1. In a "soft" insurance market, each of the following is true for insurers EXCEPT:

   	a.	Profits are improving.
   	b.	Underwriting standards are loosened.
   	c.	Insurance is difficult to obtain.
   	d.	Premiums paid by policyholders decline.

2 points

1. The economics of insurance is based upon the:

   	a.	law of large numbers.
   	b.	practice of probability.
   	c.	practice of utmost good faith.
   	d.	theory of probable cause.

2 points

1. A contract that is an agreement to buy or sell at an agreed-upon price in the future is a tool for managing which risk?

   	a.	stock price fluctuations.
   	b.	commodity price risk.
   	c.	bankruptcy protection.
   	d.	liquidation of assets.

2 points

1. A policyholder must accept the entire insurance contract, with all its terms and conditions, under the legal characteristic known as:

   	a.	aleatory.
   	b.	unilateral.
   	c.	adhesion.
   	d.	conditional.

2. A homeowner is painting his house and leaves the ladder outside propped up against the building. A young neighbor, about 5 years old, climbs up the ladder, just like he would do on the playground to go down the slide. The child falls off the ladder and breaks his leg. His parents sue. The homeowner is liable under what law of negligence?

   	a.	"The thing speaks for itself."
   	b.	Contributory negligence.
   	c.	Attractive nuisance.
   	d.	Sovereign immunity.

1. From the standpoint of the insurer, which of the following is a characteristic of an ideally insurable risk?

   	a.	The chance of loss must be calculable.
   	b.	The loss must be intentional.
   	c.	The loss must be indeterminable.
   	d.	There must be a small number of possible large exposures.