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Chapter 2

Self-Assessment Quiz

Self-Assessment Quiz


This activity contains 10 questions.

	The spreading of losses incurred by a few individuals over a larger group, so that average loss is substituted for actual loss, is known as   pooling of losses. loss indemnification. transfer of risk. fortuitous loss.

	All of the following are ideal requirements that must be met for a risk to be privately insurable EXCEPT   the loss should be within the insured’s control. there must be a large number of similar exposure units. the chance of loss must be calculable. losses should not be catastrophic.

	Which of the following statements is (are) true with respect to insurance and gambling? Insurance is simply a wager that if a loss occurs, you’ll be paid for the loss. Both gambling and insurance are socially productive.   II only both I and II neither I nor II I only

	Claire does not own health insurance. For the past two weeks, she has been experiencing sharp abdominal pain. Given her condition, she would like to purchase health insurance. When higher-than-average risks (like Claire) are insured at average premiums, losses are higher than anticipated. What is this problem called?   moral hazard morale hazard speculation adverse selection

	Insurers use a process of selecting and classifying insurance applicants to prevent individuals who have a higher-than-average probability of loss from obtaining insurance at average rates. This process is called   producing. underwriting. adjusting. marketing.

	Franklin is concerned that if he damages someone else’s property or injures someone, he will have to pay a large damage award. What kind of insurance can Franklin purchase to protect himself against such claims?   ocean marine insurance fidelity bonds liability insurance social insurance

	Which of the following statements is (are) true with regard to insurance fraud? Insurance fraud hurts insurers but does not affect policyowners. Fraudulent claims are a cost of insurance to society.   II only I only both I and II neither I nor II

	All of the following are benefits of insurance to society EXCEPT   provides a pool of investment funds. indemnifies losses. enhances credit. reduces insurance company operating expenses.

	Government insurance programs include insurance designed to deal with complex economic problems that are difficult to insure privately. These programs are compulsory, and the right to benefits is based upon past contributions or coverage under the program. These programs, which include workers compensation and social security, are called   marine insurance. public assistance (welfare) programs. multiple-line insurance. social insurance programs.

	All of the following risks are privately insurable EXCEPT   financial insecurity caused by the premature death of the family breadwinner. legal liability arising out of negligent use of a car. adverse commodity price movements. fire damage to personal property.

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