DOC PREVIEW
UIUC FIN 431 - Fin 431 - Sample First Exam (2006)

This preview shows page 1-2 out of 6 pages.

Save
View full document
View full document
Premium Document
Do you want full access? Go Premium and unlock all 6 pages.
Access to all documents
Download any document
Ad free experience
View full document
Premium Document
Do you want full access? Go Premium and unlock all 6 pages.
Access to all documents
Download any document
Ad free experience
Premium Document
Do you want full access? Go Premium and unlock all 6 pages.
Access to all documents
Download any document
Ad free experience

Unformatted text preview:

UNIVERSITY OF ILLINOIS AT URBANA-CHAMPAIGNCollege of Business DEPARTMENT OF FINANCESample First ExamFinance 431 Name:_______________________ Spring, 2006 Maximum Number of Points: 30For this exam, you may use either the State Farm Car Policy we used in Finance 230 or the Personal Auto Policy included as Appendix B in the text. To make sure you are graded fairly, please circle the policy you are using for this exam:State Farm Car Policy Personal Auto PolicyTrue/False and Multiple Choice Questions - Circle the appropriate answer (1 point each). 1. State Farm is a proprietary insurer. T F2. Net investment income includes realized capital gains (losses). T F3. An underwriter determines that an applicant for insurance has T Fpoor moral character. The underwriter would then be concernedthat this applicant might engage in insurance fraud.4. The Gramm-Leach-Bliley act is Federal legislation that applies T Fto insurance companies.5. Intentional torts are not covered by liability insurance policies. T F6. Which of the following loss reserve methods consider past loss payment development patterns in setting the current loss reserve? Indicate all that apply. A. Case reserve plusB. Expected loss ratio methodC. Chain ladder method D. Bornhuetter-Ferguson methodE. Excess-of-loss method7. The risk manager of a manufacturing firm is working with an insurance broker to place coverage for the firm’s liability risks. Which step in the risk management process does this represent?A. Identify and analyze loss exposureB. Select technique to handle loss exposureC. Implement the chosen techniqueD. Monitor results 8. A claims adjuster has negotiated a high/low agreement for $1,000,000 (high)/$100,000 (low) with a plaintiff in a commercial liability claim. The jury finds the policyholder liable for $3,000,000. How much does the plaintiff receive in this case?A. $100,000B. $1,000,000C. $1,100,000D. $3,000,000E. None of the above9. While driving your car, you forget that you have your bicycle on the top of the car and tryto drive into your garage. You damage the bike, the roof of your car and the garage door. In this situation, which policy will pay for this loss?A. Only your Personal Auto Policy (or State Farm Car Policy) will payB. Only your Homeowners 3 Special Form will payC. Both policies will payD. Neither policy will pay10. Mr. R. Jones, an Insurance Producer, has an agreement with Generous Mutual Auto Insurance Co. The agreement authorizes Mr. Jones to sell and service policies issued by Generous Mutual. What would you call that agreement?A. An agency agreement B. A conditional receipt C. An insurance binderD. A disclosureShort Answer/Calculation Questions (2 points each).11. CUMIS Insurance Company writes a Homeowners insurance policy with a $500 deductible and a $400,000 policy limit (on Coverage A – Dwelling) for a policyholder. CUMIS has a Quota Share reinsurance policy that cedes 75% of the each loss and a Per-risk Excess reinsurance policy for $75,000 x/s of $25,000. (The quota share policy inures to the benefit of the per-risk excess policy). If a fire caused $120,500 in damage tothe house, indicate how the loss would be split:Policyholder ________________CUMIS ________________Quota Share Reinsurer ________________Per-risk Excess Reinsurer ________________12. What advice would you give to your parents to help them be prepared to get the best settlement for their personal property in the event of a total loss to their home? Assume that they already have adequate policy limits and are dealing with an insurance company that treats policyholders fairly. 13. Calculate the indicated rate level change based on the following information:Actual Loss Ratio 63%Expected Loss Ratio 68%14. Calculate gross premium based on the following information:Loss frequency 12%Loss severity 1,320Fixed expenses 40Variable expenses (including profit) 22% 15. What is the primary difference between an independent agent and an exclusive agent?16. You are the Chief Underwriter for a large auto insurer. You have recently read that improper use of cell phones while driving has caused a lot of automobile accidents. Can you use this information to improve your company’s underwriting process? Explain youranswer.17. An insurance company has the following experience for 2005:Written Premium $815 millionEarned Premium 795 "Incurred Losses 580 "Loss Adjustment Expenses 85 "Underwriting Expenses 225 "Net Investment Income 95 "Calculate the Operating Ratio using Net Investment Income and the Trade Basis Combined Ratio.18. An auto insurance company has the following experience for the year 2005:Unearned premium reserve 12/31/04 43,300,000Loss reserve 12/31/04 65,300,000Written premium during 2005 68,700,000Paid losses during 2005 45,700,000Unearned premium reserve 12/31/05 47,200,000Loss reserve 12/31/05 71,300,000Calculate the calendar year 2005 loss ratio for this company.For questions 19-20, use the Cumulative Loss Payment data listed below to fill in the missing data on the next two tables. Assume that there is no further loss development after 48 months.Cumulative Loss Payments(000 omitted)Development Age (Months)Accident Year 12 24 36 482002 600 900 990 10002003 700 980 11172004 800 11802005 90019.Paid Loss Development FactorsLink FactorsAccident Year 12-24 24-36 36-482002 1.50 1.10 1.012003 ? 1.142004 1.475Average ? 1.12 1.01Age-Ultimate ? ? 1.0120.Estimated Loss Reserves Based on Average Paid Loss Development FactorsAccident Year Paid to Date Age to Ultimate Ultimate Losses Loss Reserve2002 1000 1.000 1000 02003 1117 1.010 1128 112004 ? ? ? ?2005 900 ? ? ?Total ? - ?


View Full Document
Download Fin 431 - Sample First Exam (2006)
Our administrator received your request to download this document. We will send you the file to your email shortly.
Loading Unlocking...
Login

Join to view Fin 431 - Sample First Exam (2006) and access 3M+ class-specific study document.

or
We will never post anything without your permission.
Don't have an account?
Sign Up

Join to view Fin 431 - Sample First Exam (2006) 2 2 and access 3M+ class-specific study document.

or

By creating an account you agree to our Privacy Policy and Terms Of Use

Already a member?