Answers (Chapter 2)

1. Simplify the state insurance department's task of comparing the

financial reports of many different insurers.
2. To ensure that these insurance company representatives have a
prescribed minimum level of insurance knowledge.
3. Stockholders own a stock company. Subscribers own a reciprocal
exchange
4. A corporation owned by policyholders that provides insurance to its
policyholders.
5. Prior-approval law.

6. The National Flood Insurance Program

7. It is a program that makes insurance available to those who cannot
obtain coverage because private insurers will not voluntarily provide it.
8. A federal program that provides retirement, survivorship, disability,
and medical benefits to eligible individuals.
9. To maintain insurer solvency

10.
11.

Actuarial equity.
Licensing the excess and surplus lines brokers that transact

business with the unlicensed insurers.

12.
A system that gathers data from insurers financial statements
and develops financial ratios to determine an insurers' overall financial
condition.
13.
Accepts loss exposures from a primary insurer.
14.
Insureds with similar characteristics are placed in the same class
and charged the same rate. However, your accidents have probably
placed you in a different classification. Your premium is based on the
loss experience for policyholders in your classification.
15.
The guaranty fund in Ted's state will pay for Ted's losses.
16.
By obtaining coverage through the excess and surplus lines
market.