NH STATE INSURANCE AGENT
EXAM QUESTIONS &
ANSWERS(GRADED A+)
Fair Credit Reporting Act - ANSWERProtects consumers by requiring that the
consumer be notified in certain situations and by establishing provisions for the
removal of outdated and incorrect information.
Fraud and False Statements - ANSWERanyone engaged in the insurance business
who makes a false material statement or report or willfully and materially overvalues
any land, property, or security in connection with financial reports or documents
presented to an insurance regulatory official or agency will be punished
Risk - ANSWERChance or uncertainty of loss
Exposure to Risk - ANSWERa condition or situation that presents a possibility of loss
Hazard - ANSWERAnything that increases the chance of loss
Peril - ANSWERThe cause of a loss
Avoidance (avoid risk) - ANSWERNot doing something at all to not have a risk
Retention (retain a risk) - ANSWERSelf insurance is a form of risk retention -
individual personally retains the risk & must accept the economic loss if it becomes
reality
Transfer - ANSWERShifts liability from one person to another
Speculative Risk - ANSWERRisks in which there exists both the possibility of gain
and the possibility of loss
Pure Risk - ANSWEROnly possibility of loss
4 primary sources of application information - ANSWER-agent or producer info
-consumer report
-government records
-financial rating
Adverse Selection - ANSWERThe tendency for people with a greater-than-average
exposure to loss to purchase insurance.
Law of Large Numbers - ANSWERPredicting the number of losses that will occur, an
insurance company can provide large amounts of insurance for relatively little money
, Reinsurance - ANSWERHelp cover the insurers exposure to loss
Stock Company - ANSWERWhen it first forms, it sells stock to stockholders to raise
the money necessary to operate a business
Mutual Companies - ANSWERThe insured's are owners of the company, profits are
returned to the insured's in the form of dividends or reductions in future premiums.
Fraternal Benefit Societies - ANSWERAn incorporated society or order, without
capital stock, that is operated on the lodge system and conducted solely for the
benefits of its members and their beneficiaries and not for profit.
Reciprocals - ANSWERAgree to insure each member and share the losses with
each other.
Lloyd's Association - ANSWERVoluntary association of individuals, or groups of
individuals , who agree to share in insurance contracts
Risk Retention Groups - ANSWEROwned by policy holder, must be licensed by at
least 1 state, only liability insurance.
Purchase liability insurance on a group rate basis
Surplus lines - ANSWERHighly specialized insurance coverage such as auto racing
liability and tuition refund insurance
Admitted or Authorized Insurer - ANSWERA company that meets the insurance
departments standards and is authorized to do business in a state
Nonadmitted or Unauthorized Insurer - ANSWERAn insurance company that is not
authorized to do business in a state
Federal Government - ANSWERProvides war risk insurance, nuclear energy liability
insurance, flood insurance, federal crop insurance
Direct Writer System - ANSWERThe insurance companys agents are actually
employees. They may receive a salary, be paid by commission or a combination of
both.
Direct Response System - ANSWERThere are no agents. These companies sell
through direct mail or over the phone.
Independent Agency System - ANSWERAgencies that are independent contractors
with several different companies to represent and sell insurance for those
companies.
Independent or Nonexclusive Agent - ANSWERAn agent who represents more than
one company
EXAM QUESTIONS &
ANSWERS(GRADED A+)
Fair Credit Reporting Act - ANSWERProtects consumers by requiring that the
consumer be notified in certain situations and by establishing provisions for the
removal of outdated and incorrect information.
Fraud and False Statements - ANSWERanyone engaged in the insurance business
who makes a false material statement or report or willfully and materially overvalues
any land, property, or security in connection with financial reports or documents
presented to an insurance regulatory official or agency will be punished
Risk - ANSWERChance or uncertainty of loss
Exposure to Risk - ANSWERa condition or situation that presents a possibility of loss
Hazard - ANSWERAnything that increases the chance of loss
Peril - ANSWERThe cause of a loss
Avoidance (avoid risk) - ANSWERNot doing something at all to not have a risk
Retention (retain a risk) - ANSWERSelf insurance is a form of risk retention -
individual personally retains the risk & must accept the economic loss if it becomes
reality
Transfer - ANSWERShifts liability from one person to another
Speculative Risk - ANSWERRisks in which there exists both the possibility of gain
and the possibility of loss
Pure Risk - ANSWEROnly possibility of loss
4 primary sources of application information - ANSWER-agent or producer info
-consumer report
-government records
-financial rating
Adverse Selection - ANSWERThe tendency for people with a greater-than-average
exposure to loss to purchase insurance.
Law of Large Numbers - ANSWERPredicting the number of losses that will occur, an
insurance company can provide large amounts of insurance for relatively little money
, Reinsurance - ANSWERHelp cover the insurers exposure to loss
Stock Company - ANSWERWhen it first forms, it sells stock to stockholders to raise
the money necessary to operate a business
Mutual Companies - ANSWERThe insured's are owners of the company, profits are
returned to the insured's in the form of dividends or reductions in future premiums.
Fraternal Benefit Societies - ANSWERAn incorporated society or order, without
capital stock, that is operated on the lodge system and conducted solely for the
benefits of its members and their beneficiaries and not for profit.
Reciprocals - ANSWERAgree to insure each member and share the losses with
each other.
Lloyd's Association - ANSWERVoluntary association of individuals, or groups of
individuals , who agree to share in insurance contracts
Risk Retention Groups - ANSWEROwned by policy holder, must be licensed by at
least 1 state, only liability insurance.
Purchase liability insurance on a group rate basis
Surplus lines - ANSWERHighly specialized insurance coverage such as auto racing
liability and tuition refund insurance
Admitted or Authorized Insurer - ANSWERA company that meets the insurance
departments standards and is authorized to do business in a state
Nonadmitted or Unauthorized Insurer - ANSWERAn insurance company that is not
authorized to do business in a state
Federal Government - ANSWERProvides war risk insurance, nuclear energy liability
insurance, flood insurance, federal crop insurance
Direct Writer System - ANSWERThe insurance companys agents are actually
employees. They may receive a salary, be paid by commission or a combination of
both.
Direct Response System - ANSWERThere are no agents. These companies sell
through direct mail or over the phone.
Independent Agency System - ANSWERAgencies that are independent contractors
with several different companies to represent and sell insurance for those
companies.
Independent or Nonexclusive Agent - ANSWERAn agent who represents more than
one company
