AINS PRACTICE EXAM WITH COMPLETE
SOLUTIONS
Which mtwo mof mthe mfour mquadrants mof mrisk mare mclassified mas mpure mrisks?
Select mone:
A. mHazard mrisks mand moperational mrisks
B. mHazard mrisks mand mstrategic mrisks
C. mOperational mrisks mand mfinancial mrisks
D. mFinancial mrisks mand mstrategic mrisks m- mcorrect manswers m-A. mHazard mrisks
mand moperational mrisks
Correct. mHazard mrisks mand moperational mrisks mare mpure mrisks.
Because minsurance mcontracts mimpose man mobligation mfor methical mpractices mand
mbehaviors mon mthe mparties mwhile mdealing mwith mone manother, man minsurance
mcontract mis mcalled ma
Select mone:
A. mContract mof mindemnity.
,B. mContract mof madhesion.
C. mContract mof mutmost mgood mfaith.
D. mConditional mcontract. m- mcorrect manswers m-C. mContract mof mutmost mgood
mfaith.
Correct.Insurance mcontacts mare mconsidered mcontracts mof mutmost mgood mfaith
mbecause mboth mparties mare mobligated mto methical mpractices mand mbehaviors
mwhile mdealing mwith mone manother.
Winston mis mskimming mthrough mhis mnew mpersonal mauto mpolicy mthat mjust
marrived. mWinston mdiscovers mthat mevery minsurance mpolicy mis mrepresented
mthrough ma mcollection mof mpolicy mprovisions. mHe mdiscovers mall mof mthe mfollowing
mpolicy mprovisions, mEXCEPT:
Select mone:
A. mConditions
B. mDefinitions
C. mExceptions
D. mDeclarations m- mcorrect manswers m-C. mExceptions
Correct. mWinston mfinds mthe mpolicy mprovisions mof mconditions, mdefinitions, mand
mdeclarations. mThe mother mtwo mmain mprovisions min ma mpolicy mare mthe minsuring
magreement, mand mthe mexclusions.
Sean mwas mdriving mand mcaused man minjury mto ma mpedestrian mnamed mWilbur. mIn
mthe mcontext mof mthe mresulting mclaim mmade mto mSean's minsurance mcompany
mand massigned mto mAndrea min mthe mclaims mdepartment, mSean mand mWilbur mand
mAndrea mare, mrespectively,
Select mone:
A. mClaimant mand mclaims mrepresentative mand minsured
B. mClaimant mand minsured mand mclaims mrepresentative
C. mInsured mand mclaimant mand mclaims mrepresentative
D. mClaims mrepresentative mand minsured mand mclaimant m- mcorrect manswers m-C.
mInsured mand mclaimant mand mclaims mrepresentative
Correct. mIn mthis mscenario, mSean mand mWilbur mand mAndrea, mare, mrespectively,
minsured m(Sean), mclaimant m(Wilbur), mand mclaims mrepresentative m(Andrea).
Risk mcontrol mcan massist mthe mclaims mdepartment mby
Select mone:
A. mReporting mthe mexistence mof mnew moperations.
B. mDesigning mproduct mrecall mprocedures.
C. mDeveloping msafety mmanagement mprograms.
D. mProviding mlaboratory manalyses. m- mcorrect manswers m-D. mProviding mlaboratory
manalyses.
, Correct. mRisk mcontrol mcan massist mthe mclaims mdepartment mby mproviding
mlaboratory manalyses.
When mthe mSmiths mpurchased mtheir mfirst mhome, mthey mwere mrequired mto
mpurchase ma mhomeowners minsurance mpolicy min morder mto mget ma mmortgage.
mBecause mthey mdid mnot mhave ma mlot mof mextra mmoney min mtheir mbudget, mthey
mwanted mto mbuy mas mlittle minsurance mcoverage mas mpossible. mThe mSmiths'
minsurance magent madvised mthem mthat mif mthey mpurchase man minsurance mpolicy
mthat madequately mcovers mdamage mto mtheir mhome mand mpersonal mproperty, mthey
monly mhave mto mbudget mfor mthe minsurance mpremium, mrather mthan mthe mfull mcost
mof mrebuilding mthe mhouse mand mreplacing mits mcontents. mWhich mone mof mthe
mfollowing mkey mcomponents mof minsurance mis mthe minsurance magent mexplaining
mto mthe mSmiths?
Select mone:
A. mRisk
B. mPooling
C. mTransfer
D. mRisk mcontrol m- mcorrect manswers m-C. mTransfer
Correct. mThe minsurance magent mis mexplaining mthe mconcept mof mtransferring mthe
mfinancial mconsequences mof munanticipated mevents mto man minsurer.
Because mthe minsurance mcompany musually mdetermines mpolicy mwording mand mthe
minsured mhas mlittle mchoice mbut mto m"take mit mor mleave mit," man minsurance
mcontract mis ma
Select mone:
A. mBilateral mcontract.
B. mNontransferable mcontract.
C. mContract mof mindemnity.
D. mContract mof madhesion. m- mcorrect manswers m-D. mContract mof madhesion.
Correct. mInsurance mis mconsidered ma mcontract mof madhesion mbecause mone mparty,
mthe minsured, mmust madhere mto mthe mcontract mas mwritten mby mthe mother mparty
m(the minsurer). mThe minsurer mdetermines mthe mwording mof mthe mpolicy, mand mthe
minsured mhas mlittle mchoice mbut mto mtake mit mor mleave mit.
Which mone mof mthe mfollowing mis mthe mcorrect mformula mfor mcalculating man
minsurer's mcombined mratio?
Select mone:
A. mLoss mratio m+ mexpense mratio
B. mLoss mratio m+ munderwriting mratio
C. mInvestment mincome mratio m+ moverall moperating mratio
D. mInvestment mincome mratio m+ mpremium mincome mratio m- mcorrect manswers m-A.
mLoss mratio m+ mexpense mratio
SOLUTIONS
Which mtwo mof mthe mfour mquadrants mof mrisk mare mclassified mas mpure mrisks?
Select mone:
A. mHazard mrisks mand moperational mrisks
B. mHazard mrisks mand mstrategic mrisks
C. mOperational mrisks mand mfinancial mrisks
D. mFinancial mrisks mand mstrategic mrisks m- mcorrect manswers m-A. mHazard mrisks
mand moperational mrisks
Correct. mHazard mrisks mand moperational mrisks mare mpure mrisks.
Because minsurance mcontracts mimpose man mobligation mfor methical mpractices mand
mbehaviors mon mthe mparties mwhile mdealing mwith mone manother, man minsurance
mcontract mis mcalled ma
Select mone:
A. mContract mof mindemnity.
,B. mContract mof madhesion.
C. mContract mof mutmost mgood mfaith.
D. mConditional mcontract. m- mcorrect manswers m-C. mContract mof mutmost mgood
mfaith.
Correct.Insurance mcontacts mare mconsidered mcontracts mof mutmost mgood mfaith
mbecause mboth mparties mare mobligated mto methical mpractices mand mbehaviors
mwhile mdealing mwith mone manother.
Winston mis mskimming mthrough mhis mnew mpersonal mauto mpolicy mthat mjust
marrived. mWinston mdiscovers mthat mevery minsurance mpolicy mis mrepresented
mthrough ma mcollection mof mpolicy mprovisions. mHe mdiscovers mall mof mthe mfollowing
mpolicy mprovisions, mEXCEPT:
Select mone:
A. mConditions
B. mDefinitions
C. mExceptions
D. mDeclarations m- mcorrect manswers m-C. mExceptions
Correct. mWinston mfinds mthe mpolicy mprovisions mof mconditions, mdefinitions, mand
mdeclarations. mThe mother mtwo mmain mprovisions min ma mpolicy mare mthe minsuring
magreement, mand mthe mexclusions.
Sean mwas mdriving mand mcaused man minjury mto ma mpedestrian mnamed mWilbur. mIn
mthe mcontext mof mthe mresulting mclaim mmade mto mSean's minsurance mcompany
mand massigned mto mAndrea min mthe mclaims mdepartment, mSean mand mWilbur mand
mAndrea mare, mrespectively,
Select mone:
A. mClaimant mand mclaims mrepresentative mand minsured
B. mClaimant mand minsured mand mclaims mrepresentative
C. mInsured mand mclaimant mand mclaims mrepresentative
D. mClaims mrepresentative mand minsured mand mclaimant m- mcorrect manswers m-C.
mInsured mand mclaimant mand mclaims mrepresentative
Correct. mIn mthis mscenario, mSean mand mWilbur mand mAndrea, mare, mrespectively,
minsured m(Sean), mclaimant m(Wilbur), mand mclaims mrepresentative m(Andrea).
Risk mcontrol mcan massist mthe mclaims mdepartment mby
Select mone:
A. mReporting mthe mexistence mof mnew moperations.
B. mDesigning mproduct mrecall mprocedures.
C. mDeveloping msafety mmanagement mprograms.
D. mProviding mlaboratory manalyses. m- mcorrect manswers m-D. mProviding mlaboratory
manalyses.
, Correct. mRisk mcontrol mcan massist mthe mclaims mdepartment mby mproviding
mlaboratory manalyses.
When mthe mSmiths mpurchased mtheir mfirst mhome, mthey mwere mrequired mto
mpurchase ma mhomeowners minsurance mpolicy min morder mto mget ma mmortgage.
mBecause mthey mdid mnot mhave ma mlot mof mextra mmoney min mtheir mbudget, mthey
mwanted mto mbuy mas mlittle minsurance mcoverage mas mpossible. mThe mSmiths'
minsurance magent madvised mthem mthat mif mthey mpurchase man minsurance mpolicy
mthat madequately mcovers mdamage mto mtheir mhome mand mpersonal mproperty, mthey
monly mhave mto mbudget mfor mthe minsurance mpremium, mrather mthan mthe mfull mcost
mof mrebuilding mthe mhouse mand mreplacing mits mcontents. mWhich mone mof mthe
mfollowing mkey mcomponents mof minsurance mis mthe minsurance magent mexplaining
mto mthe mSmiths?
Select mone:
A. mRisk
B. mPooling
C. mTransfer
D. mRisk mcontrol m- mcorrect manswers m-C. mTransfer
Correct. mThe minsurance magent mis mexplaining mthe mconcept mof mtransferring mthe
mfinancial mconsequences mof munanticipated mevents mto man minsurer.
Because mthe minsurance mcompany musually mdetermines mpolicy mwording mand mthe
minsured mhas mlittle mchoice mbut mto m"take mit mor mleave mit," man minsurance
mcontract mis ma
Select mone:
A. mBilateral mcontract.
B. mNontransferable mcontract.
C. mContract mof mindemnity.
D. mContract mof madhesion. m- mcorrect manswers m-D. mContract mof madhesion.
Correct. mInsurance mis mconsidered ma mcontract mof madhesion mbecause mone mparty,
mthe minsured, mmust madhere mto mthe mcontract mas mwritten mby mthe mother mparty
m(the minsurer). mThe minsurer mdetermines mthe mwording mof mthe mpolicy, mand mthe
minsured mhas mlittle mchoice mbut mto mtake mit mor mleave mit.
Which mone mof mthe mfollowing mis mthe mcorrect mformula mfor mcalculating man
minsurer's mcombined mratio?
Select mone:
A. mLoss mratio m+ mexpense mratio
B. mLoss mratio m+ munderwriting mratio
C. mInvestment mincome mratio m+ moverall moperating mratio
D. mInvestment mincome mratio m+ mpremium mincome mratio m- mcorrect manswers m-A.
mLoss mratio m+ mexpense mratio
