Webce Insurance test questions with verified answers.pdf

Webce General Insurance & Life Insurance Exam
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Questions and Answers (Verified Answers)
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1. Buying life or health insurance is an example of which risk management
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technique?


risk avoidance
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risk reduction
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risk retention
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risk transfer
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: risk transfer
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2. What is the mathematical concept of probability that helps insurers estimate
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the statistical likelihood of mortality or morbidity losses at any given age?
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law of large numbers
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underwriting principle m m




law of probability
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actuarial principle m




: law of large numbers
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,3. A person who refuses to engage is risky activities like rock climbing for fear
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of injury or death is demonstrating which risk management technique?
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risk avoidance
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risk reduction
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risk retention
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risk sharingm




: risk avoidance
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4. Which of the following is an insurable risk?
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the possibility of losing money in stock investments t
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he possibility of losing money gambling in Las Vegas
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the possibility of becoming disabled and unable to earn an income
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the possibility of one's home value decreasing due to a drop in market prices-
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: the possibility of becoming disabled and unable to earn an income
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5. All the following statements regarding reinsurance are correct EXCEPT:
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Reinsurance is a risk-sharing process used by insurance companies.
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Claims are paid to the policyowner separately by each insurer participating in
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the reinsurance agreement.
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The insurer accepting some of the risk being transferred from another insurer
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is known as the reinsuring company.
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,The insurer seeking to transfer some of its risk to another insurer is known
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as the ceding company.
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: Claims are paid to the policyowner separately by eachinsurer participating in the
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m reinsurance agreement.
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, 6. All of the following are characteristics of a stock insurance company EX-
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CEPT:
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They are governed by a board of directors.
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They may issue dividends.
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They have minimum financial capital requirements that must be met before
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they can conduct business.
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They are owned by policyowners.
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: They are owned by policyowners.
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7. All of the following statements regarding the career agency distribution
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system are correct EXCEPT: m m m




The managerial form of career agency system uses company employees as
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the agency managers.
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There are two types, the general agency system and the managerial system.
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It uses agents who primarily if not exclusively represent one insurer.
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Personal producing general agents (PPGAs) are commonly hired to manage
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career agencies. m




: Personal producing general agents (PPGAs) are commonly hiredto manage career
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m agencies.


8. The federal Risk Retention Act of 1986 contains guidelines for which of the
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following entities? m




reinsurance companies m

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