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FIN 3100 Exam 2 Review Questions with Correct answers Latest Update 2024 Test
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FIN 3100 Exam 2 Review Questions with Correct answers Latest Update 2024 Test
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FIN 3100 Exam 2 Review Questionswith Correct answers Latest Update
2024 Test
Describe the basic characteristics of stock insurers - Correct Answers Objective is to
earn profit for stockholders
Elect a board of directors who then appoint executive officers to manage corporation
If the business is profitable, the company can declare dividends and pay them to
stockholders
Describe the basic features of mutual insurers - Correct Answers No stockholders.
Policyholders elect board of directors who appoint executives to manage corporation
May pay dividends to policyholders or give a rate reduction in advance
Classified in three categories: advance premium mutual, assessment mutual, fraternal
insurer
Identify the major types of mutual insurers - Correct Answers Advance Premium
Mutual: premiums charged cover claims, company pays beyond anticipated
Assessment Mutual: assess policyholders an additional amount if things are
unfavorable, very few exist from problems collecting assessment
Fraternal Insurer: affiliated with fraternal benefit societies, nonprofit organizations
banding from commonalities. Most use level premium method
The corporate structure of mutual insurers has changed over time. Briefly describe
several trends that have had an impact on the corporate structure of mutual insurers. -
Correct Answers 1. Increase in company mergers: absorbing and blending with
another insurer. Due to reducing combined operating/overhead costs
2. Demutualization: mutual converted to stock insurer. Easier to raise capital, have
greater flexibility, tax advantages
Explain the basic characteristics of Lloyd's Corporation - Correct Answers Market
where members join together to form underwriting syndicates to insure and pool risks
Individual members (Names) belonging to syndicates now have limited legal liability
, Corporations with limited legal liability and limited liability partnerships are also
members
Members meet stringent financial requirements
Licensed only in a small number of jurisdictions in US
Describe the basic characteristics of a reciprocal exchange - Correct Answers
Members insure each other (cross-insurance)
Attorney-in-fact (person authorized to perform transactions for someone else) manages
reciprocal, usually a corporation
Most are small, little P&C premiums
Explain the legal distinction between an agent and a broker - Correct Answers Agent
represents principal (insurance company), has authority to act on their behalf
Broker represents insured, even if receiving commission from insurer. No authority to
bind but can accept applications
Explain the difference between a "retail" and a "wholesale" intermediary and describe
the two types of "wholesalers" - Correct Answers Retail producer: initially produces
business, handles all customer contact
Wholesale: ??
Surplus Lines Broker: not licensed in state of loss exposure, exist to assume risks
others decline. No authority to bind.
Managing General Agent: unusual lines of coverage, deals with admitted and non-
admitted. Broad range of power.
Describe briefly personal selling systems in the marketing of life insurance - Correct
Answers Commissioned agents solicit and sell life insurance. Includes career agents,
multiple line exclusive agency system, independent property and casualty agents,
personal-producing general agents, and brokers
Describe briefly financial institution distribution systems in the marketing of life
insurance - Correct Answers Commercial banks using fixed and variable annuities,
and also life insurance.
Describe briefly direct response system in the marketing of life insurance - Correct
Answers Life and health insurance sold directly to consumers without meeting in
person
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