AIDA 182 FINAL ACTUAL EXAM 200 QUESTIONS
WITH CORRECT ANSWERS
What describes components of an insurance rate? - ANSWER-Amounts to
pay future claims, loss adjustment expenses, other expenses, and an
amount for profit and contingencies.
An earned exposure unit is what? - ANSWER-An exposure unit that has
provided a full year of coverage, by the insurer.
The amount in rates to protect against claims or expenses being high is
what? - ANSWER-The loading for profits and contingencies.
Rate regulation is generally based on having rates that are adequate, not
unfairly discriminatory, and what? - ANSWER-Not excessive.
What happens when sudden, large rate changes occur? - ANSWER-
Regulatory or legislative action may occur.
Primary goal of ratemaking for an insurer? - ANSWER-Develop a rate
structure that enables the insurer to compete effectively while earning a
reasonable profit.
What is true of the five ideal characteristics of rates? - ANSWER-Some
often conflict with one another and compromises are necessary.
What is the rate multiplied by the number of exposure units? - ANSWER-
Premium.
,What is the component in ratemaking to pay future claims and loss
adjustment expenses? - ANSWER-Prospective loss costs.
What component in ratemaking is for premium taxes and fees paid to
regulatory organizations? - ANSWER-Expense provision.
The pure premium is the amount included in the rate per exposure unit
required to pay losses. This component is also called what? - ANSWER-
Loss cost.
With regards to investment operations, what is true? - ANSWER-Loss
reserves for liability insurance are much greater than for property
insurance.
What is pure premium? - ANSWER-The amount included in the rate per
exposure unit required to pay losses.
What are expenses associated with adjust claims? - ANSWER-Loss
adjustment expenses.
A property-casualty insurer has what two operations? - ANSWER-
Insurance operations and investment operations.
What is true of rate calculations? - ANSWER-Some states require
investment income to be considered explicitly in rate calculations.
Future acquisition costs, overhead, and premium taxes is what? -
ANSWER-The expense provision of a rate.
, The amount to pay future claims and loss adjustment expenses is what? -
ANSWER-Prospective loss costs.
Investment return depends on loss reserves, the associated unearned
premium reserves, and what? - ANSWER-The types of insurance written.
In house adjusters salaries are part of what? - ANSWER-Loss adjustment
expenses
The value being insured in a $100,000 homeowners policy is what? -
ANSWER-The exposure base.
The delay in reflecting loss experience in rates stems from what? -
ANSWER-Time period during which rates are in effect, usually a full year.
What is a starting point to estimate future losses? - ANSWER-Past loss
experience.
Loss estimates need to be where? - ANSWER-Shown legally through loss
reserves on their (the insurer's) balance sheet.
Insurers wait longer in ratemaking process is to do what? - ANSWER-
Permit loss data to mature.
What is true with respect to estimating losses for use in the ratemaking
process? - ANSWER-Rates are based on incomplete loss experience
because we are estimating.
WITH CORRECT ANSWERS
What describes components of an insurance rate? - ANSWER-Amounts to
pay future claims, loss adjustment expenses, other expenses, and an
amount for profit and contingencies.
An earned exposure unit is what? - ANSWER-An exposure unit that has
provided a full year of coverage, by the insurer.
The amount in rates to protect against claims or expenses being high is
what? - ANSWER-The loading for profits and contingencies.
Rate regulation is generally based on having rates that are adequate, not
unfairly discriminatory, and what? - ANSWER-Not excessive.
What happens when sudden, large rate changes occur? - ANSWER-
Regulatory or legislative action may occur.
Primary goal of ratemaking for an insurer? - ANSWER-Develop a rate
structure that enables the insurer to compete effectively while earning a
reasonable profit.
What is true of the five ideal characteristics of rates? - ANSWER-Some
often conflict with one another and compromises are necessary.
What is the rate multiplied by the number of exposure units? - ANSWER-
Premium.
,What is the component in ratemaking to pay future claims and loss
adjustment expenses? - ANSWER-Prospective loss costs.
What component in ratemaking is for premium taxes and fees paid to
regulatory organizations? - ANSWER-Expense provision.
The pure premium is the amount included in the rate per exposure unit
required to pay losses. This component is also called what? - ANSWER-
Loss cost.
With regards to investment operations, what is true? - ANSWER-Loss
reserves for liability insurance are much greater than for property
insurance.
What is pure premium? - ANSWER-The amount included in the rate per
exposure unit required to pay losses.
What are expenses associated with adjust claims? - ANSWER-Loss
adjustment expenses.
A property-casualty insurer has what two operations? - ANSWER-
Insurance operations and investment operations.
What is true of rate calculations? - ANSWER-Some states require
investment income to be considered explicitly in rate calculations.
Future acquisition costs, overhead, and premium taxes is what? -
ANSWER-The expense provision of a rate.
, The amount to pay future claims and loss adjustment expenses is what? -
ANSWER-Prospective loss costs.
Investment return depends on loss reserves, the associated unearned
premium reserves, and what? - ANSWER-The types of insurance written.
In house adjusters salaries are part of what? - ANSWER-Loss adjustment
expenses
The value being insured in a $100,000 homeowners policy is what? -
ANSWER-The exposure base.
The delay in reflecting loss experience in rates stems from what? -
ANSWER-Time period during which rates are in effect, usually a full year.
What is a starting point to estimate future losses? - ANSWER-Past loss
experience.
Loss estimates need to be where? - ANSWER-Shown legally through loss
reserves on their (the insurer's) balance sheet.
Insurers wait longer in ratemaking process is to do what? - ANSWER-
Permit loss data to mature.
What is true with respect to estimating losses for use in the ratemaking
process? - ANSWER-Rates are based on incomplete loss experience
because we are estimating.
