Financial Issues in the Insurance Industry

What is the fundamental concept behind insurance?

• investment management

• shared risk

• profit

What is the term for the amount of money each person pays into the insurance pool?

• deductible

• premium

• claim

• investment

How do insurers determine the amount to charge for premiums?

• By calculating administrative costs

• By calculating administrative costs

• By assessing the likelihood and cost of insured events

What is one financial risk that insurance companies face?

• Decreased investments

• Lower premiums

• Major disasters

What is reinsurance?

• Insurance purchased by individuals

• Insurance purchased by insurance companies

• Insurance sold by government agencies

• Insurance for specific industries only

How do insurance companies manage risks caused by changes?

• By increasing premiums

• By reducing investments

• By diversifying investment portfolios

What benefits do insurance companies offer to policyholders to prevent losses?

• increased premiums

• safety information and services

• lower coverage limits

• limited claim options

Describe how reinsurance works.

• Insurers pay premiums to policyholders.

• Policyholders pay premiums to insurers.

• Insurers pay premiums to other insurers

Why is government oversight important in the insurance industry?

• To increase profits

• To reduce regulations

• To ensure legal and ethical operations

• To limit competition