1. The A.M. Best Company can help you to determine which of the following about your insurer?
a. Its reputation for settling claims
b. Its customer service rating
c. How many complaints have been filed against it
d. Its financialstrength rating
2. Which of the following is a primary reason that insurance consumers are not well-informed?
a. Insurers have not made much effort to inform consumers
b. The rewards of making informed decisions are not worth the cost of obtaining the needed information
c. State insurance regulators do not provide the needed information
d. Insurance prices are so low that most consumers do not care to be informed
3. The efficient insurance market requires all of the following conditionsexcept
a. Numerous sellers and buyers
b. Well-informed consumers
c. Numerous purchase substitutes (homogeneity)
d. A government subsidy for lower-income citizens
4. In choosing an insurance company, the most important factor is
a. How many dollars it pays for claims
b. The amount of liquid assets the insurer has
c. Its financial strength
d. The state in which it is domiciled
5. Given the following choices, the best advice for purchasing automobile insurance is
a. Always buy full coverage
b. Always buy the cheapest policy
c. Choose the largest deductible you can reasonably afford
d. Never buy auto insurance from a stock company
6. Which of the following is true about the supply and demand curves for insurance?
a. The demand for insurance is very elastic and sensitive to price
b. As price declines, the demand for insurance increases dramatically
c. The supply of insurance increases dramatically with a decrease in the price
d. Insurers will tend to reduce supply if the price is artificially increased or decreased
7. One of the reasons why there is not sufficient supply for high-risk insurance applicants is
a. Consumers will not buy insurance if prices are increased
b. The existence of joint underwriters associations
c. Regulators have limited the premiums that insurers can charge for such customers
d. The number of insurance contracts written by an insurer is totally regulated