MICHIGAN PROPERTY CASUALTY EXAM

PDF Download MICHIGAN PROPERTY & CASUALTY EXAM Actual Qs and Ans - Expert-Verified Explanation -Guaranteed passing score -98 Questions and Answers

-Format: Multiple-choice / Flashcard

Question 1: Principle of Indemnity

Answer:

Insured is restored to the same financial or economic condition that existed prior to the loss.Insured should not profit from an insurance transaction.

Question 2: Merchant Marine Act of 1920 (The Jones Act)

Answer:

Because workers' compensation laws do not apply to seamen, the Jones Act allows insured seamen to make claims for injuries suffered during the course of employment. It also regulates maritime commerce in U.S waters, transportation of cargo, and the rights of seamen.

Question 3: Combined Ratio

Answer:

Sum of the loss ratio and expense ratio

Question 4: Contract Law

Answer:

Pertains to the formation and enforcement of contracts

Question 5: Loss Ratio

Answer:

Determined by dividing Paid Losses + Loss Reserves by Total Earned Premiums

Question 6: Loss

Answer:

Reduction, decrease, or disappearance of value. The basis of a claim for damages under the terms of an insurance policy.Question 7: Gramm-Leach-Bliley Act (GLBA a.k.a the Financial Services Modernization Act of 1999)

Answer:

Requires financial institutions which include insurers, to provide each consumer with a privacy notice at the time the consumer relationship is established and annually thereafter.

Privacy notice must explain:

• the information collected about the consumer

b) Where that information is shared

• how that information is used

• how that information is protected

Question 8: Independent Agency

Answer:

An agent or agency that enters into agency agreements with more than one insurer.

Question 9: Insurance Agents/Producers

Answer:

Licensed individuals representing an insurance company when transacting insurance.

Question 10: Management

Answer:

The determination of what types of protection are required to meet an insured's needs.

Question 11: Insurers

Answer:

Manufacture and sell insurance coverage by way of insurance policies or contracts.

Question 12: Applicant

Answer:

Party submitting application for insurance

Question 13: Mass Marketing

Answer:

Mass marketing is used to target a specific type of insurance to a large group of individuals, such as the American Association of Retired People (AARP)

Question 14: Private vs Government Insurers

Answer:

Most insurance is written through private insurers, however there are instances where government provides an alternative, usually when there is a lot of risk involved and private insurers have no means to insure. (Gulf Coast)

Question 15: The Insurance Contract

Answer:

A legal contract purchased to indemnify the insured against a loss, damage or liability arising from an unexpected event. Designed to transfer risk from the insured to the insurer.

Question 16: Direct Mail or Direct Response Company

Answer:

-Sells insurance policies directly to the public with licensed employees or contractors -A marketing system utilizing direct mail, newspapers, magazines, radio, television, internet, web sites, call centers and vending machines.

Question 17: The Insured

Answer:

Person or entity that buys insurance for protection from loss of life, health, property or liability.

Question 18: Insurable Interest

Answer:

Requires the potential for an insured to suffer financial or economic hardship in the event of a loss.Property-Insurable interest must exist at the time of the loss Casualty-Insurable interest must exist at the time of the loss.Life and Health- Insurable interest must exist at the time of application, but not at time of loss

Question 19: Reinsurance Companies

Answer:

Insurance company that assumes all or a portion of a risk from a primary or ceding insurance company.

Question 20: Marketing and Sales Department

Answer:

Responsible for advertising and selling

Question 21: Morale Hazard

Answer:

Attitude that increases the probability of a loss Example: Indifference or carelessness of leaving one's house or vehicle unlocked.

Question 22: Executives

Answer:

Oversee operations of the business

Question 23: Fraud and False Statements (Fraudulent Insurance Act)

Answer:

1) Fraud always involves a false statement and deceit; it can be either a criminal or civil crime. Federal laws prohibit the commission of fraud.

2) In 2001, each state enacted its own Fraudulent Insurance Act.

3) A fraudulent act involves a misstatement of material fact by a person who knows or believes that statement to be false.