WPCI - Washington Property and Casualty Insurance Exam

Question 1: An applicant asks why an insurer will cover the chance that her warehouse burns down but refuses to insure the money she plans to wager at a casino next month. The distinction rests on which type of risk each situation represents. Which term names the insurable one?

Speculative risk

Morale hazard

Pure risk

Physical hazard

Question 2: A homeowner leaves an oily rag near a furnace, and the rag eventually ignites, causing a fire that destroys the garage. An examiner wants the term for the fire itself, the direct cause of the physical damage, as opposed to the condition that made ignition likely. Which term applies?

Hazard

Loss

Exposure

Peril

Question 3: An underwriter reviews two files. In the first, an applicant deliberately understates prior claims to obtain a lower rate. In the second, an insured routinely leaves his keys in an unlocked running car because coverage exists. The first behavior, rooted in dishonesty, illustrates which specific type of hazard?

Moral hazard

Morale hazard

Physical hazard

Legal hazard

Question 4: An actuary explains that although the company cannot predict which specific policyholder will suffer a loss next year, it can forecast quite accurately how many losses the entire insured group will experience. This predictive reliability grows as the group enlarges. Which principle does the actuary describe?

Adverse selection

Indemnity

Law of large numbers

Reinsurance

Question 5: A company notices that a disproportionate share of its new applicants are individuals with poor loss histories who were declined elsewhere and are eager to lock in coverage before further problems arise. Left unchecked, this tendency threatens the accuracy of the company's premiums. Which term captures this tendency?

Adverse selection

Law of large numbers

Moral hazard

Retention

Question 6: After a covered kitchen fire, an insured discovers that two separate policies apply to the same damaged property and hopes to collect the full amount twice, ending up wealthier than before the fire. The principle preventing any such profit from a loss governs the outcome. Which principle is it?

Utmost good faith

Insurable interest

Subrogation

Indemnity

Question 7: A property owner sells her rental building in March but keeps the fire policy in force. In July the vacant building burns. The insurer denies the claim, pointing to a requirement about when a financial stake in property insurance must exist. At what point must that stake exist?

Only at policy application

At both application and loss

At the time of loss

Only after the claim

Question 8: An insurer rates a trucking firm partly on the number of vehicles it operates and the total miles they travel each year, reasoning that more units and more activity mean more chances for the company to owe a claim. Which term names this measure of units at risk?

Peril

Hazard

Retention

Exposure

Question 9: A corporation issues shares of stock to raise capital, is governed by a board that its shareholders elect, and distributes any taxable dividends to those shareholders while selling nonparticipating policies to its customers. Which classification of insurer does this ownership structure describe?

Stock insurer

Mutual insurer

Reciprocal insurer

Fraternal benefit society

Question 10: Policyholders of a certain insurer receive an annual dividend that the tax authorities treat as a nontaxable return of overpaid premium, and those same policyholders elect the company's board because no stockholders exist. Which type of insurer, issuing participating policies, is described here?

Stock insurer

Lloyd's association

Mutual insurer

Risk retention group

Question 11: An unincorporated group of subscribers agrees to insure one another's losses, each maintaining an individual account that is assessed when any member suffers a covered loss, and the whole arrangement is managed by an attorney-in-fact. Which type of insurer does this describe?

Stock insurer

Reciprocal insurer

Mutual insurer

Fraternal benefit society

Question 12: An insurer was chartered and has its home office in the same state where a particular agent is now selling its policies. From the perspective of that state's insurance department, examining where the company was incorporated rather than where it operates, how is this insurer classified?

Domestic insurer

Foreign insurer

Alien insurer

Nonadmitted insurer

Question 13: A newly formed insurance company applies to a state so that it may legally transact business and sell most insurance contracts within that state's borders. The document the state grants the company, authorizing it to operate as an admitted carrier, has a specific name. Which term names that document?

Producer license

Binder

Financial rating

Certificate of authority

Question 14: Several commercial trucking companies in the same industry form an entity solely to provide liability insurance to themselves, retaining and pooling their own liability risk as an actual insurer regulated in the state where it is headquartered. Which organization does this describe?

Risk purchasing group

Reciprocal exchange

Risk retention group

Surplus lines broker

Question 15: A producer's written agency contract states explicitly that he may bind coverage only up to five hundred thousand dollars on any single policy. The specific grant of power set down in that contract, spelling out exactly what the insurer permits the agent to do, is known as which kind of authority?

Implied authority

Express authority

Apparent authority

Fiduciary authority

Question 16: An agent's appointment with an insurer has quietly ended, yet the insurer's sign still hangs outside his office and blank applications remain on his desk. A member of the public, reasonably relying on these outward appearances, assumes he can still write coverage. Which kind of authority does this situation illustrate?

Express authority

Implied authority

Apparent authority

Stipulated authority

Question 17: In the law of agency governing insurance, one person is authorized to act on behalf of another whose interests are being represented in dealings with applicants. In this relationship the insurance company occupies the role for whom the producer acts. Which term names the insurer's role?

Agent

Third party

Fiduciary

Principal

Question 18: For several years an insurer knowingly accepts a policyholder's premium payments well after the due date without objection, then suddenly tries to cancel for late payment. The insured points to the doctrine that first describes the insurer's voluntary surrender of a known right by that conduct. Which doctrine is that first step?

Waiver

Estoppel

Subrogation

Rescission

Question 19: A producer collects premium money from applicants and is required to hold it in trust for the insurer, keeping it entirely separate from his personal checking account. When an agent instead mixes those trust funds with his own money, the industry gives that improper act a specific name. Which term applies?

Rebating

Subrogating

Commingling

Twisting

Question 20: An instructor lists the requirements every legally binding insurance contract must contain: consideration, a legal purpose, an offer, acceptance, and competent parties. A student then asks which of several proposed answers is actually one of these required elements rather than a mere policy characteristic. Which choice is a required element?

Aleatory nature

Competent parties

Adhesion

Utmost good faith

WPCI Washington Property and Casualty Insurance Exam - Set 2 - Part 1

Question 1: An applicant asks why an insurer will cover the chance that her warehouse burns down but refuses to insure the money she plans to wager at a casino next month. The distinction rests on which type of risk each situation represents. Which term names the insurable one?

Question 2: A homeowner leaves an oily rag near a furnace, and the rag eventually ignites, causing a fire that destroys the garage. An examiner wants the term for the fire itself, the direct cause of the physical damage, as opposed to the condition that made ignition likely. Which term applies?

Question 7: A property owner sells her rental building in March but keeps the fire policy in force. In July the vacant building burns. The insurer denies the claim, pointing to a requirement about when a financial stake in property insurance must exist. At what point must that stake exist?

Question 8: An insurer rates a trucking firm partly on the number of vehicles it operates and the total miles they travel each year, reasoning that more units and more activity mean more chances for the company to owe a claim. Which term names this measure of units at risk?

Question 11: An unincorporated group of subscribers agrees to insure one another's losses, each maintaining an individual account that is assessed when any member suffers a covered loss, and the whole arrangement is managed by an attorney-in-fact. Which type of insurer does this describe?

Question 12: An insurer was chartered and has its home office in the same state where a particular agent is now selling its policies. From the perspective of that state's insurance department, examining where the company was incorporated rather than where it operates, how is this insurer classified?

Question 14: Several commercial trucking companies in the same industry form an entity solely to provide liability insurance to themselves, retaining and pooling their own liability risk as an actual insurer regulated in the state where it is headquartered. Which organization does this describe?

Question 17: In the law of agency governing insurance, one person is authorized to act on behalf of another whose interests are being represented in dealings with applicants. In this relationship the insurance company occupies the role for whom the producer acts. Which term names the insurer's role?

Need Guaranteed Results?