Michigan Property & Casualty Exam Guide Questions and CORRECT Answers
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Course
Michigan Property & Casualty
Institution
Michigan Property & Casualty
Michigan Property & Casualty Exam
Guide Questions and CORRECT Answers
Indemnity - Correct Answer- a payment for damages or loss
Risk - Correct Answer- Uncertainty or chance of loss occurring
Pure Risk - Correct Answer- Presents the chance of loss with no opportunity for gain
Speculative Risk ...
Michigan Property & Casualty Exam
Guide Questions and CORRECT Answers
Indemnity - Correct Answer- a payment for damages or loss
Risk - Correct Answer- Uncertainty or chance of loss occurring
Pure Risk - Correct Answer- Presents the chance of loss with no opportunity for gain
Speculative Risk - Correct Answer- Presents the chance of loss with an opportunity to gain
(Like Gambling)
Exposure - Correct Answer- a unit of measurement used to determine rates charged for
insurance coverages.
Hazards - Correct Answer- Conditions or situations that increase the probability of an insured
loss occurring.
Peril - Correct Answer- Causes of loss
Risk Retention - Correct Answer- planned assumption of risk by an insured through the use
of deductibles, co-payments, or self-insurance.
Risk sharing - Correct Answer- method of dealing with risk for a group of individual persons
or businesses with a similar exposure.
Risk reduction - Correct Answer- an attempt to lessen the possibility or severity of a loss.
Risk transfer - Correct Answer- buying insurance
Elements of insurable risk - Correct Answer- due to chance, definite and measurable,
statistically predictable, not catastrophic, randomly selected and large loss exposure
,Adverse Selection - Correct Answer- insuring of risks that are more prone to losses than the
average risk.
Law of Large Numbers - Correct Answer- the larger number of people with a similar
exposure to loss, the more predictable the losses will be.
Stock Company Insurer - Correct Answer- Stockholders own and do not share profits or
losses
Mutual Company Insurer - Correct Answer- Policyowners own shares and share profits or
losses in excess premiums, but are not guaranteed.
Authorized - Correct Answer- Admitted
Rating Services - Correct Answer- Am Best
Fitch
Standard and Poor's
Moody's
Weiss
Law of Agency - Correct Answer- Agent represents the insurer, not the insured
Any knowledge of the agent is presumed to be knowledge of the insurer
If the agent is working within the conditions of his/her contract, the insurer is fully
responsible
When the insured submits payment to the agent, it is the same as submitting a payment to the
insurer.
Principal - Correct Answer- Insurer
Express Authority - Correct Answer- Written in the contract
,Implied - Correct Answer- Not expressed or written, but is assumed
Apparent Authority - Correct Answer- Perceived or appearance
Fiduciary Responsibility - Correct Answer- Legal duty in handling funds from the insured or
insurer.
Elements of a legal contract - Correct Answer- Agreement - Offer and Acceptance
Consideration
Competent Parties
Legal Purpose
Contract of Adhesion - Correct Answer- Prepared by one party and accepted or rejected by
another party.
Aleatory Contract - Correct Answer- Exchange of unequal amounts or value
Personal Contract - Correct Answer- Between the insurance company and an individual.
Unilateral Contract - Correct Answer- The insurer is not legally bound, but the insured is.
Conditional Contract - Correct Answer- Policy owner and insurer must meet certain
conditions before the contract is executed.
Contract Ambiguity - Correct Answer- Court stated that these are in the favor of the insured.
Indemnity - Correct Answer- A reimbursement without financial gain
Utmost Good Faith - Correct Answer- There will be no fraud, misrepresentation, or
concealment between both parties
Representations - Correct Answer- believed to be true to the best of ones knowledge.
, Warranty - Correct Answer- An absolutely true statement upon which the validity of the
insurance policy depends
Involved in Fraud - Correct Answer- fined and up to 10 years or prison time unless it
jeopardizes the insurers' security then it may be extended up to 15 years.
Involved in Embezzlement - Correct Answer- Fined and Prison time unless it is less than
$5,000 then time may be reduced to 1 year.
Elements of Insurable Risk - Correct Answer- Financial (Monetary)
Blood (Relative)
Business (Partner)
Loss Ratio - Correct Answer- (Incurred Losses + Loss Adjusting Expense) / Earned Premium
Schedule Rating - Correct Answer- Rate is developed by applying a schedule of charges or
credits
Experience Rating - Correct Answer- Past loss experience
Retrospective Rating - Correct Answer- Actual losses during policy period determine final
premium
Merit Rating - Correct Answer- Based off of other personal factors
Physical Hazards - Correct Answer- material, structural, or operational features of risk
Moral Hazards - Correct Answer- Lying on insurance applications or have committed
fraudulent acts in the past
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