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"$350 Replacement cost - Depreciation - CORRECT ANSWER John's two-year-old bicycle was
stolen. The bicycle's purchase price was $700, its current replacement cost is $800, and depreciation was estimated at $450. What was the bicycle's actual cash value?"
"Underwriting authority reports - CORRECT ANSWER All of the following are sources of
underwriting information to evaluate an insurance submission, EXCEPT:"
"Implemented risk management techniques may prove to be ineffective or become obsolete -
CORRECT ANSWER Which one of the following best explains why producers should be alert to
changes in clients' loss exposures?"
"Field Underwriter - CORRECT ANSWER James works very closely with producers on a daily
basis. In addition to evaluating the applicants that the producers submit, James is involved in presenting policy quotations, processing policy endorsements, helping to explain coverages, and making coverage recommendations. James works as a"
"Balance sheet - CORRECT ANSWER Rachel is considering investing in the stock of an
insurance company. Which one of the following is likely to provide the best indication of the insurer's financial position at this point in time?"
"Support producers and insureds - CORRECT ANSWER At Greenfield Insurance Company,
Bernadette and Rachel are corporate underwriters, and Tomas and Jose are field underwriters. All of the following are underwriting activities typically performed by corporate (or staff) underwriters like Bernadette and Rachel, EXCEPT:"
"Transfer - CORRECT ANSWER When the Smiths purchased their first home, they were
required to purchase a homeowners insurance policy in order to get a mortgage. Because they did not have a lot of extra money in their budget, they wanted to buy as little insurance coverage as possible. The Smiths' insurance agent advised them that if they purchase an insurance policy that adequately covers damage to their home and personal property, they only have to budget for the insurance premium, rather than the full cost of rebuilding the house and replacing its contents. Which one of the following key components of insurance is the insurance agent explaining to the Smiths?"
"Providing laboratory analyses - CORRECT ANSWER Risk control can assist the claims
department by"
"Loss ratio + expense ratio - CORRECT ANSWER Which one of the following is the correct
formula for calculating an insurer's combined ratio?"
"Property-casualty insurance and life-health insurance - CORRECT ANSWER The two main
sectors of the insurance industry are"
"Moral hazards - CORRECT ANSWER Joel is the underwriter for Stanton Industries. He
received a notice from the premium auditor on the account. After a recent visit to the insured's location, the auditor wanted to make Joel aware of a decline in the business and some questionable business practices. Which one of the following types of hazards is the auditor identifying?"
"Risk management review - CORRECT ANSWER Donna is an insurance producer. She makes an
appointment with potential policyholder Sandie to review her loss exposures. She asks Sandie to complete a questionnaire to assist her in this effort. Donna is conducting a"
"Besides risk management goals being attainable, they should also pose a challenge - CORRECT
ANSWER Riley Turner is performing a comprehensive evaluation of Hardwick Enterprises to
make sure its insurance and risk management efforts are serving the organization appropriately. Which one of the following will be true in regard to this effort?" "Identifying the policy, calculating a loss reserve, determining the cause of loss, preparing a loss
statement - CORRECT ANSWER James West is a claims rep with Hatters Insurance. As he
learns how to handle a claim from start to finish, which one of the following best describes the correct order for him to follow during this process?"
"75% - CORRECT ANSWER The financial report for Hometown Insurer contains the following
information: Earned premiums $4,000, Written premiums $5,000, Net investment income $1,000, Incurred losses $3,000, Incurred underwriting expenses $2,000, What is Hometown Insurer's loss ratio?"
"Compensation for disfigurement - CORRECT ANSWER Margaret was severely injured and
scarred due to a recent accident. Which one of the following is an example of general damages Margaret received?"
"Stockholders own a stock insurer. Members own a reciprocal insurance exchange - CORRECT
ANSWER A stock insurer differs from a reciprocal insurance exchange in which one of the
following ways?"
"Replacement cost - CORRECT ANSWER If an insured wants to receive "new for old" in the
event of a property loss, he or she would purchase"
"Hazard risks and operational risks - CORRECT ANSWER Which two of the four quadrants of
risk are classified as pure risks?"
"Contract of utmost good faith - CORRECT ANSWER Because insurance contracts impose an
obligation for ethical practices and behaviors on the parties while dealing with one another, an insurance contract is called a"
"Contract of adhesion - CORRECT ANSWER Because the insurance company usually
determines policy wording and the insured has little choice but to "take it or leave it," an insurance contract is a"
"Direct writer marketing system - CORRECT ANSWER Bill is an insurance producer for and
employed by ABC Insurance Company (ABC). He represents only ABC when marketing insurance products, and uses an administrative staff also employed by ABC. Bill is a producer in the"
"Monitor the underwriting decision - CORRECT ANSWER Michael is a commercial lines
underwriter. He received a risk control report on a new business that he had recently written with Laura, one of his producers. After reviewing the report, Michael contacted Laura to let her know that they needed to process a policy change request adding a new classification and some exposures to the general liability policy. These activities are occurring during which one of the following steps of the underwriting process?"
"Personal umbrella - CORRECT ANSWER Joe and Helene are married with two teenage
children and two dogs. They own three cars and a large house with a swimming pool in the back yard. Their insurance agent advised them that the pool, teenage drivers, and dogs put them at risk for large liability losses. Which one of the following personal property-casualty insurance policies would provide them with protection for their high potential for large liability losses?"
"Maintaining insurer solvency - CORRECT ANSWER Windsor Insurance has sold more personal
auto policies in the recent quarter than ever before in its history, thanks to new commission incentives for ambitious staff members. Even though Windsor is collecting more money upfront, it is actually making less per policy after remitting the higher commissions. Some claim payments are also now being delayed, resulting in many complaints against the company. Which one of the following objectives of insurance regulation is not being realized through this scenario?"
Risk - CORRECT ANSWER Uncertainty about outcomes, can be positive or negative
- Risk management is concerned with both positive and negative, insurance alleviates the uncertainty associated with negative financial consequences"
"Transferring - CORRECT ANSWER The act of moving the financial consequences of
unanticipated events to an insurer"
"Pooling - CORRECT ANSWER All insureds share the cost of each other's losses.
- Helps to keep premiums affordable and helps insurers cover large losses when they occur"
"Life Insurance - CORRECT ANSWER Replaces the income-earning potential lost through
death. Helps pay expenses related to an insureds death"
"Health Insurance - CORRECT ANSWER Protects individuals and families from financial losses
caused by sickness and accidents"
"Homeowners Insurance - CORRECT ANSWER Provides Protection when people's homes
and/or belongings are damaged or stolen and liability coverage for situations such as the family dog biting a guest"
"Personal Auto - CORRECT ANSWER If the insured is at fault in an accident, provides coverage
for bodily injury to another person, or damage to another person's auto. Also provides coverage for damage to the insured's auto (not wear and tear). Typically legally required"
"Personal Umbrella - CORRECT ANSWER Provides additional protection for people with a high
potential for large liability losses"
"Commercial Property - CORRECT ANSWER Covers damage to buildings or their contents that
result from fire, vandalism, and other causes of loss"
"Government Insurance - CORRECT ANSWER Can step in when private insurers are unable or
unwilling to satisfy legitimate insurance needs
- May participate to accomplish social goals and reduce risk to society"
"Speculative Risk - CORRECT ANSWER A chance of loss, no loss, or gain.
- May be managed by maintaining the property to enhance its resale value"
"Pure Risk - CORRECT ANSWER A chance of loss or no loss, but no chance of gain.
- May be managed by purchasing insurance"
"Hazard Risk - CORRECT ANSWER Arises from property, liability, or personnel exposures"
"Operational Risk - CORRECT ANSWER Arises from people, processes, systems, or controls"
"Financial Risk - CORRECT ANSWER Arises from the effect of market forces on financial assets
or liabilities"
"Strategic Risk - CORRECT ANSWER Arises from trends in the economy and society"
"Artificial Intelligence - CORRECT ANSWER Enables computers to perform tasks that require
critical thinking, such as making decisions. It allows robots to work alongside humans and cars to operate without human drivers"
"Sensors - CORRECT ANSWER Detect and measure objects or conditions continuously to warn
of problems or malfunctions. Smart sensors may trigger a response to an issue, which helps reduce losses"
"Computer Vision - CORRECT ANSWER Helps a machine recognize an object and respond to it
as a human would" Which two of the four quadrants of risk are classified as pure risks? Select one: A. Hazard risks and operational risks B. Hazard risks and strategic risks C. Operational risks and financial risks
D. Financial risks and strategic risks - CORRECT ANSWER A. Hazard risks and operational risks
Correct. Hazard risks and operational risks are pure risks."
"Winston is skimming through his new personal auto policy that just arrived. Winston discovers that every insurance policy is represented through a collection of policy provisions. He discovers all of the following policy provisions, EXCEPT: Select one: A. Conditions B. Definitions C. Exceptions
D. Declarations - CORRECT ANSWER C. Exceptions
Correct. Winston finds the policy provisions of conditions, definitions, and declarations. The other two main provisions in a policy are the insuring agreement, and the exclusions." "Sean was driving and caused an injury to a pedestrian named Wilbur. In the context of the resulting claim made to Sean's insurance company and assigned to Andrea in the claims department, Sean and Wilbur and Andrea are, respectively, Select one: A. Claimant and claims representative and insured B. Claimant and insured and claims representative C. Insured and claimant and claims representative
D. Claims representative and insured and claimant - CORRECT ANSWER C. Insured and
claimant and claims representative Correct. In this scenario, Sean and Wilbur and Andrea, are, respectively, insured (Sean), claimant (Wilbur), and claims representative (Andrea)." "Risk control can assist the claims department by Select one: A. Reporting the existence of new operations. B. Designing product recall procedures. C. Developing safety management programs.
D. Providing laboratory analyses. - CORRECT ANSWER D. Providing laboratory analyses.
Correct. Risk control can assist the claims department by providing laboratory analyses." "Because the insurance company usually determines policy wording and the insured has little choice but to "take it or leave it," an insurance contract is a Select one: A. Bilateral contract.
"James West is a claims rep with Hatters Insurance. As he learns how to handle a claim from start to finish, which one of the following best describes the correct order for him to follow during this process? Select one: A. Identifying the policy, calculating a loss reserve, determining the cause of loss, preparing a loss statement B. Identifying the policy, issuing the claim payment, investigating the medical claim, closing the file C. Receiving a claim from a manager, denying the claim, contacting the insured's representative, setting a claim reserve D. Receiving a claim from a manager, calculating a loss reserve, contacting the insured's lawyer,
verifying coverage - CORRECT ANSWER A. Identifying the policy, calculating a loss reserve,
determining the cause of loss, preparing a loss statement Correct. James will handle claims including (in this order) identifying the policy, calculating a loss reserve, determining the cause of loss, and preparing a loss statement." "Destructive competition in the insurance industry could result in Select one: A. Excess regulation. B. Oversupply of insurance. C. Insurance shortages.
D. Inadequate regulation. - CORRECT ANSWER C. Insurance shortages.
Destructive competition in the insurance industry could result in insurance shortages." "Margaret was severely injured and scarred due to a recent accident. Which one of the following is an example of general damages Margaret received? Select one: A. Hospital expenses B. Compensation for disfigurement C. Prescription costs
D. Lost wages - CORRECT ANSWER B. Compensation for disfigurement
Correct. An example of general damages is compensation for disfigurement." "The processing of almost every claim involves which one of the following activities? Select one:
A. Engaging an accident scene reconstruction specialist B. Salvaging C. Subrogating
D. Determining the amount of damages or extent of loss - CORRECT ANSWER D. Determining
the amount of damages or extent of loss Correct. Determining the amount of damages or extent of loss is a claim handling activity common to all claims." "Joe is the owner of JG Auto Repair. He is always frustrated with the amount of commercial insurance premium he pays every year, even though he has not had a single claim in over 10 years. Joe is looking to partner with an insurance company that will share its profits and maybe return a portion of his premium if the results are good. Which one of the following types of insurer is the right fit for Joe? Select one: A. Reinsurer B. Mutual insurer C. Stock insurer
D. Surplus lines insurer - CORRECT ANSWER B. Mutual insurer
A mutual insurer is owned by its policyholders and formed as a corporation for the purpose of providing insurance to them. To share profits, mutual insurers may pay dividends to policyholders as a return of a portion of premiums paid." "The difference between an independent agency and an exclusive agency is that an Select one: A. Exclusive agency employs direct writer agents, who are employees of the insurer. B. Independent agency employs direct writer agents, who are employees of the insurer. C. Exclusive agency is contracted to sell insurance for one insurer or group of insurers.
D. Independent agency is contracted to sell insurance for one insurer or group of insurers. -
CORRECT ANSWER C. Exclusive agency is contracted to sell insurance for one insurer or group
of insurers. Correct. The difference between an independent agency and an exclusive agency is that an exclusive agency is contracted to sell insurance for one insurer or group of insurers." "At Greenfield Insurance Company, Bernadette and Rachel are corporate underwriters, and Tomas and Jose are field underwriters. All of the following are underwriting activities typically performed by corporate (or staff) underwriters like Bernadette and Rachel, EXCEPT: Select one:
B. $ 50,
C. $100,
D. $160,000 - CORRECT ANSWER A. $ 10,
Correct. The amount of special damages is $10,000. Special damages are for specific, identifiable expenses." "Riley Turner is performing a comprehensive evaluation of Hardwick Enterprises to make sure its insurance and risk management efforts are serving the organization appropriately. Which one of the following will be true in regard to this effort? Select one: A. Results-based standards are solely responsible for ensuring successful risk management. B. Riley will concentrate on new risk management techniques rather than changes in loss exposures. C. Besides risk management goals being attainable, they should also pose a challenge. D. The four step-by-step risk consultation process is considered the most effective method to use.
- CORRECT ANSWER C. Besides risk management goals being attainable, they should also pose a challenge. Correct. Besides risk management goals being attainable, they should also pose a challenge." "Joe and Helene are married with two teenage children and two dogs. They own three cars and a large house with a swimming pool in the back yard. Their insurance agent advised them that the pool, teenage drivers, and dogs put them at risk for large liability losses. Which one of the following personal property-casualty insurance policies would provide them with protection for their high potential for large liability losses? Select one: A. Homeowners B. Personal umbrella C. Personal auto
D. Health insurance - CORRECT ANSWER B. Personal umbrella
Correct. A personal umbrella policy provides additional protection for people with a high potential for large liability losses. Limits are usually in the millions, above the limits offered in a homeowners or an auto policy." "All of the following are sources of underwriting information to evaluate an insurance submission, EXCEPT: Select one: A. Underwriting authority reports
B. Telematics C. Inspection reports
D. Applications - CORRECT ANSWER A. Underwriting authority reports
Correct. All listed are sources of underwriting information, EXCEPT underwriting authority reports." "Joel is the underwriter for Stanton Industries. He received a notice from the premium auditor on the account. After a recent visit to the insured's location, the auditor wanted to make Joel aware of a decline in the business and some questionable business practices. Which one of the following types of hazards is the auditor identifying? Select one: A. Moral hazards B. Legal hazards C. Morale hazards
D. Physical hazards - CORRECT ANSWER A. Moral hazards
Correct. Auditors can identify a variety of hazards. Moral hazards include questionable business practices or a failing business." "Which one of the following is the amount of business an insurer can write based on regulatory guidelines, usually a comparsion of the insurer's written premiums to the policyholders' surplus? Select one: A. Underwriting guidelines B. Book of business C. Policyholders' surplus
D. Capacity - CORRECT ANSWER D. Capacity
Correct. Capacity is the amount of business an insurer can write based on regulatory guidelines, usually a comparsion of the insurer's written premiums to the policyholders' surplus." "Rachel is a new employee of Westley Insurance, and has been asked to review some existing policies to become familiar with the types of policies she will be working with. Which one of the following will Rachel find is true as she conducts her review? Select one: A. Policy provisions state what is covered, but not what is not covered, in that particular policy. B. Rachel finds the policy begins with a coverage overview and then goes into more coverage details. C. The definitions personalize the policy and are usually found on the policy's first page.
"James works very closely with producers on a daily basis. In addition to evaluating the applicants that the producers submit, James is involved in presenting policy quotations, processing policy endorsements, helping to explain coverages, and making coverage recommendations. James works as a Select one: A. Risk Control Representative. B. Field Underwriter. C. Staff Underwriter.
D. Service Representative. - CORRECT ANSWER B. Field Underwriter.
Field underwriters, sometimes referred to as line underwriters, perform duties that include: selecting insureds, presenting policy quotations, processing policy endorsements, helping to explain coverages and making coverage recommendations." "Jennie recently purchased a personal auto policy from Westcox Insurers. Three weeks later, Jennie reported her car was stolen from her driveway during the middle of the day. Upon further investigation, claims representative Harry finds out the home address he has on file for Jennie does not match the location where the theft occurred. In light of this scenario, which one of the following would be particularly helpful for Harry to pursue concerning Jenny's claim? Select one: A. Harry can verify Jennie's address and other possible helpful information by reviewing her policy which has her original application information attached. B. As Westcox is a mutual insurer owned by its policyholders, Harry will find it especially helpful to review the insured's associated rights and duties. C. Since Jennie purchased a modular policy, Harry will need to spend extra time reviewing the length and complexity of her contract.
D. Harr - CORRECT ANSWER A. Harry can verify Jennie's address and other possible helpful
information by reviewing her policy which has her original application information attached. Correct. Harry can verify Jennie's address and other possible helpful information by reviewing her policy which has her original application information attached." "Rachel is considering investing in the stock of an insurance company. Which one of the following is likely to provide the best indication of the insurer's financial position at this point in time? Select one: A. Balance sheet B. Sales report C. Income statement
D. Cash flow report - CORRECT ANSWER A. Balance sheet
Correct. Of the items listed, an insurer's balance sheet provides the best indication of its financial position because it shows admitted assets, liabilities, and policyholders' surplus at a particular point in time." "Many auto manufacturers have automated a portion of their assembly lines by introducing a smart product. The smart product performs repetitive tasks, such as making the same weld on each vehicle frame as it passes the smart product. These smart products, which can be fixed or mobile, reduce repetitive motion injuries. They can also be used to perform dangerous tasks and for heavy-lifting jobs. These smart products, enabled by artificial intelligence, are called Select one: A. Robots. B. Drones. C. Wearables.
D. Automated sensors. - CORRECT ANSWER A. Robots.
Correct. These smart products are called robots." "Windsor Insurance has sold more personal auto policies in the recent quarter than ever before in its history, thanks to new commission incentives for ambitious staff members. Even though Windsor is collecting more money upfront, it is actually making less per policy after remitting the higher commissions. Some claim payments are also now being delayed, resulting in many complaints against the company. Which one of the following objectives of insurance regulation is not being realized through this scenario? Select one: A. Restricting cancellations or renewals B. Safeguarding policy language C. Maintaining insurer solvency
D. Preventing destructive competition - CORRECT ANSWER C. Maintaining insurer solvency
Correct. The objective of maintaining insurer solvency is not being realized through this scenario. The objective exists to help guarantee insurers have funds necessary to pay claims as they become due." "Michael is a commercial lines underwriter. He received a risk control report on a new business that he had recently written with Laura, one of his producers. After reviewing the report, Michael contacted Laura to let her know that they needed to process a policy change request adding a new classification and some exposures to the general liability policy. These activities are occurring during which one of the following steps of the underwriting process? Select one:
Correct. Direct writer marketing systems use producers who are direct employees of the insurer. Bill is a producer in the direct writer marketing system." "Erin has recently graduated from college and relocated to Chicago. She has purchased a car and rented an apartment and now needs to purchase insurance. She is comfortable buying from social media recommendations and recently was impressed with an insurer sending her coverage details online with a minimum of forms and salesperson interactions. Which one of the following is likely the best distribution channel to meet Erin's needs? Select one: A. Direct response B. Financial institution C. Call center
D. Group marketing - CORRECT ANSWER A. Direct response
For customers like Erin, the direct response distribution channel using social media, email blasts, website ads, and direct mail would be the best." "Sports, Inc. is looking to obtain a commercial property policy on its building for $400,000. If their insurer decides to charge them a rate of $0.50 per $100 of building insurance, what premium must Sports, Inc. pay? Select one: A. $1, B. $2, C. $4,
D. $8,000 - CORRECT ANSWER B. $2,
Correct. [$400,000 (insured value) รท $100 (exposure unit size)] x $0.50 (rate per unit) = $2,000." "Maria is a new producer who wears many hats when forming relationships and then serving her established customers. In this capacity, which one of the following scenarios most accurately describes her ongoing work wearing the hat of "claims handler"? Select one: A. Juanita directly contacts Maria who sold her a policy to adjust her homeowners claim; Maria nicely explains she has no further responsibilities after making the sale. B. Veronica directly contacts Maria for guidance on how to report a stolen car, Maria provides that, and claims rep Sean takes over after an introduction from Maria. C. Alex directly contacts Maria after a hailstorm damages his new car the day after he bought a policy from her, and she handles the claim as he is a brand new customer.
D. Customer Roland directly contacts Maria and she assumes full responsibility for his claim as she
was the first insurance employee to receive the claims informa - CORRECT ANSWER B.
Veronica directly contacts Maria for guidance on how to report a stolen car, Maria provides that, and claims rep Sean takes over after an introduction from Maria. Correct. Veronica directly contacts Maria for guidance on how to report a stolen car, Maria provides that, and claims rep Sean takes over after an introduction from Maria." "Martina, a premium auditor for Cintriell Insurance Company is conducting a premium audit for Carolina's Cookies. Carolina mentioned to Martina that she is opening a coffee shop at another location. By sharing this information, Martina would provide a contribution to which one of the following insurer functions? Select one: A. Underwriting B. Claims C. Accounting
D. Risk Control - CORRECT ANSWER A. Underwriting
Martina would provide a contribution to underwriting." "A stock insurer differs from a reciprocal insurance exchange in which one of the following ways? Select one: A. Both are owned by stockholders. However, the reciprocal insurance exchange provides coverage to investors. B. Both are formed to provide profit to investors. However, the stock insurer is managed through a board of directors. C. A stock insurer provides insurance to its policyholder-owners. A reciprocal insurance exchange provides insurance to investors.
D. Stockholders own a stock insurer. Members own a reciprocal insurance exchange. - CORRECT
ANSWER D. Stockholders own a stock insurer. Members own a reciprocal insurance exchange.
Stockholders own a stock insurer. Members (subscribers) own a reciprocal insurance exchange."
The primary role of insurance is to - CORRECT ANSWER Indemnify individuals and
organizations for covered losses."
"A homeowners policy is a type of - CORRECT ANSWER Personal property-casualty insurance
policy."
