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C16 Business Of Insurance Exam Questions With 100% Correct Answers | Verified | Latest Update
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C16 Business Of Insurance Exam Questions With 100% Correct Answers | Verified | Latest Update
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C16 Business Of Insurance ExamQuestions With 100% Correct Answers |
Verified | Latest Update
5iWaysiInsuranceicompaniesispreadiriski-iCorrectiAnswer--
Shareiriskiwithiotheriinsuranceicompaniesi(foriveryilargeirisk,iseveraliins
urersisubscribeitoipercentageiofirisk)
-Reinsureitheiriski
-deductible
-
spreadiriskioveridiverseigeographicaliregioni(softeniriskiofilocalizedidisa
sters)
-
formiriskipoolsi(syndicatesiofiinsuranceiandireinsuranceicompanies,iorg
anizeditoiunderwriteiparticularirisk)
Twoiprinciplesiofiinsurancei-iCorrectiAnswer-
1.iPremiumsiofitheimanyiareiuseditoipayitheilossesiofitheifew
(riskitransferreditoiinsurer,ideductible,icompanyisharesiandispreadsirisk
,igeographicispreadiofirisk,iformingiriskipools)
Premiumishallibeicommensurateiwithitheiriski
(Capitalimeetsiprobabilitiesiofiloss,ipremiumsimustibeiadequateitoipayif
utureiclaims,ifierceicompetition,iadverseiselection,ilongiandishortitaililin
es,itimeigapsiinipricing)
,ShortitailiandiLongitailicomparedi-iCorrectiAnswer-
Tailirefersitoitheiamountiofitimeibetweenitheiincidentianditheidetermin
ationioficlaimi
-Shortitail-
linesiareithoseiwhereitheiinjuryioriotheriharmibecomesiknowniquicklyi(r
elativelyishortiperiodiofitimeibetweenieventiandiresolution)
-Longitail-
linesifeatureiclaimsiseparatedifromitheicircumstancesithaticausediitibyi1
0,i15,i20iyrsiorimore
-toipriceirisksitimeigapsimustibeiconsiderediforilong-taililines
-toipayiclaimsifromimanyiyearsiago
-toipayiforiclaimsiinitheifutureiwithitoday'sipremium
Negativeiconsumeriperceptionsiofiindustryiandihowitoiimprovei-
iCorrectiAnswer--pricesigoiup/downiasicapacityitightening
-lefticustomersiwithipooriopinion
-
mediaiportraysinegativeiimagei(politicatiansipromiseitoidoisomethingia
boutirates)
-
insurersiwantitoieducateiinsuranceipeopleiaboutihowiinsuranceiindustr
yiworks
-
caniprovideimoreiinformationioniquestionsilikei(goodiriskivsibad,ihowiisi
,airiskipriced,iwhyiratesigoiup,iwhyiaiprofitableiindustryibenefitsieveryon
e0
-feeliifiaiclaiminotimade,ipremiumishouldibeireturned/reducedi
-presentiservicesiinipostitiveilight
-insuranceiprotectioniintangible
-
10iwaysiinsuranceiaffectsisocietyiandieconomyi-iCorrectiAnswer--
banksiwillingitoiissueimortgagesionibuildingsithatiareiinsured
-
developersiwillingitoiadvanceifundsitoibuildingicontractorsioniprojectsig
uaranteedibyisuretyibonds
-retailersimoreiwillingitoiaccepticommercialirisksiwithiliabilityiinsurance
-
professionalsimoreiwillingitoiprovideiservicesiwheniinsurediagainstiriski
ofimalpractice
-
manufacturersimoreiwillingitoiacceptirisksiassociatediwithishippingigoo
dsi(wheniinsured)
-membersiofisocietyimoreiwillingitoiuseiautomobiles
-peaceiofimind
-providesiemployment
-contributesitoieconomy
-investmentsihelpifinanceigovernments
, -claimipaymentsiboostilocalieconomiesiandicreateijobs
Goaliofireinsurancei-iCorrectiAnswer--givesipeaceiofiminditoiinsurers
-
confidenceiinstilledithatifinancialiruiniwillinotioccuriisiaimajoriunplanne
dieventiwereitoioccur
FouribasicifunctionsiofiInsurancei-iCorrectiAnswer-Financingi-
ioffersiaiuniqueimethodiofifinancingitoiinsuranceicompanies,ifreesiupica
pitalithatiwouldibeiotherwiseitiediup,imeetisolvencyiregulations,iexpans
ioniofioperations
Stabilizationi-
ikeepiinsurer'sigrowthiandidevelopment,iuseditoikeepioperationaliresul
tsireasonableiwithoutifluctuations,icanihelpimaintainiconfidenceifromis
takeholders,iattractinewicapital
Capacityi-
irequireiabilityitoiinsureibusinessesibeyonditheiriresources,itakeionirisksi
higherithanitheyiwouldinormallyiwrite,imayinotiwantitoibeilimiteditoism
allilines,icateritoineedsiofibigiproducers
Reinsuranceiuseditoiprotectiagainsticatastrophicilossi-
ilookitoiprotectiresourcesisuchiasitheiricapitaliandisurplus,theirilossiratio
ianditheiriinvestmentiposition
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