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C11 PRINCIPLES AND PRACTICE OF
INSURANCE
WITH CORRECT SOLUTIONS.
Areas of regulation for Intermediaries - correct answer- Q- ualifaction (must pass test) O-peration of business (must follow requirements) L- Icences - Must have license L- icence Renewal - Renewed annual
The Categories of insurance: - correct answer- 1) Social
-Workers Compensation 2) Life and Health Life, accident and sickness, and disability.3) General property/casualty insurance Personal Property Boiler and Machinery Automobile Commercial property Crime Business interruption Liability Aviation 1 / 3
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Marine Inland Transport
Main functions of insurance - correct answer- 1.) Spread of risk
- volume, diversity of risk, location
2.) Security - Peace of mind 3.) Credit - Individuals, banks 4.) Capital - Premium investments 5.) Employment - Insurance creates jobs 6.) Loss prevention - Research
Reasons of reinsuring: - correct answer- 1.) Increase the
insurer's capacity to write business 2.) Maintain a proper reserve 3.) Reduce the effect of a catastrophic loss 4.) Provide stability in a fluctuating market 5.) Enable an insurer to cease operations
Steps of Rate Determination - correct answer- 1.) Classification of risks - Broad categories work way down 2.) Gather statistics - Better for longer period 3.) Determine the pure premium - Required to pay the losses that occur 2 / 3
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4.) Determine Total premium Pure premium + trendsand expense 5.) Determine rate per 100$
Things required for insurance contracts - correct answer- 1.) Insurable interest 2.) A risk of promise and indemnity 3.) Utmost good faith
Risk Management steps: - correct answer- Identify: You would have to identify the risks.
Measure: Once you have found which risks pose a threat you
need to measure the loss frequency and severity.
Control: The three ways of controlling risk are: Reduce Assume Transfer
Necessary elements of a legally binding contract under
common law: - correct answer- Agreement (offer and
acceptance) Capacity to contract
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