CIA CIA Insurance Market Analysis & Pricing

Question 1

In insurance pricing, the 'pure premium' represents:

Accepted Answer

The portion of premium needed to cover expected losses only, excluding expenses and profit

Answer

The total premium charged to the policyholder

Answer

The premium after applying all discounts

Answer

The reinsurance cost per policy

Question 2

A CIA appraiser analyzing insurance market conditions notes a 'hard market.' This is characterized by:

Accepted Answer

High premiums, restrictive coverage, and limited insurer capacity

Answer

Low premiums, broad coverage, and easy availability

Answer

Stable premiums with increasing competition

Answer

Declining claim frequency across all lines

Question 3

Which rating factor most directly influences the premium for a homeowner's property insurance policy in the US?

Accepted Answer

Credit score where permitted, construction type, and geographic location

Answer

The insured's annual income

Answer

The number of family members in the household

Answer

The age of the oldest household member

Question 4

The combined ratio in insurance is calculated as:

Accepted Answer

Loss ratio plus expense ratio

Answer

Net premiums written divided by surplus

Answer

Investment income divided by earned premiums

Answer

Ceded losses divided by assumed losses

Question 5

In insurance market analysis, 'adverse selection' refers to:

Accepted Answer

Higher-risk individuals disproportionately seeking insurance, skewing the insured pool toward poorer risks

Answer

Insurers selecting only the best risks

Answer

Reinsurers avoiding catastrophic coverage

Answer

State regulators rejecting rate filings

Question 6

Which federal program provides flood insurance to property owners in the US because private insurers largely avoid this risk?

Accepted Answer

National Flood Insurance Program (NFIP)

Answer

FAIR Plan

Answer

Federal Crop Insurance Corporation

Answer

Terrorism Risk Insurance Program (TRIP)