AINS 101 EXAM QUESTIONS ANSWERS 2024 ALREADY GRADED A+ GUARANTEED SUCCESS

AINS 101 EXAM QUESTIONS ANSWERS 2024 ALREADY GRADED A+ GUARANTEED SUCCESS "$350 Replacement cost - Depreciation - CORRECT ANSWER 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?" "Underwriting authority reports - CORRECT ANSWER All of the following are sources of underwriting information to evaluate an insurance submission, EXCEPT:" "Implemented risk management techniques may prove to be ineffective or become obsolete - CORRECT ANSWER Which one of the following best explains why producers should be alert to changes in clients' loss exposures?" "Field Underwriter - CORRECT ANSWER 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" "Balance sheet - CORRECT ANSWER 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?" "Support producers and insureds - CORRECT ANSWER 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:" "Transfer - CORRECT ANSWER 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?" "Providing laboratory analyses - CORRECT ANSWER Risk control can assist the claims department by" "Loss ratio + expense ratio - CORRECT ANSWER Which one of the following is the correct formula for calculating an insurer's combined ratio?" "Property-casualty insurance and life-health insurance - CORRECT ANSWER The two main sectors of the insurance industry are" "Moral hazards - CORRECT ANSWER Joel is the underwriter for Stanton Industries. He received a notice from the premium auditor on the account. After a recent visit to the insured's location, the auditor wanted to make Joel aware of a decline in the business and some questionable business practices. Which one of the following types of hazards is the auditor identifying?" "Risk management review - CORRECT ANSWER Donna is an insurance producer. She makes an appointment with potential policyholder Sandie to review her loss exposures. She asks Sandie to complete a questionnaire to assist her in this effort. Donna is conducting a" "Besides risk management goals being attainable, they should also pose a challenge - CORRECT ANSWER 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?" "Identifying the policy, calculating a loss reserve, determining the cause of loss, preparing a loss statement - CORRECT ANSWER James West is a claims rep with Hatters Insurance. As he learns how to handle a claim from start to finish, which one of the following best describes the correct order for him to follow during this process?" "75% - 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 is Hometown Insurer's loss ratio?" "Apply to the part of the policy period that has already occurred - CORRECT ANSWER Earned premiums are the portion of written premiums that" "Classify the various exposures - CORRECT ANSWER 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?" "Leads and referrals that can be used to generate new business - CORRECT ANSWER Which one of these is most directly associated with a satisfied customer?" "Determining coverage quotes - CORRECT ANSWER Jessie is a new customer service representative (CSR) at the Winfield Agency. Jessie usually engages in all the following activities, EXCEPT" "Time, cause, and location - CORRECT ANSWER For a loss exposure to be ideally insurable it must be definite in" "Revenues - CORRECT ANSWER Earned premiums are shown on an insurer's income statement because they are" "Allian issues more preprinted policies than manuscript forms. - CORRECT ANSWER 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?" "Insurers may become insolvent - CORRECT ANSWER Why are insurance regulators concerned about the effects of large catastrophes?" "$2,000 - CORRECT ANSWER 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?" "Determining the amount of damages or extent of loss - CORRECT ANSWER The processing of almost every claim involves which one of the following activities?" "Compensation for disfigurement - CORRECT ANSWER Margaret was severely injured and scarred due to a recent accident. Which one of the following is an example of general damages Margaret received?" "Stockholders own a stock insurer. Members own a reciprocal insurance exchange - CORRECT ANSWER A stock insurer differs from a reciprocal insurance exchange in which one of the following ways?" "Replacement cost - CORRECT ANSWER If an insured wants to receive "new for old" in the event of a property loss, he or she would purchase" "Hazard risks and operational risks - CORRECT ANSWER Which two of the four quadrants of risk are classified as pure risks?" "Contract of utmost good faith - CORRECT ANSWER 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" "Contract of adhesion - CORRECT ANSWER Because the insurance company usually determines policy wording and the insured has little choice but to "take it or leave it," an insurance contract is a" "Direct writer marketing system - CORRECT ANSWER Bill is an insurance producer for and employed by ABC Insurance Company (ABC). He represents only ABC when marketing insurance products, and uses an administrative staff also employed by ABC. Bill is a producer in the" "Monitor the underwriting decision - CORRECT ANSWER 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?" "Personal umbrella - CORRECT ANSWER 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?" "Maintaining insurer solvency - CORRECT ANSWER 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?" Risk - CORRECT ANSWER Uncertainty about outcomes, can be positive or negative - Risk management is concerned with both positive and negative, insurance alleviates the uncertainty associated with negative financial consequences" "Transferring - CORRECT ANSWER The act of moving the financial consequences of unanticipated events to an insurer" "Pooling - CORRECT ANSWER All insureds share the cost of each other's losses. - Helps to keep premiums affordable and helps insurers cover large losses when they occur" "Life Insurance - CORRECT ANSWER Replaces the income-earning potential lost through death. Helps pay expenses related to an insureds death" "Health Insurance - CORRECT ANSWER Protects individuals and families from financial losses caused by sickness and accidents" "Homeowners Insurance - CORRECT ANSWER Provides Protection when people's homes and/or belongings are damaged or stolen and liability coverage for situations such as the family dog biting a guest" "Personal Auto - CORRECT ANSWER If the insured is at fault in an accident, provides coverage for bodily injury to another person, or damage to another person's auto. Also provides coverage for damage to the insured's auto (not wear and tear). Typically legally required" "Personal Umbrella - CORRECT ANSWER Provides additional protection for people with a high potential for large liability losses" "Commercial Property - CORRECT ANSWER Covers damage to buildings or their contents that result from fire, vandalism, and other causes of loss" "Commercial Crime - CORRECT ANSWER Protects against losses from theft of business personal property and money, including employee theft" "Commercial General Liability - CORRECT ANSWER Protects a business against its legal liability to others for bodily injury and property damage" "Commercial Auto - CORRECT ANSWER Covers liability for bodily injury and property damage caused by the use of the business's autos and also damage to the business's autos when they are in an accident" "Workers Compensation - CORRECT ANSWER Covers legally required benefits that businesses are required to pay to their employees for job related injuries and illnesses" "Commercial Umbrella - CORRECT ANSWER Provides additional liability limits beyond those provided by other commercial policies, protecting a business in the event of a large liability loss" "Stock Insurers - CORRECT ANSWER Objective is to earn a profit., and they attract stockholders by the expectation of investment returns" "Mutual Insurers - CORRECT ANSWER Include some large national insurers and many regional insurers. To share profits, mutual insurers pay dividends to policyholders as a return of a portion of premiums payed" "Surplus Lines - CORRECT ANSWER Provide insurance coverages unavailable in the standard market" "Reinsurance - CORRECT ANSWER Allows a primary insurer to transfer some loss exposures to another insurer. Can help small insurers provide insurance for large accounts" "Reciprocal Insurance Exchanges - CORRECT ANSWER Each member is both an insured and an insurer" "Lloyd's - CORRECT ANSWER An insurance and reinsurance marketplace a bit like the stock exchange" "Captive Insurers - CORRECT ANSWER Formed to cover loss exposures of specific organizations" "Government Insurance - CORRECT ANSWER Can step in when private insurers are unable or unwilling to satisfy legitimate insurance needs - May participate to accomplish social goals and reduce risk to society" "Speculative Risk - CORRECT ANSWER A chance of loss, no loss, or gain. - May be managed by maintaining the property to enhance its resale value" "Pure Risk - CORRECT ANSWER A chance of loss or no loss, but no chance of gain. - May be managed by purchasing insurance" "Hazard Risk - CORRECT ANSWER Arises from property, liability, or personnel exposures" "Operational Risk - CORRECT ANSWER Arises from people, processes, systems, or controls" "Financial Risk - CORRECT ANSWER Arises from the effect of market forces on financial assets or liabilities" "Strategic Risk - CORRECT ANSWER Arises from trends in the economy and society" "Artificial Intelligence - CORRECT ANSWER Enables computers to perform tasks that require critical thinking, such as making decisions. It allows robots to work alongside humans and cars to operate without human drivers" "Sensors - CORRECT ANSWER Detect and measure objects or conditions continuously to warn of problems or malfunctions. Smart sensors may trigger a response to an issue, which helps reduce losses" "Computer Vision - CORRECT ANSWER Helps a machine recognize an object and respond to it as a human would" Which two of the four quadrants of risk are classified as pure risks? Select one: A. Hazard risks and operational risks B. Hazard risks and strategic risks C. Operational risks and financial risks D. Financial risks and strategic risks - CORRECT ANSWER A. Hazard risks and operational risks Correct. Hazard risks and operational risks are pure risks." "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: Select one: A. Conditions B. Definitions C. Exceptions D. Declarations - CORRECT ANSWER C. Exceptions Correct. Winston finds the policy provisions of conditions, definitions, and declarations. The other two main provisions in a policy are the insuring agreement, and the exclusions." "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, Select one: A. Claimant and claims representative and insured B. Claimant and insured and claims representative C. Insured and claimant and claims representative D. Claims representative and insured and claimant - CORRECT ANSWER C. Insured and claimant and claims representative Correct. In this scenario, Sean and Wilbur and Andrea, are, respectively, insured (Sean), claimant (Wilbur), and claims representative (Andrea)." "Risk control can assist the claims department by Select one: A. Reporting the existence of new operations. B. Designing product recall procedures. C. Developing safety management programs. D. Providing laboratory analyses. - CORRECT ANSWER D. Providing laboratory analyses. Correct. Risk control can assist the claims department by providing laboratory analyses." "Because the insurance company usually determines policy wording and the insured has little choice but to "take it or leave it," an insurance contract is a Select one: A. Bilateral contract. B. Nontransferable contract. C. Contract of indemnity. D. Contract of adhesion. - CORRECT ANSWER D. Contract of adhesion. Correct. Insurance is considered a contract of adhesion because one party, the insured, must adhere to the contract as written by the other party (the insurer). The insurer determines the wording of the policy, and the insured has little choice but to take it or leave it." "Which one of the following is the correct formula for calculating an insurer's combined ratio? Select one: A. Loss ratio + expense ratio B. Loss ratio + underwriting ratio C. Investment income ratio + overall operating ratio D. Investment income ratio + premium income ratio - CORRECT ANSWER A. Loss ratio + expense ratio Correct. The combined ratio formula is the sum of the loss ratio and expense ratio." "For a loss exposure to be ideally insurable it must be definite in Select one: A. Value, extent, and consequences. B. Duration, damage, and cost. C. Scope, origin, and coverage. D. Time, cause, and location. - CORRECT ANSWER D. Time, cause, and location. For a loss exposure to be ideally insurable it must be definite in time, cause, and location." "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? Select one: A. Allian issues more preprinted policies than manuscript forms. B. Allian offers modular policies for coverages common to a large number of its insureds. C. The manuscript forms that Allian issues are developed by ISO. D. Customized coverages are usually issued through a self-contained policy. - CORRECT ANSWER A. Allian issues more preprinted policies than manuscript forms. Allian issues more preprinted policies than manuscript forms." "James West is a claims rep with Hatters Insurance. As he learns how to handle a claim from start to finish, which one of the following best describes the correct order for him to follow during this process? Select one: A. Identifying the policy, calculating a loss reserve, determining the cause of loss, preparing a loss statement B. Identifying the policy, issuing the claim payment, investigating the medical claim, closing the file C. Receiving a claim from a manager, denying the claim, contacting the insured's representative, setting a claim reserve D. Receiving a claim from a manager, calculating a loss reserve, contacting the insured's lawyer, verifying coverage - CORRECT ANSWER A. Identifying the policy, calculating a loss reserve, determining the cause of loss, preparing a loss statement Correct. James will handle claims including (in this order) identifying the policy, calculating a loss reserve, determining the cause of loss, and preparing a loss statement." "Destructive competition in the insurance industry could result in Select one: A. Excess regulation. B. Oversupply of insurance. C. Insurance shortages. D. Inadequate regulation. - CORRECT ANSWER C. Insurance shortages. Destructive competition in the insurance industry could result in insurance shortages." "Margaret was severely injured and scarred due to a recent accident. Which one of the following is an example of general damages Margaret received? Select one: A. Hospital expenses B. Compensation for disfigurement C. Prescription costs D. Lost wages - CORRECT ANSWER B. Compensation for disfigurement Correct. An example of general damages is compensation for disfigurement." "The processing of almost every claim involves which one of the following activities? Select one: A. Engaging an accident scene reconstruction specialist B. Salvaging C. Subrogating D. Determining the amount of damages or extent of loss - CORRECT ANSWER D. Determining the amount of damages or extent of loss Correct. Determining the amount of damages or extent of loss is a claim handling activity common to all claims." "Joe is the owner of JG Auto Repair. He is always frustrated with the amount of commercial insurance premium he pays every year, even though he has not had a single claim in over 10 years. Joe is looking to partner with an insurance company that will share its profits and maybe return a portion of his premium if the results are good. Which one of the following types of insurer is the right fit for Joe? Select one: A. Reinsurer B. Mutual insurer C. Stock insurer D. Surplus lines insurer - CORRECT ANSWER B. Mutual insurer A mutual insurer is owned by its policyholders and formed as a corporation for the purpose of providing insurance to them. To share profits, mutual insurers may pay dividends to policyholders as a return of a portion of premiums paid." "The difference between an independent agency and an exclusive agency is that an Select one: A. Exclusive agency employs direct writer agents, who are employees of the insurer. B. Independent agency employs direct writer agents, who are employees of the insurer. C. Exclusive agency is contracted to sell insurance for one insurer or group of insurers. D. Independent agency is contracted to sell insurance for one insurer or group of insurers. - CORRECT ANSWER C. Exclusive agency is contracted to sell insurance for one insurer or group of insurers. Correct. The difference between an independent agency and an exclusive agency is that an exclusive agency is contracted to sell insurance for one insurer or group of insurers." "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: Select one: A. Formulate underwriting policy B. Conduct underwriting audits C. Research the market D. Support producers and insureds - CORRECT ANSWER D. Support producers and insureds Correct. All listed are corporate (or staff) underwriting activities, EXCEPT supporting producers and insureds, which is a field (or line) underwriter's responsibility." "The two main sectors of the insurance industry are Select one: A. Homeowners insurance and auto insurance. B. Property insurance and liability insurance. C. Personal insurance and commercial insurance. D. Property-casualty insurance and life-health insurance. - CORRECT ANSWER D. Property-casualty insurance and life-health insurance. Correct. The two main sectors of the insurance industry are property-casualty insurance and life-health insurance." "Which one of the following best explains why producers should be alert to changes in clients' loss exposures? Select one: A. Knowledge of such changes will inform their efforts to create a list of experts that can be called to assist. B. Producers have expertise about risk financing through insurance. C. Producers can aid clients in developing risk management cost allocation plans. D. Implemented risk management techniques may prove to be ineffective or become obsolete. - CORRECT ANSWER D. Implemented risk management techniques may prove to be ineffective or become obsolete. Correct. Producers should be alert to changes in clients' loss exposures because implemented risk management techniques may prove to be ineffective or become obsolete." "A liability loss has the following damages: Medical expenses:$10,000 Damages for disfigurement:$50,000 Damages for pain and suffering:$100,000 What is the amount of special damages? Select one: A. $ 10,000 B. $ 50,000 C. $100,000 D. $160,000 - CORRECT ANSWER A. $ 10,000 Correct. The amount of special damages is $10,000. Special damages are for specific, identifiable expenses." "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? Select one: A. Results-based standards are solely responsible for ensuring successful risk management. B. Riley will concentrate on new risk management techniques rather than changes in loss exposures. C. Besides risk management goals being attainable, they should also pose a challenge. D. The four step-by-step risk consultation process is considered the most effective method to use. - CORRECT ANSWER C. Besides risk management goals being attainable, they should also pose a challenge. Correct. Besides risk management goals being attainable, they should also pose a challenge." "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? Select one: A. Homeowners B. Personal umbrella C. Personal auto D. Health insurance - CORRECT ANSWER B. Personal umbrella Correct. A personal umbrella policy provides additional protection for people with a high potential for large liability losses. Limits are usually in the millions, above the limits offered in a homeowners or an auto policy." "All of the following are sources of underwriting information to evaluate an insurance submission, EXCEPT: Select one: A. Underwriting authority reports B. Telematics C. Inspection reports D. Applications - CORRECT ANSWER A. Underwriting authority reports Correct. All listed are sources of underwriting information, EXCEPT underwriting authority reports." "Joel is the underwriter for Stanton Industries. He received a notice from the premium auditor on the account. After a recent visit to the insured's location, the auditor wanted to make Joel aware of a decline in the business and some questionable business practices. Which one of the following types of hazards is the auditor identifying? Select one: A. Moral hazards B. Legal hazards C. Morale hazards D. Physical hazards - CORRECT ANSWER A. Moral hazards Correct. Auditors can identify a variety of hazards. Moral hazards include questionable business practices or a failing business." "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? Select one: A. Underwriting guidelines B. Book of business C. Policyholders' surplus D. Capacity - CORRECT ANSWER D. Capacity Correct. Capacity 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." "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? Select one: A. Policy provisions state what is covered, but not what is not covered, in that particular policy. B. Rachel finds the policy begins with a coverage overview and then goes into more coverage details. C. The definitions personalize the policy and are usually found on the policy's first page. D. The insuring agreement clarifies the insured's duties throughout the life of the policy. - CORRECT ANSWER B. Rachel finds the policy begins with a coverage overview and then goes into more coverage details. Correct. Rachel finds the policy begins with a coverage overview and then goes into more coverage details." "Jessie is a new customer service representative (CSR) at the Winfield Agency. Jessie usually engages in all the following activities, EXCEPT: Select one: A. Answering billing inquiries B. Reporting new claims C. Explaining coverage D. Determining coverage quotes - CORRECT ANSWER D. Determining coverage quotes Correct. Jessie usually engages in all of the listed activities except determining coverage quotes." "Why are insurance regulators concerned about the effects of large catastrophes? Select one: A. Insurers may become insolvent. B. Insurance rates will rise. C. Licensed insurers will be unable to handle demand. D. They could lead to destructive competition. - CORRECT ANSWER A. Insurers may become insolvent. Correct. Regulators try to maintain the financial condition of insurers because poor financial condition may lead to insolvency in the event of a large catastrophe." "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? Select one: A. Meet legal requirements B. Promote risk control activity C. Reduce social burden D. Enable efficient use of resources - CORRECT ANSWER B. Promote risk control activity Correct. Premium savings as a result of substantially fewer employee injuries provide an incentive for an insured to control losses." "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 Select one: A. Risk Control Representative. B. Field Underwriter. C. Staff Underwriter. D. Service Representative. - CORRECT ANSWER B. Field Underwriter. Field underwriters, 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." "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? Select one: A. Harry can verify Jennie's address and other possible helpful information by reviewing her policy which has her original application information attached. B. As Westcox is a mutual insurer owned by its policyholders, Harry will find it especially helpful to review the insured's associated rights and duties. C. Since Jennie purchased a modular policy, Harry will need to spend extra time reviewing the length and complexity of her contract. D. Harr - CORRECT ANSWER A. Harry can verify Jennie's address and other possible helpful information by reviewing her policy which has her original application information attached. Correct. Harry can verify Jennie's address and other possible helpful information by reviewing her policy which has her original application information attached." "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? Select one: A. Balance sheet B. Sales report C. Income statement D. Cash flow report - CORRECT ANSWER A. Balance sheet Correct. Of the items listed, an insurer's balance sheet provides the best indication of its financial position because it shows admitted assets, liabilities, and policyholders' surplus at a particular point in time." "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 Select one: A. Robots. B. Drones. C. Wearables. D. Automated sensors. - CORRECT ANSWER A. Robots. Correct. These smart products are called robots." "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? Select one: A. Restricting cancellations or renewals B. Safeguarding policy language C. Maintaining insurer solvency D. Preventing destructive competition - CORRECT ANSWER C. Maintaining insurer solvency Correct. The objective of maintaining insurer solvency is not being realized through this scenario. The objective exists to help guarantee insurers have funds necessary to pay claims as they become due." "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? Select one: A. Determine an appropriate premium B. Issue required documents C. Monitor the underwriting decision D. Evaluate the application - CORRECT ANSWER C. Monitor the underwriting decision Correct. Monitoring underwriting decisions is done by monitoring claims activity, reviewing the results of risk control and safety inspections and premium audits, and being alert to policy change requests that could alter the loss exposures." "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? Select one: A. Classify the various exposures B. Conduct initial loss control evaluation C. Confirm the inventory values D. Collect the premium - CORRECT ANSWER A. Classify the various exposures Kaito will classify the various exposures." "If an insured wants to receive "new for old" in the event of a property loss, he or she would purchase Select one: A. Replacement cost. B. Actual cash value (ACV). C. Agreed value. D. Market value. - CORRECT ANSWER A. Replacement cost. Correct. He or she would purchase replacement cost." "Bill is an insurance producer for and employed by ABC Insurance Company (ABC). He represents only ABC when marketing insurance products, and uses an administrative staff also employed by ABC. Bill is a producer in the Select one: A. Direct writer marketing system. B. Independent agency marketing system. C. Captive agency marketing system. D. Exclusive agency marketing system. - CORRECT ANSWER A. Direct writer marketing system. Correct. Direct writer marketing systems use producers who are direct employees of the insurer. Bill is a producer in the direct writer marketing system." "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? Select one: A. Direct response B. Financial institution C. Call center D. Group marketing - CORRECT ANSWER A. Direct response For customers like Erin, the direct response distribution channel using social media, email blasts, website ads, and direct mail would be the best." "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? Select one: A. $1,000 B. $2,000 C. $4,000 D. $8,000 - CORRECT ANSWER B. $2,000 Correct. [$400,000 (insured value) ÷ $100 (exposure unit size)] x $0.50 (rate per unit) = $2,000." "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"? Select one: A. Juanita directly contacts Maria who sold her a policy to adjust her homeowners claim; Maria nicely explains she has no further responsibilities after making the sale. B. 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. C. Alex directly contacts Maria after a hailstorm damages his new car the day after he bought a policy from her, and she handles the claim as he is a brand new customer. D. Customer Roland directly contacts Maria and she assumes full responsibility for his claim as she was the first insurance employee to receive the claims informa - CORRECT ANSWER B. 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. Correct. 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." "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? Select one: A. Underwriting B. Claims C. Accounting D. Risk Control - CORRECT ANSWER A. Underwriting Martina would provide a contribution to underwriting." "A stock insurer differs from a reciprocal insurance exchange in which one of the following ways? Select one: A. Both are owned by stockholders. However, the reciprocal insurance exchange provides coverage to investors. B. Both are formed to provide profit to investors. However, the stock insurer is managed through a board of directors. C. A stock insurer provides insurance to its policyholder-owners. A reciprocal insurance exchange provides insurance to investors. D. Stockholders own a stock insurer. Members own a reciprocal insurance exchange. - CORRECT ANSWER D. Stockholders own a stock insurer. Members own a reciprocal insurance exchange. Stockholders own a stock insurer. Members (subscribers) own a reciprocal insurance exchange." The primary role of insurance is to - CORRECT ANSWER Indemnify individuals and organizations for covered losses." "A homeowners policy is a type of - CORRECT ANSWER Personal property-casualty insurance policy." "Coverage for money and other business property from various causes of loss such as burglary, robbery, theft, and employee dishonesty typically is provided by - CORRECT ANSWER Commercial crime insurance." "Which one of the following describes the characteristics of a mutual insurance company? - CORRECT ANSWER A corporation owned by policyholders that provides insurance to its policyholders." "An insurer that was formed for the purpose of earning a profit for its stockholders is a - CORRECT ANSWER Stock insurer" "Autonomous Vehicle Applications (AVA) is a start-up company that develops safety technologies that can be sold to companies that are producing autonomous vehicles. One technology AVA is developing allows an autonomous vehicle to detect, extract, and analyze images; and then to respond to the images. For example, the technology would detect a presence in a crosswalk, extract the image, and a computer would analyze the image. When the image was determined to be a human being, the vehicle would slow down or stop until the crosswalk was clear. This technology, which is designed to capture and analyze images, and to act on the recognition of the image; is called - CORRECT ANSWER Computer vision" "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 - CORRECT ANSWER Artificial intelligence" "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? - CORRECT ANSWER Insurance regulation protects customers by guaranteeing insurance is available and accessible to everyone who needs it" "What term refers to the ability of an insurer to meet its obligations as they become due? - CORRECT ANSWER Solvency" "An insurer's financial statement shows a loss reserve and an unearned premium reserve. These reserves are part of the insurer's - CORRECT ANSWER Total liabilities." "Admitted assets are types of property that regulators allow insurers to show as assets on their financial statements because they are - CORRECT ANSWER Easily converted to cash" "Which one of the following is a nonadmitted asset? - CORRECT ANSWER Office equipment" "The financial report for LMN Insurance contains the following information: Earned premiums $8,000,000Written premiums $10,000,000Incurred losses $6,000,000Incurred underwriting expenses $4,000,000 What is LMN Insurance's expense ratio? - CORRECT ANSWER 40%" "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 expense $2,000,000 What is Hometown Insurer's expense ratio? - CORRECT ANSWER 40%" "Spencer Insurance Associates is an independent agency selling primarily homeowners policies. This agency - CORRECT ANSWER Is free to work with as many different insurers as it wants." "The key to the direct writer marketing system is that - CORRECT ANSWER The insurer is using its own employees as producers." "As it continues to grow, Anchoy Insurance is examining other distribution channels to more effectively market its products. Through this experience, which of one the following will Anchoy most likely learn? - CORRECT ANSWER Anchoy can use group marketing to target large numbers of recent local college graduates" "Insuring individuals with a high probability of loss at a cost lower than the insurer would normally charge for that risk because it wasn't aware of the actual risk involved is known as - CORRECT ANSWER Adverse selection" "Clare is a commercial lines underwriter. She always tries to follow underwriting guidelines, effectively evaluate loss exposures, and charge adequate premiums. By doing these things, Clare's goal is to ensure - CORRECT ANSWER Adequate policyholders' surplus" "Which one of the following statements is correct regarding the interaction between risk control and other insurer functions? - CORRECT ANSWER A risk control evaluation can make the difference between the applicant's being rejected or accepted by the underwriter" "Aimee recently accepted a job in the Underwriting department at Noble Insurance Company. Her responsibilities will include developing coverage forms, arranging reinsurance agreements, and conducting underwriting audits. Which one of the following is the title of Aimee's new job? - CORRECT ANSWER Corporate Underwriter" "Jill works in the field for Goshen Mutual as a line underwriter. Which one of the following is primarily a responsibility of line underwriters? - CORRECT ANSWER Select insureds" "Which one of the following is the first step in the underwriting process? - CORRECT ANSWER Evaluate the submission" "As an experienced underwriter, Rick has learned to make every effort to avoid a mistake that can produce insufficient premium to cover losses, or pricing that isn't competitive. Which one of the following underwriting mistakes can often cause these issues? - CORRECT ANSWER Misclassifying exposures" "Which one of the following is the fundamental measure of loss exposure used in insurance rating? - CORRECT ANSWER Exposure unit" "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" "Johann is an insurance company employee who investigates the scene of a loss and meets with insureds, claimants, lawyers, Johann is most accurately called - CORRECT ANSWER A field claims representative" "Stephanie works for Waynesgood Insurance. She appreciates the help she receives from Clem in the company's claims department who provides her with recent statistics and comments on Waynesgood's customer satisfaction levels. Stephanie works in which one of the following departments? - CORRECT ANSWER Marketing" "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" "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" "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" "Wayne, an insured, submits a claim for a seven-year-old refrigerator that was damaged due to lightning. Claims representative Guillaume will probably factor in an allowance for wear and tear. This is called - CORRECT ANSWER Depreciation" "Compensatory damages represent - CORRECT ANSWER Actual harm suffered" "Adjuster Toni is evaluating damages in a bodily injury liability claim where she has determined that the insured is completely at fault for the accident. The claimant suffered a sprain and strain injury to his neck. His special damages total $1,500. He was out of work for a week, was disabled and prevented from performing some regular activities for a month, and attended physical therapy for six weeks. In assessing general damages, Toni should - CORRECT ANSWER Use past cases which are similar as a guide" "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" "Producer Gerald Hilker is one of the most successful producers at the Westfield Agency, which represents several different insurers. Because of this, which one of the following is most likely true? - CORRECT ANSWER Gerald makes most of his income from commissions from customer sales" "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" "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" "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" "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" "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" "Insurance policies are written in such a way that the parties have to perform only under certain conditions, because an insurance contract is a - CORRECT ANSWER Conditional contract" "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" "The Insurance Services Office, Inc. (ISO) commercial package policy is an example of a - CORRECT ANSWER Modular policy" "Which one of the following most accurately describes one of the policy provisions in an insurance policy? - CORRECT ANSWER The exclusions are in place to reduce duplicate coverage" "The big differences between property and liability policies are found in their - CORRECT ANSWER Insuring Agreements" “Exclusive agency is contracted to sell insurance for one insurer or group of insurers - CORRECT ANSWER The difference between an independent agency and an exclusive agency is that an" "Insurance shortages - CORRECT ANSWER Destructive competition in the insurance industry could result in" "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 - CORRECT ANSWER 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"?" "Large number of similar exposure units - CORRECT ANSWER 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?" "Capacity - CORRECT ANSWER 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?" "Mutual insurer - CORRECT ANSWER Joe is the owner of JG Auto Repair. He is always frustrated with the amount of commercial insurance premium he pays every year, even though he has not had a single claim in over 10 years. Joe is looking to partner with an insurance company that will share its profits and maybe return a portion of his premium if the results are good. Which one of the following types of insurer is the right fit for Joe?" "Underwriting - CORRECT ANSWER 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?" "Robots - CORRECT ANSWER 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" "Harry can verify Jennie's address and other possible helpful information by reviewing her policy which has her original application information attached - CORRECT ANSWER 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?" "$10,000 - CORRECT ANSWER A liability loss has the following damages: Medical expenses: $10,000 Damages for disfigurement: $50,000 Damages for pain and suffering: $100,000 What is the amount of special damages?" "Promote risk control activity - CORRECT ANSWER 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?" "Insured and claimant and claims representative - CORRECT ANSWER 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," "Exceptions - CORRECT ANSWER 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:" "Direct response - CORRECT ANSWER 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?" "Rachel finds the policy begins with a coverage overview and then goes into more coverage details - CORRECT ANSWER 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?" "The Benefits of Insurance - CORRECT ANSWER 1. Paying for losses 2. Managing cash flow 3. Complying with legal requirements 4. Promoting risk control activities" "Personal Property Insurance - CORRECT ANSWER Protects an insured's assets by covering the cost of repairing or replacing property that is damaged, lost, or destroyed. Can cover related lost income or extra expenses" "Personal Liability Insurance - CORRECT ANSWER Provides payments for injury to others or damage to other's property for which the insured is legally responsible. It also covers the cost to defend the insured against related lawsuits" "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 Select one: A. Contract of indemnity. B. Contract of adhesion. C. Contract of utmost good faith. D. Conditional contract. - CORRECT ANSWER C. Contract of utmost good faith. Correct.Insurance contacts are considered contracts of utmost good faith because both parties are obligated to ethical practices and behaviors while dealing with one another." "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? Select one: A. Risk B. Pooling C. Transfer D. Risk control - CORRECT ANSWER C. Transfer Correct. The insurance agent is explaining the concept of transferring the financial consequences of unanticipated events to an insurer." "Earned premiums are shown on an insurer's income statement because they are Select one: A. Revenues. B. Equal to net income. C. Expenses. D. Admitted assets. - CORRECT ANSWER A. Revenues. Correct. Earned premiums are revenues shown on an insurer's income statement." "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? Select one: A. $225 B. $350 C. $450 D. $800 - CORRECT ANSWER B. $350Correct. ACV=Replacement cost - Depreciation. The bicycle's actual cash value is $350: $800 − $450 = $350." "Donna is an insurance producer. She makes an appointment with potential policyholder Sandie to review her loss exposures. She asks Sandie to complete a questionnaire to assist her in this effort. Donna is conducting a Select one: A. Sales proposal. B. Risk management review. C. Sales closing call. D. Customer service analysis. - CORRECT ANSWER B. Risk management review. Correct. For an individual or family, the risk management review process might use results of as interview or questionnaire and then suggest methods of risk control, retention of loss exposures, and insurance. Donna is conducting a risk management review." "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? Select one: A. Pure risk B. Large number of similar exposure units C. Definite and measurable D. Independent and not catastrophic - CORRECT ANSWER B. Large number of similar exposure units Correct. Since Oscar's vehicle is custom-made and used for an unusual purpose, there are not a large number of similar exposure units." "Which one of these is most directly associated with a satisfied customer? Select one: A. Increased cost efficiencies B. Leads and referrals that can be used to generate new business C. Decreased cost efficiencies D. Soft underwriting cycles - CORRECT ANSWER B. Leads and referrals that can be used to generate new business Correct. Leads and referrals that can be used to generate new business are most directly associated with a satisfied customer." "Earned premiums are the portion of written premiums that Select one: A. Are billed at the beginning of the policy period. B. Apply to the part of the policy period that follows a loss. C. Apply to the part of the policy period that has already occurred. D. Are available to generate investment income. - CORRECT ANSWER C. Apply to the part of the policy period that has already occurred. Correct. Earned premiums are the portion of written premiums that apply to the part of the policy period that has already occurred." "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 is Hometown Insurer's loss ratio? Select one: A. 20% B. 30% C. 50% D. 75% - CORRECT ANSWER D. 75% Correct. Hometown Insurer's loss ratio is its incurred losses ($3,000,000) divided by its earned premiums ($4,000,000), or 75 percent." "As a single mother on a very tight budget, Ciara is tempted to skimp on her insurance. However, her friend Mehmet tells h