What three elements make up risk?
Uncertainty, the possibility of loss, and futurity.
What characterizes a physical hazard?
A visible condition of the subject matter or environment that can cause or increase loss.
What characterizes a moral hazard?
Intentional dishonesty.
What characterizes a morale hazard?
Carelessness or lack of attention.
What outcomes are possible under speculative risk?
Loss or gain.
What outcome can pure risk produce?
Loss, but not gain.
What does risk management aim to achieve?
The greatest security at the lowest cost.
What is the first step in the risk management process?
Risk identification.
What is the second step in the risk management process?
Risk measurement.
What is the third step in the risk management process?
Risk management.
What is the final step in the risk management process?
Implementation and evaluation.
How is expected loss cost calculated?
What does a life table use to estimate mortality?
The law of large numbers, typically applied to observations of 100,000 people.
How is the mortality rate calculated?
Deaths during the year divided by the number alive at the beginning of the year.
What does a pure premium fund?
Future insurance benefits.
What does a loading premium cover?
Operating expenses.
How does a higher assumed mortality rate affect ordinary life insurance premiums?
It raises them.
How does a higher assumed interest rate affect ordinary life insurance premiums?
It lowers them.
How does a higher assumed expense rate affect ordinary life insurance premiums?
It raises them.
What is a liability reserve?
Money set aside to meet contractual obligations and pay benefits when insured events occur.
What mortality outcome can create policy dividends?
Actual mortality below assumed mortality.
What is life insurance as a risk-sharing arrangement?
A risk-transfer and mutual-aid arrangement in which many people share and absorb losses.
Which two categories does Taiwan’s Insurance Act Article 13 establish?
Personal insurance and property insurance.
Which four types of insurance fall under personal insurance in Taiwan’s Insurance Act Article 13?
Life, annuity, accident, and health insurance.
When does term life insurance pay a benefit?
On death or total disability during the insurance term.
What happens if the insured survives the term of term life insurance?
No benefit is paid.
When does pure endowment insurance pay a benefit?
Only if the insured survives to the end of the term.
When does endowment insurance pay a benefit?
On death during the term or survival to its end.
What does annuity insurance periodically pay under its contract?
An agreed amount while the insured is alive or during a specified period.
When do immediate annuity payments begin?
After the contract is concluded.
When can deferred annuity payments begin?
After an agreed interval or when the insured reaches an agreed age while still alive.
Does a certain annuity make payments conditional on the recipient’s survival?
No; payment is not conditional on survival.
What determines payment under an uncertain annuity?
The recipient’s survival.
When does a joint-and-survivor annuity continue paying?
While at least one recipient survives.
When does a joint-life annuity pay?
Only while all named recipients are alive.
What costs can health insurance compensate for when illness or injury occurs?
Income losses and medical expenses.
What conditions are required for hospitalization reimbursement?
A physician must diagnose hospitalization as necessary, the patient must be formally admitted, and treatment must occur in a hospital.
What is the maximum combined disability and death benefit from one accident?
The insured amount.
How are investment and insurance accounts structured in investment-linked insurance?
They are separated.
What share of the policy reserve is the minimum surrender value for investment-linked insurance?
75%.
Who is the policyholder and who are the insured persons in group insurance?
The enterprise is the policyholder, and its employees are the insured persons.
What minimum participation conditions apply to group insurance?
At least five members and 75% of employees must participate.
Which benefits does labor insurance cover under ordinary benefits?
Maternity, sickness or injury, disability, old age, and death benefits.
How are ordinary labor insurance premiums divided among individuals, government, and employers?
Individuals pay 20%, government 10%, and employers 70%.
Which conditions does National Health Insurance cover?
Illness, injury, and maternity.
How are National Health Insurance premiums divided among individuals, government, and employers?
Individuals pay 30%, government 10%, and employers 60%.
What must an insurance salesperson present when soliciting insurance?
Their personal-insurance salesperson registration certificate.
How is a fraction of six months or less treated for insurance age?
It is disregarded.
What must an authorized insurance premium collector provide and state?
A payment receipt or equivalent record and the collection time.
What is the cash-payment cap for one insurance policy installment?
NT$50,000.
May insurance brokers collect premiums?
No; insurance brokers may not collect premiums.
What is the stated insurance policy cancellation period?
10 days.
What causes static risk?
Random natural events or human actions.
What causes dynamic risk?
Social change, such as changing consumer preferences or new products.
What does risk avoidance or prevention do before a loss?
It avoids risk or prevents it before a loss.
How does risk treatment reduce loss severity?
It reduces loss severity during an event.
Which early groups provided forms of life insurance?
Roman religious groups and British friendly societies.
Which British society first used a life table to calculate premiums?
The Equitable Life Assurance Society.
What was Taiwan’s male life expectancy in ROC year 107?
77.5 years.
What was Taiwan’s female life expectancy in ROC year 107?
84.0 years.
What was Taiwan’s male life expectancy in ROC year 108?
77.7 years.
Which life table has the highest mortality?
The national life table.
When must an insurer pay surrender value after receiving notice?
Within one month, if premiums were paid for at least one year or the policy accumulated cash value.
Who may apply for an accelerated death benefit?
An insured diagnosed by a physician as having no more than six months to live because of illness or injury.
How does Type B variable annuity adjust payments after the first year?
Using the declared and assumed interest rates.
What expenses may hospitalization reimbursement insurance cover?
Eligible medicines, emergency-related blood, fees, ambulance transport, excess hospital expenses, room-rate differences, meals, and nursing care.
How long is hospitalization medical-expense insurance coverage?
One year.
How many reimbursement medical policies may one person hold across insurers?
At most three; medical and accident policies are counted separately.
How is the daily hospital benefit calculated?
What qualifies as long-term care status under the definition?
Qualifying physical or cognitive impairment diagnosed by a specialist.
How many daily-living activities must remain impaired for physical long-term care status?
At least three of six activities, for a prescribed period not exceeding six months.
Which seven major illnesses are listed for insurance coverage?
Coronary artery bypass surgery, acute myocardial infarction, major organ or hematopoietic stem-cell transplantation, disability after stroke, end-stage renal disease, cancer, and paralysis.
What is the additional expense-rate cap for microinsurance?
15% of total premiums.
Which benefits does the National Pension provide?
Old-age, disability, and survivor annuities, maternity benefits, and funeral benefits.
How are National Pension premiums divided between individuals and government?
Individuals pay 60% and government pays 40%.
What minimum share of monthly wages must employers contribute to labor retirement?
At least 6%.
What percentage of monthly wages may employees voluntarily contribute to labor retirement?
From 0% to 6%.
What consent does a person under legal age need to apply for insurance?
Consent from a legal representative.
Who may complete an insurance form when the applicant or insured cannot do so personally?
A family member may write it, but the applicant and insured must sign personally.
Answer 31 questions on Life Insurance and Risk Management.
1. Which combination captures the three elements that together characterize risk?
2. A factory has an exposed electrical wire that could cause a fire; a manager falsifies safety records, while an employee carelessly leaves equipment unattended. How are these hazards classified, respectively?
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