Insurance and Finance Flashcards
7 cards from real CPHRM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Insurance and Finance flashcards as text
A hospital is evaluating finite risk insurance. What distinguishes finite risk products from traditional insurance?
Answer: Finite risk transfers limited risk but allows significant premium funding and investment income sharing
Finite risk programs transfer only a defined, limited amount of risk while allowing the insured to fund premiums over time and share in investment returns, blending risk transfer with risk financing.
An insurance policy's 'insuring agreement' is BEST described as:
Answer: The core promise by the insurer to pay covered losses in exchange for premium
The insuring agreement is the heart of the policy—it defines the insurer's fundamental promise to pay, defend, or indemnify for covered claims.
A healthcare organization uses a large-deductible liability program rather than self-insurance. The PRIMARY distinction is that under a large-deductible program:
Answer: The insurer pays all claims and bills the insured for amounts within the deductible, maintaining direct insurer control
In a large-deductible program, the insurer pays the full claim and then invoices the insured for the deductible portion, while maintaining claims handling authority and providing regulatory compliance benefits.
Which actuarial method relies on historical loss ratios to project future losses by multiplying expected losses by a development factor?
Answer: Bornhuetter-Ferguson method
The Bornhuetter-Ferguson method blends a priori expected losses with actual development experience, weighting them to project ultimate losses—commonly used when data is immature.
A risk manager is reviewing the hospital's directors and officers (D&O) policy. Which of the following losses would MOST LIKELY be covered under a standard D&O policy?
Answer: A shareholder lawsuit alleging misrepresentation in financial disclosures
D&O insurance covers wrongful acts by directors and officers in their management capacity, including securities claims and allegations of mismanagement or misrepresentation to shareholders.
A hospital's excess liability policy has a 'following form' provision. This means the excess policy:
Answer: Adopts the same terms, conditions, and exclusions as the underlying primary policy
A following form excess policy mirrors the coverage terms of the primary policy, meaning exclusions and conditions in the primary policy also apply to the excess layer.
A risk manager evaluating the financial strength of a prospective insurer should PRIMARILY consult:
Answer: AM Best, Moody's, or S&P financial strength ratings
AM Best, Moody's, and S&P provide independent financial strength ratings that assess an insurer's ability to meet its policyholder obligations—the most objective measure of solvency.