1. Technique of insurance is mainly employed to cover the losses caused by  (   )

A. speculative risk             B. pure risk

C. people’s intentional acts      D. economic conditions

2.The law of large numbers helps insurance companies to  (   )

A. control losses                B. predict future losses

C. transfer losses                D. select business

3. An earthquake is an example of a  

A) moral hazard.          B) loss exposure.  

C) physical hazard.        D) peril

4. Loss control includes which of the following?

Loss reduction

Loss prevention  

A) I only          B) II only   

C) both I and II     D) neither I nor II  

5. A group of farmers agreed that if any farmer suffered a property loss, the loss would be spread over the entire group. In this way, each farmer is responsible for the average loss of the group rather than the actual loss that the farmer sustained. Which characteristic of insurance is embodied in this agreement?  

A) pooling of losses       B) fortuitous losses  

C) risk avoidance         D) indemnification  

6. Which of the following types of loss exposures may be appropriately handled through the purchase of insurance?

High-frequency, low-severity

Low-frequency, high-severity  

A) I only             B) II only  

C) both I and II        D) neither I nor II  

7. Loss frequency is defined as the 

a. probable size of the losses that may occur during some period.  

b. probable number of losses that may occur during some period.  

c. probability that any particular piece of property may be totally destroyed.  

d. probability that a liability judgment may exceed a firm's net worth.

8. Advantages of the direct response system for marketing life insurance include which of the following?

Advertising can be specifically directed to selected markets.

Complex products can be easily sold.  

A) I only          B) II only  

C) both I and II     D) neither I nor II  

9. Common sources of underwriting information for life and health insurance include all of the following EXCEPT  

A) the application.                   B) a physical examination.  

C) the Medical Information Bureau.     D) the applicant's income tax return.  

10. Which of the following statements about Lloyd's of London is true?  

Coverage is actually written by syndicates who belong to Lloyd's of London.  

Its underwriters specialize in writing life and health insurance.  

It operates as an admitted insurer throughout the United States.  

It allows underwriters to write coverage without meeting stringent financial requirements.