Insurance Premium Calculation and Rating Flashcards
6 cards from real EXAMFX practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Insurance Premium Calculation and Rating flashcards as text
Which type of reinsurance agreement requires the primary insurer to cede and the reinsurer to accept a predetermined share of every risk in a class?
Answer: Treaty reinsurance
Treaty reinsurance is an ongoing agreement where the reinsurer automatically accepts all risks that fall within defined parameters, unlike facultative reinsurance which is negotiated risk by risk.
In property insurance, 'coinsurance' requires the insured to carry coverage equal to a specified percentage of the property's value or face:
Answer: A penalty in which the insurer pays only a proportional share of losses
If an insured carries less than the required coinsurance amount, any claim payment is reduced proportionally, penalizing the insured for underinsuring their property.
What is the primary purpose of an 'insurance rate filing' submitted to state regulators?
Answer: To obtain regulatory approval or notification for the rates the insurer plans to charge
Insurers are required by state law to file their rates with the state insurance department so regulators can verify that rates are adequate, not excessive, and not unfairly discriminatory.
Which term describes the practice of refusing to write insurance or charging higher premiums based solely on the geographic location of a property in a protected class area?
Answer: Redlining
Redlining is an illegal discriminatory practice where insurers refuse to write policies or charge excessive premiums in certain neighborhoods, often targeting minority communities, without actuarial justification.
An insurance policy with an 'aggregate limit' means the insurer will pay:
Answer: No more than the aggregate amount for all covered losses during the policy period combined
An aggregate limit is the maximum total amount the insurer will pay for all claims combined during the policy period, regardless of the number of occurrences.
Which of the following best describes the concept of 'subrogation' in insurance?
Answer: The insurer's right to recover from a negligent third party after paying a claim to the insured
Subrogation gives the insurer the legal right to step into the insured's shoes and pursue recovery from the at-fault third party after the insurer has paid the insured's claim.