C16 BUSINESS INSURANCE EXAM NEWEST 2024-2025
COMPLETE 160 QUESTIONS AND CORRECT
DETAILED ANSWERS (VERIFIED ANSWERS)
|ALREADY GRADED A+
Three multilayered goal setting levels: - ANSWER- 1.
Enterprise goals
2. Department goals
3. Unit Goals
4. Individual Goals
What is capacity in an insurance context? - ANSWER- Capacity
is the amount of capital that individual insurers or entire markets
make
available for insuring risk.
What does the theory of supply and demand do? - ANSWER-
The theory analyzes the way pricing is regulated by balancing
the amount of a
product made available for purchase with the quantity required
by consumers.
,2|Page
Economic influences on the market include increased demands
for insurance and
reinsurance that result from a health economy.
Such activity increases the need for insurance and this
contributes to organic
growth in premium income as opposed to premium growth
through mergers and
acquisitions. On the downside, it also causes growth in claims
costs.
The economy theory does not strictly apply to insurance and
does not apply to all
types of insurance. Insurance that is mandated by law is not fully
governed by the
laws of supply and demand because the products must be
purchased even if the
cost is high.
What is a bull market? - ANSWER- A bull market is a market
on the rise. During this cycle there is a strong demand
for securities but a weak supply which causes share prices to
rise.
When a bull market exists, investors are optimistic and have
faith that the upturn
in the market will continue.
,3|Page
The economy is also strong and the employment is high.
What is a bear market? - ANSWER- A bear market is a market
in decline. Share prices are dropping and investors
believe the downward trend will continue. The fear perpetrates
the downward
trend.
When a bear market exists, the economy is sluggish and
unemployment rises.
What does the law of supply show? - ANSWER- Shows that the
quantity of a product a supplier will provide is relative to the
amount of payment per unit he/she will receive.
The higher the price, the more the producer wants to supply.
What does the law of demand state? - ANSWER- States that if
all other factors remain equal, fewer people will demand the
product
as its price rises.
Conversely, the lower the price the more demand there will be
for the product.
, 4|Page
What is the effect of mergers and acquisitions in the insurance
marketplace? - ANSWER- M&A tend to increase capacity as
larger companies with surplus capital expand
their geographic score and product offerings.
Larger companies have greater resources than smaller
competitions to draw from
and put to use to compete for market share.
What THREE (3) imprudent underwriting practices emerge in
highly
competitive environments in soft market cycles? - ANSWER- 1)
Undercutting rates
2) Relaxing policy terms and conditions
3) Neglecting loss prevention and control measures
Name THREE (3) strategies employed by underwriters that
signify a
hardening of the market. - ANSWER- Soft market conditions
arise when there is excess financial capacity in the
marketplace and insurers demonstrate reasonable profitability
and strong capital
bases.
Hard markets follow poor results because risks underwritten at
artificially low
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