Part 1

• What is the meaning of the term reinsurance?
• Explain the reasons for reinsurance.
• Explain the term securitization of risk.

Part 2

What unfair trade practices are each of the following insurance agents violating? Explain the terms that you use.

• Agent Jones offers a client to pay a portion of the premium if the client purchases a policy.
• Agent Peterson convinces a client to replace a life insurance policy with a new policy that adds little value.

Part 3

Julia owns a building worth $800,000. She insures the building for $300,000 with Company A, $400,000 with Company B, and $100,000 with Company C.There is a fire, and the building sustains $100,000 in damage.

• How much will Julia collect in insurance?
• How much will each company pay?
• What insurance term describes this situation?
• What is its purpose?