Exam 3

Question 1

How did employees recover their losses/damages prior to workers comp

Answer 1

By suing their employer

Question 2

How are workers comp rates determined

Answer 2

By the industry and specific job classification within that industry

Question 3

Does every state have its own variations of workers comp laws

Answer 3

Yes

Question 4

How much of lost wages are covered under workers comp

Answer 4

2/3. The other 1/3 is taxes

Question 5

What drives the cost of workers comp

Answer 5

Fraud

Question 6

o Part A of workers comp

Answer 6

 Economic damages (medical+lost wages)
• 100% unlimited damages
• Majority of the cost of workers comp comes from medical

Question 7

o Part B of workers comp

Answer 7

 The lawsuits that ensue

Question 8

How can workers comp be combatted

Answer 8

By self-insuring

Question 9

Benefits of self insuring

Answer 9

 Good if you don’t have many claims because it would incentivize you to have a safe work environment

Question 10

Drawbacks of self insuring

Answer 10

 Bad if you’re self-insured because the company pays each claim as it occurs so you have to pay them as they occur so you cannot build up a fund to cover this

Question 11

o If you are self-insured and your claims rise rapidly, what happens

Answer 11

You will have to pay more

Question 12

What are the most common risk techniques in home and auto insurance

Answer 12

Risk transfer and acceptance

Question 13

Personal vs. business auto policy

Answer 13

 A personal auto policy covers a personal vehicle. If it is used for business, a commercial policy is required

Question 14

Personal vs. business homeowners policy

Answer 14

 A personal homeowners policy covers a personal residence. If it is used as a rental, a commercial policy is required

Question 15

o 20/50/10

Answer 15

 20 is per person (PL)
 50 is per incident (total) (PL)
 10 is for property damage (PD)

Question 16

o What determines how much you pay in auto insurance

Answer 16

 Age
 Miles driven
 Type of vehicle
 Which state you are in

Question 17

Which state has the highest auto insurance rates

Answer 17

Michigan

Question 18

Types of auto insurance

Answer 18

 PL/PD – 54%
 Collision – 42%
 Comprehensive – 17%

Question 19

How many states have some form of no-fault insurance

Answer 19

12

Question 20

Who establishes workers comp in each state

Answer 20

The states themselves set the wage benefit levels

Question 21

Methods of workers comp funding

Answer 21

State funds - 20 states have their own plans that compete with private insurers

Federal Employees - The federal govt covers its own workers

Question 22

Injured employee benefits

Answer 22

Death benefits ($2,000 funeral benefit and weekly income benefit paid to the deceased’s dependents)

Medical benefits (unlimited medical benefits)

Vocational rehab benefits (Training for new employment for those with work related injuries)

Question 23

How many people die in auto accidents each year

Answer 23

Roughly 40,000

Question 24

PAP coverages

Answer 24

Liability

Medical payments

Uninsured and under-insured motorist protection

Damage to your auto

Duties after an accident or loss

General provisions

Question 25

Duties after an accident

Answer 25

Call the police then get the info from the other driver (name, address, phone number name of insurance company, address of agent, policy number, and driver's license number), then notify your insurance company, then get further instructions from your agent

Question 26

States with the highest rates of auto insurance

Answer 26

DC, Louisiana, New Jersey, Florida, and New York

Question 27

States with the lowest rates of auto insurance

Answer 27

The Dakotas and Iowa

Question 28

What makes up the auto insurance premium

Answer 28

Cost of claims, expenses of running the insurance company, profits/reserves, investment income, and the combined ratio

Question 29

The combined ratio

Answer 29

CR = ((claims + loading) / earned premiums) CR = 100% = no underwriting profits CR < 100% = expenses are less than premium reserves CR > 100% = expenses exceed premiums

Question 30

Auto insurance premiums are rising rapidly because

Answer 30

The PL/PD expenditures were very large

Question 31

How are losses being controlled in auto

Answer 31

By making the roads and vehicles safer

Question 32

No-fault laws were started when

Answer 32

In the 1970's

Question 33

Retrospective rating

Answer 33

A rating plan that adjusts the premium, subject to a certain minimum and maximum, to reflect the current loss experience of the insured. Retrospective rating combines actual losses with graded expenses to produce a premium that more accurately reflects the current experience of the insured.

Question 34

HO - 2

Answer 34

The broad form covers damage to dwellings, other structures, and personal property caused by named perils

Question 35

HO - 3

Answer 35

The special form is open perils covering for almost any type of physical damage to dwellings. However, it doesn't provide open peril coverage to personal property (only named perils)

Question 36

HO - 5

Answer 36

The comprehensive form which is similar to HO - 3, but provides open perils coverage on personal property and costs about 15% more than HO-3

Question 37

HO - 8

Answer 37

Modified coverage form which is designed for older homes where replacement value exceeds the fair market value

Question 38

HO - 4

Answer 38

The tenant form. For those who rent apartments, rooms, and houses

Question 39

HO - 6

Answer 39

The unit owner's form is designed to cover the special needs of condo and co op owners

Question 40

States with the highest rates of uninsured drivers

Answer 40

Oklahoma: 25.9% uninsured Florida: 23.8% Mississippi: 22.9%

Question 41

States with the lowest rates of uninsured drivers

Answer 41

Maine 4.5% New York 6.1 Massachusetts 6.2

Question 42

what percentage of auto insurance claims are fraudulent

Answer 42

10-15%

Question 43

Loading expense

Answer 43

Expense loading is the amount included in the premium charged by an insurance company to cover its administrative and maintenance costs.

Question 44

Independent agent

Answer 44

Not tied to one insurance company, but instead represents several

Question 45

Captive agent

Answer 45

An agent who works for AAA or State Farm. Only sell policies for their company