Liz's Test

Question 1

3 elements of insurance risk

Answer 1

1. Financial (monetary)
2. Blood (a relative)
3. Business (a business partner)

Question 2

Loss ratio

Answer 2

(Incurred losses + loss of adjusting expense) + earned premium = loss ratio

Question 3

Class rating

Answer 3

(Manual rating)
Practice of computing a price per unit of insurance that applies to all applicants processing a given set of characteristics.

Question 4

Types of rates

Answer 4

Class

Individual

Question 5

5 Basic Individual rate-making approaches:

Answer 5

1. Judgment rating
2. Schedule
3. Experience
4. Retrospective
5. Merit

Question 6

Judgment rating

Answer 6

When credible statistics are lacking or when exposure units are so varied that it is impossible to construct a class.

Question 7

Schedule rating

Answer 7

Developed by applying a schedule of charges and credits to some bar rate to determine the appropriate rate for an individual exposure

Question 8

Experience rating

Answer 8

The insured’s own past loss experience enters into the determination of the final premium.

Question 9

Retrospective rating

Answer 9

A self-rating plan under which the actual losses during the policy period determined the final premium, subject to a minimum and maximum premium.

Question 10

Merit rating

Answer 10

Most common in auto insurance. Premium based not on the actual loss records but in other facts that indicate the probability that loss will occur. (Ex: bad driving record, but no at-fault accidents)

Question 11

4 elements to establish negligence

Answer 11

1. Legal Duty
2. Standard of care
3. Proximate cause
4. Actual lost or damage