Lesson 1 Quiz

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Basic Insurance Principles

The true significance of insurance is to replace the unknown with:

______________ insurance is/are based on scientific principles.

______________ insurance is/are based on actuarial or mathematical principles.

The two basic reasons for insurance are: (1) Protects the insured against financial loss, and (2) restores the insured to the same status as before the loss.

A _____________ risk involves the possibility of loss and gain.

A _____________ risk involves the possibility of loss only.

Perils and Hazards

A hazard is the source of danger that leads to the probability of a particular loss to the insurer.

A peril is the cause of a risk.

A bodily disease of endangerment such as cancer presents a __________ hazard.

An unhealthy habit such as smoking presents a _________ hazard.

A mental trait such as road rage presents a __________ hazard.

Risk Levels

____________ occurs when an individual eludes risk entirely.

Self-insurance is a form of risk:

_______________ occurs when the chances of loss are lessened.

______________ occurs when an individual takes precautions for protection by allowing another party to maintain part of the risk.

_____________ occurs when an individual shifts the responsibility of covering the risk to another.

Prohibited Practices

When an agent induces a policyowner with one company to lapse, forfeit or surrender one policy to take out a policy with another company, it is called:

The act of making, issuing, circulating (or causing such) an estimate, illustration, circular or statement of any kind that does not represent the correct policy terms, dividends or share of the surplus or the name or title for any policy or class of policies that does not reflect its true nature is called:

Improper use of premiums collected by an insurance producer is referred to as:

Returning part of the commission or giving anything else of value to the insured as an inducement to buy a policy is known as:

The practice by which policy values in an existing policy are used to purchase another policy or contract with that same insurer for the sole purpose of earning additional premiums or commissions is known as:

Concepts

The concept founded on the ability to predict the approximate number of deaths or frequency of disabilities within a certain group during a specific time is the basic premise of:

The systematic selection of loss exposures is prohibited due to the rules of:

Regulatory Bodies

_______________ measures company performance and provides analytical reports to the IRIS - information that is also made available to agents.

_______________ protect consumers from insolvent insurers.

_______________ are organizations consisting of life and health insurance agents whose main focus is to support the industry and advance the quality of service provided by insurance professionals.

The Florida Life and Health Guaranty Association's liability for contractual obligations of an insolvent insurer cannot exceed ___________ in cash values, or __________ for all benefits including cash values with respect to any one life.

Match the following private insurance companies with their respective descriptions.

a)	Private organizations structured the same as any corporation, organized and incorporated under state laws for the purpose of making a profit for its owners, the stockholders.
b)	Owned by the organization's policyholders (each policyholder insures the risks of the other policyholders) and are managed by an attorney-in-fact.
c)	An association of individuals and companies that gathers and disseminates underwriting information, helps its associates settle claims and disputes, and provides coverage that might otherwise be unavailable in certain areas.
d)	A form of mutual insurer that provides liability coverage to insure groups of individuals who are of the same class.
e)	A relationship that occurs when one insurer transfers or relinquishes a portion of a covered risk to another insurer.
f)	Organizations that are based on religious, national, or ethnic lines and issues insurance certificates and annuities with many of the same provisions found in policies issued by commercial insurers.
a) Stock Insurers b) Reciprocal Insurers c) Lloyd's of London d) Risk Retention Groups e) Reinsurer f) Fraternal Benefit Societies (Lesson 1.5)

Match the following types of insurers with their respective descriptions.

a)	Retains a network of service providers and whose subscribers pay a fixed periodic premium in advance of any treatment and must have a PCP.
b)	Contracts with specific providers who provide discounts on health care services and does not require insureds to have a PCP.
c)	A form of industrial insurance with relatively small face amounts, also known as debit insurers.
d)	Creates its own reserves to provide coverage for future losses who will bear the loss up to a maximum amount or may look to an insurance company to provide insurance above a certain maximum level of loss.
a) Health Maintenance Organizations (HMO) b) Preferred Provider Organizations (PPO) c) Home Service Insurers d) Self-Insurers (Lesson 1.5)

Under the _______________ Agency System, agents represent several insurers through signed contracts and are paid on a commission or fee basis, not salary.

Under the _______________ Agency System, agents supply their own working environment and are supervised by regional directors.

Under the _______________ Agency System, agents are recruited, trained, and supervised as employees by a principal in the company who has a vested interest in the business written.

Choose the correct answers from the word bank below and type the correct answer in the blanks.

A company that is incorporated in Florida and is conducting business in Florida is considered a(n) insurer. A company that is incorporated in Tennessee and is conducting business in Florida is considered a(n) insurer; and a company that is licensed and incorporated in France and is conducting business in Florida is considered a(n) insurer.

Word bank: alien, domestic, foreign

A company that is incorporated in Florida and is conducting business in Florida is considered a(n) domestic insurer. A company that is incorporated in Tennessee and is conducting business in Florida is considered a(n) foreign insurer; and a company that is licensed and incorporated in France and is conducting business in Florida is considered a(n) alien insurer.

(Lesson 1.9)

______________ refers to when a stock company becomes a mutual company.

_____________ is when a mutual company becomes a stock company.

When a stock life insurance company sells both par and nonpar policies, it is doing business as a:

An insurance company owned and controlled by a group of stockholders whose investment in the company provides the safety margin necessary in issuance of guaranteed, fixed premium nonparticipating policies is called a . An insurance company characterized by having no capital stock and is owned by its policyowners and usually issues participating insurance is called a .

Word bank: mutual insurer, stock company

An insurance company owned and controlled by a group of stockholders whose investment in the company provides the safety margin necessary in issuance of guaranteed, fixed premium nonparticipating policies is called a stock company. An insurance company characterized by having no capital stock and is owned by its policyowners and usually issues participating insurance is called a mutual insurer.

(Lessons 1.5.1 and 1.5.2)

Before an entity may practice insurance in Florida, the entity must obtain:

LESSON 1: BASIC PRINCIPLES OF LIFE AND HEALTH INSURANCE and THE INSURANCE INDUSTRY