Insurance Research & Evidence-Based Practice 4

Question 1

An actuary applies the Bornhuetter-Ferguson method to estimate ultimate losses. What two inputs does this method blend?

Accepted Answer

A priori expected losses and development-pattern-based projections

Answer

The Bornhuetter-Ferguson method combines a prior estimate of ultimate losses with emerging loss development data for a credibility-weighted projection.

Question 2

What is 'moral hazard' in the context of insurance research and behavioral economics?

Accepted Answer

The increased risk-taking behavior that occurs because a party is protected by insurance

Answer

Moral hazard describes how insurance coverage can reduce incentives to prevent losses, since the insured bears less of the financial consequence.

Question 3

In a systematic literature review for insurance topics, what is the primary purpose of the PRISMA checklist?

Accepted Answer

To provide transparent reporting standards for systematic reviews and meta-analyses

Answer

PRISMA (Preferred Reporting Items for Systematic Reviews and Meta-Analyses) ensures comprehensive and transparent documentation of the review process and findings.

Question 4

What does 'adverse selection' mean in insurance underwriting research?

Accepted Answer

Higher-risk individuals disproportionately seeking or retaining insurance coverage

Answer

Adverse selection occurs when people with higher-than-average risk are more likely to purchase or maintain insurance, distorting the insured pool.

Question 5

A researcher computes Cronbach's alpha for a multi-item insurance knowledge test. What does a high alpha (e.g., 0.85) indicate?

Accepted Answer

The test items are highly correlated and measure a consistent underlying construct

Answer

Cronbach's alpha measures internal consistency reliability; a value near 1.0 indicates that items on the scale are strongly interrelated.

Insurance Practice Test

Insurance Practice Test

Insurance Research & Evidence-Based Practice 4