This chapter is from the book
This chapter is from the book
This chapter is from the book
Exam Prep Answers
C is correct. In a mutual company, insureds are also owners of the company. They can vote to elect the management of the company. Profits are returned to insureds in the form of dividends or reductions in future premiums.
C is correct. A nonexclusive, or independent, agent represents more than one company. This type of agent collects commissions on the policies sold, but collects no salary from the companies he or she represents.
A is correct. A solicitor, who often works with or for an agent, has more limited authority than the agent. A solicitor sells insurance and might even be authorized to collect premiums. However, a solicitor cannot issue or countersign policies.
C is correct. In the direct writer system, the insurer's agents are actually employees. They can receive a salary, be paid on commission, or both.
A is correct. Underwriting is the process of selecting certain types of risks and rejecting others so that the insurer will have a profitable book of business.
B is correct. The claims department sees that the company's insureds are adequately indemnified for their losses. Claim adjusters determine the cause of loss, whether the loss is covered by the policy, the value of the loss, and the amount of loss payable by the policy.
B is correct. State insurance departments devote much of their time to working with insurance agents. One of their most important duties is agent licensing.
A is correct. Rebating is giving or offering some benefit other than those specified in the policy, such as cash, gifts, or securities, to induce a customer to buy insurance. Rebating is illegal in all but two states.
B is correct. With self-insurance, part or all of the risk of loss is borne without the benefit of insurance coverage to fall back on if a loss occurs.
C is correct. Insurance is regulated primarily by the states. It is closely regulated for the good of the insurance industry and the general public.
B is correct. Agents have a responsibility to interact effectively with customers in regard to the insurance transaction, but they do not determine the provisions of the policies the insurer issues.
A is correct. The specific provisions of the written agency contract constitute the authority expressly given to the agent by the insurer.
B is correct. Insurance companies are known as domestic companies in their home states, foreign companies in other states in which they are admitted to do business, and alien companies if their home office is located in a country other than the United States.
D is correct. In addition to open competition, prior approval, and file-and-use rules, some states mandate the forms or rates for certain coverages.