C16 BUSINESS INSURANCE EXAM NEWEST 2024-2025 COMPLETE 98
QUESTIONS AND CORRECT DETAILED ANSWERS (VERIFIED ANSWE
Study online at https://quizlet.com/_fq6z6x
1. List the two fun- 1. The premiums of the many are used to pay the losses
damental princi- of the few.
ples of insur-
ance. 2. The premiums shall be commensurate with the risk.
-Insurance fulfils a societal need
-Provides consumers with financial security for particular
types of accidental losses. Also underpins the economy
facilitating economic growth and societal development
-Insurance is the promise to indemnify another person
against the possibility of a loss
-Significant claim is paid based on a nominal premium
2. Why would an 1. Risks spread over a larger geographic area soften the
insurer spread burden of localized disasters on insurers.
risks over di-
verse geographic 2. For example, a severe windstorm in one part of the
areas? country would have a devastating effect on an insurer who
had concentrated its risks in this one area.
3. What is a risk 1. A risk pool is a sharing and spreading of risk between
pool? insurers and re-insurers.
2. Formed risk pools are syndicates of insurance or rein-
surance companies that have organized to underwrite a
particular risk or group of similar risks.
4. Explain the law of 1. A mathematical premise which states that the degree of
large numbers. uncertainty is reduces as the number of events increase.
2. Insurance relies on the forecasts of loss certainty in a
large group of similar risks.
3. Enough risks must be priced in such a way as to ensure
that sufficient capital enters the pool of funds to accommo-
date what is being drawn out to pay for claims.
5. Define adverse 1. Describes the process by which potential policyholders
selection. use their private knowledge of their own high level of risk
, C16 BUSINESS INSURANCE EXAM NEWEST 2024-2025 COMPLETE 98
QUESTIONS AND CORRECT DETAILED ANSWERS (VERIFIED ANSWE
Study online at https://quizlet.com/_fq6z6x
when deciding whether or not to buy insurance.
2. High-risk individuals will try to buy lots of insurance
and pay a comparatively high rate of premium if they are
allowed.
3. Low-risk clients might not buy any insurance because
the price is too high.
6. In insurance, 1. Refers to the amount of time between an incident and
what is a tail? the determination of the claim.
2. Short-tail lines are those where the injury becomes
known quite quickly.
3. Long-tail lines are those which a claim may be separat-
ed from the circumstances that caused it by as many as
10, 15, 20 years or more. Many product liability lines have
long-tail exposures.
7. Name TWO con- 1. Severe Injuries.
cerns of On-
tario automobile 2. Long-tail trends for prior accident years.
excess reinsur-
ers that relate 3. Inadequate reserving at the primary insurance level
to the effects
of long-tail liabil- -Primary insurance companies rely on reinsurers to back
ities. stop auto coverage particularly for catastrophic claims that
end up costing over 1M.
-As of recent times there have been relatively light cata-
strophic events which led to minor rate increase for rein-
surance catastrophe treaties.
-Claims from two to five million have reinsurance layers.
There has been a general increase in the number of claims
exceeding thresholds such as 2M-5M over the past 10
years.
, C16 BUSINESS INSURANCE EXAM NEWEST 2024-2025 COMPLETE 98
QUESTIONS AND CORRECT DETAILED ANSWERS (VERIFIED ANSWE
Study online at https://quizlet.com/_fq6z6x
-Predicting long tail pricing because it is difficult to ac-
curately predict the outcome of claims that have not yet
occurred and will remain open for years before the final
settlement is reached
-Reinsurers have seen patterns of very late reporting of
catastrophic injury claims by insurers and after being rec-
ognized and reported, they continue to develop adversely
for years
8. List three ways -Insurance provides a certain freedom of action, encour-
that insurance aging activities to flourish in industries, commerce, orga-
benefits society. nizations and families
-Insurance industry facilitates growth but depends on
growth of the economy
-Insurance may facilitate borrowing towards the purchase
of a home, car or cottage (an asset)
-Insurance industry contributes to the economy by provid-
ing employment to thousands of Canadians
-Insurance companies hold large investment holdings,
such as investments to help finance governments and
businesses.
-Risk exposures are escalating. As the planet becomes
more crowded, weather becomes more erratic, values
become more concentrated, technologies become more
advances and our societies become more litigious
-Money paid to indemnify people and fix property and
bodily injury boosts the economy
9. Why is there a -Residual market mechanisms are established by the auto
need for resid- mobile insurance industry to provide a last resort insur-
ual market mech- ance facility for consumers. Not-for-profit Facility Associa-
anisms? tion (FA)
QUESTIONS AND CORRECT DETAILED ANSWERS (VERIFIED ANSWE
Study online at https://quizlet.com/_fq6z6x
1. List the two fun- 1. The premiums of the many are used to pay the losses
damental princi- of the few.
ples of insur-
ance. 2. The premiums shall be commensurate with the risk.
-Insurance fulfils a societal need
-Provides consumers with financial security for particular
types of accidental losses. Also underpins the economy
facilitating economic growth and societal development
-Insurance is the promise to indemnify another person
against the possibility of a loss
-Significant claim is paid based on a nominal premium
2. Why would an 1. Risks spread over a larger geographic area soften the
insurer spread burden of localized disasters on insurers.
risks over di-
verse geographic 2. For example, a severe windstorm in one part of the
areas? country would have a devastating effect on an insurer who
had concentrated its risks in this one area.
3. What is a risk 1. A risk pool is a sharing and spreading of risk between
pool? insurers and re-insurers.
2. Formed risk pools are syndicates of insurance or rein-
surance companies that have organized to underwrite a
particular risk or group of similar risks.
4. Explain the law of 1. A mathematical premise which states that the degree of
large numbers. uncertainty is reduces as the number of events increase.
2. Insurance relies on the forecasts of loss certainty in a
large group of similar risks.
3. Enough risks must be priced in such a way as to ensure
that sufficient capital enters the pool of funds to accommo-
date what is being drawn out to pay for claims.
5. Define adverse 1. Describes the process by which potential policyholders
selection. use their private knowledge of their own high level of risk
, C16 BUSINESS INSURANCE EXAM NEWEST 2024-2025 COMPLETE 98
QUESTIONS AND CORRECT DETAILED ANSWERS (VERIFIED ANSWE
Study online at https://quizlet.com/_fq6z6x
when deciding whether or not to buy insurance.
2. High-risk individuals will try to buy lots of insurance
and pay a comparatively high rate of premium if they are
allowed.
3. Low-risk clients might not buy any insurance because
the price is too high.
6. In insurance, 1. Refers to the amount of time between an incident and
what is a tail? the determination of the claim.
2. Short-tail lines are those where the injury becomes
known quite quickly.
3. Long-tail lines are those which a claim may be separat-
ed from the circumstances that caused it by as many as
10, 15, 20 years or more. Many product liability lines have
long-tail exposures.
7. Name TWO con- 1. Severe Injuries.
cerns of On-
tario automobile 2. Long-tail trends for prior accident years.
excess reinsur-
ers that relate 3. Inadequate reserving at the primary insurance level
to the effects
of long-tail liabil- -Primary insurance companies rely on reinsurers to back
ities. stop auto coverage particularly for catastrophic claims that
end up costing over 1M.
-As of recent times there have been relatively light cata-
strophic events which led to minor rate increase for rein-
surance catastrophe treaties.
-Claims from two to five million have reinsurance layers.
There has been a general increase in the number of claims
exceeding thresholds such as 2M-5M over the past 10
years.
, C16 BUSINESS INSURANCE EXAM NEWEST 2024-2025 COMPLETE 98
QUESTIONS AND CORRECT DETAILED ANSWERS (VERIFIED ANSWE
Study online at https://quizlet.com/_fq6z6x
-Predicting long tail pricing because it is difficult to ac-
curately predict the outcome of claims that have not yet
occurred and will remain open for years before the final
settlement is reached
-Reinsurers have seen patterns of very late reporting of
catastrophic injury claims by insurers and after being rec-
ognized and reported, they continue to develop adversely
for years
8. List three ways -Insurance provides a certain freedom of action, encour-
that insurance aging activities to flourish in industries, commerce, orga-
benefits society. nizations and families
-Insurance industry facilitates growth but depends on
growth of the economy
-Insurance may facilitate borrowing towards the purchase
of a home, car or cottage (an asset)
-Insurance industry contributes to the economy by provid-
ing employment to thousands of Canadians
-Insurance companies hold large investment holdings,
such as investments to help finance governments and
businesses.
-Risk exposures are escalating. As the planet becomes
more crowded, weather becomes more erratic, values
become more concentrated, technologies become more
advances and our societies become more litigious
-Money paid to indemnify people and fix property and
bodily injury boosts the economy
9. Why is there a -Residual market mechanisms are established by the auto
need for resid- mobile insurance industry to provide a last resort insur-
ual market mech- ance facility for consumers. Not-for-profit Facility Associa-
anisms? tion (FA)
