CIA CIA Insurance Market & Industry Practices 2

Question 1

What does 'moral hazard' mean in insurance industry terminology?

Accepted Answer

The tendency of insured parties to take greater risks or be less careful because they are protected by insurance

Answer

Moral hazard refers to the increased risk-taking behavior or reduced care that can result from having insurance coverage in place.

Question 2

A 'policy limit' in a property insurance contract defines:

Accepted Answer

The maximum dollar amount the insurer will pay for a covered loss under the policy

Answer

The policy limit is the maximum amount the insurance company is obligated to pay for any single covered loss or during the policy period.

Question 3

Which US regulatory body oversees insurance company solvency at the state level and sets model regulations?

Accepted Answer

National Association of Insurance Commissioners (NAIC)

Answer

The NAIC is the standard-setting and regulatory support organization for state insurance regulators, coordinating solvency oversight and model laws across all US states.

Question 4

What is an 'insurance endorsement' (also called a rider)?

Accepted Answer

A written amendment that modifies the terms, coverage, or conditions of an existing insurance policy

Answer

An endorsement is a written modification attached to an insurance policy that adds, removes, or alters coverage provisions.

Question 5

In US commercial property insurance, 'coinsurance' clauses penalize policyholders for:

Accepted Answer

Insuring property for less than a required minimum percentage of its full value

Answer

A coinsurance clause requires the insured to carry coverage up to a specified percentage (often 80%) of the property's full value, or face a proportional reduction in claim payments.

(CIA) Certified Insurance Appraiser Practice Test

(CIA) Certified Insurance Appraiser Practice Test

CIA CIA Insurance Market & Industry Practices 2