RMIN4000 FINAL EXAM BROWN WITH COMPLETE SOLUTIONS!!

Lannister Insurance Company insures 200,000 vehicles. In 2019, they paid a total of $136,000,000 in collision losses to the owners of 16,000 of those vehicles. What was Lannister's collision loss frequency in 2019? - ANSWER-0.08 (16k/200k) Lannister Insurance Company insures 200,000 vehicles. In 2019, they paid a total of $136,000,000 in collision losses to the owners of 16,000 of those vehicles. What was Lannister's collision loss severity in 2019? - ANSWER-8500 (136M/16K) Michael Scott owns a condominium in Scranton, PA. A fire breaks out when his girlfriend, Jan, is dancing and knocks over a candle. The fire damages the condo and Michael's most prized possession - his plasma TV. The damage to Michael's plasma TV is considered a(n): - ANSWER-direct loss What is the most important step in the risk management process? - ANSWER-Step 1: identify loss exposures I have a high deductible ($2,200) in my health insurance plan. The high deductible is an example of which type of risk management technique? - ANSWER-retention Insurance is the most appropriate risk management technique for which of the following types of loss exposures? - ANSWER-high severity, low frequency Review The Very Good Building & Development Company is a general contractor (builder). Due to difficulty finding affordable workers compensation insurance (covering employee injuries), Very Good established its own insurance company based in Vermont for the purpose of insuring Very Good's workers compensation loss exposures. The company that Very Good formed is called a - ANSWER-captive insurer Jim Halpert and his wife, Pam, are selling the home they've lived in for the past seven years. They are aware of an electrical problem in the home that they do not want to fix because it would be expensive. Potential buyers of the home are unaware of the electrical problem. This is an example of: - ANSWER-Asymmetric Information All of the following are examples of operational risks EXCEPT: a) changing conditions in financial markets b) employment practices c) customer service d) supply chain - ANSWER-A Heisenberg Insurance has a home office in Albuquerque, New Mexico and they specialize in insuring chemical manufacturers. Heisenberg is owned by its policyholders and any annual profits are distributed through rate reductions. Which type of insurer is Heisenberg? - ANSWER-mutual insurer Reubens work in insurance sales. He sells insurance through several different unrelated insurance carriers that he legally represents. What is Reuben's job? - ANSWER-independent agent Who handles the ratemaking function within insurance companies? - ANSWER-Actuaries Agent Michael Scarn sells insurance for the Federal Bureau of Insurance (FBI). He is quoting a property insurance policy for Samuel Chang, the owner of an office building. The office building is 15,000 square feet and FBI charges a gross rate of $25 per 100 square feet. What is the gross premium for the property policy covering the office building? - ANSWER-3750 (15K feet/ 100 feet = 150ft * 25$ = 3750$) Antonio is employed by an insurance company. He reviews applications to determine whether his company should insure the applicant. Antonio assigns the applicant to a rating category based on the applicant's degree of risk. Antonio is a(n): - ANSWER-underwriter Walter White is the owner of A1A Car Wash. Jesse Pinkman is a regular A1A customer. One day, while waiting for his car to be washed, Jesse slipped on a wet spot on the floor and injured his back. As a result of his injury, he threatens to file suit against Walt and A1A Car Wash. Walt quickly notifies his insurer to start the claim process. This is an example of a: - ANSWER-third party claim O'Houlihan Wrenches is a tool manufacturer. They have asked Average Joe Insurance to insure their new $40 million manufacturing facility. Because of the high amount of coverage needed, the Average Joe's underwriter has indicated that they'll need to check with their reinsurer, Globo Re, to determine if they can obtain a reinsurance policy to specifically cover the manufacturing facility. Which type of reinsurance does Average Joe Insurance need for the manufacturing facility? - ANSWER-Facultative Average Joe Insurance has entered into a Surplus Share reinsurance agreement with Globo Re. The reinsurance treaty covers Average Joe's Commercial Property line of business and includes a $250,000 retention. Average Joe insures a gymnasium for $1,500,000. The owners of the gymnasium pay Average Joe $15,000 in premium for the policy covering the factory. If the factory sustained a $600,000 loss, how much is Globo Re responsible for? - ANSWER-500,000 (250,000/1,500,000} * 600,000) Who is responsible for regulating the insurance industry? - ANSWER-individual states What is the actual cash value of a 5 year old refrigerator with a 10 year useful life? It cost $1,500 when originally purchased, but costs $2,000 brand new today? - ANSWER-1000 (5/10=50% depreciation) so ACV=RC-DEPR so =1000 Johnny and Moira Rose borrowed $150,000 from Rosebud National Bank to help fund the purchase of a new home. The home serves as collateral for the loan. Rosebud National has an insurable interest in the home based on - ANSWER-being a secured creditor Jason is the owner of a liquor store. With the insurance policy covering the liquor store, there is a provision stating that the liquor store must have a working burglar alarm at all times in order for insurance coverage to apply. What is this an example of? - ANSWER-warranty The insurance company drafts and prints the policy contract. The insured must accept the entire contract; th