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Arizona Health Insurance Exam/584 Questions and Answers
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Arizona Health Insurance Exam/584Questions and Answers
Insurance - -a contract in which one party (the insurance company) agrees
to "make whole" the insured party against loss, damage or liability arising
from an unlikely event
-In ___________ insurance, the policy protects survivors from losses suffered
after the insured's death - -Life
-Insurance __________ the risk of loss from an individual or business to an
insurance company - -Transfers
-Risk - -the uncertainty or chance of a loss occurring
-Pure Risk - -situations that can only result in a loss or no change
-In __________ risk, there is no opportunity for financial gain - -Pure
-__________ risk is the only type of risk that insurance companies are willing
to accept - -Pure
-Speculative Risk - -involves the opportunity for loss or gain
-__________ risk is not insurable - -Speculative
-Exposure - -unit of measurement used to determine rates charged for
insurance coverage
-4 Determining Factors in Life Insurance - -- Age of insured
- Medical history
- Occupation
- Sex of insured
-Homogeneous - -a large number of units having the same or similar
exposure to loss
-What is the basis of insurance? - -Sharing the risk among members of a
large homogeneous group with similar exposure to loss
-Hazards - -conditions or situations that increase the probability of an
insured loss occurring
-Physical Hazards - -individual characteristics that increase the chances of
the cause of loss
, -__________ hazards exist because of physical condition, past medical history,
or a condition at birth. - -Physical
-Moral Hazards - -tendencies towards increased risk
-__________ hazards involve evaluationg the character and reputation of the
proposed insured. - -Moral
-__________ refer to those applicants who may life on an application for
insurance, or in the past, have submitted fraudulent claims against an
insurer. - -Moral
-Morale Hazards - -arise from a state of mind that causes indifference to
loss, such as carelessness and result from actions taken without forethought.
-Peril - -the causes of loss insured against an insurance policy.
-__________ insures against the financial loss caused by premature death of
the insured. - -Life
-__________ insures against the medical expenses and/or loss of income
caused by the insured's sickness or accidental injury. - -Health
-__________ insurance insures against the loss of physical property of the loss
of income producing abilities. - -Property
-__________ insurance insures against the loss and/or damage of property
resulting in liabilities. - -Casualty
-Loss - -the reduction, decrease, or disappearance of value of the person or
property insured in a policy, caused by a named peril.
-Risk Avoidance - -eliminating exposure to a loss
-Risk avoidance is __________ but seldom __________. - -Effective/Practical
-Risk Retention - -the planned assumption of risk by an insured throughthe
use of deductibles, co-payments or self-insurance.
-Risk retention is also known as __________ when the insured accepts the
responsibility for the loss before the insurance company pays. - -Self-
insurance
-The purpose of retention is: - -1. to reduce expenses and improve cash
flow
,2. to increase control of claim reserving and claims settlements
3. to fund for losses that cannot be insured
-Risk Sharing - -a method of dealing with risk for a group of individual
persons or businesses with the same or similar exposure to loss to share the
losses that occur within that group.
-A __________ is a formal risk-sharing agreement. - -Reciprocal insurance
exchange
-Risk Reduction - -actions taken to attempt to lessen the possibility or
severity of a loss (ex: installing smoke detectors, annual physicals, making
lifestyle changes)
-The most effective way to handle risk is to __________ it so that the loss is
borne by another party. - -Transfer
-Insurance is the most common method of __________ risk from an individual
or group to an insurance company. Though the purchasing of insuranc will
not eliminate the risk of death or illness, it relieves the insured of the
financial losses these risks bring. - -Transferring
-Elements of Insurable Risks - -- Due to chance
- Definite and measurable
- Statistically predictable
- Not catastrophic
- Randomly selected and large loss exposure
-Insurable Risks Due to Chance - -a loss that is outside of the insured's
control
-Insurable Risks that are Definite and Measurable - -a loss that is specific as
to the cause, time, place and amount. An insurer must be able to determine
how much the benefit will be when it becomes payable.
-Insurable Risks that are Statistically Predictable - -insurers must be able to
estimate the average frequency and severity of future losses and set
appropriate premium rates
-Insurable Risks that are Not Catastrophic - -insurers need to be reasonably
certain their losses will not exceed specific limits because there is no
statistical data that allows for the development of rates that would be
necessary to cover losses from these events.
-Insurable Risks that are Randomly Selected and have Large Loss Exposure -
-there must be a sufficiently large pool of the insured that represents a
, random selection of risks in terms of age, gender, occupation, health and
economic status, and geographic location.
-Adverse Selection - -the insuring of risks that are more prone to losses
than the average risk
-__________ risks tend to seen insurance or file claims to a greater extent
than __________ risks. - -Poorer/Better
-To protect themselves from __________, insurance companies have an option
to refuse or restrict coverage for bad risks, or charge them a higher rate for
insurance coverage. - -Adverse selection
-Law of Large Numbers - -states that the larger the number of people with a
similar exposure to loss, the more predictable actual losses will be.
-Which law forms the basis for statistical prediction of loss upon which
insurance rates are calculated? - -The Law of Large Numbers
-When an insurance company issues a policy of a 35 y/o male, the company
really has no way of kning or accurately predicting when he will die. So they
use the __________ to look at people who are the same age, sex and have
similar health and lifestyle conditions to make conclusions based on the
statistics of past losses. This allows the insurance company yo have a
general idea about the predicted time of death for this type of insured and to
set the premiums accordingly. - -Law of Large Numbers
-What is the major difference between government and private insurance? -
-The government programs are funded with taxes and serve national and
state social purposes, while private policies are funded by premiums.
-What are the 5 ways that private insurance companies can be classified? -
-- Ownership
- Authority to transact busniess
- Location
- Marketing and distribution systems
- Rating (financial strength)
-Stock Companies - -insurance companies that are owned by the
stockholders who provide the capital necessary to establish and operate the
insurance company and who share in any profits or losses
-What is a nonparticipating policy? - -A policy issued by a stock company in
which policy owners do not share in profits or losses that does not pay
dividends to policy owners, but does pay taxable dividends to stock holders.
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