1. The text suggests that insurance consumers should:
A) inform themselves about the company, policy, etc. to protect their own self interest
B) rely on government regulation to protect their interest, since insurance companies and policiescannot be understood by the public
C) rely on attorneys and the lawsuit process to protect themselves
D) rely on self regulation of insurance companies and the insurer's goodwill to protect their interest
2. All the following are true concerning FAIR (Fair Access to Insurance Requirements) plans except:
A) they are one possible solution to the insurance availability problem
B) they are found in only four states
C) they are designed to deal with unavailability of property insurance
D) they have not been profitable in most states most years
3. Mr. Murray has asked you to help him choose an insurance company. Which of the following criteria would you not recommend that he take into consideration?
A) Insurer's financial strength
B) Insurer's claims service
C) Insurer's service both before and after a loss
D) The recommendation of at least two different insurance agents
4. The individual consumer must ultimately deal with several issues to make an efficient purchase in the insurance market. Which of the following generally should not be a major consideration?
A) The type of policy covering the exposure(s)
B) The maximum amount of insurance coverage
C) The commission the agent will receive from the sale
D) The insurance agent's expertise
5) All the following are requirements for perfect competition except:
A) a well established regulatory environment
B) numerous sellers, each holding a small market share
C) numerous well- informed consumers
D) a homogeneous, perfectly substitutable product
6. Choose the true statement.
A) FAIR plans were developed to provide insurance to automobile drivers when coverage is otherwise unavailable.
B) FAIR plans are now found in all states.
C) FAIR plans require that each property owner that requests it, be given an inspection of his property and an offer of insurance at an appropriate rate or written notice of improvements needed before insurance can be offered.
D) In general, FAIR plans have shown underwriting gains in most states in most years.
7) All of the following firms provide financial ratings of insurance companies except:
A) A.M. Best
B) Standard & Poor's
C) Moody's
D) NASD
8) Moody's Investors Service provides what type of information about insurers?
A) Financial strength
B) Average time it takes them to pay valid claims
C) Daily stock price reports
D) Complaint history
9) David and Kathy have asked you about A.M. Best Reports services. They specifically want to know if there are any criticisms of Best's and other rating agencies. You would be correct if you told them:
A) all the agencies tend to agree on the ratings for a given company, so it's difficult to compare them
B) ratings are merely estimates, and are no guarantee that the future of the insurer will remain thesame
C) it only takes one letter grade to sum up the condition of a company
D) the ratings firms have almost never made mistakes in their assessments of companies, so they're due to make one any time now
10) When choosing the right amount of life insurance to purchase, the consumer should first consider:
A) how much money she can afford for monthly premiums
B) her financial goals and reasons for buying it in the first place
C) how many assets she already owns
D) none of the above
11) Why is it more difficult to choose a good life insurance policy than to choose a good auto insurance policy?
A) People don't like thinking about death or dying, and thus cannot be objective in the selection process.
B) Most people rarely need life insurance, while auto insurance is required by law.
C) Life insurance policies are not standardized, while many non-life policies are.
D) Both B and C are correct.
12) Insurance regulators:
A) make the insurance market more efficient
B) have been forced to intervene in the market periodically
C) assist consumers in choosing the right insurance company
D) mainly deal with low-risk insurance applicants
13) A lack of insurance for high- risk drivers:
A) makes the insurance market more efficient
B) should change their behavior
C) makes insurance costs go up
D) reduces regulation in the insurance market
14) Which of the following is the best driver to maintain an adequate supply of insurance at affordable prices?
A) Regulations
B) Excluding high-risk applicants
C) Excluding low-risk applicants
D) Competition among insurers
15) Why do regulators care whether high-risk drivers have insurance?
A) Regulators are silly and have nothing better to do.
B) Otherwise insurance companies would lose too much money.
C) Excluding high-risk drivers is a violation of the Constitution.
D) The societal costs associated with the accidents caused by high-risk drivers is at least somewhat reduced by having them pay an insurance premium, even if it is too low for the associate risk.