Insurance Company Operations

The primary function of an actuary is to

• adjust claims.

• determine premium rates.

• negotiate reinsurance treaties.

• invest insurance company assets.

Insurers obtain data that can be used to determine rates from

• pricing pools.

• insurance advisory organizations.

• banks.

• reciprocal exchanges.

Which of the following statements about underwriting policy is (are) true?

• A company must establish an underwriting policy consistent with company objectives.

• Underwriting policy is usually subjective and allows the underwriter considerable flexibility with respect to lines written and forms used.

Which of the following statements about underwriting standards is (are) true?

• One purpose of underwriting standards is to reduce adverse selection against the insurer.

• Equitable rates should be charged so that each group of policyowners pays its own way in terms of losses and expenses.

The underwriting process begins with the

• agent

• desk underwriter

• inspection report

• actuary

Common sources of underwriting information for life and health insurance include all of the following EXCEPT

• the application

• a physical examination

• the Medical Information Bureau

• the applicant's income tax return

If an underwriter suspects moral hazard, the underwriter may ask an outside firm to investigate the applicant and make a detailed report to the insurer. This report is called

• an inspection report

• application

• M.I.B. report

• agent's report

One source of life and health insurance underwriting information is an organization that life and health insurance companies can join. As a member, life and health insurance companies report health impairments of applicants, and this information is shared with member companies. Although the information is shared, the underwriting decision of the member company is not disclosed. What is this organization called?

• Fair Isaac Corporation (FICO)

• Medical Information Bureau (MIB)

• National Association of Insurance Commissioners (NAIC)

• National Association of Mutual Insurance Companies (NAMIC)

Factors that may result in more restrictive underwriting decisions include which of the following?

• I only

• II only

• both I and II

• neither I nor II

Which of the following is a function of the marketing department of an insurance company?

• to settle claims after a loss has been reported

• to determine the cost of products the insurer sells

• to make final underwriting decisions

• to identify production goals