USLI Fundamentals of Insurance STUDY GUIDE| QUESTIONS WITH COMPLETE SOLUTIONS
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USLI Fundamentals of Insurance
Institution
Ball State University
Insurance industry is over 700 years old.
True
First type of Insurance:
Marine Insurance
Lloyd's of London is an insurance company.
False
Why was it important to the colonists of the new world to transfer the risks associated with the trade industry?
Because they stood to l...
usli fundamentals of insurance study guide| questions with complete solutions
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Ball State University
USLI Fundamentals of Insurance
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USLI Fundamentals of Insurance STUDY GUIDE| QUESTIONS
WITH COMPLETE SOLUTIONS
Insurance industry is over 700 years old. Correct Answer: True
First type of Insurance: Correct Answer: Marine Insurance
Lloyd's of London is an insurance company. Correct Answer: False
Why was it important to the colonists of the new world to transfer the risks associated with the
trade industry? Correct Answer: Because they stood to loose everything with the loos of any one
cargo
What two insurance markets did the new colonies have? Correct Answer: Life and Fire
Why were possessions so important to the colonists? Correct Answer: They had very few
What was significant of fire marks? Correct Answer: Helped the fire company know whether or
not to fight the fire
By the end of the 19th century, what major types of insurance had developed? Correct Answer:
Fire and flood
Insurance was a luxury to early colonists? Correct Answer: False
What is one problem with insurance being regulated by states? Correct Answer: Different
regulations for each state
What did Paul vs. Virginia decide? Correct Answer: States would regulate insurance
Why was Paul vs. Virginia overturned? Correct Answer: Interstate Commerce
The McCarren-Ferguson Act, which is still in effect today, mandates what? Correct Answer:
Insurance is regulated on state level
Although insurance is mandated on state level, which 3 areas are regulated federally? Correct
Answer: Labor, tax, and securities
In terms of insurance, what is risk? Correct Answer: The uncertainty of an outcome
Installing smoke detectors is an example of what? Correct Answer: Risk management
Which is an example of Intentional Risk Retention? Correct Answer: Carrying a deductible
Keeping copies of your social security card in a fire safe box is a: Correct Answer: Duplication
, New safety measures placed on products is a result of: Correct Answer: Product Liability
Claims
Evaluating the frequency and severity of a loss is a key part of: Correct Answer: Underwriting
What does loss frequency determine? Correct Answer: Number of losses per exposure
Evaluating loss frequency and severity helps to: Correct Answer: Create pricing and rates in the
insurance industry
Risks with an exposure level of _____ may not be eligible for insurance. Correct Answer: High
frequency/High severity
The Law of Large Numbers does which of the following: Correct Answer: Makes predictions
about losses and pool similar risks
By pooling risks by classification, insurers determine: Correct Answer: Premium rates
The area in which a home or building is located effects their rates? Correct Answer: True (city
vs. suburbs)
Insurers can use the Law of Large Numbers to predict how much: Correct Answer: True
Would a business in an urban area have a higher or lower rate: Correct Answer: Higher
What is a written premium? Correct Answer: The amount charged for a policy
Earned premiums differ depending on a particular schedule? Correct Answer: True
The expense ratio equals: Correct Answer: Incurred writing expenses over written premium
A combined ratio of over 100% would indicate____? Correct Answer: Loss
What gives an insurer an idea of how efficiently they are operating? Correct Answer: Expense
Ratio
What represents 70 percent of the premium dollar? Correct Answer: Claim Expenses
A company's surplus is associated with their ability to: Correct Answer: Write business
Combined ratio measures underwriting profitability? Correct Answer: True
Why is it important to have reinsurance? Correct Answer: To shift some financial burden
An increase in losses would: Correct Answer: Negatively affect profitability
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