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AINS 101 NEWEST COMPLETE 2024
QUESTIONS WITH 100 % CORRECT ANSWERS |
VERIFIED
"Which one of the following best explains why producers should be alert to changes in clients'
loss exposures? - CORRECT ANSWER Implemented risk management techniques may prove to
be ineffective or become obsolete" "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: - CORRECT
ANSWER Support producers and insureds"
"Moral hazards - CORRECT ANSWER include questionable business practices or a failing
business." "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? - CORRECT ANSWER Rachel finds
the policy begins with a coverage overview and then goes into more coverage details." "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? - CORRECT ANSWER $2,000"
"Destructive competition in the insurance industry could result in - CORRECT ANSWER
Insurance shortages" "The financial report for Hometown Insurer contains the following information: Earned premiums$4,000,000Written premiums$5,000,000Net investment income$1,000,000Incurred losses$3,000,000Incurred underwriting expenses$2,000,
What is Hometown Insurer's loss ratio? - CORRECT ANSWER 75%"
"Loss Ratio - CORRECT ANSWER incurred losses divided by its earned premiums"
"Jessie is a new customer service representative (CSR) at the Winfield Agency. Jessie usually
engages in all the following activities, EXCEPT: - CORRECT ANSWER Determining coverage
quotes"
"Balance Sheet - CORRECT ANSWER provides the best indication of its financial position
because it shows admitted assets, liabilities, and policyholders' surplus at a particular point in time." "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?
- CORRECT ANSWER Capacity"
"The two main sectors of the insurance industry are - CORRECT ANSWER Property-casualty
insurance and life-health insurance"
"The difference between an independent agency and an exclusive agency is that an - CORRECT
ANSWER Exclusive agency is contracted to sell insurance for one insurer or group of insurers"
"A liability loss has the following damages: Medical expenses:$10,000Damages for disfigurement:$50,000Damages for pain and suffering: $100,
What is the amount of special damages? - CORRECT ANSWER $ 10,000"
"Special damages - CORRECT ANSWER specific, identifiable expenses"
"Earned premiums are the portion of written premiums that - CORRECT ANSWER Apply to the
part of the policy period that has already occurred."
"Which one of these is most directly associated with a satisfied customer? - CORRECT
ANSWER Leads and referrals that can be used to generate new business"
"Which two of the four quadrants of risk are classified as pure risks? - CORRECT ANSWER
Hazard risks and operational risks"
"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? - CORRECT ANSWER Personal umbrella"
"Oscar's custom-built vehicle looks like a sausage sandwich on wheels. He plans to drive it to special events at schools around the country where it will serve as a mobile billboard to promote his product. Oscar is surprised to learn that insurers are reluctant to insure his vehicle because it fails to meet one of the ideal characteristics of an insurable risk. Which characteristic is Oscar's
vehicle least likely to meet? - CORRECT ANSWER Large number of similar exposure units"
"Which one of the following is the correct formula for calculating an insurer's combined ratio? -
CORRECT ANSWER Loss ratio + expense ratio"
"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 - CORRECT ANSWER Field Underwriter"
"Field Underwriter - CORRECT ANSWER 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."
"Why are insurance regulators concerned about the effects of large catastrophes? - CORRECT
ANSWER Insurers may become insolvent"
"A stock insurer differs from a reciprocal insurance exchange in which one of the following ways?
- CORRECT ANSWER Stockholders own a stock insurer. Members own a reciprocal insurance exchange." "Sota's Superstore has recently become an insured of Keithly Insurance Company. Kaito, Keithly's premium auditor, is being sent to conduct an advance audit. Which one of the following tasks will
Kaito do to assist underwriting? - CORRECT ANSWER Classify the various exposures"
"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? - CORRECT ANSWER $350"
"Which one of the following represents uncertainty about outcomes that can be negative or
positive? - CORRECT ANSWER Risk"
"The insurance agent suggested that Sally's Snack Shop buy a policy that combines property,
crime, and liability coverages into one policy. This is referred to as a(n) - CORRECT ANSWER
Commercial package policy (CPP)"
"An insurer that was formed for the purpose of earning a profit for its stockholders is a -
CORRECT ANSWER Stock insurer"
"Mutual insurance - CORRECT ANSWER provide insurance for their own policyholders"
"Interinsurance - CORRECT ANSWER another name for a reciprocal"
"Reciprocal insurance - CORRECT ANSWER provide insurance for their subscribers"
"Jimmy decided to buy a house in his neighborhood that had been foreclosed on by the bank that held the mortgage. He is hoping to do some renovation and repair work on the house, and then
sell it for a quick profit. Which one of the following types of risk is this for Jimmy? - CORRECT
ANSWER Speculative risk"
"Can result in loss or gain - CORRECT ANSWER Speculative Risk"
"One of the reasons for insurance regulation is to prevent destructive competition. In which one
of the following scenarios would destructive competition be exhibited? - CORRECT ANSWER
East Insurance comes up with a new rate structure allowing "preferred customers" discounted policies when they continually renew year after year; East eventually loses needed revenue but is rewarded by its competitors leaving the market"
"Tony now works at the corporate level for Newtown Insurance. He is considered a staff
underwriter. Which one of the following is primarily a responsibility of staff underwriters? -
CORRECT ANSWER Revise underwriting guidelines"
"Brian works in the Underwriting department for DGH Insurance. In addition to carefully selecting insureds, he works with producers and premium auditors to ensure accurate classification and
pricing. Brian is a - CORRECT ANSWER Field underwriter"
"Which one of the following is a temporary agreement providing insurance coverage until the
formal policy is issued? - CORRECT ANSWER Binder"
"Bob is shopping for auto insurance. Insurance Company A's rating system determines that Bob should be charged $800 per auto. If Bob is looking to insure four autos, what premium will he be
charged by Insurance Company A? - CORRECT ANSWER $3,200"
"The size of an employer's loss exposure for workers compensation insurance is based on -
CORRECT ANSWER The amount of its payroll"
"Work on a new claim begins for claim representative Anita upon receipt of a claim notice. Anita gathers initial information and verifies coverage. From the list of activities below, the next step
Anita would take in the process is - CORRECT ANSWER Set a loss reserve"
"Understanding the steps in the claims handling process is important to new claims reps. Which one of the following steps generally comes after investigating and documenting the claim and
before concluding the claim? - CORRECT ANSWER Determining cause of loss and loss amount"
"After Marvin's car was stolen, and he was reimbursed for the loss by Greatson Insurance, the police found and returned the vehicle, which was dented and spray-painted, but still had parts that could be usable. Greatson's rights to recover and sell or otherwise dispose of insured
property on which it has paid a total loss are called - CORRECT ANSWER Salvage rights"
"Actual cash value (ACV) is - CORRECT ANSWER Replacement cost minus depreciation"
"Damages for disfigurement are a form of - CORRECT ANSWER General damages"
"Damages for pain and suffering are a form of - CORRECT ANSWER General damages"
"Which one of the following lists provides the optimum order of responsibilities that a producer
may engage with any customer on a continual basis? - CORRECT ANSWER Meeting a
prospective customer, doing a needs and activities analysis, preparing a coverage proposal, closing the sale" "Tony is a producer working with several different insurers. Which one of the following most
accurately describes Tony's activities for reaching and serving customers? - CORRECT
ANSWER Tony will generally need to spend less time insuring a family's activities than a
business' services and liabilities" "Leadon Transportation is using the expertise of its producer Carmen to help the organization understand how to correct substandard performance as well as evaluate exceeded standards.
One measurement she will use is the cost of risk which is best described as - CORRECT
ANSWER The total cost of all aspects of the organization that relate to managing risk"
"Waycroft Industries is working with their insurance producer Graydon Murphy. Graydon and the risk managers at Waycroft have already completed the first step of the risk consultation process.
The second step of the process is - CORRECT ANSWER Comparing an organization's results
with established performance standards" "Insurance deals primarily with loss exposures that are fortuitous. Which one of the following
statements best characterizes fortuitous losses? - CORRECT ANSWER Fortuitous losses are
beyond the insured's control" "Adhering to the characteristics of an ideally insurable loss exposure in selling insurance help
assure that - CORRECT ANSWER The insurer is able to charge a premium that the insured can
afford to pay"
"An insurance policy is considered a contract of adhesion when it is drafted by the - CORRECT
ANSWER Insurer"
"When preprinted forms do not provide the terms of coverage needed by a particular insured or
small group of insureds, the insurer may - CORRECT ANSWER Draft a manuscript form to meet
the customer's needs"
"Someone has the following duties: evaluate applicants that producers submit, present policy quotations, process policy endorsements, help explain coverages, make coverage
recommendations. What is their role? - CORRECT ANSWER Field/Line Underwriter"
"In personal property-casualty insurance, which is more common: manuscript forms or pre-
printed policies? - CORRECT ANSWER Pre-printed policies"
"Which statement is true? - CORRECT ANSWER A policy begins with a coverage overview, then
goes into more coverage details"
"Which of these is an example of general damages? - CORRECT ANSWER Compensation for
disfigurement"
"What are the four quadrants of risk? - CORRECT ANSWER Hazard, Operational, Financial,
Strategic"
"What is a Hazard Risk? - CORRECT ANSWER A risk that arises from property, liability, or
personnel loss exposures."
"What is an operational risk? - CORRECT ANSWER A risk that arises from people or a failure in
processes, systems, or controls, including those involving information technology"
"What is strategic risk? - CORRECT ANSWER A risk that arises from trends in the economy and
society, including changes in the economic, political, and competitive environments"
"What is Pure Risk? - CORRECT ANSWER A category of risk that cannot be controlled, and only
has 2 outcomes: complete loss or no loss"
"What type of risk has no change for gain or profit? - CORRECT ANSWER Pure Risk"
"What is the difference between an independent agency and an exclusive agency? - CORRECT
ANSWER An exclusive agency is contracted to sell insurance for one insurer or group of
insurers."
"The processing of almost every claim involves which one of the following activities? - CORRECT
ANSWER Determining the amount of damages or extent of loss"
"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? - CORRECT ANSWER Maintaining insurer solvency"
"What type of personal property-casualty insurance policy protects someone with high potential
for large liability losses? - CORRECT ANSWER Personal umbrella"
"Why are insurance regulators concerned about the effects of large catastrophes? - CORRECT
ANSWER Insurers may become insolvent"
"What is insurer solvency? - CORRECT ANSWER The ability to meet the obligations when it
comes to making payments on claims for insurance policies."
"What is a stock insurer? - CORRECT ANSWER a corporation owned by stockholders with the
objective of making a profit for them"
"What is a mutual insurance company? - CORRECT ANSWER A corporation owned exclusively
by the policyholders with the objective of providing insurance for its members."
"In which type of insurer is each member both an insured and insurer? - CORRECT ANSWER
Reciprocal Insurance Exchange"
"What insurer provides coverages unavailable in the standard market? - CORRECT ANSWER
Surplus lines"
"What are the five main provisions in an insurance policy? - CORRECT ANSWER Declarations,
Definitions, Insuring Agreement, Policy Conditions, Policy Exclusions"
"Which of these activities is not performed by a customer service representative? - CORRECT
ANSWER Determining coverage quotes"
"What does fortuitous mean? - CORRECT ANSWER The insured has no control over whether
or when the loss will occur"
"What is a nonadmitted asset? - CORRECT ANSWER Types of property that insurers can't
easily convert to cash"
"What gives a snapshot of the insurer's financial position at a specific point in time? - CORRECT
ANSWER Balance sheet"
"What is included on an insurer's income statement? - CORRECT ANSWER Total revenue,
expenses, net income for a time period"
"Earned Premiums - CORRECT ANSWER The portion of written premiums that corresponds to
the part of the policy period that has already occured"
"Unearned Premium - CORRECT ANSWER Written Premium - Earned Premium (the portion of
written premiums corresponding to the part of the policy period that has not yet occured)" "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"? - CORRECT ANSWER
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."
"What is combined ratio? - CORRECT ANSWER loss ratio + expense ratio"
"What is the loss ratio? - CORRECT ANSWER incurred losses / earned premiums"
"What is the expense ratio? - CORRECT ANSWER Underwriting expenses/Written premiums"
"What does a staff (corporate) underwriter do? - CORRECT ANSWER Research the market,
formulate underwriting policy, revise underwriting guidelines, develop coverage forms, review rates, educate and train field underwriters, arrange reinsurance, assist with complex accounts, conduct underwriting audits"
"What does field (line) underwriter do? - CORRECT ANSWER Select insureds, ensure accurate
classification and pricing, recommend or provide coverage, manage a book of business, support producers and insureds, support marketing objectives"
"What activities are performed by producers? - CORRECT ANSWER Sales, risk management
review, policy issuance, premium collection, customer service, claims handling"
"What does a risk management review look like for an individual? - CORRECT ANSWER
Interview or questionnaire about property and activities"
"What does a risk management review look like for a business? - CORRECT ANSWER
producers devote significant time to analyzing property, products, services, employees, and liabilities to determine appropriate risk management strategies"
"What is a loss run? - CORRECT ANSWER A review of previous losses, which includes a list of
losses and their total cost"
"What are the steps of the underwriting process? - CORRECT ANSWER Evaluate the
application, Develop underwriting alternatives, Select an underwriting alternative, Implement the underwriting decision"
"What are the primary underwriting activities? - CORRECT ANSWER Minimize adverse
selection, Ensure adequate policyholder's surplus, Enforce underwriting guidelines"
"What is underwriting? - CORRECT ANSWER The process of evaluating risks, selecting who can
be insured, pricing that insurance coverage, determining terms and conditions, and monitoring underwriting decisions"
"What are special damages? - CORRECT ANSWER Damages for specific, identifiable expenses"
"What are compensatory damages? - CORRECT ANSWER Damages awarded to reimburse a
victim for harm experienced. They include special damages and general damages"
"What are general damages? - CORRECT ANSWER Damages awarded for losses that do not
have a specific economic value (pain & suffering, disfigurement)"
"What are punitive damages? - CORRECT ANSWER Damages awarded to victims to punish
defendants for reckless, malicious, or deceitful acts"
"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? -
CORRECT ANSWER Balance sheet"
"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, - CORRECT ANSWER Insured and
claimant and claims representative"
"For a loss exposure to be ideally insurable it must be definite in - CORRECT ANSWER Time,
cause, and location." "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 - CORRECT ANSWER
Contract of utmost good faith." "Pravalt Construction Company pays less than its competitors for workers compensation insurance because Pravalt has had substantially fewer employee injuries than other firms in its
class. This illustrates which one of the following benefits of insurance? - CORRECT ANSWER
Promote risk control activity" "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? - CORRECT ANSWER Direct
response" "Allian Insurance Company is a growing regional insurer selling policies in three states, specializing in personal auto and homeowners policies. Which one of the following is most likely
true regarding Allian and the policies it sells? - CORRECT ANSWER Allian issues more
preprinted policies than manuscript forms." "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: - CORRECT ANSWER Exceptions"
"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? - CORRECT ANSWER
Monitor the underwriting decision" "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? - CORRECT ANSWER Maintaining insurer solvency"
"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"? - CORRECT ANSWER
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." "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 -
CORRECT ANSWER Robots"
"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? - CORRECT ANSWER Underwriting"
"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? - CORRECT
ANSWER Transfer"
"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? - CORRECT
ANSWER Harry can verify Jennie's address and other possible helpful information by reviewing
her policy which has her original application information attached." "As a single mother on a very tight budget, Ciara is tempted to skimp on her insurance. However, her friend Mehmet tells her not to skimp on insurance, because it will help manage her cash
flows. Which one of the following examples best illustrates Mehmet's point? - CORRECT
"Willis, a claims representative, is collaborating with his colleague Suzanna from his insurance
company's risk control department. How will Suzanna help Willis? - CORRECT ANSWER
Provide laboratory analysis when Willis is investigating a claim" "Alicia works for the Drewman Agency, Sandi at insurer Greenway Insurance, and Rosa at Grossman Brokers, all as customer service representatives. Which one of the following is true
regarding their work? - CORRECT ANSWER Alicia can process policy endorsements and explain
coverage to her customers" "Which one of the following accurately describes activities related to customer service
representatives? - CORRECT ANSWER Profitability in the insurance business is directly linked
to customer retention" "An insurer has decided to take an extremely narrow interpretation of a property insurance policy provision to limit the number of loss payments it will need to make. It realizes that its interpretation is probably wrong, but it knows that individual insured's loss amounts will be small, such that most insureds will not take the trouble to file lawsuits against it. The insurer may be
violating the principle that an insurance policy is - CORRECT ANSWER A contract of utmost
good faith" "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 - CORRECT ANSWER
Contract of utmost good faith." "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 - CORRECT ANSWER Insured and
claimant and claims representative" "What is the correct order for these steps in the claims process? Calculating a loss reserve,
preparing a loss statement, identifying the policy, determining the cause of loss - CORRECT
ANSWER Identifying the policy, calculating a loss reserve, determining the cause of loss,
preparing a loss statement"
"What is a financial risk? - CORRECT ANSWER A risk that arises from the effect of market
forces on financial assets or liabilities, including market risk, credit risk, liquidity risk, and price risk." "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? - CORRECT ANSWER
Monitor the underwriting decision"
"What are the six characteristics of an ideally insurable loss exposure? - CORRECT ANSWER
Fortuitous, Definite and Measurable, Pure Risk, Independent and not Catastrophic, One of a large number of similar exposure units, Affordable" "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? - CORRECT ANSWER Besides risk
management goals being attainable, they should also pose a challenge" "What is the amount of business that an insurer can write based on regulatory guidelines?
(usually a comparison of the insurer's written premiums to the policyholder's surplus) -
CORRECT ANSWER Capacity"
"Oscar's custom-built vehicle looks like a sausage sandwich on wheels. He plans to drive it to special events at schools around the country where it will serve as a mobile billboard to promote his product. Oscar is surprised to learn that insurers are reluctant to insure his vehicle because it fails to meet one of the ideal characteristics of an insurable risk. Which characteristic is Oscar's
vehicle least likely to meet? - CORRECT ANSWER Large number of similar exposure units"
"Pravalt Construction Company pays less than its competitors for workers compensation insurance because Pravalt has had substantially fewer employee injuries than other firms in its
class. This illustrates which one of the following benefits of insurance? - CORRECT ANSWER
Promote risk control activity"
