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BU353 MULTIPLE CHOICE 2026
LATEST QUESTIONS AND ANSWERS|
ACE YOUR GRADES.
Why is mechanical breakdown an exclusion on an auto
insurance contract?
a) Loss is not fortuitous
b) Losses are correlated
c) Coverage is not needed by the typical insured
d) Coverage is available elsewhere
a) Loss is not fortuitous
Which of the following is a reason why insurers purchase
reinsurance?
a. To reduce reliance on policyholder premiums.
b. To increase geographic diversification of their insurance
portfolio.
c. To increase underwriting capacity.
d. To diversify their investment portfoli
c. To increase underwriting capacity.
Which of the following statements accurately describes a
difference between proportional and non-proportional
reinsurance covers?
a) Proportional reinsurance involves the ceding of a fixed
percentage of each policy to the reinsurer, while non-
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proportional reinsurance covers specific risks that exceed a
predetermined threshold
b) In proportional reinsurance, the reinsurer shares both the
premium and losses with the primary insurer, whereas in
non-proportional reinsurance, the reinsurer only pays for
losses exceeding a certain limit
c) Proportional reinsurance involves the reinsurer assuming
a specific share of all risks underwritten by the primary
insurer, while non-proportional reinsurance covers individual
risks on risk-by-risk basis.
d) Proportional reinsurance is typically used for managing
catastrophe risks, while non- proportional reinsurance is
more commonly employed for day-to-day operational risks.
b) In proportional reinsurance, the reinsurer shares both the
premium and losses with the primary insurer, whereas in non-
proportional reinsurance, the reinsurer only pays for losses
exceeding a certain limit
Which of the following statements is not true about
ownership structures?
a) Mutual insurance companies will be more risk averse that
stock companies because their owners are less diversified
b) Lloyds provides geographic and line of business
diversification for insurance companies
c) All stock companies are publicly traded
d) Besides insurance, reciprocal companies offer services
such as investment advice and loss control to its members
c) All stock companies are publicly traded
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Which of the following is a potential benefit of direct sales of
insurance versus purchasing insurance through a broker?
a) Direct sales allow for better risk classification of insureds,
and therefore potentially lower premiums.
b) Direct sales may result in lower administrative costs for
insurers and therefore potentially lower premiums.
c) Direct sales provide personalized advice tailored to
individual policyholders.
d) Direct sales are subject to lower tax rates and therefore
potentially lower premiums
b) Direct sales may result in lower administrative costs for
insurers and therefore potentially lower premiums.
Which of the following is a motivation for mutual companies
to hold extra capital?
a) Because mutual insurers are taxed at a lower rate than a
stock insurer, they pay less taxes on the capital that they
hold.
b) Because mutual insurers do not have access to capital
markets, they may hold more capital to provide a cushion
protection against adverse events.
c) Because mutual insurers face stricter regulatory standards
than stock insurers, they hold more capital to ensure
freedom from regulatory oversight.
d) Because mutual insurers are more risk averse than stock
insurers, they hold more capital
b) Because mutual insurers do not have access to capital
markets, they may hold more capital to provide a cushion
protection against adverse events.
BU353 MULTIPLE CHOICE 2026
LATEST QUESTIONS AND ANSWERS|
ACE YOUR GRADES.
Why is mechanical breakdown an exclusion on an auto
insurance contract?
a) Loss is not fortuitous
b) Losses are correlated
c) Coverage is not needed by the typical insured
d) Coverage is available elsewhere
a) Loss is not fortuitous
Which of the following is a reason why insurers purchase
reinsurance?
a. To reduce reliance on policyholder premiums.
b. To increase geographic diversification of their insurance
portfolio.
c. To increase underwriting capacity.
d. To diversify their investment portfoli
c. To increase underwriting capacity.
Which of the following statements accurately describes a
difference between proportional and non-proportional
reinsurance covers?
a) Proportional reinsurance involves the ceding of a fixed
percentage of each policy to the reinsurer, while non-
, Page | 2
proportional reinsurance covers specific risks that exceed a
predetermined threshold
b) In proportional reinsurance, the reinsurer shares both the
premium and losses with the primary insurer, whereas in
non-proportional reinsurance, the reinsurer only pays for
losses exceeding a certain limit
c) Proportional reinsurance involves the reinsurer assuming
a specific share of all risks underwritten by the primary
insurer, while non-proportional reinsurance covers individual
risks on risk-by-risk basis.
d) Proportional reinsurance is typically used for managing
catastrophe risks, while non- proportional reinsurance is
more commonly employed for day-to-day operational risks.
b) In proportional reinsurance, the reinsurer shares both the
premium and losses with the primary insurer, whereas in non-
proportional reinsurance, the reinsurer only pays for losses
exceeding a certain limit
Which of the following statements is not true about
ownership structures?
a) Mutual insurance companies will be more risk averse that
stock companies because their owners are less diversified
b) Lloyds provides geographic and line of business
diversification for insurance companies
c) All stock companies are publicly traded
d) Besides insurance, reciprocal companies offer services
such as investment advice and loss control to its members
c) All stock companies are publicly traded
, Page | 3
Which of the following is a potential benefit of direct sales of
insurance versus purchasing insurance through a broker?
a) Direct sales allow for better risk classification of insureds,
and therefore potentially lower premiums.
b) Direct sales may result in lower administrative costs for
insurers and therefore potentially lower premiums.
c) Direct sales provide personalized advice tailored to
individual policyholders.
d) Direct sales are subject to lower tax rates and therefore
potentially lower premiums
b) Direct sales may result in lower administrative costs for
insurers and therefore potentially lower premiums.
Which of the following is a motivation for mutual companies
to hold extra capital?
a) Because mutual insurers are taxed at a lower rate than a
stock insurer, they pay less taxes on the capital that they
hold.
b) Because mutual insurers do not have access to capital
markets, they may hold more capital to provide a cushion
protection against adverse events.
c) Because mutual insurers face stricter regulatory standards
than stock insurers, they hold more capital to ensure
freedom from regulatory oversight.
d) Because mutual insurers are more risk averse than stock
insurers, they hold more capital
b) Because mutual insurers do not have access to capital
markets, they may hold more capital to provide a cushion
protection against adverse events.
