Risk management and insurance questions
Business Finance
1, Which of the following is a covered person under the medical payments coverage of the PAP?
A) a family member of the named insured if struck by an auto while crossing the street
B) a pedestrian struck by the named insured’s auto
C) the named insured while she is operating her car as a taxi
D) a carjacker who is involved in an accident after stealing the insured’s car
2. Adverse selection occurs
A) when an insurance company loses money on its investments.
B) when insurance purchasers buy insurance but do not have a loss.
C) when catastrophic losses occur as a result of a natural disaster.
D) when applicants with a higher-than-average chance of loss seek insurance at standard rates.
3.The primary purpose of coinsurance in property insurance is to
A) reduce moral hazard.
B) achieve equity in rating.
C) minimize problems in settling claims.
D) eliminate small losses.
4.What is the legal significance of a material misrepresentation in an insurance application?
A) The contract is automatically voided from its inception.
B) The contract is voidable at the insurer’s option.
C) Loss payments are reduced by the degree of the misrepresentation.
D) The insurer is immediately entitled to a higher premium.
5.Which of the following statements about mutual insurers is true?
A) They are legally organized as partnerships.
B) They have a board of directors which is selected by state insurance departments.
C) They are owned by their stockholders.
D) They may pay dividends to their policyholders.
