ASLI 320 TEST 3 QUESTIONS WITH VERIFIED SOLUTIONS LATEST
UPDATE 2026
To protect the public, surplus lines laws in each state restrict surplus lines licensees to
placing coverage only with insurers that satisfy specific criteria. The surplus lines
licensees must verify which one of the following for each nonadmitted insurer
providing coverage? - Answers a. Their claim-payment and customer service
complaint records
B. Their financial strength and viability
c. Their history and mission statement
d. Their past and projected revenue statements
Which one of the following is a reason why increased limits factors in general liability
insurance are large? - Answers a. Data credibility is higher in upper layers.
b. Large liability losses settle quickly.
c. Reinsurance is not used to provide high limits.
D. Loss variability is greater in upper layers.
Which one of the following statements is correct with respect to taxation and surplus
lines insurers? - Answers A. Surplus lines insurers consider tax rates when
determining what products to offer in which states.
b. Surplus lines intermediaries are prohibited from collecting premium taxes in most
states.
c. Surplus lines insurers include taxes in ratemaking formulas and pay taxes directly
to the states in which they write business.
d. The taxes paid by surplus lines insurers are generally lower than those paid by
admitted insurers in the same state.
Insurer A has calculated its actual loss ratio to be 54 percent. The expected loss ratio
was 60 percent. Using the loss ratio ratemaking method, which one of the following
statements is true? - Answers a. There is not enough information presented to
calculate the indicated rate change.
b. A ten percent (10%) increase in rates is indicated.
c. The loss ratio ratemaking method does not indicate that a rate change is needed.
D. A ten percent (10%) decrease in rates is indicated.
, Situational analysis is one element of a marketing plan. Which one of the following
best describes situational analysis? - Answers a. It evaluates an insurer's expertise in
a potential new product area.
B. It examines the marketplace, competition, critical success factors, and required
resources.
c. It monitors customers to identify changing needs that must be addressed.
d. It determines the potential size of the market for a new product.
Defending liability claims through litigation can be a very long and expensive
process. Arbitration is a common forum for settling claims outside the traditional
court system. Which one of the following statements is correct regarding arbitration? -
Answers a. Solutions are proposed in arbitration to help the parties settle.
b. Only one insured and one insurer can be involved in arbitration.
C. Someone other than the insurer and the claimant decides the case in arbitration.
d. The arbitrator's decision is always binding.
Which one of the following is true regarding the administration of the Insurance
Regulatory Information System (IRIS)? - Answers a. If the insurer has financial
ratios that are inside predetermined norms, IRIS identifies the company for regulatory
attention.
b. If an insurer cannot be rehabilitated, the state's guaranty fund may be available to
increase the effects of the insurer insolvency.
C. If regulators determine that an insurer is insolvent, the state insurance department
places it in receivership.
d. Under a special provision in state licensing laws, state regulators are empowered to
completely take over an insurer at any time.
Paid Losses, Loss Reserves, and Incurred Loses for Hypothetical Auto Liability
Insurance as of the End of Year 3:
(1) (2) (3)Year Paid Losses Loss Reserves Incurred Losses1 $11,000,000 $ 0
$11,000,0002 8,000,000 3,000,000 11,000,0003 3,000,000 8,000,000
11,000,000Total $22,000,000 $11,000,000 $33,000,000
Given this data, which one of the following statements is true? - Answers a. Loss
reserves are 50 percent of the incurred losses for all three years.
b. Incurred losses for Year 3 include the lowest reserves of any year.
C. Loss reserves do not exist for Year 1 since all losses have been paid.
d. Paid losses are 33 percent of the incurred losses for all three years.
UPDATE 2026
To protect the public, surplus lines laws in each state restrict surplus lines licensees to
placing coverage only with insurers that satisfy specific criteria. The surplus lines
licensees must verify which one of the following for each nonadmitted insurer
providing coverage? - Answers a. Their claim-payment and customer service
complaint records
B. Their financial strength and viability
c. Their history and mission statement
d. Their past and projected revenue statements
Which one of the following is a reason why increased limits factors in general liability
insurance are large? - Answers a. Data credibility is higher in upper layers.
b. Large liability losses settle quickly.
c. Reinsurance is not used to provide high limits.
D. Loss variability is greater in upper layers.
Which one of the following statements is correct with respect to taxation and surplus
lines insurers? - Answers A. Surplus lines insurers consider tax rates when
determining what products to offer in which states.
b. Surplus lines intermediaries are prohibited from collecting premium taxes in most
states.
c. Surplus lines insurers include taxes in ratemaking formulas and pay taxes directly
to the states in which they write business.
d. The taxes paid by surplus lines insurers are generally lower than those paid by
admitted insurers in the same state.
Insurer A has calculated its actual loss ratio to be 54 percent. The expected loss ratio
was 60 percent. Using the loss ratio ratemaking method, which one of the following
statements is true? - Answers a. There is not enough information presented to
calculate the indicated rate change.
b. A ten percent (10%) increase in rates is indicated.
c. The loss ratio ratemaking method does not indicate that a rate change is needed.
D. A ten percent (10%) decrease in rates is indicated.
, Situational analysis is one element of a marketing plan. Which one of the following
best describes situational analysis? - Answers a. It evaluates an insurer's expertise in
a potential new product area.
B. It examines the marketplace, competition, critical success factors, and required
resources.
c. It monitors customers to identify changing needs that must be addressed.
d. It determines the potential size of the market for a new product.
Defending liability claims through litigation can be a very long and expensive
process. Arbitration is a common forum for settling claims outside the traditional
court system. Which one of the following statements is correct regarding arbitration? -
Answers a. Solutions are proposed in arbitration to help the parties settle.
b. Only one insured and one insurer can be involved in arbitration.
C. Someone other than the insurer and the claimant decides the case in arbitration.
d. The arbitrator's decision is always binding.
Which one of the following is true regarding the administration of the Insurance
Regulatory Information System (IRIS)? - Answers a. If the insurer has financial
ratios that are inside predetermined norms, IRIS identifies the company for regulatory
attention.
b. If an insurer cannot be rehabilitated, the state's guaranty fund may be available to
increase the effects of the insurer insolvency.
C. If regulators determine that an insurer is insolvent, the state insurance department
places it in receivership.
d. Under a special provision in state licensing laws, state regulators are empowered to
completely take over an insurer at any time.
Paid Losses, Loss Reserves, and Incurred Loses for Hypothetical Auto Liability
Insurance as of the End of Year 3:
(1) (2) (3)Year Paid Losses Loss Reserves Incurred Losses1 $11,000,000 $ 0
$11,000,0002 8,000,000 3,000,000 11,000,0003 3,000,000 8,000,000
11,000,000Total $22,000,000 $11,000,000 $33,000,000
Given this data, which one of the following statements is true? - Answers a. Loss
reserves are 50 percent of the incurred losses for all three years.
b. Incurred losses for Year 3 include the lowest reserves of any year.
C. Loss reserves do not exist for Year 1 since all losses have been paid.
d. Paid losses are 33 percent of the incurred losses for all three years.
