C16: The Business Of Insurance - Chapter 3;
Dynamics Of The Insurance Market
Questions And Answers
What is capacity in an insurance context? - Correct Answer-The
amount of capital that individual insurers for entire markets make
available for insuring risk
What does the theroy of supply and demand do? - Correct Answer-
analyze the way pricing is regulated by balancing the amount of a
product made available for purchase with the quantity required by
consumers.
what is a bull market? - Correct Answer-is a market on the rise. Strong
demand for securities but a weak supply. Rise of share prices,
investors are optimistic, economy is strong and employment rate is
high.
what is a bear market? - Correct Answer-is a market in decline. prices
are dropping, invest in securities, economy is sluggish and
unemployment rises.
what does the law of supply show? - Correct Answer-shows that the
quantity of a product a supplier will provide it relative to the amount
of payment per unit they will receive
, what does the law of demand state? - Correct Answer-if all other
factors remain equal, fewer people will demand the product as its
prices rises.
what is the effect of mergers and acquisitions in the insurance
marketplace? - Correct Answer--demand for reinsurance lessens
-increased capacity
-increased investors
-increased investment returns
when the investment market is performing badly what must insurers
rely in order to earn a profit? - Correct Answer-underwriting
what 3 underwriting practices emerged in highly competitive
environments in soft market cycles? - Correct Answer--Lower
Premium Rates
-Relax policy terms and conditions
-Relax loss prevention and control measures
Name 3 strategies employed by underwriting that signify a hardening
of the market? - Correct Answer--Approach risk cautiously
-set more exacting U/W standards
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