
Chapter 2 Insurance and Risk
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1.
MULTIPLE CHOICE QUESTION
20 sec • 1 pt
Which of the following is a basic characteristic of insurance?
A) pooling of losses
B) avoidance of risk
C) payment of intentional losses
D) certainty about specific losses that will occur
2.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
2) Which of the following is implied by the pooling of losses?
A) sharing of losses by an entire group
B) inability to predict losses with any degree of accuracy
C) substitution of actual loss for average loss
D) increase of objective risk
3.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
3) According to the law of large numbers, what happens as the number of exposure units increases?
A) Actual results will increasingly differ from probable results.
B) Actual results will more closely approach probable results.
C) Nondiversifiable risk will decrease.
D) Objective risk will increase.
4.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
4) From the viewpoint of the insurer, all of the following are characteristics of an ideally insurable risk EXCEPT
A) The loss must be accidental.
B) The loss should be catastrophic.
C) The premium must be economically feasible.
D) There must be a large number of exposure units.
5.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
5) Why is a large number of exposure units generally required before a pure risk is insurable?
A) It prevents the insurer from losing money.
B) It eliminates intentional losses.
C) It minimizes moral hazard.
D) It enables the insurer to predict losses more accurately.
6.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
6) Which of the following is implied by the requirement that a loss should be determinable and measurable to be insurable?
I. The loss must be definite as to place.
II. The loss must be definite as to amount.
A) I only
B) II only
C) both I and II
D) neither I nor II
7.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
7) Which of the following types of risks best meets the requirements for being insurable by private insurers?
A) most market risks
B) property risks
C) financial risks
D) political risks
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