) All of the above

59) What provision will pay reduced amount to the insured if property was underinsured
Ans: Insurance-to-value provision

60) Contract Law is a branch of

Ans: Civil Law

fall

61) Each person limit $10000

Each occurrence Bodily Injury limit: $25000
Property Damage Limit: $15000

Court Orders Liability for Bodily Injury of the Injured Driver $19500
Property Liability $17000

How much will Insurer Pay

Ans: $25000 (Check it out)

62) First step of Risk Management

Ans: Identifying Losses

63) Risk Management is required because

Ans: All of the above

64) Loss frequency

Ans: Sees how often Loss occur

65) All are risk Management techniques except

a) Survey

b) Flowchart c) Viewing Loss History

Ans: The d) option is the answer which I dont remember

66) Insurer asks the insured to keep a fire extinguisher in his boat. Why?

Ans: Loss Reduction

67) Best technique which can be used where the loss exposure cannot be avoided, prevented or
controlled
Ans: Insurance
1. What is civil law?
a.)government takes responsibility for prosecuting the wrongdoers.
b.) applies to wrongful acts that deem the society
c.) deals with a personal quarrel between two people.

2. Federal government deals with al the following except

a) Unemployment
b.) flood insurance
c.)crop insurance
d) retirement benefits for the elderly

3.) social security provides all the following benefits except

a.) medical benefits to the aged
b.) disability benefits to the aged.
c.) retirement benefits to workers
d.) medical care to elderly

4.) State government deals with one of the following

a.) Worker s compensation
b.) crop insurance
c.) flood insurance.

d.) social security program

5.) Formal enactments of federal, state and local legislative is referred to as

a.) statuary law
b.) common law
c.) constitutional law

6.) In property insurance, Carelessly taped electrical wiring is an example of

a.) cause of loss
b.) hazard
c.) peril
d.) Time element loss

Problem:
Given : Earned premium : $ 2,000,000
Written Premium : $2,000,000
Investment Income: $660,000
Incurred loss: $1,500,000
Underwriting Expenses: $ 200,000
7.) Calculate the loss ratio
.75
.1
.5
.35
8.) Calculate the expense ratio

.75
.10
.5
.33
9.) Calculate the Investment income
.33
.38
.10
.5

10.) Calculate the policy holder s surplus

11.) Given the net Underwriting gain or loss is $100,000. TO calculate the overall gain or loss
which other data is necessary
1
2
3

Investment income
Net Investment income gain or loss
Overall income

12.) In the balance statement of an insurer which of the following will be present.
1
2
3
4

Admitted assests
Expense
Revenues
Net Investment Income

13.)Jane works for XYZ insurance and in an automobile firm. She has a client John who buys a
automobile from her. If she recommends him to buy XYZ insurance Which unfair trade practice
is it?
1
2

Tie- in sales
Rebating

Some two more options

14.) Policy provision called Condition can be defined as

Any promise that qualifies an otherwise enforceable promise of the insurer.
Other three options dnt remember

15.) Why is a catastrophic claim like Recession not handled by insurance companies
1.) Because of the large number of consequences due to the catastrophic loss
2,) number of people involved are less
3.)

16.) John is 22 yr old, male , who walks only one km per day His insurer( underwriter) says
that this will be considered while deciding rating and will he will belong to the large grp of pple
in this category.. which type of rating was he talking about
1
2
3
4

Class rating
Judgemental rating
Independent rating
Experience rating

17.) which one of the following is true about modular policy ?

1.) It represents the package policy
Other options I dnt remember

18.) When will you have Adverse selection?

When the premium is low as compared to loss exposures.

19.) XYZ wanted to incorporate risk management in his house. Which is the intial risk
management step ?
1

Identifying loss exposure

2
3
4

Analysis Loss exposure

Examining the feasibility of the risk management technique
Implementing the risk management technique.

20.) ABC has a small retail shop . He buys property, liability, house owner insurance from XYZ
insurance. Another insurer advices him that only buying insurance is not necessary, he should
implement risk management techniques as well. What are advantages he will have if he
implements the risk management techniques?
1. he will achieve business goals
2. He can reduce risk and hence develop his business
3. He can reduce expenses by handling loss exposures
4. all the above
21.) After analysis of the loss exposures , what is the risk management step?
1. identifying loss exposure
2. Examining feasibility of the risk management techniques
3. implementing the risk management techniques
4. monitoring the risk management techniques
22.) Mary is the single parent and has to commute a long distance for work . There is no other
proper mode of transport and she is having a very critical economic situation,She wants to buy a
automobile to drop her children at school and also to commute to work. Which is the best risk
management tech which she can follow.
1
2
3
4

Retention
Insurance
Avoidance
Loss control

23.)Joseph takes a house, he is advised by his insurer to install a fire extinguisher in his
house.Which risk control technique is he following by doing the same?
1. loss prevention
2.loss reduction
3. retention
4. avoidance

24.) What is the loss frequency ?

The number of losses which occurred in aperiod of time ( refer to definition) John takes house
owner insurance frm ABC insurance agency and auto insurance from DEF agency.
25.) DEF advertises using the agents name and photo but mainly focuses on advertising the
insurance company it represents what kind of agency is DEF
1. exclusive agency
2. independent agency
3 direct writing agency
26.) some information similarly given on ABC and asked which type of agency it is..
27.) some questions on state insurance regulators .. I dnt remember them exactly
28.) XYZ takes reinsurance with ABC cause there is no other way to continue doing business..
ACC to the AGREEMENT 50% of all the loss exposures will be reinsured by ABC. Which kind
of reinsurance is it?
Treaty reinsurance
Facultative reinsurance
Two more options
29.) what is NAIC ? ..
Model law one option .. that is the answer.
30.) which one of the following is not private funds
Guaranty funds
Stocks
Mutual funds
Reciprocal funds

31.) According to continuing education laws for insurance representatives which one of the
following is true
1.) the need to clear a written exam before renewing the license .

I dnt remember the other options..

Important notes
1 Plz follow 3rd edition book for ins21
2 Go through the glossary before the exam
3 Be through with the examples . most examples are repeated
from the book in the exam
4 Read the contents in the furnished inside the boxes
5 Formulas highly important
1.Loss payable clause:
Ans:Secured lender and personal property
2. Idemnity
3.Provision not included in the claim settlement of liabilty insurance
Ans: Co-insurance
3.Insurance as transfer system
4.Law of large numbers
Ans: Predict future outcomes or losses
5.not insurable loss property
Ans: Property with small dollar value
6.Federal Govt Insurance
Ans: Crop and Flood
7.state Govt insurance Regulator
Ans: should prevent from excessive premium and inadequate returns and unfairly discriminatory
8. IRIS
Ans: Financial Ratios(To determine the financial status of the Insurer)
9.NAIC

Ans: Model Law

10. Rate Making system:
Ans :Actuarial Rate Making provides the rate for insurance
11.Excess and supply business
Ans: Provides insurance for poor experience
12. Broker
Ans: Represents the customer
13. Over all operating gain or loss (Formula0
14.unearned premiums (problems )
15.To calculate premium problem
16. wat are non admitted asserts
Ans: Office furnitures
17.Non admitted asserts
Ans:not easily converted to cash
18. the usage of fire extenguisher helps in
Ans: Loss Reduction
19:define Loss frequency
And: no of losses occurred in a given period
20. during hurricane lots of claims occur , which kind of adjuster will help the insurance
company
Ans: I ndependant adjuster
21.capacity ratio (formula)
22.responsibilty of agent to principle
23.responsibilty of principle to agent
Ans: to pay the commission to the agent

24.Express authority
Ans: Gives binding coverage to the agent
25.Exclusive agency system
Ans: all of the above( dont remember the options)
26.Independant agency system will receive wat kind of commission
Ans:Contingent Commission
27.Exclusive Agency advertisement
Ans: Can advertise about the agency and the company( the answer will contain the advertising
using the photo of the owner)

28.underwriting activity :know the steps: questions will be like wat wats 1st step . 4th step etc)
29.Adverse Selection
Ans:Premium Low relative to loss exposure
30.standard Form
Ans: Insurance Advisory organisation develops the standard form
31. define faculative reinsurance
32.Define Treaty reinsurance
33;Morale hazard
Ans: I have insurance I need not be careful
34.Actual Cah value
Ans: Actual cash value includes depreciation
35.Modular Policy:
Ans: Modular policy consists of differents document none of which by itself forms a complete
document
36. Contract law comes under
Ans:Civil Law

37.comman Law is other wise know as

Ans: Case Law
38.A teenager sprayed graffiti on the fence of the neighbour wat form of coverage does it come
under
Ans:Basic form of coverage
39. Exclusions does not come under declarations page
40.The dispute between private parties comes under which law
Ans:Civil Law
41. A person tries to harm the reputation of the other by false advertising
Ans:Intentional tort
Statutory Liabilty
Ans: Workers compensation
42. wat is the first step in risk management
43. mortgagee:
Ans: cannot modify the coverage
44.public adjuster:
Ans: Represent the insured
45:which of the following is the best option;
Ans: capacity can be increased by reinsurance
46 the underwriters can determine The financial status of commercial insurance company by
Ans: Financial Rating / inspection report ( not sure)
47.wat is most importanly done in in the implementation step of Risk Management
Ans: To determine the costs of the risk (not sure again)
48: The agent is not given exclusive rights to collect premium but still he collects wat form of
authority is this
Ans:Implied Authority

49.Policy holder surplus(formula)

Ans: admitted asserts total liabilities

What is the process by which insurers decide which potential customers to insure and what
coverage tooffer them?
a . R e i n s u r i n g b . M a r k e t i n g c . P r o s p e c t i n g d .
U n d e r w r i t i n g DPam operates a home business that requires her clients to come to
her house. The possibility of one of Pam's clients tripping on a step leading to Pam's house and
injuring herself is
aa . P r o p e r t y l o s s e x p o s u r e . b . L i a b i l i t y l o s s e x p o s u r e . c . P e r s
o n n e l l o s s e x p o s u r e . d . H u m a n l o s s e x p o s u r e . BAll of the following
are types of property insurance,
EXCEPT:a . F i r e a n d a l l i e d l i n e s b .
C r i m e c. Busine
s s i n c o m e d . D i r e c t o r s a n d o f f i c e r s DA mutual insurance company is
owned
bya . I n d e p e n d e n t i n v e s t o r s . b . P o l i c y h o l d e r s . c . S t a t e i n s u r a
n c e d e p a r t m e n t s . d . M u t u a l f u n d s . BWhich one of the following is most
likely to have the characteristics of an ideally insurable loss exposure?
a. Explosion of an industrial factory steam boiler b . S u n d a m a g e t o a n e
xterior paint finishc. Physical damage to a lunar land rover d . Ter
m i t e d a m a g e t o a h o m e AThe possibility of Chuck's house being damaged by fire
isa . A p r o p e r t y l o s s e x p o s u r e r e l a t i n g t o r e a l p r o p e r t y.b . A p r o p e r t y l o s s e
x p o s u r e r e l a t i n g t o p e r s o n a l p r o p e r t y. c . A n o n i n s u r a b l e l o s s e x p o s u r e .
d . A c o m m e r c i a l l o s s e x p o s u r e . AAll of the following are types of insurance
provided by the federal government
EXCEPT:a . F l o o d i n s u r a n c e b . C r o p i n s u r a n c e c . T e n a n t
s insuranced. Social SecurityC