1.All of the following statements about the methods of regulating insurance are true EXCEPT

		insurers are totally exempt from regulation by federal agencies and laws.
		all states have insurance laws that regulate the operations of insurers.
		the courts regulate insurance in many ways, including the interpretation of policy clauses and provisions.
		state insurance commissioners, through administrative rulings, have considerable power over insurers doing business in their states.

2.The long-run relative frequency of an event based on the assumption of an infinite number of observations with no change in the underlying conditions is called

		objective probability.
		objective risk.
		subjective risk.
		subjective probability.

3.An individual's personal estimate of the chance of loss is a(n)

		objective probability.
		objective risk.
		subjective probability.
		a priori probability.

4.Which of the following is a financial risk that may be faced by a business organization?

		lost income after a fire loss
		injuries suffered by employees at the workplace
		product liability risk
		currency exchange rate risk

5.According to the law of large numbers, what happens as the number of exposure units increases?

		Actual results will increasingly differ from probable results.
		Objective risk will increase.
		Nondiversifiable risk will decrease.
		Actual results will more closely approach probable results.

6.The worst loss that could ever happen to a firm is referred to as the

		severity of loss.
		frequency of loss.
		maximum possible loss.
		probable maximum loss.