Exam (elaborations)
CIP C16 - CH01 - The Insurance Industry in Canada
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CIP C16 - CH01 - The Insurance Industry in Canada
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CIP C16 - CH01 - The Insurance Industry inCanada
List the 2 fundamental principles of insurance? - CORRECT ANSWER--
premiums of the many used to pay losses of few
- premium shall be commensurate with the risk
Why would an insurer spread risks over divers geographical areas? - CORRECT
ANSWER-- soften the burden of localized disasters on insurers
What is a risk pool? - CORRECT ANSWER-- syndicates of insurance or
reinsurance companies that have organized to underwrite a particular risk or
group of similar risks
- to share and spread risk between insurers and reinsurers
Explain the Law of Large Numbers? - CORRECT ANSWER-- a mathematical
premise which states that the degree of certainty in probabilities increases as the
number of events increases
Define ADVERSE SELECTION - CORRECT ANSWER-- the process by which
potential policyholders use private knowledge of their own level of risk when
deciding whether or not to buy insurance
For claims that take a long time to settle, what do we call the period of time
between when the claim occurs and its final resolution - CORRECT ANSWER--
tail
- refers to the amount of time between an incident and the determination of a
claim
Name 2 concerns of Ontario automobile excess reinsurers that relate to the
effects of long-tail liabilities. - CORRECT ANSWER-- severe injuries
- long tail trends for prior accident years
- inadequate reserving at the primary insurance level
, List 3 ways that insurance benefits society. - CORRECT ANSWER-- providing
security
- savings
- encouragement of investment
Why is there a need for residual market mechanisms? - CORRECT ANSWER--
Provide a last resort insurance facility for consumers to ensure that insurance
coverage is available even to those who are considered a high risk.
In property and casualty insurance, what are the 2 traditional methods of
distribution, and how do they differ? - CORRECT ANSWER-- independent
brokers; solicit consumers and they fit the consumer to the company.
- agents; only sell one companies policies
List 3 perceived advantages of the direct response method as a distribution
channel. - CORRECT ANSWER-
1)professional advice with no commission or fees - CORRECT ANSWER-
2)Technology-enabled sales and services - CORRECT ANSWER-
3)Extended hours for access to services - CORRECT ANSWER-
What are the 4 basic functions of reinsurance? - CORRECT
ANSWER-1)financing.
2)stabilization.
3)gain capacity.
4)protect against catastrophic loss
What are 7 potential effects of foreign ownership on a property and casualty
insurance company operating in Canada? - CORRECT ANSWER-1)deploying
capital 2)divesting certain lines 3)cost of retrocession covers and reinsurance
4)emerging risks 5)setting underwriting philosophies and procedures 6)
technology 7)investment markets
Describe 1 obstacle deploying capital into Canada. - CORRECT
ANSWER-government regulation
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