AINS 101 Exam Prep Questions
AINS 101 Exam Questions with 100%
Verified Answers 2025
When her car's windshield breaks, Ciara has to pay only $100 of the $600 cost of
replacing it. - CORRECT ANSWER-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?
A. Ciara needs her car to get to her job, and she needs her job to make car payments
and pay for her car insurance.
B. When her car's windshield breaks, Ciara has to pay only $100 of the $600 cost of
replacing it.
C. When her car's transmission goes out a month after the warranty expires, Ciara is
faced with a $1,100 repair bill.
D. Ciara finds it difficult to come up with a $787 auto insurance premium every six
months.
Reinsurance - CORRECT ANSWER-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?
Artificial intelligence. - CORRECT ANSWER-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.
Speculative Risk - CORRECT ANSWER-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?
,AINS 101 Exam Prep Questions
Insureds share the cost of each other's losses. - CORRECT ANSWER-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.
Risk - CORRECT ANSWER-Which one of the following represents uncertainty about
outcomes that can be negative or positive?
A. Loss exposure
B. Transfer
C. Risk
D. Pooling
Commercial crime insurance. - CORRECT ANSWER-Coverage for money and other
business property from various causes of loss such as burglary, robbery, theft, and
employee dishonesty typically is provided by
Artificial Intelligence - CORRECT ANSWER-Mutual Fund Company (MFC) offers a wide
array of mutual fund options to investors. Each mutual fund has a different fund
objective and set of investment guidelines that apply to the fund. While MFC gives
considerable freedom to its fund portfolio managers, they are required to abide by the
fund's investment guidelines. To monitor compliance, MFC developed a computer
algorithm. The computer algorithm continuously monitors each fund's compliance with
investment guidelines. If a fund manager violates the investment guidelines, the
computer immediately notifies MFC's internal control director, and corrective action is
taken. MFC's use of the computer algorithm to monitor investment compliance and to
provide notification when corrective action is necessary illustrates use of
Indemnify individuals and organizations for covered losses - CORRECT ANSWER-The
primary role of insurance is to
Insureds share the cost of each other's losses. - CORRECT ANSWER-Which one of the
following best describes the concept of pooling?
A. Insureds share the cost of each other's losses.
B. Risk management is concerned with positive and negative risks.
C. The financial consequences of unanticipated losses are transferred to an insurer.
D. Insurance benefits society as a whole.
Mutual insurer. - CORRECT ANSWER-A type of insurer that is owned by policyholders
and may pay dividends to policyholders as a return of a portion of premiums paid is a
Auto insurance is compulsory, and the program makes it possible for all drivers to have
reasonably priced insurance. - CORRECT ANSWER-The state of Maryland operates a
residual auto plan (the Maryland Auto Insurance Fund—MAIF) that provides coverage
for drivers who are unable to obtain coverage from private insurers. Which one of the
following is the best rationale for the MAIF program?
,AINS 101 Exam Prep Questions
A. Private insurers face limited competition, and the state increases competitive
pressures by operating this type of plan.
B. Auto insurance is compulsory, and the program makes it possible for all drivers to
have reasonably priced insurance.
C. Private insurers overcharge for auto insurance, and the state provides a low-cost
alternative.
D. Auto insurance for high-risk drivers is profitable, and the program enables the state
to share in the profits.
Strategic Risk - CORRECT ANSWER-ABC Company experienced a dramatic
ideological shift in corporate policies after a national election. This is an example of
which one of the following quadrants of risk?
A. Operational risk
B. Financial risk
C. Strategic risk
D. Hazard risk
Renegade keeps enough cash assets on hand to cover claims on policies long after it
collected the premiums from customers. - CORRECT ANSWER-Renegade Insurance
prides itself on its upstanding reputation through its commitment to small communities'
homeowners coverage needs over the past twenty years. Which one of Renegade's
actions over this time would best illustrate its continued commitment to maintaining its
solvency?
A. Renegade emphasizes that its insurance is readily available and accessible to
customers in its service area that need it.
B. Renegade's producers know policy language well so that they can easily and
understandably answer policyholders' questions.
C. Renegade keeps enough cash assets on hand to cover claims on policies long after
it collected the premiums from customers.
D. Renegade is committed to branching out in the near future to include more
coverages for specialized small businesses.
Solvency - CORRECT ANSWER-What term refers to the ability of an insurer to meet its
obligations as they become due?
Insurance regulation protects customers by guaranteeing insurance is available and
accessible to everyone who needs it. - CORRECT ANSWER-Carlos is new to the
insurance business and is learning about insurance regulation and what he, now
working with Grady Insurance, will need to be aware of regarding the subject of
compliance. Which one of the following will Carlos find is accurate as he better
understands why insurance is regulated?
A. Insurance regulation protects customers by guaranteeing insurance is available and
accessible to everyone who needs it.
B. The U.S. insurance industry is governed by federal laws that protect citizens by
leveling the playing field for insurers and policyholders.
C. Insurance regulation speaks to the types of risks insurers may cover, but does not
play a part in how they invest their profits.
D. Insurance regulation prevents insurers from covering catastrophic occurrences so
insurers can remain solvent.
, AINS 101 Exam Prep Questions
Net income - CORRECT ANSWER-All of the following appear on an insurer's balance
sheet, EXCEPT:
A. Liabilities
B. Assets
C. Net income
D. Policyholders' surplus
Snapshot of its financial position - CORRECT ANSWER-An insurer's balance sheet can
best be described as a
A. Relationship between revenue and liabilities.
B. Snapshot of its financial position.
C. Relationship between assets and expenses.
D. Summary of premiums written.
Policyholders' surplus (The major categories of liabilities found on an insurer's financial
statements are loss and loss expense reserves, unearned premium reserves, and other
liabilities. Policyholders' surplus is not a liability category.) - CORRECT ANSWER-All of
the following are categories of liabilities found on an insurer's balance sheet, EXCEPT:
A. Loss and loss expense reserves
B. Policyholders' surplus
C. Unearned premium reserves
D. Other liabilities
(3/4) + (2/5) = .115 (115%) - CORRECT ANSWER-The financial report for Hometown
Insurer contains the following information:
Earned premiums $4,000,000
Written premiums $5,000,000
Net investment income $1,000,000
Incurred losses $3,000,000
Incurred underwriting expenses $2,000,000
What was the Hometown Insurer's combined ratio?
Loss Ratio + Expense Ratio = (Incurred Losses/Earned Premiums) + (Incurred
Underwriting Expenses/Written Premiums) - CORRECT ANSWER-How do you get
combined ratio?
4/10 = .4 (40%) - CORRECT ANSWER-The financial report for LMN Insurance contains
the following information:
Earned premiums $8,000,000
Written premiums $10,000,000
Incurred losses $6,000,000
Incurred underwriting expenses $4,000,000
What is LMN Insurance's expense ratio?
Incurred underwriting expenses / Written premiums - CORRECT ANSWER-How do you
get expense ratio?
AINS 101 Exam Questions with 100%
Verified Answers 2025
When her car's windshield breaks, Ciara has to pay only $100 of the $600 cost of
replacing it. - CORRECT ANSWER-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?
A. Ciara needs her car to get to her job, and she needs her job to make car payments
and pay for her car insurance.
B. When her car's windshield breaks, Ciara has to pay only $100 of the $600 cost of
replacing it.
C. When her car's transmission goes out a month after the warranty expires, Ciara is
faced with a $1,100 repair bill.
D. Ciara finds it difficult to come up with a $787 auto insurance premium every six
months.
Reinsurance - CORRECT ANSWER-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?
Artificial intelligence. - CORRECT ANSWER-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.
Speculative Risk - CORRECT ANSWER-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?
,AINS 101 Exam Prep Questions
Insureds share the cost of each other's losses. - CORRECT ANSWER-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.
Risk - CORRECT ANSWER-Which one of the following represents uncertainty about
outcomes that can be negative or positive?
A. Loss exposure
B. Transfer
C. Risk
D. Pooling
Commercial crime insurance. - CORRECT ANSWER-Coverage for money and other
business property from various causes of loss such as burglary, robbery, theft, and
employee dishonesty typically is provided by
Artificial Intelligence - CORRECT ANSWER-Mutual Fund Company (MFC) offers a wide
array of mutual fund options to investors. Each mutual fund has a different fund
objective and set of investment guidelines that apply to the fund. While MFC gives
considerable freedom to its fund portfolio managers, they are required to abide by the
fund's investment guidelines. To monitor compliance, MFC developed a computer
algorithm. The computer algorithm continuously monitors each fund's compliance with
investment guidelines. If a fund manager violates the investment guidelines, the
computer immediately notifies MFC's internal control director, and corrective action is
taken. MFC's use of the computer algorithm to monitor investment compliance and to
provide notification when corrective action is necessary illustrates use of
Indemnify individuals and organizations for covered losses - CORRECT ANSWER-The
primary role of insurance is to
Insureds share the cost of each other's losses. - CORRECT ANSWER-Which one of the
following best describes the concept of pooling?
A. Insureds share the cost of each other's losses.
B. Risk management is concerned with positive and negative risks.
C. The financial consequences of unanticipated losses are transferred to an insurer.
D. Insurance benefits society as a whole.
Mutual insurer. - CORRECT ANSWER-A type of insurer that is owned by policyholders
and may pay dividends to policyholders as a return of a portion of premiums paid is a
Auto insurance is compulsory, and the program makes it possible for all drivers to have
reasonably priced insurance. - CORRECT ANSWER-The state of Maryland operates a
residual auto plan (the Maryland Auto Insurance Fund—MAIF) that provides coverage
for drivers who are unable to obtain coverage from private insurers. Which one of the
following is the best rationale for the MAIF program?
,AINS 101 Exam Prep Questions
A. Private insurers face limited competition, and the state increases competitive
pressures by operating this type of plan.
B. Auto insurance is compulsory, and the program makes it possible for all drivers to
have reasonably priced insurance.
C. Private insurers overcharge for auto insurance, and the state provides a low-cost
alternative.
D. Auto insurance for high-risk drivers is profitable, and the program enables the state
to share in the profits.
Strategic Risk - CORRECT ANSWER-ABC Company experienced a dramatic
ideological shift in corporate policies after a national election. This is an example of
which one of the following quadrants of risk?
A. Operational risk
B. Financial risk
C. Strategic risk
D. Hazard risk
Renegade keeps enough cash assets on hand to cover claims on policies long after it
collected the premiums from customers. - CORRECT ANSWER-Renegade Insurance
prides itself on its upstanding reputation through its commitment to small communities'
homeowners coverage needs over the past twenty years. Which one of Renegade's
actions over this time would best illustrate its continued commitment to maintaining its
solvency?
A. Renegade emphasizes that its insurance is readily available and accessible to
customers in its service area that need it.
B. Renegade's producers know policy language well so that they can easily and
understandably answer policyholders' questions.
C. Renegade keeps enough cash assets on hand to cover claims on policies long after
it collected the premiums from customers.
D. Renegade is committed to branching out in the near future to include more
coverages for specialized small businesses.
Solvency - CORRECT ANSWER-What term refers to the ability of an insurer to meet its
obligations as they become due?
Insurance regulation protects customers by guaranteeing insurance is available and
accessible to everyone who needs it. - CORRECT ANSWER-Carlos is new to the
insurance business and is learning about insurance regulation and what he, now
working with Grady Insurance, will need to be aware of regarding the subject of
compliance. Which one of the following will Carlos find is accurate as he better
understands why insurance is regulated?
A. Insurance regulation protects customers by guaranteeing insurance is available and
accessible to everyone who needs it.
B. The U.S. insurance industry is governed by federal laws that protect citizens by
leveling the playing field for insurers and policyholders.
C. Insurance regulation speaks to the types of risks insurers may cover, but does not
play a part in how they invest their profits.
D. Insurance regulation prevents insurers from covering catastrophic occurrences so
insurers can remain solvent.
, AINS 101 Exam Prep Questions
Net income - CORRECT ANSWER-All of the following appear on an insurer's balance
sheet, EXCEPT:
A. Liabilities
B. Assets
C. Net income
D. Policyholders' surplus
Snapshot of its financial position - CORRECT ANSWER-An insurer's balance sheet can
best be described as a
A. Relationship between revenue and liabilities.
B. Snapshot of its financial position.
C. Relationship between assets and expenses.
D. Summary of premiums written.
Policyholders' surplus (The major categories of liabilities found on an insurer's financial
statements are loss and loss expense reserves, unearned premium reserves, and other
liabilities. Policyholders' surplus is not a liability category.) - CORRECT ANSWER-All of
the following are categories of liabilities found on an insurer's balance sheet, EXCEPT:
A. Loss and loss expense reserves
B. Policyholders' surplus
C. Unearned premium reserves
D. Other liabilities
(3/4) + (2/5) = .115 (115%) - CORRECT ANSWER-The financial report for Hometown
Insurer contains the following information:
Earned premiums $4,000,000
Written premiums $5,000,000
Net investment income $1,000,000
Incurred losses $3,000,000
Incurred underwriting expenses $2,000,000
What was the Hometown Insurer's combined ratio?
Loss Ratio + Expense Ratio = (Incurred Losses/Earned Premiums) + (Incurred
Underwriting Expenses/Written Premiums) - CORRECT ANSWER-How do you get
combined ratio?
4/10 = .4 (40%) - CORRECT ANSWER-The financial report for LMN Insurance contains
the following information:
Earned premiums $8,000,000
Written premiums $10,000,000
Incurred losses $6,000,000
Incurred underwriting expenses $4,000,000
What is LMN Insurance's expense ratio?
Incurred underwriting expenses / Written premiums - CORRECT ANSWER-How do you
get expense ratio?
