BUSFIN 3300 Exam 3 with Complete
Solutions
Financial Modernization Act of 1999 (Gramm-Leach-Biley) - ANS-What drove insurers
to become much more diversified?
Mergers - ANS-Why has the number of life insurers, and in particular mutual life
insurers, declined significantly?
Financial Holding Company (FHC) - ANS-an umbrella organization that can own
subsidiaries involved in different parts of the financial industry (similar to a bank holding
company)
Repeal of Glass-Steagall Act (this act separated commercial and investment banking by
a single bank) - ANS-What allowed banks, insurers, and securities firms to affiliate with
each other and start offering each other's products?
1. Products offered
2. Legal form of ownership
3. Method of distribution
4. Place of incorporation
5. Licensing status - ANS-What are the 5 ways to classify an insurer?
Stock Insurer - ANS-a corporation owned by stockholders
Earn profit for stockholders by increasing the value of the stock or paying dividends -
ANS-What is the objective of a stock insurer?
Mutual Insurer - ANS-a corporation owned by the policyholders
1. Advance Premium Mutual
2. Assessment Mutual
3. Fraternal Insurer - ANS-What are the three main types of mutual insurers?
Advance Premium Mutual - ANS-A mutual insurer who is owned by the policyowners;
there are no stockholders, and the insurer does not issue assessable policies
Assessment Mutual - ANS-A mutual insurer who has the right to assess policyowners
an additional amount if the insurer's financial operations are unfavorable
, Fraternal Insurer - ANS-a mutual insurer that provides life and health insurance to
members of a social or religious organization
1. Must operate through a lodge system
2. Only members can buy the insurance - ANS-What are the two requirements to
fraternal insurance?
Demutilization - ANS-the conversion of a mutual insurer into a stock insurer.
Holding Company - ANS-a company whose primary business is owning a controlling
share of stock in other companies
Lloyd's of London - ANS-not an insurer, but a society of members who underwrite
insurance in syndicates
Reciprocal Exchange - ANS-An unincorporated organization in which insurance is
exchanged among the members (called subscribers)
Blue Cross and Blue Shield Plans - ANS-nonprofit, community oriented plans that cover
hospital services, physicians' and surgeons' fees, and other medical services
Anthem, Inc. - ANS-The largest provider of health insurance in the U.S. and the largest
for-profit organization within the Blue Cross Blue Shield Association
Highmark - ANS-Not-for-profit Blue Cross Blue Shield health care company that also
operates several for-profit subsidiaries
Managed Care Plans - ANS-This plan is involved in making healthcare decisions in
addition to financing healthcare
Captive Insurer - ANS-an insurer owned by a parent firm for the purpose of insuring the
parent firm's loss exposures
Single Parent (Pure) Captive - ANS-an insurer owned by one parent
Association Captive - ANS-an insurer owned by several parents
Savings Bank Life Insurance - ANS-life insurance that is sold by mutual savings banks,
over the phone, or through websites
No - ANS-Is captive insurance the same as self insurance?
Self Insurance - ANS-A special form of planned retention by which part or all of a given
loss exposure is retained by the firm
Solutions
Financial Modernization Act of 1999 (Gramm-Leach-Biley) - ANS-What drove insurers
to become much more diversified?
Mergers - ANS-Why has the number of life insurers, and in particular mutual life
insurers, declined significantly?
Financial Holding Company (FHC) - ANS-an umbrella organization that can own
subsidiaries involved in different parts of the financial industry (similar to a bank holding
company)
Repeal of Glass-Steagall Act (this act separated commercial and investment banking by
a single bank) - ANS-What allowed banks, insurers, and securities firms to affiliate with
each other and start offering each other's products?
1. Products offered
2. Legal form of ownership
3. Method of distribution
4. Place of incorporation
5. Licensing status - ANS-What are the 5 ways to classify an insurer?
Stock Insurer - ANS-a corporation owned by stockholders
Earn profit for stockholders by increasing the value of the stock or paying dividends -
ANS-What is the objective of a stock insurer?
Mutual Insurer - ANS-a corporation owned by the policyholders
1. Advance Premium Mutual
2. Assessment Mutual
3. Fraternal Insurer - ANS-What are the three main types of mutual insurers?
Advance Premium Mutual - ANS-A mutual insurer who is owned by the policyowners;
there are no stockholders, and the insurer does not issue assessable policies
Assessment Mutual - ANS-A mutual insurer who has the right to assess policyowners
an additional amount if the insurer's financial operations are unfavorable
, Fraternal Insurer - ANS-a mutual insurer that provides life and health insurance to
members of a social or religious organization
1. Must operate through a lodge system
2. Only members can buy the insurance - ANS-What are the two requirements to
fraternal insurance?
Demutilization - ANS-the conversion of a mutual insurer into a stock insurer.
Holding Company - ANS-a company whose primary business is owning a controlling
share of stock in other companies
Lloyd's of London - ANS-not an insurer, but a society of members who underwrite
insurance in syndicates
Reciprocal Exchange - ANS-An unincorporated organization in which insurance is
exchanged among the members (called subscribers)
Blue Cross and Blue Shield Plans - ANS-nonprofit, community oriented plans that cover
hospital services, physicians' and surgeons' fees, and other medical services
Anthem, Inc. - ANS-The largest provider of health insurance in the U.S. and the largest
for-profit organization within the Blue Cross Blue Shield Association
Highmark - ANS-Not-for-profit Blue Cross Blue Shield health care company that also
operates several for-profit subsidiaries
Managed Care Plans - ANS-This plan is involved in making healthcare decisions in
addition to financing healthcare
Captive Insurer - ANS-an insurer owned by a parent firm for the purpose of insuring the
parent firm's loss exposures
Single Parent (Pure) Captive - ANS-an insurer owned by one parent
Association Captive - ANS-an insurer owned by several parents
Savings Bank Life Insurance - ANS-life insurance that is sold by mutual savings banks,
over the phone, or through websites
No - ANS-Is captive insurance the same as self insurance?
Self Insurance - ANS-A special form of planned retention by which part or all of a given
loss exposure is retained by the firm
