Utah Health Insurance Exam Questions & Answers Already Graded A +
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Course
Utah Health Insurance
Institution
Utah Health Insurance
Certificate of Authority - License for insurance company to do business. This allows insurers to be
considered ADMITTED or AUTHORIZED.
Moral Hazard - Dishonesty or character defects in an individual that increase the frequency or
severity of loss (Example: Applicant lies on insurance application...
Utah Health Insurance Exam
Certificate of Authority - License for insurance company to do business. This allows insurers to be
considered ADMITTED or AUTHORIZED.
Moral Hazard - Dishonesty or character defects in an individual that increase the frequency or
severity of loss (Example: Applicant lies on insurance application)
To be insurable, a risk must be - -due to chance
-Definite and measurable
-Statistically predictable
-NOT catastrophic
-Large loss exposure (large pool of randomly selected people/risks)
Insurance - Transfer of risk.
Types of risk - Pure and Speculative
Pure Risk - A chance of loss or no loss, but no chance of gain. The ONLY type of insurable risk.
Speculative Risk - Chance of loss or gain. CANNOT be insured. (Example: Buying stock in the stock
market)
Types of Hazards - Physical, Moral and Morale
Physical Hazard - A physical condition that increases the chance of loss.
Morale Hazard - Through carlessness or irresponsible actions an increase in the possibilty of a
loss. (Example: Not cutting down a tree branch that might fall on your house because you have insurance
if it does)
,Perils - causes of loss insured against in an insurance policy
Avoidance - Eliminating exposure to a loss (not driving so you won't get in a car accident)
retention - Planned assumption of risk through the use of deductibles, co-payments, or self-
insurance.
reduction - Actions such as installing smoke detectors to reduce the risk of loss from fire or getting
an annual physical to help prevent/detect health problems early.
Transfer - Transferring the risk of loss to another company or entity. Insurance is the most
common way to transfer risk.
Adverse Selection - Tendency for poorer than average risks to seek insurance.
Reinsurance - Insurance purchased by other Insurer(s) to spread or diversify risk; promotes
industry stability.
Ceding Insurer - The company transferring risk in a reinsurance arrangement.
assuming insurer - reinsurer or company who is taking over the risk
Stock Companies - -Owned by stockholders
-nonparticipating (policy holders DO NOT share in profits or losses)
Mutual Companies - -Owned by the policyowners
-Participating (ploicyowners are entitled to dividends)
,-Dividends are NOT guaranteed
Fraternal Benefit Societies - Must be nonprofit, have a lodge system (ie. religious organization),
representative form of government and offer insurance to its members only.
Domestic Insurer - An insurance company that conducts business in the state of incorporation.
Foreign Insurer - An insurance company that is incorporated in another state.
Alien Insurer - An insurance company that is incorporated outside the United States.
Who does an agent represent? - The INSURER (insurance company) not the insured.
Express Authority - The authority granted to an agent by means of the agent's written contract..
Implied Authority - the authority that the agent has that is not specifically listed in their contract,
but is assumed to have to conduct business. (Required to be able to conduct business). Example:
collecting premiums
Apparent Authority - A third party's reasonable belief that an agent has authority to act on the
principal's behalf. Based on the actions words, etc of the principal. Example: Using business cards or
brochures
Fiduciary Responsibility - -An ethical and legal obligation to perform a person's duties in a
trustworthy manner.
-Money related
-Must not commingle funds
-Forwarding premiums to the insurer/principal in a timely manner is an example of acting in a fiduciary
capacity
Parts of a contract - Offer, acceptance, consideration, and legal purpose
, Consideration - Exchanging something of value
Insured's Consideration - 1. A truthful and complete application
2. Premium Payment
Insurer's Consideration - Promise to pay qualifying claims
Acceptance - UNDERWRITER approves a prepaid application.
(An agent/producer CANNOT bind coverage, but they can accept an application)
Legal Purpose - Insurable interest and consent
1. Must be of age (18+)
2. Cannot be high
3. Cannot be drunk
4. Must be mentall competent
Contract of Adhesion - Take it or leave it agreements, where the insured has no say in the contract
terms and conditions.
Aleatory Contract - A contract where the values exchanged may not be equal but depend on an
uncertain event
Personal Contract - A contract between an individual and an insurer.
unilateral contract - Only ONE of the parties is legally bound (the insurance company).
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