AINS 101 Exam Prep Questions with Correct Answers
Question 1:
Which one of the following statements is correct regarding the benefits provided by insurance?
Insurance reduces the financial consequences of loss exposures but not the related uncertainty.
The primary role of insurance is to meet mandatory insurance requirements.
The reduction in losses paid by insurers due to risk control measures benefits individual
insureds but not society as a whole.
Answer:
Insurance helps reduce the financial burden to society by compensating accident victims.
Question 2:
Shelton Industries experienced a fire in its manufacturing plant. Several employees suffered
burns and smoke inhalation injuries as they tried to escape the building. Which one of Shelton
Industries' commercial property-casualty policies would pay for the employees' injuries and
illnesses?
Answer:
Workers compensation insurance
Workers compensation insurance
Workers compensation insurance
Workers compensation insurance
Question 3:
A homeowners policy is a type of
Answer:
Personal property-casualty insurance policy.
Question 4:
Which one of the following correctly describes a reason for government involvement in
property-casualty insurance?
Selling insurance provides the government with a non-tax source of revenues and profits.
Government programs can meet legitimate public demands unmet by private insurers.
Competition from government plans keeps private insurer's premiums competitive. Preventing
high-risk individuals or activities from being insured is in the public interest.
Answer:
Government programs can meet legitimate public demands unmet by private insurers.
,Question 5:
Insurance Company wrote a commercial liability policy for a manufacturer of off-road
motorcycles. The potential costs of the insured's loss exposure exceed Insurance Company's
capacity. Insurance Company could consider which one of the following types of contractual
transferring agreement to meet its needs?
Answer:
Reinsurance
In an effort to reduce expenses, increase profitability, and reduce human errors; ABC Insurance
Company decided to automate most of its personal lines underwriting function. The company
now uses standardized application forms that are submitted electronically to one of the
company's regional offices. At each regional office, a computer with a scanner reads the
applications. The computer has been programmed with acceptable answers to the questions. If
the answers on the application are all acceptable, the policy is automatically issued. Rejected
applications are automatically forwarded to a human underwriter who reviews them. The use
of this technology has reduced the company's expense ratio by two and a half percent, and
reduced the time it takes to issue a policy. ABC Insurance Company's use of computers to
evaluate applications electronically is an application of
Radiant sensors. Artificial intelligence. Artificial intelligence.
Question 6:
Jimmy decided to buy a house in his neighborhood that had been foreclosed on by the bank
that held the mortgage. He is hoping to do some renovation and repair work on the house, and
then sell it for a quick profit. What type of risk is this?
Answer:
Speculative Risk
Question 7:
Which one of the following best describes the concept of pooling?
The financial consequences of unanticipated losses are transferred to an insurer. Risk
management is concerned with positive and negative risks.
Insureds share the cost of each other's losses. Insurance benefits society as a whole.
Answer:
Insureds share the cost of each other's losses.
Question 8:
Which one of the following represents uncertainty about outcomes that can be negative or
positive? Loss exposure
Transfer Risk Pooling
Answer:
Risk
,Question 9:
Coverage for money and other business property from various causes of loss such as burglary,
robbery, theft, and employee dishonesty typically is provided by
Answer:
Commercial crime insurance.
Question 10:
The insurance agent suggested that Sally's Snack Shop buy a policy that combines property,
crime, and liability coverages into one policy. This is referred to as a(n)
Answer:
Commercial Package Policy (CCP)
Question 11:
Which one of the following describes the characteristics of a mutual insurance company? A
corporation owned by policyholders that provides insurance to its policyholders.
An unincorporated association that provides reciprocal coverage to subscribers. An
unincorporated association that earns profits for its individual investors.
A corporation owned by stockholders that earns profits for the stockholders.
Answer:
A corporation owned by policyholders that provides insurance to its policyholders. A
reinsurance company
Assumes loss exposures from a primary insurer.
Provides primary insurance for loss exposures that private insurers are unwilling to provide. Is
formed to write all or part of the insurance for a parent company.
Question 12:
Transfers losses to a primary insurer.
Answer:
Assumes loss exposures from a primary insurer.
, Question 13:
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
Answer:
Computer Vision
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
Question 14:
of the computer algorithm to monitor investment compliance and to provide notification when
corrective action is necessary illustrates use of
Answer:
Artificial Intelligence
Question 15:
The primary role of insurance is to
Answer:
Indemnify individuals and organizations for covered losses
Question 16:
Which one of the following best describes the concept of pooling? Insureds share the cost of
each other's losses.
Risk management is concerned with positive and negative risks.
The financial consequences of unanticipated losses are transferred to an insurer. Insurance
benefits society as a whole.
Answer:
Insureds share the cost of each other's losses.
Question 1:
Which one of the following statements is correct regarding the benefits provided by insurance?
Insurance reduces the financial consequences of loss exposures but not the related uncertainty.
The primary role of insurance is to meet mandatory insurance requirements.
The reduction in losses paid by insurers due to risk control measures benefits individual
insureds but not society as a whole.
Answer:
Insurance helps reduce the financial burden to society by compensating accident victims.
Question 2:
Shelton Industries experienced a fire in its manufacturing plant. Several employees suffered
burns and smoke inhalation injuries as they tried to escape the building. Which one of Shelton
Industries' commercial property-casualty policies would pay for the employees' injuries and
illnesses?
Answer:
Workers compensation insurance
Workers compensation insurance
Workers compensation insurance
Workers compensation insurance
Question 3:
A homeowners policy is a type of
Answer:
Personal property-casualty insurance policy.
Question 4:
Which one of the following correctly describes a reason for government involvement in
property-casualty insurance?
Selling insurance provides the government with a non-tax source of revenues and profits.
Government programs can meet legitimate public demands unmet by private insurers.
Competition from government plans keeps private insurer's premiums competitive. Preventing
high-risk individuals or activities from being insured is in the public interest.
Answer:
Government programs can meet legitimate public demands unmet by private insurers.
,Question 5:
Insurance Company wrote a commercial liability policy for a manufacturer of off-road
motorcycles. The potential costs of the insured's loss exposure exceed Insurance Company's
capacity. Insurance Company could consider which one of the following types of contractual
transferring agreement to meet its needs?
Answer:
Reinsurance
In an effort to reduce expenses, increase profitability, and reduce human errors; ABC Insurance
Company decided to automate most of its personal lines underwriting function. The company
now uses standardized application forms that are submitted electronically to one of the
company's regional offices. At each regional office, a computer with a scanner reads the
applications. The computer has been programmed with acceptable answers to the questions. If
the answers on the application are all acceptable, the policy is automatically issued. Rejected
applications are automatically forwarded to a human underwriter who reviews them. The use
of this technology has reduced the company's expense ratio by two and a half percent, and
reduced the time it takes to issue a policy. ABC Insurance Company's use of computers to
evaluate applications electronically is an application of
Radiant sensors. Artificial intelligence. Artificial intelligence.
Question 6:
Jimmy decided to buy a house in his neighborhood that had been foreclosed on by the bank
that held the mortgage. He is hoping to do some renovation and repair work on the house, and
then sell it for a quick profit. What type of risk is this?
Answer:
Speculative Risk
Question 7:
Which one of the following best describes the concept of pooling?
The financial consequences of unanticipated losses are transferred to an insurer. Risk
management is concerned with positive and negative risks.
Insureds share the cost of each other's losses. Insurance benefits society as a whole.
Answer:
Insureds share the cost of each other's losses.
Question 8:
Which one of the following represents uncertainty about outcomes that can be negative or
positive? Loss exposure
Transfer Risk Pooling
Answer:
Risk
,Question 9:
Coverage for money and other business property from various causes of loss such as burglary,
robbery, theft, and employee dishonesty typically is provided by
Answer:
Commercial crime insurance.
Question 10:
The insurance agent suggested that Sally's Snack Shop buy a policy that combines property,
crime, and liability coverages into one policy. This is referred to as a(n)
Answer:
Commercial Package Policy (CCP)
Question 11:
Which one of the following describes the characteristics of a mutual insurance company? A
corporation owned by policyholders that provides insurance to its policyholders.
An unincorporated association that provides reciprocal coverage to subscribers. An
unincorporated association that earns profits for its individual investors.
A corporation owned by stockholders that earns profits for the stockholders.
Answer:
A corporation owned by policyholders that provides insurance to its policyholders. A
reinsurance company
Assumes loss exposures from a primary insurer.
Provides primary insurance for loss exposures that private insurers are unwilling to provide. Is
formed to write all or part of the insurance for a parent company.
Question 12:
Transfers losses to a primary insurer.
Answer:
Assumes loss exposures from a primary insurer.
, Question 13:
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
Answer:
Computer Vision
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
Question 14:
of the computer algorithm to monitor investment compliance and to provide notification when
corrective action is necessary illustrates use of
Answer:
Artificial Intelligence
Question 15:
The primary role of insurance is to
Answer:
Indemnify individuals and organizations for covered losses
Question 16:
Which one of the following best describes the concept of pooling? Insureds share the cost of
each other's losses.
Risk management is concerned with positive and negative risks.
The financial consequences of unanticipated losses are transferred to an insurer. Insurance
benefits society as a whole.
Answer:
Insureds share the cost of each other's losses.
