AINS 101 COMPREHENSIVE EXAM
QUESTIONS AND SOLUTIONS STUDY GUIDE
●● Which one of the following statements is correct regarding the
benefits provided by insurance?
A. Insurance reduces the financial consequences of loss exposures but
not the related uncertainty.
B. The primary role of insurance is to meet mandatory insurance
requirements.
C. The reduction in losses paid by insurers due to risk control measures
benefits individual insureds but not society as a whole.
D. Insurance helps reduce the financial burden to society by
compensating accident victims.
Answer: Insurance helps reduce the financial burden to society by
compensating accident victims.
●● Shelton Industries experienced a fire in its manufacturing plant.
Several employees suffered burns and smoke inhalation injuries as they
tried to escape the building. Which one of Shelton Industries'
commercial property-casualty policies would pay for the employees'
injuries and illnesses?
Answer: Workers compensation insurance
,●● A homeowners policy is a type of
Answer: Personal property-casualty insurance policy.
●● Which one of the following correctly describes a reason for
government involvement in property-casualty insurance?
A. Selling insurance provides the government with a non-tax source of
revenues and profits.
B. Government programs can meet legitimate public demands unmet by
private insurers.
C. Competition from government plans keeps private insurer's premiums
competitive.
D. Preventing high-risk individuals or activities from being insured is in
the public interest.
Answer: Government programs can meet legitimate public demands
unmet by private insurers.
●● Insurance Company wrote a commercial liability policy for a
manufacturer of off-road motorcycles. The potential costs of the
insured's loss exposure exceed Insurance Company's capacity. Insurance
Company could consider which one of the following types of contractual
transferring agreement to meet its needs?
Answer: Reinsurance
,●● In an effort to reduce expenses, increase profitability, and reduce
human errors; ABC Insurance Company decided to automate most of its
personal lines underwriting function. The company now uses
standardized application forms that are submitted electronically to one of
the company's regional offices. At each regional office, a computer with
a scanner reads the applications. The computer has been programmed
with acceptable answers to the questions. If the answers on the
application are all acceptable, the policy is automatically issued.
Rejected applications are automatically forwarded to a human
underwriter who reviews them. The use of this technology has reduced
the company's expense ratio by two and a half percent, and reduced the
time it takes to issue a policy. ABC Insurance Company's use of
computers to evaluate applications electronically is an application of
A. Radiant sensors.
B. Artificial intelligence.
C.
Answer: Artificial intelligence.
●● 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. What type of risk is this?
Answer: Speculative Risk
●● Which one of the following best describes the concept of pooling?
, A. The financial consequences of unanticipated losses are transferred to
an insurer.
B. Risk management is concerned with positive and negative risks.
C. Insureds share the cost of each other's losses.
D. Insurance benefits society as a whole.
Answer: Insureds share the cost of each other's losses.
●● Which one of the following represents uncertainty about outcomes
that can be negative or positive?
A. Loss exposure
B. Transfer
C. Risk
D. Pooling
Answer: Risk
●● Coverage for money and other business property from various causes
of loss such as burglary, robbery, theft, and employee dishonesty
typically is provided by
Answer: Commercial crime insurance.
QUESTIONS AND SOLUTIONS STUDY GUIDE
●● Which one of the following statements is correct regarding the
benefits provided by insurance?
A. Insurance reduces the financial consequences of loss exposures but
not the related uncertainty.
B. The primary role of insurance is to meet mandatory insurance
requirements.
C. The reduction in losses paid by insurers due to risk control measures
benefits individual insureds but not society as a whole.
D. Insurance helps reduce the financial burden to society by
compensating accident victims.
Answer: Insurance helps reduce the financial burden to society by
compensating accident victims.
●● Shelton Industries experienced a fire in its manufacturing plant.
Several employees suffered burns and smoke inhalation injuries as they
tried to escape the building. Which one of Shelton Industries'
commercial property-casualty policies would pay for the employees'
injuries and illnesses?
Answer: Workers compensation insurance
,●● A homeowners policy is a type of
Answer: Personal property-casualty insurance policy.
●● Which one of the following correctly describes a reason for
government involvement in property-casualty insurance?
A. Selling insurance provides the government with a non-tax source of
revenues and profits.
B. Government programs can meet legitimate public demands unmet by
private insurers.
C. Competition from government plans keeps private insurer's premiums
competitive.
D. Preventing high-risk individuals or activities from being insured is in
the public interest.
Answer: Government programs can meet legitimate public demands
unmet by private insurers.
●● Insurance Company wrote a commercial liability policy for a
manufacturer of off-road motorcycles. The potential costs of the
insured's loss exposure exceed Insurance Company's capacity. Insurance
Company could consider which one of the following types of contractual
transferring agreement to meet its needs?
Answer: Reinsurance
,●● In an effort to reduce expenses, increase profitability, and reduce
human errors; ABC Insurance Company decided to automate most of its
personal lines underwriting function. The company now uses
standardized application forms that are submitted electronically to one of
the company's regional offices. At each regional office, a computer with
a scanner reads the applications. The computer has been programmed
with acceptable answers to the questions. If the answers on the
application are all acceptable, the policy is automatically issued.
Rejected applications are automatically forwarded to a human
underwriter who reviews them. The use of this technology has reduced
the company's expense ratio by two and a half percent, and reduced the
time it takes to issue a policy. ABC Insurance Company's use of
computers to evaluate applications electronically is an application of
A. Radiant sensors.
B. Artificial intelligence.
C.
Answer: Artificial intelligence.
●● 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. What type of risk is this?
Answer: Speculative Risk
●● Which one of the following best describes the concept of pooling?
, A. The financial consequences of unanticipated losses are transferred to
an insurer.
B. Risk management is concerned with positive and negative risks.
C. Insureds share the cost of each other's losses.
D. Insurance benefits society as a whole.
Answer: Insureds share the cost of each other's losses.
●● Which one of the following represents uncertainty about outcomes
that can be negative or positive?
A. Loss exposure
B. Transfer
C. Risk
D. Pooling
Answer: Risk
●● Coverage for money and other business property from various causes
of loss such as burglary, robbery, theft, and employee dishonesty
typically is provided by
Answer: Commercial crime insurance.
