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Insurance Fundamentals and Regulations
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Insurance Fundamentals and Regulations
Insurance Fundamentals and Regulations
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1
Question
What role does an insurance agent play in the industry?
Page 1
Answer
Represents insurers and sells policies.
2
Question
What is the primary function of an insurance broker?
Page 1
Answer
Represents clients and finds coverage.
3
Question
How does an insurance agent differ from a broker?
Page 1
Answer
Agent represents insurers and sells policies; broker represents clients and finds coverage.
4
Question
What does the actuarial department in an insurance company do?
Page 1
Answer
Calculates premiums using statistics.
5
Question
What is adverse selection in insurance?
Page 1
Answer
High-risk people more likely to buy insurance.
6
Question
What defines whole life insurance?
Page 1
Answer
Lifetime coverage with cash value.
7
Question
What is the role of the underwriting department?
Page 1
Answer
Assesses risk, approves or denies policies.
8
Question
Who owns a mutual insurance company?
Page 1
Answer
Owned by policyholders.
9
Question
Who owns a stock insurance company?
Page 1
Answer
Owned by shareholders.
10
Question
How does ownership differ between mutual and stock insurance companies?
Page 1
Answer
Mutual owned by policyholders; stock owned by shareholders.
11
Question
What is reinsurance?
Page 1
Answer
Insurer transfers risk to another.
12
Question
What characterizes an admitted insurer?
Page 1
Answer
Licensed by the state.
13
Question
What defines a non-admitted insurer?
Page 1
Answer
Not licensed by the state.
14
Question
What distinguishes admitted insurers from non-admitted insurers?
Page 1
Answer
Admitted licensed by state; non-admitted not licensed by state.
15
Question
What does an actuary do in insurance?
Page 1
Answer
Sets rates using data.
16
Question
What is a hazard in the context of insurance?
Page 1
Answer
Condition increasing risk.
17
Question
What does the law of large numbers explain in insurance?
Page 1
Answer
Larger sample predicts outcomes.
18
Question
What is the fundamental definition of risk?
Page 1
Answer
Uncertainty of loss.
19
Question
What characterizes pure risk?
Page 1
Answer
Only possibility of loss.
20
Question
What defines speculative risk?
Page 1
Answer
Chance of gain or loss.
21
Question
How does pure risk differ from speculative risk?
Page 1
Answer
Pure risk has only possibility of loss; speculative risk has chance of gain or loss.
22
Question
What is rebating in insurance sales?
Page 1
Answer
Returning part of premium to induce purchase.
23
Question
What constitutes twisting in insurance?
Page 1
Answer
Misleading policy replacement.
24
Question
How does twisting differ from simple replacement?
Page 1
Answer
Twisting is misleading policy replacement; replacement is new policy replaces old.
25
Question
What is fraud in the insurance context?
Page 1
Answer
Intentional deception for gain.
26
Question
What is the purpose of a guarantee association?
Page 1
Answer
Protects policyholders if insurer fails.
27
Question
What is a contract of adhesion in insurance?
Page 2
Answer
One party sets terms, other accepts.
28
Question
What are the requirements for a valid insurance contract?
Page 2
Answer
Requires competent parties and legal purpose.
29
Question
What does the commissioner of insurance do?
Page 2
Answer
Regulates insurance in the state.
30
Question
What is a policy summary?
Page 2
Answer
Overview of key policy features.