Property And Casualty Insurance License Underwriting and Rating 2

Question 1

What is a 'surplus lines' insurer?

Accepted Answer

A non-admitted insurer that covers risks that admitted carriers won't write

Answer

Surplus lines insurers are not licensed (admitted) in a state but are authorized to write coverage for unusual or hard-to-place risks that admitted carriers decline.

Question 2

What is a 'residual market' or 'assigned risk plan' for auto insurance?

Accepted Answer

A mechanism to provide coverage to drivers who cannot obtain insurance in the voluntary market

Answer

Assigned risk plans (also called auto insurance plans) assign high-risk drivers who are rejected by the voluntary market to participating insurers on a rotational basis.

Question 3

What does 'filed rate' mean in insurance regulation?

Accepted Answer

A rate submitted to and approved by the state insurance department before use

Answer

In prior-approval states, insurers must file rates with the state insurance department and receive approval before using them; in file-and-use states, rates are filed and can be used immediately.

Question 4

What is 'combined ratio' in insurance?

Accepted Answer

The sum of the loss ratio and expense ratio, measuring underwriting profitability

Answer

The combined ratio equals the loss ratio plus the expense ratio; a combined ratio below 100% indicates underwriting profit, while above 100% indicates an underwriting loss.

Question 5

What is a 'retrospective rating plan'?

Accepted Answer

A plan where the final premium is adjusted after the policy period based on the insured's actual losses

Answer

Under a retrospective rating plan, the insured pays an initial estimated premium, which is later adjusted based on actual losses incurred during the policy period, within minimum and maximum limits.

Property And Casualty Insurance License Practice Test

Property And Casualty Insurance License Practice Test

Property And Casualty Insurance License Underwriting and Rating 2