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Michigan Property & Casualty Insurance Exam Questions and Answers
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Michigan Property & Casualty Insurance Exam Questions and Answers
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Michigan Property & Casualty InsuranceExam Questions and Answers
Risk - Answer -The possibility that a loss will occur
Speculative Risk - Answer -Chance of loss or gain
Pure Risk - Answer -only the possibility of loss
Peril - Answer -cause of loss
Exposure - Answer -The potential for accidents and other losses
Direct Loss - Answer -Loss that is a direct result of a peril, such as fire.
Indirect Loss - Answer -Loss that is a result or consequence of a direct loss
Moral Hazard - Answer -Arise from a person's character (dishonesty)
Morale Hazard - Answer -A condition of carelessness or indifference that increases the
frequency or severity of loss.
Physical Hazard - Answer -a physical condition that increases the frequency or severity
of loss
Sharing risk - Answer -Two or more individuals share risk
transfer risk - Answer -The purpose of insurance
Avoidance - Answer -eliminating certain risk by not engaging in certain activity
Retention - Answer -Self-insurance, person will pay for loss
Reduction - Answer -Lessening the possibility or severity of a loss.
, Law of Large Numbers - Answer -A principle stating that the larger the number of similar
exposure units considered, the more closely the losses reported will equal the
underlying probability of loss.
Elements of Insurable Risk - Answer -Calculable
Affordable
Non-catastrophic
Homogeneous
Accidental
Measurable
Adverse Selection - Answer -risks that have a greater than average chance of loss
Reinsurancd - Answer -Transfers risk from one insurer to another
Stock Insurer - Answer -Owned by stockholders
Mutual Insurer - Answer -owned by policyholders
Fraternal Benefit Society - Answer -An insurance company formed to provide insurance
for members of an affiliated lodge, religious, or fraternal organization with a
representative form of government.
Reciprocal Insurers - Answer -are unincorporated groups of individual members that
provide insurance for other members through indemnity contracts. Each member acts
as both insurer and insured and are managed by Attorney in Fact.
Lloyd's Association - Answer -insurance provided by individual underwriters, usually
insure unusual risks
Risk Retention Group (RRG) - Answer -a mutual insurance company formed to insure
people in the same business, occupation, or profession
Self insurers - Answer -These insurers do not transfer their share of a loss to an
insurance company, but instead establish their own pool of reserves to cover losses that
may arise.
Domestic Insurer - Answer -An insurance company that conducts business in the state
of incorporation.
Foreign Insurer - Answer -An insurer licensed to operate in a state but incorporated in
another state.
Alien Insurer - Answer -An insurance company that is incorporated outside the United
States
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